Imagine the Roman engineer—let’s call him Marcellus—admiring the high walls of the amphitheatre. Eight years of hard work and tough decisions and tons of materials. The best concrete that was ever mixed and used. The size and architecture. He knows the Colosseum will last for generations.
Whether ancient Roman engineers were thinking about sustainability is hard to say. But they were probably thinking about their legacy. Today we face news about climate, wars and broken infrastructure every day. Building our own personal or professional legacy seems an ongoing struggle. Amidst all the turmoil, sustainability might seem like a buzzword.
But it’s getting tangible. Changing regulations will require companies to be transparent with climate and other environmental, social and governance (ESG) factors. The U.S. Securities and Exchange Commission (SEC) is working on enhanced disclosure rules for publicly listed companies. The European Union has adopted the Corporate Sustainability Reporting Directive starting 2023. Many other countries are moving ahead with similar initiatives.
The pressure comes from regulators, investors, customers and employees. Companies already know it’s time to do something about sustainability. Their leaders want to leave a positive legacy. At the same time, it’s not easy to know how to make an enduring, positive contribution—beyond being compliant.
A common definition of sustainability is “meeting the needs of the present without compromising the ability of future generations to meet their needs.” Businesses of all sizes, and in all sectors need to translate this into a clear picture of what sustainability means for their organizations, including metrics and targets.
Connecting sustainability to fundamental business goals, including financial metrics, is the key to demystifying sustainability for any organization. Let’s look at a few key sustainability topics and the metrics that impact Engineering and Construction companies.
Sustainable Development Goals—a Macroeconomic Tool
Let’s start with the Sustainable Development Goals. They are a powerful call to action by the United Nations, which requires countries to adhere to and report on a clear set of goals to achieve a more sustainable world. The deadline? 2030.
Many businesses have adopted SDGs as well, by selecting those most relevant to them. It’s a bold statement and shows commitment. But it must become more than a letter of intent. Furthermore, as a company, how do you choose from 17 equally important SDGs? And what’s the impact you want to make?
Ultimately, the SDGs are useful to refer to when looking at an entire sector, such as engineering and infrastructure. The latest ICE report on infrastructure in 2023 connects SDGs with developments in the infrastructure sector. It analyzes issues facing the infrastructure sector globally and their impact on society and the environment. As many other studies and industry voices point out, there is a strong need to design and build more resilient infrastructure to meet the challenges of climate change. It’s more critical than ever to make infrastructure lasting—and to reduce its life-long ecological footprint.
Demystifying ESG—Environment, Social and Governance Factors
A good way to start including sustainability in a company’s operations is by defining an ESG strategy. Consider ESG a map for identifying and structuring a wide range of sustainability-related issues and opportunities for the company:
- When you think about the environment, society and governance, what are the first aspects that come to mind?
- How many of those aspects need to be fixed or improved within your organization so it can be called “sustainable”?
- In which aspects are you performing so well that they become a competitive advantage?
No matter your role, this exercise helps to understand how sustainability matters can affect your organization and how interconnected they are.
This is the beginning of an important process in organizational sustainability management and reporting. It is called materiality assessment: defining what matters for a company to disclose, set targets and include as part of its strategy and decision making.
What Investors are Looking at: Sustainability Reporting
The sustainability reporting standards issued by the International Financial Reporting Standards (IFRS) and the recently created International Sustainability Standards Board (ISSB) include metrics that are industry specific. These disclosure areas and metrics allow comparability within an industry. They are the basis for assessing materiality.
Analyzing the sustainability metrics specific for engineering companies is a pragmatic way to start on your reporting journey. It ensures transparency for investors—who are accustomed to this way of reporting.
The Sustainability Accounting Standard (issued by SASB Standards, now part of IFRS Foundation) lists the following disclosure topics, specific to engineering and construction services:
- Environmental Impacts of Project Development: number of incidents of non-compliance with environmental permits, standards and regulations; and adding an explanation of the processes to assess and manage environmental risks associated with project design, siting and construction.
- Structural Integrity & Safety: amount of defect- and safety-related rework costs; and monetary losses resulting from legal proceedings associated with such incidents.
- Workforce Health & Safety: total recordable incident rate and fatality rate for direct employees and contract employees.
- Lifecycle Impacts of Buildings & Infrastructure: number of projects certified, or in the process of certification, to a third-party sustainability standard; and the process to incorporate operational-phase energy and water efficiency into project planning and design.
- Climate Impacts of Business Mix: amount of backlog for hydrocarbon related projects and renewable energy projects; or backlog cancellations for both.
- Business Ethics: number of projects in countries that have the 20 lowest rankings in the Transparency International’s Corruption Perception Index; and monetary losses from legal proceedings associated with charges of bribery or corruption and anticompetitive practices. These metrics should be enhanced with a description of the policies and practices for preventing bribery and corruption, and anti-competitive behavior in project bidding.
Note that emissions are not (according to those standards) required to be disclosed by engineering companies, as they are usually not materially relevant for them. A medium-sized engineering company, operating from a medium-sized office, will not generate a lot of emissions itself. But its clients will. The whole-life emissions from construction, operation, maintenance and use of infrastructure contribute to a high percentage of total carbon emissions. Since infrastructure is a major contributor to emissions, the role of engineering in reducing emissions is vital.
Emissions are just one aspect. Engineering companies ultimately serve all infrastructure sectors which have an impact, positive or negative, on society and the environment—from energy and water utilities, to transport and mobility, to urban planning and development.
This reflects into efforts to transform engineering services. We need to reframe engineering so that it becomes an enabler for building, operating and maintaining sustainable infrastructure.
From Compliance and Transparency, to Maintaining a Long-Lasting Business
Sustainability should be at the core of every business that wants to endure and thrive. A plan based on understanding the link between social and environmental aspects and your own governance will help engineering companies focus on clear metrics and goals.
This ultimately leads to identifying and managing sustainability-related risks and opportunities, and to determining the impact your company can have. Include the same from your ecosystem—whether suppliers, business partners and clients. The world has become much more complex than in the ancient times. We’re fortunate to have technology to take over the hard work, and with ongoing research for developing new materials and innovative building processes.
The Industrial Internet of Things (IIoT) helps to maintain new and aging infrastructure. 3D laser scanning provides deep insights into how ancient structures were built—and what we can learn from that. Imagine the amazement of the Roman engineer Marcellus if he caught a glance of all this technology.
Engineers play an important role in the sustainable transformation. With a look at the past and a vision for the future, a sustainable world is possible.
Olivia Falkenstein is a sustainability consultant and partner at Dunn & Falkenstein Consulting. Focusing on the connection between purpose and profit, she supports leaders to develop, pursue and communicate their sustainability strategies.