Environmental, social, and governance (ESG) software has become a hot topic in recent years. The concept of ESG software isn’t new but investing based on the potential impact on the environment and society has been widely applied to investment practices only recently. Both global asset management companies and startup growth-oriented funds have turned their attention to the development of such software.

Implementing an ESG strategy is attractive to technology leaders because it has the potential to reduce risk, lower costs and generate returns. It is also seen as an opportunity to mitigate environmental, social, and governance (ESG) risks while improving financial performance.

This enables them to conduct detailed ESG analysis that’s usually impossible due to the massive quantities of data needed for further research while using machine learning (ML) algorithms and artificial intelligence (AI) technologies instead.

For example, this kind of software can be used to create an ESG score for a company based on the algorithm that analyzes the environmental and social policies of this business, historical data on its financial performance, data from independent sources ― such as nongovernmental organizations (NGOs) ― about its economic activities in different regions, potential risks it may incur when working outside of its own country.

What is ESG Software?

ESG stands for Environmental, Social, and Governance. As the term implies, these are factors of consideration built into ESG software. There are many different types of social enterprise software, but most have some type of social good element to them. This can be in how they handle crowdfunding or non-profit donation processing or more complex applications that help companies track their CSR expenditures or acquire government grants. 

The value proposition here is multi-faceted, with businesses getting a new product line on their balance sheet while also being able to receive tax benefits for taking part in certain legal activities. When it comes to the consumer side of things, there’s an added sense of pride that goes along with using a company whose business model supports one’s values.

What Does ESG Software Do?

ESG software does many things, but primarily it’s designed to help companies achieve their legal obligations in regards to environmental and social issues. This can be everything from tracking the carbon footprint of your company all the way down. 

This has the added benefit of helping companies discover inefficiencies and overages while also giving them a chance to make their business more efficient. There are many ways that ESG software can be used, including:

• Carbon footprinting
• Paperless law practices
• Public outreach programs to get input from stakeholders

How Can Companies Use ESG Software?

There are several different options when it comes to using ESG software, depending on your needs. For example, there are social enterprise networks that you can join that connect you with other like-minded individuals and businesses so you can share tips and best practices with one another. 

This is great if you’re just getting started or trying to figure out how to implement ESG elements into your business. One example of this is Greenbiz.com. If you’re already fairly committed to ESG principles but are looking to connect with others then this is a great resource that’s well worth exploring further.

ESG software also comes in the form of applications for tablets and smartphones, so if your employees tend to be more mobile you can set up alerts to remind them about certain legal requirements while they’re on the go or not sitting at their desks. 

This ensures everyone stays compliant without needing constant oversight from management. The other major benefit here is that it drives accountability within your organization since employees need access to these apps in order to do their jobs properly, whether it’s tracking carbon output or entering information into your paperless law practice.

Apple: A Path To Be Followed or a Special Case?

Apple Inc. ranks among the most valuable companies in the world and has established itself as a leader in sustainable business practices due to its continued use of renewable energy sources, environmentally friendly technology features available on its products, consumer education initiatives regarding recycling old Apple products, and so on. Its brand is also highly valued by consumers who are more inclined to buy an iPhone or iPad knowing that their purchase will help support a company that prides itself on having one of the lowest carbon footprints per dollar made within any industry.

Whether the principles that apply to Apple are applicable equally to smaller companies remains to be seen. If they can prove that the initiatives they have taken since Steve Jobs’ reign can result in financial benefits, then other companies will follow their example and incorporate sustainable practices into their long-term business plans.

Final Thoughts

Although using ESG software is by no means foolproof or the ideal solution to incorporating sustainable investment portfolios into existing financial models, it provides a useful starting point for decision-makers who want to begin moving toward a more sustainable, ethical approach.

The use of these platforms allows more people to gain access to information about the impact companies have on the environment and society, which they may not have had access to before. These platforms can also be used as a way for those who don’t possess much knowledge about sustainability issues to still engage with this sphere without exposing themselves to too much risk.

However, the main disadvantage that arises from using the ESG platform is that it requires people who actually know what they’re doing, such as individuals with backgrounds in environmental science and technology, so that data can be put together accurately.  

Without these types of professionals, many decision-makers who are inclined to include ESG criteria into their portfolios cannot do so because the information they’re receiving is either too vague or incomplete.