Feature Article

ESG: 6 Things Building Professionals Need to Know

Clients need AEC professionals to help them achieve environmental, social, and governance goals. Here’s how people are turning aspirations into strategies.

This article is also available as a printable BuildingGreen Spotlight Report, including the CEU quiz. Download now »

a tall stone building with a tapered design, lit up at dusk with the skyline of New York City behind it.

Lendlease, which is targeting elimination of scope 1 and scope 2 emissions by 2025 and scope 3 by 2040, worked to reduce embodied carbon in Claremont Hall. The project team reduced concrete emissions 33% and reinforcing steel 28%.

Photo: Lendlease
When and why did the word “sustainability” in corporate marketing turn into the acronym “ESG”—short for environmental, social, and governance?

I’ve asked a lot of people this question and gotten a lot of different answers. But it seems to come down to this: although some people have been using the term ESG for more than a decade, a much broader shift toward that language started in 2020, partially in response to the murder of George Floyd. As many people told me, despite its origins in the “triple bottom line” concept of the late 1980s (the three bottom lines often being named people, planet, and profit), the word “sustainability” is widely perceived to be exclusively about environmental issues, while “ESG” explicitly includes social concerns.

There could also be something a little more self-serving at play. The adjective “sustainable,” which began to be used in the 1980s to describe a kind of development that supports social equity in tandem with protection of nature’s ecosystem services, can sound squidgy and nebulous. And the word’s long been despised, primarily by people in the sustainability movement, for mischaracterizing the movement’s goals—not ambitious enough in contrast to a word like “regenerative,” say.

Enter “ESG,” with origins in the finance industry. It was perhaps first used in a 2004 United Nations Global Compact white paper called “Who Cares Wins,” the stated goal of which was “to better integrate environmental, social, and governance issues in analysis, asset management, and securities brokerage.” The 20 endorsers of the report (investors like Deutsche Bank and Goldman Sachs) called for standardized frameworks for data reporting—some regulatory, some voluntary—that would help tie sustainability performance to financial performance. The idea behind ESG reporting was (and is) that there are financial risks associated with environmental, social, and governance failures. Hence, in order to make better decisions, investors need data showing how publicly traded companies are managing those risks.

If you think that sounds a lot narrower than the concept of sustainability, you’re not alone—and you’re not wrong. On the positive side, ESG is focused on metrics and accountability; on the negative side, it doesn’t include everything we mean to be talking about when we talk about sustainability. Nevertheless, the tide has probably already turned. Companies, and not just publicly traded ones, are talking about ESG rather than sustainability now. Many of those companies are your clients, and you are part of their supply chain. That means your activities, if they have enough impacts, could be included in their ESG reporting, along with the projects you help them design, build, retrofit, or operate.

In this report, we’ll take a look at what building professionals need to know about ESG, including:

  •  What ESG does and doesn’t cover
  •  The ESG terms, metrics, and frameworks you should know about
  •  How ESG works in the real estate industry
  •  How specific design and construction decisions can support your clients’ broader ESG goals
  •  Why your firm might want to consider starting its own ESG program
  •  Why ESG isn’t everything

1. ESG Frameworks Don’t Tell You How to Design, Build, or Operate Buildings

ESG is about the performance of companies. Most of the relevant frameworks have nothing at all to say about the performance of individual buildings.

We all know that buildings contribute to (or detract from) a company’s environmental and social performance—and the more significant the building portfolio, the greater the impact. However, even though buildings are decidedly part of the picture, most ESG reporting frameworks do not delineate or require specific green building strategies. (The GRESB ESG reporting framework and scoring system for the real estate industry does take green building best practices and certifications into account as part of its rankings; see #3, below.) In fact, most ESG reporting frameworks don’t delineate or require any specific environmental, social, or governance strategies; they simply ask companies to disclose certain metrics without saying whether the resulting numbers are good or bad. The judgment calls about good and bad numbers are left to sustainability rating agencies and, ultimately, investors themselves.

A screen grab of some of the text from the JLL 2021 Global Sustainability Report Progress against Targets

JLL reported on its ESG key performance indicators, or KPIs, in its 2021 sustainability report.

Image: JLL
In this way, ESG standards differ fundamentally from green building standards, as explained by Chris Pyke, Ph.D., senior vice president for product at ArcSkoru, Inc., a for-profit affiliate of the U.S. Green Building Council (USGBC).

“ESG and green building are complementary strategies to address a profound market failure,” said Pyke in a BuildingGreen-hosted webinar in October 2022. That “market failure” is, in short, a history of inadequately addressing environmental and social impacts. But unlike certifications such as LEED or BREEAM, which provide detailed guidance about what to do and what to avoid, “ESG doesn’t internalize its own values.” As Pyke puts it, “There is no ESG Platinum.” So although ESG initiatives can “motivate and inform the development and operation of individual assets” (buildings), he said, there is no specific set of green building practices that are understood to improve an organization’s ESG performance.

The exception to this might be one big, aspirational metric that more and more companies are committing to: net-zero-carbon operations.

“We have very ambitious, absolute targets across all of our three scopes by 2040, with no more than 5% offsets,” said Cynthia Curtis, corporate sustainability officer for the Americas for commercial real estate developer and investor JLL. (See the glossary sidebar for a basic explanation of the three scopes Curtis is referring to.) “We have put in place a very high bar for ourselves because it is what the science is saying we need to do. With real estate being responsible for roughly 40% of greenhouse gas emissions, we believe we have not only a responsibility but an obligation to take action.”

Compared with many ESG goals, a hard metric like net-zero-carbon performance—whether it’s for a real estate company like JLL or some other type of company—has obvious implications for the design, construction, and operation of a committed organization’s building portfolio. That’s provided the definitions and parameters are clear, though—one reason Curtis said JLL and other real estate companies are working with the Science Based Targets initiative to develop a building-industry-specific carbon reporting protocol.

Ultimately, even though ESG frameworks don’t dictate how to practice green building, ESG reporting in combination with programs like LEED or BREEAM could help scale environmentally and socially sustainable building practices not just in the real estate industry but potentially across sectors (see Will ESG Move the Green Building Needle?).

To help that go faster and penetrate beyond the new construction sector, USGBC has said it will develop a framework designed to push existing building decarbonization and other green building goals at the portfolio scale (see Templeton: LEED Is Not Enough; Portfolio Framework Is Next).

2. You Might Need to Learn Some New Terms and Be Familiar with Multiple ESG Frameworks

“Who Cares Wins” came out in 2004, but in all the years since its publication, the finance industry has yet to settle on unified ESG standards, metrics, or reporting frameworks. Regulatory agencies haven’t helped much. So people looking for ESG data—or, in the case of building professionals, looking to support their clients’ ESG goals and reporting—need to be familiar with several different systems.

Here are six major programs providing standards and frameworks for ESG reporting.

CDP

Formerly the Carbon Disclosure Project, CDP is an international nonprofit that provides an online environmental disclosure platform and then scores reporting companies (as well as cities, states, and regions) on their environmental performance. This combination of disclosure platform and scoring framework closely resembles GRESB’s approach (see #3, below). It publishes an “A List” of high performers in its three focus areas of climate change, deforestation, and water security.

Disclosing entities typically hire CDP-accredited consultants to help them set goals and do their reporting.

Global Reporting Initiative (GRI)

Founded in 1997, the nonprofit Global Reporting Initiative (GRI) created the first corporate sustainability reporting framework. GRI publishes both universal and sector-specific standards for ESG reporting, along with topic standards designed to help corporations report on specific issues material to their business practices.

GRI offers paid consulting services to help reporting companies meet its requirements. Because of this, a separate entity within GRI, the Global Sustainability Standards Board (GSSB), actually develops the standards, which are free PDF downloads. GRI claims there is an “organizational firewall” between GSSB and the larger organization.

GRI is gradually developing sector standards for 40 industry categories, starting with the highest-impact sectors first. There are three so far, for coal; oil and gas; and agriculture, aquaculture, and fishing. Mining, food, and textiles/apparel are coming next.

Greenhouse Gas Protocol

The Greenhouse Gas Protocol, a business group convened by the World Resources Institute and the World Business Council for Sustainable Development, has developed a variety of standards for disclosing greenhouse gas emissions. These include the 2004 GHG Protocol Corporate Accounting and Reporting Standard (which, among other things, defines scope 1, 2, and 3 emissions, and describes how to measure and report them) and its supplement, the 2011 Corporate Value Chain (Scope 3) Accounting and Reporting Standard (which focuses on scope 3 activities, boundaries, and data reporting).

a building on a sunny day with a patio, exterior stairs, walkways, and shading on metal frame supports.

This adaptive reuse project at Fifth & Tillery in Austin, Texas, aligned with ESG goals for both the developer and owner/operator relating to tenant health and climate resilience.

Photo: Ryan Conway, courtesy of Gensler
The Greenhouse Gas Protocol has also published a standard covering emissions reporting for products. The group recently announced plans to update its corporate standards.

Science-Based Targets initiative (SBTi)

Established in 2015, the Science-Based Targets initiative (SBTi) develops sector-specific standards to help companies in those sectors set and meet emission reduction targets in line with a 1.5°C global heating goal.

A standard for the building industry is under development and will cover both embodied and operational carbon.

Finalized standards already exist for a number of industries, including cement manufacturers, electrical utilities, and forest, land, and agriculture companies.

Sustainability Accounting Standards Board (SASB)

The Sustainability Accounting Standards Board (SASB) is a nonprofit providing sector-specific guidance on reporting ESG-related financial risks. This is an instance of single materiality, meaning only one dimension is covered: even though it’s associated with ESG, the focus of these disclosures is exclusively the economic bottom line. In other words, what financial risks does the company face because of its environmental and social impacts?

SASB Standards cover 77 different industries.

Task Force on Climate-Related Financial Disclosures (TCFD)

The Task Force on Climate-Related Disclosures (TCFD), established in 2015, publishes recommendations about how companies should measure and report on financial risks related to climate change, including their greenhouse gas emissions and resilience planning. TCFD, which is chaired by former New York City Mayor Michael Bloomberg, is an industry coalition created by the international Financial Stability Board (FSB), which develops policies and standards for the finance industry. The TCFD also tracks use of the framework, which is steadily rising, in a status report.

Companies use the TCFD Framework (whose longer name is “Recommendations of the Task Force on Climate-related Financial Disclosures”) voluntarily, but it could form the backbone of required reporting for publicly traded corporations in the future. For example, the U.S. Securities and Exchange Commission (SEC) has proposed a new reporting rule that references the TCFD Framework.

a table showing what is covered by seven common ESG programs.
Source: BuildingGreen, Inc.

3. GRESB—the ESG Survey and Scoring System for Real Estate—Can Inform Other Sectors

Above, we said that ESG frameworks won’t tell you how to design, build, or operate building projects, but we pointed out a partial exception, the Global Real Estate Sustainability Benchmark. The GRESB survey and third-party scoring system take green building certifications and best practices into account. Even though GRESB is used exclusively by companies that develop and manage real estate assets, parts of the survey can help inform other industries’ decisions about their buildings and building portfolios. (Disclosure: the author’s husband was for several years a key software developer for GRESB through his employer, Green River, which is no longer a contractor with the nonprofit.)

To participate in GRESB, real estate companies fill out a detailed online survey. All companies answer questions about management practices (like “Does the entity have a senior decision-maker accountable for ESG issues and/or climate-related issues?”), but the bulk of GRESB questions (70%) are divided into two different components: —Performance (for managers of existing buildings) and Development (for developers of new construction projects). The focus is on portfolio-scale policies and practices, and for the Performance component, users enter asset-by-asset energy and water consumption data, which get aggregated into portfolio-level data.

Where GRESB came from

GRESB was a spinoff from GRI, according to Pyke. “Real estate was the largest asset class [in GRI], but it operated differently than general entities like Coca-Cola or Boeing or something like that,” Pyke explained. The creators of GRESB realized two things, he told BuildingGreen: that “most investors were indirect investors in buildings” and that there was a “need to focus not just on a building but on the investable entity” that owned or managed it. “Green building focused on a project team on a jobsite. But it was ultimately controlled by a corporate entity or functional entity above its head. People with a background in finance realized that was a point of influence over real estate.” In addition, real estate companies were already being “bombarded” by requests for information, he said—partly in response to research pioneered by Nils Kok, the eventual founder and CEO of GRESB, showing that green real estate was more lucrative than conventional real estate—so GRESB was an obvious step toward streamlining and standardizing that request process. (GRESB was for six years owned by USGBC’s sister nonprofit, Green Building Certification Inc., which gave it up in 2021.)

ESG materiality matrix

This matrix, provided by Stok, shows the outcome of a hypothetical ESG materiality assessment, a process for identifying and prioritizing goals that are likely to be relevant to investors and other stakeholders based on financial risks and social and environmental impacts of the business.

Image: Stok

Instead of “scraping” publicly available data like most ESG rating agencies do, GRESB created its own online survey. “There are little sweat shops of folks dedicated to scraping data,” Pyke said, but GRESB asks the real estate companies themselves to put in the work. After it submits its answers, a third party, SRI Quality System Registrar, validates the data. Then submitting companies get benchmarked against peers in the same investment sector (e.g., commercial office, residential, diversified). GRESB releases trends and top rankings to the public, but investors can purchase access to detailed data.

GRESB has improved over the years, argues Sara Neff, head of sustainability at Lendlease Americas. “GRESB is the gold standard for measuring sustainability in real estate globally,” Neff told BuildingGreen. “It is what our investors expect us to do and to perform very, very well in. … It’s a lot of work, but it’s how we communicate to our stakeholders what excellence looks like.” But it wasn’t always as rigorous as it is now. “It is performance based. That’s a shift in GRESB, to be more focused on performance scores. It’s not, ‘I have all the right policies and targets and data.’ It’s, ‘Was I efficient?’” In other words, did the portfolio demonstrate good energy, water, and waste performance and meet other important ESG targets?

As Dan Winters, senior director at GRESB, told BuildingGreen, “In 2010, when we asked a portfolio manager who had 250 buildings in this fund, ‘Can you access the energy, water, waste, and emissions metrics for the portfolio?’ his head exploded 250 times.” Data became more accessible over time, and GRESB started requiring full asset-level data in 2020.

How GRESB moves the market

Because of its performance focus, Neff says, GRESB helps the industry move forward; it’s “critically important for people starting out in ESG programs because it shows what you need to be working on,” she explained. “It teaches the industry how to do sustainability. It helps us know what activities are meaningful.”

The 2022 trend data show an improvement in average scores globally “despite the lagged impact of the pandemic recovery on participants’ performance scores” (a phenomenon associated with employees returning to formerly empty buildings that had used very little energy or water during pandemic lockdowns). That average score boost did not hold in the Americas, a fact the organization attributes to rising participation. With 30% of reporting companies in the region new to GRESB, the assumption is that their portfolios are not high performers yet.

Winters says that when a new user gets a “poor” score, they are likely to “experience the GRESB stages of grief.” What it gradually teaches them, though, is to stop committing “random acts of LEED buildings and LED replacements.” When they start, these entities “don’t have a repeatable program and can access only a few metrics to communicate,” but over time, it gets better, Winters claims. “Often, after the third year in the GRESB benchmark, executives say something to the effect of, ‘This has been a good investment. I’ve learned a lot about our company, and we are clearly making meaningful improvements,’ which is a clear sign ESG is intertwined and integrated in achieving business objectives.”

diagram showing the relationship between multiple Global Reporting Initiative standards

GRI publishes both universal and sector-specific standards for ESG reporting, along with topic standards designed to help corporations report on specific issues material to their business practices.

Image: Global Reporting Initiative
The assessment looks at “aspects”—comparable to LEED’s categories, according to Winters—that include energy, water, waste, greenhouse gas emissions, and building certifications alongside less obvious things like risk assessment, tenants and community, and data monitoring and review. Within these aspects, “indicators,” which come with points and are comparable to LEED credits, Winter says, include things like performance targets for energy, water, and waste; tenant engagement programs and tenant satisfaction metrics; whether the company requires environmental product declarations (EPDs) and health product declarations (HPDs); the percentage of projects undergoing whole-building life-cycle assessment; the percentage of projects achieving green building certifications; and many, many more. All the survey questions are listed in the GRESB Real Estate Assessment online reference guide.

What AEC professionals can learn from GRESB

Winters calls GRESB “the best forcing mechanism ever” for sustainability-focused building professionals. “Firms use LEED points to communicate superior buildings, and the same basic concept applies to the firm,” he said. “Investors value high GRESB scores for their portfolios, which drives the desire for more building-level LEED certifications at the highest levels.”

“Yes, we need beautiful buildings,” explained Neff. “But we also need buildings that are operating very, very efficiently,” whether because of glazing, how the roof is programmed, or building orientation, she said. “Architects have a lot of influence over that, and we expect architects to be focused on sustainability,” Neff added. “At Lendlease, we have very, very aggressive climate goals”—elimination of scope 1 and scope 2 emissions by 2025 and absolute zero, including scope 3, by 2040. “No offsets allowed,” Neff clarified. That means “we now need our structural engineers to build structures that reduce embodied carbon. We need architects to figure out how to put in batteries. Because we’re under a lot of pressure, we really look to the AEC community.”

But companies like Lendlease are only part of the picture, and GRESB has no direct influence on non-real-estate-sector clients. Still, we can learn from the features it rewards (many of which are already deeply ingrained sustainability strategies)—and we can especially learn from its focus on portfolios rather than individual building projects.

Greenhouse Gas Protocol WRI Diagram of Scopes and Emissions Across the Value Chain

This illustration shows what emissions should be included in scope 1, scope 2, and scope 3 inventories and reporting.

Image: Diagram of Scopes and Emissions Across the Value Chain (Greenhouse Gas Protocol)
“We are awesome at building green schools,” said Pyke by way of example. “We need to empower them at the district level.” Furthermore, “churches, fire stations, housing authorities, municipal portfolios” are all ripe for change. “Each one needs that structure that GRESB has pioneered,” he argues. “GRESB does a lot of stuff wrapped around the axle of how investors operate; there’s a lot of GRESB speak that we don’t need for other portfolios. But the concept of a level of portfolio or organizational leadership is the right idea.” Owners of such portfolios don’t communicate to investors, but they do talk to voters and elected officials, shareholders, or CEOs, Pyke said, promoting the idea that portfolio owners and managers like these should start hiring sustainability professionals to scale the work. Eventually, Pyke said, we would see “elevation of those professionals climbing the ranks and becoming more impactful, more outward facing in their organizations” just as they have in real estate.

Building professionals can help move this forward by developing portfolio-scale sustainability strategies that take clients’ stated values into account, by encouraging clients to think about environmental and social values at the organizational level rather than one building at a time, and by advocating for specific ways to get green portfolios owned, leased, or operated by their school districts and local governments.

4. Existing ESG Goals Should Influence Every Building Project

Anthony Brower, AIA, often gets called into design meetings with clients who want to talk about ESG. “Before I even finish sitting in the chair,” says Brower, who is global climate action & sustainability leader at Gensler, the client is saying, “Tell me how to make an ESG-compliant building.” He adds, “It doesn’t work that way.”

“Measurable Impacts”

But that doesn’t mean it’s a lost cause. It just means, as discussed above, that there’s no standardized ESG framework dictating how to design, build, or operate a building. For any client with an ESG program, buildings are absolutely relevant and should align with that program’s targets. To serve this need, Brower and colleagues at Gensler have developed “Measurable Impacts,” a way of connecting ESG goals with building performance. “It’s data-driven design,” Brower told BuildingGreen. In addition to using data to inform design, it can also provide data that can be used in ESG reporting.

Brower uses the example of a real estate investment trust Gensler has worked with that owns factories and has ESG goals. “Industrial properties are often the properties that create fenceline communities,” Brower notes. These communities “have less access to tree canopy,” which results in lower environmental performance, higher climate risk, and major health problems in neighborhoods that are usually already economically disadvantaged (see Fighting for Environmental Justice with ‘Smart’ Surfaces). By investing in tree cover in fenceline communities, the developer can raise its own property values while also creating “an environmental benefit that starts crossing into social impact,” Brower argues. Gensler works with clients to develop key performance indicators (KPIs) for their buildings and portfolios that align with any existing ESG goals. In this way, a “backward-looking” tool, ESG reporting, can become a design guide.

Other KPIs could include anything from thermal comfort data to a neighborhood’s access to a food and other necessities, as Brower has explained in a blog post co-written with colleagues Stacey Olson and Audrey Handelman.

More alignments to consider

Other experts we spoke with also had ideas for how to align building design, construction, and operation with ESG programs.

One increasingly common ESG goal for companies is a net-zero-carbon commitment, and this has clear implications for buildings and portfolios, as mentioned above.

And it’s not just operating emissions. “We can’t just rip down and rebuild” every time programming needs change, points out JLL’s Curtis. “The planet doesn’t have sufficient raw materials to enable us to do that.” Even if it did, “in order for us to collectively stay under the 1.5-degree temperature rise, we need to accelerate rapidly our retrofits, and deep retrofits in some circumstances,” she added. Curtis also thinks we should be designing circularity into any new construction projects that go forward “so that what’s being designed today can at a future point in time be repurposed or remodeled for another purpose.”

Like JLL, Lendlease has found that a huge percentage of its emissions are scope 3, which includes embodied carbon. “Something like 92% of our buildings’ carbon emissions are in the materials,” according to Neff. “Most of my time is spent on construction materials—lower-carbon steel, lower-carbon concrete.” Lendlease has also been working with mass timber on some projects. “Our targets define your activities,” she said.

Another big area of impact is on neighborhoods, as Brower mentioned in discussing tree canopies. So part of ESG, argues Curtis, is “thinking about the building not as a standalone asset or structure but as part of a community.” This goes both ways: building-scale decisions affect the neighborhood, but there are also neighborhood features that can improve a building. “It’s dynamic; they feed off of each other,” Curtis said. “How do you improve upon that structure relative to the surroundings? How do you leverage the surroundings to create a better space?”

Building as microphone

Some clients have tiny building portfolios—or may just lease office space—making their buildings a relatively small contributor to overall environmental and social impacts. But there are still good reasons for ESG programs to influence individual building projects.

Rendering of a modern style apartment with a kitchen island and living room seating, with full length windows looking over a city skyline

Modeled embodied carbon in the core and shell of the Reed Residence, under construction in Chicago, was reduce 10% by working with local concrete suppliers.

Image: courtesy Lendlease
“We kind of think of real estate as a platform or microphone for clients’ values,” explained Devon Bertram, vice president of sustainability consulting at Stok. “It’s a really great opportunity to demonstrate action, be visual, and engage with your various stakeholders.” The space where companies do business may host clients or customers as well as employees. “Even though it might not be the biggest area of impact and opportunity,” Bertram added, it’s important for companies to use their physical spaces to make good on what they care about.

In the past, that kind of thinking has sometimes led in a questionable direction, potentially helping an organization paper over poor environmental and social performance by touting, for example, a WELL Platinum headquarters that clients and white-collar workers enjoy while core operations continued to actively harm less fortunate people and the planet. But that’s where an ESG mindset can be helpful: because its focus is the organization, it’s understood that a single building project can’t stand in for company-wide performance.

5. Some AEC Firms Should Consider Starting ESG Programs

If your clients are asking about ESG, it may be time to consider an ESG program. But many AEC firms don’t need to formalize things to that extent; it depends in part on your clientele.

ESG reporting is not a market imperative for privately held companies, said Patty Lloyd, director of sustainability at construction firm Leopardo Companies, but “we’re doing ESG because we feel that it’s important and also that it’s necessary”—both in an ethical sense and in a business sense. “There is tremendous hope for me now with the ESG movement,” Lloyd told BuildingGreen. “It is pushing sustainability forward in a concrete way.” And part of the reason for that is the increasing demand in the market for ESG commitments and reporting from suppliers like her firm.

Accountability is coming

“The time to be able to ignore this is over,” Lloyd said. ESG “differentiates you, gives you a competitive edge,” she added. “I think that in the near future, these things are going to have a heavier weight in decision-making on who gets the job and who doesn’t.” To that end, Lloyd believes general contractors “need to be starting to look at their operations and what they can do to support their clients.” For a long time, she argues, “people thought they weren’t in the same sandbox, but I think we all are now” because of ESG and its demand for metrics and accountability.

Graph showing 2022 GRESB Average Scores per Aspect

Many categories saw progress in the 2022 GRESB trend report, but energy and water performance show a post-pandemic dip.

Source: GRESB

Lloyd initiated the program in 2019, starting with baseline metrics for each of the three pillars. Many of the measures dovetail with Leopardo’s Contractor’s Commitment goals. In addition, the company set out to broadly align with ESG frameworks clients may be using. “We tried to create goals for ourselves as a firm that would improve us, our impact, and our operations as a firm, but that would also feed up into our clients’ goals,” Lloyd explained. “When we think about how our actions impact our clients, you could say that our scope 1 emissions are our clients’ scope 3 emissions. We are part of their supply chain, so our actions can directly support their goals.” Leopardo is tracking its emissions using the U.S. Environmental Protection Agency’s Simplified GHG Emissions Calculator, but other than that, “we tried to pick things that weren’t super specific to one platform or the other.”

“If a client is asking you about sustainability, they are really asking you about ESG,” asserts Jennifer Taranto, vice president of sustainability for STOBG Global Services. “We are actively reframing that conversation to talk about the whole spectrum of things and then having [clients] tell us to whittle it back to what is most important to them.”

It’s part of corporate strategy

One thing that differentiates many firms’ ESG initiatives from their former sustainability programs is that ESG activity tends to be integrated into corporate planning. “At the same time as this program is rolling out across the company, it’s also part of strategic planning,” Lloyd noted.

JLL’s Curtis echoed that. In the beginning, she said, sustainability was “a separate, distinct thing” from corporate operations, but “I would say in the last five years or so, there’s been a significant change, and even still in the last three years” regarding “the ambitiousness in the goals that we’re setting, and the understanding and appreciation of our senior leadership, our executive team. It’s almost a 180.” Curtis thinks this is “reflective of a change in perception and understanding more broadly.”

a diagram listing environmental, social, and governance indicators

This diagram shows how some common ESG factors fall into environmental, social, and governance categories.

Source: Stok
Taranto is ramping up an ESG program across 13 separate brands, starting with what she calls an ESG roadmap. “What our organization has done really well up to this point is, within our silos of environmental sustainability, of HR, and compliance, we’ve been tackling the things that we see as most materially important to us and our clients—but we haven’t been working holistically,” Taranto told BuildingGreen. So her goal is to “come up with a more holistic approach to ESG throughout the organization.” All the while, “we also know ESG tends to be a shifting landscape,” she added. “Today the things that are most materially important may not be the most materially important by the end of 2023.” This starts as a grassroots project, in the field on construction jobsites, but ultimately has to be relayed “back through all the corporate layers to make sure we’re aligning as an organization.”

Taranto said the project is actually “more robust than a strategic plan. The roadmap is really going to lay out in detail who’s involved, who’s responsible, what the impact is downstream, all the way down potentially to jobsites or admin people within the organization.”

It’s not just the money

Emphasizing the grassroots nature of the project, Taranto pointed out that STOBG’s ESG program is not just about clients’ needs.

“Our clients are certainly driving goals,” said Taranto. “But our organization has its own goals. I think there are a lot of things expected by our staff and employees about who they want to work for.”

Taranto said ESG initiatives have improved morale on jobsites because field workers “feel like they’re giving back in a different sort of way, and they can definitely see the impact that it has.”

cover of 2022 ESG report from Leopardo Companies

The 2022 ESG report from Leopardo includes reports on emissions using the U.S. Environmental Protection Agency’s Simplified GHG Emissions Calculator. 

Image: Leopardo Companies, inc.
What gets them excited? Embodied carbon, for one thing. “It’s not just the younger people,” either, she noted, but includes those who have spent 30 or 40 years in the business. There are also “design elements of jobs that get people excited,” Taranto continued, like biodiversity. “What our people love to do—and I’ve heard it over and over again—they love to drive by buildings in the community and point to buildings and tell their kids and their grandkids, ‘I built that thing.’” Being able to show off a pollinator-attracting native landscape, for example, gives them pride. “In the grind of the job, when you’re trying to get through product delivery delays … these things really keep our team going.”

So ESG is also about attraction and retention—as well as simply “doing good, being a responsible business,” Taranto claimed.

That doesn’t mean you should go for it

One thing Taranto and others pointed to is the intensity of the work an ESG program requires, and the fact that it’s not always clear what to measure, let alone what a good or bad number might be. As Arc Skoru’s Pyke noted above, “There is no ESG Platinum.”

“What I also worry about is … when are we overtaxing the system?” Taranto asked. “We ask our project teams to do so much that is not just ‘build.’ … What is it reasonable to do and to ask of people when it comes to some of this stuff?” Likewise, she added, “How do we functionally work to create an understanding of what it is to be a good business leader in the realm of ESG?” She quickly pointed out that she was “not advocating for another rating system,” but the fluidity of ESG can be a risk in itself. “Can we point to somebody or something and say, ‘This is the standard bearer for this activity’?” In other words, ESG is currently “a shifting, nebulous landscape. How do you know when you’re done?”

“I struggle with this one, to be honest with you,” said Pyke when asked whether AEC firms should have their own ESG initiatives. “Most AEC firms are smaller, privately held, and don’t respond to the same pressures that dominate the ESG conversation,” he continued. “I don’t have a great insight as to what the model for AEC firms themselves are for how they report.”

Although larger firms and publicly traded firms will feel more pressure to create ESG programs, Pyke has advice for firms that don’t work a lot for global corporations with large building portfolios. “Give yourself a little slack,” he says. “They’re not talking to you yet most of the time.” He added, “Your ESG [reporting] should explain who you are, how are you governed, what are your values on social issues, what is your efficacy on environmental issues. It’s an opportunity to say principled, complete, and internally consistent things.”

As ESG programs and reporting become more common, firms may need to get more formal about what they report and how they report it, Pyke said, but for now, the best idea may be “being prepared and having a plan.”

Nicole DeNamur, Hon. AIA, an attorney and the owner of Sustainable Strategies, agrees that AEC firms shouldn’t get too far ahead of themselves—but she does think it’s important to get in the game.

“There are lot of different layers on how you figure out where to start,” DeNamur told BuildingGreen. “I’m a huge advocate for 'just start somewhere.' Understanding what matters to the organization is a key part that sometimes gets overlooked.” DeNamur conceded that “ESG’s not perfect”—but, she notes, “nor are a lot of the things that all of us have worked under for years. The world’s on fire. Let’s move the needle.” She reiterated, “Do something. Start small; start somewhere. Don’t get that analysis paralysis.”

6. ESG Isn’t Everything

ESG is all about metrics and transparency. For this reason, it can be seen as a positive development that goes beyond the more general concept of sustainability.

Inside the Harvey B. Milk terminal at San Francisco International Airport, showing seating and a memorial wall display of photographs

The Harvey B. Milk terminal modernization and expansion project at San Francisco International Airport aimed to align with ESG goals for the airport. It did not achieve zero carbon, energy, and waste. But reductions were significant, including a 79% reduction in carbon emission intensity, a 70% reduction in energy use intensity, and a 20% reduction in embodied carbon.

Photo: Jason O’Rear, courtesy of Gensler
At the same time, ESG doesn’t do a great job of contextualizing the metrics it demands, and it’s often accused of focusing too much on financial risks to companies rather than on actual risks to people and the planet. Perhaps most notably, not everything important can be measured.

“There is a lot of really important work that has to happen that is not measured by any ESG framework that’s out there,” argues Neff. “While it is really important for companies to use GRESB, TCFD, or whatever as a tool to take them on the climate journey, companies need to remember that that’s not everything.” Neff’s examples include things like non-binding letters of interest that help startups get venture capital to scale up lower-carbon technologies, and behind-the-scenes work with construction equipment manufacturers to promote electrification. “For the AEC community, it’s a fine line to walk,” Neff conceded. On the one hand, they want to tell clients, “If you do this, you’ll do better on GRESB and TCFD,” she said. On the other, “I want my AEC folks to be suggesting things outside those frameworks. Inclusive design is not measured anywhere currently, but it’s really important.” For contractors, there’s the issue of “mental health and suicide prevention work for construction workers. That’s not measured anywhere,” Neff added. “We need to think outside the framework.”

That might be tough news for building professionals who are still learning to think inside the framework: ESG starts to sound like a lot of extra work that overlaps with but doesn’t fully replace what the green building movement has been doing all along.

But Pyke thinks we shouldn’t go too crazy over ESG in the end. “The bottom line is, we need better buildings for people and the environment. We need to do it faster and quicker and deeper. The throughline doesn’t change” just because of ESG reporting. “There’s nothing wrong with our fundamental thesis that buildings need to get better,” Pyke added. “Let’s not get distracted by the words of the moment.”

Published December 5, 2022

Melton, P. (2022, November 16). ESG: 6 Things Building Professionals Need to Know. Retrieved from https://www.buildinggreen.com/feature/esg-6-things-building-professionals-need-know