Sustainability Management Of Construction Organisations Commerce Essay

Construction is the most significant contributor of most economies in terms of GDP and employment but it is also has a major contribution towards problems of global warming and climate change . With the growing public awareness about sustainability the behaviour and actions of construction organisations in relation to sustainability have become a important issue. Sustainbility by defenition requires reducing the impacts of human development on the exsisting physical and social structure of the society and its natural systems (khalili, 2011).In Australia it is generally been accepted that sustainability needs to be the top priority of businesses; however in practice many oraganisations struggle to embrace and implement sustainability beyound minimum compliance (Chiveralls, 2011).

There is a greater need for construction organisations to manage their sustainability performance especially in changing business environments, effected by many interrelated factors such as: fluctuating construction demand (Gruneberg, 2009); changing procurement trend (Cartlidge, 2004); changing government priorities toward sustainability (Shen and Tam, 2002); and increasing clients’ expectations and demands on sustainable solutions. Many studies (e.g: Myers,2005; Mills and Glass, 2009; Jones et al., 2010) have been done to investigate the sustainability practices with in construction organisations and it is noted that environmental and social commitments are seen as an extra expense rather than a benefit.

In the past twenty years many frameworks have emerged to manage sustainability in construction, such as environmental management systems (EMS) and corporate social responsibility (CSR). However, managing organisational sustainability is not an easy process as it may require organisations to analyse their business environment and change their strategic endeavour and behaviour, towards adopting sustainable ideas and practices for improved competitiveness.

Sustainability management is emerging as one of the key approaches for organisations to remain viable in a changing business environment; it presumes that that organisations could only contribute to sustainable development if there presents a business case for these contributions (Salzmann et al., 2006). The concept of sustainability management has been well established in the manufacturing and IT industry and researchers have also linked it to competitive advantage (e.g.: Rodrigues et al., 2002; Wagner, 2005), but this link has yet to be proven for construction.

1.2 RESEARCH PROBLEM

There is a growing pressure on construction organisations to place greater emphasis on managing their sustainability performance in order to remain competitive. The concept of sustainability management has attracted interest from many researchers. Schaltegger & Synnestvedt (2002) have examined the relationship between sustainability and economic success and outlined that management is the trigger between these two. This view is in line with Salzmann (2006) who asserted that sustainability management is the key for organisations to remain competitive. Both studies emphasised on the need of industry specific research for sustainability management. Although there have been some studies done to investigate the sustainability practices of construction organisation, in different countries; but it is found that no or little emphasis has been placed on empirically modelling the sustainability management of construction organisations. Researchers have also linked sustainability management to competitive advantage; however there is no evidence of empirical research in the construction domain.

Many studies have examined the influence of individual organisational features on sustainability such as: organisational structure, organisational culture, skills and attitudes of employees, supply chain capabilities, technological capabilities and business strategies. But it appears that little empirical research has been done to examine the collective effect of external business environment and different organisational features on the sustainability performance of construction organisations.

This study argues that it is important to examine the recognized determinants as a group to explore how they influence organisational sustainability performance. Also these determinants could be used to examine the behaviour of other determinants for example, how stakeholder pressure influences the behaviour of employees and in turn how the resultant shapes the sustainability performance. Consequently, it is important to address the following questions:

1. What are the key determinants of sustainability management in construction organisation?

2. How do the key determinants inter-relate with each other to improve sustainability performance?

1.3 GAPS IN THE KNOWLEDGE

Up till now, none or few studies have been done on the sustainability management of construction organisations in Australia. Previous studies have mainly investigated the applications of environmental management systems (EMS) and corporate social responsibility (CSR) (Petrovic-Lazarevic, 2008; 2010) and their effect on sustainability. They do not consider the collective dependence effect of external environmental forces (e.g.: stakeholder pressure; legislation; economic opportunities and threats) and internal organisational feature (e.g.: culture, attitudes, resources, capabilities and strategies) on sustainability performance of construction organisation. It is therefore not known what are the key organisational resources, capabilities and strategies that drive construction organisations’ sustainability performance.

Construction literature also lacks the link between sustainability performance and competitive advantage. Tan et al. (2011) have provided a framework for achieving competitiveness through improved sustainability performance but there is a need to provide empirical evidence for this relationship.

1.4 RESEARCH AIM AND OBJECTIVES

Recognising these gaps in knowledge, the aim of this research is to examine the sustainability management of construction organisations in Australia. Following this aim, the specific objectives are to:

1. Develop and test a framework for sustainability management in construction;

2. Identify the key determinants of sustainability management in construction organisations;

3. Examine the inter-relationships of key determinants of sustainability management; and

4. Investigate the relationship between sustainability management and competitiveness.

1.5 SIGNIFICANCE OF THE RESEARCH

The construction industry plays an important role in any economy and has a significant impact on the other industries as well. Hence governments and stakeholders are making efforts to incorporate sustainability into construction activities. Although sustainability is seen as an indispensable need within Australian construction organisations, there has been a limited research done to analyse the sustainability agenda of construction organisations. This study will contribute to knowledge by investigating the potential application of sustainability management within construction organisations. Firstly it will develop a theoretical framework for studying sustainability management of organisations by integrating four theories. These are: (i) the theory of planned behaviour; (ii) the resource base theory of competitive advantage; (iii) contingency theory; and (iv) stakeholder theory. Therefore this study appears to be the first empirical research to integrate these theories to collectively explain how organisations behave and respond to achieve better sustainability performance.

Secondly, this study will fill the gap in the sustainability management related studies in the construction management literature. Although there are studies on sustainability issues within organisations and there are a number of frameworks available, none of the previous conceptual frameworks allowed for an examination of the inter-relationship between possible determinants of sustainability management. Thirdly, this research will provide the empirical evidence between sustainability management and competitive advantage.

1.6 RESEARCH SCOPE

This study will focus organisational sustainability management of general construction organisations within Australia it will not include mining; plant hire; material production and property development and investment organisations. The target group will be large and medium sized construction organisations. Small sized organisations will not be included because (i) they mainly work as sub-contractors of large and medium sized organisations; (ii) they tend to undertake small repair and maintenance work only; and (iii) they may not exhibit sustainability practices on a comprehensive scale.

1.7 RESEARCH METHODOLOGY

The study will use survey as research design method, which will use both qualitative and quantitative data collection techniques. Survey questionnaires and semi structured interviews will be used to collect data in order to fulfil objective 2, 3 and 4 as outlined in section 1.3. This is further explained in detail in section 4.

2 LITERATURE REVIEW

This section firstly discusses the nature of the construction industry and the business environment of construction organisations; then explains the impact of construction on environment. Next it looks into the concept of sustainability and sustainable development and outlines the current practices adopted by construction organisations. After that it looks into the available frameworks to manage sustainability and discusses why these frameworks fail to achieve the full potential of sustainability. Then a new concept of sustainability management is introduced and the link between sustainability management and competitive advantage is explained. Lastly the determinants of sustainability management are outlined which led to the development of the conceptual framework.

2.1 OVERVIEW OF THE CONSTRUCTION INDUSTRY

The construction industry is a significant part of many economies, both in terms of GDP and employment (Hampson and Brandon, 2004). It contributes approximately 6.82 percent to GDP annually and accounts for 9.1 percent of employment within Australia (ABS, 2010).The satisfactory growth of the industry is essential for the welfare of any economy as its growth is related to the growth of many other sectors such as services and manufacturing (Hillebrandt, 2000).

2.1.1 The Nature of Construction Industry

Ofori (1990) proposed nine features specific to the construction industry. These are: (i) large size; (ii) influence of government as a client; (iii) high production costs; (iv) unique nature of demand; (v) unattractive nature of work; (vi) wide range of technologies; (vii) temporary and multi-disciplinary collaborative nature of organizations; (viii) lengthy production processes; and (ix) complex structure of the industry. Another important feature of the industry as noted by Hampson and Brandon (2004) is that it mainly consists of small and medium enterprises (SMEs), for example 94 per cent of Australian construction businesses are SMEs employing less than 5 people.

2.1.2 Business Environment of Construction Organisations

Shirazi et al. (1996) recognized that the industry has complex-dynamic environment, which signifies the greatest amount of uncertainty in decision-making. This means that construction organisations are likely to deal with rapid changes and unanticipated decision making situations in their business activities. According to Betts and Ofori (1994), the environmental dynamism in construction is growing at an increasing fast pace and while posing significant threats it is offering proportionately greater strategic opportunities with time. Dess and Beard (1984, p. 64), referred environmental dynamism to the rate of change, absence of pattern and unpredictability of the environment.

According to Hillebrandt et al. (1995) the behaviour of construction organisations is strongly influenced by the environment within which they operate. They also identified five environmental factors shaping the competitiveness of the construction industry as: economic and industrial factors, government policies, social and technological changes, external influences and the industry’s evolution. This is in line with Betts and Ofori (1994) who observed that the environment in which construction firms operate is increasingly influenced by economic factors, technological factors, social factors and the industry’s development towards the information age.

Sustainability is becoming an important crucial point from a global construction perspective. This is highlighted, for example, by the significant impact of construction activities on waste, energy use and greenhouse gas (GHG) emissions (Wallance, 2005). The severe impacts of construction on the environment have led to a growing emphasis on sustainability management. This in turn, is reflected by the mounting pressure exerted by clients, government and other stakeholders with respect to the construction organisations becoming more accountable for their social and environmental impacts. Sustainability has now become more salient in the contract selection process due to the incorporation of sustainability into contract selection criteria.

Researchers such as Litz (1996) and Hart and Sharma (2004) have considered stakeholder engagement as an organizational capability which allows the firm to build strategic relevant relationships with their stakeholders. This is in line with Ayuso et al. (2006) who argues that organisations can improve their process of sustainability management through proactive relationship with the stakeholders.

According to Freeman (1984) stakeholders are individuals and groups which can affect the company’s performance or who are affected by a firm’s actions. Clarksson (1995) distinguished stakeholders into two groups as primary stakeholders, without whose participation and support the organization cannot survive (e.g. customers, suppliers, governments), and secondary stakeholders, which affect and are affected by the organization but are not engaged in transactions with it and are not essential for its survival (e.g. media, non-governmental organizations).

Chen (2006) outlined that the environmental factors, such as economic and competitive conditions, market turbulence and government interference are important predictors to an organization’s performance. It is recognised that long term economic growth is not possible unless that growth is socially and environmentally sustainable (Epstein and Roy, 2003).

Bonifant et al. (1995) outlined that, traditionally, regulation is perceived as an obstacle for a company’s practices and development. But on the other side Gladwin et al. 1995a recognised that regulations in the most countries plays a vital role to promote corporate adoption of broader sustainability elements such as redesign of products and processes to reduce environmental and social impacts, product stewardship, protection of habitats, operation within a region’s environmental carrying capacity, protection of the interests of future generations, as well as the equitable balancing of the interests of all segments of society (Hart, 1995, 1997). Rodriguez and Mansouri (2011) concluded that the role of regulation is to impose a framework of good practice, but its influence on a company’s performance is not necessarily positive.

The above review shows that behaviour of construction organisation is influenced by several external environmental factors and that, with the increasing social awareness about environmental issues and strict government policies to enforce environmental sustainability there is an increased demand on the construction organisations to make buildings more ‘green’ and deliver infrastructure projects that have lower carbon emissions.

2.1.3 Impacts of Construction on the Environment

The construction industry is a major consumer of the world’s energy and resources. It consumes 30 to 40 percent of global energy production and 40 percent of extracted resources. It relies heavily on natural environment for the supply of raw material such as timber, sand and aggregate for the building process. This extraction of natural resources impacts the environment both from an ecological and scenic point of view (Langford et al., 1999). Extraction of raw material and construction activities themselves also contribute to the emissions and accumulation of pollutants in the environment, which includes some of the toxic substances such as nitrogen and sulphur dioxide. These are released during extraction and transportation of materials as well as site works. About half of the total chlorofluorocarbons (CFC) emission is produced in the building industry (Moughtin 1996).

Pollutants released into the biosphere due to on-site negligence also cause water and land contamination. According to Langford et al. (1999) about one third of world’s land is degraded and pollutants are depleting environmental quality. Because of the enormous volume and intensity of energy and resource use, the construction industry exerts enormous pressure on the whole ecosystem.

The construction industry also produces a large amount of waste. Teo and Loosemore (2003) claimed that construction activities produce approximately 29 per cent of waste in USA, more than 50 per cent in UK and 20-30 per cent in Australia. According to Chiveralls (2011) the industry has not acknowledged the waste recycling to its potential. In 2006-2007, the construction and demolition sector accounted for more than a third of Australia’s 43.8 million tons of waste. Approximately 43 per cent of construction and demolition waste went to landfill which could be used for re construction.

On one side, construction activities provide abundant opportunities to achieve economic growth and social development but on the other side exploitation and mismanagement of built environment has a huge contribution towards today’s environmental problems. Du Plessis (2007) stated that the challenge for the construction sector is not just to respond to the need for adequate housing and rapid urbanization, but to do it in a way that is socially and ecologically responsible.

2.2 CONCEPT OF SUSTAINABILITY

Sustainability by definition, addresses the impacts of economic development and industrial growth on the existing physical, institutional and intellectual structure of society and its natural systems by defining and formulating the relationship between dynamic human economic systems and slower-changing ecological system (Khalili, 2011). Because natural, economic and social systems are all interdependent, it is logical that they all must be addressed when creating a sustainable solution. Due to its integrated nature, sustainability has three dimensions economy, environment and society. Traditionally these dimensions are reviewed in isolation as presented in Fig. 2.1.

Environment

Economy

Society

Fig 2. 1: The three dimensions of sustainable development (source Peet and Watts, 1996)

This piecemeal approach has the some negative side effects: Solution for one problem can make other problem worse. For example building houses for society on forest land has an adverse affect on the environmental health of planet; a tendency to focus on short term goals without the consideration of long term results; a tendency to create opposite groups, for example businesses claim that incorporation of environment and society restrict their economic growth.

Mc Elroy and Van Engelen (2012, pg.225) present a definition of sustainability based on capital theory “Sustainability is the subject of a social science or management discipline that measures and/or manages the impact of human activities on the carrying capacities of vital capitals in the world, relative to standards or norms for what such capacities need to be in order to ensure human well-being”. They argue that without context sustainability is meaningless.

Sustainability is also defined in an organisation or corporate context. Dyllick and Hockerts (2002, pg.138) defined corporate sustainability as “meeting the needs of the firm’s direct and indirect stake holders, without compromising its ability to meet future stakeholder needs as well”. Van Marrewijk (2003, p.97) presented definition of corporate sustainability as “inclusion of social and environmental concerns in business operations and in interaction with stakeholders”

Sustainable development is the process of achieving sustainability; the Brundtland Report defines sustainable development as meeting ‘the needs of the present without compromising the ability of future generations to meet their needs’ (WECD 1987, p.43). The IUCN publication Caring for the Earth (1991) provided an alternative definition of sustainable development that is also often quoted: to improve the quality of life while living within the carrying capacity of living ecosystems.

Sustainable development requires the integration of the three traditionally separate domains, i.e. the interconnections between the three dimensions as described in Fig. 2.2 need to be taken into account. Au (1996) states that, these three dimensions are objectives to be met, not just conditions to be fulfilled or manipulated. If any development strategy or path or pattern cannot meet either one of these goals, it cannot be regarded as sustainable. It is crucial that a balance of the three dimensions is maintained in order to achieve sustainable development.

Sustainable development

Fig 2.2: The integrated approach towards the three dimensions of Sustainability (source: Giddings et al., 2002)

On the other side Adams (2006) claimed that the conventional understanding of sustainable development, based on the ‘three pillars’ model is flawed because it implies that trade-offs can always be made between environmental, social and economic dimensions of sustainability. In response to this flaw, a distinction is often drawn between ‘strong’ sustainability (where such trade-offs are not allowed or are restricted) and ‘weak’ sustainability (where they are permissible). He also argued that however, in practice, development decisions by governments, businesses and other actors do allow trade-offs and put greatest emphasis on the economy above other dimensions of sustainability. This is a major reason why the environment continues to be degraded and development does not achieve desirable equity goals.

Moffat (1993) argued that despite the different definitions of sustainable development, it is clear that if discussions of sustainable development are to be translated into actual practice then an appropriate methodology must be developed. This methodology should incorporate the following four properties:

The methodology must be dynamic rather than static.

The time horizon should be sufficiently long to permit ecological and economic processes to be captured in the model.

Policies embedded in the model can be turned on so that their impact on paths of sustainable development can be examined.

Any consideration of sustainable development must operate at the national level so that policies arising from research and application are actually politically accountable to the population most affected by them.

After reviewing different definitions of sustainability and sustainable development the following definition is derived from an organisational perspective “to reduce impact of organisational activities on the existing social and environmental structure of society in achieving needs of current generation so that future generations can fulfil their needs”. Hai et al. (2010) investigated influencing factors towards sustainable development and have listed poverty, lack of information and education are the main barriers in the success of sustainable development. They have also found a positive relationship between knowledge, attitude and practice in sustainable development programmes.

2.3 SUSTAINABILITY IN CONSTRUCTION ORGANISATIONS

Construction organisations are considered worst at adopting sustainability. Myers (2005) examined the attitudes of UK construction companies towards sustainability on the basis of their public-disclosure information, and found that very few large-sized companies positively responded to the urge of managing their sustainable performance. He also found that some of the exceptionally large construction firms are beginning to acknowledge sustainability but the small unlisted firms will be slow towards embracing a positive attitude to sustainability. In view of this, Mills and Glass (2009) commented that the slow implementation of sustainable initiatives in UK companies is mainly due to the skill deficit of construction professionals about sustainable practices and technologies.

In the context of Singapore’s construction industry, Oo and Lim (2011) studied the attitudes and behaviour of 34 contractors towards environmental sustainability, and found that the contractors are increasingly recognising sustainable management as a tool for competitive advantage. Also, they ascertained that: (1) firm size and type of ownership are key factors moderating the contractors’ attitudes towards embracing sustainable practices; and (2) improved materials efficiency and increased government financial incentives are key drivers for contractors to adopt environmental practices. Similarly, Ofori et al. (2000) surveyed 53 Singaporean construction firms on their attitudes towards implementing ISO14000 environmental management system (EMS), and found that: (1) most of the firms adopted a wait-and-see attitude towards EMS implementation; (2) there is a lack of knowledge of ISO14001 standards within the industry; and (3) shortage of qualified personnel and the fragmented nature of the industry (which leads to material wastage and safety problems) are key hurdles faced by construction companies. In view of the latter, Ofori (2000) studied the possibility of using supply chain management (SCM) to improve the sustainable performance of Singapore construction firms. He suggested that effective SCM could help greening the construction supply chain, and recommended green initiatives for the Singapore construction industry such as presenting best practice awards and educating construction practitioner. This finding is shared by Lam et al. (2010), who pointed out that the use of information and communication technologies, with proper training and development, toward improving business efficiency and productivity could lead to improved sustainable performance.

Focusing on Hong Kong contractors, Shen and Tam (2002) and Tam et al. (2002) found that the contractors are not receptive to sustainability because: (1) their clients do not support sustainable initiatives; (2) cost and time are still the main performance criteria; and (3) they do not have sufficient capacity to implement environmental management system (EMS). This is consistent with the findings of Christini et al. (2004) that few construction companies have adopted EMS in their business operation due to limited organisational resources and lack of mutual commitment from the industry partners.

Zainul Abidin (2010) investigated the awareness and application of sustainable construction in Malaysia and found that the concept of sustainability is not widely received in the industry as many developers, especially small and medium companies, are still reserving themselves. He also pointed out that sustainability implementation is low because of several factors such as lack of knowledge, poor enforcement of legislation and passive culture of construction organisations. A similar study done by Sakr et al. (2009), discovered that there is low dissemination of information about ISO 14001/EMS among the top contractors due to the absence of the role of local institutions in promoting these systems.

In Australia, Hampson and Brandon (2004) emphasised the importance of construction organisations to recognise sustainable management as a key strategy for improved competitiveness, and suggested that life cycle assessment is an environmental management tool to begin with. They, however, identified that organisational inertia, lack of information and lack of capacity and government incentives are possible barriers to sustainable management. Petrovic-Lazarevic (2008) interviewed 17 large Australian construction firms about their attitudes to sustainability via the application of ISO14001 EMS as part of their firms’ CSR. He found that the majority of the firms interviewed have ISO14001 EMS certification in place, and the reasons for applying EMS include competition, quality improvement, community requirements, increased public awareness and clients’ requirements.

Hill and Bowen (1997) and Sev (2008) pointed out that for construction firms to manage their sustainable performance, they must first change their behaviour and attitudes towards being sustainable. Likewise, Carmichael (2009) and Ngowi (2001) found that positive behaviour towards sustainable performance could lead to competitive advantage over others especially in the era when most governments and public communities are giving attention to environmental issues.

2.4 STRATEGIC TOOLS AND FRAMEWORKS FOR ACHIEVING SUSTAINABILITY

The growing concerns about environmental problems and social injustice have led to the consciousness among governments and organisations that sustainable business practices are necessary for economic viability and social equity. There are a number of frameworks developed by researcher to help organisations become sustainable. Which are discussed and a summary is presented in table2.4.

2.4.1 Environmental Management Systems (EMS)

An EMS is a set of processes and practice that enables an organisation to reduce its emissions and environmental impacts via increasing process and operation efficiency. EMSs are designed based on a Plan-Do-Check- Act (PDCA) methodology (Khalili and Melarango, 2011). The first EMS standard (BS 7750) appeared in 1992, in the UK, and then it was followed by the appearance of other local and regional standards (such EMAS: European Union’s Eco-management and Audit Scheme, etc) (Hillary, 1997). The International Organization for Standardization published the first edition of the Environmental Management Systems standard as ISO 14001, in September 1996. Then an updated version was published in year 2004. Freimann and Walters (2002) presented an empirical study on the implementation of standardised environmental management systems in companies and concluded that EMSs are mostly considered economically profitable investments by managers of the participating companies.

In context of construction Tan et al. (1999) argued that EMS is just management systems and they may not guarantee any improvement in environmental performance of construction organisations. This view is shared with Lam et al., 2011 who suggested that EMS has profound positive environmental influence within the construction industry, but optimal environmental performance may not be guaranteed by the implementation of EMS (ISO 14001, 2004) alone. 

Another essential problem of EMS as identified by Lam et al., (2011) is that indicators for the sustainability are not commonly applied, especially in developing countries. Despite the requirements of annual internal and external audits in EMS, the indicators for the auditing do not always include the objective principles of sustainability in most organisations. Moreover, the degree of commitment is decided by each company, and there is no requirement for public interest to be the priority in the policies of EMS. Eccleston and Smythe, (2002) argued that since only environmental policy is required to be made available to the public then, the public has not much influence on the companies’ decisions in EMS.

2.4.2 Corporate Social Responsibility (CSR)

The world business council for sustainable development refers CSR as a continuing commitment by businesses to contribute to economic development while improving the quality of life of the workforce and their families as well as of the community and society. This definition is similar to Petrovic-Lazarevic (2005), who defined CSR as a set of principles established by an organisation to meet societal expectations of appropriate business behaviour which can achieve best practice through social benefits and sustained competitive advantage. However Kotchen and Moon (2011) argued that companies involve in CSR to offset corporate social irresponsibility, in other words when companies do more harm they also do more good. Their findings are based on the empirical analysis of 15 year panel data set that covered 3000 public listed organisations.

Corporate social responsibility is conceptualized as a principle to motivate corporate behaviour. Furthermore, it is very narrow and less strongly focused on environmental (more strongly on social) effects of corporate activities than corporate sustainability (Marrewijk, 2003).

2.4.3 Corporate Social Performance (CPS)

Corporate social performance is seen as a configuration of drivers, processes and outcomes, rather than as an outcome only. Wood (1991, p. 693) defined corporate social performance as “company’s configuration of principles of social responsibility, processes of social responsiveness, and policies, programs, and observable outcomes as they relate to the firm’s societal relationship”. Corporate social performance is very broad. Alongside motivating principles, i.e. drivers of corporate behaviour, it includes corporate behaviour as such (processes of social responsiveness) and its outcome.

Table 2.4: Strategic frameworks and their potential application to achieve sustainability. (Adopted from Khalili, 2011)

Tool/Framework

Operational Boundary

Potential application

Environmental Management system (EMS)

Organisations

Reduce an organisation’s emissions and environmental impacts

Corporate Social Responsibility (CSR)

Organisations

Provide a framework to guide the management through business strategies

Occupational health and Safety Management System (OHSMS)

Employees

Eliminates the possibility of accidents, illness or injury in the workplace by ensuring that hazards are eliminated or controlled systematically.

Life cycle Analysis (LCA)

Products

Identify potential environmental aspects and impacts of a product during its life cycle

SEA Framework

Project Assessment

Projects

Provide a global framework capable of integrating three constituents of sustainability in the course of planning actions needed to ensure business sustainability and economic viability

Corporate Social Performance

Organisations

Provide a framework for company’s social performance

2.4.4 Discussion on the Existing Frameworks

The review of the available frameworks revealed that these models fall short to differentiate between social and environmental issues. Furthermore the available frameworks do not analyse how external and internal determinants influence companies’ strategic disposition of sustainability management (Salzmann, 2006). Another major setback is that these models do not account for company-specific determinants or internal drivers such as organisational culture, employee skill and attitudes, organisational structure, tools and processes. They do not present a business case for sustainability.

2.5 SUSTAINABILITY MANAGEMENT

Sustainability management addresses the problem of organisation’s contributions to sustainability in an integrative way. It presumes that organisations could only contribute to sustainable development if organisational performance improves in all three dimensions of sustainability – economic, environmental and social – simultaneously (Figge et al., 2001). While conflicts between the three performance categories of sustainability (social, ecological and economic goals) may occur, from a realistic business viewpoint corporate sustainability management should first identify and realize opportunities for simultaneous improvements in all three dimensions in order to achieve strong corporate contributions to sustainability (Figge et al., 2002).According to Figge et al., (2001) the Integration of the three pillars of sustainability into general business management by a pragmatic approach offers the following advantages.

(i) Sustainability management that is economically sound is not endangered by economic crisis because it is not only carried out as long as the organisation is successful. Usually, if organisations find themselves under financial distress, those costs that are perceived as not contributing to the economic success are cut first.

(ii) Sustainability management that also contributes to competitiveness, as the organisation serves as an appropriate role model for other businesses.

Thus, from the viewpoint of sustainability, it is most desirable if a business improves performance with regard to all the three dimensions of sustainability simultaneously. Salzmann (2006, p: 17) defined sustainability management as “The strategic and profit-driven corporate response to environmental and social issues that are caused through the organisation’s primary and secondary activities. It incorporates a certain level of strategic disposition to respond, is based on a more or less elaborated economic rationale and implemented through tools, structures and initiatives”. This definition by Salzmann incorporates three important sub-concepts.

Strategic disposition: the companies’ willingness to integrate social and environmental issues systematically and persistently into their business strategies.

Economic rationale: the business case for sustainability. Bansal et al., (2000) argued that the business case (e.g. improved processes and reputation) the greater will be the motivation for the sustainability management.

Implementation: needs strong collaboration between general management and sustainability experts to embed sustainability into long term goal settings.

More recently McElroy and Engelen (2012, p. 90) defined Corporate sustainability management or sustainability management as “a management discipline that seeks to manage or control the impacts of organisations on vital (non-monetary) capitals in the world, such that they (i.e., the impacts and the activities that produce them) are sustainable”. They further explained that in order to be sustainable an organisation must systematically manage its impacts on vital capitals such that its impacts are fair and proportionate and that its impact would not put human well being at risk.

Epstein and Roy (2003) argued the mangers can truly integrate social and environmental aspects into their business strategies only by making the business case for social and environmental performance. The main reason for not adopting sustainable business practices is the inability to present a clear business case for such practices (Sustainability survey report PricewaterhouseCoopers, 2002). Theoretical and empirical research indicates that most organisations have potential for one or several business cases for sustainability, however it is not recognised due to complex management systems (Schaltegger and Wagner, 2006).

Schaltegger (2008) outlined that the business case for sustainability is characterised by creating economic success through (and not just along with) a certain environmental and/ or social activity. He further explained that business case for sustainability is not an automatic relationship with general practices it has to be created actively through an intelligent sustainability management approach.

2.6 SUSTAINABILITY MANAGEMENT AND COMPETITIVE ADVANTAGE

The relationships between organisations’ competitive advantage and sustainability management are well-established in the management literature, which has mainly focused on the manufacturing industry (e.g. Ansoff, 1965; Porter, 1980; Rodrigues et al., 2002). Madu (2004) argued that environmental management is a key to achieve competitiveness market, he has given examples of Xerox and Kodak; both companies have remained financially successful through re-manufacturing of products. According to Davidson (1987), the ability for firms to generate added value for their customers, and opportunities to benefit from environmental good practices are keys towards gaining competitive advantages. This agrees with Porter (1985) and Barney (1991) who outlined that firms will gain competitive advantages only if they are able to implement value-creating strategies that are not easily imitated by their competitors in a changing business environment.

Bansal and Roth (2000) operationalised the drivers of corporate ecological responses: increased environmental regulation; increased stakeholders’ pressure and awareness; increased economic opportunities; and increased self-awareness of environmental values and ethics. Rodriguez et al. (2002) pointed out that these changes, fuelled into the competitive landscape by sustainable development, have influenced the way in which firms operate and function. Welford and Gouldson (1993) studied the relationships among firms’ strategy, sustainability and competitiveness, and found that the main constituent of competitive advantages for firms are derived from sustainable practices and processes such as improved product quality, improved materials efficiency and waste reduction. Likewise, Wagner (2005) examined the sustainability and competitive advantages of manufacturers across United Kingdom (UK), Italy and Netherlands, and found that there is a positive relationship between the manufacturers’ economic and sustainability performance. Marchi et al. (2012) empirically modelled the environmental performance and strategies of Italy manufacturers, and found that firms develop green strategies to reduce environmental impacts while achieving economic benefits and competitiveness through effective supply chain management. This is consistent with the findings of Lee and Kim (2011) that the ability of Korean manufacturers to integrate their key suppliers in their green new product development using technological innovation is the key towards achieving competitive advantages in an ecologically-driven market.

Bryson and Lombardi (2009) claimed that evidence from the property development industry suggests that integration of sustainability as a distinctive competency in a firm’s strategy results in the identification of profitable market niches. Tan et al. (2011) have proposed a framework for gaining competitive advantage through sustainable construction practices and outlined that sustainability performance can have contribution towards business competitiveness. However there is a lack of empirical research to find the relationship between the two.

2.7 DETERMINANTS OF SUSTAINABILITY MANAGEMENT AND COMPETITIVE ADVANTAGE

This section discusses the possible determinants of sustainability management as identified in literature. These are: (i) organisational culture; (ii) organisational structure; (iii) skills and attitudes of employees; (iv) technological capabilities; (v) supply chain capabilities; and (vi) business strategies.

Senge et al. (1999) highlighted that sustainability cannot be achieved without innovation, and innovation is best achieved in a culture that embraces and fosters learning and change. Brown (1998, p.9) defined organisational culture as “the patterns of beliefs, values and learned ways to cope with experiences that have developed during the course of an organization’s history, and which tend to be manifested in its material arrangement and in the behaviours of its members”. It is therefore importance for firms to adopt a learning organisational culture, which encourages innovative behaviour and no-blame attitudes, so as to foster their organisational members’ commitment towards achieving sustainable performance (Hartman, 2006).

According to Tripathi et al. (2000), learning is simultaneously a behavioural, cognitive and emotional process. Thus, culture can be understood as (i) a pattern of basic assumptions, (ii) invented, discovered or developed by a given group, (iii) as it learns to cope with its problem of external adaptation and internal integration, (iv) that has worked well enough to be considered valid and therefore, (v) is to be taught to new members as the correct way to perceive, think, and feel in relation to these problems.

Baumgartner (2009) have done a case study carried out in a global mining company and concluded that if organisational culture conform with the sustainability strategies and activities, the risk of hijacked environmentalism or hijacked sustainability is minimized. Organisational culture is often cited as the primary reason for the failure of implementing organisational change programs. Cameron & Quinn (2006) have suggested that while the tools, techniques and change strategies may be present, failure occurs because the fundamental culture of the organisation remains the same. A number of studies have provided empirical support for these claims (e.g., Cameron et al., 1993; Jarnagin & Slocum, 2007). Their findings suggest that the successful implementation of culture change for corporate sustainability might be largely dependent on the values and ideological underpinnings of an organization’s culture, and that these in turn affect how corporate sustainability is implemented and the types of outcomes that can be observed (Linnenluecke, 2010).

Organisations structure is also seen as a determinant of sustainability management. Burton et al. (2006) outlined that organisational structure could influence the choice of business strategy, which defines the sustainability choices of organisations. Study done Oo and Lim (2011) outlined that firm size and type of ownership also affect the sustainability performance of construction organisation. The large non-family owned firms showed more positive attitude than medium sized family owned construction firms.

Employees’ skill and attitudes are crucial in improving sustainability performance. Studies done by Ángel Del Brío et al. (2007) and Pringle and Kroll (1997) emphasized that intangible knowledge-based (e.g., people) resources may generally lead to a sustainable management and competitive advantage when the environment changes quickly. This view is also supported by Pathirage et al. (2007) who insisted that tacit knowledge of workers is very valuable towards organisational performance in construction due to intrinsic characteristics of the industry.

Shrivastava (1995) examined the relationship between environmental technologies and competitive advantages, and argued that environmental technologies which could offer firms new substantive orientation and management process towards minimising ecological impacts of economic production while enhancing their competitiveness. He however added that, for effective implementation of environmental technologies, organisations should place greater emphasis on their company’s vision, resources, production processes and products. Thrope et al. (2007) have also outlined that use of ICT to improve efficiency and productivity along with training and development could lead to better sustainable performance. This view is supported by Lam et al. (2010) who listed technology as a driver for sustainability.

Krause et al. (2009) quoted that a company can be only as sustainable as the organisations that supply it, therefore sustainability management entail both internal operations and activities of external supply chain members. This is in line with Ho (2009) who examined the contrasts between traditional and green supply chains. They discussed several opportunities in green supply chain management in depth, including those in manufacturing, bio-waste, construction and packaging. The authors argue that some operations have discovered the cost saving benefits after adopting more environmentally friendly suply chain practices.

Integration of sustainability into business strategy could improve the economic performance of organisations. Figge et al. (2002) have outlined that sustainability management could be linked to business strategy through a sustainability balanced scorecard. Dyllick and Hockert (2002) argued that there is a need to develop business strategy to integrate environmental and social aspects of sustainability into general business management.

The above section outlined possible determinants of sustainability from different studies. However none of the previous studies have elaborated the combined effect of these determinants on the sustainability performance. The next section aims to integrate the identified determinants into a conceptual framework of sustainability management of construction organisations.

3 CONCEPTUAL FRAMEWORK FOR SUSTAINABILITY MANAGEMENT OF CONSTRUCTION ORGANISATIONS

3.1 EXPLANATION OF THE FRAMEWORK

Fig 3.1 represents the conceptual framework for sustainability management of construction organisations. The framework begins with the external environmental influences on the sustainability management, it is hypothesised that the external environment plays an important role in influencing different organisational features such as: (i) organisational culture; (ii) organisational structure; (iii) employee skills and attitudes; (iv) supply chain capabilities; (v) technological capabilities; and (vi) business strategies; which in turn shapeup organisational behaviour towards sustainability. Next it is hypothesised that if the behaviour is improved it could improve the sustainability performance and the improved performance could be a source of competitive advantage.

Sustainability management refers to the profit-driven corporate response to social and environmental issues caused by the organisation’s primary and secondary activities (Salzmann, 2006). It is hypothesised that if organisations can manage to include sustainability into their business strategy it will not only improve the environmental and social performance but also the financial performance.

External Environmental factors

Stakeholder pressure

Economic opportunities and threats

Legislation conditions

Sustainability Behaviour

Sustainability Performance

Competitive Advantage

Employee skill and attitude

Organisational Structure

Technological Capabilities

Business Strategies

Organisational Culture

Supply Chain capabilities

Fig 3.1: conceptual framework for sustainability management of construction organisation (source: Afzal and Lim, 2012)

3.2 THEORIES UNDERPINNING THE CONCEPTUAL FRAMEWORK

This study attempts to integrate three organisational theories and one theory of human behaviour into the conceptual framework. The conceptual framework is underpinned by four theories, these are: (i) the theory of planned behaviour; (ii) the resource base theory of competitive advantage; (iii) contingency theory; and (iv) stakeholder theory. These are discussed here in detail.

3.2.1 The Theory of Planned Behaviour

A number of theory’s have emerged to explain the relationship between attitudes and behaviours but most prominent within environmental research are: norm-activation theory (Schwartz, 1977), the ipsative theory of behaviour (Frey, 1988) and the theory of planned behaviour (Ajzen, 1985). Schwartz’ norm- activation theory does not take industry culture into account. On the other side Frey’s (1988) theory has been widely criticized for ignoring social influences in environmental behaviour, and has had remained largely untested in the environmental research.

Theory of planned behaviour by Azjen (1985) is one of the most prevailing models for illustrating the relationship between attitude and decision making behaviour. It is an extension of the theory of reasoned action developed by Azjen and Fishbein in 1880. This theory is widely tested to measure attitudes and behaviours in several areas e.g. to determine behaviour towards leisure choice (Ajzen & Driver, 1992), to measure the importance of self-efficacy in blood donation (Gilles and Cairns, 1995) and Smoking cessation (Bledsoe, 2006) it has also been used to predict people’ behaviour in the context of environmental research (e.g.; Hamid and Cheng, 1995 and Harland et al., 1999).

In the domain of construction this theory is been used and modified by researchers like Teo and Loosemore (2001) for understanding the waste behaviour in construction industry and Wang and Yuan (2011) to measure risk attitude of construction work force. However this theory is not been tested or applied to evaluate organisational behaviour. This study attempts to apply the theory to investigate the influence of stakeholders, legislation and external business environment on the sustainability performance of construction organisations.

Behavioral Intention

Behavior

Attitude towards behaviour

Subjective norms

Perceived behavioral control

Fig 3.2: Theory of planned behaviour by Azjen (1985)

Fig 3.2 represents the model developed by Azjen. In this model, attitudes and subjective norms (the opinion and influence of important people) about a behaviour as well as perceived behavioral control (to what extent someone think they are capable of performing certain behaviour) influence behavioral intentions which, in turn, determine the likelihood of the behaviour occurring. It is important to note that attitude and subjective norms are interlinked in this model this recognizes that personal attitudes are linked with the important social referents and perceived behavioral control. There are three major components of this theory; they will be discussed here in detail:

1- Attitude about Behaviour

The first component of this theory is concept of attitude towards behaviour. Azjen (1985) described attitude as the “psychological tendency to evaluate a particular object or situation in a favourable or unfavourable way, which causes people to behave in a certain way”. Fisher and Ajzen (1980) has pointed out that appropriately measuring the attitude is a major issue in the first place. They argued that one reason why there is a conflict between expressed attitudes and actual behaviour is that people are not very good at changing scales or moving conceptually from general attitude to specific behaviour. Jones (1996) argues that the connection between attitudes and behaviours is very unclear in terms of environmental sustainability. For example most people would show overwhelming support to reduce global warming and CO2 emissions but far fewer people actually do something practically about it. The most common concept of attitude behaviour relationship is that people form attitudes based on the knowledge obtained from exposure to information and then adopt behaviours that are consistent with the attitude they hold.

Fishbein and Azjen (1993) have identified four discrete elements of every behaviour as action, target, context and time. They argue that these elements must be considered if prediction of behaviour is required from attitude.

2- Subjective Norms

The second major component of the theory is subjective norms or the perception of individuals of how others what them to act. It is essential to note that it is not how others want an individual to behave is as important as the individual’s perception of how others want them to behave. Barr (2003) suggested that a wide variety of factors influence the environmental action they are categorized as: environmental and social values; situational factors; psychological variables.

3- Perceived Behavioral Control

The last component of the theory is the perception of behavioral control or to what extend individuals think they are capable of performing certain behaviour. The theory shows that perceived behavioral control is interlinked with the other two components and it has a direct affect on behaviour as well as on behavioral intension.

In this study the theory of planned behaviour underpins the framework in a way that the external environment influences the way the construction organisations perceive and implement sustainability into their activities. Little has been done to understand the role of external environment on the sustainability management of construction organisations.

3.2.2 Resource Based Theory of Competitive Advantage

Resource-based theory has been developed by Edith Penrose (1959) to understand how organisations achieve sustainable competitive advantages, who originally named it, as ‘the theory of the growth of the firm’. However it did not began to take shape until 1980’s; in this decade many models emerged. Such as Lippman & Rumelt (1982) explained the concept of inimitability and casual ambiguity. Subsequently this theory is widely termed as ‘the resource based view of firms’ (RBV), following Wernerfelt (1984) who emphasized the value of focusing on firm’s resources .rather than on their products. In 1986 Barney theorised how organisational culture could be source of competitive advantage, later in 1991 he presented the core elements of RBV and gave detailed definitions of resources and explained the characteristics that make resources a source of competitive advantage.

According to Penrose (1995), a firm is an entity that possesses unique collections of resources and capabilities bounded together in its administrative framework, and that ‘ownerships’ of these collections of resources and capabilities provide the basis for its strategy formulation. It is argued that performance differentials between firms within the same arena depend on having uniqueness of resources and capabilities (Barney, 1991).

The resource based theory assumes that: (i) firms are essentially heterogeneous in terms of their unique resources and internal capabilities underlying the production, and (ii) resources may not be perfectly mobile across firms, and thus the resources differences persist over time (Wernerfelt, 1984; Peteraf, 1993). According to Barney (1991) and Peteraf (1993), an organization can achieve competitive advantages over its closest competitors if its resources and capabilities are scarce and superior in use. Barney (1991) also argues that in order to provide competitive advantage resources and capabilities must fulfil the following four criteria:

1. Valuable: the resource must have strategic value to the firm (for example, by exploiting opportunities or neutralising threats);

2. Rare: the resource must be unique or rare to find amongst the current and potential competitors of the firm;

3. Inimitable: It must not be possible to perfectly imitate or copy the resource (because it is difficult to acquire; because the link between the capability and or the achieved sustained competitive advantage is ambiguous; or because it is socially complex);

4. Non-substitutability: competitors cannot substitute the resource by another alternative resource to achieve the same results.

Researchers like Litz (1996), Sharma and Vredenburg (1998) and Hart and Sharma (2004) have related the RBV to sustainability. In this study this theory underpins the framework in explaining the need to examine how organisations manage their resources and capabilities towards achieving sustainability performance. A little has been done to empirically test the effect of organisational resources and capabilities towards better sustainability practices within construction industry. Further more if sustainability performance is unique to organisation it could lead to competitive advantage.

3.2.3 The Stakeholder Theory

The basic proposition of stakeholder theory is that the firm’s success is dependent upon the successful management of firm’s relationships with its stakeholders. The term stakeholder was originally introduced by Stanford Research Institute to refer to “those groups without whose support the organization would cease to exist” (Freeman, 1984, p. 53).

According to Searcy (2012) stakeholder theory implies that corporations have obligations to individuals and groups both inside and outside of the corporation, including shareholders, employees, customers, and the wider community. The importance of stakeholders in driving corporate sustainability management depends on two factors: (1) their power to revoke a company’s license to operate and (2) their demand for sustainability management. The latter factor is influenced by the legitimacy and the urgency of the demand (Agle et al., 1999, p. 508). Scholars like (Rodriguez and Mansouri, 2011; Bosher et al., 2007; Coles, 2005; and Elgohary et al., 2006) have identified that stakeholder engagement as a source of obtaining both sustainability and competitive advantage for construction organisations.

In this study the stakeholder theory underpins the framework in support to the theory of planned behaviour. The theory helps to hypothesised that organisations could only improve sustainability performance if the stakeholder’s values are incorporated into defining the sustainability targets for organisations.

3.2.4 Contingency Theory

Contingency theory gained popularity in the 1960s (Woodward 1965; Lawrence and Lorsch, 1967). It states that “management and organizational life are situational and subject to contingencies”. The theory has a wide range of applications in organization design as well as leadership and behaviour (Luthans et al., 1977).

The contingency theory implies that the strategies, structures and practices of an organization depend on the way in which environmental variables become relevant to it (Longenecker & Pringle, 1978). Luthans and Stewart (1977) also developed a general contingency theory of management and defined the contingency approach as “identifying and developing functional relationships between environmental (e.g. technology, raw materials, culture), management (e.g. planning, leadership) and performance variables”. They also offered a detailed classification of the variables they incorporated. However, according to Longenecker et al. (1978) their theory has several shortcomings. Most importantly it is very complex and lacks a description of the functional relationships between the variables. Hence it is not a general theory in a strict sense (Luthans & Todd, 1978). Mill and snow (1978) characterised the contingency theory as follows (i) strategic choice is the fundamental linkage between an organisation and its environment; (ii) managerial competency in creating, filtering and reshaping environmental influences is vital towards organizational survival; and (iii) mutual adaptation between organisations and their environments can happen in multiple ways depending on organisations’ choice of domains.

It is evident that contingency theory is also been applied to the domain of corporate social responsibility and performance. Early empirical studies in that area pointed to the need to examine corporate social performance and responsiveness contingently upon factors such as organizational size, relevance of issues and industry characteristics (Arlow et al., 1982; Buehler et al., 1979; Shetty, 1979). Later, Greening and Gray (1994) presented a model based on their empirical analysis that incorporates institutional pressure, managerial discretion and firm size as the key determinants of corporate issues management structures. Husted (2000) presented an issue-contingent model, arguing that a better fit of corporate strategies and structures with social issues increases social performance.

In this study the contingency theory underpins the framework by putting forward the bu