Is the Sustainability Consulting Market Reaching Maturity?
For the last decade, the sustainability consulting industry has been like the Wild West — hundreds of people jumping in and making their own rules, standards, and best practices. They created a thousand different services, promised all kinds of results, and made all kinds of claims.
For the last eighteen months or so, however, things seem to be shifting a little bit. So when I came across the Inc. Magazine article, “6 Signs Your Market Is Maturing” by Karl Stark and Bill Stewart, I read it with an eye to my market: the sustainability consulting industry. According to the article, here are six signs that your market may be maturing as well as my comments on how each apply within sustainability consulting.
1. Customer needs/desires do not appear to be evolving rapidly.
For the first couple of years, we developed a brand new proposal for each and every prospective client that came through our door — because they all needed something different. Our annual survey of other sustainability consultants showed the same thing: many (if not most) clients didn’t know what they wanted at the beginning of an engagement. So naturally, once the project got going, it evolved rapidly as the client began to understand how to apply the lens of sustainability to achieve new goals. Now, however, clients are starting to follow a common path — and most sustainability consulting firms are offering a similar suite of services.
2. Consolidation by leading competitors is reducing competitive intensity.
Over the last two years, there have been a number of notable acquisitions in the sustainability consulting industry. Green Order, Prizim, Two Tomorrows Group, Domani, dcarbon8, ClearCarbon Consulting, and Viridis are just a few of the companies that have been gobbled up by larger companies (Deloitte, in particular, has been on a buying spree). I’m seeing a related decrease in the number of direct competitors to SSC — not that it’s not competitive out there, but I’m generally seeing the same three to five peers competing against us for business now.
3. Disruptive innovations and new entrants are gaining share only gradually and top out at relatively low levels.
No offense to the new players in the field, but it’s been years since we’ve seen a new entrant with the momentum and cache of a Green Order, Blu Skye, or Act Now. Most new players in the field seem to be staying small, or joining forces with other existing service providers. I haven’t seen a break-out company for a couple of years.
4. Market shares of leading competitors have solidified and are changing gradually, if at all.
This is a tricky one, since virtually no information about market share is publicly available. Certainly, the acquisition trend seems to indicate that market share is still shifting — but I do believe (and this is a gut feeling from working in the industry since 2005) that we’re now seeing the beginnings of solidification of the market leaders in our field.
5. Price, brand and/or channel strategy has supplanted product innovation as key value drivers.
There is much less product innovation in the sustainability consulting field than there was five years ago. As the market has matured, so have the methodologies and best practices for things like greenhouse gas emissions calculation, stakeholder engagement, water footprint assessment, and sustainability reporting. (The exception is the sustainability software market, which is still rapidly innovating.) As product/service innovation has slowed, resulting in a similar set of service offerings from most sustainability consultancies, clients are increasingly looking to price, brand reputation, and industry expertise to choose their consulting partners.
6. Cash flows are increasingly turning positive and being returned to investors rather than invested into the market.
Again, this is a difficult one to analyze, since most sustainability consultancies don’t share their financials with the public. The small, boutique firms are privately held and don’t disclose their balance sheets. Large companies don’t break down their financials by division — and so while you may know how PwC performed in the last fiscal year, you won’t be able to see what percentage of revenue, profits, or sales came specifically from sustainability consulting services. So I’ll pass on this one — but will eagerly watch for signs that investors are getting their money back.
So, from the list above, it does seem like there are clear signs of maturation in the sustainability consulting market. I would guess that we’re still in the early stages, with much more development to come. But I will confess that I find it heartening to believe that we’re taking a step away from the earlier “Wild West” days. Here’s to the continued maturation of our industry — it’s good for practitioners, good for clients, and good for our global sustainability journey!
Jennifer Woofter is the founder and president of Strategic Sustainability Consulting, a boutique firm specializing in helping rapidly growing mid-size businesses integrate sustainability into their business model. She tweets at @jenniferwoofter.
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