Why ESG for Building?
There has never been more investor interest and capital available for ESG-focused homebuilding and community development. At the same time, local, state, and national government entities have their own priorities for reducing the environmental impact of housing and making quality housing more accessible, inclusive, and attainable for the average American family.
The challenge is that the current metrics and measurements captured in ESG reports were designed for industries much different than ours. To take full advantage of the opportunities ESG presents, we need an approach that’s specifically designed for homes and communities.
With the right roadmap crafted by our industry for our industry, we can deliver better shelter options and build greater resiliency into our businesses—continuing to do well by doing good. To get there, a lot of details need to be worked out. That’s where the ESG Working Group comes in. Click on the links at right to view the work.
How the ESG Framework Will Be Created
Founded by Green Builder Media, Housing Innovation Alliance, and a wide spectrum of stakeholders, the ESG Working Group is creating a roadmap for defining and implementing ESG improvements for North American housing and master planned community development–from new construction of single-family homes to low-rise multifamily buildings and everything in between.
The goal of the ESG Working Group is to create an actionable set of principles and tools to encourage intelligent, expedited adoption of ESG in housing, with the first set of guidelines published by the end of 2023.
The Working Group will initially focus on new residential construction in the United States. Over time, our scope may expand to include both new construction and retrofit for housing and commercial buildings across a broader geographic footprint. More than 100 industry experts have been engaged to dig into the issue across 7 key areas:
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ESG Business Case – pinpointing why the time is now for ESG from three viewpoints: builders/developers, investors, and manufacturers/suppliers
Lead: Bill Rectanus, Chief Operating Officer, Thrive Home Builders
Investor and stakeholder demand is rapidly increasing the building sector’s adoption of ESG initiatives. ESG adoption has fueled the market shift towards sustainable green building products. Sustainable-minded builders, developers, and manufacturers will have greater access to investment opportunities in comparison to their conventional counterparts.
This subgroup will develop a compelling business case for the adoption of industry-specific ESG metrics. Investors will be able to better evaluate a company’s ESG status which in turn will unlock a higher investment potential for building professionals.
Environmental – creating a full lifecycle perspective on the impact of housing and identifying metrics that will have the greatest impact
Lead: CR Herro, CEO, AR Homes
39% of global greenhouse gas emissions can be attributed to the building industry. In response, green building practices and ESG principles are being rapidly adopted to decarbonize the industry and move towards net zero emissions.
This subgroup will analyze the best practices for sustainable building development and create a list of industry-specific environmental metrics.
Some key areas of focus include:
- Emission reduction metrics and benchmarks
- Green building practices of landscaping and building design
- Sustainable management of waste, water, and air quality
- Electrification of buildings
- Operational and embodied carbon
- Biodiversity and habitat loss
Social – determining how to deliver value to people such as greater equity + diversity, transportation + walkability, mental + physical health, and attainability
Lead: Danielle Younger, Managing Partner, Younger Homes
The building industry prioritizes the safety and well-being of construction workers and building occupants making them uniquely positioned to capitalize on the social aspects of ESG. Current metrics are qualitative and minimize the opportunity for tracking social progress.
This subgroup will develop a list of quantifiable metrics that emphasizes the connection between the social impact of the built environment and financial performance.
Some key areas of focus include:
- Social justice, equity, diversity in housing
- Attainability of housing
- Access to transportation and walkability of neighborhoods
- Physical and mental health of workers and building occupants
- Engagement with surrounding communities.
Governance – identifying tools and methodologies to create the optimal business culture with integrity, transparency, inclusivity, and broader access to talent
Lead: Todd Usher, President, Addison Homes
Building professionals and building product manufacturers need to proactively identify governance issues to minimize risk, maintain a positive reputation, and ensure the long-term success of their ESG strategy. The building sector has not set any industry-specific metrics or benchmarks to demonstrate its commitment to major governance issues such as diversifying the workforce.
This subgroup will identify corporate governance issues specific to the building industry and develop a set of benchmarks and metrics to monitor progress.
Some key areas of focus include:
- Diversification of the industry–board members, laborers, etc.
- Best practices for stakeholder engagement
- Governance policies for risk management and ethical behavior
- Outcome-based metrics demonstrating impact
Measurement – exploring tools and methodologies for documenting and validating the metrics identified for E, S + G
Leads: Betsy Scott, Executive Director, Programs and Engagement, Housing Innovation Alliance, and Eric Holt, Assistant Professor Franklin L. Burns School of Real Estate and Construction Management, University of Denver
While a diverse set of tools, calculators, and software programs exist to measure various aspects of carbon accounting, the building industry lacks a comprehensive platform that measures the impact of the built environment. Builders do not have a streamlined way to measure emissions and the impact of their projects.
This subgroup plans to analyze existing resources that measure and track carbon emissions and environmental impact, and then create strategic recommendations that building professionals can use to assess the carbon footprint of homes, buildings, and communities.
Some key areas of focus include:
- Identify key metrics and benchmarks for emissions reduction
- Address the lack of carbon emissions data for new buildings
- Clearly define net zero buildings
- Explore the uncertainty associated with Scope 3 emissions (how to calculate, who’s responsible, etc.)
- Examine existing carbon accounting calculators, software platforms, and tools that building professionals can use to measure emissions from buildings
- Understanding embodied carbon, Life Cycle Assessments (LCAs), and Environmental Product Declarations (EPDs)
Innovation – discovering breakthroughs in products, processes, technologies, and the natural world that will enhance our capabilities
Lead: Sara Gutterman, CEO Green Builder Media
As the market shifts towards green building products with the adoption of ESG, building professionals will need to innovate with respect to product specification to differentiate themselves from the competition and maximize their emissions reduction targets.
This subgroup will evaluate innovation in three main areas: products, homes/buildings, and communities/developments, exploring topics such as
- Designing for sustainability
- Decarbonization & carbon neutrality
- Exploring alternative materials to replace/reduce the use of steel, cement, and other high-impact materials
- Promoting offsite construction
- Rethinking design, construction, zoning, and land use to protect habitats and biodiversity
Compliance –analyzing the current regulatory landscape of ESG within the housing sector and making recommendations to safeguard a company’s ESG strategy against future regulatory developments.
Lead: George D. Sullivan, Sr. Principal/CEO, Net Zero Analysis & Design Corp. and Celeste Karan, EVP–Public Relations & Marketing, Net Zero Analysis & Design Corp.
ESG has entered the compliance space on a global scale. Governments and other stakeholders have been compelled to recognize the material significance of sustainability data points published by various entities, and as such, are attempting to standardize the reporting of this data into comparable, decision useful information. The goal of the compliance subgroup is to help the housing industry better understand the regulations that are being put into place, how this impacts every aspect of the real estate development process, and how they can prepare to lead in a rapidly changing marketplace.
Outreach and Education – engaging various stakeholders along our journey and driving the adoption of a housing-focused ESG platform
Lead: Cati O’Keefe, Chief Development Officer, Green Builder Media
As the ESG Working Group develops a building industry-specific framework, it will be paramount to communicate the framework fundamentals to diverse target audiences, including building professionals, manufacturers, investors, consumers, government entities, industry groups, and other stakeholders. This subgroup will develop effective messaging and marketing outreach strategies to disseminate and promote information about the Defining Principles document.
“ESG has become a mission-critical business requirement with tangible benefits like streamlined operations, productivity enhancements, and supply chain strengthening. We’re excited to play a role in the evolution of the industry by creating a set of Definitive Guidelines that building professionals, manufacturers, and industry groups can follow to implement ESG practices and streamline reporting.”
—Green Builder Media CEO Sara Gutterman
"Homebuilders' and community developers' hearts are in the right place—wanting to do well by doing good. A housing-specific ESG platform will help ensure money + mind space are spent in the right ways—delivering optimal results for people + the planet, while enabling greater resiliency in the housing business."
—Betsy Scott, Executive Director, Programs + Engagement, Housing Innovation Alliance
“ESG is the new language of Wallstreet to demonstrate resiliency strategies and corporate competence. Developing an industry specific platform to create value for suppliers and builders in participating and sharing their ESG strategic plans can elucidate individual excellence and promote industry evolution to better deliver built environments for decades to come.”
—CR Herro, CEO AR Homes