U.S. Firms Seek ESG Help as Demands Grow More Complex

Rhea-AI Summary

The ISG Provider Lens™ report highlights the growing demand for sustainability and ESG services in the U.S., driven by factors like geopolitics and investor preferences. Companies face risks such as impending regulations and loss of reputation, pushing them to improve ESG performance. Successful projects can lead to compliance, cost savings, revenue growth, and brand value. The global market for sustainability and ESG services is expected to double by 2030. Despite legal challenges, the link between mitigating ESG risk and market value is recognized. Companies struggle with data collection and reporting requirements, driving demand for compliance services.

Insights

Sustainability Analyst

The growing emphasis on sustainability and ESG (Environmental, Social, Governance) within enterprises is indicative of a broader shift in the corporate landscape. The report's projection that the global market for sustainability and ESG services will likely double by 2030 reflects an increasing integration of these considerations into core business strategies. This trend is driven by several factors, including investor preferences, consumer behavior and impending regulations.

From a sustainability perspective, businesses are recognizing the need to mitigate risks associated with climate change, such as asset damage from extreme weather events. Moreover, the potential for improved market valuation through ESG compliance is becoming more apparent. The move towards mandatory disclosures of climate-related risks and emissions data in the U.S. signifies a more stringent regulatory environment, which will likely compel companies to seek specialized services for data management and reporting.

However, the legal challenges mentioned in the report could introduce uncertainty into the market, potentially affecting the growth trajectory of ESG services. Despite this, the overall momentum towards greater ESG integration seems robust, with the demand for such services set to rise as companies aim to align with global standards and stakeholder expectations.

Financial Analyst

The ISG report's insights on ESG investments have significant implications for the financial services industry. The link between ESG risk mitigation and increased market value is a crucial consideration for investors and financial firms. As companies face pressure to improve their ESG performance, those that effectively manage and report on sustainability practices are likely to be more attractive to investors seeking long-term value creation.

Impending regulations, particularly in the U.S., may increase operational costs for companies due to the heightened data collection and reporting requirements. This could affect short-term profitability but may be offset by the long-term benefits of compliance, such as lower capital costs and enhanced brand value. The report suggests that firms with fragmented data storage or inadequate recording practices will need to invest in technology solutions and managed services to meet regulatory demands, which could lead to increased business for providers in this space.

While the report predicts significant growth in the ESG services market, the potential dampening effect of legal challenges against ESG-based investment decisions remains a risk factor. Investors will need to monitor these developments closely as they could influence the pace and scale of ESG service adoption.

Technology Analyst

The use of digital twins and AI in advancing sustainability initiatives, as highlighted in the report, represents an intersection of technology and ESG that is ripe for exploration. Digital twins can simulate sustainability scenarios, allowing companies to analyze the impact of various initiatives before implementation. This can lead to more efficient use of resources and better decision-making.

AI's role in sifting through vast amounts of ESG-related data to identify actionable insights is becoming increasingly critical. As companies are inundated with data from various sources, the ability to distinguish useful information from extraneous noise is essential for effective ESG reporting and performance improvement.

The technology solutions and managed services sector is set to expand as businesses seek to integrate ESG considerations into their operations. Providers that can offer robust data platforms and technology implementations will be well-positioned to capitalize on this growing demand. The report's identification of key players in this space serves as a guide for enterprises looking to partner with providers that have proven capabilities in facilitating ESG compliance and performance enhancement.

Enterprises are working with an expanding set of providers to measure and improve their sustainability and ESG performance, ISG Provider Lens™ report says

STAMFORD, Conn.--(BUSINESS WIRE)-- U.S. enterprise investments in sustainability and other ESG initiatives are likely to expand significantly in the next several years as companies are under growing pressure to measure and improve their ESG performance, according to a new research report published today by Information Services Group (ISG) (Nasdaq: III), a leading global technology research and advisory firm.

The 2023 ISG Provider Lens™ Sustainability and ESG (Environmental, Social, Governance) report for the U.S. finds demand for sustainability and ESG services is lower in the U.S. than in Europe but is being driven by many of the same factors, including geopolitics, investor preferences and consumer buying behavior. Enterprises in all regions face risks that include impending regulations, loss of reputation, higher capital costs and damage to assets caused by extreme weather.

“U.S. companies know they need to improve their sustainability and ESG performance but face increasing complexity at every turn,” said Andy Miears, director, adaptive organization, with ISG. “Providers offer services to help clients navigate every stage of the process.”

Successful sustainability and ESG projects can deliver not just compliance with regulations and standards but significant business benefits, including lower costs, higher margins, increased revenue and incremental brand value, the report says.

The global market for sustainability and ESG services is likely to double from 2022 to 2030, ISG says. In the U.S., impending federal and state laws may force companies to disclose hundreds of data points related to climate-related risks, emissions and decarbonization.

“New regulations will significantly increase the data collection and reporting burden on U.S. companies, driving demand for services to help them comply,” said Jan Erik Aase, partner and global leader, ISG Provider Lens Research. “Many firms today store this data in disparate systems or do not record it at all.”

Investors and financial services companies have recognized the link between mitigating ESG risk and increasing market value, which has helped to drive demand for ESG services, the report says. However, legal challenges against financial firms using ESG principles to choose investments may dampen growth in the U.S.

With more regulatory bodies worldwide requiring enterprises to disclose and improve their ESG performance, it is becoming harder for companies to identify and obtain the necessary ratings and benchmarks, ISG says. While traditional evaluations have focused on environmental performance, many are adding social and governance factors. Rating and benchmarking services, provided on a global basis, are rapidly expanding to address these challenges.

The report also explores other ESG trends, including the use of digital twins to simulate sustainability initiatives and the pivotal role of AI in distinguishing between useful and extraneous information.

For more insights into the ESG challenges facing U.S. enterprises, including how to determine which reporting standards to comply with, and advice for meeting those challenges, see the ISG Provider Lens™ Focal Points briefing here.

The 2023 ISG Provider Lens™ Sustainability and ESG (Environmental, Social, Governance) report for the U.S. evaluates the capabilities of 103 providers across five quadrants: Strategy and Enablement Services, Technology Solutions and Implementation Services — IT, Technology Solutions and Implementation Services — OT, Data Platforms and Managed Services and Rating and Benchmarking Services.

The report names Accenture, Cognizant, HCLTech, IBM, Infosys, TCS and Wipro as Leaders in four quadrants each. It names Capgemini, Deloitte, EY, PwC and SAP as Leaders in three quadrants each. CGI, EcoVadis, KPMG, LTIMindtree and Siemens are named as Leaders in two quadrants each. Bain & Company, BCG, Bloomberg, CDP, Cority, ERM, ESG Book, FactSet, ISS ESG, Moody’s ESG, MSCI, LSEG Data & Analytics, S&P Global, Sustainalytics, VelocityEHS and Wolters Kluwer are named as Leaders in one quadrant each.

In addition, Hitachi Digital Services is named as a Rising Star — a company with a “promising portfolio” and “high future potential” by ISG’s definition — in two quadrants. RepRisk, Schneider Electric and Sphera and are named as Rising Stars in one quadrant each.

A customized version of the report is available from HCLTech.

The 2023 ISG Provider Lens™ Sustainability and ESG (Environmental, Social, Governance) report for the U.S. is available to subscribers or for one-time purchase on this webpage.

About ISG Provider Lens™ Research

The ISG Provider Lens™ Quadrant research series is the only service provider evaluation of its kind to combine empirical, data-driven research and market analysis with the real-world experience and observations of ISG's global advisory team. Enterprises will find a wealth of detailed data and market analysis to help guide their selection of appropriate sourcing partners, while ISG advisors use the reports to validate their own market knowledge and make recommendations to ISG's enterprise clients. The research currently covers providers offering their services globally, across Europe, as well as in the U.S., Canada, Brazil, the U.K., France, Benelux, Germany, Switzerland, the Nordics, Australia and Singapore/Malaysia, with additional markets to be added in the future. For more information about ISG Provider Lens research, please visit this webpage.

A companion research series, the ISG Provider Lens Archetype reports, offer a first-of-its-kind evaluation of providers from the perspective of specific buyer types.

About ISG

ISG (Information Services Group) (Nasdaq: III) is a leading global technology research and advisory firm. A trusted business partner to more than 900 clients, including more than 75 of the world’s top 100 enterprises, ISG is committed to helping corporations, public sector organizations, and service and technology providers achieve operational excellence and faster growth. The firm specializes in digital transformation services, including automation, cloud and data analytics; sourcing advisory; managed governance and risk services; network carrier services; strategy and operations design; change management; market intelligence and technology research and analysis. Founded in 2006, and based in Stamford, Conn., ISG employs more than 1,600 digital-ready professionals operating in more than 20 countries—a global team known for its innovative thinking, market influence, deep industry and technology expertise, and world-class research and analytical capabilities based on the industry’s most comprehensive marketplace data. For more information, visit www.isg-one.com.

View source version on businesswire.com: https://www.businesswire.com/news/home/20240212940090/en/

Will Thoretz, ISG

+1 203 517 3119

will.thoretz@isg-one.com



Julianna Sheridan, Matter Communications for ISG

+1 978-518-4520

isg@matternow.com

Source: Information Services Group, Inc.

FAQ

What does the ISG Provider Lens™ report focus on regarding sustainability and ESG?

The ISG Provider Lens™ report highlights the growing demand for sustainability and ESG services in the U.S., driven by factors like geopolitics and investor preferences.

What are some risks companies face in terms of ESG performance according to the report?

Companies face risks such as impending regulations, loss of reputation, higher capital costs, and damage to assets caused by extreme weather.

What are the potential benefits of successful sustainability and ESG projects mentioned in the report?

Successful projects can lead to compliance with regulations and standards, cost savings, higher margins, increased revenue, and incremental brand value.

What is the expected growth in the global market for sustainability and ESG services by 2030 according to ISG?

The global market for sustainability and ESG services is likely to double from 2022 to 2030, according to ISG.

How are companies impacted by legal challenges related to ESG principles in the U.S.?

Legal challenges against financial firms using ESG principles to choose investments may dampen growth in the U.S.