2022 is expected to be a year of setbacks and recoveries. Infrastructure to focus on ESG agenda; KPMG reports

Kuwait, 07 March 2022

The year 2022, although promising opportunities to build back better, poses brand new challenges coupled with continually shifting social expectations. There, however, lies a global opportunity for leaders in infrastructure to change the very foundation of the collective approach toward the climate, social, and governance agenda.

In its report, Emerging trends in infrastructure (2022), KPMG identified that infrastructure decisions made this year will greatly determine the course of the world’s evolution over the next century. Leaders will have to brush aside their differences and put collective interest at the top to ensure that the future is more equitable, productive, and cleaner. The report points out that the execution of those decisions will rely primarily on the four-fold approach comprising insight, agility, collaboration, and bravery.

It is predicted that the race to net-zero will surge, leaving no room for infrastructure organizations to not participate in the pursuit. Owing to that, organizations may find themselves in a fix should they be unable to report their net-zero efforts. Additionally, the sector will look to invest in the direction of innovative technology solutions and recruit the right climate talent. Over the next year, it is expected that businesses may find themselves faced against insurmountable costs pertaining to the protecting, relocating, rebuilding and strengthening of infrastructure following governments’ and communities’ inability to safeguard essential services.

There is a dearth of new ideas, approaches and models. Organizations will not only look to engage with stakeholders and communities on a broader level but also shift their focus toward becoming customer centric rather than procurement centric. The society and its needs are constantly changing, giving rise to new trends. To better gauge this gap between the stated and real societal preferences, businesses will leverage innovation in technology — particularly data and analytics. Despite that, there may remain some unanalyzed uncertainties that infrastructure planners will need to address with an increased sense of trust and flexibility.

Governments, regulators and infrastructure players are anticipated to embrace governance. The report highlights that while this repositioning is expected to cater better to the society’s needs, it is not merely a way to control costs and mitigate risks. Instead, it is a means to facilitate better scope, delivery and management of projects. In addition, the regulation needs to be agile and flexible enough to accommodate the right measures to tackle any changes in the need or to fulfill unmet objectives. It is expected that over the course of the year, regulators and governance bodies may take up a more central role. Its goal would be to encourage value pertaining to the delivery and governance of infrastructure.

In addition to last year’s efforts, organizations are accelerating their digitization endeavors. Businesses are utilizing data, analytics and other technologies to better their planning cycle. They are not only embedding digital to procure new assets and services but also to improve their operational capabilities. Major players are scouting for ways to create more value vis-à-vis collection and management of data across a host of assets throughout their supply chains. The study found that infrastructure institutions will need to be accommodative of users who are unable to navigate the digital divide and tackle risks pertaining to cyber threats. It is expected that business leaders will embrace a holistic view of digital and look to think like a tech leader. 

There is a prevalent supply chain fragility among infrastructure institutions which is driven by their supply chain shortages, ranging from materials to talent. Players may invest significantly toward the creation of infrastructure assets. Additionally, they will need to address the constriction of supply chains to prevent the development rate from declining and costs from rising, and ensure that the supply of government services is seamless. However, unlocking the global supply will depend greatly on how macro-economic trends such as rise of resource nationalism, resistance to offshoring, increasing demand for local offerings, etc., impact it. The report also stressed that to mitigate talent supply constraints and overcome the scarcity of fresh perspectives, infrastructure businesses will focus on becoming more diverse as a whole.

The pandemic-driven division of how people today want to live, work and play may be a cause for concern for infrastructure planners. They will need to take into account the different investments, assets and priorities required to meet the needs of the two segments that emerged from the bifurcation. In essence, they will strive to come up with solutions that cater to everyone. While radical changes are not anticipated, businesses will still need to be flexible enough to adapt to the change of use over the course of time.

Owing to the scarcity of materials, costs are soaring — resulting in record-high government spending. Despite that, there are still numerous infrastructure projects that governments are keen on delivering. However, there may not be sufficient funds to finance the said projects. Governments are increasingly looking to shift tax brackets or implementing newer capital tax gains. They want users to bear the bulk of infrastructure costs but are concerned that it may result in a political backlash. It is expected that governments are highly likely to review their infrastructure funding plans and will make the necessary amendments to support their endeavors in the sector.