Stakeholder and societal requests for responsible corporate practices are echoing across the globe, and companies of all types are answering the call. Initiatives such as the Business Roundtable’s statement of purpose and the United Nations Global Compact’s Business Ambition for 1.5°C are the latest examples of increasing urgency to improve sustainability efforts.

These developments represent much needed progress and, for high-risk industries like construction, provide a necessary framework for creating a more responsible economy. However, the 2019 Global CSR Risk & Performance Index, which includes over 50,000 assessments evaluating the sustainability and ESG practices of more than 30,000 companies, shows that construction organizations are falling behind on the road to sustainability.

Performance of the Construction Industry

Scores given in the Index are based on companies’ performance against 21 criteria across four themes—environment, labor and human rights, ethics and sustainable procurement—and awarded on a scale of zero to 100. Scores above 64 represent advanced performance, above 45 engaged, between 25 and 44 medium risk, and below 25 high risk.

Over the past three years, large construction companies have greatly improved compared to their small and medium-sized counterparts and have closed the gap on what was previously a three to five-point difference between the two groups. But this closure is due largely to smaller organizations essentially stagnating in their performance, despite external pressures and tightening regulations.

In an industry with significant sustainability risks including environmental and local pollution, child and forced labor incidents, and health and safety accidents, as was tragically seen in a recent Cambodian building collapse, further emphasis on sustainability performance is needed. As it stands, neither small, medium or large organizations are on track to meet the ambitious objectives on CO2 emissions reduction. This is alarming when considering that 40% of all CO2 emissions are generated as a result of construction per the latest Global Alliance for Buildings and Construction Report released at COP25 in Madrid. The construction industry needs to take a hard look at its operational best practices to identify risks, and more importantly, put plans in place to improve.

Focus is on Labor and Human Rights and Environment

Out of the four themes measured in the Index, construction companies perform best in labor and human rights and environment. Despite these being construction’s best performing categories, and areas in which they have improved, scores remain below average when compared to other sectors, indicating construction companies fail to demonstrate positive, lasting change. Additionally, issues such as modern slavery, which is highlighted in recent reports like LexisNexis, remain a high-risk area for the industry. The upcoming 2022 FIFA World Cup in Qatar has faced extensive criticism for its abundance of forced laborers to complete the extensive construction projects. Strong evidence of migrant workers, inhumane working conditions and high worker fatality rates illustrate a need for construction to increase their efforts here even more.

Sustainable procurement performance is fairly low globally, and construction is no exception. Lack of progress on the procurement side indicates companies don’t have enough visibility past Tier 1 suppliers. This places them in extremely vulnerable positions, as almost half of supply chain disruptions occur in the Tier 1 category. Procurement and supply chain leaders need to proactively engage with all trading partners to address sustainability risks, improve practices and prevent a domino effect that could disrupt operations across the entire value chain.

The Path Toward Improvement

When left unmanaged, the supply chain exposes businesses to serious issues, like forced labor, poor working conditions, corruption and more. When properly handled, it is the birthplace of all success, creating long-term value for stakeholders as the lever for change. Regularly and proactively measuring supply chain sustainability leads to actionable insights and better performance. The Index found that more than 75% of companies re-assessed maintained or improved their overall score.

The construction industry should be motivated by the improvements of larger-sized organizations, but it shouldn’t stop there. Construction conglomerates are positioned to lead the charge by delivering more value to customers and employees, mitigating CSR risks, dealing ethically with suppliers, and creating positive results for their communities.