Increasingly, organisations are under pressure from numerous stakeholders to incorporate sustainability practices into their business strategies. As companies set ambitious environmental, social, and governance (ESG) goals, they often look to providers of sustainability management software to help them reduce their environmental impact and ensure employees are treated fairly.
What is sustainability management software?
Sustainability management software, also known as ESG software, helps organisations of all sizes track and report on metrics related to their ESG goals, such as greenhouse gas emissions, waste production, energy consumption, and more, said Abhijit Sunil, senior analyst at research firm Forrester.
“These tools help with data collection from different parts of the organisation for calculating the carbon footprint of the organisation,” he said. “And they enable companies to create dashboards to help multiple personas internally make decisions accordingly.”
Sustainability management tools also help create scenarios that enable companies to understand the pathways they can take to reduce the carbon footprints for the business and how they can set targets for the business to do that, according to Sunil.
In addition, sustainability management software helps enterprises with reporting this data out into standardised reporting frameworks and standards, such as the CDP (formerly Carbon Disclosure Project), the Global Reporting Initiative, the Task Force on Climate-Related Financial Disclosures, and others, he said.
However, sustainability also means paying attention to social and governance issues — the “S” and “G” in “ESG.” While much of the attention in sustainability is focused on emissions reporting, it’s not unidimensional, said Amy Cravens, a research manager at IDC.
Increasingly, organisations are expanding their ESG initiatives to track performance in other environmental issues (water, waste, circularity, and biodiversity), as well as social (workforce and community impact) and governance (compliance, ethics, privacy, and security) issues.
“A holistic ESG program will be significantly more impactful in reducing the organisation’s risk and benefiting the community and environment,” she said.
IDC is seeing a huge demand among organisations for sustainability management software, said Cravens. “That’s because ESG is still kind of new for a lot of companies, and they’re still struggling to understand what they need to do and how to approach it,” she said. “The software in conjunction with service providers is helping companies get around their ESG reporting.”
Benefits of sustainability management tools
There are a number of benefits to implementing sustainability management software, including:
Better data collection: Sustainability management tools provide automated data collection and monitor a company’s energy use, how much waste it produces, how much water it uses, and more, according to Aapo Markkanen, vice president, analyst at Gartner. The software eliminates the need to manually monitor and collect data, and, as such, accelerates the process, making it more efficient and reducing the risk of errors.
Data-driven decision making: The software collects and analyses sustainability data to help companies make decisions about how to reduce their environmental impact, set their sustainability goals, track their progress toward meeting those goals, and determine ways to improve.
Increased transparency: The reporting and analytics capabilities of ESG tools enable companies to communicate their sustainability efforts to stakeholders, including employees, customers, and investors. Being transparent about their commitments to sustainability builds trust from clients, partners, and consumers.
Reduced environmental impact: Sustainability management tools help companies define the key steps they must take to minimise negative environmental impact. These steps include recycling materials, reducing carbon emissions, and eliminating single-use plastics.
Compliance with laws and regulations: Environmental laws and regulations, as well as those addressing social justice and governance, are constantly changing, and violating them can be harmful to organisations. Sustainability management tools help companies ensure that they stay abreast of these regulatory changes and remain in compliance.
Improved reputation and brand image: The majority of consumers are more apt to do business with environmentally conscious companies. According to a 2020 McKinsey Co. survey, “60 to 70 percent of consumers said they would pay more for [products with] sustainable packaging.” Consequently, in addition to enhancing their reputations, organisations that adhere to sustainable business practices will likely increase revenue.
Defense against ‘greenwashing’ claims: Sustainability management platforms help companies build a defense against greenwashing and greenwashing claims, according to Cravens. Greenwashing occurs when organisations intentionally or inadvertently make untrue statements about sustainability performance. To counter greenwashing, organisations need to validate their claims, she said.
“Sustainability management solutions help organisations do this by producing fact-driven ESG reports and by linking metrics to foundational data, providing audit-ready disclosures that can withstand greenwashing accusations,” Cravens said.
Key features to look for in sustainability management software
Organisations should look for sustainability management software that includes the following features:
- Environmental compliance: To ensure organisations comply with environmental laws, standards, and regulations, this feature monitors and reports on companies’ environmental performance by tracking and managing their compliance obligations.
- Social compliance: Helps companies understand how they treat various groups of people — customers, employees, suppliers, community members, etc. — and understand the societal impacts of their business decisions.
- Governance compliance: Helps organisations assess the effectiveness of their governance policies and ensure they maintain regulatory compliance.
- Energy management: Businesses can use the software’s data analysis tools to monitor their energy use and uncover areas where they’re using too much energy or not using it efficiently. Companies can also uncover patterns and trends in their energy consumption and identify ways to boost efficiency.
- Emissions monitoring: Monitoring emissions helps companies ensure that they are complying with environmental regulations and identifying ways they can decrease emissions.
- Reporting/analytics: Sustainability management tools collect data from a variety of sources, including water and electric meters and waste management systems; compile it in a central database; and then analyse the data to uncover trends, patterns, and irregularities in energy and water use, carbon emissions, and waste production. The tools do the same with data related to social factors, including employee wages, employee engagement, diversity and inclusion, and data security, as well as governance factors, including diversity of board members, executive compensation, business ethics, and regulatory compliance.
- Alerts: With sustainability management tools, organisations can take the initiative to identify and address potential environmental issues. The software enables companies to set limits for such environmental factors as waste generation as well as water and energy use. The software will monitor these levels and generate alerts if environmental indicators go over those levels.
- Inspections management: Companies can use sustainability management tools to arrange and manage sustainability inspections for their assets, equipment, and facilities, ensuring inspections are done in a timely manner and according to a set schedule. Organisations can also assign these inspections to certain employees and track their progress.
- KPI monitoring: Sustainability management tools allow companies to set specific environmental and social objectives as key performance indicators. The software can track these KPIs over time and generate reports, enabling companies to see their progress toward meeting their sustainability goals.
Pitfalls to avoid when choosing sustainability management software
Here are some of the common pitfalls of sustainability management tools that companies should avoid:
Selecting tools that do not scale: “Scalability is one of the most common pitfalls we identify in conversations with end users, and what we advise them to pay attention to,” said Gartner’s Markkanen. “These tools may seem quite compelling when they are deployed as a proof or concept or in the pilot stage, but getting that scaled up to a global level to cover all of [an organisation’s] operations is a challenge.”
Not considering that it’s still early days for ESG software: Companies need to understand that most sustainability management tools have only been on in the market for about two years, said IDC’s Craven.
“Because a lot of the capabilities are still being developed, it’s really hard at this point to decide which one is going to be the best solution in the long run — which is going to have the most longevity and which is going to have the best features — because they’re still mostly in the development stage,” she said. “So it’s difficult for companies to determine which will be the lead solution two years from now.”
Cravens advised organisations to look for products from vendors with an established market presence. Although this does not preclude young companies, organisations should identify vendors with solid customer and partner bases and that have strong funding, such as Persefoni, she said.
“The large ISVs [independent software vendors] and hyperscalers moving into the market, while their solutions are young and still developing, have the resources to advance quickly and lack some of the risks of startup vendors,” she said. “Identify vendors that have expressed a long-founded commitment to sustainability, such as IBM or SAP, as they are often the most committed to developing solutions and assigning resources to these products.”
Not basing priorities on organisational capabilities and industry: A lot of these tools offer a variety of features, and organisations should select them based on their industry and what their current baseline is, said Forrester’s Sunil. “For example, some [companies] have very advanced internal sustainability teams, and they already have their processes in place, while others have not started at all,” he said.
Equally important is determining the vendor’s track record in your industry. “If you’re in the automotive industry, you should determine if the tool has good benchmarks in that industry,” Sunil said. “You should also find out if they have worked with other automotive firms in the past, and if they have refined their tools to work with the data types that are relevant for the auto industry.”
Failing to consider future requirements: Because regulations and frameworks are constantly changing, it’s important for companies to choose sustainability management tools that can easily adapt to any changes.
6 leading sustainability management platforms
There are numerous sustainability management platforms on the market. To help you begin your research, we’ve highlighted the following products based on discussions with analysts and independent research.
IBM Envizi ESG Suite: Delivered as a software-as-a-service (SaaS) collection of nine modular data and analytics products. Helps customers capture, track, and report ESG data on energy use and emissions. Consolidates more than 500 sources of enterprise ESG data, including from building automation and management systems, energy retailers, and equipment, into one system to make it easier for organisations to collect, manage, and glean insights from that data. Integrates with IBM’s application resource management, facility management, and enterprise asset management tools. Suited for existing IBM customers or organisations with mature sustainability programs.
Microsoft Cloud for Sustainability: With automated data connections and actionable insights, helps companies record, report, and reduce the environmental impact of their operational systems and processes in near real time. Brings together ESG capabilities across the Microsoft cloud portfolio as well as from Microsoft partners. Helps organisations measure data center emissions related to their use of Microsoft 365 services, including Exchange Online, Outlook, SharePoint, OneDrive, Microsoft Teams, Microsoft Word, Excel, and PowerPoint, using the Microsoft Cloud for Sustainability API.
Persefoni: Bills itself as the “platform for climate management.” Offers streamlined carbon accounting and decarbonisation planning. Enables companies to quickly meet stakeholders’ regulatory climate disclosure requirements and requests. Designed to be easy to use, the platform enables customers to track and measure their emissions across all business lines and processes. Persefoni’s Net Zero Navigator lets organisations build and track decarbonisation strategies tailored to their needs. Best for large multinational companies, asset managers, and banks that require greenhouse gas accounting automation and financial reporting.
Salesforce Net Zero Cloud: Built on the Salesforce Lightning Platform. Enables companies to manage their environmental impact and track how close they are to achieving net zero. Offers numerous tools and resources to measure and reduce energy consumption, emissions, and waste. Integrates data from multiple sources, automates workflows, and offers reporting on key sustainability metrics to help companies reduce emissions and save money. With Net Zero Cloud, organisations can determine their greenhouse gas emissions and manage third-party sustainability data. Best fit for enterprises that are aiming to go net zero in the foreseeable future.
SAP Cloud for Sustainable Enterprises: Collection of cloud-based software, including ESG and sustainability reporting tools to help companies manage their carbon use, reduce material waste, and become socially responsible. Enables companies to connect their financial, social, and environmental data so they can make better business decisions. Provides companies with insights on the environmental impact of their products. SAP Sustainability Control Tower helps organisations identify and analyse sustainability targets they haven’t yet met and take action on them. Companies can use SAP Sustainability Footprint Management to assess their carbon footprints on product and corporate levels with SAP’s carbon accounting software.
Wolters Kluwer Enablon ESG: Includes sustainability and ESG reporting tools as well as apps that enable companies to manage greenhouse gas emissions, sustainability performance, and stakeholder relationships. Lets companies centralise and validate their ESG data from sources across the enterprise, reducing the time it takes to collect that data and simplifying reporting against multiple standards. Ability to track granular emissions from field assets and lower environmental impact across the business. Best suited for life sciences, oil and gas, manufacturing, utilities, and other organisations that require environmental, health, and safety coverage.