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Sector Reports - 09/10/2018

The Heavy Construction sector fails to adequately address high health & safety risks

Weak energy transition performance also observed despite being one of the highest CO2-emitting industries worldwide

This new report analysing 59 companies from the Heavy Construction sector provides Vigeo Eiris’ exclusive opinion on sector vulnerabilities, controversies and emerging risks, as well as strengths, innovations and best practice in terms of CSR.

Key Findings:

  • The Heavy Construction sector consists of companies engaged in new housebuilding, non-residential building, civil engineering, construction rehabilitation and maintenance. Sector actors fall into three main categories: contractors (main), buyers and sub-contractors.
  • Vigeo Eiris awarded an average overall score of 30 to companies in the Heavy Construction sector, on a scale of 0 to 100. The sector’s performance has slightly increased since our previous analysis, due to improved performance amongst European companies (no improvement was observed in other regions).
  • The sector ranks 24th out of Vigeo Eiris’ 39 sectors, covering a total research universe of 4,500 companies.
  • Sector leaders are concentrated in Europe, whilst laggards are mostly listed in Emerging Markets and Asia Pacific.
  • The Heavy Construction sector disclosure rate is in line with the universe average at 55%, with European companies being most transparent.
  • ESG risk mitigation scores are limited in relation to legal security (31/100) and reputation (33/100), and weak in relation to human capital (28/100) and operational efficiency (28/100). The Heavy Construction sector’s performance is slightly above the universe average for reputation and human capital risk classes, while it is slightly lower regarding operational efficiency and legal security.
  • 44% of companies in the Heavy Construction sector display either a positive or highly positive involvement in sustainable goods and services, such as energy efficient buildings and sustainable transport infrastructure. A small number of companies (8%) show an adverse or highly adverse contribution to the Sustainable Development Goals.
  • The sector faces 111 controversies, none of which are considered critical. The controversy severity level is either rated high (47%) or significant (10%). The most frequent controversies relate to business ethics, health and safety and fundamental human rights. 58% of companies face at least one controversy.

Takeaways

  • Most of the Heavy Construction sector participates in construction and infrastructure projects in countries where violations of human and labour rights are frequently observed; particularly risks for migrant workers, sub-contracted workers and vulnerable local communities. Although the sector appears to be increasingly aware of reputational and operational risks linked to these potential human rights violations, efforts to ensure that fundamental human rights are respected still remain limited (36/100).
  • The Heavy Construction sector’s capacity to tackle climate change and support the transition to a low-carbon economy is weak (22/100), despite being one of the most CO2-emitting industries worldwide. According to the Global Alliance for Buildings and Construction that was created in light of COP21, the building and construction industry accounts for almost 40% of global CO2 emissions.
  • Business integrity issues are key in the Heavy Construction sector: companies’ participation in public bids and the development of international public-private partnerships increases the risk of exposure to corruption. The nature of Heavy Construction activities such as maintenance of infrastructure also makes it essential for companies to adhere to contract clauses. Despite this, the sector’s ability to prevent and mitigate legal security risks remains weak (27/100).
  • The provision of health and safety considerations is a key issue for the Heavy Construction sector. Companies have a responsibility to prevent accidents and to mitigate exposure to hazardous substances, noise, vibrations and repetitive movements. The sector does not appear to be responding adequately despite these high risks, displaying a weak average performance (29/100).

Best performing areas:
o Respect of minority shareholder rights
o Audit & internal controls
o Environmental strategy and eco-construction

Worst performing areas:
o Responsible lobbying
o Management of environmental impacts from the use of buildings and installations
Responsible management of reorganisations

Top Performing Companies:
o Europe: Vinci (58/100)
o North America: Tutor Perini (23/100)
o Asia Pacific: Obayashi (37/100)
o Emerging Markets: Grana Y Montero (39/100)

Companies making best progress since 2017:
o Europe: Salini Impregilo (+19)
o North America: No progress
o Asia Pacific: No progress
o Emerging Markets: No progress

To view an excerpt of our 2018 Heavy Construction sector report, download the document below.
To enquire about accessing our sector reports, please contact the relevant team below:
If you are an investor: investorcustomer.service@vigeo-eiris.com
If you are a corporate entity: corporatecustomer.service@vigeo-eiris.com
If you are an NGO or a university: contact.academique@vigeo-eiris.com
If you are a journalist: news@vigeo-eiris.com

Download :
icon-download-34x36 Key Findings_Heavy Construction_August 2018
Keywords : ESG