Reshaping the construction industry

How sustainability is reshaping the construction industry

Our latest benchmarking study on ESG reporting in the engineering and construction industry reveals key insights.

In brief
  • New regulatory requirements will require the industry to implement new processes to support disclosure of environmental data.
  • Within our study, we found 14 companies — seven public and seven private — published ESG disclosures.
  • The recent emphasis on sustainable construction puts a focus on the use of renewable materials and new construction technologies.

The engineering and construction industry is facing increasing demands for decarbonization and environmentally friendly practices. New regulatory requirements will compel companies to disclose information about greenhouse gas emissions and climate-related risks. Industry executives must actively recognize and address these developments.

To better understand and benchmark the quality of disclosures related to environmental, social and governance (ESG) across the engineering and construction industry, we conducted a study of the top 30 engineers and contractors identified by Engineering News-Record and analyzed them across more than 10 sustainability parameters. Note that the study includes social and governance topics; however, this article focuses on the environmental portion of the study. 

New regulations are prioritizing environmental disclosures

New and proposed regulations at the state, national and international level will require companies to measure and disclose greenhouse gas emissions and climate risk information, something that many have not prioritized to date.


In October 2023, California Gov. Gavin Newsom signed two bills into law that will require public and private companies that conduct business in California and meet certain annual revenue thresholds to provide climate-related disclosures, including Scope 1, Scope 2 and Scope 3 greenhouse gas emissions, in accordance with the recommendations of the Task Force on Climate-related Financial Disclosures. Additionally, the U.S. Securities and Exchange Commission (SEC) proposed a climate-related disclosure rule in March 2022, which is pending finalization. Both regulations include an assurance component that will require disclosures to be assured by an independent third-party assurance provider.


Within our study, we found that only six of the 30 companies — five public and one private — reported greenhouse gas emissions data. “Both public and private engineering and construction firms will be impacted by new climate disclosure regulations,” said Jennifer Leitsch, Managing Director, Climate Change and Sustainability Services at Ernst & Young LLP. “Companies should act now to understand which regulations apply to them and conduct a gap assessment to understand what actions they need to take in order to comply. This could include data collection to facilitate GHG emissions calculations, a climate risk assessment, or implementing processes and controls to prepare for assurance.”


Engineering and construction firms are working together to share leading practices in this area. In May 2023, the Associated General Contractors of America (AGC) launched a new Task Force on Decarbonization and Carbon Reporting.² Its goals include developing an industry guidebook on carbon reporting and educating this industry on these topics.

Construction sector is going circular

According to The Circular Built Environment Playbook,³ high-income countries account for 16% of the world’s population; however, they are generating more than one-third of the world’s waste. Circular construction is a way to reduce the environmental impact of the construction industry, known for its high burden on the environment. The principles of a circular economy for the built environment include a reduction in the consumption of materials and resources and optimization of the life span for materials and product use, as well as designing for disassembly, reuse and recycling, along with zero waste. Engineering and construction companies play an essential role in tackling the global environmental crisis, and they have an important opportunity to regenerate resources and accelerate socioeconomic development.

Circular building optimizes the use of resources and minimizes waste throughout a building’s whole lifecycle. The design, operation and deconstruction maximize value over time by using durable products and services made of secondary, nontoxic, sustainably sourced, renewable, reusable or recyclable materials. Additional value can arise from an increase in a structure’s space efficiency over time through shared occupancy, flexibility and adaptability. This will also add longevity, resiliency, durability and easy maintenance and reparability.

Climate is a key driver to apply new technologies within engineering and construction

Technology is enabling climate-friendly solutions from the initial phases of building to ensuring energy efficiency. Sustainable design will be critical as construction companies try to reduce their energy consumption in completed buildings. The construction industry must implement sustainable design, engineering and construction practices driven by applicable data to track, measure and reduce emissions and waste throughout the project lifecycle. Smart building sensors, 3D printing and energy-efficient building materials create lasting and positive outcomes for the environment.


As ConTech has become an important arm of building sustainability, it has proven more resilient to economic head winds than other innovation-oriented segments. While FinTech and property technology (PropTech) recorded sharp annual declines of capital flows (30% and 38%, respectively), investment in ConTech dropped by only 1%, reaching $5.68 billion in 2022⁴. Globally, the US was the most active country, with 97 startups attracting 42.5% of all ConTech capital, which is over four times the amount of investment in the next most active country — the United Kingdom, with 20 startups and 8.8% of the funding.


Advanced and green construction materials are supporting the ESG agenda

Green and advanced construction materials contribute higher efficiency, recyclability and durability of performance, which, in the long run, bring more benefits than the up-front capital outlays. Sustainable design will be critical as construction companies try to reduce their energy consumption in completed buildings. Engineering and construction leaders face competing pressures as they try to control costs while focusing on reducing the carbon footprint, but using energy-intensive heavy equipment to develop structures that are scalable, taller, greener, healthier and more technologically advanced than ever before.


New sustainable materials can help reduce the amount of embodied carbon a building contains. Embodied carbon refers to the greenhouse gas emissions associated with the construction process, including the production, logistics and installation of building materials. Embodied carbon contributes about 11% of the total 40% of greenhouse gas emissions that buildings contribute worldwide⁵. Many tactics can be used to help reduce the amount of embodied carbon within a construction project. One way is to reduce the amount of materials used in construction by designing buildings that are more efficient and require fewer materials.


Another way is to use low-carbon materials such as timber, bamboo and recycled steel. New construction materials have been developed and existing ones upgraded to pave their way to reduce carbon emissions and boost energy efficiency. Some examples of green construction materials include carbon fiber. Though it is costly, it is 75% lighter than iron and 30% lighter than aluminum. Additionally, using prefabricated building components can reduce the amount of waste generated during construction and lower the carbon footprint of the building. It is used to reinforce traditional building and reduce the thickness of panels and lower their weight. Once it is added into concrete, it provides excellent thermal insulation. Construction companies are also using cross-laminated timber (CLT), which is bonded in layers, manufactured off-site and assembled on-site. CLT is strong, lightweight and is extremely fire-resistant.


The construction industry itself is prone to the effects of climate change

There is added motivation for engineering and construction companies to use sustainable practices as the results of climate change directly impact the bottom line. With an increasing number of extreme weather events, damage and insurance costs are rising. Gradual climate change, including temperatures, wind conditions and rising sea levels, as well as extreme weather events such as floods, fires and droughts, all affect construction. These impacts include faster degradation of construction materials, like corrosion of metals and shorter life spans of wooden buildings, leading to structural damage. Water damage and leaks can lead to mold growth, and a sudden shift in energy use can increase HVAC usage and cause higher operational costs.


To mitigate these risks, the industry must apply climate-resilient solutions, including building codes that support sustainable construction and address risks connected with climate change. Construction companies need to provide appropriate health and safety conditions for workers at the site, including preparedness for extreme weather events and natural disasters. Using climate-resilient design and materials and solutions suitable to mitigate the impacts of climate change is a must for a more sustainable future.


If you would like the complete study, please contact Erin Roberts.


Engineering and construction leaders will need to fully understand the new regulatory requirements impacting both public and private companies that will require the industry to implement new processes and controls to support the disclosure of environmental data.

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