Can Today’s Crystal Balls Predict Tomorrow’s Markets?
The numbers for future sustainability markets are huge—but are they credible?
Supply generally reflects demand, so the fact that there is a burgeoning market research and forecasting industry suggests that someone out there wants to know where markets are headed—and is prepared to pay good money for the relevant information and intelligence.
My issue with the sector, though, is based on decades of tracking and reviewing forecasts for such sectors as environmental services, biotechnology, cleantech, renewable energy, climate solutions and the like. And the problem is that if you bother to go back and see what market forecasters were predicting 10 or even 20 years ago, they were often wide of the mark—and sometimes by a considerable margin.
I have periodically tried—at ENDS, SustainAbility and now Volans—to spotlight market trends and currently predicted valuations, generally with at least one quizzical eyebrow raised. Every so often, though, I have (somewhat rashly) offered to help others with valuations of relevant market trends.
So, for example, two years before I left SustainAbility in 2008 to co-found Volans, I landed a $1 million, 3-year Skoll Foundation grant on the basis that we would explore market financial valuations for some of the key markets that leading social innovators and entrepreneurs were going after. At the time, I thought that we could aggregate existing forecasts—but the reality turned out to be different. Either the relevant markets were poorly covered or, given that so many of them were in the Global South, they were not tracked (or valued) at all.
Breakthrough markets
Later we did a project with funding from the Generation Foundation called the Breakthrough Market Forecast, as part of our Breakthrough Capitalism work. Given that the horizon for that project was 2025, we should now be casting a critical eye over the forecasts. On a quick scan, true, there’s nothing wildly out of kilter—but that is partly because the conclusions were generic rather than statistical.
Later still, Volans worked with the Business & Sustainable Development Commission as they put together their market valuations for the various sectors linked to the UN’s Sustainable Development Goals (SDGs).
As the BSDC recalls, “from 2016 to 2018, the Commission brought together more than 35 leaders from business, finance, civil society and international organizations to make a compelling case for companies to align with the Sustainable Development Goals. Its flagship report, Better Business, Better World, shows how sustainable business models could unlock more than US$12 trillion in new market value and create up to 380 million jobs by 2030.”
Our contribution focused on a study of potentially breakthrough business models. Overall, the BSDC work began to address the challenge we had set ourselves with the Skoll Foundation work, although with the difference that many of the markets covered by BSDC were reasonably well developed—and therefore well covered by market forecasters.
The results, clearly, involved big numbers, designed to spur both public and private sector action—but I have long wondered how effective such numbers are in motivating real world action?
Now to Verdantix
One of the market research companies we quoted in that 2015 Breakthrough Markets study was Verdantix. And one of their predictions at the time was “the global sustainability consulting market will grow from $877 million in 2015 to $1.01 billion in 2020, at a CAGR (compound annual growth rate) of 4%.” Having been a player in this market for decades, I wondered how that Verdantix prediction a decade ago panned out?
The scope of the Verdantix forecast, it turns out, has since changed—following the evolution of the market. But in the firm’s broadest view of ESG and sustainability consulting (covering corporate strategy, reporting and assurance, digital and operational transformation, including the energy transition, supply chains and financial advisory) this is now a $11.5 billion market. That step up in size is largely the result of two factors that have shaped the market—investor demand and regulations.
Meanwhile, it’s not hard to find other firms covering related areas, among them recent reports from KPMG and pwc on the ESG market. Not to mention Bloomberg, who in February of this year said the following:
The ESG market could surpass $40 trillion by 2030, based on our scenario analysis, anchoring the $140 trillion of projected assets under management (AUM) globally despite 70% slower growth and polarized sentiment. Scrutiny is critical as regulators tackle greenwashing, boosting market maturity and credibility but limiting product creation. Europe is set to remain the most significant contributor, while the US may stagnate amid the election and ESG backlash. Emerging themes and small yet expanding markets like Japan could support gains.
But I felt I needed a behind-the-scenes take on all this. And I decided to talk to Verdantix co-founder Rodolphe d’Arjuzon, who directs the firm’s research strategy.
So, I began, how did Verdantix begin? He recalled that in the years immediately following the firm’s launch, in 2008 (the same year we launched Volans), he and his co-founder David Metcalfe were running a team of 10-12 people. As he explained:
“An early focus was on working out how the market would monetize all things environmental, including carbon trading and renewable energy. Companies around 2007 were making a lot of commitments, as they have been doing again recently. But many of those making the commitments really didn’t know what they were getting into. We had a lot of early success with our research on how businesses should think about climate change and sustainability, driven very significantly by firms looking for the ‘green shoots of recovery’ as they were trying to make their way out of the stagnation that followed the 2008 global financial crisis. So, we hit £1 million in revenues fairly quickly,” he recalls, “but then the market changed. People were talking about sustainability—but not spending that much on it.”
Verdantix, meanwhile, was increasingly looking for “world-enhancing innovation,” and keen to help “future-proof businesses.” But successive waves of interest—followed by downwave periods—meant that markets blew hot and cold on sustainability.
Changing the conversation
Firms at the time were “constantly changing the conversation,” d’Arjuzon recalls, with many of them were trying to “hide behind smokescreens.” Having consulted with its clients, Verdantix decided to pivot its coverage to the “technologies needed for actually achieving sustainability goals.”
The firm’s view was that these would become major growth areas as business leaders moved from talking about long-term aspirations to operationalizing sustainability across their organizations. For a sense of the areas that Verdantix now covers in the linked areas ESG and sustainability, take a look here.
So, who are the customers? Verdantix says that they fall into three main groups.
First, there are “practitioners and technology buyers who are looking to define their digital strategies, find suitable suppliers and design an optimal approach to the appointment process.”
Second, there are the “technology vendors who want to understand the present shape of their market, its likely evolution, the needs of their buyers and how best to present their products.”
And third, there are “investors who are seeking to understand more about market dynamics, the strengths and weaknesses of the leading players within it and conduct robust commercial due diligence.”
One area of interest that caught my eye was a critical review of climate technology. This Verdantix ‘Green Quadrant Enterprise Carbon Management Software 2023’ report compares the 19 most prominent enterprise carbon management software vendors. This market is experiencing significant growth and transformation, driven by firms' voluntary and regulatory commitments towards emissions reporting and decarbonization.
I confess that most of the software vendors spotlighted are unknown to me, with 13 firms—Benchmark Gensuite, Cority, IBM/Envizi, Microsoft, Persefoni, Salesforce, Schneider Electric, Sphera, Sweep, UL Solutions, Velocity EHS, Watershed and Wolters Kluwer Enablon—considered to have the most advanced all-round carbon management software capabilities.
And then there’s AI
Which brings us to AI. While much of the world is fretting about the undoubted negative impacts of the energy and water consumption of the data centers involved, Verdantix has spotlighted nine ways in which AI could help drive decarbonization. D’Arjuzon says that AI is already making an impact and explains that Verdantix’s recent research shows that 76% of firms are using or planning to use AI to improve their sustainability performance.
That said, he isn’t an undiluted fan of AI for market forecasting. “While there are some very powerful use cases for AI, when it comes to market analysis, in today’s world it mainly regurgitates,” Indeed, he wonders if the likely proliferation of AI-generated forecasts won’t undermine confidence in the whole field. He jokes that “some business forecasts seem designed to make astrology look good!”
Fine, but how does he then suggest interested businesspeople make the best use of market forecasts? “The best way forward,” he advises, “is to look at a number of forecasts on the same area—perhaps as many as 25 for a really big investment—exploring their key assumptions, independence, focus on quality and the strength of the underlying methodologies, and then make up your own mind.”
At the current pace of AI development, though, it will be fascinating to see whether by the early 2030s the latest models aren’t routinely doing this sort of work for many investors, corporate boards and C-suite leaders?
And if you want to know more about the evolution of my thinking, my 21st book is a memoir called Tickling Sharks: How We Sold Business on Sustainability (Fast Company Press, June 2024). Our video trailer can be found here. Available in good book stores and on Amazon, in hardback, paperback, Kindle and audio formats—the last being the first audio version of one of my books that I have voiced myself. Let me know what you think!
