Finance20 June, 2022

The ESG advantage for the construction industry

Today, most companies are only in the early stages of this ESG journey. Read this blog to learn more.

I was on a panel with a consulting engineer at the Futurebuild conference recently. He was part of an industry-wide initiative, featuring some of its biggest names, focused on measuring and minimizing carbon emissions in the construction industry. We shared our frustration that despite the many business benefits of building a more sustainable business, progress was slow.  

Though the pace may be frustrating, progress is being made. We can see this in the latest IPCC (Intergovernmental Panel on Climate Change) report, which is clear about the radical changes we still need, but also shows that some countries have made significant and sustained progress on cutting emissions. The pace of change is accelerating as companies in construction and beyond realize that better governance and higher standards of sustainability are not counter to the growth agenda but aligned with it. 

Near and far 

Where conflict remains is in the horizons. For those focused on the short term, additional effort and investment, changes to practices, processes, and materials, can all seem like a barrier to getting things done. But when you’re focused on the long term, on sustained and sustainable success, the equations start to shift.  

Recent events have only served to highlight this. Energy prices are a prime example: a focus on long term, sustainable success will see companies try to take control of these critical input costs, and lobby for policies that stabilize them. That can only mean less reliance on fossil fuels and an accelerated shift to renewables and associated technologies: electric transport, for example. 

Challenges of sustainability

This is not to say that a strategic focus on improving sustainability and governance is either straightforward or cost free. The many different reporting standards that constantly evolve make demonstrating performance hard. And many organizations don’t yet have the data to hand, making every new report a long process of gathering and verifying. In almost every case, seeing the true impact of ESG decisions across financial and operational plans is currently agonizingly difficult. In a time when walls within businesses are being removed, ESG requirements risk creating new silos. The disconnect between today’s reality and tomorrow’s environmental ambition is especially acute where decisions are taken in isolation. 

But that can change. As we start to integrate a broader set of business data into analysis and planning tools, we must do three things. 

First, we must start to model future projects and business performance to identify areas for improvement and explore the benefits of investment. There’s often a strong correlation between carbon and cost, whether through wasted time and materials or inefficient logistics. Increasing transparency through the organization drives better decision-making and stronger governance.  

Second, enabled by this increased transparency, we must streamline reporting. No longer should it be a long process to produce a report. Rather, the information should be at our fingertips, allowing us to communicate the benefits of investment in ESG to both shareholders, regulators, and the wider public. 

And finally, we can truly understand the impact of our ambition. Tomorrow’s full ESG requirements and regulatory standards are still opaque, but businesses can use connected planning tools today to understand the full and absolute impact of their ESG programs. Rather than simply reporting on progress against objectives created unilaterally, construction firms can model the impact of each objective, understanding the financial and operational impact and tracking the progress to a more sustainable business model.   

Tomorrow’s enterprise

As we look to the future, we can see companies emerging with very different behaviours driven by the alignment of business and broad sustainability goals. With a focus on sustainable success at their core, these organizations will have radical transparency through their supply chains. They will use this to drive faster decision making and greater adaptability – two of the key characteristics outlined in our eBook “The future isn’t what it used to be.” 

Today, most companies are only in the early stages of this ESG journey. With their understanding of data and reporting, the responsibility for plotting a course to the future lands with the CFO. 

This blog is part 1 of a three-part series. For my blog on Supply Chain Planning click here. To read my blog on Predictive Intelligence click here

Tom Cheesewright author
Independent author and Applied Futurist
Tom is an independent author and Applied Futurist. His books include ‘High Frequency Change’ and ‘Book of the Future’, he advises global businesses on future trends and makes regular appearances on popular TV shows. Tom is a guest contributor to our blogs and co-authored our Construction Sector eBook ‘The Future Isn’t What It Used To Be’.
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