How ESG Disruptors Are Advancing Product Composition Transparency And Compliance Innovation

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How ESG Disruptors Are Advancing Product Composition Transparency And Compliance Innovation

The need for organizations to demonstrate strong E, S and G credentials is mounting. Pressure from investors, a maturing regulatory landscape and evolving consumer preferences mean that ESG is top of mind for the c-suite and executives.

For firms that manufacture chemicals, use chemicals as part of production processes or manufacture components and products, a diligent approach to product compliance that is aligned with their organization’s ESG strategy is critical. Our latest ESG global survey found that one-third of sustainability leaders consider EHS - the function responsible for the operational aspects of product compliance including safe chemical handling - to be the most significant function in terms of implementing a firm’s sustainability strategy. Moreover, 77% of sustainability leaders consider product design and innovation to be significant in supporting their firm’s sustainability strategy. The importance of product compliance is clear to see in practice. Consider Dupont’s use of ‘forever chemicals’ that lead to the contamination of drinking water in 2001, an incident that was eventually settled for $670 million. Not only does this reinforce data collected through our survey, but it also demonstrates the financial, health, safety, environmental, societal and brand reputation damage caused by product compliance processes that are not also aligned with ESG goals.

Through analysis of the product compliance software market Verdantix has identified several ESG disrupters that are directly influencing product compliance software users’ needs and innovation in the market. Key disrupters include circular economy initiatives, product carbon footprint requirements, green chemistry innovation, and regulatory pressure that blends product compliance with ESG, such as the German Supply Chain Act and Conflict Minerals. These drivers are already having a direct effect on provider roadmaps. For instance, in May 2022 VelocityEHS partnered with Praedicat to launch a Green Chemistry offering that tackles ESG challenges. To cope with more demanding disclosures resulting from regulation and product carbon footprint initiatives, a central trend in the market is to facilitate greater product composition transparency. Typically, materials and chemicals disclosures only require information on a sub-set of the total components used. However, full product composition transparency is becoming a key requirement for stakeholders in all industries. Software providers are having to adapt by migrating to digital formats for product labels to aggregate full product composition data in an accessible way whilst also protecting supplier intellectual property. Moreover, software must support buyers in collecting ESG and corporate social responsibility (CSR) related data.

To learn more about the product compliance software market, solution types and their traits, and key areas of innovation buyers should be aware of, read our latest Buyer’s Guide for product compliance software.
Senior Analyst

Chris is a Senior Analyst in the Verdantix EHS practice. His current research agenda focuses on EHS software, product compliance software and digital mental health and wellbeing solutions. He was also the lead author of the most recent Verdantix EHS Software Green Quadrant benchmarking study. Chris joined Verdantix in 2020 and has previous experience at EY, where he specialized in robotic process automation (RPA). He holds an MEng in Engineering Science from the University of Oxford, with a concentration on machine learning and machine vision.