Like most other businesses, construction firms are open to more scrutiny than ever. Investors and consumers can research company initiatives and review experiences through social media and popular review sites. This more informed collective cares about who they are doing business with, not just what the construction firm can do for them. With all this in mind, an official ESG (environmental, social, and governance) program can pay off in more ways than one.
ESG Benefits for Construction Firms
To create an ESG program, firm managers must first understand it. The program allows investors, consumers, and potential clients to assess a company on more than financial data. The program covers a wide range of risk and success factors that have been shown to impact the long-term success rate of a construction business.
Owners and managers can see many benefits from an ESG program at their construction firm, such as:
- ESG programs make construction firms more competitive when bidding for jobs.
- Diverse workforces often mean companies are 35% more likely to exceed national average financial returns.
- Decreased risk of exposure for firms in areas covered by ESG policies, including hacking and ransomware.
- Increased goodwill toward your brand with involvement in the community through volunteer hours or funds, scholarships, and more.
- Increased attractiveness as Millennials, the largest buying group now, are three times more likely to work for a company because of its ESG program.
Examples of ESG Programs
A construction firm’s ESG program can include many factors, but if management struggles with where to start, consider environmental factors like water consumption, carbon emissions, recycling programs on the job site, reducing paper usage, and material sourcing. Review activities that have a social impact, including community involvement, safety practices, and diversity and inclusion programs. Implement governance policies on due diligence for contractors and suppliers, wage assignments, and fair company policies.
Creating an ESG Program
It’s never too late to create an ESG program. And if you’ve been on the fence, now is an excellent time to start. Before anything else, determine if your company is already doing something that could be considered part of an ESG program, and make a list of projects you want to investigate down the road. There are a few different frameworks you may want to consider, including the Sustainability Accountability Standards Board or the UN’s “17 Goals of Sustainable Development.”
ESG programs are becoming an integral part of telling the story of who your construction firm is to prospective clients and investors. It can be a differentiating factor in whether you get the job. Contact our talented professionals to discuss how an ESG program can impact your financial statements and disclosures.
Treasury Circular 230 Disclosure
Unless expressly stated otherwise, any federal tax advice contained in this communication is not intended or written to be used, and cannot be used or relied upon, for the purpose of avoiding penalties under the Internal Revenue Code, or for promoting, marketing, or recommending any transaction or matter addressed herein.