IT TAKES MORE THAN PRICE TO WIN SOME TENDERS.
CONFUSED BY CSR, SDG'S AND ESG'S?
Businesses do not exist in a vacuum. They form part of the community, and they also impact upon the environment. Whilst price is often a key decider when a purchase is made, the survival of a business also depends upon its reputation. Pressure groups such as Greenpeace, WWF and others increase awareness of issues which can ultimately bring about change. A business which is “out of step” with public opinion risks its future and risks not being able to attract investment or new work, even if the price is right.
In the 1970’s and 80’s events such as the ending of Apartheid and the Exon Valdez spillage raised awareness about humanitarian and environmental issues. The United Nations organised the Earth Summit in Rio, in 1992, in response to concerns about environmental issues. More latterly, as more scientific data became available, the Paris climate change agreement came about in 2015, and the UN issued 17 Sustainable Development Goals, SDG’s, in 2016.
The impact of not being a socially responsible business did not go un-noticed by the business community. In 2005 "Global Compact" produced a report called “Who Cares Wins”, in which measures for Environmental, Social and Governance (ESG) issues were tabled for the first time. Even though most businesses were unaware of the report, they were conscious of their impact on the community, and many adopted Corporate Social Responsibility policies, known more commonly as CSR policies. These policies were not measured externally nor necessarily directly linked to a particular driver connected with the business activity.
CSR has gained traction. Employees and future employees are engaged by businesses which value contributing to the community, but there were no formal measures for it. The 169 targets in the SDG’s are at a global level but because they are for developed, and less developed nations, the measures feel distant for a SME business. Never-the-less the concepts of the goals resonate with business owners, staff, customers, and suppliers and CSR measurement software became available to record activities, but the records are not formal or linked to recognised measures. Meanwhile there is a plethora of different measures for ESG’s which are more applicable to business. They are driven by investors who take an interest in the metrics to reduce their reputational risks and check a business’s sustainability. The plethora of measures is related to the diversity of businesses including systems such as Task Force on Climate-Related Financial Disclosures (TCFD), Global Reporting Initiative (GRI), World Economic Forum (WEF) and Business in The Community (BITC).
For an SME where might they start on their ESG journey?
The UK ranks just outside the top 10 at 11th in Corruption Perception Index 2021. So, for a SME business operating in the UK the legislative framework deals with a lot of issues. For example, there is legislation around, Employment, Bribery and Corruption, Modern slavery, Health & Safety, Environmental, Ecology & Carbon Reporting. For construction businesses there are the Building Regulations which deal with energy consumption and there is legislation around sustainable timber supply. Future legislation will deal with the sale of fossil fuelled boilers and vehicles. A SME can therefore make a start on their ESG journey by stating their policies on the legislation.
Next, they can take their lead from all large organisations which have been required to report their carbon emissions since 2019, in accordance with the Streamlined Energy and Carbon Reporting Framework, SECR, by calculating the emissions from their energy usage.
The carbon assessment is divided into 3 categories. Scope 1 are emissions that come directly from your organisation’s activities, including transport. Scope 2 are those that are produced by your electricity provider. Scope 3 are the most complex, they come from your supply chain and only large businesses are legally required to report these at present. Tools and calculators are available to purchase from commercial organisations, but in the first instance a free calculator from the Carbon Trust is worth considering
https://www.carbontrust.com/resources/sme-carbon-footprint-calculator or ask your accountant about an add on to your accounts package which can calculate some emissions from your spending for Scope 1 and 2 categories.
For those who are intending to bid for Government funded work then calculating their social value according to PPN 06/20 https://www.gov.uk/government/publications/procurement-policy-note-0620-taking-account-of-social-value-in-the-award-of-central-government-contracts which was introduced in 2020 will give them a measurable social value figure for their business.
Finally, the following 13 SDG’s and indicators can be considered and one or two selected to focus upon as an area to improve. Activities concerning staff welfare, training, digitisation, encouraging students into the industry and H&S are particularly applicable to construction.
ENSURE HEALTHY LIVES AND WELL-BEING FOR ALL AGES
The targets for this goal relate mainly to developing countries, but there are three indicators which are relevant to some SME construction businesses, which could be a focus:
3.5 Strengthen the prevention and treatment of substance abuse, including narcotic drug abuse and harmful use of alcohol
3.6 By 2020, halve the number of global deaths and injuries from road traffic accidents (construction workers historically have high mileages and “white vans” have a reputation of having accidents
3.9 By 2030, substantially reduce the number of deaths and illnesses from hazardous chemicals and air, water and soil pollution and contamination
ENSURE INCLUSIVE AND EQUITABLE QUALITY EDUCATION AND PROMOTE LIFELONG LEARNING OPPORTUNITIES FOR ALL
Continuing professional development (CPD) and vocational training at all ages and levels is covered. Businesses can use two of the indicators, the others are for educators.
4.5 By 2030, eliminate gender disparities in education and ensure equal access to all levels of education and vocational training for the vulnerable, including persons with disabilities, indigenous peoples and children in vulnerable situations.
4.7 By 2030, ensure that all learners acquire the knowledge and skills needed to promote sustainable development, including, among others, through education for sustainable development and sustainable lifestyles, human rights, gender equality, promotion of a culture of peace and non-violence, global citizenship and appreciation of cultural diversity and of culture’s contribution to sustainable development.
ACHIEVE GENDER EQUALITY AND EMPOWER ALL WOMEN AND GIRLS.
In the UK there is legislation dealing with discrimination and business can promote a culture of embracing equality. The use of the indicator such as can be used to track:
5.5.2 Proportion of women in managerial positions.
ENSURE AVAILABILITY AND SUSTAINABLE MANAGEMENT OF WATER AND SANITATION FOR ALL
In the UK the water industry is highly regulated, and the replenishment of underground water is required by legislation when constructing. However, businesses can exceed the minimum standard and innovate their designs and how water is used on site. Such innovations will contribute to the indicator:
6.4.1 Change in water use efficiency over time.
ENSURE ACCESS TO AFFORDABLE, RELIABLE, SUSTAINABLE, AND MODERN ENERGY FOR ALL
The use of renewable energy off the grid is beyond the control of SME’s but there is no reason why they cannot promote the use of renewables at project level, which will contribute to the indicator:
7.2.1 Renewable energy share in the total final energy consumption.
PROMOTE SUSTAINED, INCLUSIVE, AND SUSTAINABLE ECONOMIC GROWTH, FULL AND PRODUCTIVE EMPLOYMENT AND DECENT WORK FOR ALL
SME’s contribute to economic growth. The manner in which work is carried out should be sustainable. Within SDG 8 there are indicators which can be captured from a business’s strategy, operations, and selection of its supply chain. The UK H&S legislation is among the legislation which drives compliance with this goal. The indicators of interest are:
8.2 Achieve higher levels of economic productivity through diversification, technological upgrading and innovation, including through a focus on high value added and labour-intensive sectors.
8.5 By 2030, achieve full and productive employment and decent work for all women and men, including for young people and persons with disabilities, and equal pay for work of equal value.
8.7 Take immediate and effective measures to eradicate forced labour, end modern slavery and human trafficking and secure the prohibition and elimination of the worst forms of child labour, including recruitment and use of child soldiers, and by 2025 end child labour in all its forms.
8.8 Protect labour rights and promote safe and secure working environments for all workers, including migrant workers, in particular women migrants, and those in precarious employment.
8.8.1 Reduce fatal and non-fatal occupational injuries per 100,000 workers, by sex and migrant status.
BUILD RESILIENT INFRASTRUCTURE, PROMOTE INCLUSIVE AND SUSTAINABLE INDUSTRIALIZATION AND FOSTER INNOVATION
Many SME’s are involved in the retrofit market and there are opportunities to reduce CO2 emissions as a result of their activities. Doing this will contribute to the following indicators:
9.4 By 2030, upgrade infrastructure and retrofit industries to make them sustainable, with increased resource-use efficiency and greater adoption of clean and environmentally sound technologies and industrial processes, with all countries taking action in accordance with their respective capabilities.
9.4.1 CO2 emission per unit of value added.
MAKE CITIES AND HUMAN SETTLEMENTS INCLUSIVE, SAFE, RESILIENT, AND SUSTAINABLE
For those who are in construction or connected with it, this goal embraces all activities and designers can have a significant impact on quality of the outcome. The rate of pace to achieve the goal is a funding or policy issue. The industry sector must be sufficiently productive to achieve the results.
RESPONSIBLE CONSUMPTION AND PRODUCTION
The consumption of materials and the use of energy is prevalent in construction. Being conscious of this and aiming to be selective about the choice of resources can contribute to achieving the goal. Specifically, targets are:
12.2 By 2030, achieve the sustainable management and efficient use of natural resources.
12.5 By 2030, substantially reduce waste generation through prevention, reduction, recycling and reuse.
This is probably one of the better-known goals and is to connect with reducing carbon emissions. For businesses in the built environment, how buildings are designed, constructed and operated all impacts on the figure. The Construction Leadership Council has set some specific targets for the sector which focus upon this goal. Net Zero transition plans are becoming expected for public procurement contracts and contribute to the indicator:
13.2.2 Total greenhouse gas emissions per year.
PROTECT, RESTORE, AND PROMOTE SUSTAINABLE USE OF TERRESTRIAL ECOSYSTEMS, SUSTAINABLY MANAGE FORESTS, COMBAT DESERTIFICATION, AND HALT AND REVERSE LAND DEGRADATION AND HALT BIODIVERSITY LOSS
The use of FSC timber in the UK is now widespread and enables the following indicator to be realised.
15.2.1 Progress towards sustainable forest management.
PROMOTE PEACEFUL AND INCLUSIVE SOCIETIES FOR SUSTAINABLE DEVELOPMENT, PROVIDE ACCESS TO JUSTICE FOR ALL AND BUILD EFFECTIVE, ACCOUNTABLE, AND INCLUSIVE INSTITUTIONS AT ALL LEVELS
In the UK there is legislation concerning bribery, corruption, and anti-competitive behaviour. Complying with the law drives compliance with indicator:
16.5.2 Proportion of businesses that had at least one contact with a public official and that paid a bribe to a public official, or were asked for a bribe by those public officials during the previous 12 months.
STRENGTHEN THE MEANS OF IMPLEMENTATION AND REVITALIZE THE GLOBAL PARTNERSHIP FOR SUSTAINABLE DEVELOPMENT
Partnerships and collaboration leverage the speed of implementation. The UK construction sector, whilst being fragmented in delivery, has numerous Professional Bodies, Trade Associations, and other organisations to turn to for support and sharing knowledge. Affiliation with these contribute to the mechanisms which can be recognised at national level.
17.14.1 Number of countries with mechanisms in place to enhance policy coherence of sustainable development.