According to a recent survey by the International Data Corporation (IDC), companies with advanced environmental, social, and governance (ESG) strategies are increasingly adopting software solutions to address their data management and reporting requirements.

This shift signifies a significant move towards independent ESG programme management and a departure from relying on ESG consultants and service providers.

"Software platforms will play an essential role in an organisation's ESG maturity journey. These platforms will support organisations from early-stage data gathering and materiality assessments through sustainable business strategy enablement and every step in between," said Amy Cravens, research manager, GRC and ESG Reporting and Management Technologies.

IDC categorised organisations that have implemented ESG software into three levels of maturity. The first level, known as the early stage, involves companies that have established formal disclosure and compliance processes but have not yet incorporated ESG practices into their daily operations.

The second level, or middle stage, includes companies that have implemented ESG KPIs and controls to achieve their goals. The final level, the most advanced, is characterised by the integration of ESG practices into the organisation's overall strategy and business model.

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While there were differences in ESG maturity levels across industries, with the manufacturing and services sectors being further ahead than the education and government sectors, the goals for ESG software remained consistent. These goals included data management, data reporting, and risk management.

ESG software adoption was primarily driven by data management, followed by ESG reporting and ESG risk management, according to the IDC survey. Managing sustainability goals was identified as the most significant business priority for ESG software, although priorities varied across industries. The top four priorities across industries were improved compliance, improved financial performance, improved brand perception/customer loyalty, and improved operational efficiency.

While reporting was viewed as the most critical ESG software feature, data management remained a crucial factor in software purchasing decisions. As high-quality data availability is essential for both internal sustainability goals and external reporting initiatives, survey respondents identified data management, accreditation, and analysis as three of the most important ESG software capabilities. Carbon accounting, non-carbon accounting, and audit management were identified as some of the most crucial ESG software tools to meet data requirements.

The IDC report titled "ESG Software Perceptions Survey" evaluates how organisations prioritise and perceive critical ESG management tools. Apart from analysing the objectives and business priorities behind ESG software adoption, the report also examines ESG reporting requirements concerning geographic location, industry, and company size.

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Source: IDC