As the UK emerges from the COVID-19 crisis and continues to ease lockdown rules, the slogan for recovery has become ‘Build Back Better’. A large-scale response from the UK built environment sector will play a critical role in achieving a sustainable recovery as well as numerous other government commitments, particularly the net zero emissions target by 2050.
The second webinar in a series run by leading law firm Ashurst, sustainability consultancy Sancroft, environmental consultants RSK and leading construction, services and property group Kier was particularly timely as the panellists explored the key sustainability issues facing the construction and infrastructure sector and proposed practical steps businesses can take to help deliver a sustainable recovery. From this discussion 3 key themes emerged.
The post-COVID ‘new normal’
The COVID-19 pandemic has brought to light the severe vulnerabilities that exist within the construction industry in the face of external shocks. Although it is presently COVID-19, businesses across all sectors will be susceptible to a range of shocks in the future such as climate change or human rights issues. A prime example of this that has been seen in recent weeks is Boohoo, who saw over £1 billion wiped from its share value only two days after allegations of modern slavery in their supply chain were made public.
It is no longer acceptable for companies to put their head in the sand and continue business as usual. Stakeholder demands in the built environment sector are changing, particularly from the government – who are trying to reach climate change goals – and consumers. The lockdown rules over the past four months led to many people re-evaluating what they truly value, both in terms of their how they expect businesses to respond in crisis but also with regard to their personal lives, with changing behaviours in where people work and socialise as well as more individuals wanting more green spaces and positive community environments.
With environmental and social sustainability at the heart, businesses are reflecting on the changes that have been accelerated by COVID-19, what the new normal will look like and how this will affect their operations.
For many businesses and investors resilience has become central to their strategies moving forward. The panellists explored what resilience means for the built environment sector and highlighted five key areas that must be addressed.
The first is knowing the company’s supply chain. Many of the businesses that have remained successful during the pandemic have good relationships with suppliers and a strong understanding of where their materials are coming from. As businesses are trying new materials and new regulation affecting the construction industry are approaching – such as the plastics tax – ensuring supply chain stability will be imperative.
The second area of resilience that the built environment sector must consider is investing in their people. The development and implementation of more sustainable and advanced building methods will require a more highly skilled workforce. This will likely require an up-skilling or retraining of employees to help move towards a green economy and build long term resilience in the face of shocks.
Thirdly, the use of more sustainable materials and eliminating waste will be a critical part of building resilience. As has been shown with the incoming plastics regulation, the use of some materials will become harder to obtain or prohibitively expensive and businesses are starting to prepare for these changes. Ensuring attention is given to sustainable, recyclable materials will be increasingly important.
The webinar also highlighted that when thinking about building resilience is the need for greater transparency in reporting. There has been growing scrutiny from the public and investors on the targets that businesses are setting and what is being accomplished. To name just a few examples, stakeholders are now questioning what companies mean when they claim to be or aim to be carbon neutral and whether carbon reduction figures are referring to intensity or absolute reductions. Sustainability is now used as a barometer for the health of the business, therefore transparent reporting provides an opportunity for businesses to show their improvements and build resilience.
The final point that must be addressed is adaptation. As climate-related issues continue to manifest, the construction industry will have to adapt to the regulations that will come into force, future taxes such as the carbon tax and the changing consumer demands for sustainability. These changes will likely impact the costs and operations for many businesses – for example, the costs of using certain materials – and must be anticipated and managed to minimise their impact.
A Holistic approach
In recent years there has been a significant increase in businesses enhancing their sustainability vision and strategies and COVID-19 as accelerated this practice. A key component of this is taking a holistic approach to sustainability. As the panel discussed what this means for the built environment, two key themes emerged.
The first is embedding the sustainability mindset into the business agenda and across operations. It is no longer about a separated green agenda or trend. Sustainability is now featuring in the commercial language of businesses from the top-level CEOs and Managing Directors to the Project Managers in charge of delivering the projects. There has been a shift in the way costs and value are judged, going beyond just the cost of development to prioritise the lifecycle of an asset. This includes design, construction, maintenance demolition and reuse.
An example of this is being seen with businesses engaging with lawyers to incorporate sustainability goals into contracts and ensure contracts facilitate an innovative, collaborative approach. Although the built environment sector is already making big strides in the lifecycle approach, it is often disjointed and requires a more holistic, circular economy focus that includes both the new buildings and old buildings. It is estimated that 26 million existing homes will need to be retrofitted to reach net zero by 2050. Tackling the inefficiencies in the existing stock of buildings and accelerating the transition must be kept in the conversation alongside new building methods, materials, and innovations. Businesses have the opportunity to drive credible sustainable action in this way.
Secondly, the importance of community is a key factor in the holistic approach. Businesses are now asking how their projects are fostering community engagement, inclusion, and diversity amongst various neighbourhoods. Many people are now more concerned with having a sense of place that incorporates where they shop, eat, go to school as work but also air pollution and green spaces. The built environment sector must recognise that the community connections and wellbeing of building users are essential for building better settlements for the future.
COVID-19 has shown that the construction industry can work quickly and effectively in collaboration with the government. This same approach can be used when setting the standards to achieve climate goals. The green construction board that forms part of the construction and leadership council could spearhead this, but it will also take collaborations with industry bodies and leaders. There is an opportunity to set clear standards with consistent policies and strong enforcement to level the playing field allowing those who are most proactive to get the competitive advantage. The government must not lose this opportunity to unify aims, recover from COVID-19 and accelerate the transition to net zero, strengthening resilience to climate change. The sustainability journey is a leap of faith that everyone needs to take, each with their own journey to go on.
The second webinar in the ESG series took place on 15 July 2020 and the presented the views of an excellent panel comprising:
- Joanna Gillroy, Head of Sustainability at Kier Group
- Dom de Ville, Director at Sancroft
- Haydn Keen, Director at RSK
- Ellie Reeves, Counsel at Ashurst
- Sadia McEvoy, Counsel, Construction at Ashurst
For more insights and events from Sancroft, please sign up to our newsletter here. The third in our series of ESG webinars will take place on August 19th and looks at Value creation for distressed assets with a focus on energy and infrastructure.