3 Key Ways Green Builders Can Excel at ESG

Here’s how to plan, report, and excel at ESG.

Environmental, social, and governance (ESG) initiatives are shaping priorities at companies of every size in every sector, driven by changing consumer demand, shifting regulatory standards, and investor pressure. 

While sustainability metrics like LEED standards have been around since the 1990s, ESG has only more recently increased in importance. Today, as state and national regulations and overall consumer sentiment shift toward sustainability, ESG reports have become ubiquitous, impacting every facet of builder and developer processes across the home building industry.

Frequently and with good reason, sustainability is at the forefront of these initiatives. The built environment is responsible for up to 40 percent of energy consumption and greenhouse gas emissions. In addition, construction consumes nearly one-third of the world’s natural resources, making improving sustainability a win-win-win, supporting bottom-line results, environmental outcomes, and consumer interest. 

Of course, there is a substantial difference between making commitments and fulfilling promises, and measuring progress can be incredibly difficult. Without standards or even basic guidelines, builders, developers, and designers are left confused and needing direction to confidently prioritize and report the metrics that matter most. 

As green building leaders look to make ESG initiatives successful as the next frontier of sustainable impact, here are three ways they can plan, report, and excel at their commitments. 

1. Measure the ESG Metrics that Matter Most 

ESG commitments vary widely by company and industry, often including multiple reporting categories and hundreds of data points.

Home builders can start with measuring overall resource consumption, energy use, employee wellness, and workplace safety–both in the field, and in the office. While reporting standards for these metrics in the construction industry are quite variable, home builders can turn to established ESG standards in other industries that can be adopted or modified. 

These standards can provide guidance: 

The Global Reporting Initiative (GRI) Standards

MSCI ESG Focus Indexes Methodology

SASB Standards

What’s more, builders can turn to industry standardized tools, like the Carbon Leadership Forum’s EC3 calculator, to create estimates for some ESG categories. Even local home builders without in-house sustainability expertise can leverage these standards and tools to accelerate their sustainability initiatives.

By measuring the metrics that matter most, builders, developers, and designers can benchmark their current ESG initiatives while assessing and reporting improvements over time. 

2. Empower a Leader to Propel Initiatives Forward

Turning ESG promises into realities is an exercise in change management that requires a proven, seasoned leader to identify needed improvements and implement effective solutions.

For example, ESG commitments often fall victim to a short-term outlook as finance-oriented executives and shareholders scrutinize quarter earnings and near-term investment reports. Although an Ernst and Young analysis found that 84 percent of business leaders say shareholders are concerned about ESG metrics, a similar number identify short-term economic uncertainty as a top challenge to fulfilling ESG commitments. 

Simply put, since ESG initiatives take effort and time to implement and produce results, it’s easy for this short-term outlook to short-circuit efforts before they can truly take effect.

Too often, companies assign a mid-level operations manager to fulfill this task. Lacking the social capital and professional standing to enact change, their efforts fall flat, diminishing overall results and making it more difficult to fulfill ESG pledges moving forward. When builders empower a leader to propel initiatives forward, they can be confident that someone is strategically advocating for ESG priorities while ensuring the company is reaching their benchmarks.

3. Develop a System that Recognizes and Rewards ESG Outcomes 

Builders that are serious about advancing their ESG initiatives will develop a system that recognizes and rewards ESG outcomes.

For instance, home builders should make sustainability metrics a part of evaluations and performance reports, ensuring that all stakeholders are accountable and rewarded for their contributions to ESG benchmarks. 

Critically, these standards should apply to everyone, including executives. When leaders pay lip service to key priorities without making the personal efforts needed to achieve optimal results, it signals that sustainability initiatives are disingenuous at best and penny-pinching at worst

In contrast, a successful ESG plan will make organizational outcomes everyone’s responsibility, bringing an all-in approach to tackling a significant challenge.

A Closing Encouragement 

Making commitments is easy. Following through with meaningful results that improve operations, account for customer trends, and satisfy regulatory standards is exceedingly more difficult. However, with the right approach, home builders can reorient their efforts in real-time.

It’s both a challenge and an opportunity worth pursuing now.

Editor’s Note: The ESG for Building Working Group is developing industry specific guidelines to streamline the ESG reporting process for building professionals. The guidelines will be published in Fall of 2023 and will provide an actionable set of principles that home builders can adopt to meet their sustainability commitments.