Consultancies cash in on climate advice as firms race towards net zero

One example of a company helped by consultants to think in a more sustainable way is health technology company Philips. The Dutch firm has pledged to generate a quarter of its revenue from “circular” products, services and solutions by 2025, and to offer a trade-in on all professional medical equipment. Accenture helped Swiss telecoms company Swisscom devise a strategy to help it and its customers reduce their emissions by one million tons of carbon by 2025 — equivalent to 2 percent of Switzerland’s total carbon emissions.

„We supported them in assessing the business case behind more ambitious climate actions. The leadership needs numbers and business rationale when committing to more ambitious actions and implicated investments,” said Christian Meyer-Bretschneider, director for sustainability at Accenture Strategy.

Accenture also helped carmaker VW focus its ESG strategy on four major topics from an original 18, setting easily understandable ambitions and key performance indicators (KPIs) for each area including decarbonization, circular economy, human rights in business and workforce transformation.

„Nowadays, many companies want to go beyond compliance and actually improve competitive advantage,” Meyer-Bretschneider said.

Roland Berger estimates that more than 1,500 businesses worldwide, representing over 10 trillion euros in revenue and 19.3 million employees – including in carbon-intensive sectors – have set themselves net zero targets. The number of companies disclosing their emissions footprint has grown to more than 50 percent of global market capitalization. However, Accenture has predicted that 93 percent of the major companies that have committed to net zero targets will fail to achieve their goals if they don’t at least double the pace of emissions reduction by 2030. Bolstering its pitch to help them do that, Accenture said companies require ‘carbon intelligence’ capabilities to embed carbon and broader ESG strategies into their core businesses and across their value chains.

Sustainability vs the bottom line

But many companies are still resistant. While over three-quarters of investors think companies should make decisions that lead to sustainable, long-term value creation even at the expense of short-term earnings shortfalls, only around half of finance leaders are prepared to take this long-term stance, according to a recent survey published by EY.

It is perhaps not surprising that finance chiefs are focusing on protecting the bottom line rather than sustainability in the current tough economic times. However, Jordanova of Plan A said the bigger firms are still committed to reducing emissions. “Larger businesses are doubling down, smaller businesses are not as engaged.” Whether they are reacting to the stick or the carrot, the fact that many companies are suddenly trying to at least seem to be green, means that demand for all kinds of consultancy services has exploded. While big players like EY can offer end-to-end solutions, many smaller start-ups are focusing on pieces of the puzzle, such as providing software to measure emissions.

“There is not much expert knowledge to go around… everybody is needed,” said Hannah Stringham, head of communications for Right, a Frankfurt-based firm which helps companies measure their carbon footprint. “There is an increased awareness of financial risk, exposure to regulation, fear of reputational damage and the impacts of climate change.” Given the shortage of skills, the big consulting firms are spending heavily on hiring more environmental experts, while also training existing staff, and buying up smaller players. The big consultancies have all bought up smaller rivals of late. EY’s Huber predicts there will eventually be a shakeout, especially in carbon auditing when regulators agree on more standardised measurements and reporting requirements. Then players like SAP and Microsoft are most likely to come out on top, he says.

Despite the consolidation in the sector, Verdantix analyst Taylor still sees a big opportunity for boutique providers. “Global players are yet to invest comprehensively in several key areas of climate consulting services, including carbon offset project development. Independent players will continue to thrive in the market, due to the highly business- and geography-specific demands for climate consulting services,” Taylor said.

Shailendra Singh is the chief executive of SustainMantra, a consultancy advising small and medium-sized businesses in India. “Without smaller companies adapting, it doesn’t matter if the big multinationals get it right,” he said, noting that the supply chains of major players are made up of smaller companies. “Most owners of small companies don’t want to show that they don’t know what to do. We build comfort and trust, and tell them what they don’t know." While some consulting firms are buying in expertise through acquisitions, others are putting a focus on training existing staff. McKinsey, Bain & Company, and Deloitte have all announced ESG training programmes for employees in recent months. And major business schools are adjusting their offerings to include more climate modules.

Meanwhile, BCG has called on climate activists to join the company, recently announcing an internship program for up to 12 weeks. The “visiting activists” will immediately have the opportunity to advise companies on sustainability and environmental protection.

Richard Roberts, who works for UK climate consultancy Volans, is worried by that development. “The place we most need climate activists now is in frontline politics, deciding the laws that govern the market economy, not advising businesses on environmental, social and governance issues,” he wrote in a letter to the Financial Times. “We’re never going to change that if all the climate activists become management consultants.”

Many climate activists remain suspicious. They note that consultancies are often still paid to protect the status quo, focusing on maximising profits rather than the health of the planet. Consultants continue to advise carbon-heavy industries on ways to appear more sustainable, while helping them lobby against the legislation aimed at forcing them to clean up.

One consultant, who declined to be quoted, admitted his firm had helped a major energy company with a campaign that sought to make it look like it was more committed to reducing emissions than it really was, even though it had advised the client it would backfire. “We tell clients we don’t believe you should do this but you will see for yourself after two years and then you have to reverse course. It is like letting a child put their hand on a hot stove and they learn themselves.”

Greenwashing advice

BCG, a major provider of advice to the oil and gas industry, has faced allegations of greenwashing for its sponsorship of U.N. COP climate change summits, including the one planned next year in the United Arab Emirates.

“The UAE and other Middle Eastern countries need to present a much greener image to the world if they are going to get away with carrying on with oil and gas,” said Pascoe Sabido of campaign group Corporate Europe Observatory. BCG has been helping governments in the region promote the idea of developing more “sustainable cities”, but Sabido sees that as a red herring: “Ultimately it is a big front for continued oil and gas consumption.”

BCG has said it will continue to advise polluting industries as long as they commit to their own decarbonisation targets. CEO Christoph Schweizer told the FT that the group already earns more advising on sustainability than it does in the oil and gas sector, adding the one sector it refuses to work on is coal, unless it is asked to help decommission a mine.

EY’s Huber defends working with dirty sectors: “If everyone tries to avoid the big emitters, the emissions will still be there. Yes, let’s work with them but be purposeful and don’t do greenwashing. What is bad about an oil company committing to real targets?”

McKinsey employees demand real climate action

Last year, the New York Times reported that more than 1,100 employees of McKinsey had signed an open letter to the firm’s top partners, urging them to disclose how much carbon their clients emit. “The climate crisis is the defining issue of our generation,” nearly a dozen McKinsey consultants wrote in the letter. “Our positive impact in other realms will mean nothing if we do not act as our clients alter the earth irrevocably.”

Mike Forsythe, the journalist who wrote that article as well as a new book about a raft of scandals involving McKinsey, told Clean Energy Wire that the company’s efforts on sustainability were undermined by continuing to advise oil and coal firms. “Companies like McKinsey have done some very important work in the field, but it is totally undermined by their work for the big polluters, which our reporting found adds megatons of carbon into the atmosphere,” he said.

McKinsey has said it will continue to work with “hard-to-abate” industries like energy, shipping and agriculture: “Society cannot deliver necessary carbon reductions without engaging with the industries that need to transition the most,” it said in a statement.

One former McKinsey consultant said the answer was not necessarily to stop consultancy firms from working with polluting industries, but to regulate the sector, for example by demanding that consulting firms account for the emissions of the companies they advise in disclosures, particularly as a requirement for winning public contracts, and creating frameworks for privately held institutions such as consulting firms, PR firms, or law firms that include the emissions impact of their advisory practices in carbon disclosures or ESG reports. “They need incentives and costs to move away from their fossil fuel portfolios or put real restrictions on the types of work they are able to do with such clients. At the moment, they shop their relationships with regulators as a reason to be hired by polluting clients, and with regulators use confidentiality to protect themselves from disclosing obvious conflicts of interest or potentially damaging client work”

Sabido from Corporate Europe Observatory agrees. “Consultancies are also lobbying. And they are also working for governments and using what they’ve learned working for governments with private clients,” Sabido said. “If they are working with fossil fuel companies, they shouldn’t get public contracts.”