A Strategic Guide to ESG Frameworks, Reporting Standards, and Ratings

ESG (Environmental, Social, and Governance) principles are no longer just a buzzword in corporate strategy. What was once a nice-to-have is now a must-have.

However, the building industry has its own set of unique challenges and opportunities when it comes to ESG. Ticking boxes isn’t enough—it’s about aligning your goals with frameworks that ensure sustainability and social responsibility. This alignment is crucial because it impacts your stakeholders—whether they’re customers, shareholders, employees, or leadership.

And yes, it can feel a bit overwhelming (almost like swimming in alphabet soup), but that’s where Liveable comes in. We’re here to break it down with you, focusing on the frameworks, reporting standards, and ratings that are most relevant to the building industry.

1. Frameworks: Laying the Groundwork

Frameworks (or certifications) are your blueprint—the strategy upon which ESG efforts can be built. In the building industry, these frameworks help you integrate sustainability into your projects in a way that aligns with the client’s goals.

Frameworks for Buildings:

• Leadership in Energy and Environmental Design (LEED):
  LEED is the gold standard for green building certifications. It sets high benchmarks for energy efficiency, water conservation, and sustainable site development. Studies show that LEED-certified buildings tend to perform better than their non-certified counterparts, often increasing property value by 4-8% and cutting operational costs by up to 20%. It’s more than just a badge of honor; it’s a strategic investment that boosts a project’s marketability and long-term value.

• Building Research Establishment Environmental Assessment Method (BREEAM):
  BREEAM is a globally recognized sustainability assessment method, particularly popular in the UK. It looks at a broad spectrum of environmental, social, and economic criteria, from planning all the way through to operation. BREEAM-certified projects often see higher market values, with rental premiums in Europe ranging from 2-6%. BREEAM ensures that sustainability is woven into every phase of a building’s lifecycle, making it a cornerstone of any project that prioritizes sustainability.

• International WELL Building Institute (IWBI) - WELL Building Standard:
  The WELL Building Standard is all about the people who occupy the buildings. It prioritizes human health and well-being, going beyond energy efficiency to create spaces that enhance indoor air quality, natural lighting, and overall environmental quality. Research indicates that WELL-certified buildings can increase employee productivity and satisfaction by 6-12%. By focusing on the impact of the environment on people, WELL certification not only strengthens a building’s social sustainability credentials but also enhances business performance by fostering healthier workspaces.

Frameworks for Strategy

• Greenhouse Gas (GHG) Protocol:
  The GHG Protocol is the go-to standard for measuring and managing greenhouse gas emissions. It provides a global framework that companies use to reduce their carbon footprint. For any company serious about leading in climate action, complying with the GHG Protocol is essential. It promotes transparency and consistency in emissions reporting, enabling companies to demonstrate their commitment to mitigating climate change.

• Carbon Disclosure Project (CDP):
  Transparency is the bedrock of trust. The Carbon Disclosure Project (CDP) provides a platform for companies to disclose their environmental impact, focusing on carbon emissions, water usage, and deforestation. Companies that disclose their data through CDP are generally seen as more accountable and are often more attractive to investors who value sustainability. CDP participation also helps companies identify areas for improvement, making it an invaluable tool for ongoing environmental management.

• United Nations Sustainable Development Goals (SDGs):
  The UN’s Sustainable Development Goals (SDGs) provide a universal framework for sustainability, guiding businesses toward creating shared value that goes beyond borders and resonates globally. Aligning your business strategies with the SDGs not only improves your corporate reputation but also opens doors to innovation and partnerships. Companies that incorporate SDGs into their operations are better positioned to tackle global challenges and seize emerging market opportunities.2. Reporting Standards: Defining and Measuring ESG Metrics

2. Reporting Standards: Defining and Measuring ESG Metrics

Standards focus on the specific reporting tools and guidelines that enable companies to measure, manage, and communicate their ESG performance effectively.

• Global Reporting Initiative (GRI) Construction and Real Estate Sector Supplement (CRESS):
  The GRI CRESS is an industry-specific guide to ESG reporting, helping companies in the construction and real estate sectors focus on what matters most—energy use, land impact, and sustainable materials—ensuring that your reporting is both comprehensive and relevant. Using GRI CRESS helps companies effectively communicate their ESG performance, building trust and credibility with stakeholders.

• Task Force on Climate-related Financial Disclosures (TCFD):
  Climate risk is a significant issue in construction, where environmental changes can directly impact project viability and financial performance. The TCFD framework provides clear guidance on how to disclose the financial impacts of climate change, helping companies manage risks and capitalize on opportunities. Investors are increasingly looking for TCFD-aligned disclosures, making it a critical component of any robust ESG strategy.

• ISO 14001 Environmental Management Systems:
  ISO 14001 offers a systematic approach to managing environmental responsibilities, ensuring that your operations are sustainable and compliant with regulatory standards. For construction companies, adopting ISO 14001 can lead to improved environmental performance, reduced waste, and enhanced stakeholder trust, all while supporting your broader sustainability goals.

Ratings and Indices: Benchmarking and Showcasing ESG Excellence

This is where you can see how your ESG efforts stack up against others in the industry. These the tools and indices that evaluate and compare the ESG performance of companies. Benchmarks like the Global Real Estate Sustainability Benchmark (GRESB) and the Dow Jones Sustainability Indices (DJSI) provide an independent assessment of how well companies manage their ESG responsibilities, highlighting leaders, attracting investors setting performance standards.

• GRESB (Global Real Estate Sustainability Benchmark): GRESB is the leading ESG benchmark for real estate and infrastructure investments. It provides valuable insights into how companies manage their ESG responsibilities, and GRESB assessments are widely respected in the industry. A strong GRESB score not only enhances your company’s reputation but also attracts investors who are focused on sustainability.

• Dow Jones Sustainability Indices (DJSI) - Real Estate: The DJSI evaluates companies in the real estate sector on economic, environmental, and social criteria, recognizing top performers in sustainability. Being included in the DJSI is a significant achievement, signaling to the market that your company is a leader in integrating sustainability into its operations and long-term strategy.

• MSCI ESG Real Estate Indexes: These indexes assess the ESG performance of real estate companies and REITs, offering investors a clear picture of who’s leading the way in managing ESG risks and opportunities. Companies that perform well in MSCI’s ESG ratings are often seen as more resilient and better positioned for long-term success.
  

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Sources

1. U.S. Green Building Council (USGBC), "Benefits of LEED Certification," usgbc.org.

2. Dodge Data & Analytics, "World Green Building Trends 2018," construction.com.

3. Building Research Establishment, "BREEAM In-Use and Rental Premiums," bregroup.com.

4. International WELL Building Institute (IWBI), "The Business Case for WELL," wellcertified.com.

5. World Resources Institute (WRI), "Greenhouse Gas Protocol," ghgprotocol.org.

6. Carbon Disclosure Project (CDP), "Why Companies Should Disclose," cdp.net.

7. United Nations, "The Sustainable Development Goals," un.org.

8. Global Reporting Initiative (GRI), "Construction and Real Estate Sector Supplement (CRESS)," globalreporting.org.

9. Task Force on Climate-related Financial Disclosures (TCFD), "Final Report: Recommendations of the Task Force on Climate-related Financial Disclosures," fsb-tcfd.org.

10. International Organization for Standardization (ISO), "ISO 14001 Environmental Management," iso.org.

11. GRESB, "Global Real Estate Sustainability Benchmark," gresb.com.

12. S&P Dow Jones Indices, "Dow Jones Sustainability Indices," spglobal.com.

13. MSCI, "MSCI ESG Real Estate Indexes," msci.com.

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