The intrinsic link between ESG and the built environment

Posted on: 25 January, 2024

Implementing ESG can help built environment businesses demonstrate progress on their sustainability ambitions and goals.

Today, Environmental, Social and Governance (ESG) dominates the conversation when it comes to business strategy.

As incoming generations of consumers and employee turn their attention to brands that value environmental and social action (and businesses and investors follow suit), the question of ESG has become less a case of ‘does this work for our business?’ and instead ‘how can we make this work for our business?’.

The benefits of incorporating ESG are clear. A PwC survey found that 83% of consumers believe businesses should be actively involved in shaping ESG best practices, and that 86% of employees would prefer to work for a company that aligns with their values. Despite some growing criticism around their implementation and the lack of standardisation, the consensus is generally very positive, and explains why the market for ESG is thriving across various industries. In fact, as of 2023 96% of S&P 500 companies are engaged in voluntary ESG reporting.

The built environment needs to assess its relationship with the environment

The built environment is no stranger to ESG. By its very definition, our sector – from construction to real estate – is intrinsically linked to what this framework sets out to accomplish.

How the built environment changes its relationship with the planet will have a crucial impact on our ability to achieve net zero by 2050. Of all industries and sectors, we have the most ground to make up in the coming decades to address our impact on the environment. While the often-cited aviation industry is responsible for 2.8% of all global emissions, the built environment accounts for around 40%, according to many estimates. In fact, the production of concrete alone is responsible for more (8%) emissions than aviation.

Time is running out for our sector to make the changes needed to ensure net zero becomes a reality. Similarly, businesses need to recognise that sustainability is a commercial initiative as much as an environmental one. Rather than being viewed as a ‘nice-to-have’, sustainability must be recognised as a commercial imperative in order to realise its long-term benefits.

Learn more: Making a business case for sustainability: why now is the time to act

How ESG considerations can influence the building lifecycle

While it’s easy to view ESG legislation as an obstacle that hinders progress and innovation, when implemented correctly it can act as a crucial guide for the built environment across each of its three pillars:

Environmental

As a sector with such a significant impact on the environment, it can be overwhelming to know where to start and how to measure (and report) any progress in sustainability.

Every stage of the building lifecycle has an impact on environment, from the sustainable decisions made in the design process to the construction that determines a building’s embodied carbon emissions. There are also operational carbon emissions to consider – the energy consumption resulting from a building’s usage and operation – as well as what happens when it is deconstructed or demolished in the end-of-life stage.

The relationship between an asset or enterprise and the environment is a crucial component of ESG, making it a natural fit for the built environment. ESG can be used as a framework to help firms document and steer their initiatives throughout the entire lifecycle.

Here are just a handful of environmental ESG goals that could be adopted in the built environment:

• Energy consumption and net zero buildings
• Reducing water and resource usage
• Measuring whole life carbon emissions
• Creation of waste-free environments

Social

The built environment must balance its impact on the environment with its role in society, and with so much emphasis placed on the ‘E’, the ‘S’ in ESG is often neglected.

The COVID-19 pandemic put health, wellbeing and inclusivity in the spotlight, particularly as loyalty among younger generations dropped and The Great Resignation showcased a shift in mindset towards a healthy work-life balance. Many organisations have taken to incorporating through methods like biophilic architecture and urban greening in an attempt to encourage employees back into offices and create positive environments that foster health and productivity.

Learn more: What is urban greening (and how is it creating the cities of the future)?

Today, the design of a building, its accessibility and how it impacts the wellbeing of its occupants is becoming a priority, thanks to growing trends in human-centric design. ESG can help ensure this becomes a reality by attaching tangible goals and metrics to these ambitions.

Construction and real estate are also both set to play a central role in addressing the housing crisis. In the UK, housebuilding is set to fall to its lowest levels since the Second World War and under half the target set out by the government. These industries will have a crucial role in making affordable and sustainable housing a reality and helping address rising levels of homelessness on an international scale.

Furthermore, with the global flooring area expected to double by 2060 and demand for infrastructure soaring, the built environment needs to consider how new development and subsequent urban sprawl impacts populations. Alternatives to traditional development and demolition practices, such as adaptive reuse and retrofitting, can help address this, while simultaneously preserving natural, green environments.

Governance

As a sector with such a significant impact on both the environment and society, effective governance could not be more important for built environment firms to consider. Actively participating in environmental and social initiatives is crucial in the current landscape, but beyond this, making balanced and effective decisions that weigh progress, profit and appetite for risk against the pillars of ESG is critical.

Without effective governance that can enact responsible decision-making, transparency and accountability, an organisation’s results will neither be effective or demonstrable.

The increasing relationship between the built environment – from construction through to real estate and building control – tied up with extensive legislation and regulation requirements. Governance is no longer just a best practice in the sector – it’s becoming a requirement.

The built environment needs ESG

ESG isn’t perfect – its breadth, lack of uniformity and increasing commercialisation all threaten to undermine its ability to influence positive change. How it works (and how best to implement it) will also vary from one business to the next and depend on various circumstances and factors.

However, despite these challenges and concerns, ESG isn’t something that can be ignored. Without data, responsible decision-making and accountability, making any sustainability ambitions a reality that can be demonstrated effectively simply isn’t realistic.

Sustainability isn’t a passing trend – it’s here to stay and is constantly evolving. If you want employees that inspire and action change in their careers, UCEM’s Sustainability Business Specialist Apprenticeship will give your teams the skills they need, both now and in the future.

Find out more: Sustainability Business Specialist Apprenticeship – University College of Estate Management