Services firms must embed sustainability in teams, engagements, and ecosystems

Services firms hold an immense opportunity and responsibility for sustainability—whether they’re in consulting, technology, engineering, or broad business services. Our separate report explores this same statement for financial services. Outside addressing the sustainability of themselves as organizations, this opportunity and responsibility for services firms manifests throughout their teams, client engagements, and ecosystems. They must have clarity on each element (see Exhibit 1).

Many approaches exist to embed and influence sustainability. Services firms must be quick: there’s soaring market growth associated with sustainability, and we expect revenues to triple over the next two years. See our market analysis for more detail. But, despite the market and moral potential, all firms grapple with defining and quantifying the scale of their sustainability services practices. This report provides example approaches and thoughts on emerging best practices.

The services industry needs new ambition to help align everything it touches with the global sustainability context in Exhibit 2. Policy and the public can’t move at the systems level and speed sustainability demands. COP27, the latest UN summit, hasn’t changed that. Businesses hold the last levers. Services firms can and must help.

Exhibit 1: Embedding sustainability throughout a services firm’s teams, client engagements, and ecosystem—to go far beyond only addressing the sustainability of their own organizations

Source: HFS Research, 2022

Services firms can take a variety of approaches to embed sustainability throughout portfolios and teams

Firstly, sustainability must be CEO-led to ensure its priority, including embedding metrics, targets, incentives, and accountability for the whole C-suite and organizational functions. Our research indicates an alarmingly small number of CEOs and boards play even a supporting role in sustainability—let alone a leadership one. We commonly see 25%-35%, which isn’t good enough. Sustainability in a silo without CEO and board mandates can’t change behavior and priorities across organizations—made more important with sustainability having to cascade through everything, everywhere. We presented this disconnect to COP26, 2021’s climate summit, and little has changed in our data since.

Most services firms aim for global coordination of their sustainability practices, including the historically regional Big 4. EY has long talked about a global practice and appointed a Vice Chair in 2020. In 2021, KPMG announced a three-year $1.5 billion investment in its IMPACT accelerator, that supports the implementation of sustainability strategies, alongside five new dedicated sustainability hubs globally. Most firms also outline an aligned company-wide approach to building sustainability teams specific to engagements leveraging existing expertise across industries, regions, and technical matters.

On internal upskilling, Bain hopes to boost its sustainability skillset in partnership with academia, as are others. Deloitte also launched a learning program to boost employee sustainability capabilities. PwC has provided sustainability training to over 100,000 employees and plans for sustainability revenues to grow tenfold over the coming four years.

IBM’s “major and minor” approach is a balance of focused and embedded sustainability services—creating a core sustainability team and broader skills throughout the company. CEO advocacy adds to IBM’s clear leadership structures for sustainability.

Infosys has built a sustainability team reporting to the CFO, presidents, and board—with a network of “champions” throughout its business. It also has clear sustainability leadership structures throughout the firm and its go-to-market strategy. More than half of Infosys’ engagements (it has approximately 1,600 clients) now include climate solutions.

Acquisitions also build sustainability services capability. Accenture has made more than 10 acquisitions specific to sustainability and many more that it can apply to sustainability efforts. Atos acquired climate consultancy EcoAct, from which it is adding its scale and technology to the sustainability experts’ clients, and vice-versa. Capgemini’s Altran acquisition brought engineering skills—lots of them (around 4,000 people) applicable to sustainability—to compete with the likes of ERM, WSP, and Arcadis. ERM is acquiring digital capability, as are the Big 4 and management consulting firms.

Talent attraction and retention are further elements that cannot be understated. Accenture has been vocal about hiring dozens of managing directors for sustainability. Soaring headcount growth throughout the market adds to the battle for sustainability-versed talent. Employee experience and purpose are important, with people increasingly open to switching firms. EY comments that sustainability leadership is critical for talent retention; internal skilling programs include an EY master’s degree in sustainability from Hult Business School.

Services firms can also embed sustainability in client engagements

Accenture’s 360 Degree Value approach aims to embed sustainability in all client engagements. For its major “Diamond” clients, Accenture will build a scorecard of those engagements’ impacts on six sustainability and business value metrics: financial, experience, risk, talent, inclusion and diversity, and environmental sustainability. Accenture Ventures also invested in Arabesque, allowing sustainability data and insight to be taken to clients and upskill internal teams.

McKinsey formalized a sustainability upskilling practice. Upskilling clients and developing sustainability talent strategies is an opportunity for all services firms to build on internal successes. This opportunity isn’t being taken by all yet.

Embedding sustainability throughout client portfolios means, in large part, expanding existing engagements. Case studies and references are more critical in sustainability versus other more established service areas. The speed and complexity required means clients need partners who know their operations, value chains, and industries—and have similarly succeeded elsewhere.

Services firms exist at the center of vast systems of organizations, industries, and governments; few sectors have this level of influence, and its leaders must use it

Most large services firms are involved in global networks addressing sustainability, such as the United Nations, World Economic Forum, and industry-specific coalitions. They also have partnership ecosystems that include expert consultancies, technology and platform giants, and engineering powerhouses. Increasing numbers of government engagements on sustainability, digital, and more add to the influence of services firms. By setting the bar on ambition, highlighting successes, bringing technology, road mapping, business model, and more expertise to the table, and driving collaboration at the new levels we need, services firms can use their central positions to align systems with the global context across decarbonization, human rights, risk, resiliency, and beyond.

Exhibit 2: The global sustainability context addresses all UN Goals and ESG factors and must cascade across systems and throughout organizations

Source: HFS Research, 2022

The Bottom Line: For services firms to have the impact on sustainability the world needs, they must develop clear approaches to embedding and projecting sustainability throughout their internal teams, client engagements, and ecosystems.

Like the financial services sector, all services firms must have an approach to sustainability matching their opportunity and responsibility. The next step is alignment throughout the services industry for the biggest systems effect possible. Business is the last hope of addressing sustainability. The global sustainability context in Exhibit 2 must cascade throughout industries, technologies, and organizations; services firms are well placed to be catalysts.