IT Vendors – ESG what’s in it for me?
ESG: How can IT Vendors overcome entry barriers to this growing market?
The Market Dynamic:
In a previous blog we explored the size and growth in the software and services market for ESG (https://www.cambiumllp.com/it-esg-market-growth/). To date a major driver of ESG reporting has been the investment community. Spend time on their forums and within the community you will soon hear about their concerns about the reliability of the reports and the need to improve. Their holy grail is a world where ESG analysis is as reliable as financial reporting. For these investors this will require the reporting companies to pay greater attention to their data management and to:
- Quality and Accuracy
- Availability and Accessibility
A daunting task given the breadth of data to be collected both from inside and outside the organisation. Coupled with growing legislation (UK and International) and consumer stakeholder interest, more and more reporting companies are having to dig deeper to satisfy these requirements. In practice this means that virtually all aspects of an organisation’s IT system will need to be, as a minimum able to accommodate this growing demand, or for the more strategic thinkers, embody a holistic approach that puts ESG at the centre of their system design and investment decisions.
In the early stages of this market opportunity, bespoke ESG reporting solution companies appeared and covered this initial need. However as the needs grew it became clear that more and more of the IT infrastructure needed to be reworked to match these ever-changing requirements.
The role of IT
IT vendors are uniquely positioned to solve this puzzle. Companies whose expertise in creating robust data management systems, streamline data collection, ensure real-time accuracy, and integrate diverse data sources, will be key players in transforming the ESG reporting challenges into a business-as-usual process.
Tools that can automate data aggregation, apply advanced analytics for quality checks, and provide comprehensive dashboards for real-time insights not only elevates the standard of ESG reporting but also provide additional sources of value. As reporting companies extend the range of tracked data, the forward-thinking businesses are looking to better leverage this data to improve their operational performance and return on assets. These benefits have included early transition away from unsustainable products and mitigation against supply chain failure. As these benefits become more widely talked about even the laggards will need to adopt this way of working to remain competitive.
Whether your sell to the IT Buyer, the Sustainability Manager or the Executive Board the role of IT in ESG data management is evolving rapidly and staying ahead of these trends will be critical for all of these roles. IT vendors must be part of this trend. If not, best case scenario – it is a market opportunity that others will benefit from. Worst case is that your offering becomes less and less relevant and you lose traction and revenue stream in your best accounts.
Clearing the Obstacles
None of this is to say that access to this market is straight forward and from the IT businesses we engage with we regularly hear…
“This ESG thing is a fad, it will be superseded by something else in a few years”
“This ESG is complicated, the sales and marketing teams don’t have the knowledge. – what does this ESG stuff all mean? And by the way – don’t you know I have a I have a quarter to close, 2024 marketing campaign to plan. How do I fit this in with the day job?”
“I am not sure there is a fit with what we offer, how do I connect what we do with what these ESG requirements”
“We don’t really engage with the right part of the business on this and I am not sure we have the credibility to do it well”
On the first point yes, ESG is part of a lineage that includes CSR, CDP, GRI etc and might be replaced with yet another 3 or 4 letter acronyms but the pattern is clear – Companies reporting and operating responsibilities are broadening out beyond the financial and that data, and how it is managed is becoming even more critical. IT vendors need to be part of this to stay relevant.
The other points are very addressable and with the right support can be done quickly. If you are looking for answers to any of these or just want to weigh up whether this is a market for your company, we would be happy to have a chat.