By Karl Simons OBE, Chief Futurist at FYLD
These days companies operating across all sectors are embedding Environmental, Social and Governance (ESG) principles into their operations, or they are at least considering the impact of ESG on their business. The construction and Utilities industries are no different, and it is the ‘E’ in ESG that has come under the spotlight in particular as rising greenhouse gas (GHG) emissions create a growing, global emergency.
As temperatures around the world soar and nations strive to meet ambitious net zero targets, new regulations on ESG reporting requirements are being formalised in the European Union and U.S. states. This includes California’s new climate disclosure law and the European Union’s corporate sustainability reporting directive (CSRD).
The rise of non-financial reporting means companies who ignore their ESG impact and obligations to make it transparent, face more significant consequences than ever before. It could be a ticking time bomb. Worryingly, around 75% of companies, including construction and utilities companies, say they are unprepared for upcoming audits around ESG criteria, according to a recent study by KPMG.
Construction cons
We should first consider what ESG means for these sectors, and in particular, their environmental impact. The global construction industry for example is under intense pressure to understand and acknowledge the impact its practices have on climate change. According to the UN Environment Programme, the buildings and construction sector is by far the largest emitter of GHG, accounting for a staggering 37% of global emissions.
This figure includes emissions directly produced by the construction industry, such as those from machinery used on construction sites, the transport of goods and workers within the sector, the impact of re-work, as well as the emissions expected during the operational phase of a building’s lifespan.
Increasingly, construction companies are being forced to rethink the way they plan their builds from the outset. Many are embracing ‘green building practices’, which often means opting for sustainable, recycled materials, or energy-efficient designs and renewable energy sources.
However, there are still harmful emissions being released by construction companies en masse when it comes to inadequate project planning, site maintenance and re-work. Excessive road travel, whether that is transporting materials to and from building sites, or project managers travelling to and from sites across the country for inspections has a negative effect on the climate, which often gets less attention.
According to the European Environment Agency (EEA) ‘Transport and Environment Report 2021’, road freight increased by 31% between 2000 and 2019. This is a worrying figure as the EEA estimated that as much as 77% of EU transport emissions came from road transport in 2020 alone, and a portion of these emissions can be attributed to the construction industry.
There is a problem because sectors such as construction and utilities typically require labour intensive, physical work on job sites, often located across the country at any one time. Historically, project managers overseeing time-critical, high-risk operations often need to be in several places at once. This puts extreme pressure on time poor managers and leads to an increase in emissions if excessive car or van travel is required. However, many do so not out of need but because they simply don’t have the digital solutions in place to revolutionise the way they plan and keep track of projects and teams.
A recent survey found that 50% of construction executives and managers are satisfied with their current processes, yet as much as 90% still use outdated methods such as email, Excel and paper forms across 25-100% of their business processes, which includes planning site inspections.
Without robust data collection and management through advanced technologies to plan projects and inspections, and to remotely track progress and perform quality checks, project managers within the global construction industry face unnecessary site visits, equating to increased emissions.
Smart tech in modern construction
It’s time for change. The World Economic Forum (WEF) believes that digital technologies have the potential to cut global emissions in the three highest emitting sectors (Energy, materials, and mobility) by 20% by 2050.
Advanced AI and machine learning technology offers greater remote visibility of sites, helping project managers avoid delays, prioritise sites and spot job blockers in advance. This means less time spent on the roads, resulting in less emissions.
FYLD’s technology is an excellent example that cuts down the volume of paperwork that has historically been deemed essential for project planning and monitoring. By digitising this instead, it is far more efficient and environmentally friendly. The collaborative nature of digital tools usually means jobs are completed on time and to a high standard, avoiding any delays or rework, which would mean an increase in emissions.
A great example of this is the work undertaken between FYLD and Trinity, a company responsible for delivering a West Midlands-based works programme for Cadent Gas, the UK’s largest gas distribution network. On one project, Trinity undertook the task of replacing the gas distribution mains network over a 10-year period and replacing 3,400km of gas mains pipes. By using our pioneering software to launch a fit-for-purpose, efficient and sustainable, remote working system, we were able to deliver a significant reduction in CO2 emissions.
Murky waters
Another key environmental consideration for companies operating in these sectors is how their operations affect our water sources. According to the World Resources Institute (WRI), we face a 56% shortfall of clean water supply by 2030 globally, a figure previously estimated at 40%. This frightening figure emphasises the need for corporate organisations to take full responsibility for industrial waste and how they treat it.
The World Bank has even gone as far as to warn that we face an “invisible” crisis of water pollution that is impacting both communities and economies. It is concerning that around the world, 80% of municipal and industrial wastewater is returned untreated, and in the United States, 50% of rivers are polluted.
Perhaps progress is being made, but is it enough? According to a report published in October 2023 by the UK government’s Environment Agency, there were fewer serious water pollution incidents in the UK in 2022 than in the previous year, but it warned that the number remains “unacceptably high“.
The government also announced around this time that it would be removing the current £250,000 limit on fines that can be issued to companies deemed to be polluting our waters. These changes would effectively open the door to environmental regulators to impose record-breaking fines.
In March 2024, it was reported that more than 80% of the fines dished out by the Environment Agency through prosecutions and other enforcement actions were levied at the water sector in 2022. That is despite water and wastewater firms being responsible for just 9% of serious pollution incidents, according to Utility Week’s analysis of government figures.
As well as the moral duty to do the right thing, to protect the public and wildlife, and the reputational benefits, there is a financial incentive for companies to review how they treat water that goes beyond avoiding fines. The CDP, a not-for-profit charity that runs the global disclosure system for investors, companies, cities, states and regions to manage their environmental impact, believes that water-related risk has a combined business value of US$425 billion, based on 2019 data.
However, the CDP also suggests that for companies who recognise the value in investing in ESG and monitoring their environmental impact, companies could secure $340 billion in water-related business opportunities if they take urgent measures to protect water bodies. There is therefore a financial benefit in companies working in these sectors to recognise their environmental impact, and build solutions into an ESG strategy to operate better for people and the planet, as well as the bottom-line.
The innovation combating water pollution
FYLD works with large water utilities in the UK and across the U.S. to increase productivity, enhance safety and reduce the environmental impact of operations.
A long-standing FYLD customer, Morrison Water Services (MWS), integrated the FYLD platform into its operations and it has transformed the way that projects are planned and monitored, allowing managers to benefit from real-time data on productivity and risk reporting.
Working on a recent water maintenance project in partnership with Yorkshire Water, MWS used FYLD to significantly reduce delays by providing the contractor with up-to-date and accurate survey video from the site. As a result, both MWS and Yorkshire Water have seen a decrease in job aborts, an increase in productivity, and leakages were reduced by 35% at just 8% of the usual outlay it costs to prevent leaks.
Companies using the FYLD platform benefit from proactive alerts and job blocker updates, which include warnings about pollution levels. As the alerts include evidence of what’s happening in real time, it allows managers to take immediate action to mitigate any adverse impact on the environment and protect the business from any wrongdoing.
It is clear to see; these digital tools empower companies to stay one step ahead of pollution, allowing them to avoid fines, reputational damage and comply with their ESG principles allowing for long-term business growth.
