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Managing Change Sustainability Report 2008 Managing Change Sustainability Report 2008 Gammon Sustainability Report 2008 C Gammon at a Glance Shanghai Shenzhen Macau Hong Kong Singapore Gammon is a leading construction and engineering With an annual turnover around US$1billion, we directly services group. We have been building a wide range employ some 2,525 full-time staff, giving us one of the of construction projects in Asia for more than 50 years. strongest construction teams in Asia. We are the market leading construction contractor We are a private company jointly owned by Jardine in Hong Kong, where we are headquartered, and also Matheson, an Asian-based conglomerate with extensive operate extensively in Singapore, Macau and Mainland experience in the Region and Balfour Beatty, a world-class China. We also have group companies incorporated in engineering, construction and services group. Malaysia, Thailand, Vietnam, the Philippines and Indonesia With the support of our shareholders, we are able to and have completed projects in all of these countries. deliver a unique combination of local presence, technical capability and financial strength. Our Brands Balfour Beatty E&M Limited Civil, foundations, building Specialist Public-Private Engineering design services Electrical and mechanical and maintenance services, Partnership business and material technology contracting services and support services covering plant and equipment, concrete technology and steel fabrication D Gammon Sustainability Report 2008 02 Chief Executive’s Statement 03 Remaining Focused 06 Corporate Leadership 08 Health and Safety “ Duty of Care, Yourself and Your Community ” 12 Economic and Business “ Integrity, Value, Social Responsibility ” 16 Social Responsibility “ Connected, Contributing, Caring ” 20 Environment “ Use Wisely, Waste Less, Emit Less ” 24 Verification Statement Selected 2008 Performance Summary Accident Incident Rate Greenhouse Gas Emissions Group Turnover per 1,000 workers tonnes CO2 equivalent US$ millions 11.4 75,185 1,108 1,129 66,791 32.5% 11.3% 953 18.5% 8.2 8.3 822 44,870 39,820 5.6 2005 2006 2007 2008 2005 2006 2007 2008 2005 2006 2007 2008 Calculated based on Greenhouse Gas Protocol published by WBCSD/WRI Excluding air travel and landfill waste 2005 to 2007 data adjusted to utilise local emission factors for electricity Turnover by Region Employment by Region Employment by Gender US$ millions 1,809 Total 76% 79% Male 5.4% 139.1% 150% 1,650 905 2,525 859 staff 79% Female 220 24% 490 21% 21% 92 304 2 5 224 226 2007 2008 2007 2008 2007 2008 2007 2008 2007 2008 2007 2008 2007 2008 2007 2008 Hong Kong Singapore China Hong Kong Singapore China Male Female & Macau & Macau Represents monthly-paid staff Represents number of monthly-paid staff The total number of staff including daily-paid workers was 4,201. Including subcontractors working on our sites the number swells to more than 8,730 people Gammon Sustainability Report 2008 1 Chief Executive’s Statement The challenge for us as a business and for the industry is to be equal to the demands stakeholders and the community will make whilst delivering sustainable and successful growth. We are at a time when corporations and interaction with the communities in which we live and governments need to make courageous and work. So we have revisited our commitment to build considerate choices to secure the future for stronger connections with our communities and endeavour to manage our business in such a way as our children in both the near and long term. to have a positive impact on society overall. 2008 was a year of two parts. It began with rapidly rising Along with the financial crisis, the challenges of commodity prices and pressure on personnel resources as overstressing the earth’s resources and of climate change we struggled with growth. The year ended with falling are on local and international agendas with an increasing prices, the credit crunch and rising unemployment. The sense of concern. The construction industry must look to financial crisis and ensuing downturn is causing turbulence contribute through advancing energy conservation, and unease in the global economy. As many view the carbon-critical designs, and life cycle planning and costing. failure of corporate consciousness in the financial sector as Whilst we work to meet these many challenges I believe a root cause, it is natural that sustainable principles and we must also remain focused on resolving underlying corporate responsibility are emerging at the forefront of issues for long-term sustainability. Human resources, public discourse. imbalance in the procurement process, safety and quality The construction industry is being called upon as a vehicle of life remain the significant issues affecting our business. for creating jobs and economic stimulus. I believe we must We cannot address these issues in isolation; it requires seize the opportunity to demonstrate our industry’s role in partnership and courage to transform our industry. sustainable development and produce more sustainable I believe those who embrace social responsibility and buildings, communities and infrastructure. Applying the underlying tenets of sustainability will survive best. integrated approaches that consider longer-term societal Our prior years’ reports encouraged a dialogue for change values will yield benefits during the present downturn and and growth that I still feel relevant. This report discusses long lasting value when conditions improve. the need to remain focused on long-term sustainability Gammon as a company was not immune to the downturn. whilst managing change in the short-term. Yet I am optimistic, because we pride ourselves in good governance and the ability to adapt and deliver products, services and innovation under challenging conditions. The rapidly changing business climate highlighted to us that business as usual is not an option and we need good risk management and closer engagement with all our Thomas Ho stakeholders. Chief Executive Gammon Construction Limited I believe the construction company of the future will be judged not just on what it builds, but how it builds. May 2009 Gammon has long been a strong corporate sponsor of community programmes, but I foresee a greater 2 Gammon Sustainability Report 2008 Remaining Focused Pacific Place Mall, Hong Kong. The risk profile for our business has changed; tight credit in the supply chain and the private sector, and imbalanced contract terms, mean our industry’s capacity to take on supply chain risks is limited. Midway through 2008, private project funding dried up, Gammon remains committed to customer delivery and material and energy prices dropped and governments hence is exposed to the costs of supplier default, a risk that began launching efforts to stimulate their economies to is heightened in the current economic conditions. prevent a deeper economic downturn. This recession was Additionally, typical contract conditions in our core private met with a call to increase government infrastructure and sector markets leave the contractor to bear numerous risks, construction projects. including for example of adverse ground and weather In some respects, prospects for the construction industry conditions. The reduced activity in the private sector is also may be brighter than most due to this balance of demand. causing significant margin pressure. The contractor is However, the overall balance of risk is worsening mainly therefore having to finance increased levels of risk on a because of increased risk in the supply chain. Imbalanced lower margin and does not benefit from any material contract terms mean our industry’s capacity to take on interest income. supply chain risks is limited. As a result, the ability of contractors to bear risk is reduced, The reduction in available credit is the main source of except in cases where reasonable margins and contract increased risk in our supply chain. As a main contractor, conditions can be achieved. Gammon Sustainability Report 2008 3 Construction Market (Hong Kong) Construction Market (Singapore) in HK$ billions in S$ billions 34.6 forecast 82.1 forecast 28.0 73.9 59.4 67.5 24.5 56.0 48.2 48.7 16.8 41.7 43.2 14.3 14.5 11.5 10.0 10.3 01 02 03 04 05 06 07 08 09 01 02 03 04 05 06 07 08 09 Private sector Public sector Private sector Public sector Construction work performed by main contractors (excluding repair, maintenance, Value of contracts awarded. Projected demand for 2009 is an upper bound figure alterations and special trades). Information up to 2008 from Report on the Quarterly published by the Building and Construstion Authority, Singapore Government. Survey of Construction Output issued by Census and Statistics Department, HKSAR The range is S$22-28 billion Government. Forecast based on government estimate of HK$39.4 billion from 2009/10 budget speech and internal estimate for private sector of HK$20-30 billion Procurement We call for a speedy implementation of these initiatives. Once in place and if managed successfully, consideration “Is the industry positioned to capitalize on should be given to retaining these measures to make our opportunities arising out of present day converging industry more sustainable for the long term. economic and environmental concerns?” The current economic climate highlights the need to Human Resources evaluate our industry’s economic business models and innovate in pursuit of long-term sustainability. Integrated “With industry unemployment currently at 11.2%, approaches to the pre-construction process need to be is now the time to worry about skills shortages?” adopted because they produce the maximum value. Notwithstanding the current climate, the next few years While life-cycle planning may be further off, facility and will be critical for the industry. Competition for talent will energy management, waste and carbon considerations are intensify in the civil streams and project management. becoming the norm. However, the bid process is still Contractors will need to redeploy their talent to cope with restricting the submission of engineering alternatives and the shifts in their business portfolio resulting from changes undervaluing safety, environment and innovation in award in market demand.
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