Our collective responsibility

Overview

Sustainability makes good business sense. That's why we have now been reporting on it for 10 years. It's why we have invested the time to understand the sustainability issues that matter most to our business and to our customers and the significant opportunities in the transition to a low-carbon economy.

Embedding sustainability in everything we do is now expected by our customers, our shareholders, our employees and the communities in which we operate. This applies to large and small projects alike.

Sustainability is not just about the environment, or a single issue like carbon. That is why our sustainability vision looks holistically at aligning profitable markets, healthy communities and environmental limits.

Our business continues to grow. As we are joined by more people from more cultures, our increasing size and scale mean we have a responsibility to embed sustainability thinking not just among our 50,000 people and in our own working practices, but across the wider 500,000-strong Balfour Beatty community made up of partners, contractors and suppliers.

As a market leader, we have a real opportunity to have a positive influence and ensure that sustainability is a collective responsibility, taken seriously across all stages of the infrastructure lifecycle.

Building expertise on sustainability issues underpins our growth ambitions and helps us deliver value. As new markets are driven by the move towards sustainable development, there will be tremendous opportunities for continued growth in areas such as renewable energy, rail infrastructure and greener building stock. The low-carbon economy is estimated to be worth over £100bn over the next 10 years in the UK alone and we are determined to take advantage of the exciting opportunities ahead.

Sustainability – Our 2020 vision

We believe that sustainability is a collective responsibility and are working together to develop and implement a sustainability strategy covering our global operations until 2020.

We aim to be a leader in sustainability and to play a significant role in helping our customers to make sustainable choices. We also recognise that the impacts of climate change, resource depletion and the expectation of our customers, investors, employees and society will continue to intensify.

During 2009, we critically evaluated and set out our sustainability vision and roadmap, outlining where we wish to be in 2020. The roadmap addresses 31 key issues grouped into 10 focus areas, and sets three critical milestones for each:

Further milestones will be developed for 2015 and 2018. A renewed focus on sustainability, facilitated by the vision, positions us to manage non-financial risk better, to exploit opportunities for increasing efficiency and to enter new markets, and enhance our reputation as a leader in infrastructure development and management.

During 2010, a good deal of work has been undertaken to embed our sustainability vision, as well as our ethics and values, across all areas of the business. Embedding will continue in 2011 with a range of activities aimed at employees, including a Company-wide e-learning programme.

Linking our business strategy to the sustainability vision

The strategic priorities for the Group are highlighted in the Strategic review section. To achieve this strategy, there is a clear connection with our sustainability vision and the risks and opportunities we face.

Business strategy	Sustainability context, risks and opportunities
1 Develop our business further	Demand for sustainable infrastructure is creating new growth opportunities for us. Our 2020 vision and roadmap set out how we will meet our customers' expectations – and how we will ensure our businesses operate sustainably themselves. As we grow and enter more diverse markets, we need to ensure that all our employees make decisions that prevent us from conducting business unethically or being exposed to potential damage. Our Group values, Code of Conduct and ethics helpline will help us manage these risks.
2 Focus on markets with the greatest opportunities	We work on infrastructure assets across their entire lifecycle and increasingly our customers are asking us to deliver more sustainable solutions. The multi-billion pound low-carbon economy also presents us with significant opportunities in fields ranging from new nuclear generation to energy-efficient buildings. Renewable energy, rail and waste infrastructure and the increasing demand for integrated services in the water market are all areas of business that will increase in size and value to us.
3 Improve operational performance and cost-effectiveness	Adequate margins are a prerequisite for investment in long-term sustainability. We aim to operate more efficiently to remain a competitive and sustainable business.
4 Continue to strengthen core skills	Our customers in both developed and emerging economies are investing in increasingly complex projects requiring an ever broader range of skills. Our people management strategy needs to ensure that we have these skills, and that our future leaders can manage increasing complexity and change across a broader range of countries. Our ability to integrate a range of stakeholders relies on effective engagement with suppliers and provides us with an opportunity to innovate for more sustainable outcomes. We anticipate particular opportunities in the low-carbon economy.
5 Continue to show leadership in values and behaviour	As a market-leading business, we are intent on setting the industry standard for ethical conduct, safety and sustainability. Our Code of Conduct, ethics training and Zero Harm vision are essential markers of the standards we set for ourselves and, ultimately, our supply chain. We will differentiate ourselves by embedding sustainability into everything we do as a business by 2020. Over time, our leadership will result in sustainable infrastructure consistently being the best option from an economic, community and environmental perspective.

Leadership and governance

We aim to be a leader in areas such as ethics, safety and the environment and believe that the long-term future of the organisation depends on it.

We have put in place a series of measures to ensure that we are managing the business to achieve those goals:

Policies

Balfour Beatty has clearly stated policies and principles (available in full at www.balfourbeatty.com) for key issues such as:

Within this framework, operating companies are required to develop specific policies and practices, relevant to their particular business.

Risk management

In addition to setting out the roadmap to achieve our sustainability vision, maintaining and building on our leadership position also involves the effective management of risks within the Group.

The Board is responsible for ensuring that risks are identified and appropriately managed across the Group. Responsibility for risk identification, analysis, evaluation, mitigation, reporting and monitoring rests with divisional/operating company management.

While risk management is a key driver for our sustainability vision, non-financial risk is also reflected in our Group-level risk management process (see Principal risks and risk management).

Ethics and values

As an international infrastructure group, we operate in diverse markets.

We need to be certain that all who work for us are confident in their ability to make decisions that will consistently prevent the organisation from conducting business unethically or being exposed to serious risks.

We recognise that further growth could potentially stretch the boundaries of our businesses and their management teams and expose us to more risk. This has led to a lot of effort being focused on our Group-wide ethics and values programme, including our Code of Conduct, which aims to support our employees in making the right decisions and encourages all our employees to make our values second nature in their thinking.

We believe that having a common set of values that represent what we are as a Group and what we want to be recognised for will offer clear business benefits to us and support us through the challenges of future growth.

Our Code of Conduct has been issued to all levels of office-based staff across the Group. During 2010, they undertook online training, supported by targeted, in-person training where necessary, to ensure they fully comprehend the Code and the importance of ethical behaviour. This training course was produced in eight languages and completed by nearly 28,000 people.

A significant focus of our work during 2010 was preparation for the new UK Bribery Act, which is due to come into force in 2011. We believe our Code of Conduct already sets a standard appropriate for the Bribery Act, but the Act has created a new, strict liability criminal offence of failure by a commercial organisation to prevent bribery occurring. It is a defence for us to demonstrate that we have 'adequate procedures' to prevent bribery and we have been working to ensure that the Group has such procedures in place.

As reported last year, and as a result of the settlement with the Serious Fraud Office, at the end of 2008 we appointed the Global Infrastructure Anti-Corruption Centre (GIACC) to report on our anti-corruption compliance programme. During 2010, GIACC continued its detailed review of our operating companies. This included reviewing Parsons Brinckerhoff (PB) for the first time, in the same way that all our other operating companies had been reviewed in 2009. GIACC's main conclusions are set out in our 2010 Sustainability Report.

Our sustainability vision in action

Profitable markets

We believe that sustainability will have a growing influence on our business, our customers and other stakeholders over the coming decade. It will therefore be a competitive issue in the marketplace. Through our leadership, we can influence the market so that sustainable infrastructure is consistently the best option.

We want our customers and investors to choose Balfour Beatty because we contribute to their long-term profitability through more sustainable infrastructure. Over time, we have seen growing numbers of customers wanting sustainability to be a key part of our service.

An example of this is a project to provide street lighting for Coventry City Council, which has delivered a number of technical innovations that will result in a 38% energy reduction across the city's street lighting stock. Our innovative use of remote dimming technology was one of the key, winning aspects of the bid.

We are seeking to meet the sustainability aspirations of our existing customers and entering new growth markets such as clean energy. We have also started to capture data on the profitable markets component of our roadmap.

In 2010, we estimated that our baseline revenues of recognised sustainable goods and services, such as LEED, CEEQUAL and clean energy, amounted to 22% of our total revenues. We also established for the first time in 2010 that 4% of our projects had agreed sustainability deliverables with the customer. We will continue to track both these indicators as measures of our effectiveness in growing our revenues through sustainability and in influencing our customers.

As we look to offer our customers more sustainable solutions, we have engaged our business development teams in a series of work-winning workshops to understand how we articulate and promote this.

We have established an energy forum to research and develop our approach to maximising new commercial opportunities across the Group from the transition to a low-carbon economy. These include offshore wind, carbon capture and storage, waste from energy facilities, new nuclear and developing the transmission network. In 2010, we were selected as preferred bidder on the world's largest offshore wind farm project at Thanet in the UK. On financial close, this will see us own, operate and maintain the offshore high-voltage transmission assets of the 300MW capacity scheme.

Parsons Brinckerhoff is currently advising the UK Government on its carbon capture and storage demonstration projects.

Influencing the market to adopt more sustainable outcomes will also help the long-term growth of our business. Balfour Beatty, for instance, is a strategic partner and sponsor of the development of the UK Green Building Council's sustainability leadership course in conjunction with Cambridge University.

More details on how we are meeting our customers' sustainability needs, how we have been influencing the wider sustainability agenda and communicating externally can be found in our separate 2010 Sustainability Report.

Healthy communities

People and communities are at the heart of our business.

Our pre-eminent concern is safety – protecting the well-being not only of our own people, but of everyone we come into contact with.

Our sustainability as a business depends on how successfully we recruit, develop and motivate our people, so this must be a priority too.

We, and our customers, also recognise that we have a wider responsibility to the local communities wherever we work. So we seek to make a long-term contribution to society through our community investment, as well as the infrastructure we create.

Health and safety

Our employees have a fundamental right to enjoy safe work and go home every day free from injury. In addition, no member of the public should be put at any risk from our activities. These two guiding principles underline our approach to health and safety, which is core to our own reputation and that of the industry.

By looking after our employees, we will encourage them to look after themselves and others affected by their activities, so that we strengthen our reputation as a trusted employer and supplier of high-quality, safe services to our customers. Only by setting the highest standards for ourselves will we be able to retain the trust of our customers and the people using our infrastructure.

Indeed, our industry-leading safety performance helps differentiate our offering and maintains our licence to operate, particularly for customers with a similar focus on safety excellence.

We have always set ourselves high standards in safety, but in October 2008 we went further still, committing to reach Zero Harm across all of our operating companies. The programme is now two years into its journey and Zero Harm thinking has been adopted and embedded across all our businesses

In 2010, the Accident Frequency Rate was reduced from 0.17 to 0.16.

Regrettably, the Group experienced five fatalities during 2010 (four in the UK and one in Indonesia), compared to three in 2009. Safety has never had a higher profile than it does now, and these tragic incidents serve to remind us that despite our real commitment to Zero Harm, and the progress we have made, our goals are challenging.

A suite of assessment tools called Zero In has been developed to measure vital indicators for organisational readiness for Zero Harm. Pioneer businesses trialled the full suite of tools towards the end of 2010, ready for Group-wide rollout in 2011.

Governance of health and safety

Heath and safety issues are reviewed by the Board and the executive team. Balfour Beatty requires all its operating companies to have formal safety management systems. These are subject to external audit.

Our people

We believe we have been successful at developing strong leaders for the business and establishing great careers for our people. However, as we become larger, more complex and more geographically spread we need to evolve some of these strategies.

Our new divisional structure creates the need for more focused senior leadership roles to manage increasing complexity, working in new markets and geographies and with new cultures and changing political and economic landscapes.

We have developed and published a leadership framework, which identifies the key areas we expect our leaders to focus on and sets out the values and behaviours we expect. All our businesses will consider how they use the leadership framework in their people management activities, demonstrating to our employees that there is, for the first time, a clearly-defined set of behaviours and expectations for our current and future leaders.

We have made significant steps towards our aim of enabling employees to see vacancies across the Group by launching our first online internal vacancy portal.

We have also developed a facility to allow employees whose current roles are coming to an end to upload their CVs through their HR teams so that our internal recruiters can view potential transferring employees to fill their vacancies.

Community engagement

We regard good corporate citizenship as an integral part of our business. We care about how our actions affect others and wish to contribute positively to communities wherever we work – not simply through the lasting infrastructure we leave for the public, but in our wider contribution to those communities.

We seek to engage fully with the communities and individuals directly impacted by our project work and appreciate the legitimate interests that many local communities have in the way we do business. By engaging with them, early and consistently, we can identify and deliver additional value through our projects.

Our customers increasingly wish to see our involvement with local communities shown in bid documentation. Providing local training and employment opportunities is now a key element in winning public sector work, and through the scale of our activities we can make a very positive contribution to communities.

Consultation with local people often involves leaflet drops, project websites, communication via social media and community discussions or exhibitions. Our larger projects have permanent community relations staff, ensuring that we liaise with key stakeholders regularly.

Community investment

We believe that employees who are more closely connected to their communities are more passionate about the work they do, so we have programmes to offer them the opportunity to make a significant and sustainable contribution.

In 2010, the Group donated over £2.8m to charitable causes around the world, including through The Balfour Beatty Charitable Trust which was set up in 2009 to mark our centenary year.

The aim of the Trust is to assist in providing appropriate financial assistance to a wide range of projects, designed by expert organisations, to help disadvantaged young people advance in life. In 2010, the Group donated a total of £358,000 to the Charitable Trust, with a further £152,000 generously donated by employees.

In the UK, through the Building Better Futures initiative, we continued working with The Prince's Trust to support their Community Cash Award and Development Award programmes and with Action for Children, providing disability learning equipment and supporting a young carers' fund. In 2010, the Charitable Trust also appointed Coram as a new charity partner. Coram works with vulnerable children, young people and their families and provides adoption, parenting advice, supported housing and family support and education. During the year, the Trust helped to fund Coram's adoption programme for hard-to-place children.

Outside the UK, the Trust has provided financial assistance to support Project H.O.M.E. in Philadelphia, US, a charity working to end homelessness. Through our professional services business, Heery International, the Trust has also provided support to CHRIS Kids, an Atlanta-based charity dedicated to healing children, strengthening families and building communities.

Additionally, our US operating companies donated over £1m to a variety of causes, including the United Way, Foundation Fighting Blindness, Save the Children's Haiti Emergency Relief, Make a Wish and the Children's Medical Center. Elsewhere, we contributed to Save the Children and Reach Italia Onlus, providing aid for children in developing countries.

We continue to sponsor the Balfour Beatty London Youth Games, Europe's largest youth sports programme. In 2010, we donated £282,000 for the 2010 Games and supported the development of the volunteering communications systems with £255,000. As title sponsor, we have committed a further £930,000 to the Games up to 2013, as well as running a volunteer programme for employees.

Environmental limits

We see clear business advantage in taking a leadership position on environmental issues, recognising the opportunities in helping customers reduce their own impacts and respond to environmental pressures.

Improving our own performance in areas such as carbon and waste reduction will reduce our costs. As customers increasingly consider environmental performance, from carbon footprints to ecology, in their purchasing decisions, a leadership position will give us competitive advantage.

2010 was the first year we have been able to set a global baseline for our environmental impacts. As our data collection systems have improved, and our understanding of these impacts has grown, we have reported increases in our CO₂, water and waste. Our challenge, and opportunity, is to reduce these impacts and achieve the 2012 targets in our sustainability roadmap.

Environmental factors are also creating new markets for us, from alternative energy generation and transmission to protecting assets from climate change.

Energy, carbon and climate change

As well as reducing our own energy use, we see huge opportunities in helping customers to reduce their carbon footprints, build new low-carbon assets and protect existing assets from the impacts of climate change.

We continue striving to reduce our CO₂ emissions from our own buildings, project sites and transport fleets. We are also reducing the carbon embodied in the materials we use – for example, by replacing aggregates with recycled materials.

In 2010, we established a global baseline for our CO₂ emissions. CO₂ emissions relative to revenue from our vehicles, plant and buildings were 42.8 tonnes/£m, (2009: 36.3 tonnes/£m). Our target is a 10% reduction against the 2010 baseline by 2012 and 50% by 2020.

Some climate change impacts are unavoidable due to greenhouse gases already in the atmosphere. Increasing temperatures will affect material durability; higher rainfall and more intense storm events will bring more flooding. We need to consider these risks when designing and constructing to protect the value of our customers' assets and the assets we invest in.

Parsons Brinckerhoff, a recognised leader in climate change adaptation, is working on major studies for the US and Australian Governments. Our adaptation strategy for the UK Highways Agency is now being used as an example around the world and will be used to develop best practice in Balfour Beatty too.

We will continue to work on delivering our goal of a 10% carbon reduction by the end of 2012 and a 50% reduction by 2020 against a 2010 baseline.

Waste

Having established a global baseline for our waste in 2010, we are now working on halving the total sent to landfill by 2012 and ultimately diverting all our worldwide project waste from landfill by 2020.

Waste disposal is a significant and rising cost. Reducing waste can help us to reduce project costs and meet customers' desire for lower environmental impacts.

Increasing waste regulation is creating a significant new commercial opportunity for us. In the UK, 30–40 municipal waste/energy from waste plants are needed within the next five years. This represents a market worth £8bn or more by 2015 in the UK alone.

We continue to seek opportunities to reduce, re-use, recycle and recover waste and to use recycled materials where possible.

To drive re-use of waste we have also set a target of at least 25% of our major materials coming from recycled sources by 2012, where we specify the material. Major materials include concrete, aggregates, steel, aluminium and copper. During 2010, we achieved a 3.4% recycled content in the major materials we procured globally. This figure increased to 10% in the UK.

Developing good quality data for tracking the recycled content of our major materials will be important in 2011. We will continue to focus on our 2012 goals of halving waste to landfill per £m revenue against a 2010 baseline of 101 tonnes of waste to landfill per £m revenue and achieving a minimum of 25% recycled content of major materials (by value).

Materials

Sustainable materials management reduces costs as well as environmental impacts. Already, 75% by value of the timber we procure directly comes from recognised, responsible sources.

We continue to procure timber from recognised sustainable sources, including those certified by the Forest Stewardship Council (FSC) and the Programme for Endorsement of Forestry Certification (PEFC). Our target is 100% from responsible sources by 2012.

For the first time in 2010, we extended our data collection to track the sourcing of other major construction materials such as aggregates, concrete and steel. Where these schemes exist (UK and Europe) some 19% of our major materials (excluding timber) were from recognised, responsible sources. Our 2012 target is 25% (by value) from responsible sources worldwide, where such schemes exist.

Engaging our supply chain on responsible sourcing will be a key element in becoming a more sustainable business.

As we work towards our 2012 targets we will continue to develop responsible-sourcing schemes and to encompass a wider range of construction materials in the UK and possibly elsewhere.

Water

Almost half the world's population will be living in areas of water stress or scarcity by 2030. Delivering sustainable water solutions is a growth market and we will take a lead by developing a water footprinting tool in 2011. We see growth opportunities from integrated service offerings in desalination, treatment and distribution; urban water run-off collection; and detection and repair of leaks.

Our focus has also been to reduce water usage in our premises (for example, through self-closing taps, waterless urinals and staff awareness campaigns) and on construction sites (for example, capturing rainwater for vehicle/plant cleaning, concrete batching and dust suppression). Our site accommodation cabins can also be supplied with rainwater harvesting systems.

We seek to provide new buildings with water-saving technologies such as grey water recycling and use of rainwater harvesting techniques.

We will continue working to reduce direct use of water per £m revenue by 10% by 2012 against a 2010 baseline of 233.3m³/£m revenue.

The water embodied in the materials we use or consume is likely to be much greater than our direct consumption. In 2011, we will develop a unique footprinting tool to help us determine where reductions can best be made.

Environmental governance

Strategic environmental issues are reviewed by the sustainability working group. An environmental managers' forum reviews key topics and shares best practice across the Group. Environmental performance is audited regularly and Group-wide statistics are collated to measure the Group's major environmental impacts.

Five minor environmental incidents resulted in enforcement action and fines in 2010 (2009: 7) totalling £11,000 equivalent. All these minor incidents took place in Singapore for potential mosquito breeding sites, exceeding noise limits and site drainage. Corrective actions have been completed for each violation.