To meet the increasing needs from the urbanized population across the globe, the construction sector is continuously growing and delivering new buildings and infrastructures. The Compound Annual Growth Rate for the sector is expected to grow by 3.5% between 2021 and 2026. The footprint of the sector is heavy, with construction activities accounting for 39% of global energy-related CO2 emissions according to the World Green Business Council.

Identifying Digital transformation as a forward-looking materiality issue

To ensure business continuity, construction companies’ stakeholders are increasing their expectations on the companies’ sustainability performance throughout the value chain. To meet the Paris Agreement climate goals, energy intensity per square meter must decrease with 30% by 2030 compared to 2015 levels. Local legislation is also increasing its standards on CO2 emissions, and other effluents. From an investor perspective, ESG benchmarks like the S&P Global Corporate Sustainability Assessment also weigh Building Materials and Resources conservation & efficiency at 10% of the total assessment, showing the importance of the topic.

In a recent publication from the World Business Council for Sustainable Development (WBCSD), the topic of digitalization of the built environment was identified as a key acceleration topic to drive future evolutions in the construction sector. In order for industry players to grab the opportunities offered by the development of new technologies in the construction sectors, companies are advised to define a structured use of digital technologies to accelerate sustainable transformation.

As pointed out in the WBCSD study, the application of digital technologies has the potential to improve the sustainability performance of the construction sector in all aspects of its business including operations, compliance, supply chain and disclosure. Moreover, the use of digital technologies drives new business opportunities including in resource optimization, smart maintenance, and raw material supply.

Managing the digital transformation issue through open innovation and stakeholder collaboration

Construction companies which have identified digital transformation as a key material issue (already) are more likely to take the proper next steps to leverage this materiality within their business strategy. Ferrovial and HOCHTIEF both have included digital transformation and innovation management as key focus areas in their materiality assessments.

German company HOCHTIEF has identified the ‘Acceleration of innovation processes through digital developments’ as one of its four strategic goals. As part of this strategy, HOCHTIEF founded Nexplore in 2018 as a group-wide platform for digital innovation. Through this new company, HOCHTIEF has doubled its R&D spending to reach € 41M. Nexplore’s objective is to develop technology solutions to digitize the infrastructure sector, using next-generation technologies including artificial intelligence, blockchain, computer vision, natural language processing, and internet of things. The company relies on collaboration and partnership from multiple stakeholders including universities and corporates.

In January 2021, Nexplore joined the newly created MIT Climate and Sustainability Consortium which aims at accelerating large-scale, real-world implementation of solutions to address the threat of climate change across multiple industries including the construction sector. Other founding members include LafargeHolcim and digital solution experts like IBM and MathWorks.

Other industry frontrunner Ferrovial has also integrated new digital technologies within its innovation strategy toward more sustainable building and solutions. The company has developed a structured approach to open innovation, investing more than € 48M in R&D investments annually and collaborating with start-ups, private actors, universities and public innovation bodies to design digital-based innovations. As such, Ferrovial is an active member of the Climate-KIC partnership which focused on climate innovation to mitigate and adapt to climate change through building decarbonization and more sustainable constructions.

Ferrovial also produces innovative complementary services that bridge digital solutions with operational eco-efficiency. The company has created the Energy Control Center which allows private and public actors to monitor and improve the energy efficiency of public and building lighting. Currently analyzing energy consumptions amounting to an approximate cost of € 25M, the center has achieved 4% savings without additional investments in its first year of operation.

Through these two examples, frontrunners from the construction industry reveal that by integrating digital transformation and innovation management within their materiality assessments, companies facilitate the creation of bridges between their business objectives and sustainability strategy. These companies have also identified the strong stakeholder interest for the topic of innovation and as such, they have developed structured open innovation strategies to increase cross-sector synergies and use new technologies to develop new and sustainable solutions.

Looking for help?

Are you considering updating your materiality matrix and with that including a forward-looking perspective? Get in touch with Johana Schlotter at johana@finchandbeak.com or  +31 6 28 02 18 80 for a frank conversation and to hear about how Finch & Beak can support you to accelerate sustainability in the new normal.