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Why Europe (and maybe not only) can't build the ESG System it demands

· 15 min read
Guilherme Moreira
Guilherme Moreira
Co-Founder EXO

Three years and the system still doesn't work​

In September 2025, EU Environment Commissioner Jessika Roswall announced the EU would delay the EU Deforestation Regulation (EUDR) for the second time in twelve months. The implementation date: now December 2026.

The reason? After nearly three years of preparation, the Commission's IT system cannot handle the expected data load.1

In her official letter, Roswall stated: "Despite efforts to address the issues in time for the EUDR's entry into application, it is not possible to guarantee that the IT system can handle the expected load... [it] will very likely lead to the system slowing down to unacceptable levels or even to repeated and long-lasting disruptions."2

But EUDR isn't the only regulation facing technical implementation failure. The Corporate Sustainability Reporting Directive (CSRD) reveals an even broader crisis:

A Semarchy survey of 1,000 senior data leaders found that only 17% say their data is currently audit-ready for CSRD compliance, despite 89% having collected ESG data for at least a year.3 A Baker Tilly survey is more damning: 88% of companies don't feel ready to meet CSRD expectations, and 57% have little to no knowledge of the regulations.4

The complexity is staggering: ESRS requires managing over 1,100 potential data points across fragmented systems.5 Companies report that 83% find collecting accurate data for CSRD a significant challenge, and 29% feel unprepared for ESG data audits.6

Read that again. The European Union—with substantial resources and technical talent—cannot build IT systems to support its own regulations after three years. And the companies expected to comply? 88% aren't ready. The infrastructure simply doesn't exist.

If the regulators can't do it, and 88% of companies aren't prepared, the system isn't just struggling—it's failing.

Policy moves slow. Implementation moves slower​

The Omnibus timeline shows just how glacial this process really is:7

Between February and July 2025, the EU published directives and adopted positions on CSRD and CSDDD. But look at when companies actually have to comply:

  • 2026: Targeted assurance guidelines (maybe)
  • 2027: CSRD reporting for Wave 2 companies
  • 2028: CSRD reporting for Wave 3 companies and CSDDD first wave
  • December 2026: EUDR implementation (after two delays)

From policy announcement to actual implementation: 3-4 years minimum. And that's assuming no more delays.

The EUDR has already been postponed twice. CSRD and CSDDD timelines have been pushed back multiple times. In April 2025, the EU adopted "simplifications" that reduced administrative burden by an estimated 30%—not because companies were overwhelmed, but because the infrastructure to support compliance literally doesn't exist.8

This isn't efficiency. It's failure at scale.

When only the rich can afford to comply​

The ESG software market has a price problem that affects everyone:91011

  • Basic SaaS tiers: $25-50 per user/month (limited functionality)
  • Enterprise platforms: $150-200+ per user/month
  • IBM Envizi ESG Suite: Starting at €4,162 per month (~$50,000+/year)12
  • Implementation timeline: 4-12 weeks minimum
  • Total cost with integration, consulting, and training: Regularly exceeding six figures

Even large corporates struggle with these economics. Two-thirds of companies plan to allocate over 10% of their IT budgets just to CSRD compliance.13 But here's the deeper problem: these expensive, siloed systems don't enable the collaboration that ESG actually requires.

When your ESG platform costs €50,000+ annually and takes months to implement, you can't extend it to suppliers, distributors, or partners. You're stuck collecting data through spreadsheets, emails, and manual processes—exactly what these expensive systems were supposed to eliminate.

Meanwhile, 47% of organizations still use spreadsheets for ESG reporting.14 This includes Fortune 500 companies. Not because they prefer Excel. Because even they can't afford to give sophisticated ESG tools to everyone who needs them.

The International Finance Corporation found 60% of SMEs cite cost and complexity as fundamental barriers to ESG software adoption.15 But the collaboration barrier affects corporates just as much—they need data from partners who can't access their systems.

Do the math: CSRD will affect approximately 50,000 companies.16 CSDDD impacts 4,000 foreign companies and thousands more in value chains.17 For every large enterprise that can afford sophisticated ESG software, there are dozens of suppliers, distributors, and partners who cannot.

When CSRD mandates scope 3 emissions reporting, how exactly are you supposed to calculate your supply chain footprint when your suppliers can't afford the tools to measure theirs and your ESG platform is too expensive to share with them?

The answer: you can't. The system is broken by design, not just for SMEs, but for the corporates who need to collaborate with them.

The compliance trap​

This creates a vicious cycle:

Market participants are openly questioning whether EUDR will "may never happen now" after multiple postponements. As one trade source told Fastmarkets: "It will be difficult for the EU to delay implementation of EUDR again without losing credibility."18

But they keep delaying anyway.

Global ESG disclosure policies exploded from 614 in 2020 to 1,225 in 2023.16 There are now over 2,400 ESG regulations worldwide.19 Each regulation brings new frameworks—CSRD, CSDDD, EUDR, SFDR, CBAM, EU Taxonomy. The complexity is so extreme that even regulators can't build systems to support it.

Companies face talent shortages in sustainability reporting, carbon accounting, and biodiversity conservation. Smaller firms especially "struggled to attract or develop the talent needed to navigate evolving regulatory requirements."20 Complex, expensive tools require specialized expertise, which is itself scarce and expensive.

And here's the kicker: companies that invested early in EUDR compliance now face competitive disadvantages. They've incurred compliance costs while competitors gained additional preparation time from delays.21

The system punishes the responsible and rewards the laggards.

"There are already so many ESG tools"​

This is the constant question, we heard here and there, that misses the entire point.

Yes, there are hundreds of ESG platforms. The market was $1.92 billion in 2024, projected to hit $5.54 billion by 2033.22 It's crowded.

But crowded with what? Expensive, complex enterprise tools that 60% of SMEs literally cannot afford to use.

Having many inaccessible solutions doesn't solve an accessibility crisis. It perpetuates it.

The market is saturated at the high end. What's missing is technology that the majority of companies can actually implement.

What innovation actually looks like​

I recently finished Matt Ridley's "How Innovation Works," and it shifted (or cleared) how I think about what we're building. If you haven't read it, I recommend it!

Ridley makes a crucial distinction that stuck with me: innovation is fundamentally different from invention. As he writes, innovation is "the turning of inventions into things of practical and affordable use to people."23 It's not about creating something new—it's about making the essential accessible to everyone who needs it.

This idea resonated deeply because it's exactly what's broken in ESG technology today.

Throughout history, breakthrough innovations weren't about making existing solutions more sophisticated. They were about making essential capabilities accessible to people who'd been excluded:

The printing press (1440s) didn't create better manuscripts. It made books affordable, democratizing knowledge and catalyzing the Renaissance.

The personal computer (1970s-80s) didn't improve mainframes. It reimagined who could use computing and why.

Cloud computing (2000s) didn't build bigger data centers. It changed the delivery model, making enterprise infrastructure accessible to startups and creating the entire SaaS economy.

Ridley describes innovation as "an incremental, bottom-up, fortuitous process that happens as a direct result of the human habit of exchange, rather than an orderly, top-down process developing according to a plan."23 It's gradual, collective, collaborative—not the work of lone genius.

The pattern is identical every time: true innovation extends capability to those who've been excluded. It makes the essential affordable and practical.

When applied to ESG technology, this principle somehow gets dismissed as "not differentiated enough." But here's what Ridley's book helped me see clearly: it's the only innovation that actually matters. Because without accessibility, none of the sophistication in the world creates impact at the scale we need.

The technical problem nobody wants to solve​

Building accessible ESG software isn't easy. It's exponentially harder than building complex enterprise tools.

It requires:

Translating complexity: Taking CSRD's double materiality assessment, ESRS reporting standards, and scope 3 calculations across 15 categories and making them intuitive enough that you don't need consultants and sustainability PhDs.

Radical cost reduction: Using cloud-native architecture, automation, and AI to drive operational costs down by orders of magnitude. Not cutting features. Eliminating waste in how systems are built and operated.

Real scalability: Building platforms that start simple enough for any company but can grow to comprehensive sustainability programs without forcing users to migrate to different systems.

Real interoperability: Building systems that can integrate with existing ERP, HRMS, CRM, and finance systems—but being honest about the work required. Integration isn't plug-and-play. Pre-built connectors still need mapping, data transformation, and validation. Automation reduces ongoing manual work, but someone has to build and maintain it first. The value comes from reducing repetitive data entry after proper implementation, not from magical "seamless integration." Systems need technical maturity to be effective.24

Continuous adaptation: Designing systems that evolve as regulations change, incorporating EFRAG updates and new ESRS standards without breaking existing workflows.

These problems require deep expertise in both enterprise software architecture and ESG regulatory frameworks. Making things simple for users is exponentially harder than building complex systems.

Most ESG software companies don't even try. They build for enterprises with unlimited budgets because that's easier.

The market that should exist​

The numbers tell a clear story:22

  • ESG software market: $1.92 billion (2024) → $5.54 billion (2033)
  • SME segment growing at 19.52% CAGR, expected to reach 40% market share by 2035
  • Large enterprises currently control 68.27% of the market

But SME growth only happens if accessibility barriers fall. If they don't, that 40% projection is fantasy.

ESG reporting will become as fundamental as financial reporting. The question isn't whether it happens—it's whether we build infrastructure that lets everyone participate or infrastructure that excludes most companies by default.

Right now, we're building the second option.

Why this matters more than people realize​

The timeline for regulation is set. But if supporting systems can't keep pace—and the EUDR delays prove they can't—we get one of two outcomes:

  1. Regulations get watered down to match what infrastructure can handle (already happening)
  2. Companies face compliance requirements they literally cannot meet

Neither serves the sustainability agenda.

Every company that can't implement ESG practices because technology costs too much is a missed opportunity. Every supplier excluded from value chains is a broken link. Every regulation delayed because systems can't handle the load is time we don't have.

And we're running out of time.

What needs to exist​

The technology to solve these problems exists. Modern cloud architecture, automation, AI, and thoughtful system design give us everything we need to build ESG platforms that are simultaneously powerful and accessible.

We're not constrained by technology. We're constrained by how we think about building it.

ESG software needs to be built on entirely different principles:

Accessible by default: Designed so any company can adopt it without IT departments and consultant armies. Modular architecture means you implement what you need, when you need it.

Genuinely affordable: Architected to operate at cost structures that work for SMEs, not just enterprises with unlimited budgets.

Actually simple: Complex regulatory requirements translated into intuitive experiences that don't require specialized training. Simplicity for users comes from abstracting complexity—doing the hard technical work so they don't have to.

Truly scalable: Systems that grow from basic compliance to comprehensive sustainability programs without forcing users to switch platforms. Proper encapsulation means adding capabilities doesn't break existing workflows.

Continuously adaptive: Platforms that evolve with regulatory changes, incorporating new frameworks without breaking workflows. Clean separation of concerns between data collection, regulatory logic, and reporting output.

This isn't about building "lite" versions of enterprise tools. It's about fundamentally rethinking what ESG technology should be.

Infrastructure that matches the problem​

At its core, this isn't about software. It's about building infrastructure that enables sustainability transition at the speed and scale the climate crisis demands.

When regulators build policy faster than technical systems can support it, there's a fundamental capacity mismatch. When 60% of companies cite cost as a barrier to adoption, there's a market failure. When regulations get delayed because supporting IT systems don't work after three years, there's a systemic problem.

Closing these gaps requires technology that matches the scale of the problem—systems that can be deployed in days, not months; adopted by thousands of companies, not hundreds; updated continuously as regulations evolve.

If your solution requires six-figure budgets, six-month implementations, and specialized teams to operate, you're building for the wrong scale. You're building tools that can serve hundreds of companies when we need tools that can serve tens of thousands.

The choice​

CSRD reporting begins for Wave 2 companies in 2027. CSDDD's first wave hits in 2028. The regulatory machinery won't stop.

But the infrastructure to support it is failing in real-time. How we build the next generation—whether we prioritize sophistication for the few or accessibility for the many—determines whether sustainability goals remain aspirational or become achievable.

Accessibility isn't a compromise with capability. Accessibility is what makes capability matter.

The technology sector has proven this repeatedly. Companies that recognized accessibility as the innovation—not a feature set—didn't just capture market share. They transformed entire industries.

ESG technology needs that transformation now. The gap between regulatory ambition and technical capacity is widening. Regulators are failing. The market is failing.

This is the problem we're solving at EXO Innovation & Sustainability.

We're building ESG software architected from the ground up for accessibility—not as a marketing claim, but as a technical and economic imperative. Because we understand that making sustainability tools genuinely accessible requires solving hard problems in system architecture, cost structure, and complexity abstraction that most ESG software companies won't tackle.

If you believe innovation means making the essential accessible—if you want to help turn complex, costly systems into infrastructure that lets companies and the world thrive—join us.

We're building this in the open. We need people who understand that simplicity is harder than complexity, that true scalability serves thousands not hundreds, and that accessibility is how we'll actually achieve sustainability at the speed the crisis demands.

Visit esg.exo-team.com to learn more. Follow our progress. Reach out if this mission resonates. Early supporters, potential users, fellow builders—we want to hear from you. Let's build the infrastructure that should exist.

Because someone has to. And that infrastructure changes everything.

Sources​

Footnotes​

  1. ClientEarth, "EU Commission blames IT issues for deforestation regulation delay" (September 2025) - ClientEarth Press Release ↩

  2. Letter from Commissioner Jessika Roswall (September 23, 2025), quoted in Ropes & Gray analysis ↩

  3. Semarchy, "CSRD Readiness Research: The Data Imperative" (July 2025) - Semarchy Blog ↩

  4. Governance Intelligence, "CSRD & ESRS compliance: Challenges, strategies" - Governance Intelligence ↩

  5. Envoria, "ESRS data points: Guide for successful CSRD reporting" (February 2025) - Envoria ↩

  6. Coolset, "What you need to know to start reporting on CSRD from 2025 onwards" (June 2025) - Coolset Academy ↩

  7. ESG Book, "The Omnibus Timeline" (2025) ↩

  8. Ropes & Gray, "EU Deforestation Regulation Deprioritization" (September 2025) - Ropes & Gray ↩

  9. Coolset, "Best 16 ESG reporting software tools in 2025" - Coolset Academy ↩

  10. Prophix, "Top 11 ESG Reporting Software Platforms in 2025" - Prophix Blog ↩

  11. People Managing People, "How Much Does ESG Software Cost?" (September 2024) - People Managing People ↩

  12. IBM, "IBM Envizi ESG Suite Pricing" - IBM ↩

  13. Semarchy, "CSRD Readiness Research: The Data Imperative" (July 2025) ↩

  14. Coolset, "Best 16 ESG reporting software tools in 2025" - Coolset Academy ↩

  15. Straits Research, "ESG Software Market Size & Outlook, 2025-2033" - Straits Research ↩

  16. Plan A, "Top 12 ESG software to consider for your business" (July 2025) - Plan A Academy ↩ ↩2

  17. Good Lab, "EU ESG Regulations: Unpacking the Impact on US Businesses" (July 2025) - Good Lab ↩

  18. Discovery Alert, "EU Deforestation Regulation Delay: What This Means for Markets" (September 2025) - Discovery Alert ↩

  19. Coolset, "Best 16 ESG reporting software tools" - Coolset Academy ↩

  20. National Law Review, "ESG in 2024 and Outlook for 2025 in the US and EU" - National Law Review ↩

  21. Discovery Alert, "EU Deforestation Regulation Delay: What This Means for Markets" (September 2025) ↩

  22. Straits Research, "ESG Software Market Size & Outlook, 2025-2033" - Straits Research ↩ ↩2

  23. Matt Ridley, "How Innovation Works: And Why It Flourishes in Freedom" (2020) - Matt Ridley's Website ↩ ↩2

  24. Roots Analysis, "ESG Reporting Software Market Insights & Trends 2025-2035" - Roots Analysis ↩