Environmental Business Journal, Volume 38 Numbers 3/4: Q2 2025 EBJ Environmental Industry Outlook 2025
Spheros Environmental is redefining excellence in environmental consulting. Backed by Union Park Capital, the company integrates air, water, digital services, permitting, climate services, and ecological sciences to deliver sustainable, science-based solutions for clients nationwide. Since its founding in 2021, Spheros has expanded its expertise through strategic acquisitions, including Sonoma Technology, LRE Water, HydroGeoLogica, Timberline Aquatics, and in early 2025 EcoAnalysts, creating a multidisciplinary powerhouse in environmental innovation.
CEO of Spheros Environmental, Andra Kidd is a business leader with more than 27 years of experience with multi-national consulting firms leading P&L, business development, and M&A programs. As Director of Operations for ERM North America, she had operational and P&L responsibility for 6 business units with over 2,000 in headcount during the height of the COVID pandemic. As previous Chief Operating Officer at Verdantas, she brought 5 acquisitions together as one company, developed new systems and processes, developed leadership teams, integrated ERPs, and eventually launched as a new company in January 2022. As Chief Growth and Strategy Officer for Verdantas, she led corporate strategy, organic growth programs, and the M&A growth program.
EBJ: Our attempt to assess the Trump effect on company growth forecasts revealed a sizable change from post-election to after the first month in office. Do you believe this is an overreaction? Do you believe the disruption is temporary, and that companies can pivot and react, or that the attempts to dismantle the administrative state will have long-term impact on strategic planning in the environmental industry?
Andra Kidd: The administrative actions and tariffs that have been rolled out since the new administration have taken office have had a general overall impact of reducing confidence in future projections of our economy, so it’s not surprising to see that sentiment play out in the AEC industry growth forecasts as well. While we don’t have a crystal ball to project the remainder of 2025 and beyond, leadership teams are wise to examine the current exposure of market sectors that are potentially going to experience a slowdown vs. investing in market sectors that may experience a potential boost in the coming years. Spheros Environmental serves clients across many market sectors and practices, and while we’ve seen a few projects in the climate and environmental justice areas get cancelled or put on hold, our mix of client is fairly diverse between government (mostly state and municipality) and private clients, and so we are continuing to invest in those market sectors with which we see strong future growth potential. If tariffs do continue to remain in place, it’s possible that capital improvement projects relying on supply chain strength could end up experiencing delays, which could impact our AEC industry. One tactic we are employing to limit risk is to bid work with an assumption that if significant delays do occur, rate escalations appropriate to the current year of the work will apply. On the whole, we remain optimistic that firms with strong client relationships serving multiple market sectors will be successful in the coming years.
EBJ: When we aggregate the responses on rate increases and salary increases the last two years, while both are going up each year 4-6%, you will notice that billing rates went up more in 2024 than they did in 2023, whereas salary costs went up less than the previous year. Would you agree that in general rate increases lag salary increases? And in general, how did you approach rate increases with your clients, and how much scope do you think there is to increase them further in the next couple years?
Kidd: Multi-year agreements often have a pre-defined percentage of annual billing rate increases, which can potentially result in a delta between salary costs and rates collected if the going market for salaries surge ahead of average rate increases, as has occurred particularly in years 2021 – 2023. For some multi-year projects bid at set rates of inflation, the strong market for AEC hires and actual inflation increases have meant that salaries have increased faster than the contracted rates. The impact of all of the above is that billing rates on a whole slightly lag salaries. Going forward, we anticipate that this lag will catch up as salaries continue to stabilize. Shifting to value pricing vs. hourly billable is another strategy that can be introduced to have greater control over the project cost vs. pricing.
EBJ: Across the industry, operating margins increased significantly more in 2023 and 2024 compared to 2021 and 2022. What would you attribute this to?
Kidd: In the two years following Covid, the AEC industry saw significant increases in salary and bonuses to attempt to keep up with inflation and “the Great Resignation/Reshuffle” following the Covid-19 pandemic. In 2023 and 2024 annual salary adjustments began to slow, while pricing increases became more aggressive to try and increase operating margins to cover these significant increases. Pricing increases were likely driven through a shift to more value driven and technology enabled work in recent years, with much of this work being structured as fixed price.
With the introduction of AI and other efficiency-focused technologies we are likely seeing an impact to both increases in pricing and operational efficiency in overhead. We anticipate this trend continuing in the coming years. Potential other increases to operating margins in 2023 and 2024 are likely due to companies evaluating leasing arrangements. As many companies implemented more flexible work arrangements, the industry began to cut back on the needed square footage in office space.
EBJ: Have a look at the client growth prospect tables on page 4 and 5, and the change in rankings over the last couple years. The ascendance of oil & gas and manufacturing is understandable, but what about banks & law firms, and property developers moving up the list?
Kidd: O&G, Manufacturing and Mining sectors should certainly see a bump in the coming years with the existing administration’s favorable policies on re-shoring and investing in these industries in the US. Litigation is expected to grow for areas such as fire and smoke, related to extreme weather, utility maintenance, and increased human encroachment into wildlands. More litigation priority is occurring on air toxics such as PFOA/PFAS, EtO, and H2S at the state and local levels, and for private entities. Decreasing water availability in the West due to extreme weather are also causing litigation support to increase. These suits are driven by environmental organizations and the public. Environmental assessments related to property development are expected to remain a source of growth. Along the same lines, more investors are taking environmental risks and impacts into account in the diligence phase. Lenders have similar considerations in their underwriting process. All culminate to drive more work for the environmental portion of the AEC industry.
EBJ: Transportation authorities, state government and local government all dropped in their rankings considerably, does this imply the consensus believes that the infrastructure funding is past its peak, or do you believe that there is still five or six years of high infrastructure investment, and possibly new mechanisms to stimulate private investment or private partnerships for continued infrastructure investment?
Kidd: This is likely due to the sentiment around DOGE and the current administration’s efforts to enact significant cost-cutting in the government space. While much of the impact would occur directly to federal government agencies, there are many state or municipal funded projects or partnerships that rely on government funding to come through, and these projects are at risk if the current push continues without legal challenges or other pushback. That said, people generally do like to have safe and well-maintained transportation infrastructure, clean water and air available, etc., so it’s likely the pushback on the reduction in spending will be challenged and overturned to some degree.
EBJ: Renewable energy developers have fallen from the top five in rated market categories in the previous two years to the bottom five this year. Do you think this is an overreaction to the Trump administration, is it just a temporary situation, or is it the beginning of the end for double-digit growth in renewable energy segments?
Kidd: The softening confidence currently in the renewable energy market sector is likely due to both negative administrative sentiment around favorable tax incentives and direct government investing in renewable projects and goals, as well as previous supply chain issues, technical challenges and stakeholder concerns related to certain types of renewable projects (i.e. offshore wind). Global supply chain issues could continue to delay renewable projects in the US if tariff increases stay in place, as it will be a number of years before manufacturing of previously imported materials (e.g. solar panels, cabling, wiring, etc.) can ramp up to fill the demand. That said, the energy transition market as a whole has enough public buy in and momentum globally that the market will likely regain resiliency and will continue to play a significant role in energy supply. Hydrogen and carbon-capture related projects will continue due to existing investments, but perhaps run slower than expected. Geothermal also has a continuing place in the emerging trends in Energy Transition, especially in certain Western states like California.