How to select the right ESG goals and targets for your business

Posted on: 15 January, 2024

The best way to adopt, set and measure ESG goals in your organisation can vary greatly. Here are some considerations for yours.

---

Environmental, social and governance (ESG) issues are quickly emerging as one of the most important themes of the decade, as the world wakes up to the impact that humans are having on the planet. With that in mind, built environment organisations in particular need to perform well in all areas of ESG to show that they are taking accountability and responsibility for their actions through more sustainable business practices.

In order to do this, they must set benchmarks, but in particular, they need to be setting the right ESG goals and targets.

Learn more: A guide to ESG: what is it and why does it matter?

The business landscape is shifting. Today’s customers, external stakeholders and industry professionals want to ensure that the built environment complements and enhances the natural world rather than damage it further. Our sector generates 30% to 40% of total greenhouse gas emissions globally and uses one-third (32%) of the world’s natural resources, making ESG initiatives even more critical to organisations in this field.

Why getting ESG right is crucial for the built environment

With clients, consumers and job candidates all gravitating towards businesses that prioritise ESG initiatives, these have become a way for businesses to differentiate themselves and gain a competitive advantage.

Interestingly, 61% of businesses have already experienced an increase in clients looking for sustainable construction methods. Not only this, but a recent report found that the large majority (83%) of consumers think companies should be actively shaping ESG best practices, and 86% of employees would prefer to work for companies that care about these issues.

Of course, another key benefit is that the UK will gradually move closer to its 2050 net zero goals, and subsequently, the carbon footprint from the built environment can be drastically reduced.

However, simply setting loose targets isn’t enough, particularly for those who are new to these initiatives; they must establish tangible data-driven ESG goals instead.

The challenges of setting ESG goals

Greenwashing

There are several key challenges facing organisations looking to set ESG goals, one of which is the risk of greenwashing or being perceived as greenwashing.

Unfortunately, well-intentioned businesses can over-exaggerate their ESG goals and achievements in a bid to drive sales. While it’s good that 80% of business leaders believe their company is meeting ESG goals, according to one survey, 58% of those admit that there have been instances of greenwashing within their company.

Learn more: 8 types of greenwashing (and how to spot them)

Lack of standardisation

Another challenge is that there is no single unified standard or structure for reporting on these metrics. ESG data is often siloed, making it hard to connect the different departments and understand the larger impact from ESG activity.

As a result, many leaders are having to handle huge amounts of data that often reside across different systems, manually attempting to measure ESG data and successes in basic spreadsheets.

ESG is too broad to measure accurately

The final issue is that ESG can encompass everything from inclusion and diversity to reducing carbon emissions and ensuring corporate governance, making it harder to select the right goals and targets.

Learn more: The criticism of ESG – why is it becoming controversial?

In fact, the United Nations has set out as many as 17 key Sustainable Development Goals (SDGs) as an urgent call to action by all countries, to form a global partnership.

These goals recognise that ending poverty, reducing inequality, spurring economic growth and tackling climate change are all intrinsically linked. However, the goal that is most relevant or pertinent to individual organisations in the built environment will vary.

Which ESG goals should the built environment focus on?

ESG goals are the non-financial metrics that a company uses to assess their governance standards, social responsibility and environmental influence.

These goals can still have a positive impact on financial performance through attracting more customers or saving money on energy bills, but they are primarily aimed at non-financial initiatives.

Here’s how each of the three pillars of the ESG framework translates to the built environment, with examples:

Environmental

Environmental targets look at how your company can improve and protect the environment, including conservation measures taken to reduce energy consumption, pollution and waste. Some examples of these goals in the built environment could be:

• Using only sustainable materials or those that can be reused or recycled
• Reducing the need for new materials and replacements through strong, durable construction
• Eradicating reliance on fossil fuel
• Opting for more energy-efficient solutions
• Designing and creating net zero buildings

Learn more: The intrinsic link between ESG and the built environment

Social

As well as the environment, companies must also be responsible for their impact on the social fabric of the local area and on a global scale. Some examples could include:

• Adhering to workplace and industry health and safety standards, this is crucial on construction sites and dangerous environments
• Diversity and inclusion when hiring and across the workforce, this includes age, gender, race and religion
• The impact on local communities, for example, generating affordable housing or retrofitting existing local buildings

Governance

The final element is about ensuring the correct corporate governance, behaviour and compliance.

Organisations need to show that their actions match their policies, otherwise they risk being found guilty of greenwashing. Examples of governance targets could be:

• Ensuring that modern slavery and human rights regulations are being met and that they meet labour standards across the supply chain
• Offering fair pay and equity to all employees
• Ensuring transparency across the organisation
• Tackling and avoiding human rights abuses
• Ensuring corporate sustainability

How to set ESG goals

Effective ESG requires careful planning, monitoring and accountability.  However, as discussed above, there are a lot of challenges facing leaders who are trying to select and set the right goals for their organisation.

Here are four steps businesses can take to ensure their ESG goals and ambitions are both effective and realistic:

1. Conduct an assessment

In order to set relevant targets, you first need to have a deep understanding of how your organisation operates and what they are trying to achieve.

At this point, leaders need to come together to review existing data, for example, looking at energy and water usage.

This makes it easier to analyse progress and determine which ESG criteria they need to focus on. It will also make it easier to track progress further down the line.

2. Set SMART goals

In order to set and achieve larger and ambitious goals, it’s important to break these down into SMART (specific, measurable, attainable, relevant and time-based) targets.

The aim is to be as specific as possible, clearly defining what you need to do; determining how you will measure your success using key performance indicators (KPIs) and making sure that every target set, no matter how big or small, is achievable.

Of course, it’s also important that your ESG goals are relevant and connect to wider business objectives and that you give yourself a deadline by which to achieve these. This will help to keep all employees driven and on track.

Using the SMART criteria to set ESG goals in this way means you can ensure your objectives are obtainable and that you understand each step of the process within your predetermined timeframe.

3. Share your company goals across the team

Once you’ve got your SMART goals set out, it’s time to share these across your team and the organisation as a whole.

ESG goals should not be siloed. It’s important that everyone across the business is on board and that they understand the vision you are trying to achieve, whether they are directly involved in some or all of the targets or not. Everyone will play a role in some way.

Learn more: Why sustainability can’t exist in silos

4. Collect and utilise data

Finally, it’s vital that you monitor your progress as much as possible to remain accountable and ensure that deadlines are being met.

You might wish to use a range of qualitative and quantitative data to help define each goal’s KPIs.

However you choose to tackle this, make sure that you understand what you will be monitoring and when, obtaining feedback and ensuring detailed ESG reporting at all stages.

Final thoughts

The growing importance and popularity of ESG initiatives can have several key benefits for businesses operating within the built environment, provided they can select and set the right goals and targets.

This isn’t without its challenges, as leaders in the industry must establish the right criteria, define KPIs and make the most of existing data.

However, by breaking these down into smaller, more manageable targets using the SMART system, organisations and their teams can succeed in their ESG initiatives. Which, in turn, can help the nation as a whole to reach net zero status by 2050.