Given that one-fifth of the world’s greenhouse gas emissions come from buildings, the commercial real estate sector has no room for lagging in corporate sustainability. Still, the stress from ever-changing datasets and reporting requirements causes challenges when trying to achieve a sustainable future. To stay on the right track, companies must prioritize engagement with those who have the biggest interest in their success: their stakeholders.
Effective stakeholder engagement helps solve issues at every step of the sustainability journey, whether a company has just started to think about sustainability or is leading the way. When a company engages with investors, tenants, and employees in ways beyond simple surveys, the insights provided on specific risks and opportunities can guide the path on what matters most.
Let’s explore four key milestones of an organization’s sustainability journey to see how stakeholder engagement can help:
Identify: Conduct a Materiality Assessment
Even when a company acknowledges sustainability as a key metric for business success, it takes real effort to identify the areas of largest potential impact. To work through this, organizations should hold a collaborative dialogue with key sustainability players. This engagement strategy helps stakeholders identify material topics across the company’s value chain and show where resources should be prioritized.
Common material topics in the real estate sector include energy and water management, climate change adaptation, and transparency of information as elaborated by the Sustainability Accounting Standards Board (SASB). Forming a base-level understanding of what sustainability means to a company and its sector will streamline the appropriate next steps of an organization’s strategy.
Develop: Put Together a Data Inventory
Once a company understands its material issues, data collection must focus on the right metrics to track year-over-year progress. The sheer number of environmental and social metrics needed in an inventory prove challenging across all sectors, but in commercial real estate, complex reporting requirements for building portfolios make this even more difficult. In addition, data owners often aren’t informed around specific requests for data and might not have the same goals as the teams asking for it – many don’t know or even care about their organization’s efforts in sustainability.
Ensuring stakeholders are continuously educated on the purpose and benefits of data collection efforts helps secure cooperation. Reporting bodies such as CDP have prepared to ask even more of real estate companies in 2020, such as building data on embodied carbon. The ask for this information requires real estate companies to engage with individuals further in their supply chain, emphasizing the need for robust engagement strategies.
Report: Disclose to Sustainability Frameworks
With data in hand, companies should submit to groups such as CDP, DJSI, ISS, and of course, GRESB. Beyond the numbers and metrics of sustainability, these reporting bodies often ask for responses to explain and make sense of the data reported. This presents both an opportunity and trial for companies looking to lead industry discussion around material topics – with stakeholder engagement bringing twofold benefits.
First, getting stakeholder input allows companies to tailor messages specific to its groups’ needs and challenges. Second, transparency around a company’s sustainability performance primes investors to submit feedback for the future. In addition to the reporting bodies that companies are essentially required to disclose on, active participation in industry working groups such as the National Association of REITs (Nareit) can provide an effective channel to further engage with stakeholders and share best practices with peers.
Lead: Set Long-term Goals to Improve Performance
Even after an organization has its sustainability programs in place, commitments should be made to improve over time. Science-based targets (SBTs) to limit climate change to 1.5°C have taken the center stage in corporate sustainability, and 22 real estate companies have already set targets in line with climate science. While SBTs have a place in every sustainability strategy, obtaining enough stakeholder buy-in for these ambitious goals lies paramount to success.
A challenge real estate companies struggle within setting SBTs is both in the collection and management of Scope 3 data. Before the Science-Based Targets Initiative will verify a company’s reduction goals, Scope 3 targets must be set if they constitute greater than 40% of a company’s total emissions. Given the difficulty in even setting an approved SBT, organizations within the real estate sector should proactively engage with tenants, suppliers, and others to form the relationships needed for successful emissions reductions.
Stakeholder engagement is core to the success of real estate companies on their sustainability journey. Where there’s an opportunity to drive collaborative action across stakeholders, do it. By joining stakeholders across each step of the sustainability journey, you can build bridges to meet your goals and continue building upon success.
This article is written by Benroy Chan, Sustainability Associate, Schneider Electric Energy & Sustainability Services