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The sustainability services ecosystem is critical for businesses and governments to plan and meet their sustainability goals. Sustainability services providers must play a pivotal role in tackling climate change and addressing all 17 UN Sustainable Development Goals. The ecosystem, however, is fragmented, undefined, and misunderstood by most…
Sustainability and the climate crisis will dominate business and policy decisions for decades to come. Some businesses are ahead of the sustainability game, but many are catching up; even more (the silent majority) don’t know where to begin. One way or another, all businesses will have to make sustainability native to the core of everything they do. Sustainability cannot be a standalone strategy: Strategy, operations, and innovation will all have to be sustainable, or businesses will become obsolete—no matter how much time they buy themselves by lobbying or short-term profitability.
In a first-of-its-kind study, throughout the summer of 2021, HFS Research will map and define the sustainability services ecosystem across strategy and design, delivery, technology, managed services, and technical consulting—delving into the vastly varying nature of service providers’ sustainability offerings and how they manifest in enterprise initiatives.
Early in 2020, we predicted that the critical yet undefined and poorly understood sustainability services ecosystem would move toward being a thriving market
After an initial wave of activity in 2020 across the service provider community—primarily gearing up to COP26, the UN flagship climate conference delayed until November 2021—the COVID-19 pandemic caused a lull. But what quickly became apparent is that businesses and governments could not go back to normal—in sustainability terms, this means a “green recovery.” Now, in 2021, the sustainability services activity we anticipated is starting. Market leaders are doubling down, and others are molding their capabilities to meet widespread demand. Throughout the past two years, HFS Research has called for service providers to get ahead of the competition, respond to the clear demand, and hone or develop their sustainability services—but now we find ourselves calling for them to catch up.
Sustainability must be native to businesses and government policy—but first, we need to understand the ecosystem.
Sustainability services is an undefined and poorly understood ecosystem—but also a critical one in addressing the climate crisis
A lack of definition and understanding hinders every stakeholder in the sustainability services ecosystem: business leaders (i.e., the buyer), service providers (whether they specifically offer sustainability services or not), and third parties such as policymakers, academia, or technology vendors, which are all crucial in achieving sustainable transformations. No single party can achieve any aspect of sustainability alone—environmental, social, or governance (ESG) factors. Therefore, service providers and their ecosystems are vital, whether they’re providing strategy and design consulting, execution and implementation services, managed services like auditing and reporting, or technical assistance often left to the “boutique” consultancies. The HFS “value chain” (Exhibit 1) is a preliminary framework for defining the sustainability services ecosystem; it is a starting point for our ecosystem mapping study, and we will mold and redefine it based on the results.
Exhibit 1: We will mold our (working) HFS Sustainability Services Value Chain to the results of our ecosystem mapping study
Source: HFS Research, 2021
Despite the recent shifts in this ecosystem and its importance in addressing the climate crisis and all 17 UN Sustainable Development Goals, there remains a lack of definition and understanding.
Many think tanks, private research firms, and academic institutions understand and influence ecosystems like banking and financial services (BFS), healthcare, or technology. But there is an absence of the same levels of definition, understanding, and guidance regarding sustainability services, combined with the time-critical need to address the climate crisis by meeting well-laid-out targets (for example, the Paris Agreement).
The objective of this research is, therefore, to understand the sustainability services ecosystem and drive sustainability for enterprises and all stakeholders
This ecosystem mapping study comes with a broad objective—but one that meets the needs and motivations of the ecosystem. We will map and define the ecosystem through a combination of surveys, interviews, and case studies—and aim to produce a range of recommendations and pathways for further work.
Business leaders and policymakers must make seismic shifts toward the UN Sustainable Development Goalsin terms of both speed and magnitude; fittingly, the 2020s have been dubbed the self-explanatory “Decade to Deliver.” Beyond addressing the climate crisis, enterprise-level strategies must have sustainability ingrained if businesses hope to realize the $12 trillion per year they might generate. Despite this urgency and the wealth of best practice, the interactions between service providers—often playing the biggest role in the type of transformations required—and their clients and third parties are poorly understood when it comes to sustainability services.
Stakeholders’ internal dynamics for providing, buying, or engaging with sustainability services are also poorly understood. There is an equal lack of understanding of integration with other core business functions like IT, supply chain, operations, and emerging “digital” technologies such as artificial intelligence (AI), cloud computing, or the internet of things (IoT), which form an equally large part of service providers’ toolboxes for business transformation.
Three “eras” of sustainability consulting and services have emerged over the past 20 years or so. The “Corporate Social Responsibility (CSR) era” of the early 2000s involved enterprises seeking to understand their issues and responsibilities around sustainability. The second era saw enterprises aligning their sustainability goals with value creation by improving process efficiency—with businesses identifying sustainability-driven segments and molding their strategies and portfolios to take advantage. The third and current era—made even more vital as governments and enterprise look to a green recovery from the COVID-19 pandemic—sees entire industries in transition and a growing acceptance that sustainable change must involve complete business re-engineering. The third era must happen at an industry level where enterprises, service providers, governments, and third-party sectors collaborate.
A coordinated sustainability services ecosystem can be the catalyst that turns enterprise leaders’ desire into sustainable transformation—revolutionizing economies and meeting the climate crisis head-on
Service providers and their ecosystems can build the solutions and provide the guidance that helps their clients and partners make this decade count, but many are at risk of not taking or even seeing the opportunity. Several options have become apparent, and providers are pursuing them with differing levels of success: Providers can embed sustainability in their existing services and contracts, develop partnership and co-creation strategies, or ultimately set up dedicated arms to be the front for their sustainability services. But this is overly simplistic, and without a deep understanding of the sustainability services ecosystem, achieving the necessary impact is nigh on impossible.
Perhaps the biggest goal for enhancing the sustainability services ecosystem is both strategic and cultural: a mindset shift among leaders and the re-framing of sustainability’s value. When enterprises (or governments) put sustainability in a box by itself, a negative attitude invariably follows that you can either have sustainability or cost-savings, profit, and growth—it’s a “nice to have.” Drawing on emerging technology, customer knowledge, change management, and the range of capabilities at service providers’ disposal, it’s possible to make sustainability “native” to a business and fundamental to everything it does to foster the highest chance of achieving a genuine win-win-win across ESG.
The pandemic first forced companies to stabilize—but now most are looking toward a green recovery and can’t afford to go back to business as usual
Early in the pandemic, we published a call to not throw sustainability aside: Rethinking attitudes to sustainability can not only drive down emissions but also often find new efficiencies and cost savings, which will be critical for both survival and a green recovery. Sustainability was never going to be deprioritized by customers or regulators—unlike the cutbacks to ESG seen in previous financial crises.
The Bottom Line: Despite the lack of definition and understanding, the sustainability services ecosystem is moving quickly. Our ecosystem mapping study will provide definition, understanding, and recommendations, for the benefit of service providers, enterprises, and all stakeholders.
Our research over the past two years has captured the beginning and more recent rapid expansion of the sustainability services ecosystem:
Watch the HFS Research space throughout the summer of 2021 for our ecosystem mapping study and the tangents spinning off from it.