Widespread corporate digitization, a focus on ESG and strategic pivots by leading consultancies to transform their service offerings with new technology are boosting the digital Environmental Health and Safety (EHS) services market says Bill Pennington, who leads the Verdantix Environment, Health & Safety practice. Now that C-level executives are starting to view EHS as an essential investment across all industry sectors, he shares the growth outlook for EHS services across a wide range of industry risk profiles.
The market for digital environmental health and safety (EHS) services has come through a period of uncertainty in the industrial world. Firms have struggled with the difficulties of the pandemic while trying to address pressing new priorities such as the climate crisis and the ESG boom.
Uncertainty in the industrial world has benefited EHS consultancies with last year seeing an increase in spend on EHS-focused digital technology implementation, EHS platform integration and data analytics services even though the COVID recession is still affecting budgets.
Verdantix’s report Market Size and Forecast: Digital EHS Services 2021 – 2026 reports that the market hit $2.7 billion in revenues at the close of 2021 compared with $2.4 billion the previous year even though the COVID-19 pandemic is still a major issue worldwide.
Growth last year was ahead of previous forecasts highlighting the strength of the sector with expansion driven by factors including widespread corporate digitization, the focus on ESG and strategic pivots by leading consultancies to transform their service offerings with new technology.
The traditional powerhouses of North America and Europe remained the largest EHS digital services spenders while the very high-risk EHS segments, such as oil and gas and mining, retained the highest market share. But the next five years could see growth in other regions as well as growth across the whole gamut of industries’ risk profiles.
The Next Five Years
The market is seeing an increase in digital services budgets across a wide range of industry risk profiles. As the lingering effects of the pandemic fade, we forecast the market will grow to $3.8 billion by 2026.
The market spend of firms within the high- and medium-risk industry verticals is likely to grow at the fastest rate compared with the very high-risk sectors. This reflects the growing adoption of EHS technology outside the traditional oil and gas, mining and chemical top spenders, as C-Level executives start viewing EHS as an essential investment across all industry sectors.
The risk profiles of the firms engaging in large EHS technology projects will expand to include a higher percentage of high- and medium-risk industries, such as construction and manufacturing. Potentially power utilities, ports and airports, maritime, airlines, forestry, and pulp and paper could also see growth.
Many firms in these sectors are evolving from unsophisticated EHS processes, carried out on paper or excel, and are directionless on how to execute their digitization strategy. As a consequence, they are turning to the expertise and support of consultants to guide them through EHS technology road mapping, management of change strategy, as well as technology implementations and maintenance of solutions.
COVID-19 has not gone away and will limit the compound annual growth rate (CAGR) of the market but the pace of expansion will speed up and take a steeper trajectory with a CAGR of 9% between 2024 and 2026.
As corporate appetites for EHS digital solutions continue to grow the services market will continue to expand. North America will maintain its position as the highest regional spend for digital EHS services but emerging regions such as LATAM, APAC and the Gulf States are primed for quick growth. These regions will experience rapid growth as EHS software availability and demand increases and new technologies become increasingly accessible to these fast-growing economic markets.
The Sector View
EHS software implementation services are expected to remain the service line where most spending is concentrated. In part that is due to spending by mid-market firms to drive greater levels of efficiency and more insightful outputs.
In addition to software, other EHS technology implementations will see strong growth making it the fastest growing revenue stream. Companies are increasingly investing in technology, such as EHS mobile applications to drive safety culture and connected devices used to mitigate specific high-risk hazards within the workplace. Digital services will be central for firms to consolidate EHS software and technology projects.
System integration and data analytics revenue streams will take a bigger market share as enterprise-level firms look to link new IoT EHS technology within their portfolios to form connected platforms. Several service providers have already made EHS integrations their primary digital offerings.
The Future is Bright
The economic hangover of COVID-19 is lingering and the global economy’s K-shaped recovery pattern is expected to continue throughout 2022, with a number of industries, such as airlines and oil and gas still set to struggle.
Last year also saw firms under increased regulatory and public pressure to address their environmental footprints. The tumultuous period has taught firms much about the integrity of their business infrastructure.
Firms have accelerated EHS digitization strategies to strengthen their business resilience, with unprecedented levels of EHS technology pilot projects.
Ultimately, uncertainty bred by nascent technology initiatives and challenges will see the demand for digital EHS services continue to grow, as firms rely on the subject-matter expertise and technical astuteness of consultancies to support projects.