The construction industry accounts for nearly 40% of global carbon emissions when considering both building operations and the embodied carbon in materials. This makes it one of the most critical sectors for the sustainability transition, and one facing substantial regulatory pressure under the CSRD, EU Taxonomy, and national building codes.
Construction companies face a unique challenge: their environmental impact is distributed across thousands of projects, dozens of subcontractors, and complex material supply chains. Unlike fixed-site industries, construction ESG data must be collected project by project, aggregated across portfolios, and reported with the traceability that external assurance demands.
Key sustainability challenges in construction
Embodied carbon in materials
Cement, steel, aluminum, and glass are the primary contributors to construction’s carbon footprint. Cement production alone accounts for roughly 8% of global CO2 emissions. Construction companies must track the embodied carbon of materials used across all projects, requiring lifecycle assessment data from suppliers and product environmental declarations.
The EU Taxonomy sets specific thresholds for construction activities, including requirements for lifecycle global warming potential calculations that demand material-level carbon data.
Project-level emissions tracking
Unlike manufacturing with fixed production lines, construction projects are temporary, distributed, and variable. Each project has different equipment, material mixes, energy sources, and transportation distances. Tracking Scope 1 emissions from on-site diesel generators, Scope 2 from temporary power connections, and Scope 3 from material transport and subcontractor activities requires project-level data collection systems.
Waste and circular economy
Construction and demolition waste represents the largest waste stream in the EU by weight. ESRS E5 (resource use and circular economy) requires reporting on waste generation, recycling rates, and circular design practices. Construction companies must track waste streams by type and destination across all active projects.
Supply chain complexity
A typical construction project involves dozens of subcontractors and hundreds of material suppliers. Collecting ESG data from this fragmented supply chain, from small local trades to global material producers, represents one of the sector’s biggest reporting challenges. ESRS S2 (workers in the value chain) adds requirements for labor practices across the supply chain.
Regulatory landscape for construction
CSRD requirements
Large construction companies must report under the full ESRS framework. The most material topics typically include E1 (climate change, covering both operational and embodied emissions), E5 (circular economy and waste), S1 (own workforce, including site safety), S2 (supply chain workers), and G1 (business conduct, including anti-corruption in procurement).
The CSRD implementation timeline follows standard phasing, with large companies reporting from FY2027 after the Omnibus delay.
EU Taxonomy for construction
Construction activities are prominent in the EU Taxonomy. New construction must meet near-zero energy building standards. Renovation activities must achieve specified energy performance improvements. Both must demonstrate “do no significant harm” across all environmental objectives, including climate adaptation, water use, pollution prevention, and biodiversity.
Taxonomy alignment reporting requires CapEx, OpEx, and turnover KPIs linked to eligible and aligned activities, demanding detailed project-level classification.
National building regulations
In Spain, the Codigo Tecnico de la Edificacion (CTE) increasingly incorporates sustainability requirements. The EINF applies to large construction companies, and the Ley de Cambio Climatico establishes carbon footprint obligations. In Germany, the Gebaeudeenergiegesetz (GEG) sets energy performance standards, and the LkSG addresses supply chain due diligence.
Practical strategies for ESG management
Implement project-level data collection
Deploy standardized data collection templates across all projects. Capture energy consumption by source, material quantities with embodied carbon data, waste generation by category, water consumption, and safety metrics. Dcycle’s automated data collection can integrate with project management systems to streamline this process.
Build a material carbon database
Create a centralized database of embodied carbon factors for commonly used materials. Source data from Environmental Product Declarations (EPDs), industry databases, and supplier-specific data. This enables rapid carbon estimation at the design stage and accurate reporting at project completion.
Standardize subcontractor ESG requirements
Include ESG data collection requirements in subcontractor contracts from the outset. Define what data is needed, in what format, and at what frequency. This is both a reporting necessity and a supply chain management improvement.
Connect project data to corporate reporting
Project-level ESG data must aggregate into corporate-level CSRD disclosures. Establish consistent methodologies, emission factors, and data quality standards across all projects to enable meaningful consolidation. Dcycle’s carbon footprint platform supports this project-to-corporate aggregation.
How Dcycle supports construction companies
Dcycle provides ESG data management designed for the project-based nature of construction:
- Project-level tracking: Collect and manage ESG data at the individual project level with standardized templates.
- Multi-project consolidation: Aggregate project data into corporate-level reports with consistent methodologies.
- Supply chain data collection: Streamline ESG data requests to subcontractors and material suppliers.
- Multi-framework reporting: Generate reports for CSRD, EINF, EU Taxonomy, ISO 14064, and other frameworks from a single dataset.
- Audit-ready documentation: Maintain complete traceability from corporate disclosures to project-level source data.
Request a demo to see how Dcycle can help your construction company manage ESG reporting.
Frequently asked questions
What are the most material ESRS topics for construction companies?
Most construction companies will find E1 (climate change), E5 (resource use and circular economy), S1 (own workforce, especially health and safety), S2 (workers in the value chain), and G1 (business conduct) to be material. E2 (pollution) and E3 (water) may also be material depending on project types and locations.
How should construction companies handle embodied carbon reporting?
Start by identifying the materials with the highest carbon intensity in your projects (typically concrete, steel, and aluminum). Source Environmental Product Declarations from suppliers where available, and use industry-average data for materials without supplier-specific EPDs. Build a material carbon database that improves accuracy over time as more supplier data becomes available.
Does the EU Taxonomy apply to construction projects?
Yes. The EU Taxonomy includes construction of new buildings, renovation of existing buildings, and several related activities. New buildings must meet near-zero energy performance standards and lifecycle carbon requirements. Renovation must achieve specified energy improvements. Both must meet “do no significant harm” criteria across all six environmental objectives.
