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As concerns about environmental, social, and governance (ESG) issues continue to rise, organizations in every industry are feeling the pressure to adopt more transparent and thorough ESG reporting practices. Many companies are now looking to their Chief Information Officers (CIOs) to lead the charge in creating effective ESG reporting strategies.
For CIOs, this involves not only setting up the right data infrastructure and governance but also selecting the best tools for the job. While some companies have tried to adapt existing technology solutions to meet ESG reporting needs, growing regulatory demands and the need for more comprehensive transparency are prompting many to invest in purpose-built ESG tools. ESG software can help organizations move beyond basic compliance and work towards improved ESG performance overall..
[ Download our editors’ PDF environmental, social, and governance (ESG) reporting software buyer’s guide today! ]
What is ESG?
Environmental, social, and governance (ESG) refers to the three main areas used to evaluate a company’s sustainability and societal impact.
- Environmental factors focus on how a company minimizes its ecological footprint, such as reducing carbon emissions or conserving resources.
- Social factors involve how a business manages relationships with employees, customers, and communities, including diversity, equity, and inclusion efforts.
- Governance factors cover corporate policies, transparency, and accountability, ensuring ethical behavior and compliance with laws and regulations.
ESG reporting involves gathering, analyzing, and presenting data on these factors to meet regulatory requirements, attract investors, and align with company values.
Why ESG Reporting Tools Are Critical
ESG reporting tools simplify the collection and analysis of data across various categories. They provide companies with:
- Accurate Reporting: Ensures compliance with new regulations and frameworks.
- Improved Transparency: Builds trust with stakeholders by sharing clear, reliable ESG data.
- Enhanced Performance: Identifies areas for improvement and tracks progress over time.
With regulatory frameworks like the EU’s Corporate Sustainability Reporting Directive (CSRD) setting stricter standards, companies must choose tools that not only handle compliance but also support long-term sustainability goals.
Key Features to Look for in ESG Reporting Software
When evaluating ESG tools, consider these essential factors:
1. Involve Key Stakeholders Early
The first step is to involve the right people in the decision-making process. This includes leaders from IT, sustainability, compliance, and other departments that will use or rely on the reporting tools.
According to Daragh Mahon, CIO at Werner Enterprises, “Bringing the right people to the table helps define what the ideal platform should accomplish. It ensures that the tool meets everyone’s needs, from gathering data to producing actionable insights.”
2. Focus on the Problem You’re Solving
ESG reporting needs vary widely. Some companies prioritize compliance with regulations like CSRD, while others focus on environmental metrics such as carbon footprint reduction. Identify your top priorities before selecting a tool.
Tom Andresen Gosselin, ESG director at Schellman, advises selecting software that addresses the entire ESG lifecycle, including data collection, analytics, and risk management. Avoid overly narrow solutions that address only one area, such as greenhouse gas reporting, unless that’s your sole focus.
3. Prioritize Integration with Existing Systems
Your chosen software must work seamlessly with the systems your company already uses. Tools that integrate with enterprise resource planning (ERP) platforms, data analytics solutions, and customer relationship management (CRM) systems can streamline workflows and reduce manual effort.
For example, Allianz Technology chose Microsoft’s Sustainability Manager for ESG reporting because it integrates with Office 365. This compatibility made adoption easier and improved efficiency.
4. Ensure Bidirectional Data Flow
Effective ESG tools don’t just gather data—they share it across your organization’s systems. This two-way communication allows businesses to:
- Use ESG insights to inform broader strategies.
- Eliminate silos by creating a single source of truth for ESG data.
5. Consider Scalability and Future Needs
Look for tools that can grow with your organization. Regulations and ESG expectations are constantly evolving, so it’s essential to choose flexible software that can adapt to new requirements.
Mahon emphasizes treating vendors as long-term partners. “A strong relationship with your solutions provider ensures their tools will continue to meet your needs as ESG reporting evolves,” he says.
Top Vendors for ESG Reporting Software
The ESG software market is rapidly growing, with options ranging from standalone tools to integrated modules within larger enterprise systems. Here’s an overview of some leading providers:
Enterprise Software Providers:
These companies offer ESG tools as part of their broader platforms:
- Microsoft (Sustainability Manager)
- Salesforce (Net Zero Cloud)
- SAP
- Oracle
- Workday
Specialty ESG Tools:
These companies focus on dedicated ESG reporting and sustainability management:
- Workiva
- Diligent
- Sphera
- UL Solutions
- MSCI
- Navex
Other Notable Vendors:
Additional providers include:
- Diginex Solutions
- Nasdaq
- Wolters Kluwer
- SustainIQ
- OneTrust
Final Tips for Choosing the Right Tool
- Assess Total Cost of Ownership: Balance upfront costs with long-term benefits. Modular solutions can offer flexibility, allowing companies to start small and expand functionality later.
- Evaluate Vendor Roadmaps: Choose vendors that align with your company’s ESG vision and plan to evolve their products over time.
- Focus on User Experience: Select tools that are easy for employees to adopt and use regularly.
- Plan for Comprehensive Integration: Ensure the tool connects to all relevant systems to maximize value.
By making thoughtful decisions today, companies can build a robust foundation for ESG reporting that not only meets compliance standards but also drives meaningful improvements in sustainability and corporate responsibility.
