Sustainability is no longer a side project — it’s now central to how companies grow, compete, and lead. Yet as regulations tighten and consumer expectations rise, businesses trying to navigate this complexity alone risk falling behind.
Many environmental, social, and governance (ESG) challenges — from emissions to labor practices and resource use — extend far beyond a single organization’s reach. They’re embedded across industries and global supply chains, making collaboration essential. Regulators, investors, and customers now expect companies to take responsibility for their full value chains. It’s a tall order — and one that can’t be tackled in isolation.
To move from compliance to meaningful progress, collective action is the only way forward. ESG ecosystems offer a practical, strategic path. By pooling knowledge, aligning standards, and sharing data, companies can drive faster progress, reduce duplication, and strengthen resilience.
ESG ecosystems address four deep-rooted supply chain challenges
Many ESG issues originate far beyond a company’s direct operations. Ecosystems offer an effective way to tackle four key challenges that are especially difficult to solve alone.
Complex ESG reporting requirements create operational strain
New regulations — like the EU’s Corporate Sustainability Reporting Directive and the Corporate Sustainability Due Diligence Directive (CS3D) — require companies to report on ESG performance across full supply chains, including Scope 3 emissions and human rights.
A checklist approach can be overwhelming and often misses the bigger picture. But when companies work together to standardize data requests and streamline supplier reporting, they reduce friction, improve data quality, and free up time to focus on real improvements.
Evolving regulatory demands challenge sourcing strategies
Emerging polices like the EU’s Carbon Border Adjustment Mechanism impose carbon pricing on imports, eliminating the cost advantage of sourcing from high-emissions countries.
This kind of shift forces companies to rethink sourcing and supply strategies. Ecosystem collaboration helps businesses stay informed, share insights, and respond collectively, thereby reducing compliance risk and supporting more sustainable decision-making.
Sustainability trust gaps threaten brand reputation across industries
Trust is fragile in the sustainability space. One lapse — be it in labor practices, environmental harm, or governance — can quickly escalate into a reputational crisis. Ecosystems can act as trust-builders. By aligning with peers on standards, improving transparency, and committing to shared reporting frameworks, companies show investors, consumers, and partners that they take ESG seriously. These collaborations also raise expectations across the industry, encouraging continuous improvement.
Fragmented ESG efforts limit innovation and efficiency
ESG isn’t just about risk management, it’s a platform for innovation. Collaborating with other companies on shared challenges like circularity, supplier audits, or traceability often leads to better tools, smarter processes, and cost savings. When ecosystems work well, they don’t just raise ESG performance, they give companies a competitive edge.
Companies gain most from cross-industry and supply chain ESG collaboration
ESG ecosystems generally fall into two categories: vertical or horizontal. Most companies find the greatest value by participating in both.
Vertical ecosystems unite companies within the same sector
Vertical ecosystems are built around shared value chains or raw materials. By working together, companies can engage suppliers more effectively, align expectations, and improve ESG data collection. There are three typical levels of vertical integration:
- Sharing methodologies and best practices. At this level, companies coordinate on KPIs, supplier questionnaires, and reporting templates. This creates consistency without major structural changes. Examples include Railsponsible (rail), Drive Sustainability (automotive), Together for Sustainability (chemicals), and the HIGG Index (fashion).
- Centralizing supplier assessments. Here, companies use shared platforms, like Ecovadis or CDP, to streamline supplier engagement. Instead of every company asking the same supplier for the same information, suppliers respond once, and everyone benefits from better, cleaner data. The Hospitality Alliance for Responsible Procurement and the Responsible Beauty Initiative both take this approach.
- Enabling open data sharing. This is the most advanced level, yet the least common. Companies share structured ESG data openly within their industry. This kind of transparency can drastically speed up sustainability progress. TRASCE, a beauty industry consortium launched in 2024, is a recent example. While concerns about competitive advantage remain, rising regulatory demands like CS3D may soon push more companies in this direction.
Horizontal ecosystems tackle specific ESG topics across industries
These initiatives focus on one ESG issue, like labor rights, water use, or waste, and bring together companies from multiple sectors. They help set standards, identify key metrics, and align with regulatory expectations. Examples include the Responsible Labor Initiative and Global Living Wage Coalition (labor ethics); Alliance for Water Stewardship (water stewardship); and Zero Discharge Coalition (waste and chemical use).
These ecosystems are especially valuable for framing what data to gather and how to respond to topic-specific regulatory developments. While less tailored to individual industries, they offer a strong foundation for building credible, targeted ESG strategies.
Sustainability demands are rising — and so is the complexity of meeting them. ESG ecosystems provide a practical way to stay ahead: By joining forces, companies can improve reporting, reduce risk, and unlock innovation.
