Against a background of a rapid rise in construction and real estate market engagement with ESG related topics and discourses and an equally growing number of ESG initiatives, this new report by the CPEA ESG Working Group provides a snapshot of where different European players within the construction and the real estate industry currently stand in relation to ESG strategy development, implementation and related disclosures, looking at drivers, risks and challenges and potential solutions.

Need for a multi-dimensional ESG approach

According to the findings of the report most of the industry’s ESG engagement and reporting is limited to environmental issues and even here the majority of market participants focus on energy and climate issues and to a much lesser extent on wider environmental aspects such as circularity, biodiversity, pollution or water management.

By mapping the interlinkages and interdependencies between all ESG components, i.e. environmental, social and governance ESG impact areas and associated criteria, Working Group industry experts illustrate that sector stakeholders need to take a wider view if they want to avoid risks of perceptions of ESG-washing in the future. For example, there are direct links between decarbonisation targets and social outcomes which in turn also have a bearing on an organisation’s governance performance.

Contrary to general belief within the industry that governance issues only relate to the organisational level, Working Group also members demonstrate that the corporate level governance structure strongly influences the policy and strategy framework for implementation at the building or site level and, that in turn, data and documentation from the latter help inform strategy development, proof of compliance and support delivery of top-level policies and commitments.

Recommendations

Based on Working Group members’ expertise and practical examples, the report features a series of recommendations for both policy makers and market participants. On the policy side, Working Group members call for the development of an “all in one” Sustainable Buildings Directive based on Level(s), the aggregation and prioritisation of policy initiatives and the introduction of digital building logbooks to overcome existing data barriers. In terms of market practice, recommendations include the creation of a new market rule book with the obligation to prove the case “ESG compliant” on the basis of third-party verified data with penalties for greenwashing and the setting of macro-objectives with ongoing monitoring and regular reviews as part of a longer-term perspective ESG roadmap.