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