Efforts to promote ethical practices in business have been known by many names over the years. The latest acronym making the rounds at corporate conferences and boardrooms: ESG.
ESG is a blanket term that relates to how a business, corporation or public organization manages its practices in three key areas:
• Environmental concerns, which can include how much energy a company uses, how much waste it creates and efforts the company has taken to incorporate sustainable practices into its operations, like shifting to more environmentally friendly materials or adopting alternative-fuel fleet vehicles.
• Social concerns, which revolve around what an organization does to be a good citizen of the communities where it works. This can include charitable giving; creating a culture that fosters diversity, equity, and inclusion; ensuring fair pay and workplace safety; and listening to and addressing the concerns of the community.
• Governance concerns involve what an organization does to create ethical guidelines and hold itself accountable. Governance is not only about the internal ethics, rules and guidelines an organization sets for itself, but also about how it upholds those standards and works to be transparent if there is an ethical, safety or regulatory issue.
Behaving responsibly and ethically are long-held values of many successful organizations. Consumers are paying more attention than ever to ESG concerns, and it’s having a real impact on companies’ bottom line.
For example, a study commissioned by Google Cloud released in April 2022 found 82% of consumers believe it’s important for the values of the companies they do business with to align with their own. The same study found 52% of consumers prefer brands with a track record of being environmentally responsible, while 55% said they would pay more for products or services from a sustainable company.
ESG + AEC
Bernhard has been helping customers get a handle on the “E” in ESG long before the term existed. As the largest privately-owned Energy-as-a-Service company in the U.S., we’ve saved large-scale clients more than $1 billion in energy costs through EaaS agreements, thus boosting their own ESG profiles. Simultaneously, we’ve seen the benefits of pursuing ESG-geared policies and practices inside our own company.
A focus on ESG can benefit Architectural, Engineering and Construction (AEC) companies and their clients in several key ways:
Creating growth: As seen in the polling referenced above, consumers are increasingly putting their money where their priorities are when it comes to ESG concerns. That’s driving organizations to not only make purchasing and policy decisions that demonstrate their commitments to ESG, but incentivizing partnerships with AEC companies that make those considerations a priority. While dedication to ESG probably isn’t going to win a contract for an AEC company by itself, it could definitely be a factor that tips the scales in their favor.
Attracting investment: It’s not only consumers who are focused on ESG. Sustainability and social responsibility are becoming an increasingly influential factor in investment and project funding as well. According to a study by the U.S. Business Roundtable, investment dependent on business practices seen as environmentally, ethically or socially responsible now totals more than $30 trillion worldwide. Meanwhile, a February 2022 poll by Gallup found about 40% of U.S. investors look into issues like corporate governance, social values and environmental policies before deciding where to invest.
Boosting hiring and retention: In a poll released in October by Gallup, 73% of respondents said it was important that the company they work for promotes diversity, equity, and inclusion, while 55% (including 71% of those ages 18-29) said they would switch jobs to work for a company with a greater positive impact on society or the environment. By setting and sticking to ESG goals, organizations do themselves big favors in retention, hiring and employee loyalty. Given it can take months and cost tens of thousands to recruit and train a new AEC employee in a demanding role, that can have a substantial impact on a company’s bottom line.
During the pandemic, the AEC industry lost more than 1 million workers and is struggling to attract and recruit young talent, even though the industry pays nearly double the average hourly rate. Hiring and creating a work environment that can retain diverse candidates will help alleviate the talent shortage we’re currently facing.
Reducing regulatory entanglements: By adopting a company-wide focus on ESG and empowering every employee to speak up if they see something that doesn’t fit those values, AEC companies create a sense of shared ethical responsibility from the boardroom to the jobsite. Promoting and putting some teeth behind an “ethics first” philosophy can lead to fewer shortcuts and thoughtful decision making, taking into account more than just dollars and cents. In the long run, company-wide commitment to self-policing on ESG issues can lead not only to better results for clients, but also less need for government intervention.
More than just the latest corporate buzzwords that can’t translate into real growth, ESG is really about responding to consumer and investor demands for a recommitment to ethical business practices and being good neighbors to the communities organizations serve. While much of the AEC industry has been dedicated to those goals for years, recent trends show how doubling down on ESG policies can make great business sense, now and in the future.
Bernhard is the largest privately owned infrastructure company in the United States. Bernhard has more than 100 years of experience servicing higher education, health care, commercial and specialty markets. Headquartered in Metairie, Louisiana, Bernhard employs more than 2,000 employees in 21 office locations across the U.S. For more information, visit Bernhard.com.