Gathering, verifying, cross-checking, and submitting all the information required by annual ESG benchmarks can be a headache, even if you’re a seasoned ESG reporter. Requirements often change from year to year, and the task of ensuring that all of your ESG efforts and accomplishments are captured can be daunting. The 2020 reporting season has proven to be challenging across the board—especially for commercial real estate owners, whose tenants continue to be severely impacted by COVID-19 and the resulting shutdown.
At the same time, annual sustainability report is becoming less relevant. With so much emphasis placed on ESG (environmental, social, governance) data by investors, tenants, and other stakeholders, many commercial real estate companies are finding themselves having to provide granular information routinely throughout the year. And it’s no longer simply about energy consumption and carbon output—companies are now expected to document their social and governance efforts, as well as what they’re doing to prepare their assets for climate risks and other existential threats.
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Though it may be time consuming (perhaps less so if you have the tools to properly automate the data), performance disclosure continues to be a crucial step of the ESG journey. Popular benchmarks for the real estate industry like GRESB and CDP are great ways to assess your portfolio’s performance against your peers. They can also help firms quickly identify areas to improve, which can inform sustainability strategies and inspire measurable ESG goals.
Although minimizing your company’s impact on the environment; improving diversity, equity, and inclusion among your workforce; and establishing company-wide goals are worthy pursuits, they are also becoming essential to a firm’s ability to attract quality tenants and investors. But these stakeholders need hard data to verify those ESG efforts. In response, an alphabet soup of voluntary frameworks have emerged—SASB, GRI, and TCFD, to name a few. In many cases, investors are expecting firms to apply and report to several of these.
So what are the most appropriate benchmarks or frameworks for your firm to focus on? The answer is not a simple one. Each has its own requirements and areas of focus. As of 2020, we are nowhere near a single, industry-wide standard for verifying impact and comparing ESG performance. At the same time, stakeholders want clear, timely, and accurate data surrounding all aspects of ESG.
Find out what it takes to get investment grade ESG data
Owning Your ESG Narrative
At a time when the stakes are high, but the path is unclear, it can be tempting to choose from a handful of established frameworks and stick with a checkbox approach to your ESG program. However, that leaves little time—not to mention, motivation—for your team to develop strategies that truly move the needle in your performance.
What matters more than the framework you choose is having uninterrupted access to a number of data points so you can continuously monitor and track your progress toward the ESG goals that are material to your company and its stakeholders. Empowering your team with a scalable ESG data solution will allow you to take charge of collecting, assuring the quality of, and consistently disclosing pertinent ESG metrics as you see fit.
Embracing a digital, automated approach to ESG has allowed many firms to collect and report their ESG performance despite massive COVID 19-related business disruptions that continue to send shockwaves through the market. These companies can track metrics and manage ESG efforts on their terms, according to their interests and objectives—not those of outside parties that have no stake in the firms’ future.
With automated data capture and the ability to view and track performance at the asset level, real estate owners can do much more than simplify reporting. Technology enables companies to identify their highest performing buildings, and zero in on which assets require updates or projects to increase their energy efficiency, reduce water consumption, and improve waste diversion. Access to real-time data analytics can boost tenant engagement and motivate building managers and occupiers to improve their sustainability performance and mitigate climate risks such as flooding, drought conditions, and heat stress. And having all this data on hand can help firms stay ahead of investor demands, improving access to cheaper, better capital.
Until clear industry standards are developed, reporting frameworks will continue to change, evolve, dissolve, and merge with others. No matter what ESG disclosure looks like in 2021 and beyond, commercial real estate firms that adopt technology to automate the cyclical, mundane side of ESG reporting will be best positioned to meet stakeholder demands and continue to drive ESG efforts forward, year after year.