Sustainability report 2009

Climate change is high on the agenda of Governments, and a growing number of our customers, as the world looks for ways to address climate change and diminishing fossil fuel supplies. The built environment is responsible for nearly half of global emissions of greenhouse gases. With Balfour Beatty’s scale and technical expertise in the design, delivery, construction and operation of critical infrastructure, we want to play a leading role in the transition to a low-carbon economy.

Infrastructure and buildings are seen as key areas by governments and policy makers to reduce global carbon emissions:

These commitments provide further impetus for our customers and ourselves to reduce energy consumption and meet the growing demands for low carbon solutions.

The low-carbon business opportunity

The Government’s own research indicates that the UK’s low-carbon economy will grow to £65bn by 2015 presenting us with further opportunities in wind, waste management, low energy buildings etc. The value of the low-carbon economy in the US is more difficult to quantify precisely but will be larger still.

The Obama administration has allocated US$61bn to stimulate the energy sector in the America Recovery and Reinvestment Act. By 2017, nearly US$20bn in tax incentives will be poured into the wind and solar industries, along with US$54bn into direct support for energy efficiency schemes. A large chunk of the latter will be spent on improving the country’s ageing electricity grid to support renewable energy transmission and electric cars.

The US Green Building Council predicts that the market for new green buildings in the US will soar from US$12bn in 2008 to US$60bn in 2010. Green renovation of existing buildings will be even greater, rising to US$240bn by 2010.

Our investments, construction, professional services and utilities businesses can all benefit from these growing markets.

Reducing our emissions of carbon and other greenhouse gases features strongly in our 2020 sustainability vision and roadmap. Our focus has been on understanding, measuring and reducing our carbon related impacts.

Measurement

We measure and report our emissions of greenhouse gases in line with the 2009 guidance produced by DEFRA/DECC and the internationally recognised GHG Protocol covering our:

• Direct emissions (termed Scope 1) from our buildings and vehicles (including fluorinated gases)
• Indirect emissions from electricity use (Scope 2)
• Limited (Scope 3) indirect emissions from employee business travel using non-company owned vehicles as well as flights

The DEFRA/DECC guidance provides emissions factors for electricity based on the UK grid average mix of primary energy sources. The new 2009 conversion factor for electricity has been re-applied to our 2007 and 2008 data.

Practical energy saving

Our businesses continue to seek ways of reducing their CO₂ emissions from their own buildings, project site and transport fleets through:

• Expansion and use of videoconferencing facilities (e.g. across our US construction business)
• Developing and implementing green travel plans (such as car sharing, greater use of public transport and cycling to work) as in Balfour Beatty Management in the UK (now Parsons Brinckerhoff)
• Raising staff awareness of energy saving at home and in the workplace
• Training in fuel efficient driving such as the Safe and Fuel Efficient Driving (SaFED) courses run by our Plant and Fleet business available to all our UK businesses
• Better monitoring of energy consumption through use of sub-metering (e.g. for our rail depots in the UK)
• Introducing lower carbon vehicles (such as electric powered cars for use on military bases by our investments business in the US)
• Upgrading to more energy efficient plant, equipment and improved building controls such as improved insulation being applied to site accommodation cabins in our regional civil engineering business

Our UK investments business, Balfour Beatty Capital, has been particularly successful in reducing the carbon footprint associated with business travel. Promoting video-conferencing and switching from air to rail travel saved over 800 tonnes of carbon, a reduction of more than 50% in travel related emissions in 2009 compared to 2008.

We know that our carbon footprint from our direct emissions (offices, factories, depots, mobile construction plant, fleet vehicles and air travel) is comparatively small when set against the carbon impact over the lifecycle of buildings and other infrastructure. Buildings over their lifetime account for 45% of total greenhouse gas emissions through the energy they use and the production of construction materials to build them accounts for a further 10%. As the energy efficiency of buildings improves, the relative contribution of the embodied energy in materials to the overall carbon footprint will increase.

We have a responsibility to look for carbon savings beyond our own direct emissions and into the projects we design, build and manage for our customers. These indirect emissions, termed Scope 3 emissions are more difficult to quantify in practice and cover areas such as:

• The energy embodied in the processing, manufacturing and transportation of construction materials
• Energy consumed in the operational phase of assets
• Disposal of biodegradable waste
• Other supply chain impacts

Work has begun on quantifying these emissions and will continue into the future. Data from our A421 road scheme near Bedford in the UK is a case in point. Using the Highways Agency carbon calculator methodology, our project team has quantified the scheme’s carbon footprint during the period October 2008 to December 2009. Scope 3 emissions from the embodied energy in materials, worker travel/commuting to and from the site, together with waste came to 94% of the total footprint. This far outweighs the Scope 1 emissions such as fuel by construction plant and energy consumption in site offices.

See our A421 case study to see how the site team is reducing the scheme’s overall carbon footprint, including the innovative use of alternative materials in the build.

Chart data

We continue to report our global emissions to the Carbon Disclosure Project (CDP). Over 2,500 organisations responded to the CDP in 2009. The results are made available to 475 institutional investors.

Through the CDP we were among the 700 suppliers that also shared key project and operating company data with customers. In our case, this was the UK’s Department of Transport and Royal Mail to inform their assessment of supply chain carbon impacts. Our score of 57%, placed us in the first quartile of respondents (average score 39%).

The Carbon Reduction Commitment (CRC) Energy Efficiency Scheme, beginning in 2010, will apply mandatory emissions trading to cut carbon emissions from large commercial and public sector organisations in the UK.

Large construction companies such as Balfour Beatty will be subject to the CRC. The scheme’s rules are complex and signal a step-change in carbon management for many organisations. We provided comprehensive feedback to the Government’s consultation in 2009, highlighting where we believe improvements to the scheme’s design are needed.

We are actively preparing for its introduction across the Group. The CRC also provides further opportunities for Balfour Beatty to offer and deliver low-carbon solutions for customers as well as reducing our own energy costs. These range from the design and build of highly energy-efficient buildings through to our energy management expertise and changing behaviour of building users.

We continue to improve the coverage of our reporting of Scope 1 and 2 emissions. Our global emissions of CO₂ from our vehicles, plant and buildings were 383,400 tonnes in absolute terms in 2009 (324,000 tonnes in 2008, restated). Our own carbon footprint is dominated by emissions from mobile plant and company vehicle fleet. Our growth in emissions reflects first time reporting by BK Gulf and our US construction business as well as improvements in the accuracy of our data.

Chart data

In 2009, our CO₂ emissions relative to revenue from our vehicles, plant and buildings were 34.8 tonnes/£m, an 8% reduction from the 2005 figure (38 tonnes/£m). We will improve the scope and coverage of our data during 2010 to include more of our US businesses, including Parsons Brinckerhoff, which we acquired in October 2009.

Chart data

We believe that the growth of the global low-carbon economy will continue to increase through a mix of fiscal incentives, legislation, market and commercial opportunities.

Our sustainability roadmap sets out our path towards a 50% reduction in greenhouse gas emissions by 2020 relative to revenue against a 2010 baseline. Our interim goal is a 10% reduction by 2012.

Our first step in meeting this goal is developing a robust baseline covering all our Scope 1 and 2 emissions by the end of 2010. Reducing emissions will then require a mix of efficiency improvements, behaviour change, innovation and wide scale deployment of low carbon technologies in our own buildings, plant and vehicle fleet.

We will also improve our understanding of our indirect (Scope 3) emissions – especially in our supply chain through the materials and services we procure in delivering our projects. This knowledge will help us to identify areas on which to focus our reduction efforts and to identify targets for the future.

2012 and 2020 Targets

Reduce our direct and indirect greenhouse gas emissions by 10% by 2012 and 50% by 2020 per £m revenue against a 2010 baseline.