Carillion plc

Development of a sustainability strategy model as a tool to help the company deliver business solutions that result in continued profitable growth.

The company Carillion is one of the UKs leading support services and construction services companies, with annual turnover of 2bn and around 20,000 employees (14,000 in the UK and 6,000 overseas). Carillions origins are in the Tarmac Construction Services business. Tarmac had a history of innovation dating back to pre-war projects such as roads, harbours and airfields. As Tarmac Construction, the business expanded into a wide range of sectors across the UK and overseas, from house building to rail projects, with headline achievements such as the Thames Barrage, Channel Tunnel and the Suez Canal Road Tunnel. In February 1999 the Tarmac Board announced that it planned to de-merge the construction services and heavy building materials businesses and float the two as independently listed companies. On July 30th 1999, de-merger saw Carillion plc launched on the London Stock Exchange. Carillion has evolved dramatically since 1999. In particular, it has developed its Public Private Partnership investments and support services businesses. Today the Group is structured by the following divisions which reflect its key markets: health; transport; business services, including private sector facilities management and commercial building; and its international regional business, in Canada, the Middle East, the Caribbean and more recently Scandinavia.

Through the construction and maintenance of buildings, railways, roads and other infrastructure Carillion has an impact on the everyday life of thousands of people. This it recognises in its mission to make tomorrow a better place. The company attempts to fulfil this by being the leader in integrated solutions for infrastructure, building and services, and by acting according to its values of openness, innovation, mutual dependency, collaboration, sustainable profitable growth and professional delivery. This case study focuses on Carillions sustainability strategy framework as a tool to mobilise actions to ensure sustainable profitable growth. The drivers Carillion prefers to model its approach to CSR around sustainability - meeting the balance between the opportunities presented by economic growth and progress, and the pressures upon business to protect the natural environment and promote social equity. This dates back to the early 1990s, when it operated as Tarmac, and the aftermath of the Twyford Down M3 motorway extension. This project, despite meeting all legal and democratic requirements, was seen as an unnecessary invasion on the British countryside and became a focal point for national and international protestors. This resulted in Tarmac receiving some very unfavourable attention. The memories from this experience and the Boards commitment to

Article 13 and CBI CSR Case Study Series, November 2004

sustainable profitable growth were the main drivers for its approach to sustainability. Taking action As a consequence of Twyford Down the Tarmac Board decided in 1994 to establish an Environmental Advisory Panel, comprised of independent external advisors such as Professor Chris Baines, to help improve its environmental performance. The company set targets and developed and implemented action plans to meet them. In the late 1990s a number of social issues also emerged as important business considerations, for example labour standards and impacts on local communities. These issues were about more than just compliance, but about how the companys operations were relevant to social issues. Carillion realised the need to link economic performance to both social and environmental issues. The Board therefore set up an Environment Committee, which replaced the Environmental Advisory Panel, and was re-named in 2001 as the Sustainability Committee. The Committee comprises one Executive Board director, senior executives and managers, and two independent external advisors. Chaired and led by the companys non-executive chairman, the Committee sets the Groups strategy and targets such as investigate the feasibility of a zero waste strategy for Carillion. It also monitors the companys performance and oversees the publication of annual sustainability reports. While the Committee provides strategic direction, the agenda is informed by a separate operations group made up of representatives from throughout the company, which acts as the engine room for the delivery of the sustainability strategy. The Group also identifies how and where the company can set targets for sustainability. Under the committees leadership a sustainability policy was developed and approved by the Board in October 2001. The policy included the statement turn our vision into reality by embedding sustainability into everything we do.

To help implement the policy the Sun diagram shown in Fig.1. was developed. The Sun depicts how the companys specific impacts relate to the UK Governments four objectives for sustainable development: social progress, protection of the environment, prudent use of natural resources and economic growth and prosperity. The diagram has helped communicate company wide priorities as part of a process to establish a sustainable strategy.

Figure 1: Carillions Sun diagram. A strategy model was then developed to help turn the companys vision into reality. The model (see Fig. 2.) provided a way of demonstrating the business benefit and alignment and delivery of the corporate objectives. It depicts the link between the existing key performance indicators and delivery of Carillions Corporate Objectives, for example, to attract, develop and retain excellent people. A staff consultation revealed that a sustainable approach to the way the company does business was useful because it reflected not just what the business does but how it does it. However, due to widespread enthusiasm too many targets were generated with associated key performance indicators across the company, all of them logically useful, but too many to realise in practice. A key learning from the process was that Carillion had too many targets and needed to focus. As a result, 97 targets in 1999 were transformed into six Group Objectives with 14

Article 13 and CBI CSR Case Study Series, November 2004

Figure 2: Carillions Sustainability Strategy Model targets developed in tandem with the Strategy Model in 2002. Thirteen key performance indicators were established to measure progress in each and an independent audit procedure was set up. In 2003 the business strategy and the strategies of the Business Groups were aligned with the Strategy Model and this resulted in Safety and Sustainability becoming one of six corporate objectives in 2005. Carillions Strategy Model was enhanced with first-hand experience gained in implementing its own projects. For example, experience from the design and construction of the 100m Great Western Hospital in Swindon. This enabled Carillion to assess how adopting a sustainable approach to the design, construction, maintenance and life time management of the new hospital could result in bottom line profits. This was alongside less tangible benefits such as energy saving, improved site safety, reduced impact on the natural environment, a green transport plan, and an excellent human environment for patients, staff and visitors. In another example, Carillion led the consortium that constructed the new government communications headquarters in Cheltenham. Carillion initiated a series of sustainability action plans for each aspect of the project, delivering more than the tender specification requirements. These plans covered energy and water use as well as the social impact of the project which included control of site activities to minimise nuisance, a local employment office and communication with local residents. Thus, the careful planning of transport of materials led to a saving of around 200,000 lorry miles, equivalent to 300 tonnes in carbon dioxide emissions, and waste recycling achieved 48% by weight of all waste. The Great Western Hospital was considered one of the UKs most sustainable buildings by the Building Research Establishment and has won several awards for its innovation in sustainability, while the Cheltenham headquarters was voted the public-privatepartnership project of the year in 2002 and won the British Safety Councils top industrial award. The business benefits An important business benefit to Carillion of its sustainability approach has been enhanced competitiveness, which has won the company new business. Feedback from customers has revealed that the sustainability aspect of Carillions project proposals is an important

Article 13 and CBI CSR Case Study Series, November 2004

differentiator when other factors such as value for money are equal. In other words Carillions approach to CSR through sustainability wins them business and is a real selling point. An added benefit has been that the change in company policy - from being purely reactive on environmental and social issues to being proactive and managing the impact of projects through a sustainability approach has resulted in reduced risks to bottom line profits and improved the companys reputation among its customers and stakeholders. This change has also been brought about by the senior management team taking real ownership of the whole issue and understanding the companys impacts and what is being done to address them. Good communication tools have helped this understanding and ensured that the sustainability approach is embedded throughout the company. In addition to the strategy model and Sun diagram, Carillion has produced a variety of printed and electronic communication tools describing its policies and objectives, its case studies and best practice to inform and guide its people. Currently, it is extending its brand management tool kit by creating an entire section on how to maximise the value of its sustainability achievements in relation to building brand reputation and winning orders. Carillion found that, at recruitment fairs, graduates were frequently asking questions about sustainability. Having a clear strategy and being able to point to examples of how this strategy has been implemented has helped our reputation amongst graduates, which in turn has led to an improvement in the quality of people joining the company, said John Denning, Director of Group Corporate Affairs. For existing staff it has boosted efficiency and morale because they take care and pride in their work knowing that they are contributing to improving the quality of life for the communities they operate in. Carillions approach to sustainability was independently assessed as part of the Business in the Community awards for excellence in 2003. The judges selection

criteria focus was on the quality of management and evidence of impact. They noted that the companys move towards sustainability had facilitated greater innovation, enhanced individual and corporate responsibility, and improved product delivery in its construction, maintenance and service activities. Carillion received the top award for responsible business practice and was voted Company of the Year. Why is it CSR? The development of a sustainability strategy allowed Carillion to see the relevance of its impact on society and the environment and as a result encouraged it to develop actions with measurable targets. These actions go beyond compliance and demonstrate CSR. What next? In recognition of graduates interest in sustainability, Carillion plans to revise its graduate recruitment programme using its sustainability strategy as an integral tool to explain the nature of the business. It also plans to implement a community engagement strategy, to reflect the need for community involvement to be given the priority it deserves alongside the other elements of Carillions sustainability programme. In addition, Carillion plans to work more closely with suppliers on procurement issues so that they understand their requirements and see how they too can contribute to sustainability, for example through the prudent use of natural resources. Contact us Any comments on this profile? Would you like your organisation to be profiled? For further information please contact Dr Paul Toyne at Article 13 on 020 8840 4450 or email ptoyne@article13.com. For more information on Carillion please contact John Denning on 01902 316426 or email john.denning@carillionplc.com

Article 13 and CBI CSR Case Study Series, November 2004