AI Literacy - what does it mean for business?

What is AI Literacy?

Everyone seems to be talking about AI literacy, but what is it?

AI literacy is a very broad term which refers to knowledge of the uses and impacts of AI technologies. It can be seen as a set of skills and body of knowledge required to evaluate and work safely with AI tools. Contrary to popular belief, this is not a purely technological skillset and AI literacy programmes are not limited to operating large language models or prompt engineering.

In its broadest sense, AI literacy means understanding and responding to the social implications of these technologies and supporting people in understanding how they relate to their everyday lives.

Despite the growing need for AI literacy – both commercially and increasingly as a legal obligation – there is a notable absence of effective AI literacy initiatives among UK businesses.

What does the EU AI Act say about AI Literacy?

The EU AI Act is the first binding horizontal regulation on AI. It applies across the EU but also extra-territorially, bringing many UK and global organisations into scope, and sets a common framework for the use and supply of AI systems. It entered law in August 2024 and is being implemented in phases, with AI Literacy one of the enforceable obligations as of February this year.

Under Article 3 of the EU AI Act, ‘AI literacy’ means skills, knowledge, and understanding that enable providers (those who develop and market AI systems), deployers (those who use AI systems), and affected persons (those impacted by AI systems) to make informed decisions about AI systems. This includes awareness of the opportunities and risks of AI.

Key AI literacy obligations under the EU AI Act include:

• Sufficient AI Literacy (Article 4): Providers and deployers must ensure a sufficient level of AI literacy among their staff and others dealing with AI systems. This includes considering their technical knowledge, experience, education, training, and the context.
• Correct Application of Technical Elements (Recital 20): AI literacy should equip individuals with the knowledge to make informed decisions about AI systems.
• Obligation for Deployers (Article 26(2)): Deployers of high-risk AI systems must ensure human oversight by individuals with adequate training and authority. This obligation highlights the importance of AI literacy.

What about the GDPR?

The UK GDPR has no specific AI literacy rules. However, whenever AI is being used to process personal data, organisations must implement AI literacy to comply with the UK GDPR’s other requirements. Key UK GDPR obligations which trigger the requirement for AI literacy include:

• Data Protection by Design: When issuing a warning on the data protection risks of AI last year, the ICO confirmed: “Organisations developing or using generative AI must consider data protection from the outset, including rigorously assessing and mitigating risks to people’s rights and freedoms before bringing products to market.”
• The Accountability Principle: this makes organisations responsible for demonstrate compliance with principles. AI literacy programmes are an increasingly important part of this responsibility.
• Automated Decision-Making: When organisations make solely automated decisions, they must provide meaningful information about the logic involved. Understanding of the operation of the relevant AI system is essential before this information can be provided.

Why does AI literacy matter for businesses?

Within the many organisations TLT advises, we’re finding that AI literacy is an increasingly vital obligation. The key drivers of this phenomenon include:

1. Enhance Efficiency and Productivity: AI literacy helps employees use AI tools effectively, boosting productivity by automating tasks that would otherwise take longer. This allows employees to focus on more strategic, and often less mundane, tasks.

2. Aligning with Business Strategy: It enables leaders to align AI use with business strategies, ensuring that AI initiatives support overall business goals and drive competitive advantage.

3. Risk Management: AI literacy helps recognise, plan for, and mitigate AI-related issues such as ethical concerns, bias in AI algorithms, and regulatory compliance.

4. Compliance with Regulation: Ensuring AI literacy supports compliance with regulations like the EU AI Act, the Equality Act 2010, and the UK GDPR. Understanding how these regimes apply in this context is vital in avoiding legal challenges and maintaining trust with stakeholders – one of the key challenges TLT’s team does for many of its clients.

Getting AI Literacy Right

1. Role-Specific Training: Not everyone has to be an expert! AI literacy should be tailored to the specific needs of different roles. For example, procurement teams need to understand AI’s impact on supply chains, while HR professionals focus on AI’s role in recruitment and employee management.

2. Practical Application: Focus on hands-on training that allows employees to interact with AI tools and technologies. This approach helps employees see the immediate benefits of AI in their daily work

3. Continuous Learning and Development: Provide regular learning opportunities to keep employees updated on the latest AI developments. Host workshops, attend webinars, and offer access to online resources. Foster a culture of open dialogue to demystify AI.

Conclusion

Rolling out AI literacy is crucial for businesses to harness the benefits of AI while managing risks and complying with regulatory obligations.

By investing in AI literacy, organisations can enhance productivity, align AI initiatives with business strategies and mitigate major risks. At TLT, we regularly work alongside clients with advice, training and support on compliance with AI literacy and other AI obligations. To find out more, see our AI Hub or contact one of our AI Partners.

Coming soon: This article focuses on AI literacy for business. Look out for our future article on AI for social impact and digital and financial inclusion.

Contributor: Georgina Hands

This publication is intended for general guidance and represents our understanding of the relevant law and practice as at May 2025. Specific advice should be sought for specific cases. For more information see our terms & conditions.