In recent years, regulatory pressure on ESG reporting has been increasing, especially in the real estate and construction sector. The introduction of the Corporate Sustainability Reporting Directive (CSRD) and the growing demands of investors and financial institutions mean that building emissions reporting is becoming not just a recommendation, but soon a requirement. For large construction companies, ESG consultants, and compliance departments, this entails the need to establish systems for collecting, verifying, and auditing environmental data related to construction investments.
CSRD and ESG reporting
CSRD introduces the obligation to report ESG data for companies meeting certain size and economic significance criteria across the European Union. The directive foresees that non-financial statements will include, among others, information on greenhouse gas emissions, energy consumption, and environmental impact of operations. In the real estate sector, this requires a specific approach, since buildings account for a significant portion of total life cycle emissions.
ESG reporting in the context of CSRD includes both operational emissions (operational carbon) related to building use and embodied emissions (embodied carbon) resulting from the production and transport of construction materials. Companies will need to apply standardized methodologies, such as the GHG Protocol, to ensure data consistency and comparability.
Real estate as a major emitter
Construction and real estate account for about 36% of energy-related CO₂ emissions in the EU. New construction projects and renovations of existing buildings generate both operational and embodied emissions. Therefore, the real estate sector becomes one of the main areas where transparency in ESG reporting is required.
Developers, general contractors, property management companies, and institutional investors must prepare to document the total carbon footprint of buildings. In practice, this means collecting data on construction materials, construction processes, energy use, HVAC systems, heat pumps, renewable energy sources, and media consumption over the building’s life cycle.
Required data
For ESG reporting of buildings, important data will cover both design and construction phases as well as operation. The key categories include:
- Greenhouse gas emissions – covering both operational carbon and embodied carbon in the building life cycle, including emissions from materials, transport, and construction processes.
- Energy data – final energy consumption, primary energy, building energy efficiency, and energy classes.
- Material data – information on material composition, recycled content, Environmental Product Declarations (EPD), and LCA analysis for critical components.
- Resource management data – construction waste management, material recycling, and optimization of raw material use.
- Operational data – monitoring of media consumption, energy management systems, and the impact of building operation on emissions over time.
The requirement to report such data aims to increase transparency in the real estate market, enable verification by financial institutions, and support investments aligned with sustainable finance principles.
Role of the GHG Protocol
The GHG Protocol is an international standard for calculating and reporting greenhouse gas emissions. In the real estate sector, it is used to determine the carbon footprint of buildings across their life cycle, covering both direct and indirect emissions.
Using the GHG Protocol allows for assigning emissions to specific building sources, such as electricity, fuels, construction materials, transport, or operational processes. Standardizing calculation methodologies enables construction companies, developers, and financial institutions to produce comparable reports that meet CSRD and other ESG regulatory requirements.
Data verification challenges
One of the biggest challenges in ESG reporting for construction is data verification. Environmental data are often scattered, inconsistent, and difficult to audit. Sources include project documentation, energy reports, BIM models, manufacturer declarations, and LCA analyses.
The lack of a unified evidence infrastructure means that banks and investment funds have limited ability to verify report accuracy. As a result, the risk of misclassification of investments increases, potentially leading to regulatory sanctions, ESG report adjustments, and, in extreme cases, allegations of greenwashing.
ESG audit in construction projects
To ensure the reliability of ESG reporting in construction, the process of auditing environmental data is increasingly implemented. The audit includes verification of emission calculation methodologies, data consistency checks, LCA analysis, and confirmation of EPD declarations.
An ESG audit becomes an essential part of preparing projects for financing by banks and investment funds. It allows verification that reported data are complete, consistent, and compliant with applicable regulations, minimizing financial and reputational risk.
In practice, an ESG audit requires integrating data from various sources, verifying operational and embodied emissions, and documenting an evidence trail that can be reviewed by financial institutions and external auditors.
Implementing ESG audit and reporting systems in construction becomes critical for both developers and financial institutions. It enables safe financing of projects aligned with sustainable finance buildings EU principles and establishes a standard for the real estate sector in environmental transparency.
