Over the past several years, the real estate and construction industries have seen progressive and consistent change related to corporate social responsibility and energy efficiency. Consequently, ESG, which stands for Environmental, Social, and Governance, has become an increasingly important consideration. Below are five reasons why ESG should be a key component in every real estate and construction company’s corporate strategy.
Regulatory Compliance
There have been significant developments regarding ESG Reporting recently, as the European Commission adopted the European Sustainability Reporting Standards on July 31, 2023. Consequently, ESG reporting will begin for large companies operating in Europe during 2024.
Despite the fact that mandated ESG reporting requirements or frameworks do not yet exist in the US, there seems to be a clear desire by investors and regulatory bodies to begin implementation sooner rather than later.
Integrating ESG into a corporate strategy ensures compliance with the current (and likely upcoming) regulations, helping to avoid legal issues and potential fines.
Risk Mitigation
ESG factors can pose significant financial and operational risks. By directly addressing these factors in a corporate strategy, real estate and construction companies can better anticipate and mitigate risks related to environmental issues, social impacts, and governance failures.
By ignoring ESG, construction and real estate companies face significant risks to their reputation, employee retention, safety, and so much more.
Market Competitiveness
Investors, clients, and other stakeholders are increasingly considering ESG criteria when making decisions. The real estate and construction companies that embrace ESG practices may be more attractive to the investors and clients who prioritize sustainability and responsible business practices, giving these companies a competitive advantage.
Operational Efficiency
Implementing environmentally friendly practices can also lead to operational efficiencies and cost savings. For example, energy-efficient construction methods, waste reduction, and sustainable sourcing of materials can contribute to both cost savings and a positive environmental impact.
Customer Demand
Clients are increasingly seeking environmentally and socially responsible partners. By incorporating ESG principles into their strategy, real estate construction companies can meet the evolving demands of their customers, helping to secure and maintain business relationships.
Incorporating ESG into corporate strategy is not only a response to societal and regulatory expectations but also a strategic move that can contribute to long-term success, resilience, and greater efficiency.
If you need further guidance or have any questions on this topic, we are here to help. Please do not hesitate to reach out to discuss your specific situation.
This material has been prepared for general, informational purposes only and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. Should you require any such advice, please contact us directly. The information contained herein does not create, and your review or use of the information does not constitute, an accountant-client relationship.
