Insight 17 November 2020

The growing importance of sustainability in construction supply chains

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What is sustainability in supply chains? It’s the recognition by businesses that they have a duty, both moral and legal, to act ethically and responsibly to take steps to reduce the negative social and environmental impacts they may have, and where possible have a positive impact. In so doing they will protect their reputation and their profitability.

Increasingly, stakeholders including customers, clients, investors, employees and communities expect businesses to adopt more sustainable practices and demonstrate what they are doing to protect the triple bottom line of profits, people and planet.

It’s no longer seen that businesses which prioritise sustainability are going the extra mile – it has become an expectation. Failing to address these issues can present risk to your business from a reduced ability to win work, or by breaking laws that govern issues such as pollution prevention or modern slavery.

The construction industry, in particular, is facing increasing pressure to position sustainability at the heart of supply chain management.

Construction involves high-energy operations in the manufacturing of the products it uses and in building uses large quantities of materials and produces waste. Therefore it has an impact on the environment and a significant contribution to the emission of Carbon Dioxide and other greenhouse gases which are driving climate change.

Construction supply chains are often complex, and extend across many countries, making complete visibility difficult or impossible. There is also a reluctance among some supply chain partners to reveal their relationships due to concerns about commercial advantage. In the words of CIOB (The Chartered Institute of Building), this lack of visibility makes construction supply chains the “perfect breeding ground for exploitation and human rights abuses.”

While legislation regarding human rights, exploitation and the environment, and industry standards such as the Common Assessment Standard aim to improve sustainability in the construction industry, it’s your responsibility as a business owner to reduce the negative environmental and social impact that your business and supply chain relationships can have. By making the right choices it is possible to create positive impacts such as in the long-term resilience and efficiency of buildings, or the support given to communities by choosing to use locally based supply chain partners.

Here’s what you need to know about the rising importance of sustainability in construction supply chains. Learn how you can do your bit to protect the environment and minimise the negative effect your operations have on employees, local communities and wider society.

Why the importance of sustainability in construction is on the rise

Construction work has a significant impact on the environment

All stages of the construction cycle can have a negative impact on the environment. The construction industry has a huge impact on the environment, so it has an important role to play in global efforts to combat climate change and protect the planet.

Of greatest concern is the contribution to climate change through the manufacturing of materials used in construction, the construction process itself, and the use of energy by the built environment over its lifetime.

In the UK, around 40-45% of the total carbon footprint is attributed to the construction, operation and maintenance of the built environment, with a quarter coming from the construction process. The industry is also responsible for a significant proportion of all landfill waste — 32% of the total landfill waste in the UK is a result of construction and demolition projects. 13% of materials delivered to construction sites are sent directly to landfill without ever being used. As waste decomposes it generates Carbon Dioxide and other greenhouse gases, making a further contribution to climate change.

Related to the use of materials is the potential impact on the environment and biodiversity from irresponsible sourcing. An example would be timber – today it is possible to buy certified timber which comes from well-managed forestry where trees are harvested and replaced, with environmental and social responsibility being a requirement. This can protect and enhance habitats for biodiversity. Internationally, standards such as FSC exist, and there is also Grown In Britain which works to support the use of responsible use of UK produced timber. Through sensitive construction, it is also possible to protect and improve projects with biodiversity in mind and an aim to have net gain for biodiversity.

Water is used throughout all stages of the construction life cycle and accounts for approximately 30% of total water use in the UK. Water is in short supply in many areas in the UK, a situation exacerbated by climate change. Water may also be under pressure where products are manufactured overseas, both by their availability and also the risk of pollution. Construction projects can contribute to water shortages with the UK’s Environment Agency noting that unless suitable action is taken, the country may not be able to meet our water supply needs in 20-25 years. There is also the risk of pollution or contamination of water by construction activities – incidents can carry significant fines.

The risk of exploitation of construction and supply chain workers

As well as demonstrating environmental responsibility, construction businesses also need to be socially responsible. This includes ensuring supply chain workers are paid fairly and that their human rights are met, including being kept safe from harm. Workers should be paid at least the minimum wage, they should have the right to work (and the documents to prove it) and they shouldn’t be forced to work against their will or made to work unreasonably long hours.

It might sound simple enough, but modern slavery and exploitation can take many different forms and it’s on the rise in the UK, with the construction industry at particular risk. Construction ranking fifth according to current statistics from the Gangmaster and Labour Abuse Authority.

A contributing factor is the lack of visibility construction businesses have over the whole supply chain which are often large and complex, involving hundreds of different subcontractors and labour agencies, making it difficult to spot signs of exploitation. This makes it even more important for construction businesses to prioritise sustainability as they grow and expand. You’ll need to comply with the Modern Slavery Act 2015 and put clear policies, processes and guidance in place to eradicate exploitation in every stage of the supply chain.

Sustainability standards and legislation are becoming stricter

Sustainability isn’t just a moral responsibility as a business owner. You are also legally obliged to comply with regulations and legislation regarding environmental protection, human rights, employment and labour. In recent years, industry standards and legislation have become stricter, raising the bar for sustainability in construction supply chains.

For example, the Environment Bill that was introduced in October 2019 builds on other Environmental Acts and requires businesses to attain an improved level of sustainability. Businesses will need to have legitimate and effective waste management practices, meet legally binding targets regarding air pollution and their products must achieve minimum eco-design requirements including the ability to be recycled.

Clients are becoming more conscious of environmental and social sustainability

In the construction industry, clients and their stakeholders have their own reputation to maintain and values to uphold. They are becoming more conscious of sustainability and the importance of protecting the environment and the welfare of people. Construction companies’ reputation and revenue are increasingly reliant on sustainable business practices.

The business benefits of sustainability in construction supply chains

With more importance being placed on sustainability due to legal obligations and stakeholder expectations, it’s never been more vital to review and address the impact your supply chain has on the planet and people.

Improving your business’s sustainability shouldn’t be just a box-ticking exercise — it’s an opportunity to make a real difference. When you start minimising the negative impact your business operations have, and start working towards having a positive impact on society and the environment, you can unlock a range of business benefits that will help your organisation thrive:

Cut back on business costs — Sustainability can save your business money and improve your profitability. For example, by choosing the right approaches you can reduce your carbon footprint and save money. Similarly, taking care of your employees and any people your business operations affect can help you avoid health and safety fines and compensation payouts. By complying with sustainability legislation you’ll also avoid the cost of non-compliance.
Safeguard your business’s reputation and revenue — Improving your supply chain sustainability can protect your business from reputational damage and boost your professional standing. Sustainability and the resulting good reputation are key when it comes to gaining customer trust, increasing customer loyalty and marketing your business. By going above and beyond basic compliance with sustainability legislation, you can set your business apart from competitors, and word about your sustainability efforts is likely to spread and attract more customers or clients.
Mitigate supply chain risks — Sustainability is ultimately about business continuity, so making your supply chain more sustainable involves identifying and mitigating supply chain risks. By encouraging thorough risk management, sustainability efforts can help you eliminate risks that could otherwise pose a threat, not just to people or the environment, but also to the success of your business.
Improve employee satisfaction and retention — It’s not just customers, clients and investors that are interested in the sustainability of your supply chain. Many employees also feel more satisfied in roles within organisations that are environmentally and socially responsible. By positioning sustainability at the core of your brand values, you can improve employee satisfaction and retention, and benefit from a happy, productive workforce.
Appeal to investors — Investors know that businesses who aren’t taking sustainability seriously don’t have a future in the construction industry. So if you want to secure funding, adopting sustainable practices and minimising your environmental and social impact can help you appeal to investors.

How to create a sustainable construction supply chain

The key to thriving in a world that’s becoming more conscious of sustainability is to make sure your supply chain is environmentally and socially responsible. This process should address the risk mitigation and business opportunities that come from adopting new approaches. Look at the different stages and operations involved in your business processes and consider the environmental, social, and economic impact of each of those stages.

Once you have a better idea of the issues affecting the sustainability of your supply chain, you can make an action plan. This should include talking to and understanding what your clients want so you can address this and demonstrate how you can help them achieve their goals. CHAS works with a range of major contractors, public sector bodies and non-governmental organisations to understand how the market is changing, and then how we can create services that will help smaller and medium-sized business improve their performance.

The steps you take might include ensuring ethical sourcing practices throughout your entire supply chain, optimising supply chain routes to minimise the environmental impact of transportation, and reducing waste through demand planning. Increasing visibility throughout your supply chain can also help you gain valuable insights into the impact your business has on the environment and society. But ultimately, how you go about improving the sustainability of your supply chain will depend on your processes — every supply chain is different.

As the UK’s leading provider of supply chain risk management services, CHAS is here to help you manage your supply chain and achieve greater levels of sustainability.

By signing up for free as a CHAS Client, you’ll gain access to free supply chain management services and receive real-time alerts about the compliance status of your supply chain partners.

Or as a CHAS Contractor, you can join CHAS and demonstrate your compliance with assessment and certified schemes such as the Common Assessment Standard, which covers all areas of risk management, including sustainability. As an certified CHAS contractor, you’ll prequalify for thousands of projects with CHAS clients looking for suppliers with sustainable business practices.