Potential emissions disclosure rules a new gold rush for consultancies

Upcoming regulatory requirements for corporate disclosure of greenhouse gas emissions will drive a boom in demand for related advisory services – much to the delight of scarce specialist consultants who will be able to name their price.

The US Securities and Exchange Commission in March announced new climate change risk reporting requirements for public companies, which are expected to come into effect in 2024. The new rules include detailing the type of air pollution emitted throughout supply chains and having those figures verified by an auditor, as well as assessing risks and costs to operations posed by extreme weather and other climate change-related effects.

The EU, meanwhile, is planning to enact even more expansive reporting requirements that could include privately held companies as well.

The above developments have consulting firms scrambling to bolster their ESG compliance capabilities at the same time they lick their chops at the prospect of sudden, massive demand meeting miniscule supply.

The nascent sustainability consulting market has grown substantially in the last decade, but it still accounts for a small fraction of the total $1.2-trillion management consulting market, at just $4 billion, according to Source Global Research estimates.

The SEC projects the new air pollution and climate disclosure rules could cost approximately $6.4 billion in outside spending annually to prepare. That’s good news for the Big Four accountancies, who have a long history of auditing public companies and have been investing significant sums in their ESG consulting units.

Technology providers and consultants also stand to profit, capitalizing on strong demand for solutions that track and monitor greenhouse gas emissions.

Aside from a significant consulting spend, companies are also staffing up internally to fill gaps in legal and finance and to set up systems for collecting and analyzing climate data.

All told, companies could face the prospect of hundreds of billions of dollars in spending to comply with new disclosure rules, according to Source Global Research, putting it in line with the massive reforms and spending that occurred in the wake of the Sarbanes-Oxley Act.