Welcome to our ESG deep dive, a series of articles highlighting the critical impacts of major business sectors on people and the environment.
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The world needs to build 96,000 new affordable homes every day to house the estimated 3 billion people who will need access to adequate housing by 2030. The real estate sector is crucial in meeting this demand by constructing affordable, sustainable, and safe housing options for individuals and families. Access to safe and secure housing is a fundamental human right, and the real estate sector helps to fulfil this right.
However, the industry's expansion and practices to accommodate the demands of a growing population have come at a high cost to the environment, with construction and building operations responsible for 40% of global greenhouse gas emissions.
To mitigate environmental and social negative impacts such as displacement and gentrification, pollution, workers’ exploitation and unsafe working conditions, policies and regulations must be in place to ensure that the real estate sector truly benefits society.
By understanding the potential harms of the real estate sector, policymakers and individuals alike can work to create a more equitable and sustainable society.
However, the industry's expansion and practices to accommodate the demands of a growing population have come at a high cost to the environment, with construction and building operations responsible for 40% of global greenhouse gas emissions.
To mitigate environmental and social negative impacts such as displacement and gentrification, pollution, workers’ exploitation and unsafe working conditions, policies and regulations must be in place to ensure that the real estate sector truly benefits society.
By understanding the potential harms of the real estate sector, policymakers and individuals alike can work to create a more equitable and sustainable society.
Unaffordability
One of the most significant negative impacts of real estate on people's lives is the unaffordability of housing. In the EU-27, house prices rose by an average of almost 40% between 2015 and 2021. The Czech Republic ranks as Europe's least affordable housing market, with a 15.34 average gross annual salary needed to buy a 70-square-metre apartment.
Gentrification
The gentrification and touristification process can negatively impact the lives of people, particularly those from marginalised communities. Gentrification refers to renovating or improving a neighbourhood, leading to increased property values, rent prices, and displacement of long-term residents. Various studies talk about green gentrification - inequalities based on race and class regarding access to green spaces and green infrastructure. This impact is significant because it can lead to the loss of community identity, cultural displacement, and socio-economic inequality.
Health Risks
The real estate industry can also have negative impacts on people's health. The World Health Organisation estimates indoor air pollution accounts for 2.7% of the global disease burden and 3.8 million deaths yearly. Indoor levels of pollution are, in many cases, higher than those outdoors.
Labour Exploitation
The real estate industry has been linked to labour exploitation, particularly in developing countries. A report by the Business & Human Rights Resource Centre found that workers in the construction industry are often subject to low wages, long working hours, and hazardous working conditions. This impact is significant because it violates human rights and can lead to worker exploitation and health risks.
Carbon Footprint
Most major economies experienced a rebound in construction activities to pre-pandemic levels in 2021. As workplaces reopened and hybrid working became the norm, the energy-intensive use of buildings increased. Furthermore, the use of fossil fuel gases in buildings increased in many emerging economies. As a result, the demand for energy in buildings increased by about 4%, the highest increase in the past decade. This has led to a record-high CO2 emission of approximately 10 GtCO2 from buildings operations, a 5% increase from 2020 and 2% higher than the previous peak in 2019.
Deforestation
The construction of new buildings often requires clearing land, leading to deforestation. In cities, deforestation due to urban development is a severe problem, leading not only to habitat loss for wildlife, soil erosion, and increased greenhouse gas emissions, but also creating heat islands and increasing pollution. According to the World Wildlife Fund (WWF), around 18% of the Amazon rainforest has been destroyed, and an additional 17% degraded in the last 50 years due to human activities such as deforestation.
Waste Generation
The construction industry generates significant amounts of waste. According to the European Commission, construction and demolition waste account for around 25-30% of all waste generated in the EU. This impact is significant because construction waste often ends up in landfills, contributing to environmental degradation. Additionally, the production of construction materials such as cement and steel is energy-intensive, contributing to greenhouse gas emissions.
Water Usage
The real estate industry consumes a significant amount of water, especially in regions where water scarcity is an issue. European buildings are responsible for about 35% of total water consumption. This impact is significant, as water scarcity affects over 40% of the global population. To mitigate this impact, the industry must prioritise sustainable water practices, such as water recycling and rainwater harvesting.
Please contact us if you want to know more about the specific ESG impacts and risks in your sector and the important upcoming legislation that will affect organisations in this area. We can develop an overview analysis and discuss the key ESG areas your business should focus on.
Moreover, if you are interested in e.g. carbon footprint calculation, check out our offer for environmental services.
(Image by macrovector on Freepik)