Requirements for sustainability reporting have been undergoing a political shift over the past year, including modifications to the EU’s reporting requirements. The difference between European and North American attitudes to sustainability as a priority, which were significant 15 years ago, began to converge toward the end of the ‘teens but now appear to be diverging. In the U.S. in particular, there have been legal challenges to state laws and a deregulatory emphasis at the Federal level. The scaling back of the scope and granularity of sustainability reporting is having its biggest impact on small and midsize establishments in the EU. Nonetheless, mandated reporting remains in place for larger enterprisers around the world, albeit to varying degrees. Moreover, there is still demand for enterprises to set and meet sustainability objectives to achieve increased operating efficiency and to associate their brand with responsible stewardship of the environment. For these enterprises, there remains the need to achieve efficient compliance with reporting mandates as well as to have processes and systems in place to set overall objectives and mechanisms to assign responsibility for meeting them across the enterprise.
Environmental sustainability became a major business priority following decades of concern over environmental health and the recognition that enterprises impose external costs on society through the use of shared resources such as air and water. Stakeholders increasingly expect organizations to measure and disclose environmental impacts, driving the demand for software that helps enterprises collect, analyze and report sustainability data. Sustainability reporting software has emerged as a specialized category to support these requirements and enable organizations to provide transparent, auditable disclosures.
In the context of enterprise software, ISG Research defines sustainability as the legally required disclosure of defined environmental impacts. These disclosures are governed by regulations that ensure data is reported consistently, transparently and in ways that are comparable and auditable. Sustainability extends beyond environmental impacts to include management of environmental risks, their potential impact on the enterprise and strategies designed to mitigate those risks. Double materiality is a foundational concept in these disclosures, referring to both how environmental factors affect the enterprise and how the enterprise affects the environment.
By the 2000s, some enterprises were voluntarily reporting sustainability information, though reporting quality varied and lacked standardized measurement methods. To address this inconsistency, non-governmental organizations created frameworks to improve accuracy and comparability. Over time, governments began mandating the use of established standards developed by independent groups, including the Global Reporting Initiative, the Task Force on Climate-related Financial Disclosures and the International Sustainability Standards Board. These frameworks aim to create uniformity across disclosures and ensure data can be used for regulatory and investment decisions.
Enterprises often struggle with ambiguous definitions, inconsistent measurement methods and limited visibility into environmental data sources. ISG Research asserts that by 2027,
Compliance requirements are a major driver of sustainability reporting, but there are also commercial incentives. Consumers increasingly consider environmental stewardship in their purchasing decisions, and this expectation also influences enterprise procurement. Organizations that demonstrate responsible environmental practices are often viewed more favorably by customers and partners.
Explicit measurement and monitoring of carbon emissions, water consumption and waste management can also uncover operational inefficiencies and opportunities to reduce costs. Environmental data provides a lens into how resources are used across the business, highlighting opportunities for conservation and improved profitability. Because economy and ecology share common principles of resource efficiency, sustainability metrics can reveal insights that financial data alone may not capture.
Regulatory requirements for sustainability reporting continue to evolve across global jurisdictions. The European Union’s Corporate Sustainability Reporting Directive is currently the most consequential mandate, but other countries, including the U.K., Canada, Australia, New Zealand, Singapore, Hong Kong and Mexico, also require environmental disclosures. This fragmented landscape creates complexity for multinational enterprises.
A major challenge for enterprises is the divergence of measurement and reporting standards across regulatory environments. Organizations operating in multiple jurisdictions must harmonize reporting processes while ensuring compliance with local laws. This complexity increases costs and can hinder transparency if environmental data is collected or interpreted inconsistently across regions.
To address these challenges, enterprises are increasingly investing in sustainability software that automates data collection, enhances reporting accuracy and reduces compliance risk. This category of software helps organizations meet evolving regulations by enabling real-time tracking, supporting audit-ready disclosures and managing emissions across Scopes 1, 2 and 3. Advanced capabilities include sustainability risk analysis, AI-driven forecasting, benchmarking and predictive analytics. When evaluating these platforms, buyers should consider integration with enterprise systems, adaptability to regulatory change and long-term scalability.
Accuracy in environmental reporting remains a significant operational challenge. Sustainability measurement often requires estimation and modeling rather than standardized accounting practices, such as double-entry bookkeeping. As a result, environmental data may not reconcile in the same way as financial data. Reporting systems that do not incorporate materiality assessments risk generating unnecessary costs and weakening strategic performance. Achieving targeted sustainability outcomes requires careful coordination between operational teams responsible for environmental initiatives and finance functions responsible for reporting accuracy.
Our recently released ISG Buyers Guide™ for Sustainability highlights features that support comprehensive sustainability management. These include streamlined data collection, automated reporting across multiple frameworks and real-time audit readiness. Integration capabilities are essential to connect with enterprise applications that serve as systems of record for environmental data. The framework supports full Scopes 1–3 emissions tracking and alignment with global standards while adapting to regulatory change. It also prioritizes supplier data acquisition, sustainability in sourcing and advanced analytics that forecast performance and balance sustainability goals with profitability. Features for double materiality assessments and machine-readable reporting, including inline extensible business reporting language, support transparency and auditability. Artificial intelligence capabilities, including generative AI and agentic AI, further enhance forecasting, analysis and reporting.
I strongly recommend that enterprises adopt sustainability software to address disclosure requirements. This is particularly important for large enterprises, publicly listed companies and multinational organizations subject to mandatory reporting. Many companies will find current systems inadequate. Investments in sustainability software should reduce compliance costs and risks while supporting strategic decision-making and long-term performance targets.
Regards,
Robert Kugel