Sustainability is becoming an increasingly important part of our lives, but one place in particular where we’re going to see a lot more emphasis placed on it is in the world of corporate real estate. This is due to the rise of Environmental, Social and Governance (ESG) factors impacting organisational operations in new ways as it becomes a dominant part of the business landscape.
Society is watching closely, scrutinising how companies contribute to the sustainability of their business activities. Some regions even require actionable ESG regulations so that companies adhere to a certain level of compliance. Regardless, sustainability factors into corporate real estate decisions, so it’s worth understanding a little more about it.
How sustainability factors into corporate real estate
Corporate real estate (CRE) is a major contributor to carbon emissions. In fact, all buildings in the world account for around 40% of global energy usage. With every new piece of corporate real estate established, some level of efficiency and sustainability is factored in at the planning phase, but that’s not always the case.
There are some instances where they’re simply becoming more technologically advanced and, as a result, end up consuming even more energy. This is certainly true of commercial buildings requiring air conditioning through the warmer summers or in particularly hot regions.
Ultimately, there needs to be a stronger movement towards sustainability that focuses on making smarter corporate real estate projects that consume less energy and resources. But to do so is tricky – it requires the involvement of various departments, organisations and regulatory bodies operating in tandem and at peak performance.
Financially – greener buildings make sense
Many believe, especially in corporate real estate, that there will be a huge expenditure between building a green building and a regular building. Yet on average green buildings only cost 2% more to build but can save nearly up to 20% when it comes to operational costs and utilities. Keep in mind it can also depend on the regulatory framework that the building is planning for, such as Platinum LEED certification, which can be up to 10% of the additional cost.
Regardless, you’re still going to come out ahead when you make sustainable choices early on. Due to these cost savings, investing in a sustainable building makes fiscal sense, too, as the ROI will appear much sooner than it would otherwise.
From an investment perspective, greener buildings remain in high demand for the lower-cost expenditures and the relatively low inventory of these properties currently available. With more ESG regulation coming down the line, it may even force companies to move into or invest in these sustainable buildings to comply with their national or regional regulations.
However, for companies only looking to rent or lease and not outright buy, demonstrable and well-defined sustainability features will help garner a premium when it comes to rental costs. This can be because they have it as their internal mission or vision or simply as a way to gain those compliance points.
Sustainable buildings help society as a whole
The first thing to understand is just how much these buildings cut down their carbon emissions. Some studies say that, at the least, it’s around 34% less carbon being produced, and that number will only continue to grow as efficiencies and technology evolves. And because fewer resources are required to manage and power these locations, it also leads to less waste.
In addition, the materials used in the construction of these greener buildings also typically mean less volatile organic compounds (VOCs), which can damage air quality.
When it comes to air quality, greener buildings score higher for that, too. They tend to use a more systematic and technical approach for improved monitoring to provide better quality air. It sounds unmeasurable, but it isn’t. We know what good air looks like based on the data collected by air quality sensors. We’ve espoused the benefits of better indoor air quality before – not only does it improve employee productivity but it also reduces absenteeism due to illnesses and stress.
Another part of making corporate real estate sustainable comes from the materials that are used. Whether it’s recycled metals to sustainable timber, many of the materials are either eco-friendly or greener in their production methods.
All of this allows for a better overall planned structure and the integration of technologies that can collect the necessary data points to build better buildings the next time around.
But really, when it comes down to it, organisational change has to be driven from the inside. There are a few roles in corporate real estate that have the power and the potential to drive sustainable change, so let’s take a look at them.
The roles that are in charge of sustainability and the change it brings
Those that help to maintain the pristine condition of the building are also the first line of defence to keep it that way. They fulfil a range of tasks, such as scheduling consistent, sustainable audits to ensure that there’s always a focus on areas that could use improvement. In addition, they are there to ensure that only sustainable products are used through either green partners they found or when it comes time to replace heavy machinery and equipment.
Facility managers go beyond just using energy-efficient light bulbs. They know to have the latest efficient HVAC systems and when to replace windows to take advantage of insulated ones to save costs dramatically.
They are also the ones that help the commercial tenants with better habits, such as knowing where all the recycle points are, turning the lights off after work (which can also be automated), and even reducing the overall need for office space, as many industries have successfully adopted hybrid workplace solutions.
Sensors also play a big role here to help with data collection, tracking and automation to help maintain an efficient working operation.
CRE directors help to forge the message
The board of directors is critical as the primary sponsors and stakeholders in driving sustainable change. The corporate real estate directors are ultimately the primary owners of this purpose and help to spread the message down the chain.
They need to take a proactive yet simple approach to what the plan will look like and how to incorporate technology in the right fashion for monitoring and measuring their carbon footprint. Once that’s set, it’s about connecting it to all future capital allocation strategies to ensure enough funding to go sustainable and stay sustainable.
CRE directors can help to provide reward schemes for achieving certain statuses, rankings, certifications or milestones, as a motivational tool as well.
A final piece to consider is that this type of process and strategy should be included in the financial filings and reporting so that the company is able to show its progress and achievements in sustainability and ESG.
How the CFO plays a role in all of this
All of this information and reporting needs to come from a centralised and standardised format. For example, all the cost savings, benefits, operational efficiency, sales movement and so on must come from a single source of truth. One of the best places to put this would be towards the person in charge of the financials, and that’s the CFO.
Incorporating the CFO into this strategy helps to have this type of information for ESG reporting readily available, and it can be incorporated into the financial reporting and strategy.
For the CFO looking to drive sustainable change, it’s a way to have everything ready to showcase to the company’s shareholders, stakeholders or customers. Many target markets find sustainability as one of their core needs from a company they interact with or buy from. It’s part of their value alignment with companies and brands; thus, proper messaging disseminated by the CFO can help to maintain that brand loyalty.
It comes at a time when the CFO of yesterday had a different mission in mind, where it was all about top profits for minimal expenses. Yet, with consumer behaviour shifting, alongside even major investors who have concerns about ESG, it’s time for the CFO to adapt and help bring the right type of message and financials forward, working closely with the corporate real estate directors and facilities managers to maintain a competitive advantage.