Sustainability consultancy industry analysis using Porter's five forces

Business Research Methodology

Sustainability reporting can be considered to be in its infancy, however the practices are developing quickly because of the need for organizations to understand their relationship to the environment in terms of externalities that are produce in operations, as well as social factors that affect local and regional communities, which is a critical success factor in regards to both compliance measures and long-term planning. Many early models such as the 3P model (Tsai & Chou, 2007) and the triple bottom line (Norman & MacDonald, 2004) have been replaced or supplemented with more sophisticated reporting forms. For instance, the Genuine Progress Indicator (GPI) includes many factors that go beyond the basic economic factors normally required in reporting, such as income distribution, education, resource depletion, health measures, and even leisure times to evaluate the real health of a country (Redifining Progress, N.d.).

Many of the different models are also becoming increasingly developed in areas that include information related to the hard sciences in which few business people are familiar with, especially in the ecological arena (Davies, 2010). This in turn has led to the rise of the sustainability consulting agencies that are in the market, and such firm specialize in providing expertise in the field of sustainability reporting. Organizations are including sustainability development in their objectives, and the inability of organizations to interpret and understand the technical jargons of sustainability have led them to the failure of transforming values into actions (O'Brien and Sarkis 2014). Thus, the role and importance of sustainability consultancy firms are exponentially growing and it is an attractive industry.

Porter's five forces

Bargaining power of buyers

Organizations are increasingly adopting sustainability reporting, which has become a major practice among public firms. Furthermore, more and more organizations require expertise in the field of sustainability to complete such reporting and there is a limited supply of such experise. Thus, the bargaining power of buyers is low (O'Brien and Sarkis 2014).

Bargaining power of suppliers

The information and data regarding sustainability practices are in high demand, and the programs regarding such information systems are complex. Furthermore, organizations can find it difficult to decode the complexities internally, which makes the bargaining power of suppliers low (Ballou et al. 2013).

Threat of new entrants

The investment regarding sustainability consultancy is moderately high, but the wake of new accounting standards and procedures has allowed new rivals to enter the market, thus making the threat from new entries in the sustainability consultancy industries rise. However, firms tend to approach the consultancy agencies that offer services in more than core avenues. Thus, boutique consultancies and big consultancy firms hold an edge (Haanaes et al. 2013).

Competitor rivalry

The competitors in sustainability consultancy are high as more and more consultancy firms are rise as the industry exponentially grows. Therefore, competitor rivalry is high in this industry as firms compete to establish their brands and their procedural core competencies. The need for sustainability reporting also had led to the rise of more competitors in the field (O'Brien and Sarkis 2014).

Threat of substitutes

The threat of substitutes is present in the sense that the field is young and far from being standardized into universal requirements. Therefore, firms can innovate if they improve the research and development position of the field and offer new products and services. For example, there can be improvement in sustainability programs, information systems, as well as training to research employees, among many other factors that could represent the next alternative solution for firms regarding sustainability reporting industry.