Global Construction industry cautiously optimistic, with ESG and government projects driving positivity

KPMG’s 2023 Global Construction Survey ‘Familiar challenges— new approaches’ finds the industry is cautiously optimistic, despite facing ongoing volatility, including continued supply chain disruption, rising inflation and a possible recession.

This positivity can be attributed to a number of 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.

• 66 percent of respondents are optimistic about the direction of the construction industry with 38 percent of project owners being “very optimistic” – in comparison to just 18 percent in the 2021 survey.
• Four out of ten engineering and construction (E&C) respondents expect revenue growth of more than 10 percent in the next 12 months. 54 percent of respondents can fully envisage the benefits of environmental, social, and governance (ESG) investments and are making improvements.
• 50 percent cite the need for appropriate workplace demographics, with diversity, equity, and inclusion (DEI) ranked as the third most important factor for determining future success.
• 81 percent of E&C firms are adopting mobile platforms, with 43 percent using Robotic Process Automation (RPA) and 37 percent adopting AI. As a measure of the room for growth of AI, a mere 4 percent are currently applying it across every project.
  

Despite this positivity, the after-effects of COVID-19 are still apparent and the industry is continuing to face a number of challenges, with continued supply chain disruption, high energy and materials prices, and labor shortages pushing up costs and delaying project timelines. 45 percent of project owner respondents say they have experienced a pandemic-related schedule delay or cost impact of more than 20 percent.

The sector continues to struggle with poor project performance, with 37 percent of respondents revealing that they have missed budget and/or schedule performance targets due to lack of effective risk management and that only half of project owners’ projects are meeting completion deadlines – a rise in five percent since the 2021 survey.

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 standardized risk management processes and controls. 36 percent of respondents are placing greater emphasis on accurate risk reporting (up from 25 percent in 2021) and establishing a dedicated risk management department (20 percent, up from 17 percent in the last survey).

In our very 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 percent of respondents). This year’s report notes that ESG has become a more important and integrated part of leaders’ thinking, with 54 percent saying they fully envisage the benefits of ESG investments and are making improvements in this area. 50 percent 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 percent of project owners recognize the need to integrate ESG into both their projects and reporting in order to enhance access to capital to fund their projects.

However, project owners and E&C firms 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.

Responses to the survey suggest that the construction sector is making improvements to and companies are continuing to prioritize 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 minimize the risk of incidents in the workplace.

Many companies are also making tangible steps to destigmatize 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.

DEI was ranked as the third most important factor in determining future success by respondents to the 2023 survey, with half of respondents (an increase of 8 percent from the 2021 survey) citing the need for appropriate workplace demographics to help address disruption and 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 percent of respondents from E&C firms say their organizations have adopted, or are starting to adopt, mobile platforms (up from 69 percent in 2017), with 43 percent either using or starting to use RPA (up from 10 percent in 2017). However, a smaller proportion of the respondents’ companies are applying these technologies across all projects, creating a lack of consistency in standards across the industry.

The survey also reveals that the popularity of artificial intelligence (AI) is continuing to grow, with 37 percent of respondents saying they were either adopting or just starting to adopt the use of AI (up from 23 percent in 2018 and 29 percent in 2021) – in the form of digital twins, smarter construction equipment, data and document management, and enhanced safety and communication. With that, there is still a way to go with just 4 percent applying AI across every project.

For more information, access the full report at KPMG 2023 Global Construction Survey. (PDF 5.05 MB)

For media queries, please contact:
Hannah Smith, Manager, Global External Communications
T: +44 7920 020858
E: hannah.smith@kpmg.co.uk

The KPMG 2023 Global Construction Survey (the 14th of our Global Construction surveys) contains the perspectives and insights from almost 300 E&C firms around the globe.

Many of the responses were gathered through face-to-face interviews with senior leaders – many of them chief executive officers. The vast majority of respondents are from organizations carrying out significant capital investment projects.

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