While I generally approach decision making with a slant towards the use of logic and hard numbers, my experience tells me that cold logic is not always the best path to follow. To get a brighter picture of an issue or the impact of one’s actions, one must also look at life from a different perspective - one which panders more towards sentimentality and emotion. My views below are by no means the be-all-and-end-all of how to approach target setting; I have simply drawn from my experience in big corporate finance, where trading floors operations are driven by numbers and algorithms, and from general life experience and observations in the changing environment. With that said, let’s look at how real estate organisations can use some of the principles that I have learned to set environmental targets that matter.
Consider prevailing issues
Growing up I remember how television documentaries brought the plight of flora and fauna and other environmental struggles straight into our living rooms. Over the decades my mouth has been agape at the sight of seabirds slicked in oil following the Exxon Valdez tanker disaster in 1989, bottled-nosed dolphins choking on discarded plastics in environmental documentaries; not to mention, clouds floating over Europe gifting the inhabitants below with a dose of radioactive particles, in the aftermath of the Chernobyl explosion. Yet, until the early 1990s, this information was only accessible to the privileged few. The invention of the internet revolutionised the ease with which information can be accessed on a global scale and now an ever increasing number of people can view snippets, snapshots, full blown documentaries of how we, as a society, are impacting the environment. Over the years, the collective global sentiment towards environmental issues has changed and people are very much concerned with the future of the planet. Recurring themes include the impact on Biodiversity and ecologies and of course, climate change and how greenhouse gases are affecting natural environments are prevailing issues. These issues are now a focus of regulatory bodies and woven into the legislative agenda of many governments. Real Estate companies, like many other businesses, need to consider their responsibilities, measure and reduce their impact on the environment. In some cases this is mandated.
Know your boundaries
Setting a target involves knowing and setting the boundaries of measurement. Boundaries depend on the actions as an organisation and the resultant consequences - consequences that are a direct result of your actions or caused indirectly by upstream or downstream operations should be considered. Whatever the extent may be, the targets you set must be placed within the context of your impact boundaries. If we consider a real estate organisation as an organic entity, which consumes natural resources, using those resources to carry out its daily internal functions crucial for survival, and producing waste that must be discarded in one form or another, then by this analogy, one can question the impact of acquiring those natural resources, the immediate impact of performing the so-called internal functions as well as the treatment of the waste produced. Although Greenhouse Gas emissions are not the only source of environmental impact, the well established GHG protocol offers guidance and exemplifies how to measure and classify direct and indirect emissions. Conversely, it is not possible to measure everything, so boundaries of measurement should be tempered by other factors mentioned in this blog, such as the aforementioned prevailing issues and the company vision and mission, which I touch on below.
Know your audience
One of the key pillars of communication is knowing your target audience. Different groups will have different motivations and therefore respond accordingly; others may be incentivised to ensure those targets are reached. We normally refer to these groups as stakeholders, and commercial real estate organisations have their fair share of stakeholders, which may include investors, employees, tenants, regulatory bodies to name a few. Tenants may be concerned with issues such as the air quality within rented spaces and landlords who ensure certain standards are met will go a long way in securing lengthy tenancy contracts and renewals. Speaking of standards, RESET air and Well Building spring to mind.
The mindset of a tenant will be completely different from that of an investor, who is interested in the ESG risk the activity and practices of the organisation pose on their investment. As we know ESG risk is now a well established theme in the financial world and using a framework such as GRESB ensures that your environmental practices are measured and made transparent to different audiences, including investors and contemporaries in the real estate space.
S.M.A.R.T Goals & frameworks
This is one principle of success that I picked up, not only from the financial world but from my time as a Personal Trainer. A S.M.A.R.T goal is a smart statement, in my opinion, which improves the chances of success. Although, there are slight variations on this synonym, the one that I have worked with stands for specific, measurable, achievable, recordable and time-managed. This basic framework can be applied to achieve targets which are quantifiable within a time frame. Quantitative measures easy to understand by most audiences, they also lend themselves to comparisons over time periods as well as comparisons between similar entities such as owned assets or competing organisations. A nice example of this is an energy benchmark which measures consumption in an area over an annual timeframe (e.g. kWh/sq. meter/yr.), that can be used to set an asset's target consumption for the following year; it can also be used to compare several buildings in a portfolio.
Outcomes and impacts are sometimes not so easy to quantify but there is still a lot of information to be gained from qualitative data - even data from closed questions which result in a 'yes' or 'no.' These types of responses can be enumerated and used as a part of a scoring system and framework. We see this type of scoring system used by governing and regulatory bodies such as GRESB; members receiving a score will try to achieve or better their score in following years as well as aspire to be one of the top 10 ranking members.
Vision and Mission Statements
Before setting environmental targets (or any targets for that matter) it helps if there is a strategic driving force behind these goals. A vision statement is one strategic element that conveys a set of ideas describing some desirable future state. Vision statements are, therefore, aspirational and have long-term implications. Likewise, mission statements are yet another strategic element that are the next step towards setting goals and targets for an organisation. Mission statements are more concise action-oriented and contain high level plans of what is to be achieved. Vision and mission statements are precursors of the aforementioned SMART goals. However, in a changing world, vision and missions are subject to revision by steering committees, the impacts of which will be felt throughout the organisational hierarchy.
Below are example vision and mission statements from the Patagonia clothing company, to emphasise that this approach is used widely but is also applicable to the real estate space.
Example: Patagonia Clothing
Vision: A love of wild and beautiful places demands participation in the fight to save them, and to help reverse the steep decline in the overall environmental health of our planet.
Mission: Build the best product, cause no unnecessary harm, use business to inspire and implement solutions to the environmental crisis.
As you can see the vision is quite aspirational and forward looking, while the mission statement is more action oriented. Whether Patagonia have achieved or are achieving their vision for the future is yet to be determined; however, their targets and goals will be set with the belief system that the vision conveys, in mind.
Accountability and Raising Awareness
Raising awareness is something that many would not immediately consider when trying to set a target, but I believe it is just as important as some of the other steps mentioned above. Awareness and accountability pertain more to the 'that matter' section of this blog title. Bringing the attention of other parties to one's intentions is used regularly, to add a sense of accountability and this is not dissimilar to the tactics used by slimmers, muscle builders and people engaging in various physical pursuits. In a similar manner organisations could adopt a campaign to raise awareness of a cause or goal. The campaign can vary from an internal email circulation to a full scale public announcement. The increased attention will potentially garner support from various stakeholders as well as attract interest from critics. Once targets are achieved, the overwhelming sense of achievement can be used to build momentum for subsequent revision of one's targets and to garner even more support for a cause 'that matters.' Under the watchful gaze of critical eyes, failure is not an option!