ESG Consulting Market Size, Share & Growth | Report 2031

Report Description

ESG Consulting Market Outlook 2031

The global ESG consulting market size was valued at USD 8.76 Billion in 2022 and is expected to reach USD 13.82 Billion by 2031, expanding at a CAGR of 5.2% during the forecast period, 2023–2031. The growth of the market is attributed to rising awareness regarding green recovery.

ESG consultation offers standards for company operations and helps in improving the company’s environmental, social, and governance performance. It further offers consultation for making responsible investments. Environmental criteria include natural resource conservation, corporate climate policy, waste, pollution, and animal care. With the growing importance of sustainable consulting and the improvement in environmental performance, the demand for ESG consulting services is surging in the industry.

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ESG governance principles guarantee that a company's accounting systems are accurate and transparent, that its leadership is chosen with integrity and diversity, and is responsible to shareholders. Most organizations have now realized and understood that proactively resolving ESG concerns enhances commercial outcomes. 

ESG is becoming highly prominent in economic and broad societal arguments, and customers are increasingly avoiding corporations with bad ESG records. Many mutual funds, robo-advisors, and brokerage firms now provide ESG-based investing solutions. 

Savvy companies are installing advanced ESG reporting software solutions that offer an audit trail while enabling data collection and management processes for teams. ESG consulting services support companies for selection and the best technology tool is used as per organizations’ needs. When corporations that participate in hazardous or immoral behaviors are held responsible, ESG standards can assist investors avoid investment losses. 

Impact of Artificial Intelligence on the ESG Consulting Market

Artificial Intelligence is revolutionizing the industries' way of thinking regarding ESG as it automates tasks, helps in making predictions, improves social responsibility, and others.  It helps in gathering information that helps investors for better ESG investing.

Banks and insurance companies are further leveraging Artificial Intelligence use cases as AI is used to assess a borrower’s creditworthiness more accurately, which is expected to reduce the risk of lending to borrowers who are not able to repay their loans on time.

Moreover, AI further is used to assess the risk of natural disasters, which in turn helps insurance companies in pricing their policies accurately. Furthermore, consulting companies are further started collaborating with AI-enabled management platforms for a better understanding of investment, decarbonizations, and others.

• In June 2023, Alaya Consulting, a leading specialist consultancy focusing on ESG disclosure, science-based target setting, and GRI-certified training, announced a collaboration with Avarni, an AI-driven carbon emissions management platform helping companies quickly understand their carbon emissions exposure, to assist HongKong based companies in their decarbonization journeys. The collaboration focuses on empowering companies in Hong Kong and beyond to prepare for proposed regulations set by the Hong Kong Stock Exchange (HKEX).

The COVID-19 pandemic significantly affected the ESG consulting market. During the pandemic, it became necessary for companies to comply with ethical behavior. ESG has risen in popularity to the point that some asset owners now include ESG strategies in their investing procedures. The pandemic caused economic and social disruptions, and it is producing both short-term and long-term ESG adjustments. 

ESG Consulting Market Dynamics

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Major Drivers 

Increasing demand for product innovation and supply chain sustainability is expected to drive the market. Rising scrutiny on resource requirements and high transparency are projected to propel the market during the forecast period. The implementation of ESG programs in small and mid-companies helps them to track important metrics such as water consumption, raw material usage, and energy consumption.

Moreover, several companies are looking for supply chain partners that embrace sustainability efforts. Many retail stores are making decisions not to stock products made by companies considered to have poor ESG performance.

Existing Restraints 

Lack of awareness regarding ESG consultation services is anticipated to hinder the market. The criteria related to the ESG encourage companies to focus on short-term goals, rather than long-term sustainability.

Additionally, the high cost associated with consultation services is expected to hamper the market in the coming years. Implementing ESG consulting services in the investment is expected to cost a lot along with additional research and due diligence, and other.

Emerging Opportunities

Increasing adoption of ESG consultation services by several companies is projected to create lucrative opportunities for market players. For instance, in March 2023 Stern IR, Inc., a Precision Value & Health company, launched its new environmental, social, and governance (ESG) advisory practice. The addition of the ESG practice will deliver a suite of solutions, including materiality assessments, ESG strategy, and roadmap developments that are well integrated with Stern's core investor relations (IR) competencies.

• For instance, in July 2023, Verdantix, the preeminent Sustainability & ESG Research firm launches its ‘Green Quadrant Report’ on leading ESG Advisors & Platforms.

Scope of ESG Consulting Market Report 

The market report includes an assessment of the market, trends, segments, and regional markets. Overview and dynamics have also been included in the report.

ESG Consulting Market Segment Insights

Application Segment Analysis

On the basis of application, the ESG consulting market is segmented into building & construction, agriculture, food & beverage, oil & gas, mining, chemicals, and others. The food & beverage segment is projected to expand at a considerable CAGR during the forecast period, to reduce waste and minimize impact on the environment. 

The current food system around the world is causing almost 26% of Greenhouse Gas Emissions. Common areas including fisheries, livestock, crop production, and supply chain are extensively contributing to that. To solve this issue of precision agriculture, the adoption of renewable energy, and improvements in land management are needed.

The oil & gas segment is anticipated to account for a major market share during the forecast period.  The demand for hydrocarbon is expected to decline unlikely in the coming decade as oil and gas businesses are cutting emissions by modifying operations to avoid losses from emissions-reducing policies.

The oil & gas industry has to follow the same regulations as other companies. Oil and gas companies need to be mindful of this mounting pressure and put strong ESG policies and procedures in place. For instance, in May 2021, the Hague District Court ordered Shell to reduce its emissions by 45% by 2030, relative to 2019.

• For instance, in May 2021, ExxonMobil lost two board seats to climate activist investors who will increase pressure to implement a low-carbon strategy faster. Thus, the implementation of strict regulations is expected to fuel the segment.

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Type Segment Analysis

Based on type, the market is divided into strategy & planning, testing, auditing & verification, technical support, and sustainability marketing. The strategy & planning segment is expected to hold a significant share of the market in the coming years, to validate customer data and maximize their sustainability needs. 

A strategy defines companies' compliance with ESG regulatory requirements such as fines and other penalties. ESG is a formalized strategy that includes measurable goals and processes for tracking, managing, and reporting on them. An ESG strategy set out a company's ESG goals so that all stakeholders, investors, and others, can move forward together.

Regional Analysis

In terms of region, the ESG consulting market is classified as Asia Pacific, North America, Latin America, Europe, and Middle East & Africa. The market in the Asia Pacific is anticipated to expand at a rapid pace during the forecast period, due to incorporating ESG in private market assets and to fulfill client demand in the region.

According to an ESG Global Survey 2021 from BNP Paribas financial company, 43% of Asia-Pacific investors incorporate ESG into private market assets as compared to 38% of respondents worldwide. The survey further reveals that nearly 60% of investors in APAC have been incorporating ESG for less than 3 years, compared to 30% in Europe and 44% in North America.

This rate is expected to increase in the coming years by 37% in The Asia Pacific as the young population is continuously seeking investments that line up with their values. Millennials, who are 25% of the Asian population, are twice as likely to consider investing in companies that target social or environmental outcomes. Thus, by integrating ESG in the region, the market is subjected to welcome immense growth in the forecast period.

Europe is expected to constitute a key share of the market during the forecast period, owing to the increasing number of government regulations and initiatives, and investments in ESG present in the region.

• For instance, in January 2023, the European Union adopted the Corporate Sustainability Reporting Directive (CSRD), which requires EU and non-EU companies with activities in Europe to file annual sustainability reports.

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