Sustainability Consulting Market to Reach $16b by 2027

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by KnowESG
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Sustainability consultants are experiencing unprecedented demand due to the need for businesses to adapt their business models in response to environmental and social challenges. According to recent research, the global market for environmental, sustainability, and governance consulting is expected to achieve a double-digit compound annual growth rate through 2027.

ESG considerations are becoming increasingly central to economic and societal discussions, with consumers increasingly avoiding companies with poor ESG track records. Investors are also showing a growing reluctance to back companies that fail to take these risks seriously. As a result, most businesses have recognised the importance of proactively addressing ESG issues to meet social needs and improve business outcomes.

However, despite the importance of ESG, many mid-market companies are struggling to meet the challenge. The lack of senior management buy-in is hindering the ESG goals of many firms while calculating the carbon or social impact of every aspect of a supply chain can be a complex and time-consuming process that further slows progress.

Consequently, there is a growing demand for external ESG expertise. A recent study by research and advisory company Verdantix predicts that companies will spend more than double on ESG and sustainability consulting over the next five years, reaching a record high of $16 billion.

Verdantix Research Director Kim Knickle said, “Over the next five years, businesses will have to reorientate themselves around ESG and Sustainability priorities. This represents a complex challenge that will take place against a rapidly evolving regulatory backdrop. As a result, consultancies stand to benefit as firms look for external expertise to help them achieve transformational change and more rigorous standards of reporting.”

The research conducted by Verdantix predicts that the ESG and sustainability consulting market will grow at a compound annual growth rate (CAGR) of 17% per year until the end of 2027. This growth will amount to a total increase of 156% from the market's 2021 size, adding almost $10 billion to its $6.24 billion value that year. Regulatory changes, stakeholder pressure, GDP growth, and policy development will drive growth across all regions and sectors.

Moreover, ESG factors will become increasingly important in investment and M&A decision-making processes. ESG investment is already considered a future driver of growth in the banking sector, where banks with high ESG ratings have higher net interest income and net fee and commission income than their peers. By 2022, the market is expected to exceed $7 billion.

Verdantix anticipates that the initial growth in ESG consulting will be strongest in the EMEA region, followed closely by North America and APAC. All ESG and sustainability consulting services are expected to achieve double-digit growth over the period, with the highest increase in corporate reporting and disclosures at a CAGR of 21%.

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