It would follow, then, that social and environmental concerns must be a top priority for construction companies. Amazingly, the opposite seems to be the case. Or at least, that is what is revealed by a survey of 201 industry executives carried out by accountant KPMG this summer.
Nearly one-third of respondents to the survey admitted that their companies did not carry out any formal analysis of how their business was affected by their corporate social responsibilities. Only one-quarter built a detailed risk profile, and another 44% said loftily: "We only take a high-level view of corporate social responsibility," which suggests a few platitudes at board level, but no operational policies to back them up.
Even more damning findings emerge from another KPMG survey on corporate sustainability published last year. Of the top 100 companies in each of 19 developed countries, only 9% of construction and building materials firms bothered to submit corporate reports on environmental, social and sustainability matters. This contrasts with 50% of utilities companies and 45% of chemicals and synthetics firms.
What is puzzling is that, given the growth of environmental protest groups and the steady increase of litigation, the contractors surveyed felt very little pressure to take their social responsibilities more seriously. Two-thirds said their firm was not worried about adverse reaction from pressure groups and was not affected by public opinion on corporate social responsibility. Eighty-three per cent said the subject had not been raised by investors and shareholders, and 58% said it had not even been raised by their customers.
To environmental pressure group Friends of the Earth, these findings come as no surprise. "The building industry is the dinosaur sector of the economy as regards corporate responsibility," says Craig Bennett, the group's corporate accountability campaigner. "And when they do take on green issues, all too often it's 'greenwash' or just giving the impression of going green. Companies love doing at things that don't really matter. For instance, housebuilders will donate a playground in the middle of a housing estate or support a local school. But they overlook the really important things like building houses with renewable materials and low energy consumption."
The Work Foundation, an industrial relations pressure group, takes a similarly dim view of the construction industry. "Building is one of the slower sectors in picking up the corporate social responsibility agenda," says Nick Isles, deputy director of advocacy. "Although it has a focus on health and safety, it treats its mobile workforce badly and encroaches on greenfield land."
On the other hand, a dozen building industry directors who participated in a seminar organised by KPMG to discuss its survey were surprised by the results. "The attendees took the opposite view from the survey respondents about the importance of corporate social responsibility," says Richard Whittington, KPMG's national head of building and construction.
The participants at the seminar suggested that the lack of an accepted definition of corporate social responsibility might explain the survey's disappointing results. Paul Hodgkinson, who attended the seminar and is chairman and chief executive of the privately owned, Lincoln-based contractor Simons Group, says: "Corporate social responsibility is often used as a catch-all phrase that means different things to different people." As well as occupational health and safety, and control of the environment and pollution, KPMG's questionnaire included the following factors in its definition of corporate social responsibility: community development, social accountability, ethics and integrity, and stakeholder engagement.
Social responsibility is extremely important to graduate applicants
Paul Hodgkinson, Simons Group
"A lot of the questionnaires were answered by finance directors," continues Hodgkinson. "There was a clear view in the seminar that they were operational people with a significantly different view from people with more involvement in social responsibility."
If the building industry as a whole scores low marks on corporate social responsibility, it can at least take pride in certain notable exceptions. In July, Carillion won the Company of the Year award from the Business in the Community organisation, which covers all sectors of industry. "Carillion's awareness of environmental issues and its move towards sustainability has facilitated and improved product delivery, in both construction and maintenance activities," says the awards citation.
Two companies that have taken social responsibility on board are railway maintenance contractors Jarvis and Balfour Beatty, which underwent trials by fire as a result of their association with headline-grabbing rail accidents. "They now compare fairly favourably with other big organisations in other sectors," says the Work Foundation's Isles. Last year, Jarvis appointed Andrew Kluth to the new post of head of corporate responsibility with the task of setting up a systematic framework covering health and safety, human resources, community affairs and environmental issues. "The corporate social responsibility framework defines performance standards, and puts in place management and verification systems," says Kluth.
And the signs are that other building industry companies are now following in the footsteps of Carillion, Jarvis and Balfour Beatty. "Corporate social responsibility is something that's growing rapidly," says KPMG's Whittington. "Ten years ago, it wasn't on people's agenda. Now it's up on everybody's radar, as you can see on company websites. I think that in another five years it will be a key element of company reports, and that's all for the good."
Whittington identifies three issues that will push companies to take corporate social responsibility more seriously: recruitment, public sector work and company law reform.
"Social responsibility is extremely important to graduates and the younger generation seeking employment in construction firms," says Simons' Hodgkinson. "Environmental matters, external charitable activities and work–life balance are all key issues to them. We know that because they go straight to these subjects on company websites. So if companies are not covering them, they're losing applicants."
Public sector clients also put great store on corporate social responsibility and as a rule require contractors to submit their credentials for tender prequalification. "The government is keen on it and local authorities are keen on it," says Whittington. "There's been a sea-change since the Newbury bypass project five or six years ago, and the way the contract was amended to accommodate natural habitats. Now all road contracts have similar requirements." Not least, Whittington believes, within the next few years, companies could be held statutorily accountable for their corporate social responsibility through reforms to company law. Last year the government published Modernising Company Law, a white paper that included sections requiring companies to submit formal reports on their social, environmental and economic impacts and to make themselves accountable to a wide group of stakeholders.
At present, the government is proceeding with one watered-down strand of the proposals in the form of an operating and financial review. But this is not good enough for a group of more than 50 organisations including charities and the GMB, Unison and T&G unions, which have formed a coalition called the Corporate Responsibility Coalition, or CORE, to push for stronger guidance on the subject.
For the past couple of years, the coalition has sponsored private members' bills that have drawn support from more than 300 MPs across all parties – but all have lapsed without debate. Later this year, the coalition hopes that a similar third bill will be selected by MPs to proceed to formal debate and, hopefully, enactment.
One industry, however, is worth closer examination: the upstream part of the oil industry. Upstream denotes everything that happens before the oil arrives at the refinery. As such it encompasses exploration, production and pipelines.
The upstream oil industry is particularly relevant to construction in that, over the past 10 years, it has developed highly effective practices for successful project delivery. These practices were developed by necessity in the 1990s, when it became increasingly difficult to extract oil from the North Sea fields profitably. New ways of constructing, commissioning and operating oil platforms had to be found.
BP was at the forefront of the changes, drawing up a new form of contract, known as the risk-and-reward alliance, to build and operate oil platforms. However, the success of the platform – £80m under target cost, delivery six months ahead of schedule – was only partly due to the contract. Equally important was the fact that BP’s commercial arrangements favoured a collaborative approach, and that the culture of the alliance was one that promoted excellent teamwork.
A key team-building initiative was to simulate aspects of the project in advance. The simulations ranged from classroom rehearsals simulating communication during hook-up, through to rebuilding a nursery school in rural Gambia as a simulation for the start-up of operations.
The main lesson from BP’s oil platform is that teamwork does not simply happen, it has to be invested in and worked at. Construction could gain much by adopting some of the oil industry’s initiatives.
Mark Birchenhough is director of management consultant Lloyd Masters.