The sustainability consulting market is set to more than double over the next five years, according to a new report from research firm Verdantix.
Spending by companies on environmental, social and governance (ESG) and sustainability consulting services hit US$6.24 billion globally at the end of 2021, and is projected to grow to US$16 billion by 2027, the study, ESG and Sustainability Consulting: Market Size and Forecast 2021-2027, estimated.
Regulatory changes that mandate sustainability reporting and pressure from stakeholders to acknowledge climate risk and decarbonise, will boost sustainability consulting spending in all regions and in all sectors, the study said.
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ESG and sustainability consulting services are expected to grow by 17 per cent a year between 2022 and 2027, but corporate reporting and disclosure services will see the largest increases, with a compound annual growth rate of 21 per cent.
Market growth will be swiftest in Europe, Middle East and Africa, but there will be comparable growth in Asia Pacific and North America, the study projected.
Clampdowns by regulators and other law enforcement authorities in Europe and the United States have led to greater scrutiny of ESG commitments. US and German regulators are probing Deutsche Bank’s AG asset management following allegations last year that the firm overstated the credentials of some ESG-labeled investment products. This has prompted other companies to verify their own public statements related to ESG.
Previous data from Verdantix showed that acquisitions in the sustainability consulting sector tripled last year on the back of a surge in spending on ESG services and demand for sustainability expertise.
The report’s author and Verdantix research director, Kim Knickle, said that consultancies stand to benefit as companies look for external expertise to help them re-engineer their business models around sustainability, and adapt to more rigorous reporting requirements as regulations increase.
Singapore Exchange (SGX) became the first stock exchange in Asia propose mandatory climate disclosures aligned with the Task Force on Climate-related Financial Disclosures last August. Most stock exchanges in Asia Pacific now mandate sustainability reporting, but rules are expected to tighten as scrutiny grows over the quality and effectiveness of reporting.