Environmental consulting outlook

    Figure 1: Global environmental consultancy revenue and revenue growth, 2011-2020e. Image: Environment Analyst

    The value of the global environmental consultancy (EC) market reached $28.5 billion in 2015, up 2.1 percent compared with the previous year, according to the latest report by business intelligence provider Environment Analyst. The sector is still lagging global economic growth — which was 3.2 percent in 2015 — mainly reflecting the ongoing impact of the natural resources sector downturn and depressed oil prices — but still represents a significant improvement on the previous two years of declining market revenues. A similar level of increase is expected for 2016 at 2.2 percent (see Figure 1).

    Figure 2: Global environmental consultancy market share by region, 2015.
    Image: Environment Analyst

    Growth has been bolstered by strong demand related to infrastructure development in Western Europe, and a return to growth of the largest regional revenue generator North America (which accounted for 52.6 percent of the global sector in 2015), which saw respective EC revenue increases of 4.9 percent and 2.2 percent (see Figure 2). Growth in North America was boosted by renewables (especially wind and solar) support work in the U.S. as well as increased activity in certain government channels.

    The fully updated and further extended version of the report, now in its sixth year, provides a comprehensive picture of the current state of the global EC sector and competitive landscape through detailed company profiles and financial statistics from the 24 players judged to be the most geographically diverse, globally ambitious, and largest companies active in this field (collectively referred to as the Global 24).

    Together these firms are estimated to make up 44.8 percent of the worldwide EC market. The report categorizes them into three main business model types — large-scale integrated, multidiscipline, and specialist — according to their size and the prominence of EC activities within the overall business. Key to the international industry’s reviving fortunes in 2015 was the improving growth rates achieved by the larger fully integrated and multidisciplinary players in this space (with organic year-on-year EC growth rates of 3.9 percent and 2.9 percent, respectively). The specialists — those with more than 50 percent of their business in environmental consulting — suffered the brunt of the declines, with the organic growth of this subgroup at -5 percent in 2015.

    “Our conclusion is that the playing field has really leveled out now between the various types of operator, and the specialists no longer seem quite so resilient,” said Liz Trew, editor of Environment Analyst’s Global Market Intelligence Service and co-author of the report. “It remains to be seen whether firms that are still struggling can take the necessary steps to adapt, modify, and innovate their offerings to the new paradigm of depressed resource markets and much more cost-conscious clients.”

    The top 10 players, in order of gross global EC revenues in 2015, were:

    1. AECOM,
    2. CH2M,
    3. Tetra Tech,
    4. Arcadis,
    5. Environmental Resources Management (ERM),
    6. Golder Associates,
    7. AMEC Foster Wheeler,
    8. RPS Group,
    9. Ramboll Environ, and
    10. WSP | Parsons Brinckerhoff.

    The next 14 in order are: GHD; HDR; Sweco (incorporating Grontmij) and MWH Global (now part of Stantec) in joint 13th; Antea Group and Jacobs in joint 15th; Cardno and Mott MacDonald in joint 17th position; ICF International; WorleyParsons, Royal HaskoningDHV and SLR in joint 20th place; Atkins; and Coffey International (now owned by Tetra Tech).

    Significant merger and acquisition (M&A) activity and consolidation involving the top end of the industry in the last five years is evident with the top 10’s combined global market share growing to 32.9 percent in 2015, up from 23.8 percent in 2010. AECOM is revealed as the market leader for the second year running, having completed the $4 billion acquisition of fellow U.S. consulting and engineering giant URS in 2014. With group revenue close to $18 billion and staff of about 90,000 (around 10 percent of which make up its EC operations), AECOM is reaping the benefits of post-merger synergies and economies of scale, having extended its lead over second-placed CH2M and achieving a top-three positioning in three major regions: North America, Asia-Pacific, and East Europe/Former Soviet Union. 

    Other recent M&A pairings have led to the appearance of both Sweco and Stantec in the Global 24 analysis for the first time thanks to their respective acquisitions of Grontmij and MWH Global. Also featuring for the first time in this report edition is U.S.-based HDR, which has itself taken part in significant M&A activity to grow the business and help realize its international aspirations.

    The EC staff numbers employed by the Global 24 remained more or less static, at approximately 75,000 in 2015 (discounting the effect of staff added through major M&A). The average EC contract size, at $67,000, has also remained virtually unchanged during the last four years.

    Figure 3: Global environmental consultancy market share by service area, 2015. Image: Environment Analyst

    Based on the service area breakdown of the Global 24’s aggregated EC revenues, Environment Analyst finds contaminated land remains the largest single discipline in the global EC market in 2015, with 33 percent of the total, ahead of the 23 percent share held by water and waste management services (see Figure 3). Environmental impact assessment (EIA) and sustainable development takes a further 17 percent, while environmental management, compliance, and due diligence services represent 15 percent. Climate change and energy-related services generate a further 8 percent of the total, and is the fastest growing of all the major disciplines.

    According to the study, the global EC market is forecast to reach $32.5 billion by 2019, up 13.8 percent on 2015 and representing a five-year compound annual growth rate of 2.6 percent. The forecast has been projected upwards since the previous edition of the report given the renewed strength of the European market and turnaround of the dominant North American region to positive growth — although still cautious given the significant uncertainties around the global economic and geopolitical landscape, and commodity price trends.

    Commenting on future outlook, Trew said, “The regional prospects have shifted back towards the advanced economies and more mature EC markets, while in terms of services the climate change and energy disciplines are expected to spearhead continued market recovery. This area alone is forecast to increase by almost 30 percent over the next five years, driven by strong underlying policy drivers and the global push for decarbonization. The rise of infrastructure development is also evident in our forecast model, with this area expected to expand by almost 20 percent by 2020.

    “But given the current low-growth market projections, M&A activity by — and impacting — the Global 24 is likely to continue at a fair pace, and also given the pressures in the wider engineering and support services industry,” she said. “Although activity is expected to be more concentrated among small and mid-size players, some commentators have raised the possibility of one (or more) of the Global 24 being snapped up by an IT giant, reflecting the growing importance of digital technologies, software applications, and big data management and environmental analytics in shaping the services on offer. The willingness to forge inter-sector and cross-sector partnerships is also becoming increasingly significant in the environmental management of complex infrastructure and other major projects.”

    Information provided by Environment Analyst Ltd. (www.environment-analyst.com), a publishing and market research organization focusing on the environmental consulting and support services sector.