IT Outsourcing Trends: ESG Compliance Software

ESG compliance software may be not as disruptive as AI innovations, but it’s an IT outsourcing trend that can hardly be ignored.

The amount of services provided and goods manufactured around the globe keeps growing steadily. Regarding the impact of such activity, and the fact that most natural resources are non-renewable, once optional, sustainability reporting has become mandatory for a vast range of organizations.

ESG reporting: the state of art

Environmental, social and governance (ESG) reporting is becoming a necessary part of business strategy for a growing number of institutions. Manual data collecting has proven to be error-prone, making the results of predictive analytics rather questionable and not as reliable as needed for effective decision making. That’s where ESG software comes in handy. 

To give you a better understanding of the complexity of ESG reporting, here is a brief summary of just a few of the major recent ESG regulations:

1. California Climate Accountability Package since October 7, 2023 declares that large companies must disclose their full carbon footprint (Scope 1, 2, and 3 emissions), as well as climate-related financial risks.
2. Corporate Sustainability Reporting Directive (CSRD) from January 5, 2023 provides a standard of mandatory ESG reporting for large European companies, and non-EU companies that generate €150M+ turnover within the EU. The CSRD will also be extended to small and medium businesses by 2028. It is rather comprehensive and encompasses
1. General company information, from core business processes, target market, stakeholders, to sustainability integration into the business strategy, sustainability-related risks and ways for their mitigation.
2. Environmental sustainability, covering Scope 1,2,3 emissions, net-zero goals and action plans; air, water, and soil pollution metrics; waste management initiatives, e.g. waste reduction, sustainable packaging, recycling, etc.; impact on biodiversity and ecosystems, e.g. deforestation risks, and preventative measures.
3. Social sustainability, from general statistics data, injury rate, wellness initiatives, training programs, to human rights compliance, and community engagement.
4. Governance sustainability, disclosing board gender diversity and inclusion, gender equity, anti-corruption and anti-bribery policies, donations, etc.
5. Double materiality assessment, including financial materiality (how sustainability factors impact financial performance), and impact materiality (how the company’s operations impact people and the environment.)
6. Independent audit verification from an external auditor, compliance with European Sustainability Reporting Standards (ESRS).
3. In the UK, the Financial Conduct Authority (FCA) introduced an anti-greenwashing rule effective from May 31, 2024. It is a part of the Sustainability Disclosure Requirements (SDR) meant to enhance transparency in sustainable finance. It aims to prevent manipulative misinformation about sustainable efforts behind the product or service creation. Companies should consider the full lifecycle of the product or service and avoid omitting or hiding important information that could influence decision-making, thus protecting consumers from misleading claims.

These and other recent regulations reflect a global trend toward more stringent ESG standards. They aim to promote sustainable development, and provide stakeholders with clearer and more reliable information. 

The landscape of ESG compliance software is evolving to meet the increasing demand for sustainable business practices. Recent developments highlight a surge in specialized software solutions aimed at enhancing sustainability across various industries. No wonder, the ESG software market is predicted to grow at staggering 17.3% CAGR.

 

The fact that Goldman Sachs, the American multinational investment bank, invested $120 million in osapiens, a German ESG software provider, is the eloquent proof that the demand for ESG compliance software is going to grow.

ESG software development at Apiko: Treeple case study

Implementation of corporate sustainability practices is not just about ESG compliance and mandatory reporting, and not a mere trend. It's a far-reaching strategy aimed at 

• Identifying the least sustainable operations within an organisation, e.g. the sources of major contamination and/or CO2 emission
• Setting the clear sustainability targets you’d like to achieve within a defined period of time
• Planning and executing actions to reach those targets
• Data-driven decision making, when after the retrospective analysis or with the real-time insights, one can make the respective adjustments to get even better results.

At Apiko, we have completed MVP development of ESG management software called Treeple Studio for EcoSphera, an Italian ESG consultancy company. In our minimum viable product we have not encompassed all the aspects of SCRD, but have rather focused on environmental sustainability. Further software product development is ongoing, but let’s take a look at the MVP first, and draw a parallel with CSRD compliance.

General company information: Enlist the company assets and organisational units, add the respective details and sustainability KPIs to make sure you monitor and manage all the essential supply chain ESG metrics. Apply filters to access the particular information in just a few clicks.

Environmental sustainability:

• Automate collecting ESG data to track Scope 1, 2, and 3 emissions
• Get email reminders and notifications about data submissions
• Plan and schedule tasks to be on track and monitor progress towards your sustainability goals

 

• Access the real-time and historical data via a convenient dashboard

 

• Analyze the obtained impact and use the predictive emission monitoring system to adjust your ESG strategy accordingly 

Independent audit verification:

Generate reports in a preferred format, so they can easily be not only used internally, but also assessed by external experts.

Take a closer look at primary ESG software features in this brief demo video.

 

ESG compliance software for construction industry

 

Tailored ESG software solutions are emerging to address these unique challenges of the construction sector, and to help reduce its CO2 footprint. For example, carbon management software is being developed to monitor and reduce emissions throughout the building process. 

Similarly, ESG software for the commercial real estate industry enhances sustainability in property management and operations.

 

In summary…

The ESG software landscape is rapidly advancing, with significant investments and innovations aimed at promoting sustainability across various sectors. Businesses are increasingly adopting specialized tools to monitor energy consumption, manage emissions, and comply with evolving environmental regulations.

Predictive emission monitoring systems (PEMS) utilize process data and statistical methods to predict pollution levels in real time, allowing for early detection and correction of issues before emissions exceed legal limits. This proactive approach helps companies comply with environmental regulations and avoid potential fines.

Advanced energy management systems (EMS) help organisations monitor and optimize their energy consumption. The software collects and analyzes data on electricity, water, and gas usage, enabling companies to reduce costs and minimize environmental impact. The global market for EMS reached $53.26 billion in 2025, compared to $35.78 billion in 2021. And it is projected to grow at a compound annual growth rate of 13% by 2030.

 

Employing the industry-specific ESG software solutions allows enhancing transparency, accuracy, accountability, and standardization in corporate sustainability practices. It greatly contributes to sustainability strategy implementation, sufficiently increasing its efficiency and effectiveness. With all said above, ESG software development will remain not only as a trend, but as one of the mainstreams in IT outsourcing.