Climate change consulting: buyers beware

Advising firms on climate change is a booming business, but potential clients should scrutinise consultancies closely before they open their wallets and their ears, says a recent report.

The report from Verdantix, a business research firm, applies 74 evaluation criteria covering carbon footprints, carbon management strategy, corporate strategy for climate change, global carbon markets advisory and clean-tech consulting to help buyers compare the climate change offerings of 16 leading consulting firms including Deloitte, EcoSecurities, ERM, ICF, KPMG and McKinsey.

“In 2008, consulting firms expect to see growth of up 200 per cent from 2007 for advice on global carbon markets and renewable energy,” said Verdantix director and report author, David Metcalfe. “Demand for climate change advice is growing at a healthy rate of 25 per cent. Buyers are looking for proven environmental expertise with a business analysis edge. This combination poses a challenge for new players entering the climate change consulting market.”

Verdantix’s analysis of the climate change business consulting market is based on in-depth interviews with practice leaders of business consultancies and a focus group composed of 15 buyers of climate change services.

The research found that, as climate change evolves from an environmental issue into an economic issue, buyers seek environmental expertise wrapped with business analysis. As a result, managers responsible for implementing climate change programmes hope to appoint advisers who combine technical expertise with business advice and financial analysis skills.

Despite the backing of strong brand names and investment in new climate change consulting capabilities, IT and strategy consulting firms have a long way to go to convince sceptical buyers that they are the right partner, says the report.

Carbon management and compliance dominate spending, according to the report. To date firms have invested in carbon measurement and management advice and plan to spend on compliance in the next 12 months. Opportunity analysis, carbon offsetting advice and strategy development are not priorities for 2009.

“Buyers of consulting engagements could overpay or select a provider with skills that do not match the challenge. Confusion will increase as more players are poised to launch services,” said Metcalfe.

Overall, ICF International comes out top in the report with “a long track record in climate change advisory, deep environmental expertise, business analysis skills and the capability to deliver engagements in energy intensive sectors and service sectors.”