Sustainability consultants face spending slow-down

Global spending on sustainability consultants will surpass $1bn for the first time in in 2019, but the projected growth rate of 4% is 'far below' original industry estimates.

A new report released this week – Sustainability Consulting: Global Market Forecast 2015-2020 – highlights several reasons for this slow-down, including a lack of budget control for sustainability managers and a lack of consultancy spend in growing economies.

The projections, from environment analyst group Verdantix, are based on interviews with 260 heads of sustainability in 13 countries as well as financial data from 5,662 firms.

“Ten years ago, the sustainability consulting market didn’t exist as a separate category of consulting work,” said the report’s author Yaowen Ma. “That’s not true anymore. In 2015, large corporations will spend $877m on management consulting advice relating to sustainability reporting, energy efficiency, sustainability risk assessment, sustainability strategy, sustainable supply chains and product sustainability.

“However, this is not the booming market that the Big Four accounting firms and other consultants expected or hoped for.”

Edie’s own 2014 Environmental Consultancy Report revealed that consultants were relatively sanguine about expansion, with 64% budgeting for growth in 2015. That optimism, however, was not matched by clients, of whom just 19% were budgeting for growth.

5 reasons for spending growth falling below expectations:

1) Only 48% of spending on sustainability engagements is paid for by the head of sustainability. The remaining 52% must be procured from other areas of the business budget.

2) Even sustainability reporting advice is only funded entirely by 60% of heads of sustainability. 

3) Fast-growing, emerging economies like China and India are not yet big spenders on sustainability consulting and account for just 19% of the global total. 

4) Spend per firm on sustainability consulting averages just $150,000 to $200,000 per year which is well below ideal deal sizes for management consultants.

5) Forecasted growth of 4% a year between 2015 and 2020 is less than the trend growth rate for major consulting and accounting firms.

Empty promises

Verdantix managing director Rodolphe d’Arjuzon said: “The analysis makes it clear that the large volume of corporate sustainability reports and PR is not currently translating into big spending on sustainability advice.

“But if you drill down into initiatives like supply chain compliance with social and environmental policies, new stock exchange rules in India or the sustainability role of EH&S leaders in heavy asset sectors you can find growth opportunities above and beyond the unexciting 4% baseline trend.”

Brad Allen

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