Demand for digital solutions that improve sustainability and environmental governance is growing in Europe, a new report by Information Services Group (ISG) has found.
According to the ISG Provider Lens Sustainability and ESG report for Europe, regulatory compliance, rising energy costs, and increasing stakeholder expectations are among the key drivers of demand for digital ESG solutions.
ISG estimates that the global digital sustainability market, which is currently valued at $21 billion, will grow to $34 billion by 2027, with a CAGR of 16%, approximately three times faster than the overall technology market.
Motivating factor
“Avoiding the risk of fines and brand damage from noncompliance with regulatory requirements is certainly a motivator for many investments in digital sustainability solutions,” commented Matt Warburton, digital sustainability lead at ISG. “However, research shows most European businesses want to become more sustainable anyway — provided they can find a way to do it profitably.”
Europe’s regulatory environment continues to lead global sustainability efforts, ISG noted, with regulations forcing companies to become more transparent and demonstrate verifiable progress reaching sustainability goals.
In addition, half of the EU’s electricity is now sourced from renewable sources, with wind power overtaking gas to become the region’s second-largest source of electricity generation. The EU has significantly reduced its reliance on Russian gas, which has dropped from 45% to 18% over the past three years.
Digital transformation
‘Increasingly, European companies are implementing sustainability-integrated digital transformation programs, which now incorporate social sustainability factors,’ ISG noted. ‘In addition, energy management systems that utilise digital twins, IoT sensors and machine learning are helping optimise energy consumption by facilities.’
Organisations that are benefiting the most from sustainability initiatives include firms in industrial, engineering, and manufacturing sectors that manage resource-intensive assets like built infrastructure, fuel-consuming vehicles, and heavy machinery, it added.
“New providers not typically seen in the technology markets are entering this space, mostly offering OT and industry-specific solutions,” added Jan Erik Aase, partner and global leader, ISG Provider Lens Research. “These new entrants, including consultancies and engineering firms, have enhanced their digital capabilities, posing a challenge to traditional IT service providers.” Read more here.
