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There are a variety of ways to measure the success of a company – its financial health, its longevity through good times and bad, the strength of its leadership, the loyalty of its customers – but in recent years, the definition of success has shifted from a purely financial meaning to one that also includes how a business impacts the world around it. Now, companies are being evaluated by investors, customers and the general public on environmental, social and governance metrics (also known as ESG), and are beginning to see the rewards—and consequences—of their business’s actions.
It’s important to note that ESG ratings are not regulated by any government agency, so criteria may be inconsistent across rating agencies. They also encompass hundreds of factors, including the following:
Environmental (how your organization positively or negatively impacts the physical natural world):
Carbon emissions
Energy consumption
Use of renewable energy
Water and wastewater management
Pollution
Waste and hazardous materials management
Social (how your organization impacts its employees, stakeholders and society in general):
Labor practices
Health and safety
Diversity, equity and inclusion
Community relations and engagement
Treatment of employees
Relationships with suppliers
Governance (how your organization is run):
Board diversity
Executive compensation
Overall ethical behavior
Data security
Supply chain management
Policies
Political contributions
Internal corruption
In the AEC industry, there is a growing demand for firms that have made commitments to improving their ESG metrics. Some construction-specific examples of ESG include:
Reducing or mitigating the use of purchased electricity and/or fuels for job site equipment
Reducing or mitigating emissions from product transportation, employee commutes to the job site and other project-related business travel
Reducing construction waste
Responsibly sourcing materials
Measuring water consumption and reducing or reusing what is used on a job site
Working with a Minority- or Woman-Owned Business Enterprise (M/WBE)
Working with local partners to bring new jobs and increased business revenue to the community, which also has the effect of reducing the commute that would be required for partners from outside the area
Enforcing safety precautions on the job site to improve employee health and well-being
Being involved in the community
Doing due diligence when hiring contractors and suppliers to ensure their ESG values align with yours
Providing equitable compensation
Hiring diverse candidates and promoting DEI initiatives within the organization
Beginning the ESG process can be overwhelming, but it’s a must-do if you want to remain competitive in the industry. Construction has such a significant impact on the environment and communities, a firm’s ESG efforts won’t go unnoticed—or unrewarded: When it comes to deciding where to invest in new projects, owners and investors take ESG metrics into account. They also consider ESG when deciding which companies to do business with. Additionally, prospective employees, particularly Millennials and Gen Z, want to work for a company that values ESG. Those who are committed to ESG will find that “doing the right thing” ultimately leads to profit and success.
Ready to get started? AOE can help you establish measurable metrics, follow through with your commitments and share your successes with your target audiences. Reach out today to take the first step towards ESG excellence.