In this guest post, Gregorio Esteban, founder and CEO of Miraval Holdings, emphasises the significance of social responsibility in ESG strategies for sustainable development, based on his Latin American market experience.
The “S” in ESG – the Social component – is often overlooked in the developed world. The focus there is on the “E” – the Environmental. However, as more developing countries and regions start to integrate sustainability into business practices, we are learning more and more about the importance of the Social element in building a future for people: a platform on which the Environmental can grow. This is perhaps no better illustrated than in the real estate and construction sector in Latin America.
Globally, real estate is one of the most emissions-intensive industries. Buildings are currently responsible for 40% of global energy-related carbon emissions, according to the International Energy Agency. Of those emissions, building operations (energy needed to heat, cool and power) are responsible for 27%, while an additional 13% is generated in the construction process (building and infrastructure materials, known as embodied carbon). Meanwhile, by the mid-21st century, as the world’s population approaches 10 billion, the global building stock is expected to double in size.
A significant amount of this building stock will be in developing countries. However, in countries such as these – for example in a major emerging market like Latin America – there is currently little ESG integration, especially in terms of labour guarantees and land reserve and conservation.
Sustainability is still a hugely important factor in the region’s future. Latin America, home of the Amazon rainforest, has crucial biodiversity, not only in a regional context but for the planet. It is also a region that is particularly vulnerable to climate change – heatwaves, drought, extreme rainfall lead to water scarcity, crop failures, loss of biodiversity. For these reasons – and because the effects of climate change hit the most vulnerable communities most forcefully – it is crucial that the issue of ESG integration in Latin America is addressed.
The problem is that any framework that exists to measure ESG is designed for first-world countries. There are no asymmetric ESG metrics that can realistically work in a region like Latin America. Priorities in this part of the world are different, with the focus of construction companies on delivering housing and keeping costs low. It’s harder to justify something like ESG to the buyer.
For the homebuyers of Latin America, it is simply not that important yet. For all the good intentions around ESG, from a buyer’s perspective – unlike in other parts of the world – it is something that concerns only an exceedingly small minority. Currently, it is more the concern of government institutions and a decision for the property developer, for the entrepreneur. In general terms, the buyer or final consumer is not asking for it. They just want to spend their money on assets which cover their needs.
This is where the importance of the Social impact of ESG comes in. Before an emphasis can be placed on the Environmental aspect, the people of the region need a prosperous future. Until they feel their basic needs are met, how can we expect people to be concerned about something like the carbon footprint?
So in Latin America, the “S” means sustainability of long-term, high-quality jobs; better skilled workers and better education; improved healthcare, labour rights and safe working environments. Miraval, for example, has focused on the health and wellbeing of the people in and around its developments by creating green areas and sports facilities in ecocities that nearby communities can access, and healthcare and educational projects for the vulnerable communities within that zone. Improving the quality of life of the people is absolutely central to making sustainable construction more relevant.
The importance of the UN’s Sustainable Development Goals (SDGs) is also crucial in this context. Because ESG frameworks in Latin America are still under development, these are a crucial guide in laying the foundations for a sustainable future. This means striving to make progress in areas like gender inclusion and socio-economic justice within the context of local needs. For us, another example would be providing clean water and sanitation in Latin-American settlements. This is of immense importance, and Miraval has honed in on it by building ecocities that have their own wastewater treatment plants, providing purified running water to communities and guaranteeing the conservation of the integral water cycle. This translates into clean water for families, but also for water-related ecosystems.
The ultimate aim is for real estate and infrastructure investment to create social wellbeing and resilience on which first world sustainability standards – and a greater emphasis on the Environmental side – can then be justified to the people and introduced.
It is important to note that, for this to be achieved, companies must think about the medium and long-term advantages of introducing sustainability, and initially must carry the financial burden that comes with this. Because at the moment in Latin America, the only way to successfully deliver a sustainable product is to do so without the downside of a higher price. The motivation for this should be there because companies that do not start embracing a sustainable future will fall behind. Ultimately, by embracing sustainability, companies will be able to stay relevant, attract investment and retain top talent.
Over time, as progress is made, the hope is for asymmetric ESG metrics that work for the region to take shape, incorporating metrics that have been developed internationally while considering what makes sense locally and regionally. As this happens, new technologies can be adapted and incorporated in the region, facilitating sustainable and resilient infrastructure development.
Miraval, for example, will work towards making its buildings more energy efficient and reducing the supply chain carbon footprint, with the ultimate aim of a net zero future. The company has already started this by making its buildings more efficient in a passive way – through the use of insulation in walls and windows. It is also a firm believer in the use of “on-site assembly automation” as far as the building process is concerned, whereby modularized elements of a building – for example kitchens and floors – are produced off-site. This reduces the amount of energy spent on workforce, waste management and supply chain.
With time, it is hoped that clear ESG frameworks are introduced in Latin America which importantly work from the start – without the need to adapt and change them in years to come, as we have seen with first world sustainability. But, before we get there, the foundations for this must be laid. This is why the Social side of ESG is absolutely critical, not only in Latin America, but for the planet’s future.
Gregorio Esteban is the founder and CEO of Miraval Holdings, a sustainable developer of self-sufficient ecocities in Latin America. He is leading Miraval to become the first LatAm-focused sustainable real estate company to be listed in Europe.
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