Embrace SEC Regulations to Gain a Competitive Edge

The U.S. Securities and Exchange Commission's (SEC) proposed rules have every market talking and wondering what it could mean for their business and how it will impact operations. These regulations would require construction organizations to provide investors with standardized environmental, social and governance (ESG) disclosures backed by data—not just empty promises, greenwashing or lip service. As with all disclosures, its purpose is to shed light on a company’s ESG activities while improving transparency. While it may seem like a regulatory burden, it may offer the competitive edge contractors need to stand out and attract investors.

Just look at how the conversation has evolved around emissions reporting over the past few years. In 2020, investors poured $51 million into ESG-impact funds, more than doubling such investments in a year. Publicly traded or not, construction companies need to respond to the growing market demand for ESG initiatives supporting sustainable business practices. Take steps with sustainability efforts now or risk being left behind and potentially losing business to better-positioned competition. Consider the below five-step formula to achieve success with an ESG plan.

1. Identify the company's Waste Output’s Impact

Every process in a construction business either adds value or creates waste. By conducting a thorough review, contractors can gain insights into waste collection and disposal practices on project sites and at the office, such as:

• What materials are coming in and what types of waste are being disposed of? What are their their weight, source and cost?;
• What materials, if any, are being recycled and reused?; and
• The location, size and pick-up frequency (scheduled or on-demand) of all regularly placed waste containers. (Are they well placed and right-sized with the appropriate signage? Regional weather patterns and time of season are other factors to consider.)

Whether contractors partner with experts or conduct their own routine, operational waste analysis on all various sites identifying the waste output’s impact can lead to improved profit margins in addition to a boost in the ESG score. Why contribute to the landfill’s 145 million tons of construction and demolition waste when it could be a valuable commodity that can be recycled into new products or repurposed in many unique ways?

2. Measure Against Benchmarks

Once contractors have collected data and know the ins and outs of their operations, they can establish a baseline and benchmark for performance by comparing SEC requirements, existing policies and competitor practices. Developing a strategic decision-making process will prove difficult without knowing a starting point or baseline measurement.

With this data and new measurement procedures in place, contractors can identify improvement opportunities and even streamline their organizations.

3. Set Goals and Build Solutions

The next step is to set challenging but realistic goals and build waste management solutions. Having clear and actionable objectives helps contractors operationalize ESG principles. These standards use current data and trends in the sustainability/ESG investment sectors to outline realistic value creation opportunities for the construction organization. ESG should work to build the most value for a business financially, socially and environmentally.

For example, contractors might find a high percentage of contamination in one of their recycling bins, indicating the need for improved communication and education about what should go into them. This will save time and money for the long haul.

4. Implement New Initiatives

Waste prevention and recycling programs can be improved by actively engaging and educating the workforce and identifying markets for recovered materials. Getting the team’s buy-in might take time, but it’s imperative to reach goals. Pro tip: start with one or two clear objectives to engage team members. Then, roll out other initiates gradually, so prevention and recycling behaviors become a habit.

Use the waste program results to inform continued actions and make any adjustments in the organization's reduction and recycling activities.

After reviewing the results, list the most promising activities and evaluate how they align with original goals. Then, when selecting any new activities based on the program, focus first on waste prevention. This helps eliminate waste at the source and save natural resources and energy.

5. Rinse and Repeat

The sustainability process is never complete. Material costs fluctuate based on demand, as the pandemic has consistently proved with supply chain disruptions. If contractors change what they’re taking in, it changes what’s going out. This takes the company back to square one, and new waste management solutions must be found.

Data analysis shouldn’t be a one-and-done experience to set contractors in a better place. What might work today may not work tomorrow. So, rinse and repeat the above steps, keep a pulse on the sustainability conversation and contractors will have a competitive curve that’ll keep them ahead in the ESG game.

Don’t wait to combat climate change and nurture the workforce/workplaces when the market is already positively responding to ESG initiatives. This is the future. When contractors move from a cursory view of sustainability to a more nuanced understanding of what it can achieve, they will create key points of differentiation and strengthen their competitive advantage.