Environmental, social, and governance (ESG) initiatives evolved from the concept of governance, risk, and compliance (GRC). This significant update reflects the changing consumer expectations towards becoming more conscious about their social and environmental impact. Keeping this in mind, companies also focus more on environmental and social issues than just complying with regulations and mitigating financial or operational risks. G2’s new Environmental, Social, and Governance (ESG) Reporting category will help software buyers choose the best tool to track their company’s ESG initiatives. 

Simplifying ESG and why does it matter

While ESG is not new, its environmental and social parts have become critical recently. In response to consumer pressure, companies and investors have started focusing more on it. 

A company’s operations and decisions have a vast and unpredictable social impact on its employees, customers, partners, communities, and social groups. So it becomes all the more important for a business to evaluate how it can best contribute to society. Hence, its social initiatives can range from diversity and inclusion to fair trade, anti-slavery, or anti-corruption. Environmental refers to initiatives protecting the environment from pollution and harm. A company’s role here can be proactive (through investments in green energy or sustainable raw materials) and reactive (reducing carbon emissions when it’s impossible to eliminate).

Governance, on the other hand, refers to what is now known as GRC, which ensures companies avoid breaking the law.

Governance initiatives are reactive, while environmental and social tend to be proactive. ESG is both. It ensures compliance with existing laws and aims to prevent environmental and social issues. 

How does ESG reporting software help?

ESG as a strategy is similar to GRC; however, the market for that software is still in its early stages. While governance, risk, and compliance (GRC) vendors started adapting their solutions to include new requirements, they failed to cover everything. With the main focus of GRC vendors yet to be the environmental and social parts of ESG, other vendors included some form of it in sustainability management software, corporate social responsibility (CSR) software, and diversity and inclusion consulting providers. 

However, as consumers and governments focus on ESG, investors want to ensure that the companies they back adhere to the same principles. And since evaluating ESG initiatives can be complicated, ESG reporting software was born.

The image below describes the intersection between ESG reporting and other categories on G2. 

How to use ESG reporting software?

ESG reporting software cannot identify and mitigate ESG risks. You’ll need to use other software solutions like GRC or EHS. Instead, the reporting tool helps you show investors and other stakeholders that you’re taking these challenges seriously and are doing something about them. 

While its scope may seem limited, ESG reporting software can be a great tool to attract investors, gain the trust of your customers, and hold yourself accountable.

Edited by Shanti S Nair