ESG Risk Management Solutions Are Quickly Coming to Market as Enterprises Expand Their Overall GRC Strategy, According to IDC Business WireESG Risk Management Solutions Are Quickly Coming to Market as Enterprises Expand Their Overall GRC Strategy, According to IDC Business WireESG Risk Management Solutions Are Quickly Coming to Market as Enterprises Expand Their Overall GRC Strategy, According to IDC Business Wire
Impact Investing Forum 2023
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NEEDHAM, Mass BUSINESS WIIRE) – As companies are increasingly tasked to collect and report on ESG metrics, there is a market for software solutions that can support the ever-changing requirements of ESG risk management. International Data Corporation (IDC) recently forecasted that worldwide ESG risk and reporting software revenue will more than double in the 2020-2025 forecast period and grow to more than $720 millions by 2025. In the past few years, there has been a seismic shift in how ESG risks are prioritized by market participants. ESG has become a key decision factor for consumers and investors. While corporate social responsibility (CSR), has been an important tenant of corporate governance risk and compliance (GRC), for some time, it has now become a foundational factor for consumers, investors and enterprises. Traditional CSR approaches were primarily focused on philanthropic activities, but they weren’t necessarily linked to the need for positive business outcomes. ESG, on the other hand, is performance-driven and focuses on the materiality/business impacts of ESG activities. ESG is distinguished from CSR by its association with existing frameworks or emerging legislation. CSR is mainly a governance issue, with policies being dictated internally. ESG tracking and reporting, on the other hand, is largely a governance issue with policies being dictated by internal mandates. Companies are unable to effectively monitor ESG risk, and it is even more difficult to use data to make tangible changes. These frameworks can be used as a guideline for what companies should be tracking for ESG. However, different scoring systems and methodologies can cause inconsistency when comparing companies’ ESG performance. Companies can design their ESG reporting to only capture the good data and ignore the bad. This allows them to present an optimistic view of ESG activity. These metrics are not reliable and can lead to concerns about greenwashing. ESG risk management solutions are rapidly emerging as a segment of risk management software. These solutions were originally designed to track and report ESG metrics, but they are now being integrated with other areas of risk management, such as third-party risk and operational risk, privacy risk and business resilience. You can further subdivide the ESG risk software landscape into solutions that enable companies to manage risks and solutions that allow them to report on their ability manage risk. Solutions that use a modular approach to ESG risk management are primarily data management tools. ESG metrics are consolidated, organized according to applied frameworks, and tracked over the years. These solutions can be used to track and report on past events and are retrospective,” Amy Cravens, research manager, Governance, Risk and Compliance at IDC. Solutions that integrate an ESG lens across a company’s risk landscape, are deeply integrated into existing processes and leveraged as strategic business tools, are at the other end of this spectrum. These tools can be predictive and gather intelligence to monitor indicators and respond to risk vectors. ESG is rapidly becoming a key component of companies’ overall governance risk and compliance (GRC). IDC expects that ESG risk management solutions will be more popular among GRC users than ever before, with 50% of them using them by 2021. This figure will rise to over 90% by 2026. The IDC report, Emerging ESG Risk Management Solutions (IDC# US48240421) provides an overview of the market for ESG risk management software solutions. The report discusses key market drivers such as investment, reputational, legislative developments and key elements of an ESG management ecosystem. It also examines the competitive environment for ESG solutions. This includes point solutions that focus on ESG risks reporting to the financial sector as well as integrated ESG risks solutions as part of governance, risk and compliance (GRC). About IDC
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