Chief Sustainability Officers’ Role ‘Disappearing’
The forecast predicts that spending by heads of sustainability on consulting services will shrink by 2.4 percent a year over the next five years, from $417 million in 2016 to $369 million in 2021. By contrast, other business functions such as finance, sourcing, and product design will spend more on sustainability projects resulting in compound annual growth for the entire market of 4 percent over the next five years.
“Heads of sustainability often say that if they successfully persuade executives to take responsibility for the sustainability agenda they will work themselves out of a job” said Yaowen Ma, Verdantix industry analyst. “Over the last 18 months our research has identified a trend towards the head of sustainability role disappearing. Responsibilities are handed over to the VP of environment, health and safety or to the director of corporate responsibility. The role is slowly becoming redundant as sustainability programs mature and other function heads take over.”
Key findings include:
- Across nine major economies, sustainability consulting spend will total $912 million in 2016 with the US accounting for $344 million (38 percent) of the total and Europe for $292 million (32 percent). In 2016, government and stock exchange initiatives will result in sustainability consulting spend of $78 million in Brazil and $38 million in India.
- Sustainable supply chain engagements will account for $227 million (25 percent) of the total market in 2016 reflecting the uptick in corporate risk management around supplier ethical performance and regulations on conflict minerals and slavery. Energy management will continue to be a focus for spend, representing $206 million (23 percent) of the 2016 total market.
- Rising interest from investors in environmental, social, and governance (ESG) issues, a continued focus on supply chain stewardship and growth in the application of analytics to EHS data sets to inform sustainability strategies will be key growth drivers between 2016 and 2021.
- Supply chain and resource management engagements will see the fastest growth of 7 percent annually with strategy and innovation growing by 6 percent per year. Consulting spend on climate risks, ESG, and social impact investing will grow by 5 percent each year over the next 5 years.
“Despite the best efforts of the management consulting profession, sustainability is still just a narrative about corporate performance not a clearly defined market,” Ma said. “With a forecasted value of less than $1 billion, small deal sizes, and competition from consultants at not for profits it is not a market that excites the top brass of consulting firms. That’s why the largest consulting firms have turned away from the sustainability market, defunded global practice groups, and folded sustainability experts into industry teams.”
While sustainability consulting spending may be on the downward slope, Verdantix says EHS consulting spending is on the rise, with EHS executives planning to increase EHS spending this year, according to a different Verdantix survey.
The global survey of 312 EHS executives in late 2015 found that 10 percent of firms will increase spending in 2016 by double digits and 21 percent will spend between 5 percent and 9 percent more in 2016. Three quarters of respondents expect budgets to increase in 2016, which is an increase from 62 percent who increased spend in 2015.
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