The Path to a Sustainable Construction Industry Using ESG Criteria
The construction industry is currently undergoing a major transformation—probably the largest transformation it has ever experienced. Not only is digitalization advancing rapidly, but the topic of sustainability is becoming increasingly relevant due to environmental regulations from the German federal government. Europe is firmly committed to becoming climate-neutral by 2050 and taking greater responsibility toward nature and people in the future. To achieve this goal, the industry must change in various areas.
The construction industry is responsible for an enormous share of CO2 emissions. A large portion is generated during the manufacturing processes of steel, iron, and cement: over 10 million tons of CO2 emissions are released annually (Source).
Sustainability, however, primarily means acting in a climate-neutral manner and conserving resources. In companies, sustainability is also reflected in how employees are treated. The ecological footprint of a company therefore has a much greater reach than it may appear at first glance. But where to start? And most importantly: how?
This is where ESG criteria come into play. They can help companies act more environmentally consciously at various levels. One thing is certain: the construction industry is increasingly relying on compliance with ESG criteria, which will have a major influence on many processes in the future.
Read now: klarx and Sustainability
What Does the Abbreviation ESG Stand For?
ESG stands for "Environmental, Social and Governance" and provides extensive approaches to greater environmental awareness in companies. These deal with both environmental and climate issues as well as social and business-related challenges. These three criteria each encompass various factors that must be taken into account. For only when these criteria are demonstrably met is a company considered "sustainable."
What the Different ESG Criteria Mean
The three pillars represent the consideration of a company's environment, social conditions, and governance structures.
The "Environmental" criterion deals with aspects of sustainability that relate to a company's ecological environment. This involves calculating and offsetting or reducing CO2 emissions, saving energy, and planning resources sustainably and with foresight.
The criteria "Social" and "Governance," on the other hand, deal with sustainable processes within the company's internal environment.
"Social" primarily focuses on the social and societal aspects of the activities of companies and governments. The central focus is always on people as whole beings. Are we protecting our employees well in production? Are employee rights being respected? Are we paying our employees fairly?
And how are our governance structures organized? This is not just about a company's structure and partnerships, but also about whether management acts improperly or withholds important information from employees and customers because it was obtained through corruption rather than legitimate means.
What Opportunities and Risks Do ESG Criteria Bring for Companies?
But what do these criteria mean for the construction industry? Non-compliance has consequences not only for the environment but also for the company itself. In addition to construction companies, ESG goals also affect investment decisions. Project developers who do not demonstrate an ESG strategy risk the company's long-term profitability, as investors will increasingly need to align themselves with EU Sustainable Finance regulations such as the Disclosure Regulation, which has been valid since May 2020. For construction companies, this means: without considering ESG criteria, there will be no investors in the future.
What Does klarx Do Regarding Sustainability?
klarx has been climate-neutral since 2021. We calculate and offset our emissions, our equipment is fueled with climate-neutral diesel from BayWa, and our Climate Officers deal with all concerns and questions regarding sustainability and the environment in the construction industry. At klarx, we share responsibility for the areas of social considerations and governance structures. Employee and development discussions help us maintain transparent communication and respond to the needs of all employees.
Continuous exchange between our Sustainability Team, People & Culture, and also management make it possible to implement and successfully maintain ESG criteria.
