Implementation of the SDGs in the Construction Industry

Developed by Mathias Jensen

In September 2015, 193 world leaders came together with a vision to transform our world for the better. They came to an agreement of 17 global goals for sustainable development (SDGs), with the aim to make an end to extreme poverty, inequality and climate change by 2030. In the pursuit of reaching these goals, it is inevitable for business to take action. One essential thought behind these goals was to make them famous, so that we all have common goals and know what we are fighting for.

The construction industry is responsible for 30% of the total global resources, 40% of global energy consumption and up to 30% of the total global greenhouse gases. Furthermore, the construction industry is considered to be the industry that could potentially reduce its energy consumption with the lowest cost. However, the question is how to implement the SDGs in the construction industry.

The SDG compass presents five steps that assist companies in maximizing their contribution to the SDGs: understanding the SDGs, defining priorities, goal setting and integrating sustainability. It is particularly important that a company is fully capable of identifying all goals which apply to them. The construction industry could highly influence goals 11(sustainable cities & communities), 9(Infrastructure & Innovation) and 7(affordable & clean energy), but certainly also some of the other goals.

History

Figure 1: 17 sustainable development goals

In September 2015, the sustainable Development Goals (SDGs) replaced the Millennium Development Goals (MDGs), which started a global effort in 2000 to eliminate the indignity of poverty. The MDGs defined some measurable goals which focused on tackling extreme poverty and hunger, preventing deadly diseases, expanding primary education to all children, amongst other priorities. The world achieved a lot over 15 years with the MDGs, however the job is still unfinished for millions of people. The SDGs aim to go the last step to end hunger, full gender equality, improving health services and getting every child into school. The plan is to achieve this by leading the world onto a sustainable path.

The SDGs were introduced in Rio de Janeiro in 2012 at the United Nations Conference on Sustainable Development. The SDGs consist of 17 goals, which can all be seen from figure 1.

SDG compass

The SDG compass has been created to help companies take a strategic approach to the SDGs and to maximize their contribution to sustainable development through core business activities. It guides companies to align strategies with the relevant SDGs, and to measure and manage their impacts. This is very useful, as many companies struggle to identify what actions they can do to contribute to the goals.

The SDG compass guide is organized into five steps: understanding the SDGs, defining priorities, setting goals, integrating and reporting and communication.

Understanding the SDGs

Countries are struggling to translate the SDGs into meaningful and efficient action to implement at the national level. Each country needs to identify what policy implication of the SDGs is for them. Therefore, some countries report, that they have not made much progress in terms of taking action. It is, however, crucial for the implementation of the goals, that countries learn from each other’s experiences.

Goals and targets will support or conflict one another, depending on geography, governance arrangements and technology. It is important to understand the interactions between goals and targets, identifying where key trade-offs lie, and also where different goals reinforce each other in order to develop smart policies. However, having different ministries and planning agencies, discussing priorities is likely to be an unruly process. This is where a common language and framework may come in handy.

In an interview with UN Tribune, associate professor and director of the Center for United Nations and Global Governance Studies at Seton Hall University, Martin Edwards said: “I worry about promising action on climate while promising sustained economic growth and full employment while increasing access to energy all at the same time. We might not be able to get everything here, so our attempt to advance some goals might come at the expense of others.”

The initial step for every business is to familiarize themselves with the SDGs and understand the opportunities and responsibilities they represent to the business. By aligning their priorities with the SDGs, companies avoid being exposed to growing legal and reputational risks. Furthermore, they will improve trust among stakeholders and resilience to costs or requirements imposed by future legislation.

The SDGs are expected to be an extremely helpful tool in the creation of more effective partnerships with governments, civil society organizations and other companies. This is due to the common language created by the SDGs, which assist companies to communicate in a more consistent and effective way with stakeholders about their impact and performance.

Defining priorities

Figure 2: Mapping of value chain

The 17 SDGs represent targets and goals which aim towards a somehow perfect world, but not all of them are equally relevant for each individual company. Each individual company should conduct an assessment on the current, potential, positive and negative impacts they have on the SDGs and the likelihood of future ones. A way for the companies to do this assessment is by executing a high-level mapping of their value chain, where areas with high likelihood of either negative or positive impacts on the issues that the SDGs represent are identified, see figure 2.

To map high impact areas, certain tools and methodologies are available:

• Life Cycle Assessment (LCA) methodologies
• Environmentally-extended input-outpot (EEIO) models

Some tools can be applied to specific SDGs:

• GHG Protocol Scope 3 Evaluator
• The social Hotspots Database
• The Human Rights and Bussiness Country Guide
• WBCSD Global Water Tool
• Poverty Footprint Tool

Figure 3: The logic model

In order to track performance over time, each of the high impact area indicators, which most adequately express the relationship between a company’s activities and the impact on sustainable development, need to be identified. To understand which data to collect The Logic Model can be used, see Figure 3. A company should then have an understanding of its main impacts on sustainable development and therefore be able to define priorities across the SDGs.

Priorities in the construction industry

Governments around the world are committed to improve resource efficiency and sustainability, which in the construction industry includes certain aspects.

One of these aspects is, that the construction industry in the UK consumes more than 400 million tonnes of material a year. 32% of landfill waste comes from the construction and demolition and 13% of products delivered to construction sites are being sent directly to landfill without being used. It is therefore important to prepare a site waste management plan to reduce the waste. This plan should describe how the materials can be managed efficiently, and how to re-use and recycle the materials.

Another important aspect is the fact that buildings are responsible for 40% of energy consumption and 36% of CO2 emissions in the EU. Old buildings generally need remarkably more heating oil compared to new buildings, and the total EU energy consumption could be reduced by 5-6% and CO2 emissions lowered by about 5%. In order to obtain these reductions, laws for energy performance of buildings are created all over the world.

It is also important to mention the focus on housing and regeneration, including homelessness, special needs housing, public sector stock and vacancy rates.

Setting goals

After the impact assessment and prioritization, a helpful tool to driving good performance is to set specific, measurable and time-bound sustainability goals. In the SDG Compass, goal setting consists of four actions:

• Define scope of goals and select KPIs
• Define baseline and select goal type
• Set level of ambition
• Announce commitment to SDGs

It is essential to select key performance indicators (KPIs) that are specific, measurable and time-bound targets in order to measure progress. When the KPIs are selected, the baseline can be tied to a particular point in time or a particular period in time. In addition, the goals can be absolute goals, which take only the KPI into account, or they can be relative goals, which compare the KPI to a unit of output. However, the value of ambition of the goals are recommended to be considered carefully. Ambitious goals tend to result in greater impacts and better performance in comparison with more modest goals. Finally, making some or all of the company’s goals public, may inspire employees and business partners and result in a constructive dialogue with external stakeholders.

Setting goals in the construction industry

The construction industry is one of the most important industries to improve when considering the SDGs. One example of a company which has announced ambitious and specific goals is the largest US contractor, Bechtel. They have announced the following goals which are aimed to be achieved by 2030:

• Contribute 100 ideas to help achieve the SDGs
• Improve resilience of 5,000,000 people to natural hazards
• Use sustainable material alternatives to reduce their environmental footprint on 100 percent of their key projects and non-project facilities
• Engage 100 percent of their key suppliers to promote sustainability in the delivery of materials and/or services, and preventing modern-day slavery, including their own supply chains

Integrating

Figure 4: Embedding sustainability goals in the organization

After identifying the specific KPIs and setting goals for the company’s strategic priorities, the next task is to integrate it into the core business. The SDG compass describes three actions, which can be undertaken in order to accomplish this:

• Anchoring sustainability goals within the business

Active leadership by the CEO and senior management is important to succeed with organizational change. They need to create a shared understanding within the company of how the SDGs can be achieved.

• Embed sustainability across all functions

It is essential to ensure support and ownership of corporate functions such as R&D, Business Development, Supply Management, operations and Human Resources. Some companies have established cross-functional sustainability councils, boards or task forces. Figure 4 illustrates the integration of sustainability through the company’s functions.

• Engage in partnership

At least three different types of partnerships between companies exist. 1) Companies in the value chain can combine complementary skills, technologies, and resources. 2) Industry leaders can come together to raise standards and practices across the entire industry. 3) Complex challenges can be tackled by multi-stakeholder partnerships. (governments, private sector and civil society organizations)

Engaging in partnerships in the construction industry

To meet the challenges of sustainable construction, it is crucial to enlist help of all stakeholders throughout the entire value chain including, design, construction, operation and maintenance. The large French contractor company, Bouygues Construction, elaborate on their website that they create customised partnerships based on specific goals, to obtain important results on the environmental respect level and to contribute to the performance of customers.

Furthermore, they give an example of how partnerships provide significant results. This example tells how they entrusted the manufacture of sheathing to a supplier who was able to manufacture the equipment on site, and adapt its production to the site’s needs. This happened during the construction of the underground high-voltage power line between Boutre and Trans (PACA), and resulted in 87,525 kilometres of transportation avoided and 5% gain in productivity for the installation.

Reporting and communicating

Figure 5: Mapping SDG reporting priorities through materiality

Over the last decade, it has become important to report and communicate progress with regards to the SDGs to stakeholders. Companies use internationally recognized standards such as the standard offered by GRI, for sustainability reporting. GRI has defined ten principles for sustainability reporting to help companies prepare high-quality information on the issues that matter: stakeholder inclusiveness, sustainability context, materiality, completeness, balance, comparability, accuracy, timeliness, clarity and reliability. Figure 5 shows a mapping of SDG reporting priorities through materiality. Material issues reflect a company’s significant economic, environmental and social impacts – both negative and positive.

Due to the importance of reporting and communication, companies have to discuss performance with regards to expectations set by the SDGs and also align disclosures with the language of the SDGs, to have a common dialogue amongst stakeholders.

Reporting in the construction industry

Figure 6: Royal BAM Group’s materiality matrix

Figure 6 shows a materiality matrix conducted by the large Dutch contractor, Royal BAM Group, and displays the prioritisation of matters based on their relative importance to BAM and to BAM’s stakeholders. For this materiality matrix, BAM employees and stakeholders were asked to identify the potential impacts of certain matters within the time frame 2016-2020. The BAM employees evaluated the impacts based on the known or potential effects on BAM’s activities, products, services and relations both within and outside of BAM. Additionally, the stakeholders identified and prioritised impacts on themselves and society.

All the relevant matters were selected from many different topics by BAM, based on their ability to affect financial, environmental and social value creation for BAM’s stakeholders. The clients group selected ‘health and safety’ and ‘project and product quality and control’ as being the most relevant matters. The group of employees indicated ‘employee recruitment, development and retention’ as a material theme. According to providers of financial capital, BAM’s performance on ‘circular economy’ is the most relevant to their organisations. ‘Business conduct and transparency’ was selected as the most important material theme by BAM’s subcontractors, suppliers and the group representing society (NGOs, government and knowledge institutes). Finally, stakeholders ranked ‘innovation’ high when considering the theme ‘digitalisation’.

Limitations

People argue, that the SDGs are not as appealing as their predecessor, the MDGs, because they were more precise and measurable. The MDGs held everyone accountable for meeting these “quantified and time-bound” targets. Some think the SDGs seem as just idealistic rhetoric to motivate people in rich and free countries to care about the world’s poor, and some find many of the goals unattainable.

Furthermore, the SDGs are broken down into 17 goals and 169 indicators, which may seem like a lot, considering the importance of not losing sight of the big picture. Greater cooperation between governments, the private sector and many facets of civil society is necessary in order to accomplish all this.

If companies are not fully capable of defining which of these many goals that apply to them, it may be difficult for the world to achieve the SDGs. The construction industry is a key partner in the effort to achieve the SDGs, and the industry must be changed through the adoption of environmentally friendly design, procurement, construction methods and management practices. For example, the construction industry could highly influence goals 11(sustainable cities & communities), 9(Infrastructure & Innovation) and 7(affordable & clean energy).

Annotated bibliography

• https://sustainabledevelopment.un.org/sdgs

This website lists all the sustainable development goals (SDGs), which consist of 17 goals and 169 indicators with the aim to make an end to extreme poverty, inequality and climate change by 2030.

• http://sdgcompass.org/wp-content/uploads/2015/12/019104_SDG_Compass_Guide_2015.pdf

This SDG compass has been created to help companies take a strategic approach to the SDGs and to maximize their contribution to sustainable development through core business activities. The SDG compass guide is organized into five steps: understanding the SDGs, defining priorities, setting goals, integrating, reporting and communication.

• https://www.weforum.org/agenda/2016/07/understanding-interactions-is-key-to-making-the-sdgs-a-success/

This article describes why understanding how the SDGs interact with each other is key to their success.

• https://www.researchgate.net/publication/307906714_SDG2030_A_SUSTAINABLE_BUILT_ENVIRONMENT'S_ROLE_IN_ACHIEVING_THE_POST-2015_UNITED_NATIONS_SUSTAINABLE_DEVELOPMENT_GOALS

In this article, some of the important goals in the construction industry are outlined, and the importance of a sustainable built environment in achieving the goals is elaborated.