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Whether you are a skeptic of ESG (Environment, Sustainability and Governance) and see it as nothing more than a buzzword or trend, a believer in the long-term value of sustainability implementation, or land somewhere in the middle, ESG regulations have and will impact the construction industry.

A survey by GlobalData found 61% of construction leaders face a growing demand for sustainable construction methods. Even if construction leaders are not convinced ESG is a legitimate priority, they’ve likely felt pressure to comply from government officials or outside groups:

  • U.S. regulators recently proposed that publicly traded companies should be required to report greenhouse gas emissions and risks related to climate change from their operations and from the energy they consume.
  • Bank lenders offer ‘green’ loans with interest rate discounts of around 5-10 basis points to companies with credible ESG strategies because they have lower credit risk.
  • Half of the investors surveyed by EY said they expect to expand their investments in private equity and venture capital funds that focus on ESG over the next two to three years.
  • Consumers (64%) worldwide will buy or boycott a brand solely because of its position on a social or political issue—such as corporate ESG compliance.
  • Millennials are three times more likely to seek employment with a company because of its stance on social and environmental issues.

These pressures have perhaps influenced the 73% of the construction industry that have prioritized ESG, according to an ESG survey by Avetta and the National Safety Council. Some companies pursue an ESG agenda because of cost-reduction, business opportunity, or protection from risk exposure.

CRH, a provider of sustainable building materials and solutions, has followed suit. Through its sustainability initiatives, the company aims to eliminate fatalities in any calendar year; become carbon neutral by 2050; reduce the carbon intensity of cement by 33%; achieve 33% female leadership by 2030; and derive 50% of revenue from products with enhanced sustainability attributes by 2025.

CRH customers and stakeholders want assurance that the products it supplies are produced responsibly. To make an impact on issues in its supply chain, CRH has embedded a sustainability approach in its sourcing strategy.

Navigating government, lender, investor, consumer and employee expectations means developing and promoting an ESG agenda with concrete practices, reporting, and goals. If you’re dipping a toe into ESG considerations or fine-tuning an ESG strategy, consider these seven best practices to strengthen ESG strategy as a construction leader: 

  1. Identify. Start by identifying which ESG standards to follow—what to measure and which KPIs to track. This allows you to monitor performance and determine areas of improvement. If public, note which ESG metrics competitors or other construction companies release in their reports. If you need more guidance, organizations like Science-based Targets Initiative, Task Force on Climate-Related Financial Disclosures (TCFD), The Value Reporting Foundation (VRF/SASB), Global Reporting Initiative (GRI) and the UN Sustainable Development Goals (SDG) provide standards for ESG performance.

    CRH focuses on six priority areas—safety, environment, people, products, collaboration and integrity to drive their sustainable future.

  2. Vet and Get it in Writing. To ensure vendors and suppliers don’t put your organization at risk by neglecting policies like health and safety, conflict minerals, water scarcity, and human rights or diversity, outline your ESG expectations in formal contracts. Choose vendors and suppliers that share your organization’s ESG goals and policies. Supplier prequalification tools can assist in the vetting process and ensure that suppliers have the necessary credentials and certifications.

    CRH requires its suppliers to sign a Supplier Code of Conduct through its Know Your Supplier due diligence system. The company incorporates human rights considerations and other organizational policies into its code of conduct.

    The company also relies on the due diligence system to obtain third-party supplier-related data related to financial risk, sanctions screening, and adverse media to address ESG issues. CRH works with the local teams to engage stakeholders, understand key ESG risks and priorities, provide responsible procurement training and awareness, and set up necessary ESG supply chain processes and systems.

  3. Appoint a spokesperson. Critical to ESG strategy is a spokesperson that reports ESG standards, KPIs, and goals to the board of directors or company executives. This spokesperson can help paint the picture of the long-term payoff that sustainability can bring. Sustainability culture in an organization improves when there is buy-in and awareness at the top.

  4. Consider ESG remuneration. There is increasing evidence that sustainability positively impacts a company’s bottom line. Many companies put their money where their mouth is by giving financial incentives for ESG performance. These companies prioritize long-term sustainability and company value rather than short-term profit maximization.

  5. Choose a monitoring approach. Qualitative and quantitative data are critical to managing, monitoring, and reporting the outcomes of an ESG program—the right tools to do so are crucial. ESG leaders have options in management approaches such as surveys, certifications, inspections, and self-assessment questionnaires to intuitive technology. If feasible, ESG technology automates and tracks ESG performance against baseline standards. These solutions can forecast potential risk areas, notifying ESG leaders so they can address them before an event.

    From a risk and opportunity perspective, CRH employs a variety of tools to manage ESG risks, capitalize on ESG opportunities, and extract value from both financial and sustainability standpoints. CRH takes a matrix approach towards procurement using heat maps to classify its suppliers into 12 assessment criteria such as health and safety, human and labor rights, environment, climate change, and governance to understand the footprint of procurement spend, assess risks in line with ISO 20400, generate risk profiles, and recommend toolkits and solutions based on the risk profile.

  6. Engage. Engage your employees, stakeholders and industry peers in ESG conversations to shift the focus from rules and policies to building an intentional and sustainability-conscious company culture. Use existing communication channels to share ESG content. The goal is to build on sustainability knowledge and start conversations to increase “ESG IQ”—to bring forward innovative ideas to help the organization operate more effectively and better the industry.

    For example, CRH publishes an annual ‘Commitment to Human Rights’ Modern Slavery Statement elaborating on how it addresses human rights issues.

    To address broader industry-level challenges, CRH actively participates in various industry initiatives. As a founding member of the Global Cement and Concrete Association (GCCA), CRH has partnered with peers to improve health and safety across the building materials value chain. It also collaborated with GCCA members to launch the ‘Road Safety Handbook’ to improve road safety by promoting better transport standards.

  7. Prioritize health and safety. Because construction is an inherently dangerous industry, it’s critical to prioritize health and safety (EHS) in your ESG plan. Construction industry professionals know this—95% of construction professionals in the Avetta/NSC survey said they were “very engaged”/“extremely engaged” in EHS as part of their ESG plans. That is more than 10 percentage points higher than the overall average. Failing to prioritize EHS practices puts your employees at risk and can make your organization vulnerable to reputational and financial liabilities.

Through due diligence and a suite of factory audits, CRH closely monitors salient impact areas—the safety and employment conditions of employees and contractors working on its sites, the health of communities living close to its materials activities’ sites, or labor rights of those working in its extended supply chain—to identify where the social issues are the most prominent within an organization. The company also evaluates country-specific and commodity-specific human rights risks, consulting subject-matter experts where required. To further integrate human rights into its business fabric, CRH educates procurement teams on the spectrum of human rights and provides suppliers with access to a 24/7 grievance hotline.

The global focus on ESG is pushing the construction industry to do more and report more. Consider these seven best practices to future-proof your organization, help meet sustainability expectations, and position your company for long-term ESG success. 

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