Ernst & Young has taken a dramatic counter cyclical leap to upscale its capacity in sustainability consulting with the acquisition of Terence Jeyaretnam’s Net Balance consultancy. The move will catapult the EY team to around 100 people, making it the biggest in its field in the country.
EY currently has about 40 people in Melbourne, Sydney, Perth and Brisbane. Net Balance has about 60 staff, all of whom will join the new team. Mr Jeyaretnam will become a partner in the business, joining Matthew Bell, Matthew Nelson and Michele Villa.
Dr Bell, partner climate change and sustainability services Ernst & Young, said the move was a good fit.
“It’s very much more a merger than a takeover,” Dr Bell told The Fifth Estate on Tuesday during a hectic round of meetings with staff from both sides of the merging operation.
The EY and Net Balance teams would complement each other’s skills and strengthen the capability of the business to capture growth opportunities in sustainability, climate change, supply chain, energy and advisory services assurance, he said.
A key area of strength for Net Balance was social sustainability, which was a key growth area, especially in relation to work environments and health and safety.
Due diligence had been under way for several months and the merger, to be completed in September, was spurred by regard for the work of Net Balance.
“We think they are the best competition to us and there are a company that’s most respected in the market,” Dr Bell said. “It’s a really obvious decision to see whether we could bring together this team and be the best sustainability practice in the Asia Pacific.”
Growth
Growth was not a numbers game, Dr Bell said, but all the same he though the practice could double in size within four to five years.
Key was the company’s Vision 2020 platform.
Global
Though support for carbon markets in the political arena might be looking soft right now, around the region, in Southeast Asia, Thailand and China, it was off and running. China was planning on a national emissions trading scheme next year.
“We’ll continue to be in carbon markets though we’re hoping to do more in China. We’re already doing more in China with regional development of emissions reductions programs and while Australia is not seeing a lot of action there’s quite a lot going on in Asia.”
What was interesting is there are now seven pilot schemes in China covering 700 million tonnes on carbon, twice the size covered by the carbon tax in Australia, which captured about 250 million tonnes, he said.
It was also interesting to see that China was not afraid to push forward at speed with an ETS even though it may not have the exact right model in place, Dr Bell said.
“When we saw the regional trading schemes in China we said, ‘If you do this too quickly, you’ll make mistakes’. They said, ‘We expect to make mistakes and to learn from them.’
“From our perspective we’ve got too many opportunities. We need scale to capitalise on all of them to do the work we want.”
Property sustainability still strong
Though there was pull back on sustainability from a political standpoint, Dr Bell did not think this was true of the property industry.
“When you talk to people at Stockland, DEXUS and Mirvac, they’re doing a lot,” he said.
Some of the big companies may be less vocal and this could be attributed to a change in leadership and leadership style, but Mirvac, for instance, had gone against the tide with a very strong and highly visible agenda.
This was possibly the influence of chief executive Susan Lloyd-Hurwitz and sustainability head Paul Edwards, he said.
GPT too was also strong on the “social context of their buildings, the long term viability of those properties and the shareholder value and returns.”
Dr Bell did not have much light to shed on the political scenario and the prospects for the Renewable Energy Target. There was a “lot of preemptive concern about the Warburton review” on this, he said, and clearly some media had a taken a view that a decision to scrap the RET had been all but announced.
Scrapping the RET, though, would be counter to the economic modelling that demonstrated direct benefits of the RET “depending on how you cut the figures”.
“From a personal view it’s sad to see climate policy stripped away, if only for the level of investment it provided and the knock on job creation.”
But within the business the view was far more pragmatic. The sentiment is that over the medium term carbon and energy wouldn’t be allowed to sit in a policy vacuum for very long.
In general too, there was “an awful lot of growth in the marketplace”. You just needed to consider the social context and the environment factors that deliver value to business, he said.
The divestment from coal and fossil fuel campaign was one example of broad shifts and it was “interesting in the way it targeted the banks”, not so much because they were highly exposed to the sector, but perhaps for the visibility angle.
There was clearly an impact from how companies disclose their investment, how this drives value for their business and how they continue to drive shareholder value.
Asia-Pacific climate change and sustainability Leader Mathew Nelson said the move with Net Balance meant his team would become Australia’s “leading advisors in the areas of sustainability strategy, reporting and assurance, social impact, carbon, energy, health, safety and environment”.
“This acquisition will further strengthen EY’s ability to service our clients across all areas of sustainability and climate change, particularly social, supply chain, energy and sustainability advisory services,” Mr Nelson said.
Mr Jeyaretnam said Net Balance was looking forward to joining EY.
“The combined EY and Net Balance team will clearly be the largest sustainability service provider in Australia with deep technical expertise and experience. Joining our colleagues at EY is very exciting as it will present both our clients and our staff with significant opportunities especially as we look to expand into new markets and broaden the range of services, projects and initiatives we can offer,” he said.