ESG is now at the forefront of real estate professionals, facilities managers and investors’ minds. As companies face more stringent requirements to report on their environmental, social, and governance performance, ESG has finally taken center stage on everyone’s agenda. This sudden switch in priority comes as a result of last year’s event COP26 where current sustainability challenges were discussed along with a solution for all: the ESG roadmap. And with the built environment contributing over 40% of carbon emissions, climate risk and energy consumption have increasingly turned into areas of contention when it comes to corporate responsibility. As a result, investors have now turned their focus to green buildings and ESG factors to ensure their portfolio is future-proofed, compliant with the law and attractive to occupiers in the long-run. Here’s why you should start implementing a sustainability strategy using an ESG framework now.
What is ESG?
CSR was the precursor of ESG, corporate social responsibility, which focused mostly on socially conscious business practices. For some, this framework didn’t go far enough and its criteria weren’t easily measurable. CSR has evolved into ESG, offering clearer standards and goals for organisations with a conscience to implement.
ESG stands for Environment, social and governance criteria are best described as a set of conventions which are meant to positively influence a company’s behavior.
Environment: refers to a company’s impact on the environment such as their carbon footprint, amount of pollutants used etc. It also includes how sustainable the company is with regards to supply chain and broader activities.
Social: encompasses all things related to how a company manages its workforce, how inclusive and diverse they are and matters relating to health and wellbeing
Governance: has to do with good corporate governance and how a company's board of directors instill positive change. It also includes how fair compensations are across the company.
Why does ESG matter to the Real Estate Industry?
Following ESG principles is of utmost importance, especially for real estate professionals who need to ensure their buildings are as sustainable as possible.
Buildings are responsible for 40% of annual global CO2 emissions with 28% of these coming from building operations, while building materials generate an additional 11%. Within buildings, around 78% of the energy costs comes from heating, ventilation and air conditioning systems (HVAC), causing about 21% of all UK emissions and 15% of electricity consumption worldwide (Net Zero Strategy, 2022). Looking at these stats, the COP26 target of reaching net zero emissions by 2050 seems ambitious but necessary.
It goes without saying that the effects the built environment has on the planet and the community should no longer be ignored but addressed. The real estate sector has, therefore, a duty to act to prevent any further harm to the planet. And with rising energy prices, businesses are now increasingly concerned about controlling their energy spendings. Keeping costs down is a crucial part of facilities and building managers’ jobs who have had to find more creative ways to stretch their budget and mitigate wasteful practices.
\ Furthermore, the UK government has recently announced a new piece of legislation whereby large businesses will have a duty to report annually on their climate risks as part of the Taskforce on Climate-related Financial Disclosures recommendations. Additionally, companies will have to issue a document clearly stating their net zero plans.
Which ESG/sustainability framework to use?
Currently there are a number of frameworks to choose from that can act as guidance to help you reach your ESG targets, all of which have been standardised to ease reporting, such as the GRI, Global Reporting Initiative which is by far, widely used for ESG reporting. Other options include: The Carbon Disclosure Project (CDP), Global Real Estate Sustainability Benchmark, International Integrated Reporting Framework (IIRF) and The Sustainability Accounting Standards Board (SASB). Adopting one of these guidelines will not only evidence your commitment, but it’ll also demonstrate you’re in it for the long haul.
One of the aims of ESG regulations is to build and operate buildings that will stand the test of time with a positive impact on the environment. While this sounds all well and good, questions remain: how does a company know they are doing the right thing? How can they measure the success of their strategy against ESG standards ? How can a building optimise its ESG rating?Before starting your ESG journey, it’s helpful to adopt a solid framework as a baseline to measure your efforts and regulatory compliance criteria. It is also important for stakeholders’ engagement and transparency especially since, in the UK, firms need to generate an annual report disclosing their company’s impact on the environment as well as their social and ethical practices. It is recommended to look into the industry you operate in, your location and your broader goals before opting for a particular framework.
Although ESG reporting is still developing, and seems daunting to some, it’s crucial to adopt a framework that will help you keep sight of your broader ESG goals.
You will need data to validate your ESG reporting
Any ESG strategy needs to be validated with data. More importantly, data is KEY to its success, allowing you to identify gaps, measure your results and make improvements. Data enables you to obtain a clearer picture of your building’s performance, providing you with information about your energy consumption, carbon emissions and air quality. In short, It helps you quantify your strategy in easy-to-interpret insights so actions can be taken when needed.
When it comes to understanding your overall building performance, a feedback loop would undoubtedly give you the opportunity for continuous improvements. Hence why data should be the foundation of any ESG reporting.
At BlockDox, we gather data from a variety of sources to provide you with rich insights into your building’s performance. You can discuss your ESG plan with us, and we’ll help you identify which data you’ll need in order to achieve a positive ESG rating based on your chosen framework. We can also generate regular reports to ease your compliance obligations.
Being experts at controlling and monitoring air quality, we also help you ensure your buildings are safe for occupants to be in. After all, air quality is considered an important aspect of the ‘Social’ of ESG and should therefore be included in your ESG plan.
No matter what sustainability goals you have in mind, BlockDox are here to accompany you in your ESG journey.