Influential relationships between the client and the supply chain

The establishment of the importance of client power has indicated that in order for changes to occur throughout the supply chain the client must be influenced to make more informed low carbon choices through the perception of success (von Medling et al., 2013). Influencing the client is at present difficult due to the hierarchical nature of top down supply chain approaches (Rosinski et al., 2014; Dirix et al., 2013). By addressing the position of the client and presenting the possibility of supply chain reorganisation, the potential to influence client decisions becomes greater.

Influential relationships are a key component of diffusion literature and central to innovation (Dubois and Gadde, 2002; Miozzo and Dewick). Relationships with the client are essential to

190 ensure that innovation diffuses via information flow pathways within the supply chain. With increased levels of integration, innovation has potential to reach those whom it may not have reached under previous circumstances, furthering the perceived potential for networked supply chain approaches (Dubois and Gadde, 2002; Cheng et al, 2001). It is thought that a supply chain network could aid the retention of knowledge and relationships as members of the supply chain work in close proximity rather than working in fragmented silos (Songip et al. 2013; Blayse and Manley, 2004). A change such as this would require movement away from institutionalised norms.

The pressures of client influence were found to be predominantly normative however there is some evidence of coercive pressure. For example, supply chain actors are obliged to inform the client on price due to contractual agreements (Coercive); however they are not obliged to inform them on environmental outcomes. There was an indication that once the expected specifications are met, then the parties involved do not go beyond this and it is not encouraged (normative). Reasoning behind this could be due to a lack of influence exerted on each supply chain actor down the chain:

‘Unless in a way, as part of an architect's obligations, once you're' in a relationship with a client, you do have an obligation to inform them of a lot of things, whereas I don't think you have to do anything to do inform them about how environmental they would have to be.’ (Architect, supply chain position 3)

‘But in answer to your question I don't think the client is probably very well informed because, yes, who would be the person to inform them really. Would it be architects once they've … once you're at RIBA work stage 1 kind of thing.’ (Architect, supply chain position 3)

The findings showed that client influence greatly impacts on client innovation. Research participants acknowledged the importance of the supply chain and the impact that supply chain positions have on the ability to innovate - ‘It [innovation] depends on where you are in

the chain’. The importance of influencing the client to encourage innovation is the key factor in establishing environmental innovations in construction projects. Often those below the client in the supply chain will not inform them about low carbon options as they are coercively and normatively driven to adhere to the client’s needs. The client is driven by his or her own coercive pressures such as contractual and financial obligation (Yang and Chen, 2015). Any additional considerations outside of the project scope are often neglected.

The structure of the supply chain inhibits the ability of those in other positions to innovate leaving the onus on the client. Clients are not required to agree on any innovation which may

191 potentially be used i.e. behavioural processes, technology and any education and or training which may be required to use the innovation in order to ensure its use (Ryd, 2014; Janda, 2011). The notion is that if the client takes on innovation then the rest of the chain will follow, but often only for that specific project. It is due to the hierarchical nature and linear structure of the supply chain that the construction industry has been considered as a relatively low innovation industry, even though as suggested in the data ‘Innovation doesn’t have to be

the grand new…just something which is different’ (Songip et al., 2013). Unfortunately the implementation of any innovative process is considered risky. Coercive pressures placed on the client by regulation, legislation, cost and risk are inhibiting the development of low carbon innovation.

A possible solution to the concerns surrounding risky ventures could be to introduce change through incremental steps. Not only does it reduce risk but enables those involved to adapt to new pressures slowly (Male and Stocks, 1991; Slaughter, 2000), linking to the prospects of steady behavioural modification. The findings suggested that behaviour modification was essential for implementing low carbon solutions but the means to change behaviour was also essential:

‘I mean you can modify your behaviour… there's no point in saying, right, recycle everything, and not put any bins out. If you put five bins out with five different classifications then tell them to recycle at least they can start to do it, so you've got the behavioural aspect and also you've got this technology or whatever. You're giving them the means to do it.’ (Subcontractor, supply chain position 4)

The implementation of small behavioural changes could aid the development of sustainability. Small manageable changes have shown to be much more effective than radical changes. Some have argued that incremental innovative changes are the only innovation relevant in the construction industry due to high risks (Male and Stocks, 1991). Behavioural change is important to the development of sustainability as it enables sustainable attitudes to filter down the supply chain, but more importantly these changes must be influenced by the client, whose power is crucial in low carbon development.

The most prevalent institutional pressure found in the data was the extensive client power exerted over the entire supply chain (Ryd, 2014; Kilinc, Ozturk and Yitmet, 2015). Client power appears to result in the disruption of relationships between supply chain actors. Clients may decide to engage in relationships with architects and suppliers who solely focus on cost and do not try and influence low carbon decisions (Ahmed and Kangari, 1995). Power can

192 ultimately reduce the ability of the rest of the chain to extend their expertise in sustainability as they aim to provide client requirements as suggested in the findings:

‘No one talks about lifecycle costing or … much, mostly because I think we do … the vast proportion of our schemes are design and build contracts which means that the … your client, during those stages, is the contractor, who doesn't care about anything but the capital costs of the building.’ (Architect, supply chain position 3)

‘It's whether or not there's a client or someone who is willing to pay for it or wants to tag that on as something in their building.’ (Architect, supply chain position 3)

‘They choose not to because they don't have to, and therefore it's a cost saving.’(Architect, supply chain position 3)

Yes, whoever's paying for it, is the person that needs to say that that's important, yes.’ (Architect, supply chain position 3)

Focus remains on capital cost to the detriment of sustainable outcomes because there is no demand for low carbon buildings which must come from the client. Capital cost savings are the prime objective, but perhaps short-sighted when the long term benefits of low carbon buildings are realised. Immediate low cost will almost always be chosen over long term low cost in the form of low carbon initiatives (Feminias, Kadefors and Eden, 2009). The data showed that low carbon building development will only occur if is specifically in the contract, if not the bare minimum will be carried out:

‘Unless it's something they have to do, because it's written in to the contract, it's not going to be a concern of theirs really. It tends to be a tick box exercise.’ (Architect, supply chain position 3)

Client demand for low carbon construction is the only requirement for a sustainable building (Ryd, 2014). There was an emphasis on the supply chain placing responsibility for sustainability and low carbon strategy on the client. Others felt powerless to have any sway in low carbon decision making. Participants suggested that ‘it's really down to the clients deciding it's important enough to build in to the requirements’. The client decides on particular specifications and the supply chain follows in order to win and maintain contracts (Ahmed and Kangari, 1995). Evidence suggests that the structure of the hierarchical supply chain has hindered the development of innovation in the construction industry maintaining its low innovation reputation (Songip, et al., 2013).

In the event that a client may require an emissions analysis from the conception of the project the contractor may find difficulties in obtaining the information from the supply chain. The root cause of emissions would need to be traced when accounting for all CO2. The problem

193 arises when the data is simply unavailable; hence the technological focus on emissions analysis (Chrisna et al., 2011). The need for carbon traceability could provide an indication of where coercive pressures from the client could aid the development of sustainability. Increased collaborative processes could ease data dissemination and enable those involved in a project to make more informed low carbon decisions (Orlander, 2007: Ayuso et al., 2011; Bal et al., 2013; Hernandez and Kenny, 2011). The ease of obtaining this data is currently difficult as there is low demand and a reliance on cost, quality and time. The exclusion of carbon impacts is still considered to be standard practice (Yang and Chen, 2015). There was a definite sense that the focus on traditional values eliminates the risk of increasing costs and running over time:

‘People are looking at cost, risk, compliance, profitability, stuff like that. I think, at the moment with carbon, it's just … it's still so low down the pecking order and things are not really considered as much as what it should be, but I think that will change over the next five to 10 years. I think it will have to become more important because of the Climate Change Act.’ (Consultant, supply chain position3)

There was an acknowledgement that coercive influences such as the Climate Change Act could have a significant impact on carbon emissions, but the prospects were long term. Additionally, the Climate Change Act itself provides no specific construction legislation regarding emissions outputs (Department for Energy and Climate Change, 2008). In the near future the focus was not expected to change beyond traditional values. With clients currently being driven primarily by cost, those throughout the supply chain are influenced by cost. If the client requests low carbon strategies or products, only then will the rest of the supply chain follow suit as demand increases (Ryd, 2004). The evidence below provides acknowledgement that there are currently two types of clients, those who strive for low costs and those who strive for sustainability. Both types of client are ultimately driven by a series of coercive pressures from funding bodies and legislation. There was a sense of the need for increased legislation to increase the demand for low carbon buildings:

‘On the lower end of the spectrum clients are normally just driven by money rather than sustainability, unless there is a reason for it to be sustainable, and that's where I go back to the sort of the PR side of things.’ (Architect, supply chain position 3) ‘Certainly clients are becoming more involved as more pressure is put on them. There's still a bit more legislation to go I think before it will become mainstream’ (Architect, supply chain position 3)

194 The clients interviewed in the data collection process also acknowledged these pressures. For example investments and pay-back time for low carbon technologies was a key factor in the development of their sustainability programmes:

‘Well I think … I don't want us to do things from a sustainability point of view or energy savings point of view, just for the sake of doing it, so for example, we looked at wind, could we do something with wind, but I mean, the investment which is a barrier, it's the amount of investment and the pay back, you look at putting wind turbine on, it was something like 12 years pay back, so we ruled that out.’ (Client, supply chain position 6)

The client is not always free to act sustainably if the costs do not allow it. Clients from different construction sectors are subject to a series of legislation such as the Social Value Act, an indication that some are addressing sustainability using the triple bottom line and remaining competitive (Hart, 1995; Rodriguez-Melo and Mansouri, 2011; Florez et al., 2013).

‘So yes, clients I think are absolutely pivotal to this and that doesn't have to be a retail … a physical retailer with physical customers, I think in some of our bigger engineering construction contracts, industrial and infrastructure, clients have very strict requirements too, and things like the Social Value Act.’ (Mechanical and electrical engineer, supply chain position 3)

Coercive pressures placed on the client have been found to both aid and hinder the development of low carbon buildings. Client pressures such as capital cost appears to have hindered low carbon decision making as any additional costs on procedures which are not enforced is ultimately considered as ‘additional’ work whereby errors can increase supply chain risks (Love, et al., 1999; Cheng, et al., 2001; Love, et al., 2004). Coercive legislation however has in some respects aided the development of low carbon buildings, particularly in subdivisions within construction and the public sector which have in some cases had to respond to legislation. The core problem with the coercive pressures imposed on the client is that they are inhibiting collaborative networks as the client is at the head of the supply chain (Ryd, 2014). Collaboration can be used to solve problems in the construction industry via the dissemination of information, opening up the possibilities of innovation diffusion, decreased business risk and easing low carbon choices through these means (Rogers, 1971; Cheng et al., 2011). In cases where clients were actively seeking sustainable buildings interest was diffusing to other professionals, but primarily among those who had the same positive attitude towards sustainability as indicated in the findings:

‘It's the clients who are pushing the agenda and leading professionals who have those same attitudes.’ (Architect, supply chain position 3)

195 The transfer of information via homophilous influences indicates the need for greater influence between all supply chain actors (Gatignon and Robertson, 1985). The diffusion of low carbon innovation throughout the supply chain can only be achieved by reaching those who are not accommodating the same set of sustainability principles (Gatignon and Robertson, 1985). Heterophilous influences are critical for the diffusion of low carbon innovation. By reaching and appealing to those who would not normally adhere to low carbon strategies via weak ties, low carbon strategy can be diffused further (Granovetter, 1973). Weak ties between groups ultimately have the potential to explore previously unobtainable avenues of business and innovation diffusion, whilst simultaneously encouraging new ideas by transcending normative barriers (Gatignon and Robertson, 1985). Weak ties are highly important in the adoption and diffusion of low carbon innovation as the greater the number of people which an innovation can reach, the faster the ‘critical mass’ of adoption is reached and so therefore the sooner the innovation spreads throughout an industry or supply chain (Rogers, 1971).