The Path to a Sustainable Construction Industry Through ESG Criteria
The construction industry is currently undergoing major transformation – probably the largest transformation it has ever experienced. Digitalization is advancing rapidly, and sustainability is becoming increasingly important through environmental regulations set by the German federal government. Europe is 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 significant portion comes from the manufacturing processes of steel, iron, and cement – producing over 10 million tons of CO2 emissions annually (Source).
Sustainability, however, means above all acting in a climate-neutral way and conserving resources. In companies, sustainability also reflects how they treat their own employees. A company's ecological footprint has far greater reach than it might 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 sustainably across different levels. One thing is certain: the construction industry is increasingly focusing on compliance with ESG criteria, which will have significant impact 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 comprehensive approaches to greater environmental awareness in companies. It addresses environmental and climate issues as well as social and corporate governance challenges. These three criteria each encompass different factors that must be considered. A company is only considered "sustainable" when it demonstrably fulfills these criteria.
What the Different ESG Criteria Mean
The three pillars stand for environmental consideration, social conditions, and governance structures of a company.
The "Environmental" criterion deals with sustainability aspects that relate to a company's ecological environment. This includes calculating and offsetting or reducing CO2 emissions, energy conservation, and sustainable, forward-thinking resource planning.
The "Social" and "Governance" criteria, by contrast, deal with sustainable processes within a company's internal environment.
"Social" primarily focuses on the social and societal aspects of the activities of companies and organizations. The focus is always on people as a whole. Are we protecting our employees well in production? Are employee rights being upheld? Are we paying our employees fairly?
How are our governance structures set up? This isn't just about a company's structure and partnerships – it also involves examining whether management acts improperly or withholds important information from employees and customers that arose 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 just for the environment, but also for the company itself. Beyond construction companies, ESG goals also impact investment decisions. Project developers who cannot demonstrate an ESG strategy risk their company's long-term profitability, as investors will increasingly need to align with EU Sustainable Finance regulations like the Disclosure Regulation, which has been valid since May 2020. For construction companies, this means: without ESG criteria, no investors in the future.
What Does klarx Do About Sustainability?
klarx has been climate-neutral since 2021. We calculate and offset our emissions, our machines are fueled with climate-neutral diesel from BayWa, and our Climate Officers address all concerns and questions about sustainability and environmental issues in the construction industry. At klarx, we share responsibility for social and governance areas. Employee and development conversations help us maintain transparent communication and address the needs of all team members.
Continuous collaboration between our Sustainability Team, People & Culture, and management makes it possible to implement and successfully uphold ESG criteria.
