ESG, the shorthand for various Environmental, Social, and Governance initiatives that strive to evaluate an organization’s sustainability and ethical impact, originated as a tool for investors but has spread across various sectors, including commercial construction and development.

The emphasis is undoubtedly warranted. The built environment is responsible for 40 percent of energy and process-related CO2 emissions, 50 percent of extracted materials, 30 percent of water consumption, and 35 percent of landfill waste. And the built environment’s long-term impact–today’s buildings will affect communities for generations to come–makes it an especially high-stakes sector for tracking and improving ESG metrics.

However, monitoring ESG isn’t just an altruistic endeavor. At its core, ESG is a business strategy with clear bottom-line benefits from enhancing brand reputation, attracting and retaining employees, increasing innovation, and more all while helping understand and improve their stance on these three areas.

Companies in the design and commercial construction sector are now frequently asked about their ESG metrics, especially by large corporations or government agencies required to assess ESG impacts before awarding contracts. And new regulations mandating sustainability efforts, including tracking carbon emissions and climate impact, from California and the EU are expected soon.

Gathering ESG stats alone won’t create long-term business or external benefits; to do so, the data must be used to inform change. Specifically, ESG metrics can prompt probing questions that lead to new processes, automation, use cases, and efficiencies that create positive outcomes.

Here are three questions commercial construction companies can address now and in the years to come that will help create results.

ESG Question 1: What can I directly control?

For investors, builders, and contractors, effective ESG outcomes are contingent on action, not just insights. Start by identifying what you can directly control. This might include your corporate policies, vehicle fleet, staff, offices, and anything else your company owns or manages.

For the commercial construction sector, the controllable pieces often include:

● Environmental:

○ Office energy and water consumption

○ Corporate fleet fuel consumption and emissions

○ Office waste and recycling efforts

● Social

○ Corporate employee diversity

○ Hiring a local workforce

○ Corporate philanthropic spend

● Governance

○ Dedicated sustainability/green team

○ Employee satisfaction

○ Code of conduct/ethics

While not every metric will be meaningful to your company, ESG data allows you to identify custom recommendations that apply to something as small as a department or as wide as an entire region.

After developing a baseline of current impacts, begin setting achievable improvement goals. These might be six- or 12-month outlooks but the key is consistent progress. Setting goals too high initially could risk the whole project, while small early wins can pave the way for bigger successes. As you reach early goals, then look toward more ambitious targets.

ESG Question 2: How can I continuously improve?

Simply put, ESG goals are never met. The goalposts are always moving, pressing the commercial construction sector to become more efficient and effective over time.

This is both good for business and good for the environment.

After you’ve established a rhythm in handling the more straightforward data points and venturing into the more complex areas, it’s time to challenge your organization. To achieve impactful results, set stretch goals and targets beyond the current capabilities and expectations of your organization.

By setting aspirable objectives, you push your company to innovate, be creative, and break out of complacency. Such goals, driven by the insights gleaned from ESG data, can lead to breakthrough performance improvements and elevate your company’s reputation in sustainability and governance.

Where can I exert influence?

After addressing areas directly under your company’s control, expand your reach. Identify areas where you can exert influence and have the ability to track and implement changes easily, such as subcontractor activities.

Navigating these influence zones requires companies to leverage relationships, fostering strong partnerships and clear communication to align stakeholders with ESG objectives.

This includes setting transparent expectations, including integrating specific contract clauses or offering guidelines. Despite the challenges of indirect control in these zones, it’s crucial to monitor alignment through feedback, audits, or specialized ESG software to ensure goals are being met.

To be sure, exerting influence is often a multi-year process that requires gradual evolution and continual intentionality.

The Benefits of Effective ESG Implementation

In an era increasingly defined by sustainability and ethical considerations, effective ESG implementation goes beyond just being a checkbox for the commercial construction sector.

It offers tangible and intangible benefits, from boosting employee morale to unlocking new market opportunities. As contractors face an evolving landscape where sustainability questionnaires become table stakes to win bids, not investing in ESG strategies risks sidelining business growth and future operational potential.

A robust ESG framework doesn’t just ensure compliance; it sets organizations apart, carving a niche to stand out from the competition.

Data isn’t the final destination of the ESG movement. It’s the starting point for change, and it should prompt the commercial construction sector to ask essential questions that propel real change in their organization and throughout the built environment.

About the Author: Tommy Linstroth is the Founder and CEO of Green Badger (https://getgreenbadger.com/), a leading SaaS provider simplifying sustainability and ESG in the built industry.

By Tommy Linstroth, Green Badger

Feature Image Courtesy of Tommy Linstroth, Green Badger – (c) 2023