HomeBuildingsSpending on ESG consultancy services to jump 32.3% per year to $158bn in 2025

Spending on ESG consultancy services to jump 32.3% per year to $158bn in 2025

Spending on (mostly tech-linked, commonly IoT-linked) business services to streamline and manage environmental, social, and governance (ESG) performance will grow to $158 billion in 2025, at a compound annual growth rate (CAGR) of 32.3 percent. Analyst house IDC said most of the money – nearly two thirds, by 2030 – will go on “sustainability-linked” business consulting services.

The market for ESG services has been spurred recently by the global Covid-19 pandemic, and is being driven hard by environmental sustainability mandates from customers, investors, and regulators. It is, by turn, driving the IoT agenda, with many IoT suppliers claiming rising demand among enterprise users, particularly in the commercial real estate market, for solutions to help with energy usage, water usage, and healthy environments.

IDC defines ESG business services as professional services for tracking and managing ESG targets, and for helping enterprises drive digital change in the name of environmental sustainability. This includes services for “increasing process efficiency or supply chain services to reduce risk”, which works as a mission statement for the broad IoT sector. It says enterprises are focused on business strategy, ‘human capital management’, and risk management.

Strategy consulting, geared to “embed sustainability into businesses”, is the largest area of ESG spending, it said – “which is the driving force of corporate purpose and in turn sustainable operations”. It stated: “Organizations face mounting pressures to improve and document their ESG performance. Because the initial steps to a sustainable transformation can be daunting… sustainability-linked consulting spending has become a high priority.”

Human capital management is the fastest-growing area of spending – due to “creating organization-wide training and process efficiency improvements”. IDC stated: “In 2022, all enterprises are being pushed to transform and fundamentally change the way they do business to become sustainable enterprises… [The] 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.”

Dan Versace, research analyst in ESG business services at IDC, said: “Those organizations that develop and implement plans to better internalize and address their environmental and social impact stand to thrive in the years ahead as leaders in the sustainability space… With the market being still in its infancy, opportunities for differentiation are everywhere. Firms should assess their sustainability-linked business services to determine where these offerings can best be utilized and identify other end-user pain points where new offerings will be needed.”

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