Sustainability Software Faces Shake-Up as Rules Ease in EU and US
Takeaways
- The global sustainability reporting software market is slowing down as regulatory rollbacks in the EU and US reshape demand.
- Market consolidation is accelerating, with mergers, acquisitions, and partnerships among software vendors.
- Smaller vendors face survival challenges, while larger firms pivot toward integrated, cost-efficient platforms.
After years of rapid expansion, the sustainability reporting software industry is hitting a slowdown. The shift comes as both the European Union (EU) and the United States (US) ease their regulatory momentum, forcing hundreds of software vendors to rethink their growth strategies.
Fueled initially by a surge in environmental, social, and governance (ESG) regulations, the sector had become one of the fastest-growing segments in business technology. But according to market experts, the policy pullback is now sparking a wave of consolidation.
In December 2024, research firm Verdantix projected the global ESG reporting market to reach $5.6 billion by 2029, growing at 26% annually. However, with regulatory revisions underway, Verdantix is reassessing that outlook. “The industry is still growing, but not as much as previously forecast,” says Lilly Turnbull, a senior analyst tracking the sector.
Data from PwC’s Strategy& confirms the deceleration. The market has shifted from “hypergrowth triple-digit” annual revenue gains to double-digit growth, according to Marius Lorenz, Director of Deals, Strategy, and Operations at PwC.
Read More: Sustainability Policy Split Widens Between U.S. and EU in 2025
Regulatory Rollback Reshapes the Market
The slowdown stems largely from two major policy moves. The US withdrew its federal-level climate disclosure rules in March, while the EU began simplifying sustainability requirements. A key EU initiative, the Corporate Sustainability Reporting Directive (CSRD), could see its scope cut by more than 80% under the proposed omnibus reform.
These policy shifts are prompting widespread reassessment among sustainability software providers. “The omnibus proposal is clearly accelerating market consolidation,” says Viktoria Demin, Director of Sustainability Value Chains at PwC Germany. “Companies are either downsizing their operations or acquiring competitors to strengthen their market position.”
Consolidation Gains Momentum
Three main patterns are emerging as the market reorganizes:
- Larger firms are developing full-service platforms that integrate reporting, carbon accounting, and supply chain management.
- Smaller providers are forming strategic partnerships with established players to stay relevant.
- Private equity-backed companies are expanding aggressively through acquisitions.
One such player, Position Green, has continued its acquisition spree despite slower growth. “We are looking at consolidating the market,” says CEO Joachim Nahem, adding that investor demand for reliable ESG data remains strong. “If you want access to a wider pool of capital, you must disclose emissions or energy efficiency data,” he says. “There are also risks — getting insurance for any assets without climate risk data is becoming harder.”
Also Read: Top 10 ESG Software Platforms To Track Your Company Metrics
Survival of the Fittest
Still, analysts warn that not all vendors will survive. “Sub-scale firms that cannot secure a niche or partner will disappear, leaving a smaller set of more resilient players,” predicts Lorenz. Larger corporations are shifting focus toward interoperability, cost efficiency, and assurance-grade reporting, rather than piling on multiple tools.
Meanwhile, smaller firms, many no longer covered by the revised EU regulations, are reconsidering their investments. “SMEs are delaying software investment unless they face significant customer pressure or sustainability is critical to their business model,” Turnbull notes.
The industry’s rapid rise may be slowing, but the drive for accurate, transparent sustainability reporting, now shaped more by business necessity than by regulation, is far from over.
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Source: Sustainable Views
