Ashley Wright, CEO of Australia-based GHD Group, says the firm’s environment business “continues to be one of the strongest and top performing at a global level for the company.” Consultant ERM sees a need for Top 200 firm services as “businesses continue to grapple with the challenge of delivering against sustainability objectives that require fundamental transformation of both strategy and operations,” says CEO Tom Reichert, who joined the firm in February from a Boston Consulting Group executive role.

Top 200 firms’ environmental services revenue reached a new high this year, with a total of $112.7 billion generated last year, and non-U.S. revenue at a whopping $53.3 billion. That total grew in part from environmental services revenue reported by global water and waste giant Veolia Environnement—again in the top spot at $33.7 billion—and newly ranked Larsen & Toubro Ltd, the India-based engineer-contractor that came in at No. 3.

 

AECOM moves into second place, reporting its 2021 Top 200 revenue at $6.8 billion, up from $3.75 billion for the previous year, with the figure now 51% of its corporate total.

Frank Sweet, CEO of its global environment business, attributes the boost largely to a more focused look at what constitutes environmental revenue as part of an ESG-related tally. “We were basically undercounting by a lot,” he says. “It is a high growth area for us, something we really want to leverage in the marketplace.”

WSP Global Inc. boosted environmental revenue to nearly $2.8 billion, with last year’s purchase of sector heavyweight Golder. Its just-announced $1.8-billion deal to add in Wood Group’s environment unit is part of stated strategy for WSP’s earth and environment practice to generate one-third of corporate net revenue by 2024, says André-Martin Bouchard, practice global director.

 

Political Winds Shift

List leaders say high court limits on federal environmental regulation and congressional inaction on climate-change funding won’t stop needed change. “What’s occurring right now is that a significant part of civilization has realized there needs to be a change regardless of what direction politicians set,” says AECOM’s Sweet. 

The legislative stalemate on climate change funding could reverse with a July 27 deal between Senate Majority Leader Chuck Schumer and West Va. Sen. Joe Manchin, chair of the Energy and Natural Resources Committee, who had pulled his bill support earlier this month, citing its cost and inflation.  

The legislation, which includes $369 billion for climate and clean energy programs and tax credits, gained Senate approval Aug. 7 pushed by Democrats  as part of larger budget reconciliation legislation and could pass the House of Representatives as early as Aug. 12.

Proponents say the bill could reduce overall carbon emissions by 40% from 2005 levels by 2030, with Schumer describing it as "the greatest pro-climate legislation that Congress has ever passed." In a statement, President Joe Biden said "we will improve our energy security and tackle the climate crisis — by providing tax credits and investments for energy projects.”

Among its provisions are reversal of a 10-year ban on offshore wind leasing set by former President Donald Trump in federal ocean tracts off Florida, Georgia and the Carolinas, proposed offshore wind planning in U.S. territories such as Puerto Rico and Guam, and $100 million for the US Interior Dept. earmarked to boost overall wind farm transmission development.

The bill also includes fossil fuel-related incentives that Manchin wanted, including mandated oil and gas leasing in the Gulf of Mexico and off Alaska and about $1.55 billion in funding and grants for methane gas reductions and mitigation, as well as a proposed per-ton fee on excess emissions starting in 2024

The bill would require the Interior Department to offer at least two million acres of public lands and 60 million acres of offshore waters for oil and gas leasing each year for a decade as a prerequisite to installing any new solar or wind energy on federal lands. An agreement among Schumer, House Speaker Nancy Pelosi, D-Calif, Manchin and Biden would also ease federal permitting rules for pipelines and other infrastructure if Congress agrees.

Some environmental groups also are unhappy with the oil and gas provisions. "It’s self-defeating to handcuff renewable energy development to new oil and gas extraction,” Brett Hari, government affairs director at the Center for Biological Diversity said in a statement. "If the department failed to offer these minimum amounts of leasing, no right of ways could be granted for any utility-scale renewable energy project on public lands or waters.”

A group of 347 conservation and community groups asked Biden and Schumer in a July 29 letter to  “hold the line against any new fossil fuel projects.”

Bu the bill still faces strong Republican opposition.

 

Concrete Actions

More aggressive U.S. partisan politics on climate change actions appear linked to diverging national attitudes. In Pew Research poll results just issued, 49% of adults queried say the administration’s climate change policies are taking the U.S. in the right direction, while 47% say the opposite. Three-quarters of surveyed Republicans say stricter environmental laws hurt the economy, up 20% from 2019, Pew Research found. Among Democrats, 21% say regulation hurts the economy, up from 14% in 2019. But 61% of Democrats who back Biden policies say the administration is doing too little.

Emission reduction commitments are already locked in for many Stantec clients, adds firm president and CEO Gord Johnston. “They’ve talked about moving toward carbon neutrality, toward net zero,” he contends. “We’ve had no clients say they’re going to pull back based on this.” Neville Reynolds, VHB environmental service line chair, says: “Climate change is a monumental issue impacting not only the environmental industry, but all markets, services, and sectors. VHB say it is performing an increasing number of resilience studies and vulnerability assessments.

Carbon capture and direct CO2 removal is viewed as a climate solution with the best chance for real congressional backing—favored by industry but opposed by most environmental activists. 

The existing 45Q federal tax credit for carbon sequestration has bipartisan support, says Ben Rubin, executive director of the Carbon Business Council, a new lobby group of CCS technology firms. A Senate bill just floated by Susan Collins (R-Maine) and Maria Cantwell (D-Wash.) would spur federal research and fund carbon removal pilots. 

But with better-funded federal climate action a tough challenge, states and municipalities are “at the front line of concrete actions,” says Bouchard.

States already have been the key driver of clean energy sector growth in recent years, setting aggressive deployment goals, particularly for solar and offshore wind power. Top 200 firm revenue in air pollution and clean energy work rose to 16.3% of the total this year, from 10.8% last year. 

Burns & McDonnell reported that sector revenue makes up 57% of its environmental services total, up from 27% in 2021, and Pepper Construction said it is a recent entrant in the solar facility market. There now are 19 U.S. offshore wind projects at development stages, with 18 GW of capacity having a power offtake pathway, says K.C. Sahl, national offshore wind director at VHB, which provides regulatory, permitting, and technical consulting services for some projects.

Terracon President and CEO M. Gayle Packer believes the June Supreme Court ruling setting some limits on U.S. Environmental Protection Agency regulation of coal-fired power plant emissions won’t spell doom for climate change action. “EPA will likely consider alternative approaches to regulate emissions from existing coal and natural gas power facilities,” she says. “We don’t foresee this ruling will have a significant impact on our overall compliance-related business.” 

But the court’s decision next term in a case challenging EPA wetlands protection under the U.S. Clean Water Act could have more reach if the majority rules for the plaintiffs, she says. “This ruling could have a significant impact depending on how state and local governments respond.”

 

Doing Good Business

Even as Top 200 firms keep an eye on issues ahead, this year’s group reporting environmental services revenue at $1 billion or more includes all top 20 listed firms, expanded from just 14 on the 2021 list. Amentum, AECOM’s former government services unit spun off in 2020 to private equity owners, is a new participant debuting at $1.1 billion in 2021 revenue. Clean Harbors Inc. and Arcadis NV return to the list in top 20 slots, but Haskell and Gilbane Building Co. are missing in the leading 40, with the latter divesting its environmental unit last year.

Water services provider Suez North America appears as a Top 200 firm for the last time this year, now owned by Veolia in a deal completed in January that the new parent says creates a U.S.-Canada unit with 10,000 employees and a global firm with $43 billion in projected 2022 water and waste services revenue. 

Cardno Ltd. did not file for this year’s list, with its December purchase by Stantec, although the latter’s total includes just three weeks of its new unit’s revenue. Cardno reported $320 million in revenue on last year’s Top 200. Water-wastewater sector builder Eagle Contracting LP remains on the list despite its late 2021 purchase by contractor Satterfield & Pontikes.

An end to prolonged business closures boosted work for some Top 200 firms, including list newcomer Alliance Environmental Group, a key mold and asbestos-removal firm in California and other states, says Kelly Kambs, interim CEO. For Partner Engineering and Science Inc., which rose 22 spots on the list, fewer pandemic restrictions in 2021 and low interest rates generated “an absolutely historic boom year for commercial real estate transactions and the environmental consulting needed to facilitate them,” says CEO Joe Derhake. AEI Consultants CEO Holly Neber also noted “unprecedented demand” for firm services in that niche but foresees volume to normalize this year with rising interest rates.

Charter Contracting Co. Ltd., a remediation specialist, was able to execute backlog and secure new work last year, says President Robert Delhome, but high oil prices and inflation “are making clients take a more measured approach to the projects they want completed, which has caused a revenue slide into 2023.” Trihydro Corp. “was able to negotiate rate increases with many of our larger clients, which was key in the inflationary environment,” says President Kurt Tuggle, but he is watching if project approvals slow.

Even so, Worley CEO Chris Ashton says he is “confident in growing our sustainability business,” noting that prospects in that sector now account for about 52% of projected revenue as of April, “and we are seeing these opportunities accelerate.” With added regulatory and market pressure on private- and public-sector sustainability performance and disclosures, “there is no room for complacency as the bar is being continually raised,” he says.

California consultant Dudek is “cautiously optimistic for the next 12 months,” says Joseph Monaco, president and CEO. “We continue to see favorable performance metrics, a strong backlog, and a heavy volume of contracts and RFPs, but we can’t ignore some of the more macro-economic issues brewing on the horizon.”

 

The IIJA Infusion

Passage last November of the federal Infrastructure Investment and Jobs Act (IIJA) began to set the stage for U.S. environmental services growth in 2021, with remediation work spurred by reinstatement of the Superfund tax and needed reviews for billions in environmental and other infrastructure projects set to be funded and executed in coming years. 

“This law reinstates the chemical excise taxes and invests an additional $3.5 billion in environmental remediation at Superfund sites, making it one of the largest investments in American history to address legacy pollution,” says Manjiv S. Vohra, CEO of contractor ECC, noting funding already transferred to the U.S. Army Corps of Engineers and projects bid under task order contracts. The firm’s 2021 environmental services revenue was “somewhat less than expected,” he says, but it foresees a 25% boost over the next 12 months.

IIJA also has earmarked about $10 billion to evaluate levels of per- and polyfluoroalkyl substances (PFAS) contamination in municipal water supplies and determine remediation approaches, says Packer of Terracon, which assisted Colorado on a statewide assessment in 2020. 

Barr Engineering Co. says its PFAS-related work has grown as more states toughened regulation, but it expects further boost over the next year from both public and industrial clients, following EPA’s PFAS “strategic roadmap” issued in 2021. 

IIJA funding also boosted EPA brownfield redevelopment with $1.5 billion provided over five years. Langan is active in the sector, involved in gaining cleanup completion certificates for nearly half of New York City sites in 2021, according to CEO David Gockel.

The law and other new federal funding also will boost nuclear waste cleanup, although issues remain controversial. Sector revenue fell to 4.9% of the Top 200 total this year, from 5.6% in 2021. 

Veolia revenue in U.S. nuclear site decommissioning, waste treatment and remediation “has been slower than expected primarily related to delayed awards of significant billion-dollar [federal] contracts,” says Valerie Bielstein, a nuclear unit spokeswoman. It remains “optimistic” about sector growth, noting recent commissioning of a second U.S. waste vitrification facility using its GeoMelt technology, which also is being assessed by nuclear clients in Japan, the U.K. and France, she says. Veolia and French utility company EDF formed a joint venture last year to expand the technology’s application.

Go With the Flow

Top 200 firms in global water and wastewater design and construction also see market improvements, although with remaining execution challenges. Judy Construction reported award of its largest-ever project contract in 2021, more than triple the firm's previous record, says CEO Steve Judy. “Our outlook for the next 12 months is strong with the water industry thriving and [IIJA] further fueling the robust market,” says CEO Mike Heitmann of contractor Garney, which reported $1.068 billion in sector revenue, up from last year.

Vikram V. Rajadhyaksha, CEO of engineer DLZ Corp., says Cares Act and ARP funding “certainly helped jumpstart 2021 water design work. Some communities directed portions of these federal relief funds to water projects.” He says added infrastructure funding sources should drive more water-related projects for the next 12 to 18 months and possibly beyond. 

But M.B. Kahn Construction President Bob Chisholm said project delays caused by supply chain glitches and high bid prices “resulted in our not meeting year-end in-place projections,” a trend he expects to continue. “Cost escalation will slow awards for new work while clients adjust to increasing costs of projects,” Chisholm says.

PC Construction notes similar challenges, although it grew its Top 200 revenue total to move up 22 places on the 2022 list. “Challenges that still very much impact our industry include subcontractor availability and capacity, cost escalation, supply chain disruptions and labor shortages,” says CEO Jay Fayette. He says the number of projects being solicited are initially attracting interest from many bidders, “but when bid/proposal day arrives, the number of actual bidders is much lower than in the past.” 

One example, he notes, is a wastewater improvement project advertised in the $25-million to $30-million range in 2021. While 14 firms prequalified, only two actually bid, both in the $55-million range. Fayette says the new realities in this sector are forcing contractors “to be more strategic and selective in choosing projects to pursue ... and poses challenges for owners to progress their projects forward.”

Looking ahead, “the big question for the industry is whether current backlog and funding in place are enough to bridge over ... a manufacturing and service labor driven recession,” says Rajadhyaksha of DLZ. “Only time will tell, but our water infrastructure needs in this country are at an all-time high.”

 

Global Trends

Beyond the U.S., Victor Creixell, CEO of Spain-based Tradebe Environment says that industrial sectors it serves in waste management recovered from pandemic disruptions and increased production volumes in 2021. “In the next 12 months we expect the market to continue its growth trend, with a focus on recycling technologies,” he says. The firm reports 61% of environmental services revenue as non-U.S. derived. U.K.-based Harsco Environmental cautioned that political and market instability generated by the war in Ukraine “is impacting eastern and western Europe where we have a large footprint.” 

Noting that impacts in the industry historically trail the global economy by 12 to 18 months, Yde van Hijum, CEO of Netherlands-based Antea Group, says “in the event inflation is effectively tempered and geopolitical stability is reestablished in Europe ... the industry may escape some factors exerting downward pressure on the market.” He says “we remain bullish on the long-term outlook for the environmental consulting industry; it just may take more than 12 months to see net positive growth overcome some near-term adversities.”

Top 200 firms are hopeful the blitz of proposal activity in late 2021 translates into bottom-line benefits this year. 

TechLaw Consultants CEO Brian Shutler says cancelled work and COVID-19 delays last year took a toll on revenue and profits, forcing the firm to rely on PPP loans rather than cut staff pay or resort to layoffs. He says it now expects “a record number” of new and replacement long-term federal contracts procured in 2021 that could lead to “exponential” backlog growth. 

Edward Van Woudenberg, CEO of Groundwater & Environmental Services Inc., notes major “headwinds” last year dropped its 2022 Top 200 rank, saying the firm is now retooling for future growth. “We are continuing to take aggressive strides to ready GES for this transformation, and make the investments needed to support clients through the change toward sustainability, resilience, renewables and climate change,” he says.

Data assistance by Jon Keller and Rebecca Pence