Adrienne Miller
, General Manager New Zealand at Infrastructure Sustainability Council, discusses ‘The Paradigm Shift’ from asset to impact in the world of construction and infrastructure. She also outlines the major parties involved and the key things to consider.
Infrastructure and construction have been the target world-wide of Covid stimulus spending.
Because of the magnitude of that investment, there’s increasingly a call for that investment to do more. The change represents both a risk, and an opportunity for the sector.
Its less about the what – the physical or engineering solutions we deploy – and more about how that infrastructure is delivered and how it will perform across the life cycle of the asset for the communities it serves.
What is driving this paradigm shift from asset to impact?
Obviously, we have all the much-heralded changes in the physical world creating a need to consider asset resilience in the face of climate change and natural disasters.
We are also seeing vast changes in terms of human expectations and social licence.
Stakeholders that are discerning consumers
Customers and the purchasers of services are increasingly not just the passive recipients of goods and services, they are more discerning “consumers” with expectations not only of the goods and services they buy, but the organisations that produce them.
Taxpayers, Ratepayers and Shareholders have started to develop a conscience about what pay for and invest in and to hold organisations to account where they stray from those expectations.
Staff too have expectations of their employers. They want their companies to do more than provide a pay check. They want them to do good and act with purpose.
What do all these stakeholders care about?
The immediate and far flung reaches of an organisation’s supply chain and that’s not just source of goods and services, it’s the impact every single linkage in the supply chain has on environment, carbon emissions, the way they treat their staff, communities in which they work and cultures they encounter along the way.
Indigenous perspectives increasingly valued
As well as environmental and ecological considerations, there’s a need to be applying an ethical and human centric lense and one that is also respectful of other cultures and their world views. There’s seemingly a greater acceptance that indigenous cultures may have insights about the horizons and the interconnections required when we take a big picture, system based, approach.
Here in Aotearoa we are already starting to see greater recognition for the role of Te Ao Māori and Mātauranga Māori in informing approaches and a mainstreaming of the concept of kaitiakitanga or stewardship. There’s also a growing demand to recognise partnering with Tangata Whenua at a project governance level to honour Te Tiriti. This is a change in maturity to “inclusion of”, rather than a “consulting with” approach.
Sustainability Maturity curve similar to safety
Sustainability (which is about viability and social licence, not just environmental considerations) is following a similar maturity curve to what the sector has seen with health and safety. Its becoming less about compliance with rules and more about culture and approach, and being values and purpose aligned.
Social Media & technology amplification
All this stakeholder expectation is amplified by social media – a democratised & easy access platform for good and bad, skewing views inside echo chambers that makes it hard to distinguish between fact and fiction. Consumer experience of tech too is a driver – it has both enabled analysis and data collection (it is possible to know pretty much anything) and has raised the bar on expectations on what can be done and by when. Its 24/7 immediacy.
Legal & regulatory
There’s a pincer movement in play between procurer and stakeholder demand (a pull factor) and regulatory, reform and reporting change (a push factor) playing out -particularly in the context of climate change response.
We have climate-related financial disclosures regime that will be mandatory for publicly listed companies and large insurers, banks and investment managers implementing a Mark Carney, TCFD-like, approach.
The goal of these mandatory climate-related financial disclosures is to:
- promote greater transparency and more accurate pricing signals in the market;
- incentivise low-emissions investment;
- create a level-playing field for businesses already considering climate change.
Ultimately, it is considered that finance and insurance will be differentially priced based on action on climate issues providing the right incentives to
- the necessary investment on mitigation and adaptation (to address physical and transition risk);
- ensure resilience in the face of Climate change; and
- reduce the risk of stranded assets.
We’re certainly starting to see increasing sustainable finance and green, social and sustainability bond offerings.
We also have some clear analysis from both offshore (the IPCC AR6 report on physical climate change) and here in NZ ( in the form of the National Climate Change Risk Assessment out of our Ministry for the Environment and advice from the New Zealand Climate Change Commission) on what is required in terms of climate response.
The legislation is playing catch up to some extent. Amendments to the Local Government Act 2002 have been in place since 2019 requiring councils to promote social, economic, environmental, and cultural well-being (the four well-beings) but its much clearer now what the risks are and that we do need to adapt to and mitigate the effects of climate change.
Much has also been written about the responsibility of directors and decisionmakers. Suffice to say there are clear conclusions reached that suggest directors’ fiduciary duties and the role of those responsible for designing, building and operating assets are quite different than they once were, with a private members bill making doubly clear for company directors.
Sustainability also an opportunity
Adopting a sustainable approach is both a way to address this risk, and opportunity to shine for those that understand and get ahead of the pack. As well as an ability to win work, there are benefits in the battle for talent. Recruitment and retention of staff will be easier for those that are on board and authentically leading with purpose.
The Paradigm shift – assets to impact
There’s quite a change a thinking required, but we are already equipped with a lot of what we need to succeed in the new paradigm.
The first and most important point is that the traditional “cost, time, quality triangle” has a number of elements that have flipped.
Take time and cost for example. Traditionally we’ve only looked at cost, but now the concept is economic and we look at return on investment. We also look beyond the project construction phase. When we focus only on the construction phase, time is a multiplier for construction costs (a bad thing) and so we want time to be as short as possible. However under this revised thinking where outcomes are key, and we are looking at the entire life cycle of the asset and ROI, time becomes a multiplier for good.
Also quality isn’t about the thing, the asset, but the experience of it by the community it’s designed to serve and the impact the project and asset can have in that community, not only physically, but culturally, environmentally and socially. Yes other considerations are now relevant too.
To be able to deliver on social licence and stakeholder concerns, we need to overlay a second triangle over our old cost – time – quality triangle. That new triangle contains three further points: representing cultural, social and environmental considerations. Finally, to fully embrace sustainability and hold it all together, we need good, inclusive and transparent governance practices.The two triangles together make a star -a chance to shine – held together by the rigor of good governance.
A choice to “shine or be left behind”
Organisations in the sector have a choice between choosing to adjust to this new approach and shine, or where they do not, run the risk of being left behind, as other organisations seize the opportunity that sustainability represents.
Note: The piece above was written during COP26 and is published with the authors consent following the recent IPCC reports heightening the need for urgent action on Climate action
