Protecting our environment, decreasing emissions, and producing sustainable energy resources have long been a concern for businesses. More recently, investors are also looking at long-term sustainability and ethical considerations when deciding on where to invest their resources and are using Environmental, Social, and Governance (ESG) metrics to make these decisions. Companies with solid ESG plans have a higher probability of success, so it is imperative that businesses consider ESG in their own company processes.
Overview: ESG in Construction & Real Estate
Value-oriented ESG practices are valuable, especially in construction and real estate. Because of the importance of investment in real estate development, ESG is now at the forefront of decision-making when considering where to devote financial resources. An investor wants to know the impact of a company’s previous activities and their effect on the surrounding community. Companies that prioritize environmental, social, and governance concerns often build better reputations, have higher customer satisfaction, and more sustainable value-creation—all linked to long-term success and increased capital investment.
1. Environmental Practices
The environmental standards in ESG metrics are largely influenced by federal regulations and concerns about global warming, greenhouse gas (GHG) emissions, and environmental impact. Consider the following when planning a construction project:
Monitor water consumption on the job site
Using a hydrometer to collect data on the daily usage of water can keep projects within the scope of an environmentally conscious building plan. Companies can integrate low-use fixtures and commit to reusing and recycling gray water. Companies should emphasize water conservation to their employees, set responsible goals for water consumption, and institute consequences for carelessness, like forgetting to shut off a valve.
Reduce emissions both during the building phase and throughout the life of the building
Data shows that the Engineering and Construction (E&C) industry accounts for 25-40% of the world’s total carbon emissions and 30% of greenhouse gas emissions are attributed to buildings. It is crucial that companies commit to procedures that reduce the negative, yet necessary, impact construction has on our world. Start by using sustainable products with optimal life-cycle value. Additionally, use new, more efficient methods of heating, cooling, and lighting, which can drastically impact the consumption of raw materials used.
Recycling, reusing, and repurposing can not only reduce waste but provide cost-saving opportunities
Construction and Demolition (C&D) materials account for a large amount of the United States’ annual waste, with more than 600 million tons of C&D debris generated in 2018. Builders can reduce waste by buying used materials. A project that uses recycled materials not only reduces waste sent to landfills, but it saves money that would otherwise be spent on new materials. Additionally, construction engineers can design for adaptability and disassembly proactively, so the impact of future demolition is reduced.
2. Social Practices
The construction industry plays a fundamental role in building communities. Because of its integral role in shaping the cities and neighborhoods we depend on, it is in a key position to make a positive social impact.
Human safety should be paramount to any building plans
Not only should worker safety be stitched into every project, but the safety of the people who will work, live, or spend time in the finished structures is critical. According to the World Economic Forum, people on average spend nearly 90% of their time indoors, so the health of occupants should always be taken into account.
Consider the growing urbanization of communities
About 200,000 people are added daily to urban areas. Construction companies that provide affordable and comfortable housing will have a positive impact on the community it serves.
3. Governance Practices
Because the construction industry directly impacts the daily lives of people who live and work in the community, the accountability of companies in the industry is paramount.
Transparency and accountability should be among the pillars of every company’s core values
Collaboration and cooperation develop trust and reputability not only among the people who work for the company but also for the people who utilize the services, buildings, or provided products.
Incorporate dedicated processes to verify and confirm that all regulatory requirements are met
Demonstrate a commitment to industry-wide safety efforts and decrease any chance of missed regulatory requirements that may impact the success of the company as well as the well-being of its customers.
Collaboration between key stakeholders across the construction industry—including general contractors, architects, engineers, subcontractors, and other stakeholders—will play a large role in maintaining good ESG practices. Each of these players will play a key role in sustainable construction practices.
When a company in the construction industry makes ESG a priority, it attracts stakeholders by reducing risks, improving long-term sustainability, and positioning itself for long-term success.