Climate becomes mainstream business for consultancies
Emerging reporting requirements are also fuelling the advisory market for climate and governance
Climate and good governance have become a mainstream business for consultancies as companies embrace these goals either on account of management choice, regulatory requirement or customer preference, according to industry leaders.
Businesses adopting sustainability goals have prompted large consulting firms to set up separate verticals for this practice even as specialized firms seek to tap the opportunity, which is expected to see significant growth in the next decade.
According to Jamil Khatri, co-founder and CEO of Uniqus Consultech Inc, a firm specializing in environment, sustainability and governance (ESG) advisory, many corporations that have espoused net zero targets have created significant opportunities for consultancies.
“The ESG consulting market is very broad, and going forward, it is expected to become universal. Whether it is investors, regulators, customers or the board of directors, every stakeholder is trying to embrace ESG, and they need help with it. All consultancies have rightly identified this as a major opportunity,” Khatri said.
Uniqus Consultech, founded in December by Khatri, who previously served as global head of accounting advisory services and member of the India leadership team of KPMG, along with Sandip Khetan, former head of financial accounting advisory services of EY India, opted to focus on climate, ESG and accounting advisory.
“We decided to focus on two areas—ESG and climate change and accounting advisory because I believe the ESG opportunity is perhaps going to be the best opportunity for consulting in the next one to two decades,” Khatri said.
Emerging reporting requirements are also fuelling the advisory market for climate and governance.
According to Sambitosh Mohapatra, leader – ESG at PwC India, Sebi’s requirement of business responsibility and sustainability reporting (BRSR) and disclosures for the top 1,000 listed entities by market capitalization from FY23 has triggered large corporations to think about ESG as a value preservation measure immediately while it will develop into value creation measure over the next couple of years.
Mohapatra said the need for firms to have capabilities in ESG strategy to execution is felt. “While such services used to account for around 1-2% of the revenues for advisory firms, the possibility of a ten-fold increase is possible over the next decade,” Mohapatra said.
Businesses have to find ways to improve their ESG performance and raise resources to mitigate risks while exploiting the opportunities. Climate-related policies are increasingly influencing global trade rules now. The EU is now in the process of implementing a border tax on carbon-intensive imported items.
The commitments to net zero emission by nations will drive millions of investors and businesses to focus on ESG-related factors in their strategic decisions and investments, according to Prashant Chikhal, director, assurance and risk advisory at Nexdigm, a consulting firm.
Along with the regulatory framework and compliances, businesses also need advice for finding opportunities either within their existing business for further investment or for divesting from activities not aligned with their ESG goals. “In addition to large consulting firms strengthening their teams, we have also witnessed venture funding in this consulting space with tech-enabled ESG consulting firms,” said Chikhal.
Accounting rule maker Institute of Chartered Accountants of India (ICAI) has been regularly issuing standards and resources to support this growing practice, he said.
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First Published:3 Jan 2023, 10:59 PM IST
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