Ro Coroneos ©Gavin Jowitt
Ro Coroneos ©Gavin Jowitt

Firms must prioritise sustainability to stay attractive to investors, says Lendlease

3 June 2022

 

Lendlease Australia’s head of responsible sourcing, Ro Coroneos, talks about the firm's mission to reach absolute zero carbon by 2040 and building the culture necessary to achieve the target.

 

Lendlease is aiming to be carbon neutral by 2025 and absolute zero by 2040. Can you tell me about that journey and how you plan to achieve this?

The path to Mission Zero is prefaced with our sustainability framework, which has three aspects: achieving growth in a way that facilitates economic prosperity for future generations; to create places that are adaptive, that support inclusive communities and can withstand environmental stresses; and respecting the natural environment, as well as the health and wellbeing of the communities who interact with our projects and places.

 

The domain for our supply chain is about conserving water, eliminating waste, participating in the circular economy, consciously sourcing sustainable materials, and trying to do that in a business as usual (BAU) way rather than treating sustainability as a special add-on. 

 

So the goal is to make sustainability BAU?

Yes, the mindset is very much about integrating all these elements as part of business as usual. I’ve come across discussions in industry around there being procurement, and then sustainable or ethical procurement – I don’t agree with that. I believe all procurement should be ethical and sustainable, where you’re able to do that. We’re at a place where we can’t consider this an exotic add-on, we don’t have that luxury anymore.

 

We have to speed up, start being brave and integrating these things into business as usual. The more we do that, the closer we get to critical mass, and then the mainstreaming accelerates more quickly. Investors are recognising this too, and are actively seeking this out. We’re a partnering organisation, that’s how we deliver, so we need to be attractive to investors. If we are not looking good in the sustainability space, we’re not going to progress or be as competitive.

 

That's only three years away. How close are you to hitting the 2025 target?

Well, we have hit some key milestones. We now use 100% renewable energy across our European portfolio. And there’s One Sydney Harbour – a high-rise residential apartment complex within a precinct called Barangaroo, which is an urban regeneration project we have delivered over the past 10 years. That was Australia’s first carbon neutral precinct. Some pieces of the precinct are in completion now, and we’re on track to achieve 40% embodied carbon reduction for that.

 

We also collaborated with Boral in Australia to use a concrete mix that has a 40% reduction in carbon emissions over the standard, and we’ve raised £250m with the UK’s inaugural green gilt bond. We are on our way to phasing out diesel and gas in our operations, and moving towards renewable electricity – that’s before 2030. We’ve already achieved that in Europe and are making significant progress in Australia, and in the US as well.

 

Also, we’re collaborating with some of our strategic supply chain partners as well, some of whom are extremely advanced, probably more advanced than us, and we’re learning from them. Then there’s the stakeholder pace around our tenants, residents and clients, around the commitment to the transition to renewable electricity. So there are many inroads and we’re racing to get as much done as we can.

 

Net zero seems extremely ambitious when construction materials are involved…

For construction, our immediate focus is securing sustainable options for concrete, steel reinforcement, post tensioning, and facade, aluminium and glass. We’re actively looking at these things, at innovative products and materials. They’re the big-ticket items and about 70% of our challenge, so if we can address those, we will substantively address that challenge.

 

But it’s not just the big-ticket items, there’s also interior categories, you know, paints, waste, flooring, furniture joinery, and moving our property portfolio away from gas to electrification. They’re more fiddly but they also make a contribution, though it might take a little bit longer on some parts. I would never claim that we’ve solved it, but we’re in it, trying to wrangle it. 

 

When it comes to absolute zero, is that realistic for any industry, let alone construction?

It is quite daunting. But I think what’s really exciting is that if it’s not absolute zero, it’s pretty bloody close. We are talking to some suppliers who are already devising ways to get to zero, or absolute zero and some have cracked that. We’re starting to see big players making significant R&D investments – they’re betting for the future on this. And for our part, we see opportunities to trial and pilot these things as a demonstration of what’s possible.

 

Another aspect to this is the building information modelling (BIM) and digital twin technology that are running in parallel. It unlocks a targeted approach to sustainable delivery of an operation and the full lifecycle of a project or asset because it’s not guessing, it’s precise. You can use AI to predict patterns of use for buildings, so when to turn on the air conditioning, how the security is phased, when the sunshades come down, the technology learns this and becomes autonomous.

 

Over the lifecycle of an asset, from design to delivery, to maintenance and end-of-life, this digital twin and BIM bring intelligence through the phases, and you’ll be able to see exactly what you need from a buildability perspective, from a cost-planning perspective, and it informs the building construction and preventive maintenance. So your capex and opex are much more refined. It’s time-saving, efficient and has sustainable outcomes because you get really good quality data in terms of your carbon emissions, water use and energy consumption. You can identify efficiency opportunities and improve them.

 

What stage are you at right now?

We’ve launched decarbonisation roadmaps for each of our regions – the Americas, Asia, Australia and Europe. The biggest challenge at the moment is to determine which suppliers can work with us on this, what’s the level of investment required. Tenants, clients and the government want to do the right thing to deliver sustainable, energy-efficient, low-carbon outcomes.

 

We have to respond to increasing market demand, and there’s a competitive advantage if we are able to do that more effectively, more innovatively or seamlessly. That requires us to change our procurement practices because we have to bring our suppliers on the journey, but it’s also about our culture. We’re all about ferocious, tenacious leadership, and sustainability has actually been inherent in Lendlease for decades.

 

The cultural pace is important because the younger generation is expecting this – it’s not that we’ve got to convince senior management, it’s the next generation. They want to work for a company that has its act together or is trying to do something about this issue. That’s where the talent attraction will be. There’s no time to waste speculating, there is an urgency.

 

How do you incentivise change with more traditional suppliers?

Construction is a fairly traditional industry; it’s manual and labour-intensive, so there’s a transformation needed in education and training. The supplier landscape is varied, you know? There are more traditional suppliers, if I can call them that, and there are others we have recognised as higher risk categories. It’s a different proposition for an aluminium producer or facade manufacturer, to someone who might be doing formwork. For those with a higher risk exposure to climate change, I think they’ve recognised they have to make the investment to change.

 

For those that don’t have that same level of exposure, they learn by the experience of working on a project, they get dragged along, or they fall away. From our perspective, we have a process for segmenting and assessing, and we take a risk-based approach to how we assess suppliers that are most aligned with what we’re trying to do. And there’s an investment for us to work with those suppliers, to build capacity for them to work with us on demonstration projects, so there’s all sorts of partnering opportunities.

 

Others may not be as big, or the culture is not so much about R&D investment, not everyone’s going to be resourced to do that, so there will be an aspect of obsolescence to it. There’ll be other factors, such as the economic viability of current approaches – the newer ones might be more efficient, but they may not have invested in those. In that case, they may still win work, but it may be on a different level or on a smaller scale. 

 

What are the options for carbon-intensive materials, such as concrete and cement, which have become vilified to an extent?

Some materials are demonised, yes. This green concrete project, that’s about thinking what’s the technology solution for concrete? And we could say the same about timber, right? If it’s not Forest Stewardship Council (FCS) certified, what’s the chain of custody? Which native community have you decimated in getting hold of that timber? So is certification the solution? Because supply chain transparency is absolutely critical.

 

And having environmental product declarations, for example, they’re a minimum requirement we want to see, but it’s harder to show that from a social risk perspective, of course. You can have beautiful credentials for solar panels and polysilicon, but as 75% comes from the Xinjiang region in China, that has human rights abuse connections, so how do we reconcile that? To me, that is going to be a really interesting crossroad, in how we manage the rare earth minerals that are used in renewable technologies as well as smartphones and intelligent electronic devices. What’s the human rights due diligence around that? Does that not have equal footing with the carbon impact?


What role does sourcing play in the development of lower carbon materials?

It could be a combination of partnerships, investments, several things we treat as advanced category management. That means we’ve identified the strategic partners who can work with us in that transition, we engage with them to find where the opportunities are for the sustainable outcomes we’re trying to achieve and how they can help us do that.

 

We look at where that can be applied on our projects, so that’s an engagement we did directly with the supplier and with the project team. And, depending on what transpires determines if it will be a one-project event, a long-term partnership, a pilot – there are a raft of different avenues.

 

Can you elaborate a little on sourcing’s relationship with innovation at Lendlease?

This is something we facilitate with our key suppliers. For example, we’re a member of Responsible Steel, which has a certification method with a number of inputs on how steel is produced, and we are part of that process. Those criteria address 12 principles with 100 requirements that set the benchmark for steel production. So you can nominate a site to be audited against the standard to meet the ESG requirements. When you have steels onsite that have been certified against the standard, you can certify that the steels are compliant with that standard. That’s just one partnership.

 

Another one of our projects, the Milan Innovations District (MIND), has real innovation opportunities. MIND is a 100-hectare mixed-use redevelopment that’s aimed at becoming a world-leading space for technology and science. It’s a hub that’s ripe with opportunities to demonstrate innovation, and sourcing is a key part of that project.

 

Absolute zero includes addressing Scope 3 emissions. How are you measuring this?

It’s really hard. We started last year using data from suppliers, there’s public information, use of technologies, supplier relationships – it’s all of those things. We are still refining our in-house measurement method and we rely on background data, referring to environmental product declarations, doing lifecycle assessments, we look at recognised standards, use other licensed data, there might be protocol.

 

It’s a combination and it’s not easy. I wouldn’t say we’ve solved it but we’re using a multitude of sources to form an estimate of it at this point, and that will evolve and improve over time.

 

What do all these efforts in sustainability deliver, apart from being worthy?

It’s about finding new ways of working. Of doing something new and leading progressive approaches to mitigating climate risk. We create legacy – our imperative is to ensure that legacy endures for the right reasons. It’s hugely attractive to know you’re part of a team delivering a legacy that’s supporting sustainable communities. For example, our Barangaroo project in Sydney is a tangible precedent of our response to climate risk.

 

Our business has to evolve and future talent can help us do that, but what attracts them to us in the first place is the potential to create legacy for the right reasons. It is difficult, but it’s also urgent. We can’t wait until 2040 because it’s hard and complex, we have to start now and look at solutions. And culturally, the industry has to change as well. 

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