Today’s business leaders face mounting pressures to improve their Environmental, Social, and Governance (ESG) skills. Because the initial steps to the formulation of a sustainable enterprise transformation can be daunting for the C-suite, demand for ESG business strategy consulting has increased.
According to the latest worldwide market study by International Data Corporation (IDC), ESG business services spending will grow to $158 billion in 2025 with a five-year compound annual growth rate (CAGR) of 32.3 percent.
“In 2022, all enterprises are being pushed to transform and fundamentally change the way they do business to become sustainable enterprises,” said Dan Versace, research analyst at IDC.
ESG Business Consulting Market Development
Owing to increased pressure from customers, investors, and regulators, savvy organizations are just beginning to understand the business case for actionable Corporate Sustainability strategies. Those organizations that develop and implement plans to better internalize and address their environmental impact will thrive.
IDC defines ESG business services as forward-thinking professional services that are centered around achieving goals and objectives related to environmental sustainability and social governance.
It can also include ESG-enabling services, known as sustainability-linked professional services, that enable organizations to increase their sustainability capabilities through traditional business process improvement, such as services focused on increasing process efficiency or supply chain services to reduce risk.
The main focus areas for organizations’ investment in sustainability are business strategy, human capital management solutions, and risk management. The largest area of spending — strategy consulting — will enable organizations to efficiently embed sustainability into their business strategy, which is the driving force of corporate purpose and in turn sustainable operations.
Human capital management will be the fastest-growing area of spending. This is primarily due to the dual challenge of creating large-scale organization-wide training and process efficiency improvements necessary for sustainability efforts to succeed in the future, on top of addressing social pillar topics such as human capital management internally.
The increased spending across functions is forcing organizations to address corporate sustainability in a holistic way, moving away from the ad hoc approach that was present in years past. This imperative to act sustainably in all facets of an organization is becoming more powerful as mandated sustainability disclosures draw nearer.
While many organizations are already reporting on their climate-related performance voluntarily, professional services will still be needed to increase the process efficiency as more resource-intensive reporting becomes mandatory.
In addition to the recognition of the inherent link between social and environmental sustainability beginning to be understood on the corporate level, more nuanced and pointed services will be needed to address the societal impact of enterprises’ operations in the future.
Outlook for ESG Business Consulting Solutions Growth
“By the end of the forecast period, IDC expects sustainability-linked business consulting services to encompass nearly two-thirds of the total business services market,” added Versace.
With ESG consulting in its infancy, IDC analysts believe there are opportunities for differentiation. Management Consulting firms should assess their sustainability-related services to determine where these offerings can best be utilized, and identify where new thought leadership will be required.
That said, I believe the ESG market is nascent and subject to shift as CHROs, CIOs and CTOs decide how they foresee utilizing business technologies in the most effective manner. Pervasive work-from-home employee trends and flexible working initiatives have disrupted prior IT leadership assumptions.
Now is the time to consider Digital Workspace solutions that are better suited for the Anywhere, Anytime Workforce. This creates a significant upside growth opportunity for informed IT vendors with strategic ESG foresight and unique professional service capabilities.