In a recent interview with Reuters, SAP said it sees growing demand for sustainability software, even as the U.S. looks to weaken climate protection targets.
“The topic of sustainability will not disappear from investors' discussions,” said SAP chief financial officer Dominik Asam in an interview. “I spoke to many investors at the World Economic Forum in Davos who are concerned with sustainability. They are very optimistic despite the recent U.S. elections.”
He is not alone in his assessment.
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“We do see a lot of applications, some solutions specific to that space,” Amy Cravens, research manager at analyst firm IDG told GlobeSt.com. “It seems to be one of the more resilient to political changes because there are financial incentives.”
“Overall, we’re seeing spend on software increasing,” Cravens added. “The transition from voluntary reporting to mandatory. That is a strong lever in Europe, but we’re seeing regulation in other regions as well. And organizations in other regions responding to regulation that may fall in other jurisdictions.”
But while sustainability software use may be growing, it is also a complex topic to discuss. Different categories of available software can blend into one another.
Cravens forecasts the total market size of the software at about $6 billion globally. Disclosure management is worth $1.2 billion by itself. “It’s very blurry between these spaces,” she said, because of the overlap in functions.
Visual Lease, now part of CoStar Group, has been conducting surveys. In 2023, the percentage of financial executives who said their companies had analyzed environmental data was 58%, which is up a fifth since 2023. The percentage that had established environmental benchmarks in 2023 was 39%. That number is now 43%.
“We still have 14% out there saying they have yet to begin their analysis and planning for a report,” Bill Harter, principal ESG solutions advisor at Visual Lease, told GlobeSt.com. “There have been a lot of questions of what will be.”
“I’m seeing the people I’m talking to aren’t quite sure about which way to go,” Harter adds. “The EU itself, the CSRD requirements, they’re pushing straight on ahead. But in the individual countries, there is some political backlash that I think is going to push things back a little bit.”
Five years ago, a lot of ESG reporting didn’t happen with specialty software. It was “very speculative, very soft and fluffy — very aspirational,” says Harter. “There’s a definite drive for software to help companies make sense out of this. But an awful lot of people are saying artificial intelligence is going to figure this all out. Eventually, it’s going to, but the problem with large language models of AI is you need a structure.” And the software isn’t ready yet to do what is necessary.
Driving adoption, Harter says, is that parts of compensation plans are tied in part to ESG targets. “Is there going to be some pushing back on it? Possibly. But it’s not a given. People are going to be pushing in both directions. There are people digging in on the other side. People are drilling in and trying to back up with real numbers.”
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