in the Engineering and Construction Sector
FEATURED PAPER
By Bob Prieto
Chairman & CEO
Strategic Program Management LLC
Florida, USA
Introduction
ESG stands for Environmental, Social, and Governance. It is an approach for evaluating the extent to which a corporation works on behalf of environmental and broader social goals. This focus is in addition to its role to maximize profits on behalf of its shareholders.
Investors are increasingly applying these non-financial factors to identify material risks and growth opportunities. As such ESG risks are a key component of any Enterprise Risk Management (ERM)[i] program. Companies are increasingly making disclosures in their annual report or in a standalone sustainability report and these disclosures and reports are of increasing interest to clients, regulators, and staff.
Throughout this paper we look at these risks both as they are encountered in engineering and construction projects but also in turn by the enterprises that undertake them. The project nature of the engineering & construction industry makes this class of risks both important at the project and enterprise levels. These risks permeate the entire project value chain.
Definition of Environmental, Social, Governance (ESG)
Prior to defining ESG it is useful to consider some other terms such as sustainability and the triple bottom line which have been around for several years.
“In the broadest sense, sustainability refers to the ability to maintain or support a process continuously over time. In business and policy contexts, sustainability seeks to prevent the depletion of natural or physical resources, so that they will remain available for the long term.”[ii] Sustainability is made up of three pillars: the economy, society, and the environment. These principles are also informally used as profit, people, and planet. Sustainability stresses intergenerational equity.
The Triple Bottom Line is a concept that closely relates to sustainability, and seeks to measure performance against profit, people, and planet. The result is three bottom lines. “The concept behind the triple bottom line is that companies should focus as much on social and environmental issues as they do on profits.”[iii]
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How to cite this paper: Prieto, R. (2022). Environmental, Social and Governance Risks in the Engineering and Construction Sector, PM World Journal, Vol. XI, Issue VI, June. Available online at https://pmworldlibrary.net/wp-content/uploads/2022/05/pmwj118-Jun2022-Prieto-ESG-Risks-in-the-Engineering-and-Construction-Sector.pdf
About the Author
Bob Prieto
Chairman & CEO
Strategic Program Management LLC
Jupiter, Florida, USA
Bob Prieto is a senior executive effective in shaping and executing business strategy and a recognized leader within the infrastructure, engineering, and construction industries. Currently Bob heads his own management consulting practice, Strategic Program Management LLC. He previously served as a senior vice president of Fluor, one of the largest engineering and construction companies in the world. He focuses on the development and delivery of large, complex projects worldwide and consults with owners across all market sectors in the development of programmatic delivery strategies. He is author of nine books including “Strategic Program Management”, “The Giga Factor: Program Management in the Engineering and Construction Industry”, “Application of Life Cycle Analysis in the Capital Assets Industry”, “Capital Efficiency: Pull All the Levers” and, most recently, “Theory of Management of Large Complex Projects” published by the Construction Management Association of America (CMAA) as well as over 800 other papers and presentations.
Bob is an Independent Member of the Shareholder Committee of Mott MacDonald and a member of the board of Dar al Riyadh. He is a member of the ASCE Industry Leaders Council, National Academy of Construction, a Fellow of the Construction Management Association of America, and member of several university departmental and campus advisory boards. Bob served until 2006 as a U.S. presidential appointee to the Asia Pacific Economic Cooperation (APEC) Business Advisory Council (ABAC), working with U.S. and Asia-Pacific business leaders to shape the framework for trade and economic growth. He is a member of the Millennium Challenge Corporation advisory board where he had previously served. He had previously served as both as Chairman of the Engineering and Construction Governors of the World Economic Forum and co-chair of the infrastructure task force formed after September 11th by the New York City Chamber of Commerce. Previously, he served as Chairman at Parsons Brinckerhoff (PB) and a non-executive director of Cardno (ASX).
Bob serves as an honorary global advisor for the PM World Journal and Library and can be contacted at rpstrategic@comcast.net.
To view other works by Bob Prieto, visit his author showcase page in the PM World Library at https://pmworldlibrary.net/authors/bob-prieto/
[i] Prieto, R. (2022). Enterprise Risk Management in the Engineering and Construction Industry, PM World Journal, Vol. XI, Issue V, May.; https://www.researchgate.net/publication/360449837_Enterprise_Risk_Management_in_the_Engineering_and_Construction_Industry
[ii] Sustainability; Investopedia; https://www.investopedia.com/terms/s/sustainability.asp#:~:text=In%20the%20broadest%20sense%2C%20sustainability,available%20for%20the%20long%20term.
[iii] Triple Bottom Line, Investopedia; https://www.investopedia.com/terms/t/triple-bottom-line.asp
