SMBs Face Cost Barriers in Launching Their Sustainability Journeys

Corporate sustainability programs, not so long ago, were primarily the domain of the world’s largest companies, many of whom were early adopters in setting science-based targets and publishing extensive sustainability and corporate social responsibility (CSR) reports to showcase their carbon emissions reduction objectives and progress toward meeting those goals. However, in the past few years, the landscape has begun to change, and a number of small and medium-sized businesses (SMBs) have launched their own sustainability initiatives, driven by factors including customer perceptions, investor expectations, regulatory and compliance requirements, cost reduction and operational efficiencies, and improvement in brand reputation. In particular, larger companies’ supplier engagement programs, designed to assess and mitigate Scope 3 emissions from their value chains, are driving unprecedented growth in the number of organizations embarking on sustainability journeys, presenting new challenges for SMBs as they grapple with how best to design and execute on effective sustainability programs.

Types of Sustainability Consulting Needed by SMBs

In undertaking such initiatives, SMBs quickly learn that carbon accounting software and other “ready-made” tools are not always so straightforward – the most effective sustainability programs must be built with hands-on guidance and expertise from consultants who are subject matter experts in the various subdisciplines of corporate sustainability, in addition to analytical tools that can help make the process more efficient.

The journey begins with strategic sustainability planning and prioritization, informed by a materiality assessment – an analytical approach best executed by an objective, informed third party. Companies then conduct Scope 1 and Scope 2 greenhouse gas (GHG) footprints to establish a baseline for direct and indirect emissions produced by their operations – again, an audit process that is most effectively conducted by a consultant with knowledge of the process and how best to categorize each organization’s carbon emissions, often utilizing software and other analytical tools. Following the Scope 1 and 2 footprinting, organizations may then utilize the data as a baseline for target setting. And the final step for new sustainability journeys is often to create and publish an initial sustainability report to communicate a company’s current footprint, its emissions reduction targets, and its key initiatives for abatement.

Cost Barriers to Sustainability Consulting

Small and medium-sized businesses who are embarking on their sustainability journeys often attempt to start with a “do-it-yourself” approach, either manually or using off-the-shelf carbon accounting software. However, the success rate of such DIY initiatives tends to be quite low, since every organization’s carbon footprint and supply chain are unique, requiring expertise to utilize software most effectively, and it is difficult for a company to navigate the nuances successfully on the first attempt. In addition, key stakeholders such as executives and investors often expect the credibility of an objective third party, as opposed to an internal team, with key tasks such as sustainability strategy, materiality assessments, and sustainability reports. When an SMB evaluates sustainability consultants for the first time, sticker shock is a common occurrence – most consulting firms’ offerings are simply not designed with SMBs in mind, and the initial phase of services in a sustainability initiative can easily reach the hundreds of thousands of dollars.

Why Is Sustainability Consulting Expensive?

The high prices of traditional incumbent consulting firms are driven by several key factors. First, these professional services firms operate with significant overhead costs – payroll for often thousands of consultants and support staff, recruitment and development costs for consulting teams that tend to turn over fairly rapidly, office locations, travel expenses, and so on. They also tend to operate under a regime of investor expectations for high gross margins, whether the firm is publicly traded, owned by private equity, or overseen by a team of senior managing partners, which puts significant pressure on each client engagement to deliver margins at a certain threshold.

To facilitate these margins, consultants are also expected to work at a high utilization rate, which is essentially the percentage of working time a consultant spends on billable client projects. Utilization is the primary metric by which a consultant’s performance is measured, which has a significant influence on organizational behavior and project team design. Driven by the need for high utilization, consulting firms are motivated to load up project teams with multiple consultants, even in cases where such an approach is not strictly necessary to achieve client objectives. Firms leverage this “all hands on deck” method to boost utilization of senior and junior consultants alike, as well as to provide more inexperienced consultants with on-the-job training. All these factors combine to create a cost and resource structure that is misaligned with the needs of most SMBs.

The Need for Boutique Sustainability Consulting

For all of these reasons, the engagement model of large consulting firms is often a misfit for SMBs attempting to launch a new corporate sustainability program – pricing and team structures offered by such incumbents are designed with the largest companies in mind, and are in large part engineered to meet the financial and cultural needs of the consulting firms themselves. Smaller, boutique firms can frequently be a much better fit for the needs of SMBs. These boutiques are usually staffed by experienced subject matter experts who cut their teeth in larger consulting organizations, and often with significant industry experience, as well. With lower overhead and margin expectations, such boutiques can offer SMBs world-class talent at more affordable prices, and at a scope and size that is tailored to the client’s needs, rather than those of the consulting firm. Smaller firms are also nimbler in terms of deploying innovative methodologies, including a highly efficient fusion of software and professional services, combined with a reliable blend of expertise, guidance, and quality control.

Canopy Edge was formed with exactly these goals in mind – to bring the best corporate sustainability expertise to the underserved SMB market as more and more smaller businesses launch their sustainability initiatives for the first time. To find out more about getting started on your sustainability journey, contact Canopy Edge for an assessment of how we can design an engagement that meets your organization’s most important needs at a scope and price point that are the best fit for your company.