Sustainability Is Driving Major Change Within The Construction Supply Chain

It’s quite clear today that the drive toward greater sustainability, including resource conservation and energy efficiency, in North America and other parts of the world is occurring at a much faster pace than many experts predicted. Sustainability is now driving a rapidly growing percentage of infrastructure, commercial and residential projects that are defined and funded by local, state/provincial and federal governments as well as public institutions and private enterprises.

The definition alone helps explain why: Sustainable construction projects improve the environmental, social and economic impact while reducing project construction and lifecycle costs.

As a result, sustainability is now seriously impacting every level within the construction supply chain, including:

• Architects, government, public and private engineers and design-build firms
• General contractors, subcontractors and specialty contractors
• Finished and virgin material processors and producers
• Equipment manufacturers and technology providers that serve targeted or multiple levels within the supply chain

In fact, the quest for sustainability is starting to turn the traditional supply chain process upside down by requiring suppliers at all levels to expand their view of who their customers are while accepting new levels of transparency, specifications, products, technologies and construction practices.

To explain this new paradigm, we need to see how sustainability-driven projects require a serious shift in the supply chain mentality. No matter where the supplier exists within the chain and who he perceives are his customers, sustainable projects demand that his customer base includes the government, public or private owner who defines and funds each project, as well as the architects, engineers and design-build firms and all the other suppliers that must employ and benefit from his sustainable value.

While any supplier may sell to the next level up, or to multiple levels, as is often the case with equipment and technology suppliers, his operation and products produced must contribute to and provide a sustainable value for the ultimate customer—the government, public or private owners who define and fund projects. If not, his customers may have to consider suppliers that do provide a sustainable value or they might also prove to be unsuccessful.

When it reaches the contractor level, sustainability begins to seriously affect which contractor will win the bid. With sustainable projects, it is more likely that the lowest bidder will not provide enough sustainable value to win the bid unless all his suppliers and their suppliers contribute significantly along the way.

For example, if a road contractor is bidding on an Illinois-Livable and Sustainable Transportation project, then his bid could be chosen over lower bids if his approach fits the projects sustainability goals better. To achieve this, here is an oversimplified, but realistic approach a contractor could take where his suppliers and their suppliers all contribute.

1. Hire a portable recycle asphalt or concrete crushing contractor to remove and re-size the existing road surface and base for use again as base and/or as a percentage of his new asphalt production.
2. Produce asphalt mix using a portable green foam asphalt plant to meet very stringent emissions standards, reduce heated oil-based emulsion use and deliver performance specs.
3. Use a portable plant to lessen the number of haul trucks and the distance they travel to reduce fuel consumption and air pollution.
4. Employ more sustainable paving equipment and methods of paving.
5. Use hydrogen-fueled light towers and solar-powered message boards.
6. Stripe the new road with non-toxic, biodegradable paint.
7. Use recycled steel for the road barriers.

In this example, every step within the contractor’s supply chain had to provide a sustainable value or he probably would have chosen other suppliers that did in order to meet the requirements of the project. This leads to another critical element within the new supply chain paradigm—transparency.

Today, sustainability-driven projects demand full disclosure and accountability throughout the supply chain meaning that every supplier must know the value that his suppliers and their suppliers bring to the table. A second issue is what percentage of each supplier’s product, equipment or technology is locally sourced with respect to the project’s location. This could prove to be another major paradigm shift in the future as project requirements increase the demand for more local sourcing.

So the big question often asked is: Why should equipment and technology suppliers care? Here’s a short list of reasons:

1. Adding Or Detracting Value – Throughout the supply chain, equipment and technologies will be evaluated in the same manner as raw and finished material suppliers, construction practices employed, all contractors and even the architects, engineers or design-build firms chosen for each project. Equipment and technologies will either be perceived as adding value to the sustainability of a project or detracting from it based on the project’s goals.
2. Impacting Bid Selection – Throughout the supply chain, customers will be reviewing their suppliers somewhat differently and more intently. Quality, price and delivery will remain important, but so will how each vendor and his vendors contribute to sustainability in his bid. Adding a greater sustainability value than competitors could become the key deciding factor.
3. Premium Market/Competitive Advantage – As an equipment or technology supplier, the rapidly expanding sustainable construction market opens up a larger premium market segment, as well as potentially providing a strong competitive advantage that is not driven by price.
4. Credible Sustainable Rating Systems – Across most construction industry segments within North America and other parts of the world, the sustainability movement is spawning numerous highly detailed and effective construction project rating programs. Many exist today and many more are under development on local, state and federal levels as well as independently through industry segment associations and private enterprise.
   • The U.S. Green Building Council’s (USGBC) Leadership In Energy & Environmental Design (LEED) for sustainable building projects has 37,000 certified architects that must renew their credentials every two years.
   • The National Ready Mix Concrete Association’s (NRMCA) Green-Star Program has close to 200 certified concrete plants in the U.S. that meet very stringent sustainability requirements, and that number is growing quickly.
   • The newly formed Institute for Sustainable Infrastructure (ISI) is an independent, non-profit organization founded by the American Council of Engineering Companies (ACEC), the American Public Works Association (APWA) and the American Society of Civil Engineers (ASCE). Its goal is to “develop and administer a sustainable rating system for North American Infrastructure” that will be formally launched in the summer of 2011.
   These are just three examples of the independent groups representing strong, accountable programs directly linked to sustainability. And there are numerous others in various stages of development, execution and proven performance on the local, state and national levels in North American and globally. For example, since its start in 1991, the USGBC now operates in 91 countries with extensive rating systems for public, commercial and residential construction. Today, it is working on a road certification program as well as continuously fine-tuning its current rating systems.
5. Sustainability Is Positively Reversing Today’s Price Paradigm – Certified architects, engineers, design builders, general contractors and subcontractors who specialize in sustainable design and construction practices have created a competitive advantage that allows them to charge more for their expertise and ability to deliver the sustainable goals of the project owner. The same is now, or will soon be true for every level of the supply chain that conscientiously contributes sustainable value, transparency and accountability. For the first time in many years the construction industry finally has a great, viable opportunity to reverse the trend of reducing costs to remain competitive.
6. Great Humanitarian And Environmental Cause – If nothing else, sustainability-based construction is having a positive effect on people and the planet. Rarely does such an opportunity present itself.

Explore your organization inside and out to determine how you add value to sustainability—environmentally, socially and economically. Research your opportunities, define your values and competitive advantage, then genuinely determine a strategic direction, connect with the appropriate market segment associations and independent programs and communicate them well up and down the supply chain.