Sustainability has become a pressing global issue, and as responsible industry leaders, it is essential for us to address the environmental, social, and economic aspects of our projects. By adopting sustainable practices, we can create lasting positive impacts on the environment, enhance the well-being of communities, and drive long term profitability.
In this special feature, we focus on sustainability in the construction industry in the Kingdom of Saudi Arabia.
KEO International Consultants
Capitalizing on Sustainability: The Rise of ESG Principles in Saudi Giga-Projects By Loubna Haddad, Regional Manager ESG Solutions at KEO International Consultants
With Saudi Arabia’s Vision 2030 placing sustainability at the heart of the Kingdom’s future, the role of ESG (Environmental, Social, and Governance) principles in the construction industry has never been more crucial. In a world where investors, stakeholders, and society at large increasingly demand sustainable business practices, the construction and infrastructure sector, particularly giga-projects, should adapt and embrace this new reality.
Saudi Arabia, a center of such ambitious undertakings, is driving a transformative agenda focused on the dedicated pursuit of sustainable development, supported by a robust regulatory landscape.
The shift towards ESG principles is not merely a passing trend. It signifies a paradigm shift in how the investment community, regulators and stakeholders view the responsibility of businesses in addition to the increased sustainability standards that their real estate and infrastructure assets are achieving. This focus derives from the understanding that businesses integrating ESG principles contribute to global sustainability goals while demonstrating enhanced risk management, operational efficiency, and stakeholder relations. In the construction industry, where environmental footprints and societal impacts are significant, the link between ESG performance and business success becomes particularly important.
So, what does ESG integration mean for the construction industry? Essentially, it involves incorporating sustainability into every phase of the project lifecycle – from conception and design to construction and operations.
Environmentally, this means adopting strategies, best practices and ensuring third-party certification by recognized green standards and alignment with environmental risk management frameworks. Such practices include the improvement of energy efficiency, using renewable energy sources, and utilizing sustainable materials, coupled with minimizing waste and conserving water. It also involves preserving local biodiversity and designing projects resilient to changing climate conditions. These methods, alongside principles of circular economy, contribute to the design of infrastructures that minimize waste and reduce environmental impact throughout their lifecycle.
The opportunity to adopt sustainable practices and cutting-edge technologies to reduce environmental footprints has never been greater. For example, incorporating innovative and smart monitoring and operational optimization technologies, BIM Building Information Modeling with Digital Twins, and the latest solutions in renewable energy systems into the project design phase can enable the development of efficient buildings right from the start and maximize the long-term functionality of the asset. Nowadays, a digital representation of physical and functional characteristics can optimize the use of energy resources, reduce waste, and improve overall environmental performance throughout the supply chain and delivery. In the realm of giga-projects, this has the potential to considerably diminish the carbon footprint at an impressive scale. Furthermore, strategies such as centralized water recycling systems and the use of drought-resistant landscaping can aid in water conservation. The integration of green and blue spaces can help sustain local biodiversity, adding ecological value to the urban expanse of all new developments.
Socially, ESG integration involves ensuring that projects align with the welfare of local communities. This includes engaging stakeholders from the early stages of project planning, providing safe and fair working conditions, supporting local economies, and contributing to social infrastructure.
Active community engagement can help identify potential social impacts and collaboratively develop mitigation strategies. Moreover, the construction industry can support local economies by promoting local hiring and procurement, boosting local employment and business growth. Mega and Giga-projects, due to their scale, can create significant opportunities for job creation and economic stimulation. Furthermore, the construction industry, being a major employer in the region, has a key role in enhancing worker welfare and safety. They can also contribute to social infrastructure, such as local schools, hospitals, and other community facilities, enhancing the quality of life for local populations.
In terms of governance, ESG integration involves operating with robust transparency, ethical business practices, and strong corporate governance structures. Within the regulated landscape of the GCC region, the adoption of best practices in corporate governance is a necessity. This means compliance with all relevant regulations, meeting international standards, and demonstrating accountability to all stakeholders.
Effective governance includes transparency in all aspects, from procurement and supply chains to the overall environmental and social performance of a project. Ethical business practices include maintaining a corruption-free environment, respecting the code of conduct, and empowering the workforce. With projects of the scale of giga-projects, the importance of robust governance is amplified and stringent checks and balances are needed to ensure high standards of ethical conduct and regulatory compliance.
1What reinforces the case for ESG integration? Take for instance a study from the University of Cambridge, which found that Real Estate Investment Trusts (REITs) with higher Global Real Estate Sustainability Benchmark (GRESB) scores significantly outperform their peers in terms of returns. In essence, they found that each 1 percent increase in a REIT’s historic GRESB scores had led to a rise of approximately 1.3 percent in return on assets (ROA) and about 3.4 percent in return on equity (ROE). This strengthens the case for the financial benefit of sustainability engagement in the real estate and construction industry.
2Furthermore, the MSCI’s ESG Factor Returns review highlighted that a sample of companies, which score in the top ESG quintile consistently outperformed those in the bottom quintile over 5-year periods within the MSCI ACWI Investable Market Index. This illustrates the strategic advantage and long-term value of integrating ESG principles into business operations.
At KEO International Consultants, we are proud to lead the way in the transition towards ESG integration in giga-projects. Our holistic approach to sustainable design and construction considers the environmental impact of the projects we advise on, their potential for social value, and the governance mechanisms vital for their success.
Our team of dedicated sustainability professionals provides consultancy and support services to clients throughout the project lifecycle. We assist in the design of energy-efficient structures, advise on the use of sustainable construction materials, support stakeholder engagement processes and offer guidance on regulatory compliance. Our goal is to ensure construction projects meet their functional needs while also contributing net-positively to the environment and society, thereby attracting ESG-focused investors.
Looking ahead, we foresee an even stronger integration of ESG principles. There’s no doubt that the future of the Saudi construction industry is interwoven with the implementation of ESG principles. We believe that ESG presents more than just a challenge to overcome; it represents a wealth of opportunities to be explored. Those companies that can harness ESG’s potential will emerge as industry leaders, paving the way for sustainable growth in Saudi Arabia and beyond.
Today, as we stand on the brink of a sustainable era in the construction industry, it is imperative for all of us to reevaluate and redesign our approach. By weaving ESG principles into our business models and operations, we can make sustainability the cornerstone of these projects, ensuring not just their success, but also a future where both the industry and our planet can thrive.
Join us in embracing the power of ESG, and together let us create a sustainable construction industry that creates shared value for all.
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