ESG Regulations Drive "Generational Opportunity" and Partner Wins, Workiva Software CEO Asserts

ESG has emerged as an important and sometimes polarizing topic in U.S. politics, but ESG regulations across the United States and Europe are driving a "generational opportunity" for Workiva reporting software, CEO Julie Iskow (pictured, top of page) asserted during the company's earnings call on August 3, 2023. Moreover, partners increasingly influence Workiva's ESG software sales, Iskow added.

"Even with the ongoing political debate, stakeholder demands for transparent, non-financial data continue to grow louder," Iskow asserted. "What's clear from our experience working with our corporate clients is that new and impending ESG regulations across the U.S. and Europe are driving the convergence of non-financial and financial reporting, as well as the requirement that data be audit ready and investor grade."

ESG Regulations and Pending Legislation to Note

Among the key ESG regulations and potential legislation that Workiva is tracking, Iskow noted:

• June 9: EFRAG, which is the technical advisory to the European Commission under the CSRD (Corporate Sustainability Reporting Directive), issued a draft set of enterprise reporting sustainability standards for providing further clarification on this already past mandate. The European Union on July 31 voted on final approval for these reporting standards.
• June 18: Swiss voters accepted the new law that formalizes Switzerland's commitment to climate protection and adoption of new reporting requirements.
• June 26: The International Sustainability Standard Board (ISSB) launched new ESG standards IFRS S1 and IFRS S2. The standards will usher in a new era of sustainability related disclosures and capital markets worldwide, the ISSB asserts.
• June 27: The Australian Government announced plans to implement mandatory climate related financial disclosure requirements for companies and financial institutions.
• October 2023: In the United States, the SEC is targeting October 2023, to provide further clarity on an SEC climate disclosure rule.
• And in California, two ESG disclosure bills have passed the Senate and are now in committee review in the assembly. The two state bills would require companies operating in California to report their greenhouse gas emissions from across their supply and value chains and their climate related risks, Iskow noted.

Roll all of those developments together, and ESG ranked among Wokiva's top three booking solutions in Q2 of 2023, Iskow told Wall Street analysts during the earnings call.

Workiva Partners Influence ESG Software Sales, Deployments

Meanwhile, Workiva partners increasingly influence ESG software sales, Iskow said.

"The strength of our partner program continues to contribute to both new logos and deal expansions that are sourced by or co-sell with a Workiva advisory or technology partner," she added

Among the anecdotes Iskow mentioned:

1. A Big Four advisory firm is deploying Workiva's ESG and GRC solutions for a a multinational telecom company based in Europe.
2. A regional advisory firm and a climate accounting software partner influenced a Fortune 500 provider of food facilities to purchase Workiva's ESG software.
3. An ERP technology partner and Workiva won a deal with a top 20 US city. A regional consulting partner also influenced the deal, and will be implementing the project.
4. A regional advisory firm sourced a win with a Top 15 insurance company.
5. A technology consulting partner sourced a six-figure win with a building products manufacturer.

Still, Iskow did not disclose the customer or partner companies by their official names.

Workiva Professional Services and Partners

Meanwhile, Workiva continues to transition lower-margin setup and consulting services to partners, according to CFO Jill Klindt. The effort will provide more opportunities to partners, while allowing Workiva to focus on higher-end XBRL services, Klindt asserted. XBRL, short for eXtensible Business Reporting Language, enables the standardization of data for key stakeholders and investors.

Overall, partners are delivering a growing percentage of Workiva's customer wins Iskow said -- though she didn't disclose actual percentage figures.

Workiva Financial Results: The company's overall business appears to be performing well. Among the anecdotes to note:

• Total revenue was $155 million in Q2 of 2023, up 18% from Q2 of 2022.
• GAAP net loss was $20.9 million in Q2 of 2023, which was smaller than a $28.9 million net loss in Q2 of 2022.

The figures generally beat Wall Street's expectations, according to SeekingAlpha.

Workiva Software Generative AI Integrations

Meanwhile, Workiva's software platform now features Generative AI (artificial intelligence) integration capabilities with third-party platforms such as Google Cloud and Microsoft Azure. Workiva committed to maintaining an "open ecosystem" approach to Generative AI, while also maintaining a "responsible" use of AI.

Through Generative AI integrations, customers gain the ability to "author, edit, and rewrite content across the company’s entire suite of solutions, ultimately shifting users from being content producers to content editors, helping to streamline workflows, and freeing up time to focus on greater value-add tasks. Additionally, users will have access to a digital thought partner and a productivity enhancer that can answer free-form questions anytime during their workflow," Workiva asserted.

Workiva Amplify 2023: So what's next? It's safe to expect more generative AI and ESG software updates at the Workiva Amplify 2023 conference, which is scheduled for September 19-21 in Nashville, Tennessee.

ESG Regulations: Opportunities and Challenges

Editor's note: Sustainable Tech Partner does not view ESG regulations as "all good" or "all bad." In the march toward carbon reduction, businesses must carefully evaluate sustainable strategies and ESG regulations -- without undermining fiduciary responsibilities to investors.

Among the areas of concern to note: ESG-focused investment funds don’t seem to deliver better ESG business performance, and ESG funds have performed poorly in financial terms, according to a Harvard Business Review article that quoted research findings from University of Chicago, Columbia University and London School of Economics.

Still, the need for effective financial and ESG reporting is real. And that business need is driving demand for Workiva's software and partner engagements.