EDR Insight attended the Environmental Consultants Roundtable (ECR) meeting that took place during the ASTM gathering in Atlanta in late October. The ECR covered many great topics as it set out to create a common forum for industry professionals with the goal of discussing, understanding and addressing core issues that environmental professionals face everyday. The roundtable, formed in June 2012, has roughly 200 members and meets four times a year, twice at the Environmental Bankers Association (EBA) meetings and twice at ASTM meetings. The mission of the roundtable is to represent the interests of the environmental due diligence industry and enhance the image of environmental professionals practicing in this sector of the marketplace. EDR Insight, in this first of a series of three briefs based on roundtable events, wants to share a recap of the “Preparing for the Phase I Market in 2020” presentation given by Nestor Benavides, President of EMG. As one of the most energetic and thought-provoking presenters at the meeting, Nestor shared his perspective on where the industry is headed and how environmental professionals can and should adapt to remain competitive moving forward.
Below is a summary of the key points from the presentation:
A look outside…
Nestor opened his discussion by talking about what is happening outside of the industry and began with the following quote:
“Most of us are uncomfortable with change…but we cannot ignore what is going on…” ~ David Houle, Futurist
There has been in a transition from the Information Age of the 20th Century to the Shift Age of the 21st. With this swing in the ways in which consumers interact with, and purchase from, companies we have begun to experience the following characteristics of the Shift Age, (1) a flow to global expansion, (2) a flow to the individual having the power of choice and (3) an accelerated connectedness among people across the globe.
Similar to the sentiment above, David Houle describes our current state as being “at an inflection point”, whereby we are in a decade of transformation in which “businesses that do not change the nature, form, and character of how they deliver their services will be left behind.” According to Houle, “the next 10 to 100 years will see the combined change that we have seen in the whole last millennium”.
When you stop to think about all that has changed over the past 20, or even 10 years, the swing from the age of information to the Shift Age becomes very apparent, with images of fax machines, big Apple computers, overly large, basic cell phones and encyclopedias coming to mind. These technologies have been replaced with smart phones, tablets, apps, Google Earth and numerous other advances that allow us to be connected to the world, more information and one another. All of this advanced technology has created a flow to the individual that has not only shaped every aspect of personal life, but has also influenced the ways in which we do business. With increasing integration and rapid adoption of mobile capabilities, as well as business collaboration and note taking software, companies need to begin reimagining and redeveloping methods and strategies that will keep them current and competitive in an ever-changing marketplace.
Before taking a look at the internal workings of a consulting firm during this shift, Nestor shared some interesting, fun facts about the rapid expansion of technology:
- There is more computing power in an iPhone 4 than in all of the USA in the 1950s
- There is more computing power in one cell phone than on Apollo 13
- It took 30 years to reach 1 billion cell phone users, 4 years to get to 2 billion and now we are at 5.6 billion
- There were 700,000 cell phone contracts in existence in 1985, yet in 2007, 1,500,000 new cell phone contracts were issued per day …
With all of these statistics and support for the rapid technological developments that are taking place, and those that are to come, it will be vital for consultants to look within their businesses and determine how they can remain competitive through this shift.
Though the recession brought about a slow down across the country, that period of weak growth is behind us as many metros and business have weathered the storm and are slowing, but steadily recovering.
Examining the current state of the industry, it is apparent that lenders are more risk averse, demanding more from environmental consultants while continuing to put pressure on pricing. There have been a few years with little infrastructure investment, yet the majority of the market is still using Phase I ESAs and seeing differentiation in clients and services starting to change. Vapor intrusion is creating “noise” and additional work, especially as more and more information to consider and review is available online. There is a complexity with Phase I ESA work that is driven by differences in state protocols and expectations, with not many changes coming from federal regulators.
During his presentation, Nestor stated, “this industry has evolved beyond regulation drivers to a point where environmental professionals need to be consultants to our clients on their risks and alternatives, instead of policemen for the recommendations and regulations.” More environmental due diligence is being focused on business support and risk management on the heels of regulation drivers. “While clients are not currently demanding data integration, they are demanding more in a time where there is greater access to information and expecting to pay less”. This creates pressure and opportunity.
Finally, Nestor mentioned that he was seeing portfolio work starting back up and expects the positive trend to continue.
What does it all mean?
“We cannot solve today’s problems using the same mindset that created them.” ~ Albert Einstein
What is the takeaway for environmental consultants navigating their through the climb out of the recession? It may be that the connectedness and integration that is going on in our personal lives needs to also be occurring in our work lives. “As of now, this industry hasn’t shifted too much. With the current level of use of technology and client needs being voiced, there is a massive opportunity to take this industry forward.”
What will companies need to do to prepare for the next decade?
To wrap up the presentation, Nestor discussed six needs that environmental consultants and their firms will have to consider as they prepare for the next decade. First, EPs will need a more streamlined Phase I ESA work process with greater transparency to on-site data, the potential elimination of reports whereby data would flow straight into a client database, and better protection and accountability for consultants (geo-locating pictures, time stamps, video logs, etc). Environmental consultants want to look for solutions that effectively drive speed, as those solutions will also assist with margins (lower cost and higher price). Leveraging mobile technology will also be important with tools like video streaming and Google streetview. EPs should also expect to see “issue resolution between the buyer/seller, lender and consultant become “virtual”, possibly simultaneous with the on-site visit”.
The second way in which companies need to prepare for the future is by simplifying the analysis of the data, especially because increased data and information cannot continue to expand without more efficient analysis solutions. Consultants will need to look into software solutions aimed at standardizing and accelerating actions and follow up. There will be a need for better delivery of reports and intelligence to clients, even including hyperlinked recommendations to Google streetview, regulations and communications. There is even a possibility of creating an integrated score for a given site that quantifies its environmental risk.
Integrated delivery of intelligence for clients is the third need consultants should consider moving forward with potential for tighter integration of data with client systems (MISMO or other) and a digital exchange of loan underwriting information between parties. With the availability of information becoming less of an issue and the progress of integration, automatic formatting and quick and consistent analysis coming to the forefront, federal, state and local government records, aerial photography, city directories and topographic data will only become more readily available on the web.
A diversity in the client service offerings will become a need, with Nestor suggesting the creation of more than one ASTM standard for Phase I ESAs since different client needs are currently being delivered by the same standard. He suggests that full Phase I ESAs for more complex properties and multiple alternatives for Phase I ESA”updates/screening” or “risk reduction” services for less “risky” properties. There is a potential for separate scopes based on risk with more information and access to existing information increasing.
Opportunities will be created as energy evolution may create additional industry issues and needs (i.e. natural gas cars, more deserted tanks and systems, disposal). There is also a potential shift with environmental focusing a little more on sustainability instead of just current liability. “For example, if natural gas starts being used in vehicles, commercial or otherwise, on a greater scale, facilities and infrastructure will have to be built up to support it, creating opportunities and additional liabilities at gas stations and vehicle storage and servicing facilities.” The “average age” of buildings will also create liability and opportunity as the industry moves into the next decade and buildings continue to get “older”. Nestor stated, “The need for our services is increasing as so many of the commercial buildings hit the critical 30+ year mark of construction. Additionally, there has been very little new commercial construction in the past 5 years, and reduced amounts spent on repair and maintenance as a result of the tight economy. All of these factors point to opportunities for increased services needed as the economy continues to expand.”
Finally, staying competitive as an environmental professional will require a different kind of effort than consultants are used to. Providing leading solutions for the client, as well as the employee will be essential in attracting and retaining top performers. Clients will expect more technologically advanced consultants and resources. Environmental due diligence will become less and less about the Phase I, and more and more about responsiveness, customization, connectedness and innovation. “There is an increasing need to become more efficient and/or differentiated – that’s capitalism.”
“The current market pressures combined with wireless expansion creates a tremendous opportunity. We can be intimidated or angered by it, or we can embrace both. Delivering greater client value (faster information flow with greater transparency and customization) can also increase efficiencies (lower costs) so that we can increase market share, client satisfaction and profitability, while competing in a price sensitive market.”
Businesses that do not change and evolve will be left behind, and changing involves the recognition that finding a more efficient way to do business will be more important than price. “Price did not decline, it shifted to a new equilibrium.” With a move away from a price-centric business model to a more technological and strategic outlook, environmental consultants can position themselves and their organizations to be successful as we move into the future.
NOTE TO READERS: EDR Insight wishes to thank Nestor Benavides for sharing his insight and for acting as a reviewer for this brief.