The International Finance Corporation says that investments in green buildings in developing countries could reach $24.7 trillion by 2030. The industry is paying more attention to environmental, social, and governance principles. Construction companies are under increasing pressure to reduce emissions, cut waste, and use sustainable materials. It’s not just about following rules. Clients and investors also demand environmentally friendly practices, such as:
Decreasing greenhouse gas emissions from machinery and transport.
Using low-impact construction materials and energy-efficient designs.
Managing construction waste effectively and recycling materials on-site.
Planning for climate resilience, such as flood resistance.
Obtaining the proper certifications.
This article examines how these values strengthen sustainability foundations and how green practices reshape the construction industry. Read on to learn more about the movement’s environmental goals, social impact, design risks, and emerging technologies.
Building With Purpose: People, Equity, and Communities First
The social part of environmental, social, and governance prioritizes human rights, safety, and community impact. In the construction industry, the focus is on how companies treat their people and whether they involve the local communities. But the most important question is whether or not the projects benefit society’s social well-being overall. It also analyses how inclusive the workplace is, how equal the sharing of resources and opportunities is, and how construction activities contribute to achieving social equity.
Examples of ESG elements:
Ensure fair labor standards and a safe workplace.
Provide training and skill development for employees.
Encourage diversity, equity, and inclusion in hiring.
Reduce disruption to local communities during construction.
Support community growth by contributing to schools and hospitals.
A company that prioritizes its employees usually experiences higher retention rates and greater productivity. Furthermore, focusing on ESG minimizes legal risks while improving the company’s public perception.
Design And Planning Decisions Carry Serious Sustainability Risks
Design and planning choices in construction can carry serious sustainability-related risks, not just for the project itself, but also for long-term insurability, liability, and regulatory compliance. As insurers and risk managers evaluate the resilience of construction projects, early decisions in materials, methods, and community impact are under closer scrutiny.
While environmental, social, and governance issues often guide internal company policy, they’re also becoming external risk factors that influence underwriting decisions, coverage terms, and claim exposures. Experts have pointed to the growing need for construction and design professionals to account for sustainability risks across planning, processes, and coordination—all of which may have implications for insurance coverage.
Design and construction companies are supposed to evaluate various risk factors in construction and design, including:
Environmental
Material selection: Using components manufactured with lower energy consumption can reduce exposure to environmental claims and contribute to favorable insurance profiles.
Water consumption: Excessive or inefficient water use, both during construction and across the building’s lifecycle, can increase liability and regulatory risk.
Construction methods: Low-carbon, energy-efficient techniques may be seen as a lower underwriting risk than traditional, carbon-intensive approaches.
Use of new and innovative technologies: Advanced building systems can support more accurate risk modeling and mitigation.
Waste management: Poor waste handling can result in environmental damage claims. Prioritizing reduction and reuse lowers risk.
Future-proofing design: Resilience against climate change (e.g., heatwaves, flooding) is a growing factor in both insurance underwriting and building codes.
Social
Community impact: Construction that disrupts local transportation or livability can lead to community complaints or liability claims.
Accessibility: Projects that fail to consider inclusive access can face regulatory penalties or discrimination lawsuits, affecting insurability.
Governance
Procurement and supply chain: Poor oversight of vendors and suppliers can result in compliance failures, ethical risks, or contractor-related claims. Especially if third-party partners are involved in fraud, labor violations, or substandard work.
Sustainability Is Becoming A Defining Force In The Industry
The construction industry is undergoing a seismic shift toward sustainability, and the insurance sector is right at the heart of it. As environmental, social, and governance principles influence everything from materials to methods, insurers must adapt to new types of risk exposure, design liability, and underwriting complexity. From net-zero regulations to green building certifications, sustainability decisions now shape not only environmental outcomes but also long-term insurability.
Many sources are calling for the construction sector to take action. Investors and consumers are increasingly concerned about sustainability factors. This industry is responsible for about 40% of global energy consumption and one-third of carbon emissions. Over four billion tons of cement are made yearly, contributing to around 8% of global carbon emissions. In addition to the ’embodied carbon’ linked to construction and supply chains, buildings release greenhouse gases through heating, cooling, and lighting. 80% of the buildings that will be used in 2050 are already built, indicating that reducing carbon emissions from the current stock is a key focus.
Regulations and reporting requirements are changing rapidly across the world. Companies bidding for government contracts over £5 million annually in the UK must aim for net-zero carbon emissions by 2050. Also, new EU proposals will require mandatory reporting on the emissions of new buildings throughout their entire lifecycle, starting between 2027 and 2030.
Strong eco-consciousness metrics attract investors. They can enhance property marketability, attract good tenants, raise property values, and increase profits. Construction professionals must address climate change challenges for the greater good, secure investment, and reduce the risk of claims and lawsuits.
Design Must Prioritize Resilience, Durability, And Lower Risk
When looking at potential risks in the design and construction industry related to climate change, the focus is on two main areas: what is built and how it is built. Key areas to consider are sustainability, durability, resilience, energy efficiency, waste reduction, and water conservation.
Diego Assef, Head of Global Practice Group for Professional Indemnity Claims at Allianz Global Corporate & Specialty, notes, “We’re used to seeing skyscrapers in our cities, but their high energy needs for heating and cooling are being questioned.” He adds, “We’ve seen a steady rise in claims about design errors in mechanical and plumbing plans, including issues with heating, ventilation, and air-conditioning systems. Problems like overheating floors and temperature variations lead to higher maintenance costs and equipment replacements, posing risks for those insured.”
Buildings must also be able to withstand changing weather patterns in the future, including extreme heat, flooding in Europe, or wildfires in California. This is especially important if the buildings are expected to last a certain number of years.
Efficiency Starts Long Before Breaking Ground
Energy efficiency should start from the beginning, using renewable energy sources like solar, wind, and geothermal power. Innovative monitoring technologies, natural light, sound insulation, and designs that support natural heating improve energy performance. The focus now shifts from basic energy efficiency to ambitious goals like zero energy use, carbon neutrality, and even ‘positive energy,’ where excess renewable energy gets returned to the power grid.
Using low-flow fixtures and effective waste disposal methods promotes water conservation, including the recycling of gray water. Designing buildings to be easy to update also saves resources and reduces waste.
New software allows industry professionals to make smarter sustainability choices during design. Building information modeling creates a detailed digital model of a building, showing its blueprint and functions. Digital twins simulate building performance and usage, helping experts gather valuable data.
Data And Connected Tools Drive Smarter Sustainability Choices
Data also powers the Internet of Things, which connects devices, sensors, and wearables. That network enhances environmental, social, and governance performance in areas like energy use, machine maintenance, waste management, budget tracking, and health and safety.
Construction professionals should consider the entire life cycle and ecological impact when choosing building materials. They should consider factors such as ethical sourcing, transportation, toxicity, permeability, and long-term issues like durability, reuse potential, and disposal methods.
Besides exploring different materials, professionals should consider modern construction methods to lower emissions and costs. Modular building, or ‘prefab,’ is gaining popularity thanks to digital tools that allow precise off-site fabrication of building components. This method’s support notes its advantages, including better material use, lower costs, improved quality control, and less exposure to weather conditions.
Certifications Give Buyers And Builders Confidence In Outcomes
Well-intentioned efforts can sometimes lead to unexpected problems. For instance, while renewable energy systems can produce ‘clean’ electricity, improper disposal of solar panels can release harmful substances into the environment. Additionally, discarded wind turbine blades are building up in landfills. There are also concerns about how onshore wind farms impact bird migration and how offshore farms affect fishing and recreational activities.
That is why it is vital that Industry professionals stay updated on the latest technology, materials, and methods to improve a building’s environmental performance. Here are various organizations that provide clear assessments and unbiased evaluations of building design and construction:
Building Research Establishment Environmental Assessment Methodology is one of the oldest methods for evaluating sustainability in planning projects, infrastructure, and buildings. It can be used for new buildings, existing ones, or renovations, and covers all stages of a building’s life.
The WELL standard helps create and certify environments that improve health and wellbeing.
Leadership in Energy and Environmental Design is a rating system that focuses mainly on the impact of energy use.
The Green Globes initiative is a rating system and offers guidance on designing, operating, and managing these buildings.
Even Good Innovations Bring Environmental Trade-Offs
The bottom line is that industry professionals need to keep up with the latest technology, materials, and methods to enhance a building’s environmental performance. However, innovations can also bring risks. As climate change creates new challenges, leaders must develop creative project designs, even when unsure of their outcomes.
Good intentions can sometimes lead to unexpected problems. For example, renewable energy systems can produce ‘clean’ electricity, but improper disposal of solar panels has contaminated the environment with harmful substances. Discarded wind turbine blades are also piling up in landfills. There are concerns about how onshore wind farms impact bird migration and how offshore farms affect fishing and recreational activities.
Conclusion
Sustainability is now an essential part of the construction industry. It drives performance, reduces risks, and gives companies a competitive advantage. Every decision made by a firm—like where to build and what materials to use—affects supply chains, communities, and long-term investments.
Innovative companies are asking essential questions. They seek partners with similar values, track performance over a building’s life, and plan for a quickly changing world. The firms that adopt this approach will shape the future of construction. Those who do not will fall behind.
