Sustainability in the Real Estate Industry: How can you create more positive impact?

Scientific report after scientific report, from the COP26 summit to the latest IPCC assessment, the science cannot possibly get any louder and clearer: the future for us and our planet is looking bleak, and our window of opportunity to act is narrowing. Sustainability and securing a sustainable future is no longer a ‘nice-to-have’ sentiment – it is now a matter of survival.

Now, more than ever, it is time for all of us across different industries to put on an urgent climate lens, to understand our impact, understand how to reduce it, and take decisive action. Today we turn our attention to one of the most emissions-intensive industries: the real estate industry.

The climate impact of the real estate industry

The real estate industry currently contributes to almost 40% of global greenhouse gas emissions: 28% from operational emissions (i.e. energy needed to heat, cool, and power buildings) and 11% are generated from materials and construction. From the construction of new properties to the upkeep and performance of existing ones, there are high levels of energy consumption and a strong reliance on fossil fuels in the real estate industry.

For example, while the use of robust materials such as concrete and steel in construction allow for long building lifespans, they are materials that are highly energy-intensive and contribute to a significant portion of CO2 emissions.

Why should the real estate industry care about sustainability?

Recent IPCC reports have already confirmed that extreme, catastrophic weather conditions due to our changing climate (i.e. storms, floods, fires, extreme heat, and other risks!) are going to happen way sooner than you’d expect, which also means rapidly increasing physical threats for the real estate industry!

Interest in sustainability has also been rapidly increasing among investors, owners, and tenants. Investors, policymakers, and the public are also increasingly calling for changes to be made in real estate companies’ business models.

Upcoming legislations such as the EU taxonomy and the SFDR will contribute to increasing demands for transparency in non-financial reporting and higher levels of accountability, on top of proposals for mandatory non-financial due diligences. Besides, who’s to say that there won’t be any more legislation coming up? At SustainLab we like to say, just because you don’t know what you don’t know doesn’t mean it won’t hurt when it hits you: planning ahead and staying ahead of the game (i.e. the eventual influx of additional reporting legislation in the future) can only be rewarding. Fast, fitting and data-driven actions today = clear advantages tomorrow.

How can businesses in the real estate industry reduce negative impact and create more positive impact?

1. Understand your impact

What exactly are the main impacts related to your business? Where is your company creating or reducing value for society and for the environment? One of the most important steps to reducing your impact is to first understand your impact: knowing where you stand will enable you to identify and implement high-impact actions to reduce negative impact and increase positive impact over time. For real estate industries, it is particularly important to understand your biggest emission drivers, as well as your typical emission hotspots.

We know, we know, ‘understanding your impact’ can be seen as something ‘easier said than done’. Like many industries, the real estate industry faces the challenge of data: from insufficient, inaccurate data to challenges in data management, it can be hard to quantify and assess impact, and to take necessary data-driven actions. But what if it didn’t need to be all that difficult? With sustainability management software solutions such as SustainLab, you can easily monitor, measure, and track your KPIs, understand your impact, as well as set goals and track them.

Moreover, better data can lead to a better understanding of potential impact of revenue, costs, and risks, less financial risks, better capital attraction, better investor relations, and ultimately, a better fight against the climate crisis!

2. Review and increase your energy efficiency

Given that a large proportion of the real estate industry’s emissions comes from operational emissions, such as energy needed to heat, cool, and power buildings, improving energy efficiency should definitely be at the top of your ‘to-tackle’ list.

Explore strategies that will help minimize the need for energy use in buildings for heating and cooling, such as energy conservation measures (ECMs) and renewable-energy technologies (RETs).

While actions can, and definitely should, be taken retrospectively to continuously improve energy efficiency, action can also already be taken as early as the planning and design phases of real estate to ensure that energy efficiency is taken into account when developing infrastructure and buildings.

Increasing your energy efficiency will not only help you inch closer toward your carbon goals, it will also help you minimize business interruptions and reduce operational costs.

3. Ensure sustainability across the value chain

With so many different stakeholders, parties, and activities involved across a real estate value chain, it is important to ensure that sustainability is embedded throughout. This can be done through actions such as conducting due diligences, adoption of sustainability codes of conduct, and establishing strict vendor selection criteria.

Activities of developers, contractors, designers, and other specialists in the building process can often produce hidden environmental costs. The adoption of a sustainability code of conduct among partners can then be helpful in such situations, to establish and set the ground rules for common best practice standards.

Vetting existing and future suppliers in terms of their environmental sustainability initiatives through due diligence and strict vendor selection criteria is also something that can be undertaken. Such steps can help to ensure responsible sourcing principles, and allow for easier collaboration with suppliers in sourcing and choosing materials that are sustainably sourced and low-carbon.

Not forgetting the post-building sectors of real estate, due diligence can also be conducted on potential landlord partners, to understand and establish shared goals around sustainability efforts within properties.

While these are not new strategies for working with your impact in your value chain, they can definitely drive more success in the sustainability of your business when used smartly. So, what’s another way you can work to ensure sustainability across the value chain? Our answer? Co-creation.

Instead of imposing sustainability requirements and demands onto the different parties across your value chain, why not think about sustainability as something that can be co-created? By drawing on the expertise of different actors within the value chain, and with a little bit of innovation, new solutions for sustainable development can be co-created rather than enforced! Afterall, magic happens when good companies with the goal of creating a positive impact work with other good companies with a similar goal.

4. Research and development: Aim for new sustainable development methods and consider other impacts apart from carbon

To meet carbon emissions goals, and stay ahead of the curve, developers must consider the research and development of newer, more sustainable development methods. However, when it comes to sustainability in real estate, your carbon emissions are not the only impact you need to consider. We’re talking about things like other environmental impacts such as air quality, as well as social impacts such as quality of living.

Efforts should be invested into the research and development of green spaces. In several cities, urban greenery projects have already started popping up, with the objective of improving the quality of life for citizens through sustainability efforts. This includes development of clean energy infrastructure, weatherizing buildings, the use of sustainably sourced materials, and the purposeful inclusion of green spaces to decrease carbon emissions.

Such projects can not only beautify existing and future developments and cities, but also help to improve air quality, reduce noise, and on a whole benefit tenants and residents.

Understanding your impact in these areas might be harder than understanding your carbon impact, since they can be harder to measure and track, with less defined measurements and reporting guidelines. Nevertheless, they are still super important areas to consider and include in your impact measurements.

So, are you ready to go from being high-impact, to being part of the solution?

We can no longer hide from the facts: the impacts of the climate crisis are already being felt, and will continue to cause more problems and more risks, particularly for those in the real estate industry. But is it all bad news? No!

Real estate leaders with great foresight will know: take the appropriate steps to future-proof your business now, and not only will you keep your head above the water (and your business afloat). Better yet, you cash in on the opportunity to prosper amidst a climate transition, become a leader in the industry, and most of all, create a positive impact on our planet and its people!

Are you a real estate organization that’s in need of some help to get started on your sustainability journey? Let us help you with building the foundations to a sturdy sustainability journey! Contact us or book a free demo!

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