How big is the market for corporate sustainability solutions?
The increasing demand for sustainability has created a growing market for sustainable software and services. Companies across various sectors are recognizing the importance of adopting sustainable practices, not only to reduce their impact on the environment but also to enhance their reputation and bottom line. Sustainability software and services help organizations track, measure, and report their environmental, social, and governance (ESG) performance. In this blog post, we will discuss the size of the sustainable software and services market and some of the key trends and drivers.
What is it?
Corporate sustainability refers to the concept of businesses operating in a manner that balances their economic, social, and environmental impacts. It involves implementing strategies and practices that minimize negative impacts on the environment, while also benefiting society and ensuring long-term profitability. It is generally consolidated as the E (environment) in ESG initiatives with the Chief Sustainability Officer or executive lead reporting to the CEO or CFO.
Key aspects of corporate sustainability include reducing greenhouse gas emissions, using sustainable resources and materials, traceability and supply chain resiliency, promoting social responsibility, and ensuring ethical business practices. Overall, the goal of corporate sustainability is to create a business model that is sustainable in the long term and supports the well-being of people and the planet.
So how big is the market?
There is not a clear consensus on the size of the market. We estimate the range between $990 million and $8.3 billion in 2021. Researchers project substantial growth ranging from $12.2 to $18 billion by 2028. We believe the variance is caused by different definitions for the ESG, software, services and consultancy segments. If we add the consultancy numbers to software and services, the total addressable market could be as high as $32 billion by 2028 with all segments experiencing double digit growth.
How does the market segment the vendors?
Regarding Consultancies, Verdantix Research Director Kim Knickle said, “Over the next five years, businesses will have to reorientate themselves around ESG and Sustainability priorities. This represents a complex challenge that will take place against a rapidly evolving regulatory backdrop. As a result, consultancies stand to benefit as firms look for external expertise to help them achieve transformational change and more rigorous standards of reporting.”
While there is no consensus on the mix between software and services, the software segment is expected to grow $1 billion to $4 billion due to the increasing demand for sustainability software solutions for tracking, reporting and compliance. The consulting segment, dominated by major global firms is also expected to grow at a significant rate as companies seek guidance on sustainability strategy and implementation. We could find no separate breakdown on data providers but assume they have been consolidated in the software segment.
What is driving the growth?
The market is driven by factors such as increasing demand for sustainability data and reporting, growing regulatory requirements, and the need for companies to improve their environmental, social, and governance (ESG) performance. The market is also segmented by region, with North America and Europe being the largest markets for sustainable software and services.
The growth of the sustainability software and services market is being driven by several factors, including:
- Regulatory compliance deadlines: Many countries and regions have implemented regulations that require companies to disclose their ESG performance (example, the European Union’s Non-Financial Reporting Directive)
- Consumer demand: Consumers are becoming more environmentally and socially conscious and are choosing to do business with companies that share their values. (See our previous blog post on consumer preferences).
- Segment awareness: Increasing awareness about the benefits of sustainability management software among businesses and organizations as the big consultancies compete for thought leadership.
- Expanded market: A growing number of small and medium-sized businesses implement sustainability management software to improve their environmental performance.
- AI and data sources: The proliferation of big data and analytics is helping organizations make better decisions about their resource utilization and greenhouse gas emissions reductions strategies using sustainability management software toolsets.
- Investor pressure: Investors are increasingly focused on ESG issues and are demanding more transparency and accountability from companies.
Final Thoughts
The critical elements of corporate sustainability programs include reducing greenhouse gas emissions, using sustainable resources and materials, traceability and supply chain resiliency, promoting social responsibility, and ensuring ethical business practices. Chief Sustainability Officers are faced with hard targets and the need to lead fast transformational initiatives across global organizations.
The goal is to create a business model that is sustainable in the long term and supports the well-being of people and the planet. They will need the best out of every consultant, software, services and data vendor to achieve their goals.
