Real estate companies are under pressure from regulators, investors, lenders, staff and tenants to have a strategy for addressing sustainability and environmental, social and governance issues. 

“Only a few years ago, it was exceptional for a real estate company to have sustainability goals,” says Sam Crispin, Head of Sustainability and ESG, Asia Pacific at Savills. “Now it is essential. 

“Stakeholders don’t expect you to have all the answers, but they want to see a company is on a pathway to being more sustainable. For that, you need a strategy and it needs to stand up to scrutiny.”

Here is a guide to the four pillars your organisation needs to support a viable sustainability strategy.

1. Stakeholder engagement

Sustainability is all about how a company interacts with the world around it, so a first stage is to identify key stakeholders – investors, tenants and staff for example – and understand their concerns.

Communication with these groups is essential in order to help determine the strategy and also to get the buy-in needed to make it work. Consider also that building ESG considerations into a business might require a change of mindset and how that might be developed and communicated.

2. Materiality Assessment

Not all ESG issues are significant to all organisations, so you need to identify those which are material and consider how they affect the business. The key to setting achievable and meaningful targets is to Measure, Monitor and Report these issues.

Collaboration with stakeholders, through workshops and focus groups, will be crucial in identifying and prioritising key issues.

3. Sustainable development goals

The United Nations sustainable development goals (SDG) framework can be used to translate your materiality assessment into areas of focus. There are 17 SDGs, which were agreed by all UN member states in 2015, including: climate action, affordable and clean energy, sustainable cities and communities, good health and wellbeing and quality education.

Determine ESG goals for each relevant SDG and prepare goals which can be practically assessed to determine progress. These goals should be reviewed periodically to ensure they are relevant.

4. Key themes

A successful sustainability strategy should be part of a rounded governance structure and companies should work to continuously improve ESG data capture and systems. The ability to Measure, Monitor and Report means practical improvement rather than airy goals.

ESG is sometimes seen as a separate pillar, but it should be integrated into existing business models and be a focus for management, not just those with ESG in their job titles.

Landlords should consider introducing green leases, which can promote energy saving and waste reduction in collaboration with tenants. Technology can help businesses to drive ESG performance especially in data collection, “if you can measure it, you can manage it” adds Crispin.

Further reading:
Savills APAC sustainability & ESG services

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Simon Smith