Let me start off this post on a downbeat note: Improving sustainability is not a high priority for companies, according to data from the recent Forrester survey of business decision-makers. The survey, part of Forrester's Forrsights research, was fielded to 2,600 executives with budget authority at companies in Europe, North America, and Asia during the fourth quarter of 2010.
When we asked these corporate decision-makers about their company's top business priorities, revenue growth was #1, customer retention #2, and cost-cutting #3 (see Figure 1 below; click image for a full-sized version). Improving the corporate sustainability posture? Oops, it's down at #10, with just 10 percent of respondents indicating that sustainability is one of their firm's high priorities for 2011. When we cut those numbers by industry grouping, utilities/telecoms and public sector/healthcare are highest, with 15 percent prioritizing sustainability, compared with a low of just 7 percent in financial services.
Now, I'd like to contrast that eye-opening data with a much more optimistic set of figures from our recent research, about the growth of sustainability consulting services. My colleague Daniel Krauss and I have worked with many of the large consultancies over the last few years, and seen their sustainability practices grow from practically nothing to very substantial businesses.
Among 21 consulting firms that we surveyed late last year, 17 have a dedicated sustainability practice and five of those count more than 1,000 practitioners (see Figure 2 -- full-sized version here).
And we estimate the global market for sustainability consulting services was $2.7 billion in 2010 and will grow by more than 40 percent to reach $3.8 billion this year (see Figure 3 -- full-sized version here).
So, the reader might ask: Mr. Analyst, how do you reconcile the downbeat demand-side portrait with the optimistic supplier forecast?? The answer in a nutshell: by recognizing that sustainability is not a standalone sale. Corporate clients are not buying sustainability consulting services to "improve corporate environmental sustainability and social responsibility," i.e, to address priority #10 shown in Figure 1.
Instead, they are linking sustainability improvement to other, higher priorities. They are recognizing that improving sustainability will have a positive effect on, for example, their company's ability to acquire and retain talent (priority #7); that improving sustainability can lower the firm's overall operating costs (priority #3); and that improving sustainability can help the company acquire and retain customers (priority #2). This is the magic of the sustainability sale -- it's not about sustainability! Instead, the consulting firms (and their brethren among software vendors) are becoming expert at recognizing the sustainability elements inherent in other corporate priorities and initiatives.
All about new-customer acquisition? Companies in the CPG industry are finding that their retail and end-user customers are increasingly requiring that material sources are identified, and that packaging has been reduced to minimum.
Looking to lower costs? Many companies find that energy expenditures are among the last unmanaged set of costs on their income statement, and are implementing energy management systems and software to remedy that situation.
Plagued by employee turnover? Firms in professional services and elsewhere are finding that action plans to improve their environmental responsibility help in recruiting and retention battles.
We are working on a new research report that will identify best practices that buyers of sustainability solutions are using to drive their business priorities by improving their sustainability posture. And we welcome your ideas and input in the comments below.