For commercial real estate (CRE) companies to address the values of the modern workforce, they must prioritize Environmental, Social, and Governance (ESG) initiatives in the workplace. A pledge to these values will hold the key to positively impacting local communities, ensuring that businesses are operating responsibly, and attracting and retaining the tenants and employees that care about these standards.
ESG criteria are often used by socially-conscious investors to evaluate a company’s operations and screen potential investments. Organizations that follow these standards agree to conduct themselves ethically in these areas, and draw on a wide range of strategies to do so. Below, we define what environmental, social, and governance standards include and how CRE companies can prioritize them.
Environmental criteria address all business operations that influence the state of our planet and climate. These standards can be used to evaluate any environmental risks a company might face, and to understand how they are managing those risks. Environmental criteria can include, but are not limited to, the degree to which companies:
- Mitigate climate risk
- Use renewable energy sources
- Limit greenhouse gas emissions
- Manage water pollution
- Reduce air pollution
- Avoid deforestation
- Encourage greener commutes
The built sector plays a hand in influencing almost all of these environmental factors, and this influence will only grow as global building floor area is expected to double by 2060. More and more landlords are evaluating the sustainability of their properties using such measures as LEED (Leadership in Energy and Environmental Design) certifications. Developed by the U.S. Green Building Council, the LEED certification provides “a framework for green building design, construction, operations and performance.” These strategies help buildings and spaces set sustainability goals and go on to achieve them.
Projects pursuing LEED certification earn points for green building strategies across several categories. Based on the number of points achieved, a project earns one of four LEED rating levels: Certified, Silver, Gold or Platinum.
Social criteria involve a company’s business relationships and the equitable treatment of its people. These standards evaluate whether a company’s suppliers, working conditions, and interests uphold company values, prioritize employee health and safety, and take stakeholder needs into account. Transparency into philanthropic ventures is also a key part of these criteria. Social standards can include, but are not limited to, the degree to which companies:
- Positively impact local communities
- Ensure data hygiene and security
- Encourage diversity and inclusion
- Provide an accessible work environment for all employees
- Pay fair wages
- Operate supply chains ethically
- Prioritize mental health initiatives
Today’s CRE companies should adhere to these practices in their operations, tenant engagement initiatives, and interactions with local communities. To prioritize the health and wellbeing of building occupants and employees, many firms pursue WELL certifications. Developed by the International Well Building Institute, the WELL Building Standard is “a performance-based system for measuring, certifying, and monitoring features of the built environment that impact human health and wellbeing, through air, water, nourishment, light, fitness, comfort, and mind.”
The WELL Health-Safety certification for facility operations and management helps buildings address the health, safety and well-being of their most valuable asset: their people.
Corporate Governance criteria encompass all logistics and defined processes for running an organization. Transparency and accountability are key here: investors and potential employees may want to know that a company uses accurate accounting methods and avoids conflicts of interests in their choice of board members. Governance can also include:
- Ethical operating standards
- Diverse Board of Directors
- Full shareholder rights
- Executive compensation guidelines
- Hiring and onboarding practices
- Responsible use of political contributions
Several CRE companies are already leading the charge towards setting clear and measurable goals for hiring more diverse candidates. For example, the Real Estate Executive Council, a trade association for commercial real estate professionals of color, recently launched a new Diversity Partner Program. The program partners with “development companies, real estate groups, and other trade associations to set clear goals and guidelines for increasing diversity within their own ranks and for supporting vendor and supplier firms owned by people of color.”
Technology’s Role in Meeting ESG Needs
Technology is essential to ESG initiatives and future CRE properties.
The WEF reported on the key role that technology plays in their vision of affordable, sustainable, resilient, and livable buildings of the future: “technology and digital solutions will be among the most critical enablers to usher in the new era of real estate, allowing not only the customization of spaces according to occupant needs (e.g. temperature, humidity) but also taking building operations to the next level and addressing sustainability and affordability.”
Ultimately, technology helps modern property owners and managers achieve their ESG goals and improve retention and operation strategies by identifying efficiencies and cost savings, and continuously improving the workplace experience for occupants.
To learn more about addressing ESG needs with technology, download our latest guide, Workplace Responsibility, today.