What is ESG and Why is it Important?

Since the mid-2000s, environmental, social and corporate (ESG) governance has become a key part of business planning and operations. But what exactly is ESG, and how should planners, commercial real estate developers, architects and designers measure the impact and progress towards those goals?

ESG is an approach to evaluating companies and their efforts to achieve goals in three main areas: conservation of natural resources, consideration of people and social issues, corporate standards and transparency.

Cindy Simpson, Gensler

Investing in ESG has become more popular with shareholders. EY reports that 90% of investors surveyed said that since the COVID-19 pandemic they now attach more importance to a company’s ESG performance when it comes to investment strategy and decision making.

Additionally, a 2021 survey by Morning Consult showed that nearly 7 out of 10 frequent investors rated ESG investments as “very profitable” or “quite profitable”. This helps confirm that more ESG-focused companies can expect better returns.

ESG is not only relevant to investors, but also to individual companies. By prioritizing sustainable and socially responsible initiatives, it can improve an organization’s reputation, potentially attracting more investors.

Measure the ESG

Measuring the impact of ESG goals, however, is complicated. At present, there are no standards for ESG metrics, particularly for a building or development. This means organizations are busy trying to figure out how to get the best score against the ambitious ESG goals.

Gensler is bringing some clarity to the matter by developing a design framework focused on ESG criteria for building types. In the fall of 2021, we began to identify a variety of building features that could be reliably measured through the ‘Measurable Impact’ tool.

With Measurable Impact, we’re looking at 10 different practice areas, from sports to aviation, hospitality and office developers, to identify key ESG characteristics across different industries. We also use the tool to assess the ESG value of 70 parameters: from the thermal performance of outdoor space, to optimizing the way the public uses services, to low-carbon building materials.

These metrics look beyond the building to track how a project can potentially benefit the surrounding neighborhood. We can now help our clients strategize on their specific ESG goals and find ways to implement them through design. Finally, we will use measurable impact to help predict the future of design that will shape ESG results.

ESG goes on

ESG is a strategy for sustainable growth and development that goes beyond profits. Other critical metrics include environmental and social aspects such as achieving net zero emissions, employee care, and instilling corporate transparency. These elements contribute to a successful organization that not only benefits people and investors, but also supports local communities.

ESG will continue to grow and a company’s achievements in environmental conservation and social and governance issues will be essential benchmarks for access to capital, talent and an expanded customer base. Here are some tips to consider:

  • Align ESG goals with corporate values

As a first step, look at your company’s priorities for guidance. Are you already investing in cleaner operations to help tackle climate change or funding programs to attract diverse talent? From there, you can start tracking initial ESG goals.

To build a successful ESG strategy, you also need input from your key stakeholders. This includes shareholders, employees, and even civic or community partners. Identify those groups, study how they are affected by your operations, and invite their feedback.

  • Keep abreast of regulatory compliance rules

Take some time to understand ESG related regulations and reporting standards. There are several sources that can help you stay up to date and ensure compliance. Below are two sources:

  • The United Nations Sustainable Development Goals (SDGs) offer ways to more sustainable solutions.
    • SASB standards identify ESG issues relevant to financial performance in 77 industries. They are designed to help companies disclose sustainability information to investors.

Ultimately, ESG’s goal is to help companies better integrate their operations with social and environmental responsibilities. ESG can help a company strengthen its reputation, attract investors and talent, and actively contribute to healthy and thriving cities and communities of the future.

Cindy Simpson is the co-regional executive of the South Central Gensler region.

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