ESG stands for environmental, social and governance. It describes how a company affects the world around it, and how well it manages the risks that come with that. Investors use it to judge long-term risk, governments use it to set disclosure rules, and clients increasingly use it to decide who they work with.

For construction, ESG isn't abstract. Buildings account for a large share of global energy use and emissions, projects employ large and varied workforces, and contracts pass through long chains of subcontractors and suppliers. Each of those raises questions that someone will eventually ask you to answer.

Environmental: what your projects do to the planet

The environmental part covers the physical impact of what you build and how you build it:

  • Carbon: emissions from materials (embodied carbon), from site equipment and transport, and from running the finished building (operational carbon).
  • Materials: where products come from, what they're made of, and whether they can be reused or recycled.
  • Waste: how much construction and demolition waste a project produces, and how much is kept out of landfill.
  • Water, land and biodiversity: runoff, erosion, contamination and disturbance on and around the site.

Carbon usually gets the most attention because it's the easiest to compare across projects and companies. Our guide to carbon footprint estimation covers how it's measured.

Social: how your work affects people

The social part covers the people who build your projects and the communities around them:

  • Health and safety for everyone on site, including subcontractors.
  • Labour practices across your workforce and your supply chain, from fair pay to the risk of forced labour in manufacturing.
  • Diversity and inclusion in hiring, training and procurement.
  • Community impact: noise, traffic, local employment, and engagement with neighbours and Indigenous communities.

We cover these in more detail in the social side of ESG on construction projects.

Governance: how decisions get made

Governance is about the systems that keep a company honest and in control: who makes decisions, how they're checked, and how problems are caught. In construction that includes procurement and tendering, conflicts of interest, anti-corruption controls, approvals, document control, and how subcontractors are vetted.

Governance is also what makes the environmental and social numbers believable. A carbon figure or a safety record is only as trustworthy as the process that produced it. See governance in construction for what good controls look like.

Who is asking, and why

  • Investors and lenders factor ESG risk into financing decisions, and some offer better terms for projects that meet sustainability criteria.
  • Governments and public owners set disclosure rules and increasingly build carbon, social value and supply-chain requirements into public procurement.
  • Private clients and developers have their own ESG commitments to meet, and they pass those requirements down to contractors and suppliers.
  • Insurers look at material quality, safety records and governance when they assess risk.
  • Employees weigh a company's values when deciding where to work and whether to stay.

Even if your company isn't directly required to report, your clients probably are. Much of the data they need, such as the materials you install and the emissions from your work, sits in your records rather than theirs, so the requests flow down the supply chain to you.

Even if you aren't required to report, your clients probably are, and much of the data they need sits in your records.

Where to start

ESG can look like a long list of things to measure. In practice, most construction companies make real progress by focusing on three steps:

  1. Find out what's being asked. Look at recent tenders, client questionnaires and lender requirements. They tell you which topics matter to the people you work with.
  2. Take stock of your data. Much of what you need already exists in delivery records, timesheets, safety logs and invoices. The problem is usually that it's scattered.
  3. Pick a system. Decide where ESG data will live and who is responsible for it, so it's captured as projects run rather than rebuilt at year end.

Our step-by-step plan for getting ready for ESG reporting goes into more detail, and a ConstructESG audit can show you which requirements are likely to apply to your projects.

Key points

  • ESG covers a company's environmental impact, its effect on people, and the quality of its decision-making.
  • In construction, that means carbon, materials, safety, labour practices, procurement and controls.
  • Requests flow down the supply chain, so contractors and suppliers are asked for data even when they aren't required to report themselves.