Joost Nelis (BAM Group): ‘We Aim to Be the Market Leader in Sustainable Construction’
When BAM declared its full commitment to sustainable construction last year, it marked a significant moment in the market. BAM did this not only to secure the company's future, but also to take the lead in the market. And that for a publicly traded company which just a few years ago was facing severe difficulties.
In a conversation between Eelco Simon, partner at consultancy firm Valcon, and Joost Nelis, COO Netherlands of the Royal BAM Group they discuss how a sustainable BAM aims to become a role model for the entire sector. Nelis is the entrepreneur, who, more than a quarter of a century after the acquisition of the family business J.G. Nelis by BAM, helps shape the strategy that unites the construction sector with addressing societal challenges such as the environment. It is almost symbolic how he, from his workplace in Bunnik, Utrecht, gazes out onto a green strip nestled among offices, roads, and residential areas.
Why is sustainability so important for BAM?
‘BAM is a large organization that aims to be at the heart of society. Our strategy building a sustainable tomorrow goes beyond just sustainability. It is our ambition to assist clients in addressing their societal challenges in sustainability and to successfully resolve them. Our organization is impacted by all the major issues of the day - housing shortage, decarbonization, energy transition, climate change, labor shortages - everything intersects with our activities. We found it difficult in the past to contribute positively to these issues. We required loads of materials, emitted high levels of substances including nitrogen emissions, and consumed vast amounts of energy. Meeting the expectations of our clients was challenging, let alone surpassing them. However, we no longer want to be part of the problem, we want to contribute to the solution. Both younger and older generations of BAM employees have a strong resonance with being purpose driven. If we manage to concretely contribute to society in development, construction and maintenance, we will remain socially and financially sustainable.’
Who is the customer for BAM?
‘Traditionally, the customer was the one who signed the contract. But we now have a more holistic view of the market; we also see the customer behind the customer. That would be the user, the inhabitant, whether this customer is a buyer or a renter. The users are the ones who need to experience the value of buildings and infrastructure.'
Three years ago, the environmental defense organization (Milieudefensie) was critical of BAM's environmental contribution. However, there has been significant change in your approach since then. Are you dictated to by the customer's demands, or are you redefining it?
‘For years, we were accustomed to delivering what the customer asked for. We completed one project after the other, prioritizing lowest price. To realize the switch to sustainability requires enormous adaptability from all involved. You no longer view construction as a series of projects with a beginning and an end executed by always differing work teams and with continuously differing parties. That approach does not align with sustainable construction. We now opt for long-term collaboration with our customers and co-makers, as we call them. Through sustainable collaboration, you ensure people share all their knowledge and help each other devise and implement solutions. Together, you can make progress. This cannot happen when low price remains the decisive factor.’
How do you convince BAM employees to embrace the new way of working?
‘The shift from thinking in terms of consecutive projects to creating long-term relationships is a significant demand on our people, who are accustomed to thinking in terms of projects. I entice skeptics by taking them back to our past and showing them the value which we are now creating. A few years ago, we generated too much volatility. Prioritizing price as the sole tender criterion became a race to the bottom, while our people have so much more to offer than realizing the lowest price point. For this reason too, we must continue to transform. This value we can add to employees, customers, shareholders, and society should become a continuous consideration, and, interestingly enough, this interplay between what society demands and what we can offer appeals also to employees who were accustomed to project-based construction.’
Was this also your reason for change?
‘Absolutely. During the pandemic, certain markets came to a halt. We incurred losses on several projects, putting us in dire straits. It was the perfect storm scenario that unfolded. We could not sustain this, which is why I fully supported the new strategy, in which reducing our risk profile was an important element. This led us to bid farewell to some markets and divest or scale down businesses. Now, we are entering a phase of contemplating the creation of sustainable value, with digitization and industrialization as enablers. This is inspiring and promising.’
How was that period for you? You have been with BAM for 27 years, and you yourself also had to make that transition to value creation.
‘During the COVID period, much attention was diverted to resolving operational issues. As a result, I became more of a micromanager focused on execution than the leader I aspired to be. I then conveyed my vision for our role in the new world, where it is no longer just about the lowest costs. That is why I have always chosen to no longer tender solely based on the lowest price. I spoke about my personal growth in my work, and I also acknowledged the moments when I stumbled. You can only lead an organization through change if you make the story personal. It is not the what-question that is crucial, but the how-question, because that holds the key to what is needed for change.’
To what extent do you feel like the owner of the sustainability strategy?
‘I feel deeply aligned with the strategy. We have elaborated it in our sustainability wheel, with measurable objectives across six themes: decarbonization, circularity, climate adaptation, biodiversity, safety, and health & inclusivity. This framework empowers us to take the lead on initiatives. No one can do it alone; we do it together. But that is what makes working in construction so rewarding. It is not just about the technology; it is about the art of putting together high-performing teams. This resonates with my passion for building with people, for people. In our new ecosystem, we are bringing everyone along – from employees and co-makers to clients and end-users.’
What consequences have you attached to this perspective?
‘I empowered individuals to dive into transformation, to refine their ideas into actionable plans. Describing change this way is vastly different from relying solely on Excel sheets filled with numbers. In transformation, the focus should not be on lagging indicators but rather on leading factors. The challenge lies in shifting away from considering products that no longer align with what the market truly demands. To achieve this, it is crucial to closely observe societal and market dynamics because that is the only way to determine what aligns with the new strategy and how to implement it effectively.’
BAM is a publicly listed company expected to deliver results. What does success look like for the company and what risks are taken to achieve it?
‘Transitioning from gray to green, sustainable revenue is not only about developing new products or methods; it is about transforming our entire organization. We are willing to invest in this transformation, as we think it will not only add value for ourselves and our shareholders but also contribute to a sustainable future. It starts with establishing a stable foundation, followed by actual transformation and then expansion. This sequence is crucial because not to have it in the right order is a recipe for disaster. As COO, it is my responsibility to maintain this balance.’
It is notable that BAM is the only major player in the sector fully committed to building with wood. Is this the translation of sustainable construction?
‘It is one aspect, but not the primary theme. Wood offers sustainability benefits in a broad sense, which we leverage in our biobased concept, Flow, for free-standing housing. However, prioritizing wood does not mean we exclude other materials. I do not know of any high-rise project without steel and concrete. For that reason, we also invest in sustainable concrete.’
How important is industrialization for sustainable construction?
‘Industrialization involves the manufacturing of construction components in factories, which creates tremendous efficiency in the construction process. Sustainable construction is not feasible without it. However, this approach has failed in some countries because builders focused on offsite industrialization, creating components outside the construction site, and then integrating it with traditional building practice where materials were pieced together in constantly changing ways. If this were ever introduced in a vehicle manufacturing environment, you would immediately be shown the door. This method is highly inefficient. The beginning of construction flow is not in a manufacturing plant; it begins with a stable team and co-makers on-site, operating from a fixed reference, plan, and budget, whereafter only project-specific deviations are considered. This is the reason that industrialization starts on-site; this is where the real challenge for sustainable construction lies, not in the manufacturing plant.’
Why has the entire market not embraced this approach given its numerous advantages?
‘Not all clients are familiar with the benefits of sustainable construction. Clients focusing on their portfolios, like water boards, housing associations, and institutional investors, are leading the way. They see the value of sustainable construction for their assets. It is super-efficient, with requests for quotes in broad brush strokes rather than minute details. There are also clients who are concerned about managing the costs associated with sustainable building. We address this by preparing tenders in two phases. The first phase involves detailing a functional inquiry into a well-designed and complete building plan, with the risks managed by the party best equipped to handle them. Execution begins in the second phase with a fixed price.’
How do you convince skeptics?
‘By bringing them in contact with parties who have already experienced the results of sustainable construction. No one can better explain why this approach is so beneficial than those who have lived it.’
How crucial is digitization for sustainable construction?
‘We need digitization not just because of the Environmental Act but also because we aim to sell products and services rather than production capacity. Concrete often remains the most efficient construction method. To compete with concrete in working with wood, digitization offers a solution by producing wooden components from file to factory, without human intervention. Thanks to digitization, we have reinvented construction, keeping the cost of sustainable construction on par with traditional methods.’
Is the COO role still relevant in such a multifaceted transformation requiring extensive collaboration?
‘The title fits me perfectly; it is about the substance you give to the role. Perhaps this speaks to the evolving role of the COO, as I believe the focus of this transition closely aligns with COOs' responsibilities. Transforming requires focus, knowledge, and deep-rooted ambition. To advance the transformation process to be truly sustainable, the tasks of a COO are essential.’
When can one describe sustainable construction as a success, financially as well?
‘As BAM Netherlands, we have achieved the first significant milestone in our sustainability strategy: halving our direct CO2 intensity since 2015. We have extrapolated the journey from 'gray' to 'green' activities to 2030, with 2026 being a crucial checkpoint; by then, we aim to have reduced our direct CO2 release by 80%. Our focus is on halving our indirect CO2 emissions, scope 3, by 2030, which will have a significant positive impact. If we succeed in making BAM the market leader in sustainable construction in the Netherlands, I believe it will lead to strong financial performance, making us an attractive choice for shareholders interested in sustainability.’
This interview was published in Management Scope 05 2024.
This article was last changed on 21-05-2024