The Future of ESG Is Digital, and Software Leads the Way

The future of ESG is digital, and the transition is no longer theoretical. Five months into 2025, the evidence is unmistakable in quarterly earnings calls, venture capital deal flow, and the frantic procurement decisions of compliance teams across Europe and North America. When the European Union’s Corporate Sustainability Reporting Directive took effect in January, it exposed a reality that sustainability professionals had quietly feared: manual processes cannot scale to meet modern disclosure requirements.

The numbers tell the story. The ESG software market reached $1.92 billion in 2024 and is projected to hit $5.54 billion by 2033, growing at 12.5% annually according to market research firm Straits Research. Yet these figures understate the acceleration. Osapiens, a German-Spanish ESG tech startup, doubled its customer base and revenue in 2024 following a $120 million Series B funding round led by Goldman Sachs Growth Equity in January 2024. The urgency is palpable.

Consider the scale of the compliance challenge. The CSRD is set to impact over 50,000 companies, requiring detailed environmental, social and governance data according to the European Sustainability Reporting Standards. For a typical mid-sized manufacturer, this means tracking roughly 1,100 data points. Companies that assumed they had more time discovered in the first quarter that spreadsheets were never going to suffice.

This is not the orderly transition to sustainable business that corporate communications departments promised. It is expensive, technically complex, and shot through with uncertainty about which vendors will survive the inevitable consolidation. But the direction is clear. Software has become critical infrastructure, not optional tooling. The era of managing sustainability through Excel died somewhere around March 2025. Anyone still attempting it is learning the hard way.

Carbon Accounting Becomes Computational

The future of ESG hinges on solving the carbon measurement problem, and here the software transformation proves most dramatic. In 2023, companies reported that Scope 3 supply chain emissions were, on average, 26 times greater than their emissions from direct operations according to research from Boston Consulting Group and CDP. These indirect emissions have been notoriously difficult to measure. Software is changing this through automated data integration and artificial intelligence estimation.

Modern platforms connect directly to procurement systems, analysing transaction data to estimate emissions from purchased goods and services. When actual supplier data is unavailable, machine learning models estimate carbon intensity based on industry averages, spend categories, and regional emission factors. The accuracy remains imperfect but improving rapidly.

In June 2024, Wolters Kluwer launched CCH Tagetik ESG & Sustainability for Carbon Emissions, integrating pre-configured carbon data management capabilities based on the GHG protocol. The solution assists companies in reporting and disclosing direct and indirect carbon emissions, including Scope 3, to comply with CSRD requirements. This shift from periodic carbon accounting to continuous monitoring represents a fundamental change in how sustainability teams operate.

The computational approach extends beyond measurement. Modern carbon management platforms model decarbonisation scenarios, calculating the cost and emissions impact of interventions from renewable energy procurement to logistics optimisation. They track progress against science-based targets in real time, automatically flagging when trajectories deviate from goals. The future of ESG in carbon management is this shift from retrospective accounting to predictive strategy.

Yet the software creates a new problem: it produces so much data that teams struggle to interpret it. Organisations have gone from having too little information to drowning in metrics. The challenge is no longer data scarcity but data literacy. Companies now need data analysts alongside sustainability experts.

The Supply Chain Visibility Problem

Supply chain emissions account for an average of three-quarters of a company’s total greenhouse gas footprint according to CDP data, yet they remain the weakest link in ESG reporting. The challenge is straightforward: companies have thousands of suppliers across multiple tiers, most of whom are not measuring their own emissions accurately.

Software vendors promise to solve this through supplier engagement platforms that automate data collection at scale. The reality proves more complicated. Large suppliers with sophisticated systems can provide detailed emissions data. Smaller suppliers, particularly in developing markets, often lack the capacity to measure or report their environmental performance reliably.

The result is a tiered system emerging across global supply chains. Tier one suppliers to major corporations are rapidly digitising their ESG reporting, driven by customer requirements and, increasingly, access to financing. Everyone else remains in the analogue world, filling out spreadsheets or, more commonly, not responding at all.

Several platforms are testing AI-powered estimation to fill the gaps. By analysing supplier characteristics including industry, location, size, and operational patterns, algorithms estimate likely emissions. These proxy calculations spark controversy. Critics argue they perpetuate poor data quality and reduce pressure on suppliers to measure actual performance. Proponents counter that imperfect data beats no data when making strategic decisions about supply chain decarbonisation. The future of ESG supply chain management will be determined by which approach prevails.

The technology is also enabling new approaches to supply chain transparency. Blockchain applications, while still limited in scale, are being piloted for traceability in industries from fashion to food. These systems create immutable records of sustainable sourcing claims, addressing greenwashing concerns. Whether they will scale beyond niche applications remains an open question.

Regulatory Complexity Drives Software Adoption

The future of ESG is regulatory complexity, and software is the only viable response. The CSRD, California’s climate disclosure laws, and evolving international standards create a compliance landscape that changes monthly. Keeping pace manually has become impossible.

California’s SB 253 requires U.S.-based companies with over $1 billion in annual revenue doing business in California to report their Scope 1 and 2 greenhouse gas emissions by August 10, 2026, and Scope 3 emissions starting in 2027. SB 261 mandates biennial public reporting on climate-related financial risks by companies with over $500 million in annual revenue, beginning January 1, 2026, though enforcement has been temporarily paused following a federal court injunction.

The regulatory technology sector focused specifically on ESG compliance has responded. These platforms maintain libraries of regulatory requirements that update automatically as rules change. They map company data to relevant frameworks including GRI, SASB, TCFD, and the ISSB standards. They generate reports in required formats and maintain audit trails demonstrating compliance processes.

In January 2025, EQS Group acquired Daato Technologies, a sustainability software provider, to enhance its ESG management capabilities and provide an integrated solution for navigating regulations. This deal exemplifies the broader consolidation trend. Large corporate software vendors and private equity firms are acquiring specialist ESG platforms, betting that regulatory complexity will force companies to adopt enterprise-grade systems.

The acquisition activity has been remarkable. In April 2024, UK-based investment firm Redwheel completed its acquisition of Ecofin, a sustainability-focused boutique managing $1.4 billion in assets, to enhance Redwheel’s ESG investment capabilities. Accenture, SAP, Microsoft, and other enterprise giants have all made sustainability acquisitions or built internal capabilities over the past eighteen months. They understand that ESG is becoming embedded infrastructure rather than a standalone function.

Artificial Intelligence Enters the Picture

AI applications in ESG have moved from experimental to operational in 2025. Natural language processing systems now draft disclosure reports from structured data. Computer vision algorithms analyse satellite imagery to verify deforestation claims in supply chains. Predictive models forecast ESG performance and identify emerging risks.

In February 2025, Cologne-based startup Planted secured €5 million in seed funding to enhance its AI-driven ESG software, backed by TechVision Fonds, WENVEST Capital, neoteq ventures, AWS Gründungsfonds and Smart Infrastructure Ventures. The AI-powered software automates data extraction and impact analysis, potentially saving users up to 75% of their time. Even achieving half that improvement would prove transformative for overburdened sustainability teams.

The most significant AI applications focus on data processing rather than decision-making. Large language models extract ESG data from supplier documents, purchase orders, and contracts, processing in minutes what previously required days of manual review. This matters because CSRD and similar regulations require companies to report not just their own performance but also material impacts throughout their value chains.

In July 2024, MSCI launched its next-generation ESG Analytics Suite, featuring AI-powered tools for predictive sustainability insights and enhanced compliance capabilities. Predictive analytics are enabling proactive management. Rather than responding to problems after they appear in quarterly reports, companies can now forecast performance trajectories and intervene early.

The limitation remains data quality. AI models trained on poor data produce poor predictions. Many companies are discovering that their underlying ESG data infrastructure is too weak to support sophisticated analytics. They are spending on software before fixing fundamental data collection problems, a sequence that rarely ends well.

The Professional Identity Crisis

Digital transformation is fundamentally reshaping what ESG professionals do. The administrative burden of data collection and report preparation is diminishing. Time freed up should redirect toward strategic activities including stakeholder engagement, program development, and integration of ESG into business decisions.

Yet the reality for many sustainability teams is that they are drowning in software implementation projects, struggling to interpret floods of new data, and still manually reconciling inconsistencies between systems. The promised efficiency gains remain largely hypothetical for organisations mid-transition. The future of ESG work is being reshaped faster than professionals can adapt.

Job descriptions are evolving nonetheless. Postings for ESG roles in early 2025 increasingly emphasise data analysis skills, familiarity with specific software platforms, and ability to translate sustainability insights into business strategy. Technical competencies around carbon accounting and regulatory frameworks remain important but are assumed to be software-supported rather than performed manually. The future of ESG as a profession demands technologists who understand sustainability and sustainability experts who understand technology.

The profession is also growing. An overwhelming 87% of CEOs support incorporating ESG metrics into regular corporate reporting, underscoring the critical role these factors play in shaping modern business practices. Salaries have risen correspondingly, with senior ESG managers in large companies now earning compensation comparable to similar-level finance and operations roles.

Yet a disconnect persists between what companies want and what the market provides. Sustainability professionals with deep domain expertise often lack data analytics skills. Data analysts lack sustainability expertise. The intersection of these skillsets remains rare, creating talent bottlenecks that slow software adoption.

Integration Remains the Unsolved Problem

The most significant development in ESG software may be the push toward integration with core enterprise systems. Early sustainability platforms operated as standalone solutions, requiring duplicate data entry and manual reconciliation. Modern platforms integrate directly with ERP, procurement, and financial systems.

This integration enables ESG metrics to inform business decisions in real time. When procurement teams evaluate suppliers, ESG risk scores appear alongside pricing and quality data. When finance teams assess investments, carbon intensity factors into capital allocation models. This is the promise, at least.

The execution proves difficult. Enterprise systems were not designed with sustainability data in mind. Retrofitting them requires significant technical work and, often, custom development. In September 2024, SAP and Thomson Reuters announced a product integration, combining Thomson Reuters’ OneSource Statutory Reporting with SAP’s Sustainability Control Tower to offer enterprises a unified ESG reporting solution. Yet implementations remain complex and expensive.

Smaller companies face particular challenges. The integrated platforms designed for large enterprises cost $100,000 to $500,000 annually and require 6 to 12 months for implementation. That investment makes sense for companies facing CSRD compliance. For smaller firms without regulatory obligations, the business case proves harder to justify.

A two-tier system is emerging. Large corporations are building sophisticated, integrated ESG data infrastructures. Small and medium enterprises are muddling through with basic tools or, more commonly, still using spreadsheets. The gap between these tiers is widening, not narrowing. The future of ESG risks creating a divided landscape where only large, well-resourced organisations can meet stakeholder expectations.

The Market Reality Check

The future of ESG demands clear-eyed assessment of where software succeeds and where it struggles. The technology excels at automating data collection, maintaining regulatory libraries, and performing calculations at scale. It is revolutionising carbon accounting and enabling previously impossible supply chain visibility.

What software cannot do is make strategic decisions about sustainability priorities, engage stakeholders authentically, or ensure that ESG efforts drive actual environmental and social improvement rather than just generating better reports. Those remain human responsibilities.

There is also the question of market sustainability. The ESG software sector has attracted enormous capital over the past three years. Software investor Hg acquired AuditBoard, a cloud-based audit, risk, and ESG company, in May 2024, highlighting the growing importance of cloud solutions in the market. Some of this investment will generate strong returns. Much of it will not. The market is overcrowded with similar solutions, and consolidation is inevitable.

The cost question looms large. Is a $300,000 annual platform subscription justified by the value it creates? For companies facing regulatory compliance requirements and investor pressure, yes. For others, perhaps not yet. The market is sorting out pricing models that make sense for different company sizes and use cases. The future of ESG software pricing will determine how broadly these tools can be adopted beyond the largest corporations.

The regulatory drivers behind software adoption are strong and getting stronger. California’s climate disclosure requirements take effect in 2026 and 2027. Similar initiatives are emerging in other jurisdictions globally. The Energy & Utilities sector is the fastest-growing end-user segment in the ESG reporting software market, with a projected CAGR of 18.58% from 2025 to 2035, fueled by increasing decarbonisation targets and climate risk disclosure mandates.

This creates both opportunity and risk. Companies that digitise their ESG capabilities early will establish competitive advantages in talent recruitment, customer preference, and investor relations. Late movers will face steeper learning curves, higher costs, and reputational risks from compliance failures.

But the truly sophisticated organisations are recognising that software is necessary but not sufficient. The future of ESG requires combining digital tools with the human expertise to interpret data, make strategic choices, and drive genuine improvements in environmental and social performance. Get the balance right, and digital transformation amplifies impact. Get it wrong, and you end up with expensive software producing reports nobody reads and metrics nobody acts on.

That is the test facing ESG professionals through the second half of 2025 and beyond. The spreadsheet era has ended. The question now is whether the software era will deliver meaningful progress or just more sophisticated greenwashing. The answer depends less on the technology than on how companies choose to use it.