Environmental, Social and Governance (ESG) are a broad set of principles that can be used to assess the corporate governance, social and environmental impact of a business, both internally and externally. Taken together, ESG can be seen as representing the opportunities all businesses have to enhance the world around us.
It also represents the level of responsibility that construction companies must face up to when making decisions on where and how to build new buildings, what materials to use, how to clear the site, and so on. The answers to these and more questions play a huge role in how well the construction industry specifically – and businesses generally – respond to the climate crisis.
In 2021, CBI reported that almost two-thirds of investors took ESG into account when making an investment decision, which means a strong ESG profile can help attract investment.
ESG principles also help companies futureproof their operations. Businesses that have brought ESG practices on board in recent years, such as reduced energy consumption and reduced carbon emissions, may be better placed to weather the ongoing energy crisis as a result.
With all of this in mind, Construction Journal asked business leaders from three different UK firms what their companies are doing to embed ESG priorities and what they would like to see others doing over the coming year.
For all of our respondents, ESG starts with upskilling employees. James Low, global head of responsible business at construction company Mace, says:
'We hope to increase the carbon fluency of our people so that carbon metrics are understood as easily as the commonplace metrics of pound sterling and square feet. To truly embed our ESG ambitions across our global business we need to ensure a shared understanding on terminology and targets, embedding responsible business across all projects and programmes in all regions.
We are also continuing to equip our people with knowledge of the entire suite of solutions they can draw upon in order to deliver carbon reductions. By influencing projects and programmes in this way we are driving our ambitions forward on a much wider scale.'
This is echoed in the sentiments of Emma Schaafsma, partner at legal firm CMS, who says:
'ESG principles are increasingly central to how we run our business and we have ambitious goals in place, including science-based carbon-reduction targets. To further embed our ESG approach, this year we have established a network of sustainability champions across our offices, training them to become subject matter experts.
They will raise awareness in the firm of environmental initiatives such as reducing waste, using energy and water efficiently and sustainable travel. Training our people is a top priority at CMS and throughout 2023 we will continue to grow our ESG training programme as well as working across the whole business to embed our ESG principles.
As well as focusing on embedding ESG goals into our own operations and objectives, CMS has a significant client training programme on ESG containing OnDemand sessions, eLearning modules and topics for tailored training. Our regularly updated ESG Insight Hub contains thought leadership, commentary and expert guides on ESG topics.'
Lambert Smith Hampton (LSH) is a property consultancy that has taken steps to enhance their already established ESG programme, including the appointment of Federico Montella as head of ESG and sustainability in March 2022.
As Federico explains: 'Part of my role is to expand on the pre-existing sustainability corporate activity programme; this means setting company objectives with regards to people and planning, as well as developing ESG policy and initiatives across all our 29 offices around the United Kingdom and Ireland.'
One important and sometimes overlooked aspect of ESG is taking responsibility not just for your own businesses actions, but also being aware of what is happening at a supplier and subcontractor level.
As Emma explains: 'It is easy for construction companies to focus on curtailing their own scope 1 and acquired scope 2 emissions as these are in their sphere of control. However, given the amount of work that large construction companies subcontract, as well as their substantial supply chains, often it is the scope 3 emissions that are more critical to making meaningful inroads into net-zero targets.
Construction companies should be looking to forge an ESG alliance within their subcontract chain that ensures that all stakeholders are aligned to the same key performance indicators (KPIs) and work to a common form of measurement and reporting against those KPIs.
Establishing trust and common goals within the subcontract chain promotes more efficient and effective working practices while incentivising and rewarding further innovation.'
James expresses a similar sentiment, outlining how Mace is focusing on the carbon footprint of their supply chain and their clients. He says:
'Our impact is so much more than just our own carbon footprint – it also extends to the footprint of our clients and our supply chain. We aspire to be a leader in this space, and we are thrilled to have recently announced that we have the forward pipeline of work which will see the reduction of 1m tonnes of client carbon.
We are not stopping here though; we are now looking at how we can deliver even further client carbon reductions. When it comes to our supply chain, we are asking our partners to be on their own carbon neutral journey and to develop low carbon products and services.'
'Given the amount of work that large construction companies subcontract, as well as their substantial supply chains, often it is the scope 3 emissions that are more critical to making meaningful inroads into net-zero targets'
By now, every company should be aware of their responsibility to reduce their carbon footprint, but knowing how to take robust and monitorable action can be difficult. Federico notes that LSH have sought certification from a respected third-party expert in this field.
'We have committed to become net zero by 2030 and to do this we are being kept in check by PlanetMark, an independent business certification scheme that monitors and reports on sustainability measures by companies. In fact, we just recently had some very positive new from last year's submission in terms of carbon reduction.
LSH have achieved more than our targeted 5% carbon reduction, we have actually achieved 11%, which is great. It's great to celebrate that, but we still want to keep absolute focus for the remaining years up to 2030. So as much as it's a fantastic result, we're not there yet. We also have an ongoing responsibility to deliver this action plan in the next seven years.'
Emma notes that CMS are on a similar journey, 'We have significantly reduced the environmental footprint of the firm since calculating our baseline emissions in 2019, and we are on track to meet our science-based targets in line with the goals of the Paris Climate Agreement. We have also invested in growing the sustainability team to meet our ambitious carbon-reduction targets and ensure all our stakeholders are engaged.'
Mace published their Steps without Footprints report in 2020, outlining bold reduction targets for the business while also challenging the industry to step up. James notes that since then 'Mace has met a carbon neutral stance for two years running, through the use of gold-standard offsetting schemes led by Carbon Footprint Ltd, a UK sustainability consultancy, and we are now looking at how to use our platform and influence to make a real difference across the world.'
The environmental aspect of ESG has been a high priority for years but social impact is also key. Emma notes that in addition to upskilling staff, the CMS diversity and inclusion team have 'policies and targets in place alongside significant programme of activities to increase the social impact we have in our communities.'
At LSH, the plan is to focus 'much more on the S in ESG. We have become members of the social value portal and together with them we will take a dual approach in this regard. It's going to be very transformative in terms of our ESG policy and corporate activities as well.'
'We have targeted 32 objectives with regards to social value alongside the pillars of environment, society, growth and jobs. This has been a very interesting exercise where we pulled together heads of sectors and started this conversation that probably never really took place before internally to this level of definition, and we have received everybody's input into how we see LSH progressing in its social responsibility.
The UK government has published the Mission Zero: Independent Review of Net Zero report, which examines the steps taken thus far and outlines the requirements and opportunities facing the UK in its goal to meet net zero by 2050.
On this basis it is fair to say that ESG will become of even greater importance to UK businesses as the years progress. Companies that look for ways to not only comply but exceed current requirements may find that they have an advantage over their competition.
Learn about the core elements of a construction project lifecycle and apply essential skills to plan and oversee projects of various sizes and complexity
Wednesday, March 15, 2023
10:00 - 17:00 GMT
48 CPD hours