ESG isn’t a new concept. Using environmental, social, and governance factors to measure the sustainability and ethical impact of a business is a decades-old practice based on principles that existed for centuries. However, ESG is more important than ever as companies across sectors grapple with the increasing consequences of climate change, important social movements, and persistent equity issues. Internet searches for ESG-related topics have increased fivefold in three years, and 90% of S&P 500 companies publish ESG reports.
Fundamentally, ESG is a data initiative requiring companies to benchmark, measure, assess, and improve their performance. Despite companies having a deluge of digital data, their use of it in ESG decision-making is often underwhelming. According to a recent IBM study, approximately 40% of executives say data is a top barrier to ESG progress, with 35% identifying “shoddy data” and 25% reporting a lack of access to actionable information as the top impediments to progress. Meanwhile, 68% of U.S. executives say their companies are guilty of greenwashing, or manipulating data to misrepresent their climate impact.
The difference between data collection and actual implementation is significant. As the Financial Times put it in March 2023: “There is a gap between ambition and action.”
Collecting ESG data isn’t the end goal—it’s the starting point. Aggregating statistics on ESG is only worthwhile if the data is used to inform change. The true power of ESG data lies in its potential to guide transformative change across industries, especially in the built environment where ESG metrics coalesce at scale.
ESG for the built environment
ESG metrics have implications for every company in every sector, but the consequences are especially profound in the built environment, which is responsible for up to 40% of overall greenhouse gas emissions and consumes 40% of the world’s energy. Meanwhile, new construction depletes a staggering 32% of the world’s natural resources. These numbers will only increase as, according to The Economist, “the planet will add floor space the size of New York City every month until 2060.”
Completed projects continue to have enormous ESG implications. Less than 1% of buildings are carbon neutral, and building operations are responsible for 30% of global energy consumption and 27% of energy sector emissions, according to the International Energy Agency.
Of course, the built environment has a tremendous effect on ESG priorities that extend beyond environmental impact. Building locations, policy commitments, and hiring practices all influence ESG metrics and, more importantly, people’s lived experiences for decades after construction.
The stakes are high. When the right data is collected, data can help direct the best responses.
Data metrics that matter
ESG is a flexible framework for measuring impact, maximizing transparency, and empowering progressive organizational improvements. When evaluating the built environment’s ESG impact, stakeholders—including construction firm leaders to designers, engineers, contractors, and architects—should consider several key metrics that inform everything from the design and development of new construction initiatives to holistic, long-term building sustainability. Collectively, they help companies identify areas for improvement and track progress over time.
Here are six metrics worth measuring and tracking in buildings today.
1. Energy use
Tracking energy consumption, which includes electricity, natural gas, fuel oil, and renewables, provides a data point that can then identify areas for improvement. When implementing solutions, companies can use this baseline to measure their progress.
2. Waste generation
The waste generated by building occupants reveals not only the amount of garbage shipped to landfills, but also the amount of waste diverted from landfills through recycling or material reduction efforts. Organizations can use this information to identify opportunities to reduce their waste.
3. Workforce diversity
Research consistently shows that diverse teams comprising individuals with unique perspectives and experiences generate innovative ideas and solutions that have a positive impact on profit. HR departments likely already track this metric, making it one of the easier datasets to pull together. Otherwise, companies can distribute anonymous surveys or self-identification forms to gather demographic data.
To improve diversity, companies should implement inclusive hiring practices, such as targeted recruitment efforts and setting goals for M/W/DBE contracts. Additionally, fostering an inclusive work environment through initiatives, such as diversity training programs and employee resource groups, helps create a culture that values and celebrates people from all backgrounds.
4. Community engagement
Community engagement through corporate philanthropy and volunteering plays a crucial role in fostering social responsibility and building positive relationships between organizations and the communities in which they operate. Philanthropic initiatives have an impact beyond business operations, enhancing brand reputation, strengthening community ties, and addressing social challenges.
To improve corporate philanthropy, organizations can set donation goals and provide funding for each office / business unit to establish partnerships with local nonprofit organizations of their choice. Corporations can increase their volunteer efforts by implementing programs that offer options for employees to engage in community service. Providing paid volunteer time off or organizing team-building activities around volunteering can further incentivize employee participation.
Corporate wellness programs can promote the health and well-being of employees, leading to increased productivity, reduced absenteeism, and improved morale. To track the effectiveness of corporate wellness programs, companies can conduct employee surveys to gauge participation rates and satisfaction levels and gather feedback on specific program components. By consistently monitoring and evaluating these metrics, companies can identify areas of improvement and tailor their wellness programs to better support their employees.
Governance includes codes of conduct and ethical behavior in the workplace, as well as policies and regulations to ensure that buildings function as intended. Through strong governance policies, organizations can promote transparency and accountability while ensuring they are achieving their self-identified ESG metrics.
Take a holistic approach to evaluating the ESG impact of buildings. By considering a range of ESG metrics, from environmental impact to community integration, organizations can gain a comprehensive understanding of how their buildings are performing and identify opportunities for improvement.
Best practices for collecting ESG metrics
Companies have a bad habit of intentionally or inadvertently following an “aim, fire, shoot” approach to collecting ESG metrics. That is, they pursue ESG-related outcomes before they understand their building's current and historical impact on various ESG categories.
To combat this trend, companies can begin benchmarking ESG metrics. First, establish a baseline that informs goals and helps measure success. Just like a coach wouldn’t call plays without understanding key aspects of a game, companies can’t implement effective ESG initiatives without understanding their benchmarks.
When it comes to the act of collecting ESG metrics, small firms might choose to use rudimentary solutions, including spreadsheets and tables, to measure and assess their impact. EnergyStar, a program run by the U.S. Environmental Protection Agency and the U.S. Department of Energy, offers a free online calculator to help designers, developers, and builders understand and assess energy performance. More sophisticated software solutions allow teams to track everything from dynamic carbon footprints to long-term environmental trends.
Most importantly, companies should begin collecting ESG metrics today.
A recent draft proposal from the U.S. Securities and Exchange Commission (SEC) requires public companies to disclose their carbon emissions. Similarly, the Inflation Reduction Act introduces new reporting requirements for developers and builders that want to receive funding to “substantially lower the levels of embodied carbon and other greenhouse gas emissions associated with all relevant stages of production, use and disposal of construction materials and products including steel, concrete, asphalt and glass.”
Most importantly, companies should begin collecting ESG metrics today.
Stakeholders in every aspect of the building sector should prepare for more robust regulatory requirements moving forward. When equipped with benchmarking data and an effective method for collecting ESG metrics, companies can start evaluating their operations to identify opportunities for improvement, differentiating places where they can control outcomes to influence change.
Harnessing ESG data for transformative change
As domestic firms anticipate the shift from ESG as a valuable addition to a mandatory requirement, its principles present an opportunity to be used as a transparency tool. This allows partners, employees, investors, and tenants to gain a deeper understanding of a company’s commitment to a sustainable and ethical framework.
While ESG implementation might seem daunting, the necessity of internal resources, dedication, and trained personnel is clear. ESG is not a one-size-fits-all approach but a unique journey for each company. It’s an ongoing process of evolution, and it demands careful thought and planning to ensure its success. The primary consideration is the effective utilization of ESG data, transforming it from a simple collection to a potent tool for initiating transformative change.
The built environment, responsible for a significant percentage of global emissions and energy consumption, stands to gain substantially from the effective utilization of ESG data. By tracking metrics like energy use, waste generation, building accessibility, and community amenities, and governance, companies in the building sector can drive change and create a tangible positive impact.
The built environment, responsible for a significant percentage of global emissions and energy consumption, stands to gain substantially from the effective utilization of ESG data.
As the SEC continues to push for increased transparency in business operations, particularly in carbon emissions, the urgency to integrate an ESG strategy is more significant than ever. The landscape of ESG is rapidly evolving. A “nice-to-have” today may transition into a regulatory obligation tomorrow.
This dynamic landscape calls for businesses to start early, set up comprehensive ESG programs, and prepare themselves for the imminent regulations. The time for companies to dip their toes into the world of ESG is up. Now is the time for diving into ESG, understanding its depth, and making the most of its transformative potential for companies and communities.