The importance of integrating sustainability and ESG technology

Sustainability and environmental, social, and governance (ESG) concerns have shifted from voluntary efforts to integral parts of regulatory compliance and long-term strategy. By 2025, the integration of ESG technology into a company’s core business platform will no longer be a strategic initiative for the future; it will be a business imperative.

The evolving regulatory landscape

ESG-related regulations in the U.S., Canada and other nations are tightening rapidly, pushing companies to adopt more transparent and auditable processes for sustainability reporting. High-profile regulations, such as the European Union's Corporate Sustainability Reporting Directive and Corporate Sustainability Due Diligence Directive, are already reshaping the corporate governance landscape. California’s climate reporting and disclosure laws, Canada’s modern anti-slavery and anti-greenwashing laws, the Uyghur Forced Labor Prevention Act, and the U.S. Securities and Exchange Commission’s proposed climate-risk disclosure rules add to the complexity​.

These regulations require businesses to report on their sustainability efforts, carbon emissions and broader ESG initiatives with the same rigor as they do financial data. In 2025, companies will need robust ESG technology to measure their compliance progress and track, report and audit ESG data as stringently as financial information. For example, many companies will need to track Scope 1 and 2 carbon emissions—and increasingly, Scope 3 emissions, which involve indirect emissions from suppliers and other third parties​.

Timely and accurate ESG reporting

Organizations must provide traceable, auditable ESG data that satisfies customers, regulatory bodies, lenders and investors. California, the SEC and other global regulatory entities will require annual reports that contain verified, accurate and comprehensive ESG metrics​.

Companies must have a clear and structured approach to ESG data collection and management. Businesses will need digital tools that can automate the gathering, verifying and reporting of sustainability data. They must also provide a clear audit trail to demonstrate compliance​.

ESG integration and automation

ESG reporting involves a massive amount of data from various sources across the business ecosystem, including operations, supply chains and third parties. Carbon management platforms, enterprise resource planning modules, business process automation, supply chain tools, compliance software and other ESG technologies are helping businesses collect, analyze and report on this data more efficiently​.

To support reporting and compliance efforts, major software providers are developing technology that focuses on ESG. These platforms include:

• AuditBoard
• Equifax Supplier Risk Solution
• Microsoft Cloud for Sustainability
• Oracle Enterprise Performance Management
• NetSuite
• ServiceNow ESG
• Salesforce Net Zero Cloud
• Workiva

The systems integrate data sources and leverage artificial intelligence to compile, validate, analyze and report on ESG data​. These tools ensure the accuracy of reported data and reduce the burden of sustainability reporting, allowing executives to focus on strategic initiatives rather than managing manual data collection.

Companies that integrate ESG technology into their core platforms enhance compliance and future-proof their business operations. In addition, ESG tools offer automation, scenario planning and forecasting functionalities that can model the potential impact of sustainability initiatives, helping organizations align with decarbonization goals and science-based targets.

Additional benefits

For chief administrative officers, chief financial officers and chief information officers, the case for prioritizing ESG technology in 2025 is clear: The cost of noncompliance with ESG regulations can result in fines, legal repercussions and reputational damage. But beyond the compliance aspect, investing in ESG technology can enhance decision making and create new revenue opportunities. It can also provide the following benefits:

• Operational efficiency: Automated ESG platforms can streamline manual ESG reporting processes and reduce labor costs.
• Cost optimization: By tracking emissions and resource usage, companies can identify inefficiencies and implement measures that reduce their environmental footprint and save on costs.
• Risk mitigation: Noncompliance with ESG regulations or errors in sustainability reporting could result in legal action, fines or loss of market access. Robust ESG systems provide the transparency and auditability required to avoid these risks.

ESG data as a strategic asset

Integrating sustainability data into the organization’s digital infrastructure offers new avenues for innovation and insight. ESG data is not merely a compliance metric but a strategic asset that can be leveraged to optimize business performance, enhance customer relationships and strengthen supply chains​.

A data-driven sustainability approach can improve decision making. For example, procurement teams can use data to select suppliers based on sustainability criteria, reducing the organization’s risk of exposure to child and forced labor. This process also limits the company’s Scope 3 emissions while strengthening its sustainability credentials​. This can enhance the company’s standing with investors and customers, who increasingly prioritize sustainability in their decision-making processes.

Competitive advantage  

The companies that embrace and prioritize ESG technology will have a significant competitive advantage. Businesses that proactively adopt ESG strategies and integrate technology into their sustainability reporting and decision making will take advantage of the market demand for sustainable products and services. The race to sustainability is as much about opportunity as it is about risk.

Companies that report ESG performance clearly, accurately and in line with regulatory demands will avoid penalties and position themselves as leaders in sustainability. They will attract lenders and investors, build trust with customers, and create value across the business ecosystem. Companies that delay this transition risk being left behind, in terms of both compliance and market positioning​.

The takeaway

Regulatory and compliance requirements will dictate when companies need to have ESG reporting fully embedded into their core operations. Waiting any longer will expose companies to compliance risks, inefficiencies and missed opportunities for growth. As the regulatory landscape evolves, the integration of ESG technology will ensure compliance and create a foundation for organizations to future-proof.

ESG technology needs to be a priority in a company’s next platform or technology release. Treating ESG reporting with the same diligence as financial reporting is no longer optional. This means advocating for budget and resources now to ensure the organization is ready to meet the demands of 2025 and beyond.