Unlocking Value: Can Smarter Tech Reduce the Cost of ESG Compliance?

Australian financial institutions are allocating a staggering 34% of their compliance budgets to technology, the highest rate globally, as they grapple with mounting ESG reporting requirements.

This technological burden is set to intensify as mandatory climate-related financial disclosures roll out across the economy, with Treasury estimating implementation costs between $1.0-1.3 million per entity annually during transition.

For the financial sector, the challenge is particularly acute. With over 70% of compliance-related expenditure now directed toward digital infrastructure, institutions face a paradoxical reality: the very technology meant to streamline sustainability reporting has become its most significant cost driver. The total economic impact is staggering—at least 1,800 Australian entities will be captured under new regulations, potentially costing the economy $2.3 billion annually.

Source: Alexander Abero, Unsplash

Is Complexity Driving Costs?

The complexity stems from multiple factors. First, the fragmented reporting landscape requires sophisticated systems capable of addressing various frameworks simultaneously, with 78% of ASX100 companies using TCFD, 77% following GRI standards, and 45% implementing SASB. Second, the technical demands of climate scenario analysis—now conducted by 78% of leading Australian companies—require substantial computational resources and specialised expertise.

Within digital sustainability budgets, 60% of respondents say spending on data and reporting solutions will account for the greatest proportion of their expenditure, followed by digital sustainability strategy services (51%) and industrial optimisation solutions (46%). This technological arms race is reshaping the competitive landscape, with the governance, risk and compliance platform market projected to grow from $1.4 billion to $3.7 billion by 2033.

What can you do?

Despite these challenges, several approaches can significantly reduce the technology burden:

1. Integrated Platforms

Consolidating ESG data into a single platform can decrease redundancy, reduce storage needs, and minimise unnecessary digital emissions. Research shows organisations using integrated ESG software experience at least 25% time savings when validating and ensuring data accuracy.

2. Automation and Workflow Optimisation

Over 60% of organisations report at least 25% time savings when using software to collect ESG and sustainability data. By automating data collection processes, companies can ensure accurate, real-time monitoring while reducing manual labour costs.

3. Cloud Provider Selection

Hypothetically switching to a cloud provider powered entirely by renewable energy could reduce a company’s IT-related emissions by up to 40%. This not only aligns with sustainability goals but can reduce operational costs.

4. Strategic Integration

When integrated with broader digital transformations, the incremental costs of sustainability initiatives typically represent only 5-10% of overall program costs, with implementation expenses shared across the wider program.

Whats the bottom line?

Despite initial investment costs, organisations report a full ROI within three years of ESG software implementation. Companies with strong ESG performance often reduce operating costs by 5-10%, largely due to gains in operational efficiency and waste reduction.

For decision makers in Australia’s financial sector, the challenge is clear. Higher ESG scores are already linked to improved enterprise value and access to capital, but the cost of compliance is significant and rising. As the regulatory bar continues to lift, the question becomes whether this wave of digital investment will deliver lasting value, or simply become another layer of regulatory overhead in an already complex environment.

About the Author:

David Martin F FIN is a technology leader with deep expertise in regulatory compliance, data governance, and secure digital innovation. With over 15 years’ experience designing and scaling platforms for highly regulated industries, David has delivered robust, audit-ready solutions for multiple industries. He is passionate about empowering Australian organisations to meet evolving sustainability standards through practical technology and operational excellence.
Learn more at esgcomplianceaustralia.com.au or connect with David on LinkedIn.