A green pioneer goes global

Now in its 40th year, E&E is more confident than ever in the power of hot air.

Ecology & Environment Environmental consulting FSB 100 rank: #50 Headquarters: Lancaster, N.Y. Ticker: EEI

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(Fortune Small Business) -- Environmental businesses are everywhere these days, but Ecology & Environment (EEI) was eco-friendly long before green was a hot property -- or a viable business model.

Based in Lancaster, N.Y., just outside Buffalo, the environmental consulting firm has spent nearly 40 years getting up to speed on issues such as global warming and alternative energy. Thanks to its breadth and depth of experience, E&E has been on a recession-proof winning streak. The federal stimulus package, which is overflowing with green provisions, may provide the company an even bigger boost.

Founded in 1970 by four friends who worked together at a research laboratory in Buffalo, E&E has more than 1,000 employees, a third of whom hold advanced degrees in disciplines such as chemistry, engineering, physics and zoology. The full-service operation provides environmental-impact studies for oil pipelines, counsel on cleanup of toxic dump sites and advice to alternative-energy startups.

Being on the front line in the fight against pollution hasn't always been pretty. In 1974 E&E purchased a wind turbine in an attempt to generate cheap eco-friendly electricity. A year into the project, employees arrived for work one day to discover that the turbine had spun free.

"It went whirling through the air, and one of its blades wound up buried in the parking lot's asphalt," recalls co-founder Gerhard Neumaier, 71. The ill-fated experiment prompted E&E to educate itself about wind power -- and how to construct a safe and reliable turbine. In the years since, E&E has consulted on more than 200 wind-power projects.

In 1987 the company went public. To celebrate, it built a 64,000-square-foot prairie-style headquarters inspired by the architecture of Frank Lloyd Wright. One of America's earliest green buildings, it features rooftop solar panels and abundant windows that provide natural light and ventilation. The headquarters consumes half as much energy as an energy-hogging building of comparable size, says CEO Kevin Neumaier, 45, who is Gerhard's son (Kevin became CEO in 2008, succeeding Gerhard, who stayed on as chairman).

Last year the corporate site received a platinum designation from the U.S. Green Building Council, becoming the oldest original building to take the honor. Again drawing on its own experiences to develop consulting services, E&E now advises other companies on the steps necessary to achieve various green-building certifications.

Earning his green stripes, CEO Neumaier has commuted to and from headquarters using everything from his bicycle to Rollerblades to snowshoes. E&E encourages employees at this location to follow suit by entering them in a monthly $500 raffle if they commute by more energy-efficient means. For clients such as Advanced Micro Devices (AMD, Fortune 500), the City of Santa Barbara and Purdue University, E&E developed a proprietary software program that helps match up strangers for car pool arrangements.

"E&E manages to be on trend without being trendy," says Pam Hall, CEO of Normandeau Associates, a competing environmental consulting firm based in Bedford, N.H. "It has a reputation for sound science, which makes it very formidable."

The company also went global early. In 1982 the founders made the first in a series of exploratory trips to China, meeting with owners of smoke-belching factories in an effort to sell them pollution-remediation services.

"'What are you doing in China?' was a frequent question from local business owners who could not afford our services," Gerhard Neumaier says.

That initial reluctance did not discourage E&E from making a global push. To date the company has consulted in 83 countries; roughly a third of its business is performed on foreign soil. E&E is currently advising on a hydroelectric project in Brazil. It is also working with the government of Libya to help it develop environmental standards for the country's petroleum industry.

And Chinese factory owners now have the money to hire consultants -- plus an evolving environmental consciousness. Capitalizing on relationships established years ago, E&E recently opened its fifth Chinese field office in the city of Wuxi.

"When we started back in the '70s, environmentalism was very local," Gerhard explains. "But we always viewed it as a global issue and a global market."

E&E's prescience has been rewarded. Sales hit $118.6 million in 2008, a 9% increase from 2007. Although profits were down 40% because of a onetime tax event, earnings have roared back through the first six months of 2009, up fourfold from the same period last year. CFO John Mye says the company is on track to hit $130 million in 2009 revenues, an increase of 10% from last year.

E&E's stock got knocked around in a bruising 2008 market, but it has climbed steadily throughout 2009 and recently closed above $14, an all-time high.

"This company has a strong history of performance and a rosy future," says John Bair, a portfolio manager at SKA Financial Services in Cleveland.

Although the federal government is providing funds for alternative-power projects such as wind farms and is refurbishing schools to make them more energy-efficient, Kevin Neumaier says he is not sure how many stimulus-related projects his company will be awarded, or how much money they could bring in.

But he fully expects E&E to take off -- with the help of some properly fastened turbines.