29
Sep
The concept of ESG
- While ESG is not a new concept, its importance has escalated due to the urgent need to address climate change and social issues.
- With sustainability and environmental concerns at the heart of every business globally, the concept of ESG has gained traction. Companies continue to recognize the importance and benefits of incorporating sustainability measures and practices in their business.
- Many companies are actively adopting environmental management, ethical governance, fair labour practices, and employee work-life balance policies, among other responsible initiatives.
- By incorporating ESG principles and practices, companies can enhance their long-term performance and mitigate social and environmental risks.
- Simultaneously, investors- both institutional and individual- are now assessing and considering the environmental and social performance of companies and investments as indicators of value.
- ESG is being used as a criterion for evaluating and selecting investment opportunities by investors and donors. ESG serves as a means to minimize risk for investors.
Glossary
- Environmental responsibility is concerned with the measures and practices that reduce environmental pollution, a pressing issue in Africa as climate change continues to rise.
- Social factors are concerned with the relations between the company and employees, stakeholders, clients, and surrounding community including issues related to human rights, education, and healthcare.
- Governance standards looks at how the company is managed. Transparent and accountable governance is fundamental to ESG.
The African Perspective on ESG
- Adoption of ESG in Africa has been dismal with many companies being at the early stages as compared to the developed countries such as those in America and Europe.
- Africa is one of the most resource-rich continents and home to a number of industries that depend on its natural resources. This implies high exposure to environmental pollution and climate change.
- These industries contribute significant impacts on the environment and the communities therein which calls for sustainable operation and management.
- The young and growing Africa’s population is increasingly becoming aware of and championing social and environmental responsibility to achieve sustainability.
- ESG is not only an issue of compliance but also a competitive advantage for companies in Africa. Companies that adopt ESG principles and practices are better placed in attracting investors looking to invest in socially responsible and environmentally sustainable investments.
- The continent boasts of enormous natural resources, diverse culture and a youthful population ready to embrace innovation. Despite a few challenges, Africa is expected to be a vibrant hub for sustainable development through integration of ESG practices in the near future.
ESG & The Built Environment
- The Built Environment encompasses human-made structures, infrastructure, and spaces that make up the physical environment in which people reside, work, and socialize. It includes buildings, roads, bridges, public areas, and other constructions modified or created by human actions.
- It exerts a substantial influence on the health, happiness, and overall life quality of individuals who interact with it, making it a pivotal element in sustainable development and environmental preservation.
- The Built Environment is in a continuous state of transformation, shaped by factors such as technological progress, economic and political circumstances, and societal and cultural values.
- Within the Built Environment, ESG concerns concentrate on the ecological consequences of structures and infrastructure. These concerns encompass aspects like energy efficiency, water preservation, and the utilization of sustainable materials in construction. Property owners might aim to decrease their environmental impact by adopting energy-efficient technologies, harnessing renewable energy sources, or adopting water conservation measures.
- Social aspects entails focusing on the welfare and security of occupants within the building, fostering workplace diversity and inclusion, and evaluating the building’s influence on the nearby community. Property owners may endeavor to enhance indoor air quality and create healthier work environments for their staff, while also striving to minimize their building’s adverse effects on the local community, by mitigating noise and light pollution.
- Governance factors encompasses practices like transparency, accountability, and responsible decision-making during the construction, design, and operation of buildings and infrastructure. Property owners may aim for transparency in disclosing their sustainability efforts and the consequences of their facilities on the environment and the local community. They may also make choices that resonate with their principles and objectives, such as reducing their carbon emissions or advancing sustainability initiatives.
ESG Standards And Certification
- To bring about meaningful enhancements in the built environment, key stakeholders like construction companies, architects, engineers, and contractors must monitor and assess specific ESG metrics.
- While there isn’t currently a standardized framework for these metrics, various standards and certifications provide guidance and metrics for organizations to measure their ESG efforts.
- The most widely recognized standards in the field of sustainable construction and design are LEED (Leadership in Energy and Environmental Design), EDGE (Excellence in Design for Greater Efficiencies) and BREEAM (Building Research Establishment Environmental Assessment Method).
- LEED is a green building certification program that evaluates buildings’ sustainability and environmental performance based on criteria such as energy efficiency, water conservation, materials selection, indoor environmental quality, and innovation. It was developed by the United States Green Building Council (USGBC).
- BREEAM is a sustainability assessment method developed by the Building Research Establishment (BRE) in the United Kingdom. It assesses the environmental performance of buildings across various categories, including energy, water, materials, waste, and ecology. By adhering to BREEAM standards, organizations can demonstrate their commitment to sustainable building practices and showcase their ESG credentials.
- EDGE is a green building certification system focused on making buildings more resource-efficient. It enables developers to quickly identify the most cost-effective strategies to reduce energy use, water use and embodied carbon in materials. The strategies that are integrated into the project design are verified by an EDGE Auditor.
Common themes involving ESG and the built environment
- Energy usage: Keeping a close eye on energy consumption, including electricity, natural gas, and renewable sources, provides insights into areas where energy efficiency improvements can be made.
- Waste generation: Tracking waste production and diverting waste away from landfills enables organizations to implement strategies for waste reduction.
- Workforce diversity: Examining diversity metrics and fostering inclusive practices can lead to innovative solutions and improved profitability.
- Community engagement: Engaging in corporate philanthropy and volunteer initiatives strengthens ties with the community and contributes to social responsibility.
- Wellness: Corporate wellness programs have a positive impact on employee health and productivity, reducing absenteeism and boosting morale.
- Governance: Robust governance policies ensure transparency and accountability, aligning with self-identified ESG objectives.
- Monitoring and acting on these ESG metrics is crucial for achieving meaningful progress in enhancing the built environment. These metrics help organizations identify areas where they can make positive contributions to sustainability, social responsibility, and responsible governance within the construction and infrastructure sectors.
Our view
- ESG is rapidly becoming a critical aspect, emphasizing sustainability, social accountability, and responsible choices in the construction, design, and operation of structures and infrastructure. Embracing a comprehensive approach to ESG enables property owners and other parties involved in the Built Environment to play a role in advancing a more sustainable and socially responsible future.
- The connection between ESG and the Built Environment lies in how the planning, construction, and maintenance of physical surroundings can directly impact the environment, society, and governance.
- Factors such as energy use in buildings and transportation systems, the quality of life in communities, and the transparency and accountability in construction processes all have a role in determining ESG performance.
- ESG within the Built Environment offers a framework for assessing and enhancing the sustainability, social impact, and governance of physical environments.
- This framework allows companies to use ESG metrics to monitor and enhance their environmental sustainability, decrease carbon emissions from buildings and transportation systems, enhance the well-being of employees and communities, and promote transparency and accountability in their business operations.
- Compared to other industries, ESG holds particular importance in the Built Environment due to its direct influence on the physical environment and societal well-being.
- Furthermore, as society places growing emphasis on sustainability and social responsibility, ESG performance in the Built Environment sector becomes increasingly vital for attracting investors, customers, and stakeholders.
- Companies in the Built Environment sector must proactively address ESG concerns to remain competitive and build trust with their stakeholders.
Source: ESI Africa, International Labour Organization, PWC and Sterling Real Estate Advisory