Out-Law News 2 min. read

Global infrastructure companies home in on decarbonisation

Construction site with cranes on silhouette background

A majority of global infrastructure firms see decarbonisation as “extremely or critically important” for their business, according to research by Pinsent Masons, the law firm behind Out-Law.

Pinsent Masons surveyed 150 construction businesses as part of the annual exercise, almost two thirds of which principally focus on work outside of the UK. Nearly half of respondents said that they were seeking to operate in new jurisdictions over the next 12-18 months, despite the challenges faced by the industry as a result of the Covid-19 pandemic.

Asked for their top three areas of concern in relation to decarbonisation, 63% cited the design and construction phase, while 52% cited the need for increased recycling and 50% more engagement with the supply chain. Others pointed to procurement practices as an area where improvements could be made, with 41% anticipating the use of new contracts and key performance indicators (KPIs) by clients over the next two years.

Survey respondents also indicated increasing involvement in joint ventures (JVs) when compared to last year’s figures, as well as support for industrialising the construction process through digitalisation, collaborative ways of working and modular construction. However, most respondents are not expecting that these changes will lead to dramatic productivity improvements in the coming decade.

Laing Ian

Ian Laing

Partner, Head of Infrastructure and Head of Office, Singapore

The opportunities and challenges experienced by the sector are consistent across the globe. Rising to these challenges will require a collaborative, strategic effort across geographies, as well as tactical responses specific to markets or jurisdictions.

Infrastructure law expert Ian Laing of Pinsent Masons said that the infrastructure sector would play an essential part in the global economic recovery.

“The truly global nature of the infrastructure sector is reflected in the fact that the opportunities and challenges experienced by the sector are consistent across the globe,” he said. “Rising to these challenges will require a collaborative, strategic effort across geographies, as well as tactical responses specific to markets or jurisdictions.”

The global focus among respondents was reflected in the number that had either been involved in a JV in the last 12 months or that anticipated entering into a JV in the coming 12 months: over 60% of respondents answered in the affirmative; compared to around 36% last year. Almost 40% of respondents cited the ability to share risk with JV partners as their primary reason for doing so, although employer requirements, access to a more diverse supply chain and jurisdictional advantages were also commonly cited.

Separately, regulatory concerns and skills shortages were listed as the greatest obstacles for businesses to overcome when considering work outside their domestic market.

“The results of our survey show that infrastructure players anticipate involvement in JVs more than ever in the next 12 months, either to dilute risk or because project owners demand it either through their procurement process or because the combination of skills within the JV will make the bid more likely to be successful,” said Hong Kong-based infrastructure expert Vincent Connor of Pinsent Masons. “These are all legitimate reasons but we suggest that in the interests of the sector, greater emphasis should be placed on the last reason – rather than joint venturing to spread risk or for capacity reasons, or just because it is required.”

“This would mean that JVs are formed so that the propositions developed are not only more compelling, but draw together a combination of skills – particularly infrastructure and technology – which meet the increasingly complex demands of projects but also hopefully create longer term, sustainable relationships which are not focused simply on delivery of a single project,” he said.

Over 70% of surveyed firms are currently thinking about developing a strategy for industrialising their construction processes, broadly consistent with last year’s findings. Respondents expect this shift to involve more and better uses of technology; more collaborative working practices; improving procurement processes and contracts to account for off-site and automated construction; and new and more diverse skills among the workforce. Most respondents anticipate that increased automation will lead to productivity improvements of between 5% and 20% over the next decade.

Technology-enabled infrastructure expert Anne-Marie Friel said: “Digitalisation of construction and technology enabled processes are key to enabling more widespread industrialisation of construction, as innovation is only successful when it combines the right mix of people, process and technology to effect real change”.

“The focus should remain on removing any remaining commercial, legal and cultural barriers to encourage collaboration and data sharing for the public good,” she said.

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