STRATEGIC ENVIRONMENTAL MANAGEMENT AND POLLUTION PREVENTION

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					EBI REPORT 1610:




STRATEGIC ENVIRONMENTAL
MANAGEMENT AND POLLUTION
PREVENTION:
MARKETS, COMPETITION &
STRATEGY
Profiting in the Post-Regulatory Era




May 1996




ENVIRONMENTAL BUSINESS INTERNATIONAL, INC.
4452 Park Boulevard, Suite 301, San Diego, CA 92116-4039
619-295-7685, fax 619-295-5743, email ebi@ebiusa.com
                                                                       Contents
LIST OF EXHIBITS......................................................................................................................................... VI
1. EXECUTIVE SUMMARY .............................................................................................................................1
1.1 SUCCESS IN SEM............................................................................................................................................1
   1.1.1. Clear Definition.......................................................................................................................................3
   1.1.2. Process Control Expertise ......................................................................................................................3
   1.1.3. Information Integration Expertise..........................................................................................................3
   1.1.4. Cross Divisional Teaming and Cost Analysis .......................................................................................4
1.2 THIS REPORT: A TOOL FOR SUCCESS .........................................................................................................4
   1.2.1 Definitions of SEM and Pollution Prevention (P2) Business Elements................................................5
   1.2.2 Primary Research Data on Three Important Service Business Practices in SEM & P2: ...................5
   1.2.3 Review of the Emerging Process and Prevention Technology (PPT) Business Segment ....................7
   1.2.4 Key industry client attitudes and behaviors relative to SEM/P2...........................................................7
   1.2.5 Market size and growth estimates of the SEM/P2 service markets.......................................................8
1.3 BUSINESS STRATEGY THAT LEADS THE WAY TO SUSTAINABLE DEVELOPMENT ...........................10
2. INTRODUCTION--PURPOSE, SCOPE, METHODS AND DEFINITIONS......................................11
2.1. PURPOSE .......................................................................................................................................................11
2.2. SCOPE ............................................................................................................................................................14
2.3. DEFINITION OF THE ENVIRONMENTAL INDUSTRY ...............................................................................15
2.4 BACKGROUND ON THE ENVIRONMENTAL INDUSTRY ..........................................................................16
2.5. DEFINITION OF TERMS ..............................................................................................................................18
   2.5.1. Sustainable development.......................................................................................................................18
   2.5.2 Strategic environmental management (SEM).......................................................................................20
   2.5.3. Pollution prevention (P2) .....................................................................................................................21
   2.5.4. Environmental Information Systems & System Integration................................................................21
   2.5.5. Industrial Ecology .................................................................................................................................21
   2.5.6. Life cycle analysis (life cycle assessment) ...........................................................................................21
   2.5.7. Design for environment (DFE).............................................................................................................21
   2.5.8. Industrial metabolism (IM)...................................................................................................................22
   2.5.9. Environmental Accounting & Full-cost accounting (FCA)................................................................22
   2.5.10. ISO 14000 ............................................................................................................................................22
   2.5.11. Total Quality Management (TQM & TQEM)....................................................................................23
2.6. RELATIONSHIP BETWEEN SEM PRACTICE LINES .................................................................................23
   2.6.1 Type of Services Included ......................................................................................................................24
   2.6.2 “Make” or “Buy” Decision by Prospective Clients ............................................................................26
   2.6.3 Relation of SEM to System Integration .................................................................................................28
   2.6.4 Systemic View of SEM Practice Lines...................................................................................................29
2.7. SUSTAINABLE DEVELOPMENT AND THE EMERGING CIRCULAR ECONOMY ..................................35
2.8. MARKET DRIVERS & REGULATORY BACKGROUND FOR SUSTAINABLE MANUFACTURING ......39
   2.8.1 U.S. EPA approaches to pollution prevention--multi-media regulations and “bubbling”..............40
   2.8.2. EPA’s Pollution Prevention Programs ................................................................................................41
   2.8.3. Pollution prevention elements in the U.S. Resource Conservation and Recovery Act .....................42
   2.8.4. State environmental regulatory programs and pollution prevention.................................................43
   2.8.5. International regulatory background for sustainable development...................................................44
   2.8.6. International, national and industry environmental standards..........................................................46
2.9. STRATEGIC ENVIRONMENTAL MANAGEMENT (SEM).........................................................................50
   2.9.1. Definition and Overview .......................................................................................................................50
   2.9.2. From Waste Management to Resource Management .........................................................................51
   2.9.3. Risk Analysis and Management............................................................................................................52
   2.9.4. Information System Technological Transformations ..........................................................................53
   2.9.5. Total Quality Management and Environmental Performance ...........................................................54
   2.9.6. Determination of Environmental Costs ...............................................................................................54
   2.9.7. Training..................................................................................................................................................57
   2.9.8. Pollution Prevention .............................................................................................................................58
   2.9.9. Waste Minimization...............................................................................................................................59
2.10. INDUSTRIAL ECOLOGY ............................................................................................................................59
   2.10.1. Definition and Overview of Approaches............................................................................................59
   2.10.2. Industrial Ecosystems .........................................................................................................................60
   2.10.3. Closing resource loops .......................................................................................................................62
   2.10.4. Energy Utilization ...............................................................................................................................64
   2.10.5. Life Cycle Analysis (LCA) ..................................................................................................................65
   2.10.6. Resilience .............................................................................................................................................66
   2.10.7. New Industrial Development ..............................................................................................................67
   2.10.8. Related Approaches ............................................................................................................................67
2.11 RELATIONSHIP OF SUSTAINABILITY TO FREE-MARKET FORCES .....................................................70
2.12 A FRAMEWORK FOR SUSTAINABLE DEVELOPMENT ..........................................................................72
3. SEM/P2 IN CONSULTING & ENGINEERING AND CONSTRUCTION.........................................76
3.1. SCOPE ...........................................................................................................................................................78
3.2. OVERVIEW ...................................................................................................................................................78
3.3. C&E COMPETITIVE ISSUES ........................................................................................................................81
   3.3.1. Competition from other C&E companies; strategic alliances ...........................................................81
   3.3.2. Competition from Management Consultants.......................................................................................82
3.4. SEM SALES AND MARKETING ..................................................................................................................83
   3.4.1. SEM sales dynamics..............................................................................................................................83
   3.4.2. SEM Marketing Dynamics ....................................................................................................................86
   3.4.3. Obstacles to SEM and P2 marketing ...................................................................................................87
3.5. SEM QUALITY ISSUES ................................................................................................................................89
3.6. SEM AND C&E FUNCTIONAL LOGISTICS ...............................................................................................90
   3.6.1. Staffing Issues ........................................................................................................................................90
   3.6.2. SEM business organization: integration versus autonomy ................................................................91
3.7. INDUSTRY SEM/P2 BUYING PATTERNS ..................................................................................................92
   3.7.1. Engineering/Construction Companies.................................................................................................97
3.8 TOP C&E FIRMS IN SEM & COMPETITIVE ANALYSIS ...........................................................................99
3.8.1 PROFILES OF SELECTED C&E COMPANIES OFFERING SEM/P2 SERVICES ...................................103
   ABB Environmental Services ........................................................................................................................103
   Bechtel Corporation ......................................................................................................................................104
   Brown and Root, Inc......................................................................................................................................105
   Battelle Memorial Institute ...........................................................................................................................106
   CH2M Hill Companies Ltd. ..........................................................................................................................108
   Environmental Science and Engineering, Inc..............................................................................................109
   EMCON Associates .......................................................................................................................................110
   The ERM Group.............................................................................................................................................111
   Flour Daniel, Inc. ..........................................................................................................................................112
   Harding Associates, Inc. ...............................................................................................................................113
   ML Strategies .................................................................................................................................................114
   Montgomery-Watson .....................................................................................................................................115
   RMT, Inc.........................................................................................................................................................116
   Science Applications International Corp. (SAIC) .......................................................................................118
   SECOR............................................................................................................................................................119
   TRC Companies Inc.......................................................................................................................................120
   Roy F. Weston ................................................................................................................................................121
   Woodward-Clyde Group, Inc........................................................................................................................123
4. SEM AND THE MANAGEMENT CONSULTING MARKET...........................................................124
4.1. SCOPE ..........................................................................................................................................................124
4.2. OVERVIEW .................................................................................................................................................124
4.3. ANALYSIS OF SEM SERVICE TRENDS ...................................................................................................127
   4.3.1. Comparative analysis of trends ..........................................................................................................127
   4.3.2. Management Consulting Companies set the Standard for ISO 14000 ............................................128
4.4. STRATEGIC ALLIANCES ...........................................................................................................................129
4.5. SEM SALES CHANNELS ............................................................................................................................130
   4.5.2. Management Consulting Companies .................................................................................................130
4.6. MANAGEMENT CONSULTING SEM STAFFING ISSUES .......................................................................130
4.7. FREQUENCY OF SEM SALES BY INDUSTRY .........................................................................................131
   4.7.1. Management Consulting and SEM industry sales rankings .............................................................131
4.8 PROFILES OF MANAGEMENT CONSULTANT SEM PROVIDERS .........................................................135
   Arthur Andersen Specialty Consulting .........................................................................................................136
   Coopers & Lybrand, LLP..............................................................................................................................139
   Deloitte & Touche..........................................................................................................................................140
   Arthur D. Little, Inc. ......................................................................................................................................141
   McKinsey & Co..............................................................................................................................................144
5. ENVIRONMENTAL INFORMATION AND SYSTEM INTEGRATION........................................146
5.1. DEFINITION AND O VERVIEW ..................................................................................................................146
5.2. THE FUTURE OF SYSTEM INTEGRATION AND ENVIRONMENTAL INFORMATION ........................149
5.3. TECHNICAL CHALLENGES TO SYSTEM INTEGRATION AND ENVIRONMENTAL INFORMATION 149
5.4. MARKET CHALLENGES TO ENVIRONMENTAL SYSTEM INTEGRATION ..........................................150
   5.4.1. Strategic Alliances...............................................................................................................................150
   5.4.2. Industry obstacles................................................................................................................................151
   5.4.3. System Integration Marketing Tools ..................................................................................................152
5.5. PROFILES OF ENVIRONMENTAL INFORMATION MANAGEMENT SYSTEM INTEGRATION ...........153
   Arthur Andersen Specialty Consulting .........................................................................................................153
   EDS Corporation ...........................................................................................................................................155
   EGG Information Technologies (Division of EG&G).................................................................................156
   EIS International............................................................................................................................................158
   EnviroMetrics Software Inc. .........................................................................................................................159
   General Research Corp.................................................................................................................................160
   IBM Corp. ......................................................................................................................................................160
   Oracle Corporation .......................................................................................................................................162
6. PROCESS & PREVENTION TECHNOLOGY .....................................................................................163
6.1. DEFINING POLLUTION PREVENTION TECHNOLOGY .........................................................................165
6.2. DEVELOPERS OF PPT................................................................................................................................167
6.3. PUBLIC AND PRIVATE INVESTMENT IN PPT .......................................................................................168
6.4. PUBLIC COMPANIES OFFERING P2 TECHNOLOGY ............................................................................169
6.5. PRIVATELY HELD COMPANIES OFFERING PPT...................................................................................169
   6.5.1. Recycling & Recovery Technologies..................................................................................................170
   6.5.2. Recycling--HazWaste ..........................................................................................................................170
   6.5.3. Recycling--Oil......................................................................................................................................171
   6.5.4. Recycling--CFCs .................................................................................................................................171
   6.5.5. Recycling--Containers ........................................................................................................................171
   6.5.6. Recycling--Metals................................................................................................................................171
   6.5.7. Recycling--Explosives .........................................................................................................................172
   6.5.8. Recycling-Tires....................................................................................................................................172
   6.5.9. Recycling--Water/Wastewater ............................................................................................................172
   6.5.10. Recycling--Scrap into Wood/Plastic Lumber ..................................................................................172
6.6. MATERIALS SUBSTITUTION ....................................................................................................................173
6.7. NEW MANUFACTURING PROCESSES, PROCESS SUBSTITUTIONS AND IN-KIND PROCESSES .....175
   6.7.1. Pesticide Alternatives..........................................................................................................................176
   6.7.2. New Chemistry.....................................................................................................................................176
   6.7.3. Product Substitution............................................................................................................................176
   6.7.4. Biodegradable Plastics .......................................................................................................................177
   6.7.5. Energy Efficiency ................................................................................................................................177
   6.7.6. Durable And Nondurable Products ...................................................................................................177
6.8. THE PROCESS ENGINEERS .......................................................................................................................177
6.9. CONCLUSION .............................................................................................................................................179
6.10 LIST OF RESOURCES FOR PPT ...............................................................................................................179
7. MAJOR INDUSTRY SEGMENTS AND SEM/P2/IE ...........................................................................181
7.1. DEFINITIONS AND OVERVIEW ................................................................................................................181
7.2. PROFILE OF COMPANY "TYPES" USING SEM/P2 SERVICES..............................................................181
   7.2.1. Leaders.................................................................................................................................................182
   7.2.2. Proactive Companies ..........................................................................................................................184
   7.2.3. Reactive Companies ............................................................................................................................185
   7.2.4. Laggards or “Renegade” Companies................................................................................................186
7.3. INDUSTRY PERCENTAGES OF COMPANY TYPES .................................................................................187
7.4. CHEMICAL ..................................................................................................................................................190
   7.4.1. Overview ..............................................................................................................................................190
   7.4.2. Case Examples.....................................................................................................................................191
7.5. PETROLEUM/OIL & GAS ...........................................................................................................................197
   7.5.1. Overview ..............................................................................................................................................198
   7.5.2. Case Examples.....................................................................................................................................199
7.6. PULP AND PAPER ......................................................................................................................................202
   7.6.1. Overview ..............................................................................................................................................203
   7.6.2. Case Examples.....................................................................................................................................203
7.7. UTILITIES AND ENERGY ..........................................................................................................................209
   7.7.1. Overview ..............................................................................................................................................210
   7.7.2. Case Examples.....................................................................................................................................210
7.8. ELECTRONICS ............................................................................................................................................214
   7.8.1. Overview ..............................................................................................................................................214
   7.8.2. Case Examples.....................................................................................................................................215
7.9. TRANSPORTATION INDUSTRY ................................................................................................................218
   7.9.1. Overview ..............................................................................................................................................218
   7.9.2. Case Examples.....................................................................................................................................218
7.10. OTHER .......................................................................................................................................................220
   7.10.1. Food and Beverages Industry...........................................................................................................220
   7.10.2. Service Industries ..............................................................................................................................222
8. SEM/P2 MARKET SUMMARY ...............................................................................................................227
8.1. TOTAL MARKET FOR SEM AND P2 SERVICES .....................................................................................227
   8.1.1. Environmental Consulting & Engineering and Contracting and Construction SEM/P2 Markets 227
   8.1.2. Management Consulting .....................................................................................................................228
8.2. SEM AND P2 MARKET SIZE AND GROWTH .........................................................................................230
9. BUSINESS STRATEGY ON THE PATH TO A SUSTAINABLE ECONOMY ..............................234
9.1 ELEMENTS, DEFINITIONS AND METHODS FOR TRACKING INDUSTRY SUSTAINABILITY ............235
   9.1.1 Elements and Definitions .....................................................................................................................235
   9.1.2 Methods for Data Gathering ...............................................................................................................239
9.2 INCORPORATING SUSTAINABILITY INTO BUSINESS STRATEGY ......................................................240
   9.2.1 Buy-side Strategic Considerations ......................................................................................................240
   9.2.2 Sell-side Strategic Considerations ......................................................................................................241
9.3 SUSTAINABILITY AND COMPETITIVE ADVANTAGE ............................................................................244
9.4 COMPETITIVE STRATEGY .........................................................................................................................245
   9.4.1 Teaming or Hybrid Firms Are Important ...........................................................................................245
   9.4.4 Generic Competitive Strategies...........................................................................................................247
9.5. GENERIC STRATEGIES FOR MARKET ENTRY/EXPANSION ................................................................250
   9.5.1. Strategic Market Considerations........................................................................................................250
   9.5.2. Strategic Elements and Framework ...................................................................................................253
   9.5.3. Positioning and Approach ..................................................................................................................254
   9.5.4 Acquisition/Joint Venture Considerations ..........................................................................................257
   9.5.5 Customer Information System (CIS) ...................................................................................................258
9.6 POSITIONING AND SELLING A SUSTAINABLE BUSINESS STRATEGY ...............................................260
10. APPENDIX .................................................................................................................................................263
                                                        List of Exhibits
EXHIBIT 1-1 THE SEM ADOPTION LIFE CYCLE CURVE ................................................................................2
EXHIBIT 1-2 GROWTH OF SEM AND P2 MARKETS ........................................................................................9
EXHIBIT 2-1 GROWTH OF SEM AND P2 MARKETS ......................................................................................13
EXHIBIT 2-2 ENVIRONMENTAL BUSINESS SEGMENTS DEFINED BY EBI.................................................15
EXHIBIT 2-3 HISTORICAL SIZE OF US ENVIRONMENTAL INDUSTRY BY INDUSTRY SEGMENT ..........17
EXHIBIT 2-4 HISTORICAL AND PROJECTED SIZE OF US ENVIRONMENTAL INDUSTRY ........................18
EXHIBIT 2-5 U.S. ENVIRONMENTAL INDUSTRY SEGMENTATION ............................................................19
EXHIBIT 2-6 CATEGORIES OF SEM SERVICES, % COMPLETED AND PLANNED PROJECTS ..................25
EXHIBIT 2-7 CATEGORIES OF POLLUTION PREVENTION (P2) SERVICES .................................................26
EXHIBIT 2-8 CONSULTING AND ENGINEERING SERVICES USED BY THE CHEMICAL INDUSTRY .......27
EXHIBIT 2-9 OVERVIEW OF APPROACHES FOR SUSTAINABLE INDUSTRIAL DEVELOPMENT ............30
EXHIBIT 2-10 EVOLUTION OF ENVIRONMENTAL TECHNOLOGY SYSTEMS ............................................33
EXHIBIT 2-11 ENVIRONMENTAL INDUSTRY AND THE EMERGENCE OF A CIRCULAR ECONOMY ......37
EXHIBIT 2-12 FOUR BOX SCHEME FOR INDUSTRIAL MATERIAL CYCLES ..............................................63
EXHIBIT 2-13 ENVIRONMENTAL INDUSTRY AND THE EMERGENCE OF A CIRCULAR ECONOMY ......75
EXHIBIT 3-1 BREAKDOWN OF SEM MARKET IN 1995 .................................................................................77
EXHIBIT 3-2 SEM MARKET D ISTRIBUTION ...................................................................................................78
EXHIBIT 3-3 BREAKDOWN OF SEM SERVICES 1993, 1995 AND 1997 .......................................................80
EXHIBIT 3-4 BREAKDOWN OF P2 SERVICES 1995 AND 1997......................................................................81
EXHIBIT 3-5: C&E SEM CLIENT SALES BY POSITION ..................................................................................83
EXHIBIT 3-6: C&E P2 CLIENT SALES BY POSITION ......................................................................................83
EXHIBIT 3-7: CONSTRUCTION/ENGINEERING SEM CLIENT SALES BY POSITION ...................................85
EXHIBIT 3-8: CONSTRUCTION/ENGINEERING P2 CLIENT SALES BY POSITION .......................................85
EXHIBIT 3-9: RANK OF OBSTACLES TO SEM MARKETING ........................................................................87
EXHIBIT 3-10: RANK OF OBSTACLES TO POLLUTION PREVENTION MARKETING .................................88
EXHIBIT 3-11: FREQUENCY OF C&E COMPANIES H IRING SEM SPECIALISTS ........................................90
EXHIBIT 3-12: C&E COMPANY SEM H IRES BY POSITION ..........................................................................90
EXHIBIT 3-13: 1995 C&E SEM INDUSTRY SALES RANKINGS .....................................................................93
EXHIBIT 3-14: 1995 C&E P2 INDUSTRY SALES RANKINGS ........................................................................93
EXHIBIT 3-15: 1995 CONSTRUCTION SEM INDUSTRY SALES RANKINGS ................................................97
EXHIBIT 3-16 TOP C&E AND E/C FIRMS ......................................................................................................100
EXHIBIT 4-1 BREAKDOWN OF SEM SERVICES (MGMT CONSULTANTS) ...............................................127
EXHIBIT 4-2: MANAGEMENT CONSULTING SEM CLIENT SALES BY POSITION ....................................130
EXHIBIT 4-3: FREQUENCY OF MANAGEMENT CONSULTANTS HIRING SEM SPECIALISTS ................131
EXHIBIT 4-4: 1995 MANAGEMENT CONSULTING SEM INDUSTRY SALES RANKINGS .........................131
EXHIBIT 4-5 TOP MANAGEMENT CONSULTANTS IN SEM........................................................................135
EXHIBIT 6-1 PROCESS & PREVENTION TECHNOLOGY ..............................................................................164
EXHIBIT 6-2 PROCESS & PREVENTION TECHNOLOGY MARKET POTENTIAL BY CUSTOMER ..........166
EXHIBIT 7-1 U.S. COMPANY "TYPES" RANKED BY PERCENTAGE OF PER INDUSTRY ........................187
EXHIBIT 8-1 TOTAL MARKET FOR C&E SERVICES BY SERVICE AND FIRM TYPE (1994)...................228
EXHIBIT 8-2 ESTIMATED REVENUES OF MANAGEMENT CONSULTING FIRMS ....................................229
EXHIBIT 8-3 TOTAL MARKET FOR MANAGEMENT CONSULTING SEM AND P2 WORK ......................229
EXHIBIT 8-4 TOTAL MARKET FOR ENVIRONMENTAL INFORMATION AND SYSTEM INTEGRATION 230
EXHIBIT 8-5 ENVIRONMENTAL C&E SERVICE SECTORS (1995) .............................................................231
EXHIBIT 8-6 GROWTH OF ENVIRONMENTAL C&E MARKETS .................................................................231
EXHIBIT 8-7 GROWTH OF SEM AND P2 TOTAL MARKETS .......................................................................232
EXHIBIT 9-1 GROSS VIEW OF INDUSTRIAL METABOLISM IN THE U.S. ECONOMY ..............................238
EXHIBIT 9-2 BASIC ACCOUNTS FOR INDUSTRIAL SUSTAINABILITY ......................................................239
EXHIBIT 9-3 ADVANTAGES AND D ISADVANTAGES OF COMPETITIVE SEM/P2 STRATEGY OPTIONS 248
EXHIBIT 9-4 COMPARISON OF ER AND WM SPENDING FOR ER AND WM MARKETS ........................251
EXHIBIT 9-5 DOMAINS OF INFLUENCE WITHIN PROSPECT COMPANIES MAPPED TO SEM/P2
    POSITIONING STRATEGY .......................................................................................................................256