Environmental market set for runaway success
To those in the know the fact that the environmental sector is growing is in no more doubt than the reality of climate change. In the UK alone the industry now employs 400,000 people and has an annual turnover of £25bn, and environmental consultancy accounts for a healthy slice of this market. Both the ranks of the workforce and profits are swelling at a rate which puts national trends across the private sector as a whole to shame.
Following its extensive survey of both environmental consultants and their customers, edie quizzed experts in the field on their reaction to the survey results, their tips for the future and predictions of how the market would develop.
Most experts agreed with the prevailing message coming from clients and consultants alike - that waste and climate would top the agenda when it came to new business ground for environmental consultancies.
Overwhelmingly, the consultants we spoke to put this down to legislative drivers and, importantly, the rising profile of climate change issues both on the Government agenda and in the public eye.
Water, environmental reporting and contaminated land were also seen as having great growth potential, while IPPC and cleaner production came bottom of the market growth table.
Waste and climate: high expectations
Nigel Clark, marketing director at Enviros, said the waste management sector would continue to grow as drivers such as the landfill directive continue to exercise their influence. "There is a need to invest in new technologies, areas like waste strategies and the management of waste and recycling," he told edie.
"It's a big issue and it has massive ramifications not just for the public but also for the private sector.
We've done well in the last few years recognising the shifts in the market and building on our traditional waste skills. I'm not sure what Enviros' first job in environmental consultation was about 30 years ago, but I'm sure it will have had something to do with a landfill site," he said.
A spokesman for Entec, Francesco Corsi, agreed that energy and waste were the areas to watch out for, followed in his opinion by development - whether that be land remediation, planning or environmentally sensitive construction.
"For the market place as a whole waste and energy seem to be the big ones. There are opportunities all over the energy sector. Particularly all the nuclear decommissioning and the expected building of a new generation of nuclear will no doubt throw up plenty of opportunities for environmental consultants," he told edie.
"Water is also a very big market for us, but it's a stable area rather than an area of rapid growth," he added.
As for the climate change and renewable energy sector, it was voted the second most important growth area by consultants, and a joint first by the all-important clients. This marks an important shift since last year, when clients still did not anticipate just how significant a driver the "carbon question" will become, enforced by energy security concerns as much as the fight against climate change.
Enviros' Nigel Clark felt that media attention was directing market development in this area: "You can't open a newspaper these days without seeing another story about climate change. It's ratcheted up the political agenda.
"The issue of the environment and sustainable development has almost been consumed by the subject of climate change and the attention that's being paid to us is enormous. It's not just something that is an issue within our sector, it's now an issue of global importance and awareness," he said.
Interestingly, he noted the overlap between the two top growth areas of energy and waste. "We wrap waste into the whole resource agenda. The best way to avoid sending waste to landfill is not to generate that waste in the first place. We're looking at integrating all of our service along the resource hierarchy right from more efficient design in the first place to trying to make good use of waste resources," he said.
"People are increasingly recognising that carbon is connected to waste and asking questions like 'does it make sense to recycle this bottle when the amount of energy required to do so might be quite high? Which is the scarce resource - holes in the ground or energy?'"
"Carbon is in everything - the development agenda, the waste agenda. If you can get to grips with it it's a win-win situation for everyone. It keeps going on as a corporate and political imperative and that's not even taking into account renewables."
While the dominance of waste and energy was put into stark relief in the survey, and echoed by experts commenting on the results, other sectors should not be ignored.
While agreeing with the overall prediction of the edie survey, AEA Technology's director for future energy solutions Cathy Durston pointed to other market growth areas that followed closely behind the winning double act of waste and climate.
"We at AEA are seeing quite a big growth in the EIA / SEA area as well, which is bit further down [on the Growth Markets graph]," she told edie.
"But the categories are all pretty bunched together, so perhaps there is not so much difference in the end," she observed, adding that she sees growth across the market and not just in the areas of renewables and waste.
Karen Raymond, business development partner at ERM, also felt that EIA was a strong growth area - a fact partly explained by her company's global reach, she said.
"We've seen a very big growth in our EIA business globally with the introduction of the new international finance corporation standards such as the Equator Principles. Also the growth of the extraction industry globally is driving a lot of the growth, so we do a lot of work in the mining and oil markets all over the world," she told edie.
"We've been using staff from the UK and our offices elsewhere in international teams to service those clients so we can bring, say, mining expertise from south Africa, EIA expertise from Europe and social expertise from the US and Australia into teams for our clients," she continued.
"The UK is steadily growing but it's not seeing the level of growth which we're seeing internationally. We expect to continue to grow steadily here but our real growth in terms of numbers and revenue here in the UK is going to be servicing the international business of the company rather than local," she explained.
She also pointed to CSR as an expanding sector. "We see the growth in the CSR business as being very much providing integrated services across environment health safety and social responsibility rather than the traditional environment only," said Karen Raymond.
"But our real growth comes from the expansion in the extractive industries globally and the increasing pressure on the big international players in those industries to plan and implement major projects more responsible driven by the requirements of those providing funding."
"Most big oil and gas mineral developments don't go ahead without some sort of access to funds from say IFC or one of the major banks and that whole financial community is now imposing much more stringent standards industrial activities."
Public vs private
When it came to the great public - private debate, last year's trends appear to have grown weaker- consultants are still predicting stronger growth in the private sector than in the public, but the gap between the two is closing.
Nigel Clark of Enviros speculated on the legislation-driven forces behind these changes. "There are big public sector drivers in this market. Defra funding cuts will have some repercussions because a lot of people rely on work for them or their agencies, so it's likely to have a short term impact," he said.
"But there's no let up from the Government or the opposition in terms of their view of the importance of the environmental agenda."
"The legislative driver is still there and it's still very strong but there's not a lot of environmental legislation coming down the pipe. The EU's not pumping out new pieces of legislation every week. I don't doubt legislation is still the biggest driver but I don't think it's increasing as a driver."
"Resource efficiency and the climate agenda are fast coming up as being the increasing driver.
But AEAT's Cathy Durston saw public and private sector growth on a par - an observation all the more relevant because of her company's historical links and strong client base in the public sector.
"We actually see growth across both markets," she said. "Obviously, the private sector always has new legislation which it needs to comply with, but equally in the public sector there is additional money going to organisations like the Carbon Trust, money spent by Defra on air quality etc."
"Growth in the local authority market is also strong, particularly in the waste area," she continued.
"What we're seeing with the private sector is that increasingly companies are interested in renewable energy - for CSR reasons and legislative reasons - but they just don't have the in-house resources to look at these questions and implement them."
"So what we're finding is the interest of the private sector in terms of helping their internal resource to assess different options and implement them where appropriate as opposed to brand new legislation that's come in," she said.
To focus or not to focus?
One question the experts could not agree on was whether focusing down on environmental issues only was a better strategy than keeping a wider portfolio of consultancy services.
AEA Technology, having recently announced the intention to sell part of the business to concentrate on environmental service only, unsurprisingly believed an environmental focus drew in customers.
Nigel Clark of Enviros also felt that this was strength. "If there is a difference about us - and it's not unique, there are two or three other players who can boast this - it is that everything we do fits inside the environmental consultancy sector," he said.
"A lot of new names have come into the marketplace and built environmental consultancy onto a broad range of other services whereas this is what we specialise in."
Others, like Atkins, felt that the ability to transfer skills between sectors improved their services and attracted more customers.
IPPC - past its best?
In stark contrast to the promising climate, waste and water sectors, sectors like IPPC and cleaner production showed the least potential for future growth. Experts put this down to the increasing commoditisation of these services.
An Atkins spokesperson said: "IPPC services have passed their peak as most sectors have now undergone initial PPC permitting. This has provided a substantial quantity of work for Atkins mainly in helping the Environment Agency in delivering permits in conjunction with its strategic permitting groups.
"However, that stage of work is now coming to an end. Reviews of PPC permits will generally involve less work for consultants than the original permitting.
"However, there is still work to be done in addressing the requirements of permits that will have been stipulated with associated dates for implementation."
ISO 14001 services, meanwhile, are a less significant part of environmental consultancy than a number of years ago and they have also become more commoditised," the spokesperson continued.
"Large companies (e.g. Ford Motor Company) exerted supply chain pressure which led to a number of SMEs gaining ISO 14001 a few years ago."
But Enviros was surprised by IPPC not making it higher up the market growth chart. Nigel Clark said: "We're not expecting big growth in work purely to help companies achieve what's required of them to get their permit, but clients we've worked with so far have been quite enthusiastic in terms of installing this stuff for improved resource efficiency and environmental management.
"Although it may not be called IPPC work we're doing more work in that area than we did last year because more companies are recognising the benefits it brings.
"It is a good market but it's not a fool's paradise by any means. You have to know not only where you can get work but where you can make money from it.
ERM's business development partner Karen Raymond agreed, adding that her consultancy has made a conscious choice to sideline the more commoditised parts of the market: "We have always positioned ourselves at the leading edge of development so we're pushing the boundaries in terms of what we do and we've avoided focusing on areas of the marketplace that have become more commoditised over the years," she told edie.
"For example we don't do small everyday EIA we tend not to do the sorts of contracts where we help organisations solve relatively simple problems like getting ISO14000 certification for small organisations," she said.
But while some areas seem to be growing more than others, the interconnected nature of the business, especially with climate and energy now such a prominent part of the landscape, is sure to add to its flexibility.
The overwhelming message coming from the environmental consultancy market this year is one of optimism as demand for services continues to increase, bringing with it jobs and driving up profits.