Tommy Linstroth is Founder and CEO at Green Badger, a leading SaaS provider simplifying sustainability and ESG in the built industry.
The construction industry is increasingly under pressure—both internally and externally—to implement environmental, social and governance (ESG) reporting programs. Done right, an effective ESG program is a valuable business growth strategy that could help any organization become more profitable, attract and retain employees and lead to great improvements. Ignoring ESG has its risks, too.
Unfortunately for the built environment, the hurdles to implementing a successful ESG program are formidable. Like any business strategy, it needs financial and human capital resources, ongoing support by company leadership and a fair development timeline to see results. There’s also no off-the-shelf, one-size-fits-all option, so results from ESG reporting likely won’t happen in a couple of weeks or even months.
Three ESG Reporting Challenges
Diving deeper into our story on adopting sustainability practices, let’s look at three major challenges to implementing ESG programs specific to the built environment and offer advice to overcome them.
1. Untangling The Gobbledygook
One of the biggest issues facing construction companies trying to track ESG is the lack of access to accurate, consistent data due to the complexity of the industry. Construction projects involve a wide variety of teams—from an array of suppliers and contractors to government agencies—each potentially using different processes for measuring ESG.
Teams may not even collect or report the data at all because many, like emission impacts from subcontractor material transportation, aren’t easily captured or converted into consistent units. Even within a construction company, ESG data is often siloed across different departments, making it difficult to get a complete picture of ESG performance.
2. No Frameworks To Guide You
Still relatively nascent, ESG in construction lacks industry-wide standards that could guide companies in implementing new programs. Without universally accepted metrics and a baseline, it can be difficult to compare company performance to the industry. And any lack of consistency over time yields no measurable YOY improvement, which ultimately must be part of any ESG program goals.
3. Help Wanted
The construction industry faces a serious workforce deficit. Potentially 500,000 new hires are needed this year to match demand, which puts increased pressure on staff and a premium on efficiency. Implementing a new ESG program, which can require specialized skills and knowledge, is hardly a welcome addition to daily workloads. This is especially true for small- and medium-sized general contractors where training and adding new responsibilities to existing staff or finding experienced employees to fill new positions might not be feasible.
Without the expertise to collect and document ESG data accurately, the reporting chain either completely fails or churns out inaccurate statistics, contaminating the ESG numbers for every connected vendor/partner.
Forging A New Road
Challenges aside, the long-term benefits make addressing ESG necessary, and convincing company leadership must be the first goal. If the C-suite isn’t already leading the charge, they should appreciate that effective ESG reporting could help:
• Win more construction contracts.
• Recruit and retain good employees.
• Improve company value and open access to financing.
• Create positive PR and community engagement.
• Lower regulatory and compliance risks.
• Reduce operating costs.
Determine Your Scope
With leadership on board, lay the groundwork by considering what impact your company has on the environment, your employees, the surrounding community and the economy. To determine the scope of your ESG program, ask, “What can we achieve by tracking ESG?” Are the most important items reducing carbon emissions, more employee transparency, better job site safety or community engagement?
Once you know what you want to achieve, start collecting the data you need and keep these tips in mind.
1. Emphasize effective communication.
Make sure all stakeholders—employees, customers, suppliers and investors—understand the ESG objectives, responsibilities and expectations. Convey them early and often; don’t “set it and forget it.” Keep reminding partners and key players what’s owed, when and why.
2. Adopt and adhere to a standardized approach and processes.
While the construction industry might not have global ESG standards, consistency in your organization is key to realizing efficiencies and reducing reporting costs over time. It can also help ensure data is collected and reported in a way that makes it easier to compare performance and track progress.
3. Build internal expertise.
Investing early by training teams could pay dividends by ensuring data is collected, reported accurately and builds the company’s ESG credibility.
4. Set S.M.A.R.T. goals.
Initially, a new program is simply charting benchmarks. But, an effective program with an ROI sets targets for improvement that are: specific, measurable, achievable, relevant and time-bound.
5. Consider investing in data integration.
Removing barriers between organizations and internal department silos could improve the accuracy and completeness of ESG data. Consider researching ways to automate the collection, management and reporting of data to improve efficiency and reduce manual collection errors.
6. Create a culture of ESG awareness.
ESG reporting is about being transparent about your performance with your stakeholders. This means being open about your challenges and successes.
Start Small But Plan For Growth
Since most ESG requests are still focused on benchmarking, simply evaluating where your company currently stands is a great step forward.
To start, focus on what you control directly; at my company, we categorize these items as Tier 1 metrics. There are dozens of potential Tier 1 metrics to track, such as your office energy consumption (environmental), corporate DEI (social) and employee safety training (governance). Leading with the relatively easily quantified/verified data helps set a good foundation for success.
Once Tier 1 metrics are reliably in place, roadmap an expansion to include Tier 2 metrics—those areas your company has a lot of influence over, like gasoline used for employee commutes and selecting subs that report M/WDBE participation.
Eventually, add Tier 3 metrics, which are the hardest-to-collect ESG factors from other sources, like subcontractors’ energy use or local community engagement.
Remember, even companies with deep experience in ESG once started with the basics and continue to re-evaluate and expand their reporting. In the near future, expect greater demand for implementing corporate initiatives to improve your company’s track record and demonstrate progress against market standards. After all, managing ESG should be about continually improving transparency and making positive impacts.
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