According to a recent Verdantix analysis, this estimate shows a notable uptick brought on by stricter laws and increased demand for trustworthy sustainability data. According to Business Green, the EU's Corporate Sustainability Reporting Directive (CSRD) and the increased need for auditable ESG data to reduce associated risks are the primary drivers of the growth.

With a predicted 29% yearly rise in ESG software spending, Europe is expected to lead this upswing. Together with the Corporate Sustainability Due Diligence Directive (CSDDD), the CSRD is expected to impact over 50,000 EU businesses and more than 1,000 non-EU businesses.

With over 74% of G250 businesses currently aligning their climate risk reporting with the Task Force on Climate-Related Financial Disclosures guidelines, this significant shift occurs as the sector gets ready for required reporting standards under the EU's CSRD.

Global ESG reporting software spending is expected to rise, peaking between 2026 and 2028, before leveling off, according to Kim Knickle, research director of Verdantix's ESG and sustainability business. Demand is being driven by the imminence of sustainability reporting deadlines, such the CSRD, for more than 50,000 businesses worldwide, with substantial non-compliance implications.

With yearly growth projections of 25% and 24%, respectively, the North American and Asian markets are also expected to have strong expansion. State-level efforts in the US are still pushing for stricter ESG reporting requirements, even in the face of possible regulatory rollbacks by the Trump administration. The highest growth rates are anticipated in industries like manufacturing and wholesale and retail trade, as regulatory and supply chain-specific laws like the Australian Modern Slavery Act and the US Uyghur Forced Labor Prevention Act drive the need for high-quality, auditable data.

Furthermore, Knickle underlined that "strong, flexible reporting technologies are essential to ensure transparency, build stakeholder trust, and maintain a competitive edge as businesses face ever-evolving complexities." A wider range of stakeholders, including finance and compliance teams, are becoming more involved as a result of businesses employing ESG reporting and data management systems to improve decision-making, increase efficiency, and manage risks in addition to compliance.

This increase in spending on ESG reporting software reflects a larger trend of businesses depending more and more on technology to satisfy intricate stakeholder and regulatory requirements, keeping them competitive and compliant in a sustainability environment that is changing quickly.