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ESG In Sight – what it means for the construction industry

October 14, 2022

Environmental, social and governance (ESG) and sustainability issues are seen as a multifaceted challenge and a growing area of attention for the construction industry.
Risk & Analytics|Risk Management Consulting
Climate Risk and Resilience|ESG In Sight|Risk Culture

39% of the construction industry is responsible for carbon emissions globally

The environmental agenda is a high priority across all industries, but according to the World Green Building Council the construction industry is responsible for 39% of carbon emissions globally, making it a critical priority for contractors.1 As much as 50% of the whole life carbon emissions of a building come from the manufacturing materials and the construction process. To put things into perspective, cement accounts for 8% of the world’s C02 emissions.2

So, what does it mean for the industry?

Here are some of the highlights discussed at our 2022 Construction Risk Management Conference to help guide organizations in refining their ESG strategies:

  1. 01

    Materials and building methods

    • New coastal and flood defences
    • Upgrading buildings to protect assets from storms and floods with ageing infrastructure requiring upgrades to cope with more extreme weather events and to make buildings more sustainable with lower greenhouse gas emissions
    • Electric transport requiring investment in new charging infrastructure and battery manufacturing facilities
    • Massive growth of the renewable energy sector in which we see growth in all areas across the world
    • Reducing greenhouse gas emissions will also require the construction industry to repurpose and refurbish buildings, as well as recycle and reuse building materials
  2. 02

    Climate

    Climate change remains the world’s greatest challenge and the effects are already being felt in numerous ways that are having profound impacts on the construction industry as well as society globally. Sustainability isn’t just about building materials, factors such as location and design have a big part to play too. Ensuring a project is resilient against fire, flood, escape of water, storm as well as future proofed for changing climate risks is essential. Recent years have seen heightened natural catastrophes, and a rising trend in secondary perils, including wildfires, floods, and hailstorms.

  3. 03

    Setting ESG goals and metrics

    Understanding what complies with standards is a challenging process. Therefore, knowing how to measure your results and what goals to set is a critical part of an organization’s ESG approach. There is no doubt the ESG landscape is complex as things evolve and regulations change, but the reporting programs for companies should remain the same, consisting of four pillars. This ESG strategy also drives innovation and is good for business.

    Four pillars

    • Leadership endorsement to actively pursue ESG initiatives
    • Set ESG goals that consider the wider supply chain
    • Participate in high profile industry initiatives
    • Be proactive on climate and lead the conversation

    Effective organizations use data and analytics to influence decisions. For example, climate, DEI, health, and wellbeing analytics help leaders predict and measure the impact of decisions, while identifying specific risks and opportunities.

  4. 04

    Focus on long-term value

    Leaders have an opportunity to link ESG goals to managing long-term performance and risks. Organizations should take time to understand and quantify the environmental impact of their projects and actions. This approach nurtures cultures where all employees can flourish and contribute. This includes putting into place appropriate decision frameworks and processes for senior management to measure and assess the long-term impact of projects in the early days. In addition, a proactive approach to managing ESG risks can be beneficial to improving core business and operating strategies.

Footnotes

1 https://worldgbc.org/news-media/WorldGBC-embodied-carbon-report-published
2 https://www.bbc.co.uk/news/science-environment-58878192

Disclaimer

Willis Towers Watson hopes you found the general information provided in this publication informative and helpful. The information contained herein is not intended to constitute legal or other professional advice and should not be relied upon in lieu of consultation with your own legal advisors. In the event you would like more information regarding your insurance coverage, please do not hesitate to reach out to us. In North America, Willis Towers Watson offers insurance products through licensed entities, including Willis Towers Watson Northeast, Inc. (in the United States) and Willis Canada Inc. (in Canada).

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