Enterprises are likely to spend $158 billion on environmental, social, and governance (ESG business services in 2025 with a five-year compound annual growth rate (CAGR) of 32.3 per cent, a new IDC report has said.
Organisations face mounting pressures to improve and document their ESG performance.
Because the initial steps to a sustainable transformation can be daunting to firms that have not attempted anything similar in the past, sustainability-linked consulting spending has become a high priority, according to the IDC forecast.
"In 2022, all enterprises are being pushed to transform and fundamentally change the way they do business to become sustainable enterprises," said Dan Versace, research analyst, ESG Business Services.
Owing to increased pressure from customers, investors, and regulators, organisations are beginning to understand the business cases for sustainability.
"Those organisations that develop and implement plans to better internalise and address their environmental and social impact stand to thrive in the years ahead as leaders in the sustainability space," said Versace.
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The ESG business services are centred around achieving goals related to environmental and social sustainability and the governance of that process.
The main focus areas for organisations' investment in sustainability are business strategy, human capital management solutions, and risk management.
The largest area of spending, strategy consulting, will enable organisations to efficiently embed sustainability into their business strategy, which is the driving force of corporate purpose and in turn sustainable operations.
"Human capital management will be the fastest-growing area of spending. This is primarily due to the dual challenge of creating large-scale organisation-wide training and process efficiency improvements necessary for sustainability efforts to succeed in the future, on top of addressing social pillar topics such as human capital management internally," the report mentioned.
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The increased spending across functions is forcing organisations to address corporate sustainability in a holistic way, moving away from the ad hoc approach that was present in years past.
"Firms should assess their sustainability-linked business services to determine where these offerings can best be utilised and identify other end-user pain points where new offerings will be needed," Versace said.
