After a stellar rise in popularity over recent years, sustainability consulting looks to be heading for a slowdown as client demand shifts focus.
According to a recent report released by consultancy sector analyst Source Global Research, total spend on sustainability advice was projected to hit $48.9bn in 2023 globally — a year-on-year increase of 8 per cent, down from 9.8 per cent in 2022. Source Global expects this slowdown to continue in 2024.
Like the wider consultancy sector, sustainability specialists have been affected by a general belt-tightening among clients in response to stubborn inflation and macroeconomic uncertainty, the report suggests. It also cites a migration of spend from sustainability to other service areas.
This second phenomenon could be interpreted as a sign of sustainability’s gradual maturity, with companies moving from strategy planning to on-the-ground implementation.
So argues Tamzen Isacsson, chief executive of the Management Consultancies Association: “We’re now entering the difficult stage of sustainability [consulting], which is about managing business change and really pushing it through companies.”
Source Global finds that, at this stage, companies are inclined to turn to large tech consultancies for sustainability-related work. A need to implement two types of new technology lie behind this decision. First, technology that can drive the clean energy transition, and the other green solutions underpinning a sustainable economy. Second, technology that can enable the sustainability reporting and due diligence requirements now in force.
“We’re a large enterprise consulting business, which means we get into solutions and technology in a fairly heavy way,” explains Phil Spring, UK sustainability services leader at IBM Consulting. IBM’s focus on the nuts and bolts of sustainability management is evident in its five main advisory offerings: data and reporting; supply chain management; green IT; clean energy transition; and the automation of operations.
Spring adds that, as a larger firm, having a wide bench to draw from offers opportunities for considerable “overlay” between sustainability specialists and other experts. Take efforts to reduce supply-side emissions, for example. A client engagement might begin by assessing environmental, social and governance (ESG) requirements, then move to analysis of sustainability metrics, before advising on changes to procurement processes.
“This requires a diverse set of skills and experience, including knowledge of the particular industry and characteristics of the supply chain,” he says.
It is a point echoed by Harry Bowcott, head of McKinsey’s sustainability practice in the UK and Ireland. The firm has more than 3,500 consultants spending a “material amount of their time” on projects with a sustainability element, he says. In addition to recruiting a central sustainability team with “deep expertise”, McKinsey follows the practice of many other large consultancies in incorporating the subject into training for all advisers, whatever their primary specialism. “We want all our consultants to be sustainability literate, so we can create solutions through the joint expertise of the whole firm,” Bowcott explains.
But bigger does not always mean better when it comes to sustainability advice. There are a large number of boutique consultancies, many of which boast long-standing experience and technical knowledge.
“Sustainability has evolved hugely over the 25 years we’ve been advising clients,” says Giles Gibbons, founder and chief executive of the sustainability advisory firm, Good Business. “That experience enables us to give them a much more nuanced service.”Part of that nuance derives from the less commercial, more values-driven nature of many independent sustainability consultancies, adds Gibbons. This allows them to act as a “critical friend” and offer the honesty clients often require, he says.
The same mission-mindedness can unleash novel ways of working — such as at Systemiq, a global sustainability consulting and investment firm with roughly 350 consultants, co-founded by ex-McKinsey partner, Jeremy Oppenheim
Based on the premise that a “company-by-company approach” will never resolve today’s sustainability problems, Systemiq promotes “radical collaboration”. The firm specialises in creating coalitions and other joint structures to which it invites key players from different areas of the sectors it is working to transform.
In 2017, for example, Systemiq worked with the Austrian chemical company Borealis to create a cross-sector initiative with businesses from the retail, food, petrochemical, waste and packaging industries, plus policymakers, to tackle the problem of plastic waste at a city-by-city level.
For any industry to shift to a low-carbon footing, interests must be aligned in policy, financial markets and the real economy, Oppenheim argues. “We’ve built distinctive capabilities and a track-record on delivering precisely that approach,” he says.
Advisory firm Pollination adopts a similarly catalysing mindset. Opened four years ago, the 200-person operation says it exists to drive “positive impact” on decarbonisation and nature conservation. As a result, the firm is “much more embedded” in the success of its client, says founder and chief executive, Martijn Wilder. While its engagements may start with strategy advice, they often evolve into hands-on help with investments, business partnerships and other implementation measures.
Companies engaging smaller, more purpose-oriented consultancies should expect to be challenged, however. As Wilder notes: “Our focus is on tackling the really difficult issues. So it’s very hard for us to add value for clients who want to maintain the status quo.”
