NEEDHAM, Mass .– (COMMERCIAL THREAD) – As companies are tasked with collecting and reporting on environmental, social and governance (ESG) metrics, a market opportunity has arisen for software solutions that support the rapidly evolving requirements of asset management. ESG risks. According to a recent forecast from International Data Corporation (IDC), global ESG risk and reporting software revenue will more than double over the forecast period 2020-2025, reaching over $ 720 million in 2025.
The last few years have seen a tectonic shift in the prioritization of the ESG risk market. While corporate social responsibility (CSR) has been part of corporate governance, risk and compliance (GRC) for some time, ESG has quickly become a fundamental decision factor for consumers, investors. and businesses. And, while traditional CSR approaches have focused on philanthropic efforts without necessarily being directly linked to the need to generate positive business results, ESG is performance-driven and focuses on the materiality / business impact of ESG activities.
Another distinction between ESG and CSR is the association with existing frameworks and emerging legislation. CSR is largely a matter of governance, with policies dictated by internal mandates. In contrast, ESG monitoring and reporting is generally based on one of the many frameworks (Global Reporting Initiative [GRI], International Integrated Reporting Council, Carbon Disclosure Project [CDP], Climate Disclosure Standards Board, Sustainability Accounting Standards Board [SASB; now the Value Reporting Foundation]) and although adapted to the specific needs of each company, its application is more stereotypical.
The plethora of frameworks that currently guide ESG monitoring and reporting make it impossible for companies to effectively monitor ESG risks and even more difficult to leverage data to effect positive tangible change. Although these frameworks provide a general guideline on what companies should follow for ESG, the use of different methodologies and rating systems creates inconsistency in the comparison of companies’ ESG performance. The lack of standardization also allows companies to easily design their ESG reports to capture only the good data, ignore the bad, and present an overly optimistic view of ESG activity. Without standardization of the framework and reporting, these measurements are unreliable and have raised concerns about greenwashing.
In this context, a wave of ESG risk management solutions are entering the market as a rapidly evolving segment of risk management software. These solutions were initially designed to track and report ESG metrics, but are increasingly integrated with other areas of risk management, including third party risk, operational risk, compliance risk, confidentiality risk and business resilience. The landscape of ESG risk management software can be subdivided into solutions that allow companies to manage risk and solutions that allow companies to report on their ability to manage risk.
“At one end of the ESG risk management spectrum are solutions that take a modular approach and function primarily as data management tools, where ESG metrics are consolidated, organized around frameworks applied and tracked over time. . These solutions are retrospective, monitoring and reporting. on what has already happened, ”said Amy craven, Research Director, Governance, risk and compliance at IDC. “At the other end of the spectrum are solutions that apply an ESG lens to a company’s entire risk landscape, are deeply integrated and integrated into existing processes, and are leveraged as a strategic business tool. These tools are predictive, gathering intelligence to monitor metrics and react to redirect risk vectors. ”
ESG is quickly becoming a central part of the overall governance, risk and compliance (GRC) strategy of most companies, IDC expects the penetration of ESG risk management solutions among GRC users. increases from 50% in 2021 to more than 90% by 2026.
The IDC report, Emerging ESG risk management solutions (IDC # US48240421), provides an overview of the emerging market for environmental, social and governance (ESG) risk management software solutions. The report examines key market drivers, including developments in investment, reputation and legislation, as well as key elements of an ESG risk management ecosystem. It also examines the competitive environment for ESG solutions, including ad hoc solutions focused on reporting ESG risks to the financial community as well as integrated ESG risk management solutions as a component of governance, risk and management platforms. compliance (GRC).
International Data Corporation (IDC) is the world’s leading provider of business information, advisory services and events for the information technology, telecommunications and consumer technology markets. With more than 1,100 analysts worldwide, IDC provides global, regional and local expertise in technology, benchmarking and IT procurement, as well as industry opportunities and trends in more than 110 countries. IDC’s insight and insight helps IT professionals, business leaders, and the investment community make fact-based technology decisions and achieve their core business goals. Founded in 1964, IDC is a 100% subsidiary of International Data Group (IDG), a global leader in technology media, data and marketing services. To learn more about IDC, please visit www.idc.com. Follow IDC on Twitter at @IDC and LinkedIn. Subscribe to IDC Blog for industry news and ideas.