5 steps to embed governance in ESG planning

Pressure is growing in the built industry to demonstrate, measure and report environmental, social and governance (ESG) metrics. Director and Head of Sustainability Annabel Thorne says governance is often missed and must be considered as part of a wider sustainability strategy

Environmental, social and governance (ESG) transparency is receiving more attention than ever before in the built environment industries. There is now greater pressure to demonstrate, measure and report environmental and social impact, with shareholders and stakeholders demanding real action and accountability from all levels of a business. Client partnerships, programs of work, recruitment and investing decisions are therefore increasingly focused on ESG risk.

This business and market imperative is more than a framework or a set of guidelines to embed into an organizational strategy — the organization’s culture should also align with ESG aims and communications, to create value for all stakeholders.

What about governance?

While environmental and social have moved onto the mainstream agenda, governance is often missed. It can be summarized as the regulations and processes that inform how an organization is run. This includes decision making and the distribution of responsibilities between directors, managers, shareholders and other stakeholders.

Governance examples

Investors and stakeholders require access to information, to assess sustainability risks. Increased regulatory guidance is being issued to promote a culture of transparency and robust reporting. The following disclosure requirements are examples of external legislative governance that have been released recently or will be changed shortly:

• Corporate Sustainability Reporting Directive (CSRD) - this January 2023 directive strengthens the reporting rules around social and environmental information. Includes mandatory EU sustainability reporting standards covering ESG.
• PPN 06/21 - Procurement Policy Note released by Crown Commercial Service in June 2021 requires government departments to take account of suppliers’ Net Zero Carbon Reduction Plans in the procurement of major public sector contracts.
• Energy Performance Certificates (EPCs) are a key tool in promoting energy performance improvements. Rating ‘C’ will be required by 2027 and ‘B’ by 2030.
• Net Zero Carbon Building Standards – this forthcoming framework brings consistency in methodology and measurement, and a clear baseline for assessing and reducing carbon emissions from buildings across their lifecycle. Championed by BBP, BRE, the Carbon Trust, CIBSE, IStructE, LETI, RIBA, RICS and UKGBC.

5 steps to embed governance in ESG planning

We are finding that our public and private sector clients are very keen to achieve greater ESG outcomes, but typically struggle with crystallizing their definition of ESG, improving complicated reporting systems and addressing a lack of accurate data. When advising clients on an action plan to embed and improve ESG, we suggest these steps:

1. Establish consistent processes that crystallize the definition of ESG
2. Collect accurate data to understand significant opportunities and build strategies for improvement.
3. Have clear accountability and embed ESG responsibility and accountability in all roles, to avoid a siloed approach.
4. Effective leadership of the initiative and buy-in from senior levels.
5. Set an improvement plan for governing the changing of behaviours and processes to inspire collaboration.

The most difficult step is getting started on the action plan, but, when you get it right, a well-thought-out ESG strategy can drive positive change, improve confidence, encourage active ownership and set the scene for the organization’s long-term successful future.

Looking ahead

ESG becomes more mature, we can expect tighter governance to surround decision making, for improving environmental and social factors. There should be a clear distinction between internal and external governance: the first requires a proactive culture and mindset; the second is rooted in policy and regulatory legislation.

At AtkinsRéalis ESG is underpinned by several mechanisms - ESG is built into individual roles and responsibilities, mandatory training and bonus structures. A toolkit was created for all practitioners to identify the key ESG methodologies and metrics.

Knowledge sharing is key, and to this end client round-tables discussions have taken place to cross-pollinate ESG ideas and innovations and provide avenues of mutual support. Collaboration is the way forward and a space from which best practice can emerge.