ESG stands for Environmental, Social, and Governance. It is a set of practices and standards used to evaluate a company’s performance outside its balance sheet. ESG criteria assess how well a company manages important, non-financial aspects that can impact its long-term financial health.
Already a priority for some sectors, it is beginning to touch the construction industry in Manitoba.
So, what is it?
E – Environmental Sustainability:
- The environmental aspect of ESG evaluates a business’s impact on the environment. For construction companies, this includes factors such as energy usage, carbon emissions, recycling on job sites and material sourcing. Construction and development activities have a clear connection with, and impact on, the environment. As a result, the environmental pillar of ESG has become a key focus in the construction industry, particularly concerning the use of eco-friendly materials, adopting energy-efficient technologies and implementing sustainable construction practices.
S – Social Responsibility:
- Social responsibility concerns how a company manages its relationships with employees, suppliers, customers and the communities where it operates. Key aspects include human rights, diversity, equity and inclusion, health and safety, employee training, labour standards, and how these issues are addressed throughout the company’s supply chain.
G – Governance Practices:
- Good governance practices ensure that companies are managed ethically and transparently. Governance factors in ESG can encompass a range of practices, such as anti-fraud and anti-bribery measures, pay equity, legal compliance and cybersecurity. By implementing compliance programs with robust governance standards, companies can mitigate risks, ensure regulatory compliance and uphold ethical business practices.
In recent years, ESG has gained significant traction across various industries, and ESG considerations are becoming more prevalent in procurement policies and supply chain practices that affect the construction industry.
The City of Winnipeg’s Sustainable Procurement Action Plan is one such example, where provisions emphasizing community and social benefits may be incorporated into City of Winnipeg RFPs and construction tenders.
Putting ESG Principles into Practice
So, what does ESG look like in action? A construction company’s ESG program should encompass all aspects of its business and operations, from procurement to supply chain management to hiring and workforce practices. Examples of ESG activities can include:
- Using sustainable design, engineering, and construction methods
- Ensuring the ethical sourcing of materials and verifying labour standards for all subcontractors and suppliers
- Developing a supplier code of conduct
- Planning and reviewing logistics to reduce mileage and emissions
- Making energy-efficient choices for equipment and assets
- Implementing diversity and inclusion training programs
- Ensuring pay equity among employees, and
- Establishing cybersecurity measures to protect sensitive data.
As a starting point to integrating ESG in your business, consider developing a company code of conduct. A code of conduct sets out the standards the company expects from its employees and management, including ethical standards such as integrity and transparency, and can serve as the framework for developing future ESG policies and procedures.
Building a Sustainable Future
As ESG concerns continue gaining momentum in the construction industry, companies that proactively adopt ESG policies now are likely to find it easier to comply with future government programs and regulations later.
Embracing ESG principles can also offer tangible benefits for construction companies. By integrating sustainable practices into every stage of a project’s lifecycle, companies can reduce their environmental impact, increase operational efficiencies and mitigate potential risks. Incorporating social responsibility policies can foster a healthy work environment and a positive workplace culture and strengthen relationships with stakeholders. Good governance practices can also help safeguard against costly fraud and data breaches.
By integrating ESG considerations throughout their operations, construction companies can pave the way toward a more sustainable and inclusive future.
Lawyer
Note: This article is of a general nature only and is not presented as a comprehensive review of the law or as being exhaustive of all possible legal rights or remedies. This article is not intended to be relied upon or taken as legal advice or opinion. Readers should consult a legal professional for specific advice applicable to their own circumstances. We do not undertake any obligation to update this article to reflect changes in law that may occur in the future.