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Extracting value from the sustainability consulting boom

Author: ICAEW Insights

Published: 04 Apr 2023

Already worth almost $9bn, the sustainability consulting market is tipped for even greater success in the coming years. What is behind the boom – and what should accountancy firms do to seize the opportunity?

Growing disclosure requirements combined with mounting stakeholder expectations have spawned a booming global sustainability consulting market, which according to a recent study from analysts Growth Market Reports was worth $8.8bn last year – and is set to grow to $14.1bn by 2031.

It’s a buoyant market that has led to consolidation and affiliation deals as players jostle for market share. On 1 March, technology and management consultancy BearingPoint announced that it had acquired the sustainability consulting practice of Helsinki-based advisory firm Korkia. 

Meanwhile, KPMG in the Crown Dependencies – that is Jersey, Guernsey and the Isle of Man – last month made public a strategic partnership with ESI Monitor to deliver sustainability consulting services to corporate clients across those islands and beyond.

Knowledge gaps

“Increased disclosure models that have come in over the past few years are a key driver,” says Crowe UK Head of Sustainability Alex Hindson. “More organisations are now reporting on climate risk, through meeting the principles of the Taskforce on Climate-related Financial Disclosures (TCFD), for example.”

“What’s really interesting is that we’re increasingly seeing organisations adopting such frameworks voluntarily – even when they’re not strictly applicable – because of pressure from customers and suppliers in their extended value chain,” Hindson adds.

Under pressure to disclose, businesses are turning to sustainability consultants to help them fill knowledge gaps and align with best practice. And that is particularly true for one of the market’s biggest growth areas: the Middle East and North Africa (MENA) region.

“The decision to hold COP 27 in Sharm el-Sheikh and plan COP 28 to take place in Dubai was a masterstroke,” says Luma Saqqaf, CEO of regional advisers Ajyal Sustainability Consulting. “It has brought to corporate attention a series of issues that were only really being discussed at government level.”

Saqqaf explains: “Saudi Arabia has a goal to be net zero by 2060, and the United Arab Emirates (UAE) by 2050. That’s spurred lots of government activity around sustainability and, in turn, created pressure in other parts of society to do their bit. But that activity hasn’t really filtered down yet in the form of specific regulations and requirements for companies.” 

That presents both pros and cons, she says. It is positive because companies will need a lot of time to prepare for the regulations that are coming down the line. However, the flipside is that many of them simply don’t know where to start and feel like this whole area is a moving target.

Scale and maturity

Saqqaf’s offering is based partly on training, so that companies can understand how the journey to net zero will affect them. Sustainability is neither an add-on, nor a collection of existing measures, she says. “For example, it’s not your CSR policy or about appointing more women to boards. It must be intrinsic to your company’s strategy and operations.”

In the UK, Crowe’s advisory arm is starting to receive requests for assistance on transition-plan reporting from early adopters who are eager to ensure they will be able to anticipate future pressures. Meanwhile, Hindson says: “Other companies are asking for our help with revisiting their sustainability strategies – which may have been in place for several years, but may no longer look fit for purpose in such a rapidly developing environment.”

Jason Smith, Global Lead, Sustainable Supply and Value Chain at PA Consulting, says his firm’s clients are seeking advice on how to build social value. “They’re looking to create businesses and brands that attract and retain consumers and employees, through measures covering everything from buildings and training to communities, places and infrastructure, in order to support environmental, economic and social wellbeing.”

In addition, clients are requesting help with activities related to the circular economy, Smith says. “They want to ensure they are producing and consuming in a way that minimises or eliminates waste and maximises value, while regenerating nature.”

Identifying opportunities

Accountancy firms looking to position themselves to provide sustainability advice would do well to see it as more than just an add-on to their existing service offerings, warns Neil Davidson, Group Vice President of Professional Services at project management software provider Deltek.

“Sustainability is more than an additional profit line – it must play an integral role in a firm’s strategy. As such, serious consideration must go into the services offered. Speak to your clients. What do they want, need and have? What fits within their business’s existing proposition? From there, firms can identify where the biggest opportunities lie,” Davidson says.

Mazars Global Head of Sustainability Services Chris Fuggle says: “There’s no escape from environmental, social and governance (ESG) reporting for any modern accountant or firm. ESG data will increasingly appear in clients’ financial statements, accountants are proven controllers of robust data – and the International Financial Reporting Standards (IFRS) Foundation has taken ownership of the agenda.”

With IFRS sustainability disclosure standards S1 and S2 expected to go live from 1 January 2024, Fuggle says accountants should begin to familiarise themselves with the TCFD structure upon which they are built, and identify where their clients will have gaps.

“Preparation should start now,” Fuggle says. “Reporting is just a by-product, and accountants must think through whether the companies they serve have the governance, policies and systems in place to make progress on their sustainability goals – and to capture and report robust data.”

ICAEW Climate Change Manager Sarah Reay says the boom in sustainability consulting signals not only that businesses are taking environmental and social issues seriously, but that they are recognising their strategic importance, too. 

“There’s a huge opportunity here for practices to grow their advisory services, as clients will be looking to their trusted advisors to guide them through embedding sustainability across their organisations, and on how to report against the new sustainability standards,” Reay says.

However, the broad scope of sustainability means it is likely a steep learning curve: “Corporate sustainability covers a broad range of issues, from board diversity and remuneration to carbon footprint calculations and waste management,” Reay says. 

“As such, accountants must improve their knowledge and understanding of a wide array of interdependent issues. The key to unlocking this new service line will be investment in training. Once that’s achieved, the growth opportunities will be exponential.”

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