News & Press

As Published in CIC Construction News – Dec ’25

By Phillip Ross, CPA, CGMA, Anchin
Partner & Co-Leader, Construction Industry Group

Environmental, Social, and Governance (ESG) principles are becoming indispensable for shaping a sustainable and responsible construction sector. ESG is a holistic approach to addressing climate challenges, fostering social equity, and enhancing governance practices.

A growing number of American companies publish sustainability reports, and investors, lenders, clients, and government agencies are increasingly shaping decisions around ESG performance. Construction, a sector historically slow to adopt formal sustainability practices, is now rapidly being pushed to the forefront of these expectations. As a high-impact industry, the built environment plays a critical role in the transition toward a more sustainable future.

Commercial buildings and construction activity account for approximately 40% of global carbon emissions, including both operational and embodied emissions generated during the manufacturing and transport of building materials. Contractors, developers, and engineering firms are therefore under increased pressure to adopt frameworks that integrate sustainability and transparency into project delivery and business operations. LEED, WELL, and similar certifications were once seen as advanced achievements; today they serve only as early steps in what is becoming a much broader shift toward comprehensive ESG integration.

Looking ahead, construction firms will need to embed ESG principles into their business , project planning, procurement, and supply chain strategies. Transparency and accurate reporting will be essential, especially as clients and regulators seek clearer evidence of sustainable practices. By embedding robust ESG practices into their operations, contractors can ensure they meet environmental regulations, adhere to labor standards, and uphold governance protocols. ESG principles help to mitigate risks and could also serve as a competitive advantage.

The challenge for contractors lies not only in implementing ESG initiatives but also in meaningfully measuring their impact. ESG in construction will continue to evolve as firms determine how best to align their operations with emerging frameworks and industry expectations.

Environmental

The environmental component of ESG carries particular weight in construction due to the sector’s significant resource consumption and carbon footprint. Contractors are exploring alternative, lower-carbon materials to reduce emissions associated with cement and steel, which together account for nearly 9% of global greenhouse gas output. With the industry seeking pathways toward net-zero carbon building, material innovation is growing rapidly. Mass timber, low-carbon concrete, and recycled aggregates are becoming more common, though their use must still be balanced against structural demands, performance expectations, and cost considerations.

Beyond material choices, firms are examining how to reduce waste, improve energy efficiency, and adopt circular construction principles that reduce the construction time and minimize environmental impact. This includes greater emphasis on prefabrication, Design for Disassembly (“DfD”) and more responsible resource management across the supply chain. The industry is also exploring increased electrification of equipment and the use of renewable energy sources on jobsites.

Social

The social dimension of ESG continues to expand as contractors recognize their role in shaping workforce culture, safety, and community impact. Diversity, equity, and inclusion initiatives have become integral to workforce strategies, not only as a matter of responsibility but also as a solution to ongoing labor shortages in the skilled trades.

Workforce well-being is another key aspect. Construction carries elevated risks, and companies are prioritizing stronger safety programs, mental health support, and career development pathways. At the community level, firms are increasingly expected to demonstrate meaningful engagement and social value, whether through local hiring practices, minimizing disruptions during construction, or contributing to long-term community benefits.

Governance

Governance remains the foundation that supports effective ESG implementation. Construction companies are strengthening internal controls, refining ethical procurement practices, and increasing transparency in reporting. Good governance includes clearly defined policies, responsible leadership oversight, and robust stakeholder engagement. As supply chain complexity grows, firms must also ensure that partners, subcontractors, and suppliers adhere to ethical and sustainable practices, requiring consistent monitoring and documentation.

The Road Ahead

ESG is reshaping operational strategy for contractors and related firms across the construction and real estate lifecycle. While the industry faces significant challenges, including economic uncertainty and labor shortages, ESG adoption offers an opportunity for long-term resiliency and strategic advantage. Companies that establish clear ESG strategies and reporting mechanisms today will be better positioned to meet regulatory changes, attract capital, compete for major projects, and build trust with clients and communities.

As the industry continues to refine its approach to sustainable materials, labor practices, and governance structures, ESG will increasingly define how construction firms operate and succeed. The journey toward standardized reporting and meaningful transparency is ongoing, but the direction is clear: ESG is not a temporary trend but an essential framework guiding the future of construction.