ESG Provides Operating Accountability, Management Insight
ESG stands for environmental, social, and governance, and it refers to a set of criteria used to assess the sustainability and ethical impact of a company’s operations.
Approaches to building an ESG framework in corporate settings have gained significant attention in recent years as investors, consumers, employees, and other stakeholders increasingly seek sustainable and responsible business practices.
Integrating ESG into business strategies can have several benefits, including risk mitigation, long-term value creation, improved reputation, access to capital, and resilience in the face of environmental and social challenges.
The Components of ESG
Environmental: The environmental aspect of ESG focuses on a company’s impact on the environment. It considers factors such as carbon emissions, resource usage, waste management, pollution, and climate change mitigation efforts. Companies with strong environmental practices often prioritize sustainability, energy efficiency, renewable energy, and conservation initiatives.
Social: The social aspect of ESG looks at a company’s relationships with its employees, customers, suppliers, communities, and other stakeholders. It encompasses areas such as labor rights, diversity and inclusion, human rights, employee well-being, customer satisfaction, community engagement, and philanthropy. Companies that prioritize social responsibility often foster inclusive workplaces, support fair labor practices, and contribute positively to society.
Governance: The governance aspect of ESG focuses on the internal structure and processes of a company. It includes elements such as board composition, executive compensation, transparency, accountability, risk management, and adherence to regulations and legal standards. Strong governance practices ensure that companies are well-managed, have effective oversight, and maintain high ethical standards.
What Manufactured Housing Industry Organizations Do With ESG
Various frameworks and standards exist to evaluate and report on ESG performance, such as the Global Reporting Initiative (GRI), Sustainability Accounting Standards Board (SASB), and Task Force on Climate-related Financial Disclosures (TCFD). Additionally, there are ESG rating agencies and indices that provide assessments and rankings of companies based on their ESG performance, aiding investors in their decision-making process.
It’s important to note that ESG practices can vary across industries and regions, and the specific factors considered may differ depending on the context. Nonetheless, the overarching goal is to encourage businesses to operate in a more sustainable, ethical, and responsible manner, taking into account their impact on the environment, society, and corporate governance.
Flagship Communities in April completed and published its third ESG Report.
we understand that delivering on our commitments to sustainability, affordability, employee empowerment, and strong and transparent governance will benefit our stakeholders,” the company’s CEO Kurt Keeney said. “At Flagship, we believe that a dedicated focus on ESG will translate into strong performance.”
The 32-page report, which can be found on Flagship’s website, includes details on water conservation and renewable energy, diversified staff and Board of Trustees, and its corporate governance structure.
At the end of last year, Flagship owned and operated 69 communities with 12,601 homesites and a portfolio-wide occupancy rate of 83 percent.
On the environmental front, Flagship has eliminated more than half the waste it was creating from the construction process for the homes they were purchasing, and a portfolio-wide community lighting program has resulted in the comprehensive use of LED lighting and solar power. It also has cut back on water consumption by more than 25 percent.
“All of these accomplishments speak to our values as an organization. Since our humble beginnings in 1995 we have always been laser-focused on doing well for investors while doing good,” Keeney said. We were pleased with our ESG performance in 2022, but we continually look to improve each year.”
In March, the third largest builder in the manufactured housing industry published its first report on ESG initiatives.
Cavco’s work affirms the company’s progress on its Corporate Responsibility Report roadmap released last year to advance its goals across the tenets of environmental stewardship, social responsibility, and corporate governance. It reports that workplace injuries from 2021 to 2022 had decreased by 18 percent even though productivity increased, including a 3.5 percent increase in hours worked. The company has reduced the cost of employee benefits by 5 percent and witnessed a 20 percent increase in health care benefit enrollment.
Wages at Cavco have increased 43.5 percent in just two years.
“The gains have been a combination of base wage increases and higher payouts through incentive programs that align pay to the success of the company,” the company stated in its report.
“Customers may not read the ESG report themselves but they’re looking for that information on the way we’re approaching things. By being more vocal about what our properties are doing, we are getting that message out.”
— Sun Communities Director of Sustainability Melissa Smith
Sun Communities may have the longest-running ESG framework in the industry.
Melissa Smith is the director of sustainability for Sun Communities and has worked on ESG efforts for 22 years.
The document evolves from year to year, as our programs and initiatives become more developed. Smith has authored three of the company’s reports and feels all stakeholders have responded positively, including residents, and RV and marina customers.
“I think people are talking about it more,” she said. “Customers may not read the ESG report themselves but they’re looking for that information on the way we’re approaching things. By being more vocal about what our properties are doing, we are getting that message out.
And while it seems the ESG framework companies endeavor in are designed for external consideration, the corporate team and the individual properties benefit from the learnings as well.
“We use them for understanding around our carbon use and greenhouse gas emissions,” Smith said.
The U.S. Securities and Exchange Commission proposed a rule last year that would require climate disclosures in financial reporting for public companies. Some private companies within a public company’s supply chain will have to report as well.
To ensure accuracy in reporting, Sun hired a pair of consultants with expertise in assisting companies to develop ESG reporting approaches.
“Because of the nuances of the industry, whether it’s manufactured housing, the outdoor portfolios, marinas, we need advice on how we would approach those properties with this element in mind,” Smith said.
Additionally, one of Sun’s largest recent acquisitions expanded its ESG interests to the UK where just this year companies are required to report on greenhouse gas and provide an interpretation of risk for climate change and how it may impact assets.
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