The Rise of ESG: Why It Matters for Construction and Real Estate
By James Morton
In the past, the construction and real estate sector could claim progress simply by delivering buildings on time and on budget. Today, the rules have changed. ESG – shorthand for Environmental, Social, and Governance – has become a defining standard, not only for operational excellence, but for access to investment, talent, and clients. The days of ticking a few ‘green’ boxes are gone. The sector is under pressure to evidence positive impact in everything from carbon reduction to community engagement and transparent governance.
Yet for many firms, the rush to ‘do ESG’ brings a daunting realisation: the world of sustainability frameworks is a labyrinth. From GRESB, BREEAM and LEED to emerging tools like the EU Taxonomy and Task Force on Climate-related Financial Disclosures (TCFD), the range of standards is dizzying. What’s more, no single system captures everything that matters to every project, client, or stakeholder. The ESG landscape is, in short, a maze – and one that firms must now learn to navigate with skill.
Demystifying the Major ESG Frameworks in Construction
At first glance, the sheer number of acronyms and ratings can seem impenetrable. The key is to understand what each tool is designed to measure, and how it aligns with your company’s strategic priorities.
GRESB:
The Global Real Estate Sustainability Benchmark (GRESB) is arguably the most influential ESG rating system for real estate portfolios worldwide. GRESB evaluates not just environmental performance (energy, water, waste, carbon), but also social and governance factors such as health and safety, stakeholder engagement, risk management, and supply chain ethics. For asset owners, investors, and fund managers, a high GRESB score is now a badge of credibility.
BREEAM and LEED:
For individual buildings, BREEAM (Building Research Establishment Environmental Assessment Method) and LEED (Leadership in Energy and Environmental Design) remain the two most widely recognised certifications. Both cover a suite of criteria including energy use, emissions, water, materials, and well-being – but with subtle differences. BREEAM, developed in the UK, often goes deeper into local ecology and resource use, while LEED, developed in the US, is known for its global recognition and focus on innovation in building operations.
Emerging Standards:
The landscape is evolving rapidly. The EU Taxonomy is setting new definitions for what counts as ‘green’ finance and investment, directly influencing project funding and reporting in Europe. Meanwhile, the TCFD (Task Force on Climate-related Financial Disclosures) and the Sustainability Accounting Standards Board (SASB) are pushing companies to publicly disclose their exposure to climate risks and their strategies for managing them.
What Actually Matters? Choosing Your Metrics
The real challenge isn’t just picking a framework, but understanding which ESG metrics are most relevant – and material – to your business and stakeholders. Investors and clients are increasingly sophisticated; generic sustainability statements simply won’t do.
Environmental (E):
For construction and real estate, carbon footprint remains paramount. Tracking whole-life carbon, not just operational emissions, is now expected. Waste recycling rates, water efficiency, biodiversity impact, and resilience to climate risks (such as flooding or overheating) all feature heavily in both BREEAM and GRESB.
Social (S):
This pillar is gaining ground. Metrics such as health and safety, local employment, community consultation, affordable housing provision, and workforce diversity are now routinely scrutinised. Progressive firms are also reporting on social value generated – for instance, the number of apprenticeships or community projects delivered as part of a build.
Governance (G):
Often the least visible, but no less critical. Investors and institutional clients increasingly require proof of robust anti-bribery and corruption controls, board diversity, transparent supply chains, and clear lines of accountability. The construction sector’s historic reputation for opacity is rapidly becoming a commercial liability.
Making ESG Work: Lessons from Industry Leaders
Firms that have mastered the ESG maze offer some clear advice. The first lesson is to treat ESG as more than a compliance exercise. For example, Landsec, a leading UK property company, restructured its board-level governance to link executive remuneration to progress on carbon and social targets. Mace Group, a global consultancy and contractor, uses BREEAM and GRESB frameworks in parallel, mapping out which projects align with which metrics, and reporting results in a way that resonates with both clients and investors.
The best performers are transparent about their data gaps as well as their successes. They engage supply chain partners early, using digital platforms to track material provenance, labour standards, and progress against key indicators. Most importantly, they turn reporting into an opportunity for improvement, using the findings to drive innovation and embed best practice across projects.
Five Practical Steps for Navigating the ESG Maze
Start with Materiality: Assess which ESG issues matter most to your business, clients, and local context. Focus on what’s material, not just what’s easiest to report.
Choose the Right Frameworks: Align with client and investor expectations. For UK real estate, this often means GRESB and BREEAM; for international clients, LEED and GRI may be more relevant.
Invest in Good Data: Accurate, timely, and consistent ESG data is now a competitive advantage. Digital tools and lifecycle assessment platforms are making this easier than ever.
Engage Stakeholders: Involve your supply chain, local authorities, and end-users from the outset. Collaboration is key to both data quality and impact.
Communicate with Purpose: Go beyond compliance. Use ESG reporting to tell your sustainability story, win work, and demonstrate leadership.
The Road Ahead: From Box-Ticking to Business Value
For construction and real estate firms, the ESG maze may be complex, but it is navigable. Those who learn to move confidently through it – selecting the right frameworks, focusing on the metrics that count, and building transparency into their business culture – are reaping the rewards. Not only do they gain access to premium finance and high-value clients, but they also strengthen their ability to attract and retain top talent in an industry where reputation increasingly trumps legacy.
As one sustainability director recently put it, “The frameworks will keep evolving, but our fundamentals are now clear: measure what matters, report what matters, and always be ready to show your work.” In the age of ESG, that is what sets the leaders apart from the followers.
References & Further Reading:
UK Green Building Council. ESG Reporting for Real Estate: A Practical Guide. ukgbc.org
GRESB. Real Estate Assessment Methodology. gresb.com
BRE. BREEAM – What is it? breeam.com
US Green Building Council. LEED Rating System. usgbc.org
European Commission. EU Taxonomy for Sustainable Activities. ec.europa.eu