What is ESG and how will it impact the world of construction?

As ESG strategies gain traction across the construction industry, we take a closer look at what ESG means and examine its influence on the sector.

Understanding ESG

ESG stands for Environmental, Social, and Governance. It is a framework used to evaluate a company’s commitment to responsible and ethical operations. An ESG strategy typically involves a set of standards and accreditations addressing how a company manages their environmental footprint, social responsibilities, and governance practices. In recent years, ESG has become a touchpoint acronym for companies aiming to demonstrate sustainable and ethical business practices, making it an increasingly vital consideration for businesses worldwide.

Environmental Criteria

Environmental standards assess how a company’s operations interact with the natural world, focusing on issues such as carbon emissions, waste management, and resource efficiency. The construction industry has recognised the need to minimise its carbon footprint and decouple business growth from emissions. Key areas include reducing pollution, implementing sustainable resource management practices, and setting ambitious future environmental targets. Given that the built environment contributes to 30% of global greenhouse gas emissions and consumes 40% of global energy, it is clear that the construction sector has a crucial role to play in global efforts to combat climate change​.

Social Standards

The social aspect of ESG addresses how companies interact with employees, clients, suppliers, and the wider community. In construction, a supportive and inclusive workplace is essential for promoting wellbeing and mitigating feelings of isolation. Companies are increasingly focusing on mental health and well-being initiatives. For example, Ambit supports Lighthouse, a construction industry charity through the ‘Help Inside the Hard Hat’ campaign, which provides financial, emotional, and physical support to construction workers across the UK. Such initiatives not only enhance employee welfare but also strengthen the social fabric of organisations.

Governance Principles

Governance within ESG refers to the processes, policies, and values that guide a company’s decision-making and accountability. Good corporate governance ensures that a company’s leadership practices are transparent, ethical, and focused on long-term growth. In construction, this includes effective oversight by boards of directors, shareholder engagement, and the implementation of governance frameworks that promote responsible business practices.

ESG’s Impact on the Construction Industry

Looking forward, the construction industry is expected to further embrace ESG standards, driving a reduction in greenhouse gas emissions, improved material sourcing, improved employee safety and wellbeing, and the development of healthier, more sustainable buildings. With interest rate discounts and rental premiums afforded to companies demonstrating solid ESG initiatives, there is growing market and legislative incentive for firms to commit to strong ESG strategies. By embedding ESG into corporate strategy, companies can help shape a future where growth aligns with environmental stewardship and social responsibility.

To learn more about Ambit’s ESG initiatives and how we are contributing to a more sustainable construction industry, visit our ESG page, or discover our 2023 ESG Impact Report.