The 2023 Global Construction Survey ‘Familiar challenges – new approaches’ conducted by KPMG finds reveals that the industry is cautiously optimistic, despite facing ongoing volatility, including continued supply chain disruption, rising inflation and a possible recession.
The positivity that the survey highlights can be attributed to numerous factors including a significant post-Covid-19 pipeline, government infrastructure funding in the US, India and other countries, and ESG demands driving renewable energy and circular economy projects.
“With more and more employees looking for companies that prioritise DEI and employee health and wellbeing, amongst other factors, companies will need to offer fulfilling careers with flexible working conditions, greater work-life balance and varied career paths alongside cutting-edge innovation in purposeful, sustainable organisations in order to succeed in an ever-changing, competitive industry.”Geno Armstrong, International Sector Leader – Engineering & Construction, KPMG International
Despite this positivity, the after-effects of Covid-19 are still apparent, and the industry is continuing to face several challenges.
With continued supply chain disruption, high energy and materials prices, and labor shortages pushing up costs and delaying project timelines, 45% of project owner respondents say they have experienced a pandemic-related schedule delay or cost impact of more than 20%.
The sector continues to struggle with poor project performance, with 37% of respondents revealing that they have missed budget and/or scheduled performance targets due to lack of effective risk management, and that only half of project owners’ projects are meeting completion deadlines – a rise of 5% since the 2021 survey.
KPMG finds that engineering and construction (E&C) companies and project owners are seeking ways to improve portfolio-wide risk management, with their number one aim being to achieve clearly defined and standardised risk management processes and controls.
36% of respondents are placing greater emphasis on accurate risk reporting (up from 25% in 2021) and establishing a dedicated risk management department (20%, up from 17% in the last survey).
The rising influence of ESG
In KPMG’s first Global Construction survey in 2008, respondents revealed that the number one driver for sustainability amongst E&C companies was to position themselves as ‘environmentally aware’ (cited by 56% of respondents).
This year’s report notes that ESG has become a more important and integrated part of leaders’ thinking, with 54% saying they fully envisage the benefits of ESG investments and are making improvements in this area.
50% of E&C companies see the opportunity to gain a competitive edge through investing in ESG initiatives, suggesting that leaders are beginning to grasp the value of embracing ESG more fully.
In a nod to the importance of strong sustainability credentials to satisfy investors, the survey also found that 32% of project owners recognise the need to integrate ESG into both their projects and reporting in order to enhance access to capital to fund their projects.
However, companies have differing views on the most crucial aspects of ESG, with project owners feeling that reducing greenhouse gas outputs and developing renewable facilities as the most important, while contractors are more concerned with social considerations such as DEI and meeting government requirements.
Continuing efforts to improve worker safety
Responses to the KPMG survey suggest that the construction sector is making improvements to, and companies are continuing to prioritise worker safety, with improvements in safety monitoring and onsite health and wellness testing of workers being implemented along with a greater use of technology to help minimise the risk of incidents in the workplace.
Many companies are also making tangible steps to destigmatise mental health in the industry, by supporting workers and implementing risk assessments that cover both physical and mental health, sharing resources around mental wellbeing, and offering practical help in the form of trained peer support.
Adapting to the needs of a future, diverse workforce
DEI was ranked as the third most important factor in determining future success by respondents to the 2023 survey, with half (an increase of 8% from the 2021 survey) citing the need for appropriate workplace demographics to help address disruption, and to bring new skills and mindsets to tackle longstanding project cost and schedule challenges.
Almost half of respondents also acknowledge that implementing or updating workplace models for remote work and job site travel can play a part in making construction projects more resilient and able to thrive during volatile times.
The adoption of innovative technologies such as robotic process automation (RPA), virtual reality (VR), project management information systems (PIMS), drones, smart sensors and AI has increased significantly.
In this year’s survey, 81% of respondents from E&C firms say their organisations have adopted, or are starting to adopt, mobile platforms (up from 69% in 2017), with 43% either using or starting to use RPA (up from 10% in 2017).
However, a smaller proportion of the companies are applying these technologies across all projects, creating a lack of consistency in standards across the industry.
The KPMG survey also reveals that the popularity of artificial intelligence (AI) is continuing to grow, with 37% of respondents saying they were either adopting or just starting to adopt the use of AI (up from 23% in 2018 and 29% in 2021) – in the form of digital twins, smarter construction equipment, data and document management, and enhanced safety and communication.
KPMG’s 2023 ‘Familiar challenges – new approaches’ Global Construction Survey concludes that there is still a long way to go, with just 4% applying AI across every project.