Enterprises are racing to reach sustainability goals by improving environmental, social, and governance (ESG) performance ahead of mandated disclosures, according to an IDC forecast that predicts ESG business services spending will hit $158 billion by 2025.

A company’s ESG performance measures its ability to survive over the long term. Regardless of mandates, addressing environmental and social impact will aid organizations in the long run as front-runners in the sustainability space.

“There’s stakeholder pressure, there's mandatory reporting standards, but also being studied and being seen is a business case for sustainability,” Dan Versace, ESG Business Service Research Analyst at IDC, said in an interview with SDxCentral. “There is a clear cut way that organizations can, regardless of their motives, make more money by being sustainable.”

Many organizations have voluntarily reported their climate-related performance, such as scope-1 and 2 emissions and carbon intensity. In fact, Hewlett Packard Enterprise (HPE) fast-tracked its plans to be a zero-carbon company, chopping a decade off its original timeline.

IDC found sustainability linked consulting spending has become a top priority in navigating goals related to environmental and social sustainability capabilities. Areas of focus include business strategy, human capital management solutions, and risk management. 

Strategy consulting, which enables businesses to efficiently implement sustainability measures into business strategy, garners the largest investment share.

In regards to risk management, “there’s a growing rate of about 33% year on year, which is a huge number,” Versace noted. “By the year 2025, it looks like somewhere in the range of $16 billion will be spent worldwide on risk and compliance project oriented services.”

Human capital management is the fastest growing area of spending but also the most challenging, IDC noted. Enterprises need to balance creating organization-wide training and process efficiency improvements while juggling internal human capital management to support successful sustainability initiatives.

IDC predicts enterprises will switch focus from a pay-as-you-go approach to a more strategic, holistic approach. By 2025, nearly two-thirds of the total business services market will be encompassed by sustainability linked business consulting services.

“With this market being still in its infancy, opportunities for differentiation are everywhere,” Versace said in an IDC blog. “Firms should assess their sustainability linked business services to determine where these offerings can best be utilized and identify other end-user pain points where new offerings will be needed.”