Sustainable building solutions are no longer a ‘nice-to-have’ tick box. In fact, they are slowly becoming mandatory worldwide, driven by regulation and consumer demand. A company that decides to ignore sustainability in their real estate related activities will soon begin to see a direct impact on its competitiveness.
Public discussion on climate change, labour conditions, environmental impact and corporate governance has reached a peak. The historical signing of the 2015 Paris Agreement is proof. Every country in the world will be bound to an agreement that is intended to address climate change and cut carbon emissions.
For individual countries, the easiest landings will be for those that start with cleaner energy grids and are supported by a stable government and strong funding. Uruguay is being held up as the poster child for the coming change. The country was able to generate 95 per cent of its electricity from renewables after ten years. Individual companies will need to take a similar approach. Those that are truly committed to reducing their environmental impact will have the softest landing, and it will be achieved through the allocation of proper funds and a clear, measurable path toward sustainability. Those who do not will soon experience a negative impact on share price, reputation and market share; if they haven’t already.
One way to immediately reduce the environmental impact of a company’s operations is to apply building certification frameworks such as LEED (US), BREEAM (UK) and DGNB (Germany) to new-build projects and existing buildings. These frameworks enable owners and operators to quantify the impact of implementing sustainable practices through the application of common metrics and comparable attributes. Such certifications also suggest a variety of appropriate solutions for reducing operational costs and improving building quality.
Reduced operational costs such as energy and water consumption or maintenance requirements have a direct effect on the resale value of a building, increasing its appeal to potential investors and renters. Many large international corporations require sustainability attributes, such as green building certification, as a non-negotiable stipulation for renting in their tenant agreements. Buildings that are not up to par attract less potential lessees, and hence are not able to retain investment value. Sustainably designed, constructed and operated buildings, however, attract bigger and better companies that will rent space at a premium, and for longer.
In addition, there are considerable soft gains that have a significant operational impact. Creating healthier indoor environments by implementing measures such as improved indoor air quality and access to natural daylight can equate to less employee sick leave a happier workforce and reduced staff turnover. While these may appear as abstract Human Resource metrics, they impact the bottom line quite significantly. Happy employees tend to equate to a more profitable, sustainable business.
How much more will it cost?
For now, investors have their reputations to protect. As public disclosure of carbon footprints and energy performance of buildings and entire operations become more common and, in some cases, even mandatory, non-compliance with regulatory requirements will affect financial performance and day-to-day operations. Property values will be impacted, buildings may be required to undergo costly updates to accommodate the impact of climate change, or it may simply be uneconomical to retrofit older buildings, thus rendering them unviable.
The bottom line is that addressing climate change and incorporating sustainability into a company’s operations is the only way forward for smart businesses. At present, progressive companies are benefiting from being ahead of the curve. They are building an early reputation for sustainability, giving them an obvious competitive advantage. Those that fall behind will most likely remain there.