How smart E&C businesses can stay ahead in a challenging environment
Between a global pandemic and fierce industry competition, Engineering & Construction businesses are facing critical challenges that threaten their futures. A new research study from The Ethical Recruitment Agency (TERA) offers solutions. By embracing disruptive technologies, building strong relationships with prime contractors, and adopting modern labour policies, companies can win new business and strengthen their workforce.
COVID-19 has disrupted businesses worldwide and the Engineering & Construction (E&C) sector has been particularly hard hit. The pandemic has sped up long-standing challenges in the sector, especially in Gulf Cooperation Council (GCC) countries. These challenges include fewer projects, conservative decision-making, tougher competition and lower margins. Today, E&C companies of all sizes across the GCC are facing disrupted supply chains, liquidation and investment shortages, and an often idle or immobile workforce.
These challenges affect companies and their workforce alike. Low-skilled migrant workers from South Asia experience challenging welfare conditions even in the best of times. As E&C companies face unparalleled pressure to reduce costs, some view migrant workers as a source of savings – for example, by passing along labour recruitment costs to workers. Many E&C companies are facing difficult decisions ahead that will deeply impact their workforces.
A new study from The Ethical Recruitment Agency (TERA) offers companies a way forward. Prepared with support from the Norwegian Agency for Development Cooperation (Norad) and the Global Fund to End Modern Slavery (GFEMS), Profitable Ethical Recruitment draws on interviews with industry experts, current research, and emerging data to examine how E&C businesses can strengthen their bottom lines while also improving employee welfare. The study also aims to support a diverse range of stakeholders working with the private sector to strengthen labour standards and promote ethical recruitment.
The research finds that trends in the E&C business landscape are accelerating the need for change among small and medium construction firms (SMCs). From the United Arab Emirates to Saudi Arabia, new labour laws are eroding the employer-sponsored visa, guaranteeing worker wages and increasing penalties for noncompliance. Qatar, for instance, just announced labour reforms that will eliminate the No-Objection Certificate (NOC) and raise minimum wages. Other industry trends include:
- Intensifying investor attention on Environment, Social and Governance (ESG) issues is changing how multinational corporations (MNCs) do business. Up to a quarter (25%) of global investor funds are now held by ESG-conscious investors.
- MNCs are responding by flowing stricter requirements down their supply chain. In TERA’s research, key informants at MNCs were already telling subcontractors to reform labour practices or lose contracts.
- Increasing technological disruption in E&C is saving companies money and making low productivity business models unviable.
According to industry insiders, businesses that carry on as usual by passing costs onto workers, ignoring labour laws and disregarding new technology are sacrificing their long-term competitiveness. Short-term financial gains from these tactics are more than outweighed by financial, reputational and legal consequences over the next 1-5 years.
But for agile businesses, these dynamics offer new opportunities. TERA’s research identified clear steps that businesses can take to not only survive these changes but also grow their business, productivity and brand. The study’s recommendations include:
- Start recruiting migrant workers professionally and ethically. Using professional recruiters gives companies a more productive workforce and stands out to prime contractors that are scrutinising their supply chains.
- Mitigate rising costs with new technology. Smart technology can streamline project management, avoid costly delays, and support long-term planning.
- Prepare for disruptive visa and labour reforms. Adapting to new regulations today builds a strong brand, motivates workers, and avoids costly penalties.
The recommendations and other key findings are summarised in a two-page pull-out for SMCs that reviews the practical steps they can take. TERA has also launched an online tool that models corporate investments and gains. These tools are simple, direct, data-driven, and ideal for managers and operational staff in both SMCs and MNCs.
The study concludes that businesses that invest in change will pull further away from those that do not. Investing in better recruitment, labour standards, and technology will improve business outputs and productivity while also supporting migrant workers. While industry challenges are daunting, with the right kind of support even the smallest contractors can remain competitive.
Posted by Evline Meshreky
Evline Meshreky is a Business & Research Officer with TERA. She supports TERA’s research, analysis and engagement to help businesses find innovative workforce solutions. Prior to joining TERA, Evline managed large-scale international projects for commercial clients and nonprofit organisations.