ESG in the Built Environment

Environmental, Social, and Governance (ESG) outlines the criteria used to assess a company’s impact on our ecological systems, its relationship with the community, and the efficiency of its internal controls and decision-making structures.

The most common ESG metrics tracked in the real estate and building industry can be broadly categorized into environmental, social, and governance factors. Here are some examples of each:

1. Environmental Metrics:
   • Energy consumption and efficiency (e.g., kWh per square meter)
   • Greenhouse gas (GHG) emissions (e.g., metric tons of CO2e)
   • Water usage and efficiency (e.g., cubic meters per occupant)
   • Waste generation and recycling rates (e.g., percentage of waste diverted from landfill)
   • Biodiversity impact and conservation measures
2. Social Metrics:
   • Occupant health and well-being initiatives (e.g., Fitwel or WELL certification)
   • Diversity and inclusion metrics (e.g., gender or racial diversity in workforce)
   • Community engagement and social impact programs
   • Health and safety performance (e.g., number of incidents or accidents)
   • Stakeholder engagement and feedback mechanisms
3. Governance Metrics:
   • Board diversity and independence
   • Executive compensation structure and transparency
   • Anti-corruption and bribery policies
   • Ethics and compliance programs
   • Shareholder rights and engagement practices

Figure 1. World Economic Forum: ESG Metrics

These metrics help organizations assess their performance in key ESG areas, identify areas for improvement, and demonstrate their commitment to sustainability and responsible business practices.

• Tracking ESG performance typically involves collecting data on these factors, analyzing it, and reporting on it. The specific criteria tracked and measured should be selected based on the industry and the organization’s sustainability goals.

ESG reporting depends upon various frameworks to analyze an organization’s commitment to sustainability, responsible practices, and ethical governance. Several notable ESG reporting systems and frameworks used in the real estate and building industry, including:

1. LEED (Leadership in Energy and Environmental Design): Developed by the U.S. Green Building Council, LEED is a widely used green building certification program that includes criteria related to energy efficiency, water conservation, and indoor environmental quality.
2. BREEAM (Building Research Establishment Environmental Assessment Method): BREEAM is a sustainability assessment method for planning projects, infrastructure, and buildings. It sets benchmarks for best practices in sustainable design and measures performance across various environmental and social criteria.
3. Fitwel: Fitwel is another notable framework in the realm of ESG and sustainability, particularly focusing on occupant health and wellness within buildings. It was developed by the U.S. Centers for Disease Control and Prevention (CDC) and the General Services Administration (GSA) to promote healthier workplace environments. Fitwel provides strategies for building owners and managers to improve aspects of their buildings that impact occupant health, such as air quality, access to healthy food, physical activity opportunities, and mental health support.
4. WELL Building Standard: The WELL Building Standard focuses on the health and well-being of building occupants, addressing factors such as air quality, water quality, nourishment, light, fitness, and comfort.
5. GRESB: GRESB (Global Real Estate Sustainability Benchmark) is one of the most widely used systems for reporting on ESG performance in the real estate and building industry. It provides a framework for assessing the sustainability performance of real estate portfolios and assets globally. GRESB collects data from participants, evaluates their performance, and provides benchmarking reports that allow participants to compare their performance to their peers.
6. GRESB Infrastructure: GRESB Infrastructure is a benchmark that assesses the sustainability performance of infrastructure assets, including energy, transportation, water, and social infrastructure.
7. CDP (formerly Carbon Disclosure Project): CDP is a global disclosure system that enables companies, cities, states, and regions to measure and manage their environmental impacts, including carbon emissions, water usage, and deforestation.
8. ISO 14001: While not specific to real estate and building, ISO 14001 is an international standard for environmental management systems that can be applied to any organization seeking to improve its environmental performance.

These reporting systems and frameworks provide guidance and standards for measuring and reporting on ESG performance, helping companies and organizations improve their sustainability practices and transparency.

The built environment is increasingly focusing on ESG considerations, with efforts concentrated on mitigating greenhouse gas emissions throughout construction and renovation to reduce a building’s lifetime operational & embodied emissions. Key areas of emphasis for achieving positive outcomes include integrating new developments or redevelopments to facilitate the restoration of natural environments and biodiversity. Metrics tracking these outcomes include advancements in the circular economy, which aim to minimize raw material extraction and environmental harm while reducing air, water, and land pollution.

ESG reporting is crucial for the architecture, engineering, and construction industry as it enhances transparency and accountability, fostering trust among stakeholders, including investors, clients, and the community at large. Robust ESG reporting enables firms to manage risks associated with environmental, social, and governance factors, safeguarding their long-term viability and reputation. It also provides frameworks for identifying opportunities to innovate and differentiate by integrating sustainability principles into operations, design processes, and project delivery methods.

For example, as a third-party consultant leveraging GRESB, our clients benefit from an organization that aligns its mission with investors’ goals. GRESB delivers actionable and transparent ESG data to financial markets, providing our team with a robust foundation for our real-estate sustainability benchmarking. Through GRESB’s rigorous process of collecting, validating, scoring, and independently benchmarking ESG data, Rushing gains access to comprehensive business insights, empowering its consultants with tools and solutions for effective reporting.

Furthermore, the emergence of new frameworks such as SEAM, WELL, Fitwel, and JUST Label signifies a pivotal moment for advancing the “social” aspect of ESG consulting and reporting measures. Previously overshadowed by environmental concerns, the “social” pillar is now gaining prominence as developers, clients, contractors, and other stakeholders increasingly recognize the importance of social value. It is imperative that understanding, influencing, and monitoring the impact of buildings, developments, and cities on their communities and broader global supply chains take precedence on their priority lists. These new frameworks offer valuable tools and guidelines to assess and address social factors, ensuring that the social dimension of ESG considerations receives the attention and action it deserves within the built environment sector.

How can Rushing help?

Monitoring ESG performance is crucial for companies looking to manage risk, surpass partners’ expectations, and sustain a competitive edge. Rushing offers strategic consulting services tailored to the real estate industry, assisting companies in defining, measuring, and benchmarking their ESG metrics. Our team is equipped to help your organization enhance its reputation and generate lasting value by aligning business strategies with sustainability goals.

For details on ESG consulting kindly reach out to RushingSustainability@rushingco.com.