ESG In The Construction Industry: Opinions & Perceptions

ESG In The Construction Industry

The construction industry has changed dramatically over the past few decades. Even more recently thanks to the latest technology trends and the ongoing coronavirus pandemic. With that also comes a shift in attitudes and perceptions when it comes to how construction companies view themselves within their sectors and what their concerns are going forward. In particular, many businesses across a wide spectrum have become self-aware of their industries impact on environmental policies and issues, social performance, and governance factors. A recent report by data analytics company GlobalData has shed even more light into current perceptions and opinions on ESG in the construction industry, which is what this article will discuss today while giving some foresight into how industry attitudes might change in the coming years.

What Is ESG?

ESG stands for Environmental, Social, and Governance (or Corporate Governance). It is used as an evaluation of a businesses collective conscientiousness when it comes to environmental, social, and governing factors. Companies that tend to put a fair amount of consideration into all three categories tend to fair well with public perception and socially conscious investors. There is a lot of evidence to demonstrate that businesses that incorporate their values and concerns when it comes to ESG can increase an enterprises value and even be used as a screening by investors for any potential investments.

ESG splits itself into three categories which differ depending on the industry, however with regards to construction it is as follows…

  • Environmental criteria pertains to a companies stance on environmental concerns and conflicts with the natural world. Performance in this sector is based on factors such as the energy a company consumes, waste produced, dependency and types of natural resources used, and impact on eco systems and the environment as a whole. Perhaps one of the most pressing issues when it comes to the environmental criteria is a companies stance and willingness to combat climate change by aiming for reduced carbon emissions, both in construction and the completed buildings.
  • Social criteria pertains to a companies relationships with employees, suppliers, customers, and their communities. Performance in this sector is based on human rights, diversity, inclusion, health and safety, and the impact of construction on a community. Good relations across all boards often correlates to a greater level of a companies success, through strong ties and meaningful relationships, whereas businesses that neglect any of these factors can result in poor public and industry perception, damage to corporate image, liabilities and sometimes even legal penalties.
  • Governance pertains to a companies leadership performance. This has to do with corporate decisions with relations to policies and controls, executive pay, compliance with the law, internal controls, and stakeholders rights. Failures in this sector, for example through corruption, law-breaking, excessive lobbying, large executive pays, and tax avoidance, often leads to reputational harm and loss of trust with customers and stake holders.

Though not always necessary, businesses that give their own stance and commitments when it comes to ESG tend to enhance the image and reputation of a company with both customers, stakeholders, and the public at large.

Opinions & Perceptions on ESG in the Construction Sector

There was relatively little data when it came to corporate opinions and perception for ESG in construction. Fortunately, last year data analytics company GlobalData conducted some surveys to find out how concerned participants in the industry felt about ESG in the construction sector for their region. Each participant was able to select their answer from very concerned to very unconcerned with regards to particular ESG issues.

Source: GlobalData

For the most part, the results of the survey showed that social and governance remained to be the most important factors for businesses that worked in construction. Particularly, participants prioritised health and safety in construction above all else with 72% of respondents claiming to be very concerned about health and safety practises for construction in their region. This was followed with respondents saying they were most concerned about eliminating corruption and bribery which carried 62%, while their concerns for ethical behaviour was around 63%.

At the bottom of that list was public concerns over environmental factors such as climate change, pollution, and the use of natural resources. Surprisingly, just a little under 50% claimed they were either neutral or unconcerned about constructions impact on their communities. At the very bottom of that list was diversity and inclusion within the construction industry with just a little above 40% saying they were concerned about this issue.

Source: GlobalData

The survey then asked what participants felt was the main focus for their business with regards to ESG. Just like in the last set of questions, more than 50% of respondents said that improving health and safety for workers was their biggest priority. This is then followed by improving risk management and protecting worker’s human rights as the next focus. Interestingly, reducing constructions impact on climate change was the focus of at least 26% of respondents, despite less than 50% of participants claiming to be concerned about climate change’s impact on construction. Likewise, bribery and corruption was one of the major concern for participants in the first question, yet only 16% of respondents said that eliminating this was a focus for their company. Right down the bottom of the list was minimising the impact of construction activities on local communities, which only carried 10% of participants response.

Source: GlobalData

Participants were also asked what the main barriers were for investing in ESG activities in the construction. Cost and a lack of return of investment was the major factors for not investing in ESG, with at least 64% and 44% of respondents citing these reasons respectively. They also claimed that a lack of interest from customers (project owners and developers) and a overall lack of incentive was also contributing factors. At the bottom of this list was the capability to carry out ESG activities, with only 9% of respondents believing that architects and engineers lacked the ability to perform ESG activities.

Source: GlobalData

Even though it seemed that environmental impact was not a major concern to many construction businesses, what was very interesting was companies response to customers demand for sustainable practises. Participants were asked if they had been experiencing an increase in demand for sustainable construction methods, and at least 61% of businesses answered yes. To break this down further, 13% of businesses had seen an increase in demand for over 3 years, 28% of businesses had seen an increase in demand for more than 1 year (but less then 3), and finally 20% of business had seen a demand increase in the past year alone.

This suggests that, even though the majority of companies do not see environmental issues and the need for sustainable construction as a major concern for their business, the demand for sustainability within the industry is on the rise and will most continue to rise into the near future. Therefore, a strong commitment to tackling environmental concerns such as climate change, carbon emissions, use of natural resources, wastage, and pollution can be a huge boon for any construction and development company going forward.

Knightsbridge Development Corporation’s Stance On ESG

We here at Knightsbridge Development Corporation understand the impact that the construction industry has had on climate change thanks to our reliance of natural resources and unsustainable building materials and practices, with construction accounting for 30% of the worlds total greenhouse gas emissions overall. Not only do we adopt the best policies with regards to worker’s health and safety and corporate ethics, but we also embrace sustainability wherever possible, which is shown through our involvement in LEED Gold and Platinum accredited projects. Knightsbridge Development Corporation is committed to mitigating the impact of our operations on the environment while conducting business according to the highest ethical and regulatory standards.

You can learn more about our stance and statement on ESG by right here: https://knightsbridgecorp.ca/environmental-and-social-governance/