Imacs 2016 imecs 2016 Proceedings (Preliminary version) of the 4
DISSEMINATION OF SUSTAINBILITY IN MULTINATIONAL CONSTRUCTION COMPANIES: EVIDENCE FROM THE CZECH REPUBLIC
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- 286.Introduction
- 287.1 Literature review
- 288.2 Research methods and sample
- 289.3 Research results
- 3.2 Analysis and interpretation
- 290.Conclusion
- 291.References
DISSEMINATION OF SUSTAINBILITY IN MULTINATIONAL CONSTRUCTION COMPANIES: EVIDENCE FROM THE CZECH REPUBLIC285.Jaroslav PašmikAbstract The construction industry is one of the most greenhouse gas producing industries in the world. For corporate sustainability science it is therefore crucial to deal with the industry to find solutions towards sustainable governance and management to lower its negative impact. This inductive study of four multinational construction companies examines how organizations manage sustainability of its operations in its central locations and subsidiaries. Drawing from literature reviews, interviews, observations and company reports I have developed insights into how the companies disseminate sustainability tools and best practices within multinational operations and what are the main drivers and obstacles for a higher level of sustainability. During the research I discovered there are significant barriers to sustainability dissemination. The best sustainability practices remain limited to a small number of projects. The levels of sustainability performance remain heterogeneous among subsidiaries. On the other hand: rotation of managers and sustainability experts, product premium opportunities, brand reputation as well as level of regulation, subsidies and public awareness are identified as main drivers. Key words: sustainability, construction, management, multinational JEL Code: L, M, Q 286.IntroductionThe construction industry contributes greatly to greenhouse gas (GHG) emissions. Cement and metal production alone is responsible for 35 % of global GHG emissions not accounting for emissions from waste incineration, indirect GHG emissions from electricity generation and the usage phase of buildings (IPCC, 2014). If unabated, those emissions could have devastating consequences for the world economy and human civilization. We can expect, for example, the sea level to rise more than a meter by the year 2100 and more than 15 meters by 2500 caused by climate change (DeConto, Robert, Pollard, 2016). That would of course be a catastrophe, because the majority of world metropolises and business hubs are located in coastal areas. But, as shown in Figure 1., the construction industry and buildings have also the most promising potential to mitigate their emissions. For corporate sustainability science it is therefore vital to deal with the industry to find solutions towards sustainable governance and management to lower its negative impact. Fig. 1: Estimated sectoral economic potential for global mitigation for different regions as a function of carbon price in 2030 from bottom-up studies, compared to the respective baselines assumed in the sector assessments. 
Source: IPCC, (2007). Mitigation of climate change. Contribution of working group III to the fourth assessment report of the Intergovernmental Panel on Climate Change. In this research paper I deal primarily with multinational construction companies, with good reason: In 2014 construction accounted for 12,4 % of global GDP, which is about $9.585 trillion (Global Construction Perspectives, 2015). In the same year the top 250 global construction companies made almost 15 % of that economic performance (Top 250 International Contractors, 2015). Dissemination of sustainability practices in multinational construction companies is the key interest of this paper. Understanding and enhancing of sustainability dissemination in those companies is an important part of lowering the negative impact of the entire industry. To support my investigation I formulate two research questions for this paper: How selected companies disseminate sustainability tools and best practices within their multinational operations? What are their main drivers and obstacles for higher levels of sustainability? 287.1 Literature reviewStarting sustainable construction practices and integrating them into mainstream construction is seen as a quite recent phenomenon, about 15 years (van Hal, 2009). The wider recent adoption is attributed to the notion that integrated sustainability can bring additional profits to companies (Eichholtz, Kok, Quigley, 2013), therefore companies generate more capacity for environmental management activities, which results in consolidation of environmental management and sustainable practices (Gluch, et al., 2014). However, many researchers indicate problems in real sustainability advancements in construction processes and their outcomes, naming organizational and procedural difficulties, additional costs, lack of customer demand and lack of communication among stakeholders as main barriers (Kaatz, et. al., 2006; Ryghaug & Sørensen, 2009; Häkkinen & Belloni 2011; Hwang & Tan, 2012). While reviewing literature of sustainability dissemination in construction industry I found out the theoretical frameworks are more anchored to topics of sustainable organizational development, innovation diffusion and adoption, and knowledge management. For the purpose of this research I decided to adapt the dominant diffusion theory stated by Everettt Rogers in his book The Diffusion of Innovations (Rogers, 2003). I also take in account other research, which applies Rogers’ concept in construction sector and explained differences and specifics such as uniqueness of buildings as products and limitations of R&D investments in building industry (Yang & Hua, 2014). 288.2 Research methods and sampleI use the descriptive case study method of four multinational construction companies that operate in the Czech Republic. I selected my sample companies according to their perceived achievement in sustainability obtained from general and professional media, local professional conferences and other social events. All the selected companies declared, that in recent years they have constructed high performance buildings in local passive standard or with independent international certifications of sustainability. All the companies are active in the construction and real estate industries as investors and contractors and have foreign owners. One of the companies has headquarters in the Czech Republic; the other three, outside the Czech Republic. My data collection for description, content analysis and interpretation consists of: annual reports, sustainability reports of selected companies, open and semi structured interviews with managers, observations of building sites, and tours of finished buildings in use. 289.3 Research resultsAlthough all companies in my sample construct similar types of buildings (commercial, residential and industrial), methods, levels and rates of sustainability dissemination vary significantly. 3.1 Brief description of the cases and main sustainability dissemination toolsCase 1 company developed its internal environmental assessment system centrally. The system measures landfill waste, water and energy consumption and CO2 emissions. It is designed to primarily measure building phases of projects. Usage phase and the end of life phase are not considered. The company implements “moving targets” for sustainable buildings (called actually “green buildings” internally). It moves according to building codes of a particular country where a subsidiary operates. To be “green” a company requires a building to be 25% better than the required lowest threshold according to local building codes or other local standards. Internal assessment designed by company’s headquarters was spread to subsidiaries. It is a good tool for disseminating sustainability, but not all projects are measured. Subsidiaries are ordered by the company headquarters to start assessing their projects according to maturity of local market conditions. Czech branch is now obliged to use the scheme, but not all subsidiaries are ordered to use it. Another strong tool for dissemination of sustainability used in Case 1 Company is a manager exchange program among subsidiaries. As recorded in interviews, specialists and managers from other subsidiaries, who come for a 6 month working visit, are often responsible for achieving higher sustainability standards of local projects, for example: they propose ambitious sustainability innovations and higher certification ratings. The Case 2 company implements two centrally developed internal assessment schemes for the construction phase of their projects: One for building processes and one for projects’ building sites. As oppose to Case 1, Case 2 is not tied to the outcomes of local building codes. The assessment scheme measures over 60 sustainability indicators during project construction. The projects are selected on a voluntary basis. Other tools for sustainability dissemination are international seminars, which Case 2 Company organizes for particular units and specialists once a year, and international study trips for internal health-safety-quality-sustainability auditors to other subsidiaries. Case 3 Company has no companywide system for sharing sustainability. Company meetings across subsidiaries are organized along geographical segments and business functions. There is common system for financial calculations and planning, but not for sustainability issues. Sustainability agenda is realized more on a case-by-case basis. Since 2014 Case 3 Company has decided to adopt Michael Porter`s shared value philosophy. But adopting shared value principles is realized only in the headquarters country. Management says there are difficulties implementing this concept to subsidiaries. The Case 4 Company adopted British sustainability certification system BREEAM as its sustainability standard. Dissemination of sustainability is tied primarily to the BREEAM certification. Managers are obliged and financially motivated to achieve certain levels of sustainability certification for their projects. Progress in sustainability levels is totally dependent on development of BREEAM and local building standards.
From another observation I conclude, independent third party certifications such as BREEAM or LEED function in some ways better as sustainability disseminators than internal standards. They are more visible for all employees and stakeholders; they have “business edge” (customer is willing to pay for them). But internal sustainability assessments can be very important in other dimensions of sustainability dissemination. They can be more ambitious than independent certifications. However, there seems to be one significant problem with the sustainability dissemination in the sample companies. The best sustainability practices remain limited to very small number of projects. From the whole portfolio of sustainability leaders the share of projects, which could be described as sustainable or “green”, can be around 1 % in one case to several percent in other cases. Rates of sustainability dissemination and performance remain very heterogeneous among subsidiaries and it seems to be hard to elevate them to a higher rate or level. One popular tool for top managers is simple bottom line, or profit, which can be increased by achieving prestigious sustainability certifications offered by third parties (mostly LEED or BREEAM), but demand for such buildings is limited. Subsidies are seen as strong motivators for sustainability and its dissemination. Top management is especially sensitive to them. Other softer drivers identified are brand reputation and public awareness, which could cause problems to companies with unsustainable practices.
Global Construction Perspectives and Oxford Economics, (2015), A global forecast for the construction industry to 2030, Oxford Economics Gluch, P., Gustafsson, M., Thuvander, L., & Baumann, H. (2014). Charting corporate greening: environmental management trends in Sweden. Building Research & Information, 42(3), 318-329. Hal, van A., (2009). The Merger of Interests, On Sustainability and Benefits in the Construction Sector, Acceptance speech, Nyenrode Business Universiteit. Häkkinen, T., & Belloni, K. (2011). Barriers and drivers for sustainable building. Building Research & Information, 39(3), 239-255. Hwang, B. G., & Tan, J. S. (2012). Green building project management: obstacles and solutions for sustainable development. Sustainable Development, 20(5), 335-349. Intergovernmental Panel on Climate Change, IPCC. (2015). Climate Change 2014: Mitigation of Climate Change (Vol. 3). Cambridge University Press. 9, 44 IPCC, (2007). Mitigation of climate change. Contribution of working group III to the fourth assessment report of the Intergovernmental Panel on Climate Change. Kaatz, E., Root, D. S., Bowen, P. A., & Hill, R. C. (2006). Advancing key outcomes of sustainability building assessment. Building Research & Information, 34(4), 308-320. Ryghaug, M., & Sørensen, K. H. (2009). How energy efficiency fails in the building industry. Energy Policy, 37(3), 984-991. Rogers, E. (2003). The Diffusion of Innovations. Fifth Edition. The Free Press, New York. The 2015 Top 250 International Contractors. (n.d.). Retrieved February 24, 2016, from http://www.enr.com/toplists/2015_Top_250_International_Contractors1 Yang, E., & Hua, Y. (2014). Framework of construction innovation: A review of diffusion of sustainable innovation in the building sector. In Construction Research Congress 2014. Construction in a Global Network (pp. 2096-2105). ASCE.
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