Corporate sustainability reporting is nothing new. While the practice wasn’t exactly common 30 years ago, a decent percentage of global N100 (top 100 businesses in 58 countries) and G250 (world’s largest 250 companies by revenue) were in fact going public with whatever environmental and social metrics they elected to measure internally back in the day. Naturally, trends expand and mature, and performance standards are assigned new monikers to reflect that maturation and more holistic viewpoint. Aiding that is a far more sophisticated understanding of how and why the world is warming and what humankind’s role is in that phenomenon, for better and for worse.

“In recent years, we have witnessed a tightening focus on environmental, social, and other non-financial factors that are critical for business’ long-term viability and success,” said Professor Klaus Schwab, founder and executive chairman of the World Economic Forum, in a 2022 statement. “It is imperative for businesses to lead the charge for transparency in non-financial reporting practices, setting the example for those that are a step behind.”

Naturally, the businesses you want leading that charge include those in the energy sector and industries that are inextricably tied to it, such as transportation, iron and steel, and petrochemicals. Yet, perhaps above all others, it is imperative that large actors within the construction and building industry take a firm stand on climate action and actively engage in ESG reporting. As I have discussed before, this industry may look to governments for guidance, but “sometimes policymakers need a nudge from the private sector.”

Better products across categories

One company actively in the mix is Louisiana-Pacific (LP), a publicly-traded, $2.6 billion corporation that manufactures a number of engineered building products, including various sidings and trims (part of its SmartSide line) and resilient sub-flooring and sheathing (part of its Structural Solutions line), among others. While LP’s broader portfolio of products may not be extraordinary relative to the competition, their evident commitment to responsible sourcing, transparent supply chains, regenerative design, employee wellbeing, lessening environmental impacts, and all other matters related to ESG (environmental, social, and governance) benchmarking and reporting very much is.

“LP has always been on a sustainability journey,” says Jenni Galiotto, LP’s director of sustainability and public policy. Among the noteworthy achievements Galiotto highlights is the corporation’s 41% reduction in overall carbon intensity in the past four years, applied across their five sustainability pillars (Governance, People, Environment, Products, and Community.) Those reductions apply to scopes 1 and 2 emissions only, but Galiotto admits that her company is “actively tracking” its scope 3 emissions as well. “It’s very complex. There are a lot of different categories within scope 3,” she says, citing products, services, and transportation among the key categories LP is continually tracking and making measurable reductions in.

The scope 1 and 2 reductions are largely credited to the eight product-specific environmental product declarations (EPDs) the company released last year. Altogether, those eight labels represent 75% of LP’s net sales in North America for 2023 alone, comprising its entire SmartSide portfolio and most of its Structural Solutions portfolio. Add to which, each of the labeled products is carbon negative, storing more CO2 than is emitted throughout their respective lifecycles.

Interestingly, given LP’s strong recent history for ESG reporting, the corporation has made the unique choice to not publicly issue GHG emissions benchmarks for 2030, 2040, or otherwise. This isn’t due to shyness. Galiotto attributes the decision to a dearth of accountability within her industry and others. “A lot of companies have made very lofty reduction targets, and some have had to backtrack on them,” she says, noting that to follow suit might lead LP to potentially make choices for all the wrong reasons.

“We’re very proud of the work we continue to do and we’re doing the right thing,” she adds. “This is what works best for us.”

Regional sourcing

The Louisiana-Pacific Corporation is a purveyor of lumber products. LP sources its primary constituent materials from two key “wood baskets” in the U.S.: southern yellow pine in the Southeast feeds the company’s mills across Texas and Alabama; and aspen feeds its mills in the Great Lakes Region across Minnesota, Wisconsin, and Michigan—aspen is the species used for making SmartSide products. (LP maintains 22 manufacturing facilities in North America, and partners with the Sustainability Forestry Initiative to ensure 100% of its lumber comes from well-managed forestland.)

Harvesting close to the source certainly helps LP manage its upstream emissions and obtain favorable cradle-to-gate assessments before the product reaches consumers. “Our products are very durable, and that goes into our life cycle analysis,” Galiotto says. It is also a credit to LP for doing more to oversee and manage its broader supply chain, and to a degree, taking the ‘in’ out of ‘indirect,’ aka scope 3 emissions.

Once the raw materials have been harvested and transported a minimal number of miles for manufacturing, LP’s facilities go to great lengths to integrate every speck of lumber into the value chain. SmartSide products use up to 99% of the wood fiber that LP sources. It is used to make either siding or biomass fuel for the machinery that processes the material.

According to the company’s latest Sustainability Report, energy derived from “residual biomass generated during manufacturing” accounted for “approximately 80%” of LP’s total energy use in 2023. (The remaining 20% stems from natural gas and other nonrenewable sources.) The company adheres to EPA guidelines for recycling and end-of-life protocols for construction and demolition materials.

The ‘S’ in ESG

Returning for a moment to LP’s decision to not publicly declare its own emissions reduction targets, à la the 2030 Challenge or similar, this choice shines a light—albeit inadvertently—on a different facet of corporate accountability, or lack thereof. Of the many businesses that actively commit to globally accepted ESG reporting standards and attempt to amplify their numbers with bold emissions benchmarks and a firm deadline, one piece that often gets shortchanged is the social part of their ESG agenda.

Established companies have been hard at work over the last decade setting up protocols for measuring the successes and shortcomings of their sustainability efforts, as well as the rules and processes (i.e., governance) for ensuring their business practices are compliant with industry regulations. “Even the definition of ‘social’ is not consistent,” wrote Beth Bovis in a 2023 article for Harvard Business Review.

She continues, “It has largely come to mean all of a company’s activities and programs that support advancing the well-being of people in their employ, their supply chain, or in communities at large. This includes community impact measures, employee wellness programs, diversity, equity and inclusion strategies, and so on. In terms of a company’s social strategy, answering the question ‘How are we doing?’ becomes complicated.”

Galiotto stresses that LP is always validating the data integrity of what is collected and assumed. “When we find a different way to collect and incorporate information, we share those best practices across our mills.”

“The ‘S’ is a big part of our [sustainability] pillars,” she adds. LP’s comprehensive Human Rights Policy is in accordance with the UN’s Universal Declaration of Human Rights, which lays out clear guidelines for assuring fair labor practices, equitable pay, employee safety, and the prohibition of partnering with suppliers who rely—indirectly or otherwise—on modern slavery.

In an era when ESG reporting is commonplace, but its execution can feel somewhat lacking, Louisiana-Pacific has built a model of transparency for other large corporate players in the building industry. Rather than getting mired in the complexities of ESG regulations, the corporation has built a practice that is ahead of the curve; rather than quantifying the financial risks, LP has tied its bottom line to its ESG performance. This outlier should become the norm.

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