In early 2023, ARC Advisory Group, a technology market research firm, released the “ESG Software Emerging Market Analysis Report,” written by Peter Manos, director of research for ARC Advisory Group. Manos focuses on trends related to energy transition, industrial sustainability and digital transformation and talked with Plant Services about his software vendor emerging market research and sustainability trends for industry.
The market report considered 30 different software vendors, a wide variety of large enterprise and smaller software companies. About half a dozen are large publicly traded companies, which have added tracking and reporting and analysis capabilities for ESG to a large portfolio of software solutions, often enterprise resource planning (ERP), enterprise asset management or risk management tools. “And the other two dozen are in some very evolutionary pathways that got them to have ESG software in their mix,” Manos says.
Some companies have a legacy in traditional financial reporting (tracking income statements, cash flow, and balance sheets) or operational risk management or ORM (object-relational mapping) solutions. The largest pathway outside of the main enterprise software vendors are legacy environmental, health, and safety (EHS) solutions that have added ESG capabilities. Some are offering EHSS (or environmental, health, safety, and sustainability) solutions, and others are adding ESG modules to EHS solutions.
Manos says Tier One end users are engaging equally vigorously with Tier Three-sized solution providers because the skills sets are so specialized. “I’m not seeing a lot of what people might have expected: Tier One end users to go with Tier One vendors to put the solutions in the space, as it’s a pretty open market. It’s not totally driven from that perspective,” Manos says.
He says he was also encouraged to see ESG executives embrace transparency. In line with long-term goals set by the Paris Climate Accords, most companies can meet 80% of their long-term net zero goals, but the last 20% will require more transparency between end user communities, solutions providers and the stakeholders and communities they both serve. For more on global sustainability standards, click here.
“Transparency is going to help those solutions come forward and the alliances and partnerships and creativity to be unleashed to address the 20% that we don't know how we're going to get there yet,” Manos says.
Likewise, accountability up the supply chain is going to also differentiate “leaders from followers,” Manos says. Many industries have or are getting a firm grasp on their own carbon footprints, but sustainability will extend beyond the plant walls, both upstream and downstream of the supply chain. “We are paying for the costs of the more energy inefficient equipment, either indirectly or directly,” Manos says.
At a point in the future, when industrial decision-makers weigh options by looking at the total lifecycle costs, and sustainability will be part of doing business, Manos calls this the sustainability singularity. The name is in reference to artificial intelligence (AI) singularity, the point at which AI becomes self-aware, or the event horizon of a black hole, at which point nothing can return. “The third definition of singularity aside from the physics and IoT one is, ‘Hey, we’re all on an island; this planet is a single system’,” Manos says. For more on sustainability in the supply chain, click here.
The ARC report indicates that ESG software can be a key factor for enabling the decisions that have to be made about internal facility changes and changes to the industry as a whole. Where there’s still negativity around ESG and emissions reduction from many industries, and where, “There’s economic backlash, some of it is valid; some of it’s bogus. But how do you decide those issues: with more ESG data, not with less,” Manos says.