Segregation: sustainability knowledge silos

Interviews, survey outcomes and observations identified a third area where network fragmentation affected the role of the main contractor; that of “trapped” sustainability information and knowledge. Different aspects of sustainability knowledge and its role within the main contractor procurement process is explored in greater detail in chapter 7. In this section we consider how fragmentation appears to restrict knowledge sharing within the supply network and how this affects the role of the main contractor. Through interviews with SC team members, sustainability team members and industry meeting notes, inter and intra company sustainability knowledge was mapped. To present this in a manner to aid discussion, a simplified construction supply network was visualised, over which sustainability knowledge data has been overlaid. As the main contractor, Carillion is positioned at the centre of the network and the figure includes intra-company teams within the company. Knowledge silos identified are illustrated. This material is presented in Figure 22. Three main sustainability knowledge silos were identified: Silo A: Carillion corporate sustainability team

Silo B: Structural Engineers/Design Silo C: Manufacturers

156

157 Silo A

A small corporate sustainability team developed the companies long term Sustainability Strategy with engagement from senior business unit Directors, guidance from the corporate Sustainability board, feedback from stakeholders via a materiality survey and by reviewing KPI performance. There was board support for the Chief Sustainability Officer (CS- CSO) and the company had approved a 10-year plan, the 2020 Sustainability strategy. From the strategy, policies and charters were produced, which included the Sustainable Supplier Charter (Appendix 1, Figure 47) and Labour Charter (Appendix 1, Figure 50). Policies were available on the company intranet and on the company website. The corporate sustainability team were seen by intra-company actors as the people who ‘led’ company sustainability (Carillion Survey, 2016) and were responsible for company sustainability KPIs. Sustainability was a complex agenda and S-CSO had been ‘accused of being the only person in the company who understood it’. The corporate team had the expertise and responsibility to monitor corporate KPIs, reporting GRI and CDP performance data, and for preparing and promoting the Annual Sustainability report; one of the main forms of communication with investors, customers and other stakeholders. They also led the management of all group-wide sustainability standards such as ISO14001, and ISO9001. However, the corporate team acknowledged that ‘at a sustainability level (we) don’t tend to have the technical expertise or man hours in house to work on very complex issues’(S-CM). The corporate sustainability team relied on business units to fund and deliver the strategy. Specialist development work, such as ‘net positive biodiversity’ pilots, could only be undertaken if they could be incorporated into project costs. This limited their ability to drive actions. To translate corporate aims into action they were supported by the Business Uni S-BM who produced a Business Unit sustainability strategy and a leadership plan with activity needed to ensure they met the KPIs. The first 1-2 actions in the plan were mandatory but using his knowledge and experience the S-BM offered multiple further actions that would enhance the delivery of the goals but ‘no one ever did them’ (S-BM). With intense time and cost pressures Carillion business units were focused on delivering targets that were commercially important and which frequently entailed major cost penalties if not met.

158 In summary, within the corporate sustainability team resided the greatest level of intra company sustainability knowledge. Supported by a small number of business unit sustainability practitioners they used this knowledge to direct strategy and reporting requirements. To be effective they had to transmit the importance of sustainability issues through training and internal communications routes to drive local action. However, the good intentions of ‘top down’ sustainability KPIs issues appeared to have limited integration into operational practise, a position endorsed by the comment ‘There is a real disconnect between policy and operational level’ (D10:S-SA). The exceptions to this was where they were linked to a commercial driver such as a customer requirement or legal demands e.g. site waste management or where they had become embedded in business standard practise e.g. community engagement and FSC chain of custody. Sustainability practitioners operating within the company project teams were fragmented by expertise, job role and levels of responsibility and who ‘often struggled to get teams to achieve even legal environmental requirements’ (S-BM).

Silo B

Engineering consultancies such as Aitkins, ARUP, Mott McDonald and Walsh have built up expertise in the management of embodied carbon, with Aitkin’s having developed a carbon database (RICS 2014), Mott McDonald a suite of carbon tools (Mott MacDonald 2018) and Walsh noting, during the development of a UKGBC publication (UKGBC 2017), over fifty case studies providing carbon benchmarks. They are also working to incorporate carbon metrics into Building Information Systems (BIM) to support sustainable design, especially in the infrastructure sector (S-I), as well as other materials and waste concerns. BIM has been identified by the UK Government as a technology which could improve information flow and greater collaboration (UK Government, 2013). The expertise of the consultant engineers was understood by Carillion sustainability teams working on infrastructure projects, especially in ‘rail, the key areas of knowledge and expertise lie with consultants e.g.- Atkins, Arup’ (S-I). However, those working in other teams did not appear to be aware of this work. An excellent example of this knowledge gap between experts was witnessed during an intra-company conversation on the potential to use BIM to assess embodied carbon data during design.

159 Carillion’s internal expert, O-BIM, stated that the most effective way to hold CO2 data

would be in offline files; it would be too difficult to use directly in BIM project files. He flicked the screen to a live project and used an example of the concrete pad to illustrate his point. Looking at the information he saw CO2 data linked to the concrete and

commented;

‘who put the data in on carbon?... structural engineers? ……We didn’t ask for that. It must come from the manufacturer’s website – it’s a BIM object from their website. We don’t know who did it or how it got there’.

Consulting engineers viewed embodied carbon as a commercial opportunity, had invested heavily in developing skills and impact databases, and charged for access. This understandably created a barrier to knowledge flows and as few Carillion clients requested information on embodied environmental or social impacts at design stage there was little internal demand. For Carillion embodied carbon data was primarily a retrospective excel spreadsheet exercise for infrastructure clients, although the corporate sustainability team were considering Scope 3 carbon GRI reporting.

Silo C

Major manufacturers have gained sustainability knowledge through cost reduction programmes, emissions trading schemes (SUP-7), product development initiatives (SUP- 1, SUP-3, SUP-7, SUP-8) and resource constraints (SUP-1,3,7,8). They frequently had well informed sustainability or environmental teams (SUP-1,2, 3, 4, 7,8,10,11), were engaged with at least one industry body (SUP-1,7,8,10) and in many cases were owned by large parent companies with global perspectives that impacted on UK product specifications (SUP-1,2,6, 7,8, 11). Many of the larger companies offered lifecycle based environmental data for their main products through environmental performance declarations (EPDs), something poorly known or understood by Carillion SC team (Q14: Survey 2016). There was a sense of frustration, from manufacturers that this knowledge, developed over time, was not being used to support decision making, or as one manufacturer noted ‘a lot of the product people have been collecting a lot of this data for a long time. We’ve got stuff that can be shared…….. if people want it’ (SUP-DM). At a Carillion Director level, the siloing of this knowledge was also recognised ‘the major manufactures and trade associations are already working on some of these areas (sustainability impacts) but

160 Carillion is just not asking or capturing their work’ (SC-DB). Internally supplier sustainability data captured through Carillion’s “My Register” system was often difficult to access and ‘the (Carillion) supply chain team don’t really look at the more detailed information’ (category managers, D8). They identified this as being because of lack of demand (see chapter 5) and the high cost of developing specific reports from a third- party data manager. The BIM team also saw this as a problem of information transfer ‘vital in future ….. Opensource (software) is available…. otherwise manufactures operating systems will stop everything talking effectively to each other’ (O-BIM). However, he felt that knowledge also became institutionally trapped in manufacturer silos due to procurement legislation;

‘Carillion work to EU procurement guidelines so working closely with a manufacturer is also an issue at the design stage. At present designers tend to include a “generic” door in their specs as they’re concerned about being anti-competitive if they named a supplier’ (O-BIM).

In summary this analysis highlights four major points. Firstly, that in nearly all cases studied the end user of the building had no relationship or engagement with those who were involved in the construction of the asset, and thus no influence on its sustainability. Sustainability knowledge was siloed within Carilion corporate team boundaries and failed to extend effectively into operational teams. Consulting engineers had increasing knowledge, supported by data analysis but this was identified as a commercial product and only available if the client was willing to pay for the service. Finally, manufacturers, who had products or services providing improved sustainability, were increasingly frustrated that they could not communicate this with decision makes in the supply network. For those suppliers who were solely responding to main contractor direction they had little awareness of the company’s corporate sustainability aims.

4.61 A comparison with existing literature

Knowledge is one of the most decisive factors capable of offering competitive advantages for supply chain partners (Crone, Roper, 2001, Cheng, J. H., Yeh & Tu, 2008), however, extensive outsourcing of non-core competencies has led to a fragmentation of knowledge across networks (Zacharia, Nix & Lusch, 2011). A review of supply chain

161 maturity in construction identified poor communications, due to internal and external (primarily contractor) compartmentalisation. Suppliers also suggest that main contractors lacked the specialist knowledge to fulfil a linking role (Broft, Badi & Pryke, 2016). Whilst this appears to resonate with the findings of this research this has not been previously been tested in terms of sustainability knowledge and outcomes. The findings from the network mapping indicates that outsourcing expertise has exacerbated the situation of multiple, highly competent sources of knowledge trapped in siloes. Many manufacturers have knowledge and innovative potential to improve whole life sustainability, but they remain frustrated that they are unable to influence design. The Carillion sustainability team struggled to implement sustainability practices beyond corporate managed projects and major engineering firms are leading on many new, sophisticated commercially focused sustainability tools such as embodied carbon estimating. However, it appears that sustainability knowledge is not able to overcome primary barriers such as increased real or perceived cost, benefits to profit margins and the risk of introducing new products or processes. In considering the management of the construction supply chain, Green et al (Green, S. D., Fernie & Weller, 2005), argue that construction practitioners are not ‘uninformed or deficient’ but are human actors able to think and take action. If, assuming this is correct, which would appear to be the case for Carillion high-level decision makers, it may suggest that knowledge also remains siloed and fragmented as it is not identified as a primary client need.

4.2 Conclusions

This more nuanced analysis of fragmentation supports the observations that the construction sector operates as a dynamic complex network rather than as a linear supply chain. Indeed, it is a continually shifting network of multiple sub-networks or as hypothesised by Fernando-Solis (2008) potentially a meta-industry; a conglomerate of industries. The flexibility required to manage short term projects, initiated by multiple clients and requiring unique end products creates an environment in which the main contractor has developed expertise in managing intensive, time pressured, high risk, operations. Whilst, at a corporate level, time horizons are longer, developing the capacity for a whole-life or the systems thinking necessary for sustainability across the supply network is highly challenging. This is exacerbated by the fragmented and

162 occasional nature of the client base where sustainability remains a relatively low specification requirement rather than the lens through which to view development. Only infrastructure, with its public funding sits outside of this norm. Unlike many construction developments it could be considered to have a branded identity, a clear requirement to meet a public good and it is contractually obliged to take note of Government policy aims. Whilst these pressures have provided the basis for many sustainability initiatives it is not clear if, major infrastructure projects on their own, can create the platform to develop industry consensus.

There are major societal and intergenerational gains with greater sustainability of build such as reduced CO2 emissions, improved working conditions, and less waste of

resources. However, these benefits are frequently identified as increased costs to the providers of a product or service, and where financial benefits do arise they are not equally distributed across the network. Main contractors operate at a central node within the network, but very low margins and few direct monetary benefits from sustainability actions, restrict the company’s will or ability to be responsible for wider network sustainability goals. Carillion operated minimal management of the supply network beyond Tier 1 and where engagement did occur it was driven primarily by legislation, such as the Modern Slavery Act or by monetary benefits from major manufacturer discounts. Despite multiple Government reports, strategies and working groups there does not appear to be a clear vision of sustainability across the sector and certainly not one that offers operational guidance at a network level and made relevant to individual actors. The concept that everyone is responsible comes clearly from the research, but it remains unclear what this means to each actor within the supply network, a position highlighted by the multiplicity of goals and KPIs, each driven by self- interest and supply chain position, rather than a systems-based approach to sustainability.

Fragmentation has a major impact on the sector, affecting the main contractor’s ability to manage or lead multiple complex networks. But fragmentation is not unique to construction; food, textiles and other major global supply networks experience similar issues. Inequality of benefits across the network, unclear boundaries of responsibility,

163 weak client demand where consumer pressure is limited, are identified as issues within many sectors. However, the construction industry does differ in its multiplicity of short- term networks, which continually disperse and reform around each asset build. It is argued that this fragmentation of supply prevents the collaboration necessary to implement sustainable build. Yet, in this chapter as well as transactional, contract led, interactions we also observe relational engagement, indicating, at least at the site level, collaborative working. We also see, beyond thousands of site-specific suppliers a core of longer-term suppliers, primarily subcontractors and major manufacturers. This suggests greater pan-project stability than first suggested. These findings will be reviewed in greater depth in chapter 6, which focuses on the role of the main contractor in network collaboration.

Sustainability is a complex issue; it has developed its own language, data, experts and silo’s. Whilst many aspects of sustainability are being implemented by network actors a constantly shifting, constantly fragmenting and reforming network, appears to limit more effective network wide action. However, it could also be suggested that the construction industries very ability to manage complexity and constant change, although imperfectly, could provide the expertise needed to adapt sustainability as the lens through which building occurs.

164

Chapter 5: Focal company influence in the supply network