A Green Light for the Environmental Consulting Industry
IBISWorld industry analyst Andrew Krabeepetcharat
As Seen in the ABA Journal
The Environmental Consulting industry has been growing quickly as companies go green. The introduction of new legislation to curb emissions has boosted revenue over the past five years, as companies hired consultants to help them comply with new regulations. IBISWorld estimates revenue will grow at an average annual rate of 6.8% over the five years to 2012 to total $20.7 billion, including an estimated increase of 8.6% in 2012.
The public is increasingly striving for a cleaner environment, demonstrated by shifts in consumer sentiment that favor the environment. At the same time, companies have become more aware of how their actions affect the environment, and have sought to reduce their carbon footprints by implementing environmentally friendly practices. These firms also promote an environmentally safe image to create a positive reputation. Construction companies are jumping on the bandwagon by erecting buildings that are safer for the environment, leading to higher demand for environmental consultants from the public and private sectors. These environmental trends are contributing to rapid growth in the industry and are expected to continue boosting revenue in the future.
A Changing Climate
More stringent laws are being enforced to decrease or prevent pollution in the United States, and consultants have been hired at accelerating rates to help companies operate within these regulations. Furthermore, the threat of climate change has influenced popular opinion; as such, private companies and government agencies held more accountable for their environmental impact. These changes in public attitudes and regulations created an increased need for environmental consultants and resulted in industry revenue growth in the five years to 2012. Because of these positive operating conditions, industry firms are hiring new employees at an average annual rate of 6.0% during the past five years.
In 2010, an explosion on BP’s Horizon Deepwater drilling platform caused an unprecedented flow of oil into the Gulf of Mexico, becoming the largest spill in US history. Though the spill was detrimental to the environment, it sent industry revenue soaring 8.3% over the year. Firms specializing in remediation and environmental cleanup experienced a surge in demand as they were called in to mitigate the effects of the spill, and consultants were hired to measure the potential adverse effects, estimate economic damage and advise on reversing the environmental damage already done. Independent experts were also hired as the government used its resources to prevent further environmental destruction. The spike in industry revenue flowed into 2011, with demand for consultants' services continuing after the oil stopped flowing. As a result, revenue increased an additional 5.1% in 2011.
Energy Concerns
Environmental concerns regarding energy, especially the use of depleting petroleum and natural gas, has spurred industry growth during the past five years as the government imposes laws and restrictions to promote environmentally friendly practices. The Energy Independence and Security Act of 2007 and the Energy Policy Act of 2005 created a surge in demand for the Environmental Consulting industry’s services. These laws aim to increase production of renewable fuels, raise investment in the sustainability of products, buildings and vehicles and promote research on renewable technologies and US energy security. As such, companies have hired consultants to help businesses and public-sector entities comply with the new rules. These laws will continue to positively influence the industry over 2013 as the government and private businesses strive to achieve their goals.
The government has also allocated more than $61.3 billion in energy programs targeted toward waste management and alternative sources of power. These programs include $6.0 billion to clean up radioactive waste and $600.0 million to clean up hazardous waste that threatens human and environmental health. Just as private companies called on environmental consultants to perform site remediation and environmental sustainability consulting in the past five years, the government also increased its use of the industry's services. More clients from corporations and government organizations heavily pushed demand in the industry over the past five years.
Low Risk over Rapid Growth
Overall risk in the Environmental Consulting industry is expected to be very low. To its advantage, the industry is in a growth stage of its life cycle, and has a very low growth risk score, a result of favorable movements in demand from construction and regulation.
In 2013, the average risk score for all US industries is expected to be in the medium-low range. Furthermore, the risk score for the Professional, Scientific and Technical Services sector, which includes the Environmental Consulting industry, is also at a medium-low level. Therefore, the level of risk in this industry will be lower than that of the US economy and its parent sector.
Outlook
The future of environmental consulting is promising. Increased environmental regulations are anticipated, particularly in the areas of oil drilling and energy dependence. As a result, corporate clients will increasingly demand the industry's services for advice about drilling offshore and assistance in becoming more energy efficient and adopting renewable energy. Corporate profit margins are expected to widen in 2012, allowing firms to allocate more resources toward implementing sustainable practices and promoting positive public images during the next five years. In particular industry firms will aid construction companies in meeting standards and regulations as construction activity picks up. The industry is expected to remain highly fragmented, with most firms continuing to be nonemployers. However, some larger firms, such as Arcadis, which acquired Malcolm Pirnie in 2009, employs more than 1,300 people in 40 offices across the country, and is expected to expand over the next five years. As a result of these trends, IBISWorld expects industry revenue to grow at an average annual rate of 8.7% over the five years to 2017, bringing the total to $31.5 billion.
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