Worldwide spending on ESG to reach $158 bn in 2025: IDC

New Delhi: A new forecast from International Data Corporation (IDC) estimates that environmental, social, and governance (ESG) business services spending will grow to $158 billion in 2025 with a five-year compound annual growth rate (CAGR) of 32.3 per cent.

The IDC in a statement said the organizations 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.
“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, organizations are beginning to understand the business cases for sustainability. Those organizations that develop and implement plans to better internalize and address their environmental and social impact stand to thrive in the years ahead as leaders in the sustainability space.” he said.
IDC defines environmental, social, and governance (ESG) business services as traditional professional services that are centered around achieving goals related to environmental and social sustainability and the governance of that process.
The main focus areas for organizations’ investment in sustainability are business strategy, human capital management solutions, and risk management.

The largest area of spending, strategy consulting, will enable organizations 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 organization-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.

“By the end of the forecast period, IDC expects sustainability-linked business consulting services to encompass nearly two thirds of the total business services market,” added Versace.

“With this market being still in its infancy, opportunities for differentiation are everywhere. Firms should assess their sustainability-linked business services to determine where these offerings can best be utilized and identify other end-user pain points where new offerings will be needed.”

The IDC report, Worldwide ESG Business Services Forecast, 2022–2025 provides the first forecast through analysis of the worldwide ESG business services market by IDC-defined services lines.