The Common Sense Competitive Edge Of Social As Business Tool
Homebuilding's got a running start in realizing the business and competitive advantages of the 'S' in ESG. It's a natural extension of builder-of-choice, preferred-partner, and best-place-to-work.
People whose livelihoods produce homes and communities for people identify in their depths as makers in the best sense. Typically, in my experience, they work hardest and best as competitors.
They're – many, many of them – driven to out-perform others.
Teams – in most cases, assemblages and ecosystems of cross-disciplinary technicians – adopt the rigor, discipline, and frequently, the language of well-organized sports squads or military battalions to get at division of labor, coordination of resources, collaboration among partners, hand-offs and uptakes, and ultimately the conquest of impediments that lay in the path of ground gains, mini-empires, sprawling domains of private enterprise.
In their sinews and psyches, better is what they aim for. Better is how they want to be known, what they measure themselves by – better than the rest, better than before, always better. It's competitive by nature.
Tools, practices, processes, and platforms that make them better than they were and better than rivals can be go hand in hand in their minds, hearts, and souls with business success, present and future.
This is precisely the case with a common-sense strategy to gain a competitive edge and a business advantage at this very moment in residential construction and development time.
We don't know who gets credit for coining the now-pervasive expression – builder of choice – but its meaning as a business goal to shoot for to achieve success had won sweeping embrace among homebuilders of all sizes.
A natural extension of builder-of-choice – which essentially adds up to competitive capability advantage that comes of earning the highest performance and most fruitful returns on a reliable, sustained basis from people and firms both inside and outside the compass of the operation – takes the concept up a notch.
It has the unfortunate distinction of being gummed up in the politicization of everything, but in its heart-and-soul it's a common sense tool for companies who adapt to evolving conditions of business success and longevity.
It's ESG, which stands for environment, social, and governance – which have evolved as types of non-financial capital through which big public and small private companies gain a competitive edge on a path to success.
Whoever named ESG ESG is not a marketer. People – i.e. business strategists -- don't hear the term and say to themselves, "I want some of that," or say to their team members, "get me some of that." Understanding its value requires the same kind of rigor that "builder-of-choice" requires, the rigor that presupposes an investment here generates a disportionately greater return on that investment over there.
The ceo of one of the nation's top 10 homebuilding enterprises has said on more than one occasion:
Whoever of us can crack the code on ESG ... that's gold.
That's a big challenge, but homebuilding firms of all sizes, as well as their partner manufacturer, distributor, investor, and real estate developer partners have a running start on the challenge.
Why? They've worked over the past decade or more to become the partner of choice.
Builder-of-choice has proven itself as a gateway to capability that your organization gains as a local market advantage show up in reliable crews, quality task work, and longer-term recognition of business opportunity versus the quick buck. Builder-of-choice has proven itself as an organizing and motivating operational principle that re-tools internal processes to achieve external benefits.
The "S" in ESG works exactly the same way.
Attempt in any way to disentangle today's supply chain disruption from homebuilding and real estate's 4-horsemen chronic challenges – affordability, sustainability, resiliency, and a new next-generation workforce – and you'll find yourself fruitlessly fixing an issue in isolation that winds up breaking three others in a holistic context.
Building Talent Foundation ceo Branka Minic tells us:
The 'S' in ESG addresses sustainability and adaptiveness across social systems, among the different groups of stakeholders that a company interacts with.
Specifically, the way a company manages and relates to its suppliers, workforce, talent pool, school, at-risk residents, legislators and regulators, etc. are all considered 'S' issues. In this context, a construction company would specifically audit how these relationships enable or prevent their taking an intentional role in improving local economies in the context of public prosperity, health, job creation or labor, tax and human rights laws.
In the "S" in ESG, you can see both the complexity and the simplicity, the difficulty and the common sense ease of applying it to today's raft of business, operational, and building lifecycle challenges.
The power of ESG's "S" – if, like builder-of-choice, or preferred partner, or best-place-to-work, organizations reconstitute themselves internally for benefits from external relationships – is evident and, probably, a lifeline to a business future.
Here's where it plays a direct role, even now.
Take a look at a telling characteristic of this moment, from Bill McBride, housing industry observer and host of Calculated Risk:
Red is single family units. Currently there are 726 thousand single family units under construction (SA). This is the highest level since 2007.
For single family, most of these homes are already sold (Census counts sales when contract is signed). The reason there are so many homes is probably due to construction delays.
Another way to characterize the moment, in broad strokes, is here, from the National Association of Home Builders' vp for surveys and policy research Paul Emrath.
Let's turn first to the NAHB/Well Fargo Housing Market Index (HMI), where more than 55 percent percent of single-family builders reported a shortage (either serious or some) of each of the 16 trades listed in the questionnaire. At the high end, more than 80 percent reported a shortage of labor for each of the three categories of carpenters (rough, finished and framing crews). Similarly, in the survey for the third-quarter 2021 NAHB/Royal Building Products Remodeling Market Index (RMI), over 55 percent of remodelers reported a shortage of each of the same 16 trades. In the most extreme cases, over 90 percent of remodelers reported shortages of workers needed to perform rough and finished carpentry.
Put Bill McBride's high-level observation together with Paul Emrath's. More single-family homes "under construction" than in 24 years, schedules taking way, way longer than normal, and skilled workforce members in shorter and shorter supply.
An executive we heard from recently connected the dots between "builder-of-choice" and the power of "S" in ESG this way.
Our trade partners are one of our strongest assets. They are our partners in waste management and countless other things that impact sustainability, also with the quality and durability of their homes. Quality built homes, and homes that will live for many years is very important to our firm," he says. He adds, "How do we create a job-ready skilled worker, one invested in safety, quality and durability of the product he or she helps to build? How then do we take that product and make it even better and with innovation, add to the social product but also civic values (being good corporate citizens)? We need to think about innovations and the talent pool that can support us."
This is the sound of dots connecting, and where builder-of-choice, and partner-of-choice, and best-place-to-work, and employer-of-choice, and career-of-choice, all begin to stack up as a challenge for who builders are at their heart, competitors.
There's the challenge, be the best place for a 14-year-old to set sights on for a healthy, engaged, challenging path of growth and impact. Be better than the rest at magnetizing other firms to want to work with you, at gravitationally attracting investment, at pulling your consumers toward what you're doing because – dealing with you – they're behaving as their best selves as consumers.