General Issue Category
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Disclosure Topics (industry specific) for:
Engineering & Construction Services

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Ecological Impacts

Environmental Impacts of Project Development

Infrastructure construction projects help improve economic and social development; however, they can also pose risks to the local environment and surrounding communities. Industry activities can disrupt local ecosystems through biodiversity impacts, emissions into the air, water discharges, natural resource consumption, waste generation, and the use of hazardous chemicals. In particular, construction companies perform clearing, grading, and excavation activities and may generate harmful waste during project construction. Effectively assessing environmental impacts prior to construction may help mitigate unforeseen issues that can raise operational and capital costs. In some cases, environmental concerns and/or local community pushback can result in project delays and, in extreme cases, project cancellations, which may impact a company’s profitability and growth opportunities. A failure to comply with environmental regulations during construction can result in costly fines and remediation costs, and can damage a company’s reputation. Environmental impact assessments can provide an understanding of a project’s potential environmental impacts and the mitigation activities that may be necessary before it begins. Likewise, proper management of environmental risks during project construction can reduce regulatory oversight and/or community pushback. By assessing environmental considerations up front, as well as continuing to evaluate them during project development, engineering and construction companies may be better prepared to mitigate the potential environmental issues and financial risks that may occur, while also establishing a competitive advantage for obtaining new contracts with prospective clients.

Product Quality & Safety

Structural Integrity & Safety

Whether providing engineering, design, architectural, consulting, inspection, construction, or maintenance services, companies in this industry have a professional responsibility to ensure the safety and integrity of their work. Errors or inadequate quality in the project design phase and construction of buildings or infrastructure can cause significant personal injury, loss of property value, and economic harm. Companies that perform poorly on structural integrity and safety can therefore face potentially high costs due to redesign and/or repair work and legal liabilities, as well as reputational damage that could hurt growth prospects. Moreover, when designing and constructing buildings or infrastructure, companies in the industry must increasingly contemplate potential climate change impacts, which may affect the structural integrity of projects and the safety of the general public. Compliance with minimum applicable codes and standards may not be sufficient for maintaining and growing reputational value (or even mitigating legal liabilities) in certain circumstances, especially if the frequency and severity of climate-change-related events increases as expected. Meeting or exceeding new industry standards for quality and establishing internal control procedures to address potential design issues, including those resulting from climate risks, are practices that can help companies reduce these risks.

Employee Health & Safety

Workforce Health & Safety

Construction, maintenance and repair services, and other on-site activities require a substantial amount of manual labor. Fatality and injury rates in the Engineering & Construction Services industry are high compared with those in other industries as a result of the workforce’s exposure to powered haulage and heavy machinery accidents, fall accidents, exposure to hazardous chemicals, and other unique and potentially dangerous situations. Additionally, temporary workers may be at a higher risk due to lack of training or industry experience. Failing to protect worker health and safety can result in fines and penalties; serious incidents can lead to acute, one-time extraordinary expenses and contingent liabilities from legal and/or regulatory actions. In addition, health and safety incidents can result in project delays and downtime that raise project costs and lower profitability. Companies that seek to properly train both permanent and temporary employees and build a strong safety culture could reduce their risk profile while potentially gaining a competitive advantage in new project bids and proposals as a result of strong workforce health and safety track records.

Product Design & Lifecycle Management

Lifecycle Impacts of Buildings & Infrastructure

Buildings and major infrastructure projects are among the largest users of natural resources in the economy; during construction, these materials include iron and steel products, cement, concrete, bricks, drywall, wallboards, glass, insulation, fixtures, doors, and cabinetry, among others. Once completed, and during their daily use, these projects often consume significant amounts of resources in the form of energy and water (for a discussion on direct environmental impacts from project construction see the Environmental Impacts of Project Development topic). Therefore, the sourcing of construction materials and the everyday use of buildings and infrastructure can contribute to direct and indirect greenhouse gas (GHG) emissions, global and/or local resource constraints, water stress, and negative human health outcomes. Client and regulatory pressures to develop a sustainable built environment are contributing to the growth of markets intended to reduce the lifecycle impacts of buildings and infrastructure projects. In response, various international sustainable building and infrastructure certification schemes have been developed to assess, among other aspects, a project’s use-phase energy and water efficiency, impacts on human health, and the use of sustainable construction and building materials. As a result, multiple opportunities are being created for industries in the value chain—from suppliers that can provide such materials, to companies in the Engineering & Construction Services industry that can provide sustainability-oriented project design, consulting, and construction services. Such services can provide a competitive advantage and revenue growth opportunities as client demand for economically advantageous sustainable projects increases and related regulations evolve. Companies unable to effectively integrate such considerations into their services may stand to lose market share in the long term.

Climate Impacts of Business Mix

The Engineering & Construction Services industry works with clients that are exposed to potentially disruptive climate regulation as well as those that play a role in addressing climate change. Certain types of construction projects are significant contributors toward climate change due to the greenhouse gases (GHGs) emitted during their use phase. Projects that are likely to contribute to global GHG emissions include those in the oil and gas space and other extractives industries, as well as large buildings. While some infrastructure projects, such as renewable energy projects, are designed to reduce GHG emissions, many types of projects present trade-offs. Mass transit systems, for example, may be direct contributors of GHG emissions while lowering net emissions once the benefits offered by the system are factored in. Several companies in the industry generate a substantial share of revenues and profits from clients in carbon-intensive industries and whose future capital expenditures may be at risk due to evolving climate regulations. Downside risks may manifest through project delays, cancellations, and diminished long-term revenue growth opportunities. On the other hand, companies that specialize in infrastructure projects that contribute to GHG mitigation could develop competitive advantages as they continue to focus on these growing markets. As the industry and its customers continue to operate within an uncertain business environment and face increasing environmental and regulatory requirements, assessing and communicating the risks and opportunities stemming from climate change that are embedded in a company's backlog and future business prospects can be helpful for investors in assessing the overall impact of climate change on the business.

Business Ethics

Business Ethics

Companies in the industry face risks associated with bribery, corruption, and anti-competitive practices. This is due to several factors, including the global operations of many companies, the need to manage multiple local agents and subcontractors, the complexity of project financing and project permitting, the magnitude of the contracts involved in building large infrastructure projects, and the competitive process necessary to secure contracts with private and public entities. Ethical breaches can result in investigations by authorities, as well as large fines, settlement costs, and damaged reputations. Such breaches may include violations of anti-bribery laws, such as paying government officials in order to gain project contracts. They may also include unethical bidding practices, such as complementary bidding (e.g., submitting an artificially high or otherwise unacceptable bid for a contract that a bidder does not intend to win) and bid-pooling (e.g., coordinating to split contracts and assure each bidder is awarded a certain amount of work). Moreover, companies with poor track records can be barred from working on future projects, resulting in lost revenue. Developing an ethical culture through employee training, effective governance structures, and internal controls is critical for companies to mitigate risks associated with business ethics.

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