The Climate Change Opportunity for Deloitte Consulting
Deloitte Consulting has the opportunity to lead organizations in their approach to dealing with the ensuing impacts of climate change on their business.
Deloitte Consulting (“Deloitte”) will be significantly affected by the impact of climate change on their top clients. As a management consultancy, Deloitte helps solve real issues – many times the most complex issues that a client is facing. As both regulation and physical manifestation begin to take effect, Deloitte will need to be on the front-end of helping their clients mitigate risks and shift their business models accordingly. For Deloitte, these types of issues should be viewed through the lens of a new opportunity. But, these opportunities come with a cost – a significant investment in talent and expertise to prove to clients that Deloitte is the right firm to help solve these complex issues.
Deloitte’s Current Offerings
According to the Deloitte website, the firm offers Sustainability Services to clients in the areas of sustainability strategy, resource productivity and risk mitigation, sustainable operations and supply chain, and reporting and disclosure. While offering these services, it does not seem to be a core platform that Deloitte is emphasizing in their advertising, but merely one offering in a large “Chinese menu” of capabilities. To be a true leader in this category, it will require much more investment and effort to convince clients of the reason to think about the near future climate change impacts to their business.
The organization should be focusing on building out internal capabilities and then on a strategy to convince the market that these services are important.
Building Internal Capabilities – Structure and Talent
Organizational Structure – the creation of a single practice that will focus on sustainability will be essential because of the signal that it sends to clients. The creation of an entire practice centered on an issue signals to clients that the firm has both deep expertise and a keen sense of the importance of the topic. One can look at the similar approach that Deloitte employed to deliver social impact consulting services. The firm decided to create a Social Impact Practice, which was solely dedicated to the sector.
Talent – in order to deliver top services to the market, Deloitte must employ subject matter experts (SMEs) in this field. This will include a combination of scientists, environmental analysts, and traditional management consultants. These SMEs should be hired directly into the new practice focused on solving the organizational impacts of climate change. The diverse set of expertise will allow for a creative, holistic approach to solving individual client needs – of which there will be many.
Creating a Sales Strategy – Answering “How” and “Why”
Preparing Thought Eminence – After creating the organizational structure and acquiring the correct talent, the firm will need to create research and thought pieces that show the impacts of climate change on organizations. In combination with this research, a compelling business case will have to be made for the reason to engage in the organizational changes now as opposed to later. Robert E. Rubin, co-chairman of the Council on Foreign Relations and writer for the Washington Post, poses a question that many executives are currently grappling with: “What is the cost of inaction? In my view — and in the view of a growing group of business people, economists, and other financial and market experts — the cost of inaction over the long term is far greater than the cost of action.”1 This key question will have to be answered alongside the thought eminence and proposals for how to act. In summary, in answering the “how to act” question, Deloitte must also convince corporate America of “why to act.”
A New Opportunity
The discussions on the organizational impact of climate change are in their infant stages. The timing is perfect for a firm such as Deloitte to start shaping that discussion. Deloitte’s size and reach can enable a truly global impact on how clients think about and execute on solving the implications of climate change. The time is now for Deloitte to invest in the talent and organizational structure that can start shaping the discussion in meaningful ways. This type of investment can lead to considerable future gains as clients look for support in this important topic.
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Sources
1: Washington Post – https://www.washingtonpost.com/opinions/robert-rubin-how-ignoring-climate-change-could-sink-the-us-economy/2014/07/24/b7b4c00c-0df6-11e4-8341-b8072b1e7348_story.html
You recognize a valid point, Graham – consultants will play a major role in climate change adaptions. It reminds me a huge crisis my country faced a few years ago, where companies had to urgently decrease costs – in this case, consultants were also of huge value, as they had an unbiased view and high-capable employees to help companies analyze and optimize their fixed costs, such as rent, travel and utilities expenses. In regards to sustainability, I completely agree that consultancy companies´ external view and highly skilled employees will not only help clients to come up with new approaches and solutions to their climate changes´ problems, but also will later on apply these same solutions across industries, being paramount to minimize global warming effects.
A couple of challenges from your approach comes to my mind:
– Talent: I believe hiring SMEs will be a huge challenge, as firstly, there are not too many, and secondly, these are usually extremely passionate professionals who not necessarily match the consultancy lifestyle. Obviously, you can always raise salaries and add perks, but this could ultimately impact Deloitte´s culture in the long-term. Here, I´d have a slightly different approach: develop talent internally, either through training or working with clients to, together, develop ad-hoc solutions.
– Preparing Thought Eminence: I love the idea of researching, but I think there´s a huge first-move advantage in the field. Today, none of the MBB nor big 4 consultancy companies are a reference in the sustainability sector. That said, I´d rather focus on the clients in which Deloitte has already a good relationship and try to sell sustainability projects there. Based on these projects, then, publish articles related to the topic and try to create a brand for this type of projects, for instance, Sustainability by Deloitte.
Graham,
This is super interesting as an example of some of the second-order impacts of climate change on businesses. Climate change will change the way many large fortune 500 companies have to operate, so in order to stay relevant and add value to clients, companies that serve those players also need to adapt!
I really like what you describe as a strategy for both developing a practice and the right capabilities internally and also building an influence agenda to gain prominence and attract clients. I know Deloitte is already doing some interesting stuff in this space, too. I had the chance to plan a panel for the Social Enterprise Conference last year where a Deloitte Partner (Will Sarni) spoke about water sustainability for enterprise (https://www2.deloitte.com/us/en/profiles/wsarni.html). So it seems like some of the services are being developed, and some of the thought leadership is already happening.
Your point about a more integrated and thoughtful approach makes a lot of sense, but I had a few questions/reactions to your plan.
1) On creating a stand-alone practice: I appreciate your point that creating an independent practice within the firm is a good way to demonstrate commitment, to advertise that to clients, and to begin to align talent and resources around this new type of service. I wonder, though, if over time “sustainability” services will actually be seen as more of a cross-cutting capability that must be embedded in all of the engagements Deloitte engages in. At the (social sector) consultancy I was at before coming to school, like most consultancies, there were a set of content area verticals (education, public health, etc.) that were combined with cross-cutting capabilities (mission definition and strategy clarity, measurement and evaluation, growth planning, etc.). These capabilities were still advertised to clients and internally experts were staffed to “own” them, but they were seen as supportive of a broad set of practice areas. Maybe a model to consider! (https://www.bridgespan.org/services)
2) On developing the suite of services: One thing one my mind is how varied the sustainability-related challenges businesses are likely to face will be. The “Risky Business” report we read described a really wide range of impacts that would play out differently by region. Ideally, the sustainability capability would allow Deloitte to handle all of these kinds of changes, but I wonder if part of the strategy for developing this capability must be defining the highest impact services to develop first. What are the sectors and geographies that will be impacted first (coastal cities? agriculture?) and what are the most important services for them (infrastructure planning? new technologies?)? Deloitte could set itself up for success by taking a clear point of view on that and targeting service development and client pitching accordingly. (http://riskybusiness.org/site/assets/uploads/2015/09/RiskyBusiness_Report_WEB_09_08_14.pdf)
3) Competition: I love the idea that Deloitte can be an early mover in this space, but I know there are already some other consultancies exploring similar work. For example Accenture has unveiled a big focus on sustainability services. (https://www.accenture.com/us-en/sustainability-index). How will Deloitte differentiate itself over time?
Thanks for the post!
I find it ironic that consulting firms, whose core business is based on a workforce that travels constantly (racking up frequent flyer miles and a significant carbon footprint) are now moving into the space of sustainability consulting. In conjunction to building external market offerings, Deloitte should also continue to focus on reducing the carbon footprint of its own business internally. While it is unrealistic to think that Deloitte, or any other professional services firm, could eliminate business travel, there are technological developments that can allow Deloitte to practice what they preach.
As a former employee, I believe that Deloitte is doing a solid job at this, recently linking it to the welfare of its staff through initiatives focused on telecommuting, more focus on videoconferencing and rotating project staff between being on-site and working remotely. By increasing this focus, Deloitte can demonstrate additional credibility in this area as they are, in Graham’s words, “prov[ing] to clients that Deloitte is the right firm to help solve these complex issues”.
The blog very nicely highlights how Deloitte can become better at advising clients on sustainability issues but I don’t think the role of consulting ends there. Being a former management consultant myself, I feel that firms like Deloitte should be shaping our thinking as far as sustainability is concerned. Will Deloitte be willing to push the topic of sustainability for clients who are turning a blind eye to it right now? Or more provocatively, will Deloitte stop a consulting relationship with a client if it finds that the client is indulging in practices that are detrimental to the environment? Historically, consultants have been unwilling to play that role. The 2008 financial crisis is a case in point when consultants who were advising clients in the financial sector failed to pro-actively bring up the ticking time bomb that these companies were sitting on [1]. But will consulting redeem itself by taking more ownership with the environmental crisis?
[1] http://www.thelordsofstrategy.com
This is a really interesting article that shows how climate change can have a positive impact on an industry! It’s a great time for Deloitte to focus its efforts on sustainability consulting as the threat of climate change intensifies and regulation in the industry is changing the market landscape. With consulting practices racing to the top to be the market leader in sustainability advising, I agree with VCG that it will be difficult to find the talent to keep up with the need for these consultants. I think Deloitte will have to rely more on acquiring boutique consulting practices that already specialize in the space. This will not only give Deloitte access to talent, but it will also help give Deloitte first-mover advantage.