How sustainability grows value in the real estate industry

The growing relationship between sustainability and value.

Once, going sustainable was a leap of faith – costs were evident but the value was intangible. But now, evidence is building to support the real commercial value in sustainable initiatives.

For many early adopters, the value of sustainability could only be linked to intangibles such as brand reputation, company purpose or a moral imperative. But many also had an instinct, based on deep professional experience, that investment in sustainability could drive value, whether from higher or faster rentals or the value inherent in the buildings themselves. Up to now, however, the data simply didn’t exist to prove a commercial value in demonstrable figures that could loosen the purse-strings on tight resources.

While these intangible values can offer a real boost to bottom lines, there is a growing body of evidence that sustainability in real estate offers very tangible values as well. Those who have pioneered sustainability initiatives are reaping the benefits now as they see that value proved out. They have taken the first mover advantage and are already seeing the dividends from their early investments.

While, in the past, businesses may have felt they lacked the bandwidth or resources to invest in sustainability, today, it’s a business imperative. Resources should not be considered a barrier to developing a sustainability strategy. Even if that strategy starts with risk aversion, value and risk are connected. If a business is creating value, it’s avoiding risk. And often, when a company works to avoid risk, it creates long-term value.

While, in the past, businesses may have felt they lacked the bandwidth or resources to invest in sustainability, today, it’s a business imperative. Resources should not be considered a barrier to developing a sustainability strategy. Even if that strategy starts with risk aversion, value and risk are connected. If a business is creating value, it’s avoiding risk. And often, when a company works to avoid risk, it creates long-term value.

The basics start with compliance; companies should first look at the regulations in force today to ensure they are complying with all of them and then look at the new rules coming in the near future. Beyond regulatory compliance, companies should consider a materiality assessment, often part of frameworks and accounting standards such as the Global Reporting Initiative’s G4 guidelines. These are the backbone of reporting, they help to identify a company’s most material issues by reaching out to internal and external stakeholders for their input. 

While there is increasing sustainability focus in real estate on the environment, with good reason, social and governance issues are also growing in importance for stakeholders and should also be considered. And, when considering prioritisation, companies should be careful that goals are supporting each other.

Sustainability strategy checklist:

• First, check your compliance with real estate and wider sustainability regulations 
  
• Then consider the changing regulatory environment and what you need to prepare for
  
• Do a materiality assessment, talk to your internal and external stakeholders – for example, investors, tenants, end-users, the wider community and local businesses impacted by your projects
  
• Focus on areas where you can have the biggest impact and the highest level of control
  
• But remember the law of unintended consequences – don’t be so focused that your initiative towards one goal adversely impacts another one.
  

Metrics and measurement.

Measurement can feel like a moving target as standards evolve. But tying metrics to goals helps to focus data, while the information itself needs to be compiled with one eye on the future.

Despite how much it has matured in recent years, sustainability is still a relatively new concept. Standards around metrics, measurement and reporting are emerging, but there’s still a range of benchmarks and it can be difficult to assess the impact of a sustainability strategy.

Keeping it simple, however, does not mean ignoring the complexities of the future. Key metrics should be linked to prioritised areas and to outcomes and what stakeholders need to know should be a guiding principle. How data is formatted and stored should be done with an eye to future, as well as present, usage. Information on energy efficiency, for example, may eventually be needed to link into finance systems for carbon accounting and disclosure.