The Hidden Risks in EHS and ESG Systems—Why Functional Success Isn’t Enough

By Richard Wall

CEO, Emex

Introduction:

In the fast-evolving world of Environmental, Health, and Safety (EHS) and Environmental, Social, and Governance (ESG) systems, companies have increasingly turned to sophisticated platforms to manage compliance, mitigate risks, and achieve sustainability goals. However, the research and investment strategies in this space have largely focused on functional outcomes—such as improving safety metrics or meeting regulatory standards—while overlooking the critical importance of the underlying technology. This narrow focus has significant implications for both the longevity of these platforms and the return on investment for those backing them.

The Functional Focus in Research:

Traditionally, research in the EHS and ESG sectors has emphasized the tangible, functional benefits these systems provide. Case studies abound on how EHS platforms have helped organizations reduce incidents, ensure compliance, and enhance sustainability reporting. While these are essential outcomes, this functional focus has led to a significant gap in understanding the importance of the technological architecture that supports these systems.

The oversight means that while many platforms excel in delivering immediate functional results, they are often built on outdated or inadequate technological foundations. This poses long-term risks, particularly as organizations demand more sophisticated capabilities from their EHS systems.

Impact on Private Equity Investment Strategies:

This research focus has not only shaped industry perceptions but has also influenced the investment strategies of private equity (PE) firms. Many PE firms have poured significant capital into EHS platforms that show strong functional performance, expecting robust returns based on these outcomes. However, the underlying technology of these platforms often fails to receive the scrutiny it deserves.

As a result, several sizeable EHS platforms now exist with poor architectural foundations. These platforms struggle with scalability, face high maintenance costs, and are ill-equipped to integrate emerging technologies. For PE firms, this means that the anticipated returns may not materialize as expected, and in some cases, the investment might even turn sour.

Long-Term Risks and the Path Forward:

For EHS and ESG platforms to succeed in the long term, it is essential to shift the focus from purely functional outcomes to a more holistic approach that includes a thorough evaluation of the technology stack. PE firms, in particular, need to adopt more comprehensive due diligence processes that consider both the functional and technological aspects of their investments.

Additionally, investing in technological upgrades for existing platforms can help address some of these challenges, ensuring that these systems are scalable, flexible, and capable of supporting future growth. Encouraging research and development focused on technological innovation will further position these platforms as leaders in the EHS and ESG space.

Conclusion:

The current landscape of EHS and ESG systems is marked by a significant imbalance between functional success and technological robustness. By addressing the gaps in both research and investment strategies, organizations and investors can ensure that these systems not only meet today’s needs but are also built to withstand the demands of tomorrow.