Wates: an adaptive mindset generates value

Sustainability issues affect all businesses, but for private company, the Wates Group – operating in the built environment, a sector that is responsible for about 40% of global carbon emissions – environmental concerns present particularly stiff challenges.

“There are very high levels of carbon emissions, and relatively low levels of innovation in our sector,” Jonny says. “There is also a relatively non-diverse workforce, and it’s ageing. The industry's got a lot of adapting to do if it wants to continue to deliver the housing and infrastructure that society needs.”

Regulatory requirements and client expectations mean that carbon reduction, biodiversity and generating social value have to be central to the core operations of the business. To comply and manage risks, good data management is fundamental. “This is not just about compliance; this is about licence to operate”, Jonny says.

Pressure on the business is also driven from within the business, now in its fourth generation of family ownership, with some members of the fifth generation already working in the company. Jonny says: “As shareholders, we’re committed to passing on to the next generation a stronger, more sustainable business. The Wates Family often talks about business as a force for good, and the enterprise is committed to a promise of fostering a ‘thriving planet’. So, there's a really strong ethos in this organisation about responsibility. We are aware we have a part to play. That’s second nature for us; it’s very personal.”

The role of the board

Responding to sustainability challenges – and seeing them for the opportunities that they are – requires an adaptive mindset, Jonny argues, and the board has to drive this in order to fulfil fiduciary duties.

At the Wates Group, the board includes family shareholders, executive representation and three independent non-family, non-executive directors. The board-level Sustainability Committee, which Jonny chairs, shoulders much of the responsibility for ensuring environmental and social value issues are factored into the decision-making process.

“We have a good level of awareness and strong consensus around that board table,” says Jonny. At the same time, there are vigorous board debates. “The issues are alive and well. Is there immediate consensus on all aspects? Absolutely not. And the same debate occurs at all corners of the enterprise, not just at the board table.”

While the Wates Group has both a climate-related ethos and beliefs – which are the foundation – it also has a very clear strategic plan. “The board has very clear expectations of the business”, Jonny says. “These are rippling out from the epicentre to all corners of the enterprise.”

Those expectations are shaped by the belief that with an adaptive mindset, there are significant commercial opportunities in addressing sustainability challenges, and these opportunities should attract the capital.

“I have a strong personal conviction, informed by science and what we see around us, but also informed by the business opportunity” Jonny says. “One of the lenses through which we look at our portfolio is durability – what is the extent to which a project is environmentally additive or, on the other hand, harmful? That’s what’s interesting to the family as a group of investors. Ultimately, it's our capital. We allocate that capital where we wish to.” Accordingly, investment is being aligned to increasingly environmentally positive ventures.

The challenge of data

At the centre of many challenges is data. “We have to collect the right data to be compliant,” says Jonny. “And the data we need to gauge our impact and the value created by our activities isn't readily available. It takes a huge amount of effort to identify that data, analyse it carefully and draw conclusions. Ultimately, AI will play a big role in this analysis. We’re acutely aware of its possibilities to simplify processes and improve understanding, but the sector isn’t there yet.”

Data is also vital for galvanising action. “As always with communications, you must have loops, reinforcement loops, building awareness and making it personal, giving people the tools, taking on board their feedback. And that's just in-house,” says Jonny. “98% of our emissions are in Scope 3. So, we can do all we like in-house, but in the end, we must be super collaborators. I think this industry is inclined to collaborate and has always done so in terms of its own teams; but the value chain is complex, and we’re only just getting to grips with Scope 3.”

Consequently, the Wates Group has put in place a target for a percentage of its supply chain to adopt Science Based Targets. “That sounds like foothills, but it wasn't so long ago that we were in the foothills with Scopes 1 and 2, and now we’re within touching distance of delivering our near-term target. Our peers in the industry are really coming together. This industry needs catalysing, and this action has a catalysing effect.”

It all comes down to value

While the sector grapples with challenges around collecting and analysing data, businesses are also putting in place new human resources and reward systems to support adaptive ways of working. “It's good that we're doing this, but the implementation phase is bumpy,” Jonny says. “We rely a lot on our colleagues’ forbearance as we adapt and integrate these new ways of doing things.”

He is at pains to say that while there is work to be done and challenges to surmount, this is not a negative experience if you maintain the adaptive mindset. The Wates Group is already leveraging its considerable competencies across the built environment sector to seize commercial opportunities. Low-carbon retrofits of social housing, solar panel and heat pump installations, and BREEAM-rated buildings are all part of the Wates portfolio. A new “Wildscape” offering seeks to apply the company’s expertise in land development to foster biodiversity.

From the company’s own acquisition plan, to working with banks to invest in new technologies as a consortium and leadership training with the UK Green Building Council, decarbonisation and biodiversity is all about generating value.

“This isn't just about paperwork, compliance and reporting; it's also about business opportunity and generating value, and that gets people's attention in a different way, which is good,” he concludes.