There is a wide range of reasons why ESG (environmental, social, governance) reporting is an exploding market. One reason is that consumers care about ESG. PwC’s 2021 Consumer Intelligence Series survey reports that 91% of business leaders believe their company has a responsibility to act on ESG issues. Another is that the SEC is proposing rules that require SEC-registered companies to include “certain climate-related disclosures in their registration statements and periodic reports, including information about climate-related risks that are reasonably likely to have a material impact on their business.”
As such, the industry is expecting a standardization around ESG accounting – most likely coming this year.
What is ESG?
Gartner defines ESG as: “a collection of corporate performance evaluation criteria that assess the robustness of a company’s governance mechanisms and its ability to effectively manage its environmental and social impacts. Examples of ESG data include the quantification of a company’s carbon emissions, water consumption or customer privacy breaches. Institutional investors, stock exchanges and boards increasingly use sustainability and social responsibility disclosure information to explore the relationship between a company’s management of ESG risk factors and its business performance.”
According to one study from Harvard University, “Throughout 2021, the importance of environmental, social and governance matters proved to be even greater than expected, with ESG becoming a key area of focus for a range of stakeholders, particularly in the board room.”
When you take all these data points together, you can safely conclude that many companies, not just public companies, will soon be tracking, measuring and reporting on ESG factors.
The ESG Market
One can look at the ESG market in several ways:
- How much companies are investing in ESG practices
- How much VCs and other sources of funding are investing in ESG reporting
- How many established software vendors are easily adapting existing reporting solutions for ESG reporting
Earlier this spring Deloitte announced a $1 billion investment to expand its Sustainability & Climate practice. The practice “supports the firm’s clients in defining their strategies, embedding sustainability into their operations, meeting tax, disclosure and regulatory requirements, and accelerating their organizational and value chain transformation … [it] will span the firm’s advisory, assurance, audit, consulting, finance and tax services.
The global investor ESG software market is projected to expand at a CAGR of 15.8%, as a result of the emergence of new technologies, approaches, and players with a renewed focus on ESG integration driven by data. The market report cites a “growing emphasis on high quality, verifiable, and consistent data.”
The market is seeking software that provides KPIs, reporting platforms and other solutions that make it easier to collect, measure, analyze and report on ESG initiatives and programs.
Highlighting Select ESG Solutions
There are clear drivers indicating more and more US-based companies will be evaluating ESG software options. Other regions, such as Europe, are ahead of the US in this aspect. Take note – just because you haven’t heard of ESG implementations in the US yet, you will soon. It’s not a matter of if, but when.
Revelwood is not in the software space. We deliver solutions for the Office of Finance. The Office of Finance will be taking the lead on ESG software. We are here to help.
Over the next few months, we’ll take a look at the role of Finance in ESG and will highlight how our partners, IBM, Workday Adaptive Planning, BlackLine and more are approaching ESG. Stay tuned for blog posts on these partners!