Chief Executive's Upfront
Friday, 14 June 2019
Concrete's Contribution to Living Standards
With the change of Government in 2017, came a different way of looking at how the economy and the nation are performing. An interest in broad wellbeing was signalled. Wellbeing was to be measured via the Treasury’s Living Standards Framework (LSF).
Rob Gaimster, Chief Executive
CONCRETE NZ’S POSITION
While Concrete NZ members are generally businesses, the Association shares the Governments’ view that the wellbeing depends on more than financial performance - such as GDP.
As well as good jobs and incomes, New Zealanders want a broader set of outcomes, including economic and technical progress; safety from natural hazards; a healthy environment; different groups in society working together; and fairness for everyone.
Concrete NZ recognises that the LSF provides a useful way of thinking about how existing activities and potential investment decisions impact on current and future wellbeing.
To explore this hypothesis, BERL were commissioned to assess the concrete industry’s LSF performance.
LIVING STANDARDS FRAMEWORK
The LSF holds that inter-generational wellbeing depends on the growth, distribution and sustainability of four Capitals: Human, Social, Physical & Financial, and Natural.
- Human capital encompasses people’s skills, knowledge and physical and mental health. These things enable people to participate in work, study or recreation.
- Social capital describes the norms and values that underpin society. It includes trust, the rule of law, cultural identity, and connections between people.
- Financial & Physical capital includes houses, roads, buildings, hospitals, factories vehicles. These are the country’s physical and financial assets.
- Natural capital refers to the natural environment needed to support life. It includes land, water, plants and animals, as well as energy resources.
Evidence was collected by BERL to demonstrate how the concrete industry uses the Four Capitals to undertake Activities, produce Outputs and to secure Outcomes.
FOUR CAPITALS & THE CONCRETE INDUSTRY
As a first step, it was necessary to interpret how the LSF defines the four capitals to make them meaningful in relation to the concrete industry.
This was easiest in the case of Physical & Financial capital, as it was found the industry’s total assets were worth almost $3 billion in 2017.
The industry’s Natural capital was estimated at nearly $3.2 billion, based on the amount of constituent materials used in New Zealand concrete production over the past decade.
The stock of Human capital in the industry could be valued, using an economically standard method, at just under $10 billion in 2018.
Social capital cannot be valued in monetary terms, but the industry’s stock includes quality assurance schemes, stakeholder trust, a diverse workforce, and regional distribution of producers.
CONCRETE INDUSTRY ACTIVITIES
The concrete industry is innovative in its use of Physical & Financial capital, with examples being new products and LEAN manufacturing.
The industry is also innovative when it comes to Natural capital, with most manufacturers engaged in waste minimisation, recycling and re-use initiatives.
In terms of Human capital, the industry works hard to ensure staff are happy, productive and safe; which includes extensive training and development.
The industry enhances and preserves Social capital by participating in community activities, as well as emphasising trust through quality assurance and regulatory compliance.
CONCRETE INDUSTRY OUTPUTS
Produced at a rate of around one million cubic metres per quarter, the primary output of the industry is concrete that is used to develop Physical capital.
The industry’s outputs support Human capital by providing an estimated 11,000 jobs that are safe, satisfying and productive.
The measurable output of the activities to enhance Social capital is mainly captured in the outstanding 'pass-rate' of those in the quality assurance Scheme.
CONCRETE INDUSTRY OUTCOMES
In its assessment BERL was concerned with examining how the industry contributes to five broad wellbeing outcomes.
- Economic Progress - the industry helps to build the country’s infrastructure, enhance productive capacity and increase productivity.
- Managing Risks - innovations in product design by the concrete industry contribute to hazard mitigation.
- Sustainability - the core benefits of concrete are its durability, thermal properties, recyclability, fire & flood resilience and acoustic separation.
- Social Cohesion - concrete enables a built environment for the community (e.g. schools and hospitals) and by offering employment across the country.
- Equity - the industry empowers fairness through developments that make concrete better, cheaper and more accessible.
SUSTAIN & GROW
BERL conclude that the industry does not diminish, but rather grows and sustains the Physical & Financial, Human and Social capitals it uses.
While harm to Natural capital cannot be eliminated, the industry is diligent in mitigating and re-mediating environmental damage, and therefore nurtures Natural capital.
Concrete NZ will utilise BERL’s report An Assessment of Concrete’s Contribution to Living Standards in New Zealand to progress its relationship with government and help navigate the policy landscape.