Back in 2015, the world’s political and economic leaders gathered in the French capital to hammer out the Paris Climate Accords—an agreement widely hailed at the time as a landmark step in the battle against climate change. Earlier this month, the global elite reconvened in Glasgow for the UN’s COP26 climate conference. This event had been billed as a spiritual successor to the Paris talks of 2015; it marked the first real test of the resilience and the robustness of the Paris Accords, and represented an opportunity for the nations of the world to build on the pledges they had made six years earlier. A major difference between the two rounds of talks, however, was that this time the titans of the professional services industry were paying much closer attention.
In 2015, sustainability consulting was still seen as a somewhat niche part of the market—albeit one with strong growth potential. It was a service purchased almost exclusively by ESG or CSR managers, and regarded as primarily the domain of specialist environmental consultancies. That’s certainly not the case today. While the market for “pure” sustainability consulting work remains relatively small, the past few years have seen the explosive growth of a market for so-called “embedded sustainability work”. In other words, clients buying large programmes of consulting work have increasingly come to expect that concerns about sustainability will be embedded into the scope of that work and its deliverables; CEOs and COOs want to know how the digital transformation work they’re buying, for example, is going to help them achieve their net zero ambitions and minimize their exposure to climate risk.
The world’s leading consulting brands have recognised this shift and, as a result, many of them have embarked on upskilling programmes or hiring sprees intended to improve their access to sustainability expertise; just a few months ago, PwC cited ESG services as the primary driver behind their decision to create 100,000 new jobs over the next five years. It’s hardly surprising, therefore, that these firms would be paying close attention to the goings-on at COP26—trying to read the tea leaves and divine what events there will mean for the future of the market for sustainability services.
In our view, there are three key lessons that professional services firms can take away from COP26 and the media discourse surrounding it. First, there’s the fact that the financial services sector will play a vitally important role in providing funding for both public and private sector sustainability initiatives. One of the major announcements from COP26 was the formation of the Glasgow Financial Alliance for Net Zero, or GFANZ—a new body chaired by former Bank of England governor Mark Carney that will report into the G20 and act as a forum to coordinate sustainability investment and oversight within financial services. Investors are, it seems, taking a keen interest in making their portfolios more sustainable, and consulting firms should expect that asset managers will be some of the biggest buyers of sustainability work over the next few years.
Another key takeaway from COP26 is that the concept of net zero emissions—an idea that has come to dominate the conversation around decarbonisation—may have a limited shelf-life. In the run-up to the conference, three leading climate academics published a report arguing that net zero is a “dangerous trap” that “helps perpetuate a belief in technological salvation and diminishes the sense of urgency surrounding the need to curb emissions now.” And indeed, “Net zero is not zero” has become something of a rallying cry among climate activists and lobby groups. For now, businesses and governments continue to set out their decarbonisation targets in terms of net zero; but in a few years’ time, that may no longer be good enough. It may not be long before clients stop asking consultants how they can achieve their net zero ambitions, and start asking them how to go beyond net zero and embrace even more ambitious decarbonisation targets.
The final lesson we can draw from COP26 is that climate change will continue to be the defining political issue for Generation Z for the foreseeable future. Two of the standout moments of the conference were former President Obama telling young people to “stay angry” about climate change, and activist Greta Thunberg putting that anger into practice by aggressively chastising COP attendees for not going far enough in their commitments to reduce emissions. For consulting firms, this creates yet another strong incentive for them to invest in their sustainability offerings and to develop more sustainable business practices; if they don’t, they may find it increasingly difficult to attract and retain young talent. For Gen Z, the personal is political. Today’s top graduates want to work for businesses that are going to safeguard, not endanger, their futures—and so firms with strong sustainability credentials will be much better positioned in the talent market of the future than their peers.