ArcaWeb: Why reputation will be more important in 2020

2019 has been a challenging year for the construction sector, writes Robert Walton, Chief Operating Officer at Constructionline. Political and economic uncertainty has impacted investor confidence and raised questions about supply chain security. The lack of clarity is also making it difficult for businesses to prepare for the future; with multiple scenarios to prepare for, many are struggling to shape growth plans or see where future opportunities may lie. The inevitable result has been slower growth across the sector.

Robert Walton

While construction businesses of all sizes are feeling the heat, smaller companies have been hit hardest. Figures from the Federation of Master Builders show that SME workloads have fallen for the first time in six years, with almost a third reporting lower workloads, compared to 13% during the last three months of 2018^[1]. Figures from CIPS reaffirm this reduction in activity, also pointing to political upheaval and risk aversion as factors affecting momentum and reducing the tender opportunities available^[2].

Against this backdrop of reduced investment and delayed projects, SMEs are having to work harder to differentiate themselves from the competition; a challenge made all the more difficult when the rising price of materials and labour is simultaneously forcing them to cut operational costs. Fortunately, there is some good news on this front and it comes from a possibly unexpected quarter: compliance.

Turning compliance into commercial opportunity

A good reputation has always been the most valuable tool in an SME construction business’ arsenal. With large amounts of money on the line, buyers want to know they can rely on you to deliver on time and to expected standards. Your reputation reduces their risk. In today’s hyper-competitive marketplace, SME businesses who have previously relied on word of mouth are realising the value of shouting about their track-record. They’re getting their reputation before more buyers by investing in certification programmes and marketing materials.

What some may not realise, however, is that a reputation for quality may no longer be enough. Buyers are facing their own set of pressures and high among these is the need to operate safely, ethically and sustainably across the supply chain. Faced with increased expectations from consumers and stakeholders, those at the top of the supply chain now need to ensure raised values are upheld throughout it. And it’s no passing trend: new regulations suggest that this enhanced level of supply chain responsibility is here to stay. ISO45001 is one example; setting a new standard for occupational health and safety, the regulation expands the definition of ‘workers’ to include both employees and contractors^[3].

Regulation focused on protecting workers, eradicating modern slavery and reducing carbon is likely to become much more commonplace in the future thanks to the UN’s Global Sustainable Development Goals, our nation’s net zero ambitions and mounting pressure from civil-rights action groups. During April 2019, a group of organisations including ClientEarth, Amnesty International and Unison, called for a mandatory due diligence law for all UK businesses^[4]. Meanwhile, a government-commissioned review of the 2015 Modern Slavery Act^[5] by the Business and Human Rights Resource Centre (BHRRC) has found the legislation in need of major reform. It recommends steps to ensure more businesses take meaningful action to identify and mitigate risk across supply chains. It means that in the future, SMEs can expect buyers to want proof of their commitment to ethical and sustainable practices as well as the usual reassurances of safety and quality.

With demands increasing on all sides, SMEs could be forgiven for thinking that the new Common Assessment Standard (CAS) introduced by Build UK and the Civil Engineering Contractors Association (CECA) is just another compliance obstacle to overcome on the already challenging road to success. Delivering an action from the government’s Construction Sector Deal, CAS is intended to lift standards across the industry and should already be firmly on the radar of construction businesses. However, to those who have written it off as an additional compliance hurdle to jump, the message is this: look again. What CAS can actually provide is an important commercial opportunity.

Delivering reputational benefit through regulation

Build UK’s three strategic priorities are improving business performance, increasing productivity, and recruiting, training and retaining talent^[6]. Through these priorities, the organisation has placed sustainable growth for the sector at the heart of everything they do, and the CAS is no exception. Designed to reduce costs for businesses and streamline the prequalification process, the new system will mean that companies never have to be certified by more than one assessment body; data sharing will mean that contractors can access PQQ information from any of the three recognised assessment bodies. The CAS hails the beginning of a new era of collaboration for the industry – one that will hopefully be welcomed as it will mean less bureaucracy and less expense. It also provides businesses with an efficient way to demonstrate a commitment to ethics and sustainability – things that were once a decider in the tender process but are now often a prerequisite.

SMEs might also be surprised to learn how easy boosting their reputation through CAS can be, particularly if they are already members of a certification programme. Constructionline Gold Membership, for example, facilitates compliance with CAS for members at no extra cost, and certainly seems to provide a boost to a supplier’s reputation – verified suppliers are six times more likely to appear in buyer searches than non-verified suppliers. With reputation likely to be a key focus for 2020, the reassurance that industry stakeholders are collaborating to develop straightforward and cost-effective ways to achieve this should be welcome news indeed.