Get Ready To Report: The ESG Reporting Software Market Will Reach $4.5 Billion By 2027

Get Ready To Report: The ESG Reporting Software Market Will Reach $4.5 Billion By 2027

Rising concerns over climate change, biodiversity loss and human rights have prompted stakeholders and regulators to inquire about firms’ sustainability performance. To garner stakeholders' trust and avoid regulatory risk, organizations are increasingly leveraging ESG reporting software solutions to collect, analyse and disclose information on their ESG impact. Verdantix research finds that the ESG reporting software market was worth over $905 million in 2021 and will grow to more than $4.35 billion by 2027, at a CAGR of 30%.

The stringent regulatory pressure is a driving force behind the forecasted spending in ESG reporting software. Upcoming regulations – such as the EU’s Sustainable Finance Disclosure Regulation (SFDR), the SEC Climate Disclosure and the UK Climate Related Financial Disclosure Regulations – integrate environmental and social factors into financial disclosures, holding firms accountable for the environmental and social impact of their investments. For example, in December 2022, the European Union signed the Corporate Sustainability Reporting Directive (CSRD), which will demand over 49,000 firms disclose the ESG impact of their operations by 2024.

Additionally, shifting investment practices trigger the need to ensure consistent ESG compliance. Failing to do so poses strong reputational and legal risks, as we saw last year when the SEC fined Goldman Sachs $4 million for failing to comply with its ESG policies and procedures for three of its investment portfolios. Hence, organizations increasingly perceive ESG not only as a reporting exercise but as a strategy-integration process.

The need for accessible, consistent and reliable investor-grade data and the importance of streamlining ESG compliance will cause firms to ramp up their spend on ESG reporting software. Verdantix expects Europe to become the leading market for ESG reporting digital tools, expanding at a 34% CAGR from 2021 to 2027. Industry-wide, as ESG becomes a financial and corporate strategy factor, firms will seek software solutions that generate investor-grade data, ease compliance, and offer guidance to improve ESG performance and reporting processes. Hence, Verdantix expects the financial sector and services industry to accelerate spending on ESG reporting software, triggered by an increasing regulatory burden and a deeper integration of sustainability as a factor for business success.

To learn more about the growth of the ESG reporting software market and spending expectations across industries and regions, read the latest Verdantix Market Size And Forecast: ESG Reporting Software Solutions 2021-2027 (Global).