What is Environmental, Social and Governance (ESG)?
The built environment is responsible for 40% of all carbon emissions in the UK, and it has a major impact on the quality of people’s lives from day to day. Due to this, an increasing focus has been placed on improving the sector and creating buildings that can play a positive role in our collective future.
More businesses than ever before are determined to make progress with regards to sustainability in all aspects, and Environment, Social and Governance (ESG) is the main way that this is expressed. For this reason, all building owners and developers should be aware of the term and what it means for them.
In particular, businesses are becoming increasingly aware of the importance of data with regards to making a success of ESG. Put simply, without embracing technology and data-led approaches, it will not be possible to achieve Net Zero Carbon buildings and meet other ESG responsibilities – and businesses who do not meet their responsibilities and take ESG seriously will find it is to their detriment in the long term.
In this series of articles, we will explore ESG and what it means for you – examining what makes a successful ESG strategy and how a technology- and data-led approach is the key to meeting your responsibilities in a way that is good for the environment and will save you money.
Other articles in this series will include:
So, what is ESG? It is at heart a framework for considering the environmental, social and governance aspects of a business alongside the financial ones – thereby altering the focus of a business and making it more sustainable in the long term.
To briefly define each factor:
- Environmental – Analyses how a company impacts the environment and manages any inherent environmental risks in its operations. This includes its direct day-to-day operations and how it works across the supply chain. For example, Environmental considerations can include everything from energy usage in a building to the materials used in its construction.
- Social – Looks at how a company manages its social relationships with employees, customers, communities and more, wherever it operates. This could mean how it prioritises diversity, workplace relations, the facilities and living environment a building provides for residents, and more.
- Governance – This deals with a company’s leadership, the way it is run and the processes that go into its decision making. Good governance will allow investors, clients, employees and customers to trust the company and make them more willing to invest and work with you.
These non-financial indicators ensure accountability, and can be used in risk assessment strategies which inform investment. Businesses and buildings which do not factor ESG into their decision making are becoming increasingly less attractive to investors. This means that an asset which does not take environmental concerns into consideration, for example, can risk becoming a stranded asset in the near- to medium-term.
For example, Nathan Bonnisseau, CMO of Plan A, says: “ESG is likely to play a bigger role in how companies are assessed, not only by investors but by consumers and stakeholders.
“The numbers reflect a growing awareness that companies must manage their environmental impact in innovative ways in order to remain successful. Sustainability is the new ideal, and the development of sophisticated methods of evaluating ESG activities and effect, is the key to attaining it.”
Taking steps to make your buildings more sustainable is a win-win situation – for the environment and for your portfolio. Learn more about how sustainability can help you by getting in touch with our team today.