While I practice Environmental, Health, Safety and Sustainability (EHS&S) consulting by day, I’ve been forced to become a financial prognosticator by night. As the Principal of Citadel, a mid-sized, employee-owned EHS&S firm, I’ve always had to make forecasts about the economy, identify industry trends, and formulate corporate strategies. The basis for my decision making could be as sound as making conclusions relying on established business and trade journals or as weak as consulting with the swelling in my trick knee. Either way, it was hard for me to go wrong.
Before the last major recession, “all boats were rising” - I could always dial in growth into the planning process, as we had grown steadily for 15 years. Conversely, for 2008-2010ish, I could forecast reductions or no growth as the entire economy was either in a tail-spin or treading water – “all boats were sinking”.
But a couple of weeks ago, I was given a challenge by a valued Citadel business consultant, Dr. Kim Huynh, to conduct a webinar to a university audience. My responsibility was to share my insights into the EHS&S industry as to its stability, potential for growth, trends, and industry drivers. My challenge was that I was presenting to a mature, international audience that likely wouldn’t merely accept “because my trick knee is never wrong” predictions, and were looking for fact-based assessments. And we all know, anyone making predictions the last couple of years were, either, fools or someone who was going to soon made a fool. But, here I was, being forced to make predictions in the transparency of fog.
I turned to three trusted sources to measure the state of the economy for the EHS&S industry: (1) our existing pipeline, (2) IBISWorld’s August 2011 Report, and (3) our insurance broker.
Unrecognized by most, the environmental industry is a good leading indicator about the strength of the economy or at least investor confidence. We represent several hundred clients in numerous industries including real estate, retail, entertainment, education, energy, manufacturing/aerospace, defense, health care, government, etc. Often, environmental firms, especially those similar to Citadel that service the entire life-cycle of real estate, are the first in on deals, working with the “smart money” before architects and engineers, and well before contractors. Therefore, my first indicator was looking at work in progress, backlog, opportunities, and the telltale billable hours metric. Having reviewed those measures, the first indicator for an economic upturn was a “go.”
The second source was IBISWorld’s August 2011 Report for our industry. After reading about 50 pages of the report and all of the entertaining charts (zzzz), the conclusion was that we could expect 9.4 % annual growth for the next several years. The second indicator was a “go.” So far, so good.
The third source, while ostensibly an odd source, was our insurance broker. For the past 20 years, I’ve turned to our broker as a bellwether as to the state of the economy. Similar to Citadel, his firm represents clients from a cross-section of different industries and are intimately familiar with their clients’ business operations. In the case of our broker, it doesn’t hurt that he is the West Coast President of an insurance brokerage owned by one of the nation’s top-ten largest banks. Having his insight into his customer base and access to his parent company’s economists, he reported back that almost all of his clients were adjusting their strategic plans upward or currently hiring new staff to service existing business or expected business. Our experience is similar to many of our broker’s - we’ve been hiring additional staff (announcements will be forthcoming), investing in real estate and equipment, conducting extensive staff development, and re-tooling our practices of how we work.
The conclusion for my preparation for the webinar was that the EHS&S industry was on solid footing and that a recovery was underway. Now, I recognize that there are some destabilizing factors and some looming threats to the economy such as the presidential election, national debt/spending cuts, Europe’s sovereign debt crisis, and a series of bad options for dealing with Iran, however, it’s time for the bear (at least a timid bear) to come out of hibernation. In won’t be a quick, gangbuster recovery, but it will steadily improve over time.
Now, I just have to hope that I’m not tomorrow’s fool.
Loren Witkin
Principal
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