ESG is firmly positioned on the agenda of Canada's real estate industry. Organizations are increasingly attuned to stakeholder calls for environmental, social, and governance strategies; more importantly, they're becoming more aware of the benefits to following suit. For many, the question is no longer, "Why do we need an ESG strategy?" but "How do we create and execute an ESG strategy that will make a lasting impact?"
Real estate organizations play a large role in meeting Canada’s climate change goals through reducing carbon emissions and pursuing greener and more efficient operations. I’ve previously explored how stakeholder groups (e.g., investors, lenders, insurers, tenants and regulators) are leading the charge for a more sustainable, equitable, and eco-forward approach to real estate. As ESG becomes an access-to-capital reality, real estate companies that are not factoring ESG into their key business decisions today risk missing out on investments in the future.
Here are my high-level thoughts on how real estate organizations can best implement an effective ESG strategy:
Laying the groundwork
For an effective ESG game plan to take shape, leaders must first understand ESG-related risks and opportunities, not only across all parts of their value chain but also specific to their organization. This means taking a fresh look at current operations, evolving regulations and stakeholder requirements to explore potential strategies and implement the related processes for each of the E, S and G pillars. It’s equally important for leaders to take stock of the latest ESG trends and practices, both within the Canadian real estate industry as well as in related industries worldwide.
Only then can organizations complete a materiality assessment that prioritizes the most critical ESG risks and opportunities and decide where to focus initial efforts. This can lead to improved profitability, value, and other less tangible (social) benefits. Either way, it's important to prioritize ESG objectives from the onset.
Building the team
Developing and implementing an ESG strategy requires team members who understand and will champion the transformations required to achieve an organization’s objectives across each of the ESG pillars. This inevitably requires additional time and effort for individuals throughout the organization to raise internal awareness of what ESG is, why it’s important to the organization and how to maximize the benefits. Partnering with ESG specialists, whether new team members or external consultants, can significantly accelerate this process by bringing those industry insights, best practices and credibility to the decision-making table.
Not surprisingly in today’s environment, talent shortages are making it difficult to find and retain experienced individuals who can lead an effective ESG strategy. This should motivate organizations to improve their understanding of their needs now. Organizations that wait will likely end up scrambling to fill gaps as they appear.
Making it count
For stakeholders, proof that an organization is meeting its ESG commitments requires more than handshakes and press releases. Investors, for one, want quantifiable evidence that the organization is moving the needle when it comes to factors that matter most to their portfolios (e.g., greenhouse gas reductions, energy savings, social impacts, etc.). It’s therefore critical to establish the metrics and frameworks your organization will use to report on its ESG strategy.
Reliable data is central to ESG reporting. Once an organization decides which ESG-related factors it will measure, consideration must be given to how it plans to go about doing so in a way that ensures accuracy, integrity and relevance. Efforts must also be made to ensure ESG data collection practices adhere to evolving data privacy and security rules.
Location, location, location
An ESG transformation is neither an overnight affair nor a side project that can be pushed off to one department or team. Making good on ESG commitments means planning for a multi-year journey defined by agreed-upon roadmaps, roles and processes for measuring progress. Moreover, it’s a transformation that requires the ongoing dedication of all internal players, from board members and C-suite executives to front-line professionals and everyone in between.
That's not to say the journey needs to be difficult or costly. In many cases, acting on ESG is a matter of making small but meaningful changes in operations or supply chains. Done right, these changes can pay off in greater efficiencies and savings.
The real estate industry has long felt the push for effective ESG strategies to strengthen their business resilience and, ultimately, shape a more sustainable future. In my view, many organizations have made genuine and successful efforts to adapt rather than wait for government and regulators to dictate their path. As these ESG strategies build momentum, industry participants will be challenged to continue exploring the technologies, frameworks and processes that drive their unique E, S, and G objectives. It's no short journey but one that is sure to benefit all who take it.
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