Environmental Consultancy: A growth market?
To say environmental consultancy is big business is an understatement.Virtually all areas of commerce - from heavy engineering to financial reporting - have to take the environment into account nowadays and any responsible business managers will have a need for consultancy advice on some aspect of their business.
The full market for environmental consultancy in the UK is estimated at £1 billion and with growth predicted at between 6 and 10% over the next few years, it is set to outperform most other areas of the economy.
We asked consultants in what areas they were expecting to see growth for their business, and compared this to what the end users of consultancies said they were likely to have a greater need for over the coming year.
Perhaps unsurprisingly, all consultancies thought they would see growth over the next year, and mainly for one reason: regulation.
Dermod Sweeney, Managing Director for Atkins' Water and Environment division told edie: "Regulation is still the dominant driver for consultancy growth. It would be nice to think that businesses are investing in the environment because of their internal value systems, and maybe things are moving in that direction, but I don't think we've got there just yet."
Emma Hayward, marketing and communications manager for Environ in the UK was in no doubt about the sector's potential: "Oh, it's a growth market definitely," she said. "And not simply driven by legislation. There is a better, and growing, understanding of environmental issues by the public and that exerts an enormous commercial pressure back onto business."
This market optimism seems certainly to have been borne out by the results of our survey. We provided consultancy customers with a list of 11 business areas and asked which areas they thought they would have an increased or decreased need for consultancy.
Overall, all eleven areas reported an aggregate growth in need for consultancy services, with one or two areas standing out as needing definite attention.
Waste management and recycling was clearly identified by customers as the single area they thought they would have the greatest need for consultancy advice, with climate change issues and environmental reporting vying for second place close behind.
This, however, was not the same as the areas identified as growth markets by the consultancies themselves. As can be seen above, when asked, the consultants put cleaner production at the top of the list of growth areas, followed by climate change and CO2 emissions reduction. After this, most areas including IPPC, CSR and environmental reporting, contaminated land and impact assessments were given fairly equal billing as growth areas, with waste lower down the list.
The results seemed to conflict with the business reality for several consultancies. Dr Tom Woollard, Principal Partner at ERM and member of their executive committee in the UK said: "I find the response from the consultancies rather surprising. Our waste section is the most successful aspect of the business - mainly due to legal pressures and regulation covering the sector - and our team there is growing fast."
He said that environmental impact assessments, along with assessments of the health and social impacts of projects, were now a huge area of growth for ERM, reflecting its growing international presence, something not highlighted in the results.
Additionally, Dr Woollard said that emissions control work in terms of auditing and checking, as well as implementing management systems for pollution control were still large areas of growth as was consultancy on CSR and environmental reporting.
Atkins' Dermod Sweeney also felt the results weren't showing the same areas of business growth as he was seeing. Brownfield development and regeneration is still a key, growing, business for Atkins, and one Sweeney thought would be higher up the list of growth areas.
He said that the waste areas were growing for Atkins, along with wastewater areas after successful bids in the AMP4 bidding, but that, like ERM, the EIA work was very busy and growing rapidly, both in the UK and overseas.
Environ's Emma Hayward tended to agree with the customers' rather than consultants' results too, as waste is a sector in which she expects to see major growth. However, she did shed light on why the confusion between the two sets of results could have occurred - the WEEE Directive.
This, of course, is a waste directive, but it is also forcing manufacturers to seriously rethink and re-engineer their product design to remove various chemicals that are no longer allowed in the waste stream.
As a result, it is creating work which can be classified as either 'cleaner production', or 'waste management', depending on your point of view. All seem agreed that waste, or minimising waste production through smarter, cleaner production, will continue to be a major growth area for consultancies over the coming years.
Environmental reporting and verification was certainly seen as an area where businesses will need consultancy services in the future. This is perhaps not surprising given the changes needed in the Operating and Financial Review and new guidelines for corporate reporting.
However, although this may be a growth area now, there was some fear that, as corporate environmental reporting becomes more mainstream, this is one area which could soon be snapped up by the bigger accountancy and management consultancy firms such as KPMG, PWC and Deloitte.
Several consultants mentioned the possibility of striking up strategic alliances with such firms whereby the accountants would do the finance reports while the environmental consultants would do the technical reports. For now, though, the issue remains theoretical. While the guidelines are new, consultants remain confident they will keep the business of environmental reporting, but all know they must consider the fact that competition could easily come from outside their own sector.
One area seemingly overlooked by survey-respondents is that of the energy markets.
Doug Morton, Commercial Director of Entec UK said he also was expecting to see growth in the waste and land-remediation sectors, but added energy as another large growth prospect.
"Power generation is providing us with a lot of work now, particularly with wind," he said. "We're involved in the full service, from planning and impact assessments, to feasibility studies through to putting together contracts and actual implementation of the schemes."
He estimated that renewable schemes had been worth a couple of million over the last 18 months to Entec and the firm now had interests in other renewables such as tidal and offshore projects.
In stark contrast to last years response, the public, rather than the private sector was seen as the bigger growth area. "I think the public sector is definitely driving the cleaner production," added Morton. "Through things like the Carbon Trust and Envirowise encouraging greener resource use. There is a need for a greater drive for it in the private sector, but at the moment they're still thinking fairly short term."
This is certainly true with brownfield development where the government is driving the clean-up operations both in the north for public-spaces and in the south for housing.
One other surprisingly unmentioned by respondents was the water framework directive. This was expected to generate an abundance of work from planning to modelling and monitoring and pollution control. However, possibly due to the relatively recent introduction of guidelines, definitions and terminology, the effects do not seem to have yet found there way through to market.
The same survey in a couple of years, when rapid growth in certain areas may well have declined or peaked and new legislation or regulation is introduced, could well show up new growth areas such as the WFD, and highlight the importance of a multi-disciplinary approach for consultancies.
Given the rapid expansion of the market and the number of players within it, it is imperative for all consultancies to be able to predict and adapt to these changing conditions.
© Faversham House Group Ltd 2005. edie news articles may be copied or forwarded for individual use only. No other reproduction or distribution is permitted without prior written consent.