GovernanceDisclose the organisation's governance around climate-related risks and opportunities Leadership
Implementation
Risk
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StrategyDisclose the actual and potential impacts of climate-related risks and opportunities on the organisation’s businesses, strategy and financial planning where such information is material Leadership
Implementation
Risk
|
Risk managementDisclose how the organisation identifies, assesses and manages climate-related risks Leadership
Implementation
Risk
|
Metrics & targetsDisclose the metrics and targets used to assess and manage relevant climate-related risks and opportunities where such information is material Leadership
Implementation
Risk
|
Out-Law / Your Daily Need-To-Know
Contractors preparing to implement the requirements of the Taskforce on Climate-related Financial Disclosures (TCFD) will be at different stages on their reporting journey.
Our maturity matrix will enable these businesses to understand the maturity of their current climate risk practices; benchmark how they perform against peers and best practice; and identify the gaps they will need to address as they improve and develop their disclosures through the annual reporting cycle.
We have categorised contractors as 'beginner' (limited disclosure), 'intermediate' (moderate disclosure) and 'leader' (full disclosure) for the purposes of this guide. Similar guides are available for asset owners, consultants and suppliers.
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Beginner: thinking about the issue
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Intermediate: planning, organising, getting ready for action
Governance
Disclose the organisation's governance around climate-related risks and opportunities
Leadership
- Board to have strategic responsibility and for climate risk and ESG matters, to be implemented through the executive function.
- Plan approach for how to enable the board to have capacity and competence on climate-related risks and opportunities, including the use of expert committees or through a named individual appointed to the board who has previous experience on climate change risk management.
- Climate-related risks are listed on the risk register and subject to wider risk management and audit procedures.
- Consideration given to how effective 'bottom up' implementation of 'top down' climate strategy will be prioritised and achieved in practice, in an integrated way, working across functions and locations.
Implementation
- Plan a cross-divisional governance structure and system to enable effective implementation and prioritisation of the board’s climate strategy and opportunity for cross-fertilisation of efforts and ideas - including in relation to risk management, technology and innovation, carbon abatement and carbon pricing - and to keep informed of contractor-wide projects.
- Invest in developing competence and capacity within the executive team to ensure effective leadership and responsibility for enterprise, sustainability & innovation, to drive the innovation agenda and enterprise strategy around providing sustainable contracting solutions for customers.
- Each contracting division to develop their own climate change strategy put together with the help of the wider executive function but with individual identification of its own climate-related risks and allocation of ownership and control at divisional level.
Risk
- List climate change as a principal risk in the risk register.
- Develop a governance system to manage climate-related risks and to ensure clear consideration of physical, transition and liability risks.
Strategy
Disclose the actual and potential impacts of climate-related risks and opportunities on the organisation’s businesses, strategy and financial planning where such information is material
Leadership
- Develop strategy to ensure procurement and bid teams consistently highlight carbon impact of all new tenders.
- Invest in capability (including digital BIM capability) for assessing and developing energy and carbon efficient design solutions and embodied carbon forecasting and reporting.
- Collaborate with industry and with supply chain on management of transition risks, embodied carbon and green materials.
- Acknowledge and educate all leadership teams to understand that the contractor’s interaction with its supply chain will have a material impact on the rate at which a contractor can decarbonise.
- Designate increased investment in sectors such as battery manufacturing and storage, hydrogen and solar power generation.
Implementation
- Implement short-term activities including:
- incentivisation to participate in industrial level recycling/reuse programmes;
- waste charges/tariffs as disincentives;
- increased renewable activity;
- improvement of raw materials, directly or through key supply chain members activities as relevant;
- carbon pricing; and
- investment and research into use of new technologies and methodologies.
- Identify plan for achieving medium-term activities including:
- plan for material increased rate of recycling and reuse of materials;
- transition from fossil fuel to renewable energy in construction processes (including supply chain); and
- piloting use of new technologies and methodologies.
- Ongoing engagement and interaction (through research, investment, education, support and activities) for global manufacturing and logistics teams on best practice methodologies and performance measurement for improving efficiencies and lowering emissions within end to end processes.
- Strategy to focus on areas most important to the business – environment, materials and communities.
- Have a showcase and digital innovation hub, encouraging local colleagues and supply chain partners to attend with livestreams and rich media content. Colleagues encouraged to attend live webinars, listen to podcasts and complete sustainability training.
- Ensure that all business units within the organisation have a plan and strategy to implement the increased use and promotion of lower carbon materials.
- Train client teams in understanding any performance or operational impact of reducing embodied carbon and emissions and the use of green materials.
- Upskilling workforce, through an accredited carbon literacy education programme, to make sure colleagues are equipped to help deliver positive change.
- Providing case studies where sustainable materials have been used and what effect this has had on carbon reduction.
- Focus on offsite manufacturing to reduce carbon emissions.
- Build internal BIM, design and digital capability.
Risk
- Quantify the short, medium and long-term priorities, plans and activities identified to reduce the impact of climate-related risks and leverage the opportunity for climate-related opportunities and consider how they will impact the contractor's business activities, strategy, and financial planning.
Risk management
Disclose how the organisation identifies, assesses and manages climate-related risks
Leadership
- Raise management of climate-related risks and opportunities as a standing board level issue.
- Collaborate with wider industry to collectively plan for the response to climate-related risks: in particular, to enable greater mobilisation on innovation in technology and investment in green capacity.
Implementation
- Identify climate-related risks through a number of different forums such as risk workshops, risk champion forums and engagement with senior leaders and other stakeholders.
- Begin to explore a contractor-wide integrated Enterprise Risk Management (ERM) process for managing climate-related risks combining a bottom up operational review with a top down strategic review and external perspectives to ensure comprehensive risk identification.
- Begin to develop and implement appropriate risk management strategies for dealing with identified transition risks.
- Consider risks and opportunities created by rapid decarbonisation on a contracting portfolio and identify changes such as the potential for fewer new build opportunities but more retrofit opportunities.
- Assess the viability of construction projects that utilise low-carbon emission materials and work with customers and supply chain to research and test the quality availability/capacity and the performance and pricing of green materials.
- Develop processes to manage climate-related physical risks across operating locations and with major supply chain.
- Consider and develop integrated governance procedures and awareness raising for climate risk management.
Risk
- Commission a robust and holistic third-party assessment of potential climate-related risks and opportunities and estimate the likely impact of the risks on the organisation's strategy and financial planning. This assessment should be broad and include internal stakeholder consultation, literature review, peer comparison and scenario analysis.
- Categorise risks into potential and current risk and identify controls and mitigation.
- Identify and assess climate-related physical risks across the organisation’s key operating locations and affecting its major supply chain.
- Climate-risk related physical event assessment will include review of impact of increased severity of extreme weather events, identifying the:
- effect on the business (for example, construction site damage/project design life shortened/difficulty in obtaining insurance); and
- potential adaptation/mitigation (for example close monitoring of weather forecasts/increase resilience of sites to extreme weather/relocation of manufacturing sites to less exposed areas).
- Identify key transition risks with potential to financially impact the business.
- Transition risk assessment includes increased unit costs within Emissions Trading Systems (both UK and EU) and a reduction in free allocation of CO2 allowances under those schemes.
- Transition risk assessments will include a review of the impact of transitioning materials, products and services. Technology to low-carbon alternatives will identify the following:
- effect on the business including (for example) the impact of more stringent compliance regulations, increased need for advanced green materials, contractual requirements from customers to reduce emissions and embodied carbon over the asset lifecycle and need for greater reuse and recycling or materials and reduction in waste; and
- potential adaptation/mitigation risks including (for example) sourcing diversified products and materials, greater use of technology and increased collaboration with key supply chain members.
Metrics & targets
Disclose the metrics and targets used to assess and manage relevant climate-related risks and opportunities where such information is material
Leadership
- Measure and report on Scope 1, 2 and 3 GHG emissions and the related risks.
- Commit to reducing GHG emissions to net zero by 2050 and develop and publish quantified targets to reduce GHG emissions in relative or absolute terms (Scopes 1, 2 and 3) and report on performance against these.
- Become a member of relevant “green indices” e.g. ESG Indexes, FTSE4Good Index, the STOXX Global ESG Leaders Index and the Dow Jones Sustainability Index.
Implementation
- Obtain independent verification of the calculation of 2021 GHG emissions assertion, in accordance with industry recognised standard ISO 14064-3.
- Engage with external Scope 3 reporting experts to support the development of a reporting methodology and to establish a Scope 3 baseline and collect Scope 3 emissions related data across all the contractor’s supply chain.
- Obtain data from a wide variety of sources impacting the contractor’s operations including capital investment data, green capex forecasts, EU taxonomy KPIs, greenhouse gas emissions, climate change science data, costs of exceptional physical events, network reliability, climate transition pathways and customer feedback.
- Develop and employ measurement methodologies in line with recognised guidance for contracting companies working in the contractor’s markets.
- Plan to phase out the use of EEIO conversion factors over time and phase in the use of actual carbon data taking into account that every project is different and effectively has its own supply chain.
- Look for supplied from renewable electricity supplies backed by REGOs. Where REGOs are not available, apply a residual mix emission factor. Calculate CO2 emissions from other activities using appropriate emission factors and in line with the World Resources Institute Greenhouse Gas Protocol (Revised Edition).
- Calculate Scope 2 emissions from electricity in line with the location-based method of the 2015 World Resources Institute Greenhouse Gas Protocol Scope 2 Guidance, using International Energy Agency (2021) Emissions Factors (published in 2021) and eGRID2019 Summary Table for emissions factors (published in 2020) or any other best practice methodology for calculation of emissions from electricity.
- Calculate Scope 3 emissions estimations in line with the GHG Protocol's Scope 3 Standard and the relevant GHG Protocol's Scope 3 Standard for companies supplying materials (e.g. cement, timber and concrete), using the UK government 'GHG conversion factors for company reporting 2021' and other relevant emissions categories for the contractor’s operational activities.
- Ensure that the contractor’s supply chain provide life cycle assessment data and verified Environmental Product Declarations (EPDs) for products being supplied to the contractor.
Risk
- Identify and publish metrics to include climate-related risks and opportunities associated with water, energy, land use and waste management.
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Leader: doing, making a difference
Governance
Disclose the organisation's governance around climate-related risks and opportunities
Leadership
- Climate action is an integral part of business strategy and risk management, driven by the board, with implementation through an organisation-wide governance structure.
- Climate-related risks to be discussed/reported to the board with the same frequency as health and safety risks.
- Board has capacity and competence to respond to climate-related risks and opportunities effectively (including connected issues of technology and innovation), to set the contractor’s climate strategy, set targets and review progress.
- Risk management and audit committee reviews group level climate-related risks periodically and oversees climate-related financial disclosures.
- Contractor leads and also participates in various cross-industry initiatives in connection with its climate-related risks and opportunities impacting its business.
- Remuneration and financial incentives for executives are linked to progress towards achieving short, medium, and long-term climate targets.
Implementation
- Clear system and reporting structure in place for implementation of the contractor’s climate strategy by all divisional teams and opportunity to work collaboratively across divisions and functions on issues in connection with the detailed delivery of the climate strategy and to jointly review progress of contractor-wide projects and initiatives.
- Active engagement with whole supply chain on carbon reduction and climate risk mitigation.
Risk
- Climate-related risks and opportunities are integrated into standard board agendas and take into account all broad strategic fields which may be impacted e.g. capital investment, financial planning, remuneration, mergers, acquisitions and divestures.
- Have a system in place for internal controls, to ensure any emerging risks and uncertainties are taken into account in the company’s accounting judgments, disclosures, processes, audit and financial statements.
- Implementation of a reporting and governance system to apply to individual projects, to ensure transparency and consistency in treatment of project specific climate-related risks.
Strategy
Disclose the actual and potential impacts of climate-related risks and opportunities on the organisation’s businesses, strategy and financial planning where such information is material
Leadership
- Obtain verification by the Science Based Targets initiative (SBTi).
- Describe and publish the resilience of the contractor’s strategy to deal with different climate-related scenarios, including a 2°C or lower scenario.
- Provide extensive data on performance through public submissions to Climate Disclosure Project (CDP), TCFD and any other ESG disclosures to investors. This will include data on climate change, as well as both water and supply chain management.
- Be a role model for others through vocal advocacy for action on climate change and collaboration with peers and other stakeholders to achieve change.
- Convert revolving credit facility (RCF) to a sustainability linked loan. Under the terms of the loan, incentives to deliver annual measurable performance improvement in three key areas: carbon emissions, social value generation, and an independent ESG rating score as determined by Sustainalytics.
Implementation
- Progress short-term activities on a high priority and consistent basis and have short-term activities updated regularly to maintain focus and ensure progress.
- Implement plans for and invest in the progression of medium-term activities on a high-priority and consistent basis and have medium-term activities updated regularly to maintain focus and ensure progress.
- Plan for achieving long-term deep decarbonisation of the contractor’s end to end business to ensure ability to operate in a net-zero operating environment including, as appropriate:
- wide adoption and broad technical understanding and expertise on advanced materials and green construction methodologies;
- building contracting expertise and credentials in renewable energy, hydrogen and carbon capture technology projects.
- Use this to update short and medium term priorities on an ongoing basis.
- Participate in pilot projects for use of hydrogen, carbon capture and storage.
- Invest in developing and growing deep expertise and broad capacity in renewable energy, electrification and emerging technologies (including hydrogen and carbon capture).
- Implement specific mitigation measures required to strengthen climate resilience across key operating locations.
- Support the circular economy through active support and participation of industrial application of programmes for increased recycling, reuse and reduction of waste including a robust sustainable procurement strategy which guides what to buy, who from, and work with supply chain partners that share values on the reduction of sending materials to landfill and the preference for reuse of materials.
- Ensure all procurement and bid teams are able to clearly articulate carbon impact of all bid solutions.
- Use an internal carbon price in relevant capital expenditure approval and strategic planning processes, with the aim of directing investments towards efficiency, optimisation and lower-carbon solutions.
- Invest in research, development and testing of more sustainable manufacturing methodologies and green materials.
- Engage, support and incentivise supply chain to make significant carbon reductions through a sustainable procurement programme.
- Have a dedicated team focusing on the ongoing reduction of environmental impact of the business and its assets and not just the reduction to net zero.
- Positive discrimination for use of innovative technologies and lower carbon materials on on-site operations such as low carbon asphalt.
- Improving the fuel efficiency of fleet by introducing fully electric vehicles, installing electric vehicle charging points and expanding electric plant options.
- Commitment to ongoing innovation in low carbon construction processes including temporary construction design across the contractor’s portfolio of projects.
- Implement robust reporting system to track savings in CO2 emissions across site cabin portfolio each year.
- Change design methodology to save on the number of bricks and the amount of steel used.
- Increased investment in BIM capability and development of new business models to enable contractor to support clients in more effective upfront low carbon design solutions and more accurate embodied carbon forecasting before construction commences.
Risk
- Update and maintain the short, medium and long-term priorities, plans and activities identified to deal with climate-related risks and opportunities.
- Integrate scenario analysis outcomes into process for updating investment strategy and business plan and test resilience of investments and portfolios to cope with selected scenarios.
- Identify the financial investment that the business is going to make in managing climate-related risks and opportunities over the short, medium and long term.
Risk management
Disclose how the organisation identifies, assesses and manages climate-related risks
Leadership
- Ensure all climate-related risks are registered on the risk register, updated on an ongoing basis and fully integrated into overall risk management and governance processes.
- Consider transition risks and ensure that they are factored fully and consistently into future financial long-term forecasts for those areas of the balance sheet whose recoverability is assessed based on expected future cash flows, including property, plant and equipment, expansion assets in the course of construction, intangible assets, investment properties and deferred tax assets.
- Executive leadership team are supported by the risk champions across the business who are tasked with maintaining awareness of key risks and control measures.
Implementation
- Introduce climate component to procurement processes with pre-acquisition due diligence and in vendor reports prior to an exit.
- Implement ERM process for managing climate-related risks on an on-going basis across contractor's operations including through the training of staff and the integration of early warning indicators and mitigation strategies into the contractor’s risk management governance procedures.
- Outline in strategy plans all risk management actions and execution plan for each of the identified climate-related risks.
- Identify the 'carbon cost to be passed to clients where this is needed to drive awareness and action in innovation and investments in decarbonised assets.
- Develop risk management strategies to improve resilience with prioritisation of risks done through a collaborative process on an ongoing basis, taking into account that the risk and potential opportunities will change over time.
- Define and support the action plan to strengthen climate resilience at asset level.
- Developed contracting expertise in the migration and management of climate-related risks on projects.
- Introduce climate component with pre-acquisition due diligence and in vendor reports prior to an exit.
- Integrate measures around risk and opportunity into the business strategy for all of the contractor’s operating divisions to guide activities and progress.
- Executive leadership team is supported by risk champions across the business, who are tasked with maintaining awareness of key risks and control measures.
Risk
- Identify the contractor’s ongoing approach for measuring how climate-related risks are prioritised using risk assessment tools.
- Complete risk analysis and continue to monitor specific climate-related risk at key operating locations (including impact on supply chain, logistics and operation), using globally accepted climate change scenarios.
- Complete risk analysis and continue to monitor transition risks impacting contractor’s business including the use of green materials, impact of carbon pricing on profitability, risk of increased regulation and potential for non-compliance with net zero carbon operating environment.
- Identify climate change induced physical risks in the form of supply chain disruption including potential delays due to adverse weather conditions as well as capital project delays including unplanned costs and loss of production.
- Assess financial impact of executing actions for addressing climate-related risks as identified in strategy over time horizons that allow for appropriate financial planning by the contractor.
- Define and support action plan to strengthen climate resilience at asset level, if needed.
Metrics & targets
Disclose the metrics and targets used to assess and manage relevant climate-related risks and opportunities where such information is material
Leadership
- Adhere to the United Nations Science Based Targets initiative and follow guidance from Intergovernmental Panel on Climate Change (IPCC).
- Utilise metrics to assess climate-related risks and opportunities in line with the organisation's strategy and risk management process.
- Use appropriate science targets to manage climate-related risks and opportunities, which take account of the specific profile of the ontractor’s business and refine and update the optimum methodology to monitor performance against these targets.
Implementation
- Provide assurance of contractor’s reported GHG emissions against International Standards on Assurance Engagements.
- Implement ISO 14001-certified Environmental Management System and Environmental Sustainability Standard.
- Measure and report in accordance with the World Resources Institute and World Business Council on Sustainable Development Greenhouse Gas Protocol.
- Regular verification of methodology for measurement of emissions against relevant best industry standard(s) applying to all aspects of business.
- 100% of Scope 1, 2 and 3 emissions independently assured against ISAE 3410 Assurance Engagements on Greenhouse Gas Statements.
- Collect and report data complying with the UK government’s Streamlined Energy and Carbon Reporting (SECR) requirements.
- Collaborate with contractor’s supply chain and customers to enable the tracking, collection and sharing or actual carbon data.
- Develop and implement systems to track and report on actual carbon emissions data.
- Report on all construction sites and both permanent and temporary offices.
- Obtain third party certification of performance against targets on all projects.
- Use both location and market-based approaches to measuring energy emissions depending on the circumstances.
- When renewable energy is used, use the market-based method to reflect the emissions from renewable electricity tariffs that a company has chosen to purchase that are backed by Renewable Guarantees of Origin (REGO) certificates.
- Use an intensity ratio to track emissions against turnover.
Risk
- Undertake further research and analysis to better understand and measure how climate-related issues translate into potential finance impacts for the business.
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