2007 was a year of exceptional performance and continuing change at ERM. We achieved our highest-ever growth in the past year, growing earnings by 23% and revenue by 19%.

As part of our long-term succession planning, I was elected to the role of Chairman and John Alexander was named ERM’s Chief Executive Officer. Robin Bidwell remains a Director of the firm and has focused his attention on expanding the reach and contributions of the ERM Foundation.

In this review, we highlight the extraordinary contributions that our People make in addressing our clients’ rapidly changing and expanding needs. Our consultants around the world continue to deliver innovative and sustainable solutions – the platform for our firm’s continuing growth and evolution.

A Year of Contrasts
The last year has been marked by economic uncertainty. The credit crunch has disrupted many markets and created new challenges for our clients. As a result, we must expect to see some decrease in the level of discretionary spending, particularly in North America and Europe. Cost reduction is likely to play an important part in operational decision-making. However, we anticipate that there will be continued focus on compliance, process safety and assurance over the coming year.

At the same time, demand for energy continues to grow, driven by continued high consumption in developed countries and by remarkable economic growth in China and India. As a result, oil prices are escalating and inflation is increasing around the world. Our clients are considering renewable energy sources and introducing energy efficient processes and equipment to control cost and minimize supply chain risk.

ERM’s resource clients are reopening facilities and exploring more remote locations, especially in developing countries. High commodity prices will have a significant impact on all of our clients for the foreseeable future. We expect that an increasing proportion of our work will be in support of energy and mining companies.

The Geographic Mismatch
The speed at which these current market conditions have developed, and their specific character, have given rise to a complex business challenge for our clients. Organizations have had little time to prepare for the demands of juggling operations in growing and slowing markets. As more and more investments are made in Asia and Latin America, the question for many of our clients is how to meet their environmental commitments and requirements when most of their current technical and managerial capabilities are in one location and their facilities are in another.

Some new approaches are emerging to address this geographic mismatch, such as leveraging local knowledge and implementing next-generation assurance programs. However, there are no easy answers. To support our clients, we have been building our capacity in Africa and the Middle East and continue to grow our offices in China, India and elsewhere across Asia. We remain focused on developing our capabilities to share knowledge and manage multi-site projects for our North American and European-based clients.

Our staff numbers have grown to more than 3,500, ensuring that we have People in every corner of the globe. This means that we are constantly developing new tools in one part of the world that almost inevitably are useful in another. To foster this transfer of tools we launched our award-winning global knowledge sharing platform called Minerva in May 20071. This remarkable tool is changing our firm’s culture and enables us to provide even higher value to our clients.

The Sustainability Question
Alongside these changing market conditions, continued stakeholder pressure is driving sustainability up the corporate agenda. Organizations are looking at both their processes and products in terms of what it really means to be sustainable and what the business advantage will be. This involves comprehensive evaluations to reduce resource usage. Organizations are also seeking to involve their employees in these endeavors to increase engagement and find innovative ideas.

As part of this effort to address the broad sustainability agenda, organizations are also considering what steps they need to take to deal with climate change and how they can reduce their greenhouse gas emissions. Last year we provided a range of on-site climate change services, from calculating carbon footprints to green building assessments. We also saw our clients look in greater depth at potential business strategies that are more sustainable and climate conscious. This involves accounting for the risk of climate change during due diligence assessments and factoring in the reputational advantage or risk when expanding their operations.

ERM People
Last year we reviewed our People strategy and launched a new campaign to consolidate investment and strengthen ERM’s position as an employer of choice. We have invested in additional professional resources, training and development programs for our People across all levels. To oversee this campaign we have recruited a Global Human Resources Director, Mark Spivey. Mark has over 18 years of international experience in professional services.

At the management level, our Partner-in-training program continues to identify staff who display excellence in managing people, performance and clients. During 2007, 32 employees were promoted to Partner and another 172 are participating in the program.

Finally, I want to thank Robin Bidwell for his extraordinary contributions over the last 30 years. Under his leadership, ERM has become the world’s leading EHS consultancy. I also want to thank everyone at ERM for their enthusiasm and incredible contribution over the last year. Even under the current challenging global conditions, our People continue to bring their considerable energies and innovative ideas to ensure the sustainable development of the environment and communities in which we live and work. ERM’s success truly is the success of each and every employee.

Peter T. Regan
Chairman
August 2008