In 2024, Qingshan Research Institute conducted an in-depth study of 52 environmental protection companies—27 of which are listed and 25 unlisted. This year’s research approach has evolved: rather than pursuing quantity, the institute concentrated on high-quality samples, specifically companies excelling in operations or pioneering innovative strategies. This targeted approach reflects a pressing need: uncovering practical insights to guide the industry through its structural challenges.

One telling anecdote comes from the founder of a listed environmental protection company, who shared during an interview:

“Looking back on the past decade, my biggest mistake was over-prioritizing short-term wins while neglecting the cultivation of long-term profitability. We were constantly reacting to trends—first enjoying the dividends surge and now struggling as they fade. Even after going public, I’ve realized I transitioned from being a small boss to a big boss, but never a true entrepreneur.”

This sentiment captures a common struggle within the sector. Many companies pursued fleeting opportunities, overlooking fundamental principles of sustainable business. As the industry reflects on its past, the key question emerges: where does the environmental protection industry go from here, and how can companies rebuild competitiveness for the next three years?

Reflecting on the past decade, the environmental protection industry has shifted from trend-chasing to operational discipline. A period marked by soaring policy dividends and capital enthusiasm has gradually subsided, leaving behind hard lessons and industry-wide restructuring.

Initially, policy subsidies and venture capital fueled a frenzy. Companies chased “big projects” and touted “blue ocean strategies,” believing that simply entering the market was enough to claim a piece of the projected trillion-dollar pie. Industry conferences buzzed with ambitious visions and short-term growth-dominated boardroom discussions. However, this reliance on external drivers often sidelined the need for robust operational foundations.

As the policy winds shifted, those without solid business fundamentals struggled. A private-sector leader recounted:

“Over the years, we chased trends like new energy, soil remediation, and intelligent solutions. But each project was only a passing experiment—none bore real fruit. Now, funds are depleted, and our team is fragmented.”

This experience is not unique. Many companies repeat this cycle of chasing fads without mastering their core business. Meanwhile, those focused on operational discipline—building expertise in niche areas and deeply understanding customer needs—demonstrated resilience.

For example, Qingshan Research Institute highlighted a company specializing in industrial waste gas treatment. This firm committed to refining its core processes and addressing explicit and subtle customer demands for over a decade. While they seemed outdated during the boom, their dedication to product excellence and customer trust helped them thrive as competitors fell by the wayside.

A Shift in Priorities: The Age of Operational Strength

Today, the industry’s priorities have realigned. Policies have matured, regulations have tightened, and investors are less impressed by buzzwords and speculative pitches. Instead, they are keenly evaluating companies on operational efficiency, profitability, and long-term sustainability.

This evolution marks a fundamental shift: the main battlefield of the environmental protection industry is no longer about riding trends—it’s about mastering operations. Companies must dig deeper into customer needs, enhance their competitive edge, streamline internal processes, and deliver value in a way that transcends external market conditions.

Many once-prominent firms are now grappling with survival as mismanagement, uncontrolled costs, and weak competitive positioning catch up with them. The industry’s reality echoes the adage:

“Only when the tide goes out do you discover who’s been swimming naked.”

To remain viable, environmental protection companies must adopt a new mindset. Market demands will persist, but the ability to compete will depend on intrinsic strengths—not fleeting external advantages. Companies that align themselves with this reality are best positioned to weather challenges and seize emerging opportunities.

Five Transformations Reshaping China’s Environmental Protection Industry

The environmental protection industry in China is experiencing a seismic shift from policy-driven expansion to a customer-focused, operation-centric business model. Gone are the days when enterprises could grow rapidly by riding the waves of policy incentives and capital inflows. Today, sustainable growth demands resilience, deep market insight, and operational excellence. This shift offers not just a survival challenge but also an opportunity to fundamentally reshape the development logic of the industry. Here are five critical changes defining this transformation.

1. From Policy-Driven to Customer Value-Oriented

In the past, environmental protection companies thrived on government policies and subsidies. Success often depended on how well companies could align themselves with policy trends, leading to discussions dominated by strategies for securing government projects. However, this reliance left many companies vulnerable when policy directions shifted, exposing their lack of adaptability.

In the new business era, customer needs are emerging as the primary driver. Enterprises must move from a policy-centered approach to a customer-centric one. As a regional director of an international chemical company put it, “We care about whether environmental solutions can improve production efficiency and reduce costs, not just meet regulatory requirements.”

This transformation requires environmental protection companies to delve deeper into understanding customer processes and delivering tailored solutions. For example, in the industrial environmental protection sector, many companies have evolved from regulatory compliance providers to efficiency enablers. By offering technologies that improve resource utilization and reduce costs, environmental firms are aligning their solutions with the operational goals of their clients, creating lasting partnerships and competitive advantages.

2. From Opportunistic Growth to Sustainable Business Models

During the boom years, opportunism was the norm. Many companies rushed into emerging markets, chasing the next “blue ocean” opportunity hyped by experts or investors. However, the unsustainable growth from these speculative ventures often led to financial instability when expectations failed to materialize.

Now, companies must prioritize building sustainable business models. This involves identifying core competencies, focusing on suitable market segments, and emphasizing long-term value creation. For example, some firms have transitioned from being mere equipment suppliers to full-solution providers, encompassing design, manufacturing, and long-term operation and maintenance. This shift not only diversifies revenue streams but also enhances customer satisfaction and loyalty, laying a foundation for enduring success.

3. From Nationwide Expansion to Regional Cultivation

The earlier wind outlet era encouraged rapid, nationwide expansion. Companies opened branches across the country, often without fully understanding local market dynamics. Many overstretched their resources, resulting in operational inefficiencies and eventual retrenchment.

In the business era, regional market cultivation has taken precedence. With China’s diverse economic and environmental landscapes, tailoring strategies to specific regions is crucial. One standout example is an environmental protection company in the Pearl River Delta. By studying local policies and industry needs, the company developed a tailored service model for high-pollution industries like petrochemicals. They introduced a “pay-per-performance + maintenance” model that reduced clients’ initial costs while providing ongoing technical support. Their localized approach not only solved pressing wastewater issues but also earned them a strong regional reputation and customer loyalty.

Meanwhile, some firms are exploring international markets, particularly in rapidly growing regions like Southeast Asia. These markets offer significant potential but require careful navigation of local regulations, cultural norms, and technical demands. Success in such ventures depends on a combination of international expertise, adaptability, and robust cross-cultural management.

4. From Financing-Driven Growth to Cash Flow Discipline

Previously, the industry relied heavily on external financing to fuel rapid expansion. Companies grew on the back of abundant capital, but high debt levels and poor cash flow management created significant risks. When financing conditions tightened, many businesses found themselves in financial distress.

Today, cash flow is king. Companies are focusing on profitability, cost control, and efficient project execution. For example, an environmental firm in Shandong improved its cash flow by streamlining operations and implementing rigorous cost management practices. By introducing a robust system to manage accounts receivable and avoid bad debts, the company reduced its dependence on external financing, enhancing its financial resilience.

5. From Marketing Gimmicks to Practical Impact

During the boom, some companies prioritized flashy marketing and exaggerated claims to attract investors and clients. This led to skepticism, with some saying, “Their PowerPoint presentations save the earth, but their products can’t even meet basic standards.”

In the current era, the focus has shifted to tangible outcomes. Clients and investors alike value proven, practical solutions over hype. For instance, a Zhejiang-based firm specializing in industrial wastewater treatment demonstrated its strength by solving a longstanding challenge for a major chemical plant. Through meticulous on-site analysis and innovative technology deployment, they not only met stringent wastewater standards but also significantly reduced the client’s operating costs. The success earned them industry-wide recognition and new business opportunities.

A New Development Logic for the Environmental Protection Industry

These five transformations highlight a deeper shift in the logic of enterprise development within the environmental protection sector. The focus has moved away from opportunistic, policy-driven growth to a more disciplined, customer-oriented, and operations-focused model. Companies that can adapt to this new reality—by cultivating regional markets, emphasizing sustainable strategies, managing finances prudently, and delivering practical technological solutions—are poised to thrive in the competitive landscape.

This evolution marks the dawn of a new era for the industry, one where resilience, innovation, and operational excellence will determine who leads in the future. The question is no longer about riding the wind—it’s about how to navigate steadily and strategically in the face of changing conditions.

Three Essential Abilities for Environmental Protection Enterprises

As the environmental protection industry transitions from a “trend-driven” growth phase to a more mature and competitive landscape, companies are facing a harsh new reality. The once favorable conditions provided by government policies and quick growth strategies are now waning, leaving many businesses in need of rethinking their approach. The key to surviving this new “knockout round” is honing three critical abilities that will allow enterprises to build sustainable value, improve operational efficiency, and manage cross-regional challenges. These abilities are essential for companies aiming to thrive in this era of competition and complexity.

1. Building a Sustainable and Profitable Business Model

In the management era, it is no longer enough to rely on trends or capitalize on fleeting opportunities. Businesses must focus on long-term sustainability and profitability by understanding customer needs and creating value in a targeted, efficient way. In simpler terms, companies must be strategic travelers in a desert where resources are limited, ensuring they are heading in the right direction to survive and grow.

For instance, a company in Jiangxi initially focused on wastewater treatment equipment, but the market response was underwhelming. Through deeper research, they discovered customers were more interested in comprehensive solutions that included both equipment and maintenance services. By pivoting its business model to offer “equipment + service,” the company saw steady growth and improved customer satisfaction.

Furthermore, finding a company’s core competitive advantage is critical. A company that focused on industrial waste gas treatment became an industry leader by specializing and perfecting its niche. Its emphasis on deep technical expertise and focus on one area allowed it to dominate the market. This example highlights how narrowing focus and mastering a specific area can lead to greater success than trying to be everything to everyone.

2. Improving Operational Management Efficiency

To survive in the competitive management era, environmental protection companies must optimize their operations and boost efficiency. Refined management practices are no longer optional but essential for success. Two main areas are crucial for improving operational efficiency:

Cost Control: In the past, many companies did not prioritize cost management because profitability came relatively easily. However, the environmental protection industry is characterized by long project cycles and large capital investments, making cost control a top priority. For example, 80% of the companies surveyed by Qingshan Research Institute in 2024 emphasized the importance of cost control. Rather than simply slashing costs, effective cost control focuses on resource optimization and improving operational efficiency while maintaining service quality. This might involve improvements in areas like equipment maintenance, material sourcing, or staffing.

Process Optimization: Many companies’ internal processes became complex during periods of rapid expansion, leading to inefficiency and miscommunication. A company in the Yangtze River Delta region shared how they streamlined their internal approval processes through flat management and cross-departmental collaboration. This approach significantly improved efficiency, reducing approval times and improving customer satisfaction. Process optimization boosts internal response times, enhances market adaptability, and strengthens the company’s competitive edge.

3. Establishing Cross-Regional Remote Capabilities

As market competition intensifies, the ability to operate efficiently across regions has become a key determinant of success. In particular, developing strong remote management and collaboration capabilities is essential for enterprises aiming to expand their reach nationwide or even internationally.

Resource Integration for National Market Layout: Different regions have distinct market needs, regulatory environments, and competitive landscapes. Environmental companies must tailor their strategies to local conditions to effectively meet demand. For example, a Shandong-based environmental protection equipment company set up service centers across various regions to gain a deep understanding of local markets, allowing for rapid expansion.

Remote Management and Collaboration

In today’s digital world, information technology allows teams to collaborate and manage projects efficiently, even across vast distances. A foreign water treatment company operating in China reported that despite having team members spread across the country, the company was able to coordinate work in real time using highly integrated internal management systems. This allowed them to efficiently manage operations across six key regional markets.

Brand Influence and Credibility

Trust and reputation are essential for expanding across regional markets. Customers gravitate toward companies that are known for their reliability and strength. Building and maintaining a strong brand image, through consistent delivery of quality services and products, can help companies establish credibility and build customer trust nationwide.

Conclusion: Return to the Essence of Business

At its core, business is not about chasing the next big trend but about cultivating long-term value. As the environmental protection industry faces a new phase, companies must prioritize deeper insights into their business model, operational efficiency, and market expansion strategies. Just as a sailor must understand the laws of the ocean to navigate turbulent waters, companies that truly grasp the essence of business will be best positioned to ride the waves of competition and emerge victorious.

Lao Tzu’s wisdom that “A tree that can be embraced by two people grows from a tiny seed” serves as a reminder that greatness comes from patience, attention to detail, and steady progress. By focusing on these three key abilities—building a sustainable profit model, optimizing operational management, and establishing strong cross-regional capabilities—environmental protection companies can lay a solid foundation for long-term success in a rapidly evolving market.