Improving construction industry competitiveness

Dakshitha Thalgodapitiya

Over the past two decades, due to increasing global environmental awareness, construction activities have raised serious concerns as regards their large environmental impacts, which stem from their consumption of materials, many of which are non-renewable.

It is estimated that buildings account for about 40 percent of the materials entering the world’s economy each year and for 25 percent of the world’s usage of wood.

In addition, site construction produces many atmospheric pollutants, and negligence on construction sites may result in the spillage of substances, which are washed away into water sources.

Large volumes of waste result from the production, transport, and use of construction materials and products.

Large amounts of energy are consumed during manufacture of construction products.

Harmful emissions to the air are created during the transport of these products from factory to construction site.

It is therefore clear that construction activities can have large - adverse impacts upon the environment.

To be globally competitive, construction industry companies have to provide not only an effective and efficient building and constructing service, but must also effectively manage their businesses.

Today’s companies are focusing on both the financial side of business as well as environmental factors - within the company structure and its work sites, and in the external environment.

By establishing environmentally responsible policies in the organizational vision, companies aim to be ethically and socially responsible.

Top companies communicate to their stakeholders a commitment to socially responsible behaviour by espousing an ethical framework of their mission within society, which includes a comprehensive environmental policy.

Care for a healthy environment comprises not only a concern for keeping the external working environment in good shape, but also providing a high level of occupational health and safety.

It is clear that construction companies need to use a systematic approach to environmental management.

This can be carried out by establishing at organisational level, a formal structure that implements environmental management.

An environmental management system (EMS) involves the formal system and database, which integrates procedures and processes for the training of personnel, monitoring, summarising, and reporting of specialised environmental performance information to internal and external stakeholders of the company where the focus is on design, pollution control and waste minimisation, training, reporting to top management, and setting goals.

Worldwide, the need for a standardized environmental management system for organizations became clear after the Rio de Janeiro summit on the environment in 1992 and the Uruguay round of the GATT negotiations.

As a consequence, the first draft of the series of standards ISO 14000 was first published in 1996 and subsequently revised in 2004.

Many construction industry companies apply ISO 14001, which includes: an Environmental Management System (EMS), environmental auditing, environmental labelling, environmental performance evaluation and life-cycle assessment (ISO 2002).

The ISO 14001 EMS is a voluntary standard enabling organizations to control the impact of their activities on the environment.

It contains 17 key elements grouped into five areas: environmental policy, planning, implementation and operation, checking and corrective action and management review.

The initial requirement is to comply with applicable environmentally related legislation and regulations and to implement a continual environmentally related improvement process in the company EMS.

It improves regulatory compliance requirements; reduces liability and risk; prevents or reduces pollution and waste; improves site and project safety; generally saves money and establishes a system for continued environmental improvement.

Additionally it increases credibility and communication with stakeholders such as government agencies, community groups and investors.

Companies that have introduced EMS usually go a step beyond the legal requirements, adding their own company goals and public reporting of emissions.

All EMS key elements are subject to an annual review by top managers, which is an important commitment to guarantee the credibility and effectiveness of a company’s determination to sustain a healthy environment.

Accordingly, the top managers’ role is to communicate not only the annual review to stakeholders and lower level managers but, also the value of such ethics to the company.

Where the construction sector is concerned, various participants are encountered in a construction project: the client as the key stakeholder initiating the project, the designer, contracting and subcontracting companies, and various suppliers and consultants.

The construction sector is therefore highly fragmented and consists of business entities of various sizes and trades.

Further, it can be noticed that a large portion of construction companies are classified as small or medium-size enterprises (SMEs).

The approach used to promote EMS implementation in any industrial sector has to be different for small and medium enterprises (SMEs) and for large, corporate construction companies.

This also holds true for the construction industry. The approach should be formulated on the basis of an empirical determination of construction industry views.

What are the environmental issues on which the construction industry is focusing? Are construction SMEs focusing on the same issues as the large companies?

Do construction SMEs perceive different obstacles to EMS implementation compared to large companies?

Large construction companies around the world using EMS have demonstrated improved efficiency in occupational health and a rise in their market share. Some companies, however, have faced difficulties in implementation due to lack of Government and client support; expensive implementation costs and lack of a positive relationship with subcontractors in their work on implementing ISO 14001.

All companies have a company value or mission statement related in some way to a healthy work environment. When their corporate governance structures do not highlight any corporate social responsibility, companies should be willing to acknowledge this fact.

Companies should be committed to support a healthy environment through the application of ISO 14001 EMS Standard, which would positively impact on the community perception of those companies’ social responsibilities in providing a healthy environment.

The following reasons are given as to why ISO 14001 EMS certification is being adopted.

Companies are driven by contractual and community requirements; Importance of being competitive and maintaining quality; To be a good corporate citizen; Clients requested it; Increased public awareness through scientific research of global environmental concerns.

All these measures focused on establishing measurable processes and outcomes.

Waste is a critical factor in any healthy work environment. Disposing of contaminated material by adopting EMS has enabled companies to manage the waste more effectively.

A generalized environmental plan is primarily about waste control. A significant spin-off from developing an EMS process, besides making savings through environmental recycling and minimizing waste, is that companies have found that it added quality to their management systems and helped them to do a better job.

Communication has been highlighted as one of the key elements in creating a healthy work environment. Senior managers communicate the values and ethics of the company to stakeholders and lower level managers while companies communicate their values and ethics through the Annual Report.

Communication techniques tend to fall into two main but interrelated categories - one involves the basic planning and legal notification and the other focuses on the broader community contact.

In the first category there is a focus on resolving issues before they arise as well as having processes in place during the project.

Companies must believe that their core values should reflect the idea of maintaining a healthy work environment, primarily meaning the construction site OHS measures which ensure people return home in the same or better condition than when they arrived at work.

Implementing an EMS is not a trivial decision, as it requires significant and ongoing staff commitment and effort, increased documentation and paperwork, potential need and introduction of new technologies and large intangible costs related to the organisational change.

In general, companies decide to establish an EMS because the projected benefits are larger than the projected barriers.

The nature of ISO 14001 EMS means companies have to deal with the external environment and address such issues as policy, developing different forms of communication with their community and fulfilling legal regulations.

The companies’ core values as articulated in the organizational vision should include healthy work environment, although the understanding of what this means varies. Under a classic governance structure, it is possible that diverse understandings of a healthy work environment may contribute to a gap between the vision of the company and the way it is perceived in the community.

Companies must become aware of the importance of having the image of a good corporate citizen who cares for the environment.

They must undertake the process of improving their governance structure in accordance with EMS Standards thus improving stakeholder input.

When it comes to OHS measures, however, there are still issues such as sub-contractors safety and cooperation between owners, workers and Government to be resolved.

Even where companies have established environmental culture or corporate social responsibility committees, none has a community or supplier representative.

It is noted that there are some attempts to build the corporate environmental culture by liaising with the community directly, but still there is little knowledge sharing among companies and Government, community and customers.

Information flow tends to be one sided from the company to the community. There is little evidence of companies actually embracing the concept of active involvement by the various stakeholders in the development of the corporate environmental culture.

Without information about the community perception of a company’s environmental commitments, a gap will remain between official organizational environmental aspirations and its acceptance among stakeholders. As a result, industry competitiveness may be jeopardized.

We can conclude that promoting ISO 9001 within the industry could also be the first step in promoting the ISO 14001 standard, and that the role of the client is crucial in EMS implementation as well.

It is widely recognized that construction projects and their final outcome have a significant effect on the environment, as they actually modify the natural environment to create facilities for human activities.

A construction project is a fairly complex as well as a dynamic process.

Therefore any additional documentation required neither by the regulations nor by the contract may be viewed as unnecessary and perceived as an obstacle to the implementation of the EMS.

The construction industry is highly competitive, and any additional cost generated within the company without visible financial gain, such as the cost of establishing the EMS, may be viewed as a factor of reducing the profit margin or the chance of winning a project.

Quality management is important for environmental management from the point of view that it is much easier to implement an EMS if there is already an existing QMS.

What concerns are most important among environmental issues? It can be seen that waste control is important for all companies regardless of their size while energy savings, however, seem to be more important for large companies.

The traditional construction project goals, specified level of quality, and completion in budgeted time and cost do not take into account the environmental goals.

Companies that are proactive in implementing an effective EMS look for the following benefits: improved regulatory compliance requirements; reduction of liability and risks; enhanced reliability among customers and peers; reduction of harmful impacts to the environment; prevention of pollution and waste (which can result in cost reduction); improvements in site and project safety by minimizing injuries related to environmental spills, releases and emissions; improved relationships with stakeholders such as government agencies, community groups, and clients.

Companies must realize that reducing environmental impact ensures optimal use of resources and enforces measures which improve the company’s competitiveness.

It has been increasingly recognised that construction activity imposes external costs to the environment.

Four major obstacles to implementation of ISO 14000 are: lack of Government pressure; lack of client requirement/support; expensive implementation cost; and sub-contracting systems, which create difficulties in managing the EMS.

Since the Government is a very dominant client, the extent to which the Government wishes to restrict its choice of tenderer to those firms that have an environmental management system in place, will demonstrate its commitment to environmentally responsible operations.

The public sector clients play a critical role in driving the construction industry to improve its operations through contractual requirements.

Education of the end-users is also important to create market demand for environmentally friendly construction.

To an extent, professional institutions and other industry bodies can help to instill a greater sense of accountability among industry participants by stipulating acceptable standards of behaviour and by establishing a supportive regulatory framework.

ICTAD has belatedly made ISO 9001 standard accreditation mandatory for branding as a major contractor.

With considerable deliberations taking place on sustainable development, how many construction related enterprises in Sri Lanka have embraced EMS?