John Beck, Chairman and CEO of the Aecon, Notes that Sustainability Means Good Business in Canada

John Beck: Before I get into my thoughts and reflections on sustainability, I thought it’d be useful for you to know where my perspective comes from. As Peter said, it comes from decades of experience in the construction and infrastructure development industry. I’ve been involved with AECON my entire business life. AECON is Canada’s leading construction and infrastructure development company. Over the past five years, we’ve grown a lot. We now have over $3 billion-worth of work ahead of us, with 12,000 employees across the country—half in the East and half in the West—and one of the largest construction equipment fleets in Canada. Our mission at AECON is clear: safely and profitably deliver best-of-class services and products to meet our customers’ construction, development, and infrastructure needs in an environmentally sensitive manner.

AECON works with diverse industries including mining, oil and gas, transportation, power, utilities, and social infrastructure. We build infrastructure that is an integral part of the social and economic fabric of the communities in which it’s built. Over the years, we’ve become the largest building trades employers in Canada, and for the last five years we have been consistently recognized as one of Canada’s 50 best employers. Within that list we’ve been named one of the top eco-friendly companies in the country.

All of this is something I take great pride in, but not just for the accolades and awards. Inherently, these accomplishments positively impact AECON’s bottom line, and not only in the ways you may immediately think of. At AECON, we devote a lot of attention to aligning our corporate objectives and behaviors with the core values of our key stakeholders—they are our clients, our employees, our partners, and our investors. The truth of the matter is, sustainability is often the core value of each of these stakeholders, and I believe this alignment is fundamental to the achievement of AECON’s most important business objectives.

Lets start with our clients. AECON’s diversity of operations is such that at any given time, we’re working on highway projects, nuclear plants, utilities installations, solar parks, light rail systems, mine sites, and just about everything in between, which means our client list is long and varied. We serve some of the most important industries and stakeholders in the nation, from federal and provincial governments to large and small corporations, all undertaking critical endeavors.

AECON as a developer and builder of infrastructure understands the connection between what we do and the underlying priorities of our clients, and now more than ever before, sustainability is embedded in the priorities of these clients. We know that building a road or power plant entails a lot more than delivering a quality asset. We have to recognize that the way in which we set about delivering such infrastructure must align not only with dimensional specifications, but also the principals of our clients. And as I said before, more and more, sustainability is an integral part of our clients’ operations and needs.

A further point is that AECON’s services are increasingly sustainable in nature. Take our solar services—AECON is a leading player in the solar market, installing rooftop systems for our clients as well as developing solar parks, we’ve develop key relationships in the field with manufacturers and suppliers along the solar value chain. Most recently, we were awarded a contract by Northland Power to build six Ontario solar-generation parks. Each of these parks consists of over 40,000 solar modules, mounted on fixed structural supports, on 85 acres of land. These parks generate intelligent, green energy, and are impressive, to say the least. This type of contract is a clear example of how the ability to provide sustainable services affects our bottom line.

Another demonstration of this is Waneta Power Project, where the project will make more efficient use of the water flow at the hydroelectric British Columbia dam. The sustainable practices on the project are abundant, but a few stand out to me. The site is rural, in the midst of a robust ecological system. At one point in the project, we conceived of the possibility of relocating a female black bear and two cubs who were occupying the construction area. We also stopped work for the day for the birth of a new deer fawn and waited until the doe and fawn had moved up the hill before resuming work. We didn’t make money that day, but we made the new deer fawn happy. During the same project, we installed silt curtain fences to control the levels of sediment deposits in the river.

And I just want to add here, a couple of things I still remember from when we built highway 407 20 years ago, and we were working with the government at the time to build whatever sustainability provisions we could. First, we had bicycle paths everywhere on the right-of-way. Second, and the reason I remember this is because it really shocked me, there had been a creek that had crossed the 407 right-of-way 50 years before, and it was dry. But there was the possibility that one day there would be fish again in that creek, so we built into that dry creek fish ladders at both ends of the right-of-way so that if ever the water and fish came back the fish would climb down the one side and climb up the other side across the road. And that was built and its still there today. So I’ll say, at the end of the day, our clients know AECON has the experience with sustainable development, and that we take it very seriously. Yes, progress and construction are necessary, but we can do so while still respecting the surrounding environment.

Much of what we work on is the core infrastructure for vital cities. AECON is currently working on the Spadina TTC subway extension: when completed, for the first time, passengers will be able to travel by subway outside Toronto to the York Region, easing congestion and facilitating commutes. We all know a strong link exists between investment in public transit systems, the environment, and the well-being of the city’s inhabitants. AECON is proud to be a part of such transportation projects. And these three examples are from clients in two of our targeted sectors: energy and transportation. Sustainability and sustainable services aren’t on the sideline. They touch nearly every project we work on.

Now the second stakeholder group for whom sustainability is an imperative is employees. The Canadian Construction Sector Council has forecasted the need to recruit 111,000 more workers in the construction industry between 2011 and 2019, the next seven years now. In addition, over the same period, the industry will need to replace 208,000 workers who will leave the industry due to retirement. That’s almost 320,000 new workers to find in less than eight years. In a labor shortage, the ability to attract and retain a quality, skilled labor source is a competitive advantage. This and the next generation of young engineers, estimators, accountants, welders, and road-builders want to work for a company that takes its corporate social responsibility policy very seriously. Employees demand their companies instill in-house environmentally responsible processes. The employees of today look for companies who create places ripe for innovation. They want to be a part of the next energy-efficient technology, and with AECON building green energy projects for decades, we are the right, experienced company to join.

AECON’s subsidiary, Innovative Steam Technologies, also known as IST, is an example of such innovation. IST’s once-through steam generators reduce fuel and operating costs for increasing power input, reducing the use of fossil of fuels. These units recover waste heat energy that is otherwise being emitted into the atmosphere. We supply these units around the world, in places such as Bolivia, South Africa, Turkey, New York State, Spain, and Hawaii. But back to my point, this generation of skilled employees is attracted to this type of work and wants to be part of a company who is inspiring the next line of energy-efficient products and services. As I referred to earlier, AECON is recognized as one of the 15 best employers in Canada, on the Aon Hewitt Employee Survey. Over the last two years, in that survey, there’s been a significant emphasis on being in an eco-friendly company. We are pleased that AECON has been recognized two years in a row as one of the top 30 green companies. All and all, AECON being an environmentally responsible company is an important part of AECON’s talent recruitment and employee retention strategy, and that strategy is pivotal to AECON’s current and future success.

The next stakeholder group, AECON’s partners, is particularly sensitive to the sustainable policies of those who they choose to work with. Our project in Quito, Ecuador is a stellar example of this. AECON is a major player in the group developing the new eco international airport. Our financial partners on the project, that is our multi-lateral lenders, were very stringent on the qualifications for any participants of the group, as well as the sustainability of the project itself. Yet another example of how sustainability affects our bottom line. The financial lenders would not have worked with us if we had not been committed to sustainable practices. This is written right into the contracts. The key to our airport project is also a showcase of social responsibility for the environmental education programs of nearby schools. In 2009, the project received the America’s Award for Environmental Sustainability Leadership from CIFAL, which is a United Nations training center founded by the UN Institute for Training and Research. The Quito Airport was selected as the Best Practice Example of design and building of a green mega-project. We are pleased to be a part of this award-winning project, and give kudos to the president of our concessions group, Steve Nathan, who is a champion of sustainability at AECON, and the team-lead on this significant project. I guess he also wrote this speech.

Now I would like to discuss the last stakeholder group on our list—AECON’s investors. As you may know, AECON is Canada’s largest, publicly-traded infrastructure development company. Undeniably, our most significant stakeholder is our shareholders. There is a growing number of investors whose criteria includes screening for environmentally sustainable companies. Just the other day, I read that Mackenzie & Company have estimated that $2 trillion will be invested in the energy efficiency field by 2020, looking for an internal rate of return of 17 percent. This is a powerful finding, and one that resonates with me as CEO of a public company. Investors are more discriminating than ever before and more demanding that the companies they invest in have strong corporate social responsibility policies. In fact, I know of some funds that do not invest in any company that does not have very clear policies.

This brings me back to AECON’s internal sustainability programs, which we operate day in and day out. While there are many diverse internal programs both big and small, there are two I would like to highlight today—examples of the kinds of things we do. First, walking-the-walk, our Cambridge Office developed, constructed, and now operates a 250-kilowatt, rooftop, solar installation on a fabrication facility. The solar panels generate approximately 320,000 kilowatts of clean power a year, eliminating 65 metric tons of C02 per year. This is the equivalent of powering 29 homes, taking 12 cars off the road, or planting 15 acres of forest. This type of initiative truly is an “ah-ha” moment for us, showcasing how AECON aligns our business with that of our stakeholders. So not only do we perform solar services for our clients, we live it.

When I was introducing AECON at the beginning of my remarks today, I mentioned that we have one of the largest construction fleets in Canada. Not only do we have responsibility to our stakeholders to smartly manage this fleet, we also have the responsibility to do so in a sustainable manner. So in 2006, AECON, in conjunction with a company called BSM Wireless, launched a major initiative to install tracking technology on our entire fleet. This ensures engines are running efficiently and properly, monitored remotely, at the right balance of air ratios, but most significantly, assesses idling time. We found that many of our workers in the winter—just to keep warm, eat lunch, etc.—would let the motor continue to run and idle. The end result: we’ve identified more than 150,000 idling hours saved each year. This represents nearly 700 metric tons of carbon saved annually to lower emissions and fuel consumption. That’s the equivalent of the carbon sequestered by 160 acres of pine forest in a year. We took it a step further by installing cab heaters in the vehicles so it wouldn’t be uncomfortable. AECON’s anti-idling program has resulted in 30-40 percent fuel savings, savings of about $1.25 million in fuel each year.

In closing, AECON’s approach to sustainability is one of alignment. Our core values, our vision, our mission, and our strategic paths are calibrated to make a company that understands the larger context in which we operate. We are no more and no less than a composite of our key stakeholders, with whom we are totally interdependent, and our key stakeholders place great value upon the sustainability imperative that calls for activities and businesses in balance with the environmental and social needs of the communities in which they operate. To me this illustrates a model, societal relationship with our infrastructure. We affect our infrastructure, and our infrastructure affects us.

My parting words are, I’ve been in this industry for a long time. We don’t have to get into the number of years, but I know that as the world has changed, I’ve changed, AECON has changed, and certainly one of the most significant changes has been the absolute need to be sustainable. In the UN’s 2010 Global Impact Study, 93 percent of CEO’s believed that sustainable issues will be critical to the success of their businesses, and I whole-heartedly agree. Sustainability affects our bottom line in too many ways to count, and AECON will continually adapt and innovate to ensure we are aligned with our key stakeholders. Thank for your time today, and I’d be pleased to answer any questions you might have.