U.S. Firms Push Ahead on Sustainability, ESG Amid Changes --ISG

Companies in the U.S. plan to keep investing in digital initiatives for sustainability and ESG despite political change and uncertainty, according to a new research report by Information Services Group (ISG), a global AI-centered technology research and advisory firm.

The 2024 ISG Provider Len Sustainability and ESG report for the U.S. finds the market for digital solutions to improve environmental and social sustainability and corporate governance is rapidly evolving, with some federal regulations likely to be scaled back while others survive under the current administration. Surveys indicate U.S. enterprises will continue to carry out digital sustainability initiatives to maintain brand value, reduce risks and save money.

“Companies in the U.S. recognize that mandatory ESG reporting is a matter of when, not if,” said Matt Warburton, Digital Sustainability lead for ISG. “Achieving accurate reporting will require both investment and time.”

As investors consider the impact of climate change on company valuations, demand in the U.S. is higher for environmental solutions than for those aimed at social sustainability or corporate governance, the report says. The market for data platforms and managed services is growing fastest, driven by increasing global regulation. IT solutions and services are growing more slowly than OT and strategy and enablement services, because IT is a relatively small part of the carbon footprint of most enterprises.

More organizations are realizing there is no “one size fits all” sustainability solution and are seeking technology partners with deep experience in regulations for their specific industries, ISG says. The U.S. market has a diverse, growing landscape of providers that collaborate on these intricate transformations. AI, ML and IoT solutions for asset-intensive industries, such as power and utilities, manufacturing and transportation, are most common.

AI and ML have become foundational tools to accelerate and improve ESG solutions, while generative AI has begun to emerge in this space over the past year, the report says. Providers’ first GenAI-enabled offerings have created a wave of optimism about how this technology may address sustainability challenges, especially reporting. To show a return on investment, these tools will need to be trained on specific use cases.

Many U.S. enterprises are integrating sustainability efforts into broader digital transformations, ISG says. These projects typically represent 5 percent to 10 percent of the overall program cost and share the implementation cost for greater financial efficiency.

“Many sustainability initiatives lower costs and help companies retain customers and attract employees,” said Jan Erik Aase, partner and global leader, ISG Provider Lens Research. “Those effects multiply the benefits of digital transformation.”

The report also explores other sustainability and ESG trends in the U.S., including the impact of European ESG laws and steps toward regulation of AI’s social effects.

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