What you need to know about environment, social, and governance (ESG) for the Construction Industry
Major construction projects are usually financed by the government who is accountable for how they spend our tax dollars, or by large construction companies that are accountable to investors and industry regulations.
So, they are the first to face public pressure to demonstrate their commitment to better environmental, social, and governance (ESG) practices before other projects do.
That's why many new RFQs now contain some references or requirements about environmental, social, or governance practices.
Why should you care?
- You need to know what ESG is so you can help your clients meet their RFQ requirements
- You can attract clients who are concerned about ESG
- You can be a better citizen and contribute to the better health and good of society
So, what is ESG?
ESG refers to three key non-financial categories in evaluating a company's risk profile and performance – environment, social, and governance.
With so many international regulatory acronyms and rating systems, navigating the world of ESG can seem confusing.
ESG is also evolving, with disclosure and rating criteria that can vary based on various factors.
That's why ESG is unique to each company, with different starting points and different opportunities.
Most companies already have some ESG practices in place, so no company ever starts from scratch.
ESG concerns will have a growing influence on the construction sector in the coming years. The construction industry is keen to act on ESG issues, but more transparency and consistent reporting will be required to maintain this progress.
Watch the webinar to learn:
- What is ESG?
- The most critical facets of ESG for construction?
- Who does ESG apply to?
- Examples of failed ESG
- Examples of successful ESG
- Debunking common ESG myths
Q & A Questions addressed include:
- How does LEED rating work with ESG?
- How has the pandemic affected ESG reporting?
- Can we integrate ESG reporting with the financial statements?
- How does ESG apply to hiring construction contractors and subcontractors?
- How can ESG apply to construction employees?
- What risks should construction companies plan for?
ESG For Construction Recommended Action Steps
Below are two comprehensive lists that give Micro, Small, Medium, and Large construction companies ideas on "how to" and "what to" support or promote in the ESG space.
|(1 – 4 Employees)||(5 - 99 Employees)||(100 – 499 Employees)||(500+)|
|ESG Statement||Engage Consultant||Engage Consultant or full-time staff||Full-time staff or ESG department|
|Build relationships with customers and suppliers||Enhance community and locally focused relationships||Collaborate on decision-making processes with internal stakeholders||Streamline bureaucracy and support JV partnerships|
If you consider your construction company to be Micro or Small:
- Draft and communicate an ESG commitment statement
- Track ESG initiatives using two or three disclosure metrics
- Consider potential ESG advisory group composition, strategy, and risk management
- Volunteer in your community
- Mentor a young person, hire summer students or apprentices
- Buy sustainable, local products or only as much as you need
- Share equipment with others rather than buy
- Recycle and compost
- No vehicle idling
- Reduce energy use
- Inform your suppliers that you value sustainable solutions
If you consider your construction company to be Medium or Large:
- Identify, discuss and adapt the commitment statement to adopting a strategy & action plan for how your company thinks about ESG.
- Come up with no more than five specific, measurable items related to your business (Could be completed using a SWOT Analysis or Materiality Assessment)*
- Spread these five things across the three categories of ESG.
- Quantitative topics are Environmental and Governance.
- Track these over time with a clear reporting tool (could be an Excel spreadsheet or off-the-shelf platform) so you can see progress and potential gaps.
- Qualitative topics, or Social, range from employee well-being to gender empowerment, training, diversity & inclusion, anti-harassment, organizational development, and employee wellness. Determine which ones allow you to measure (again, it could be an Excel spreadsheet) your progress and show potential gaps.
- Ensure that your ESG program explicitly addresses a selection of the United Nations 17 Sustainable Development Goals (SDGs), as these can be the parameters used to determine ESG investment options.
- Engage an outside measuring consultant, so you have an outside barometer to measure your progress and a third party to give your program credibility with stakeholders and investors.
- Assign your ESG program to one person or department, but work collaboratively across departments or set up a cross-functional working group. Understand that diversity at all levels of the company is business imperative.
- Define an outreach program to access the major pools of capital offered by institutions that are investing in ESG friendly companies and are expected to grow in the coming few years.
- Commit from Senior Management and the Board of Directors on ESG ongoing oversight and include ESG in the organization's strategic plan, education, and decision-making tools.
- Review Senior Manager accountability and executive compensation using ESG metrics.
Let ESG work for you. Consult with an ESG specialist to determine action steps that can fit your organization's goal.
Isobel O'Connell, Senior ESG Consultant
As a global Environment Social Governance (ESG) consultant and award honoree, Isobel focuses on change management, social & environmental impact & risk, strategy, and reporting. She fosters strong working relationships, open communication with diverse stakeholder groups to address the ever-growing intersection between commerce and sustainability. Her ESG expertise includes business development, strategy, regulation & compliance reviews, and risk & disclosure management. Of note, she is known for building bridges between the project world, organizations, and communities to achieve cost-benefit-driven results in such industries as global consultancies, port operations, oil & gas, alternative energy, and mining.
* Materiality assessment is the process of identifying, refining, and assessing numerous potential environmental, social, and governance issues that could affect your business and/or your stakeholders and condensing them into a shortlist of topics that inform company strategy, targets, and reporting.