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The State of Sustainability in Corporate Real Estate and Beyond

Michael Creamer • 7/26/2021

Based on an episode of What’s Next in Corporate Real Estate here’s the good news and the bad news concerning environmental practices in real estate as well as what the future holds.

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  • Motivation to improve sustainability has never been higher among corporations, investors and individuals. That’s partly thanks to regulatory approaches like the Paris Agreement, and partly thanks to the work of activists. 
  • The impacts of climate change are already being felt: but despite a lot of positive talk about sustainability, there hasn’t been as much real-world progress as activists would like. 

  • The COVID-19 pandemic disrupted business as usual and has pushed companies to listen to what their employees and customers want, which includes better environmental practices. The momentum is with sustainability activists: but everyone has to live up to their promises. 

Corporations and individuals are more motivated than ever to act on sustainability — but is it enough to avert climate disaster? Sustainability, climate change and the environment have never been more popular sources of concern and discussion. And real estate should definitely be part of that conversation

As Head of Client Sustainability and Environment at law firm Freshfields Bruckhaus Deringer LLP, Oliver Dudok van Heel has been fighting for greener practices since before it became a trending topic.  

He admits that his job is often frustrating but believes the world could be turning a corner towards a more sustainable future. 

From the real estate angle, Katie Henry, Sustainability Manager at Cushman & Wakefield, says that certain clients (notably Microsoft) are raising expectations around sustainability. But she thinks the industry generally is still behind the curve. 

The good: More people care about the environment 

Let’s start with what’s going well sustainability-wise in real estate and the corporate world more broadly.  

Thanks to seeds sown in 2015, Oliver says, sustainability has suddenly become if not exactly cool then at least important. That was the year all United Nations Member States adopted the 17 Sustainable Development Goals (SDGs) - recognizing that ending poverty and other deprivations must go hand-in-hand with strategies that improve health and education, reduce inequality, and spur economic growth – all while tackling climate change and working to preserve our oceans and forests. 

197 countries also signed the Paris Agreement: a legally binding promise to meet certain climate goals, with the overall aim of reducing the average rise in temperature due to global warming to less than 2oC (3.6oF).  

The legally binding element gives the agreement some traction with the business world that is otherwise lacking in vague declarations about “wanting to do better” on climate.  

Companies have to comply with regulations initiated in their home countries in response to this agreement: so it’s in corporations’ and investors’ best interest to make sure companies they have stakes in are meeting these sustainability requirements. That includes looking at the efficiency and green practices of the buildings they’re working in. 

The push to prioritize climate change prevention is happening more frequently on an individual level too. Thanks to media coverage of activists like Sir David Attenborough and Greta Thunberg, the general public is paying more attention than ever to sustainability practices.  

That doesn’t just mean they aren’t using straws and are recycling. In addition to changing their own behaviors to be more environmentally friendly, people are scrutinizing corporations’ attitudes towards the climate. Setting sustainability goals and proving that you’re meeting them isn’t just a good thing to do for the planet anymore: it’s an essential selling point. 

The bad: Corporate real estate can do more  

Not to throw coal dust in your sustainably harvested champagne, but the environmental picture isn’t all rosy. Or green. 

The Paris Agreement was undoubtedly a landmark moment in the global community’s approach to climate change. But “We’ll always have Paris” won’t cut it this time.  

As Oliver points out, in the half a decade since those agreements went into effect in November 2016, progress on carbon elimination goals has been disappointingly slow. Katie adds that despite being a major source of carbon emissions, real estate is behind the curve when it comes to setting sustainability goals

Even more disturbingly, the increased pro-environment enthusiasm of individuals, investors, politicians and corporations might be too little, too late.  

Countries around the world are already experiencing the devastating impacts of climate change in the form of droughts, floods and wildfires. And carbon currently trapped in the atmosphere will continue to cause temperatures to rise for decades to come.  

Climate change isn’t the only unfolding environmental disaster: damage to ecosystems including the rainforest and reefs, for example, will also affect the way we live in the future. 

The future: Cause for cautious optimism 

If you’ve made it this far, take a deep breath while we look to the future. There is reason for cautious optimism, provided everyone is willing to put in the work. 

On the bright side, events of the last few years seem to have swung momentum in sustainability activists’ favor. Although the U.S. is not the entire world, it is the world’s largest economy, and also contributes the second-highest percentage of global carbon emissions, behind China. Therefore, the U.S.’s environmental policies have a disproportionate impact.  

Former president Donald Trump’s plans to leave the Paris Agreement were a big blow. But the election of President Joe Biden indicates that the U.S. government is back on board with environmental protection plans.  

Biden has not only rejoined the Agreement, but is working to push through an infrastructure bill based largely around promoting clean energy sources. 

More broadly, the postponed 2020 UN Conference of the Parties (COP) has been rescheduled to November 2021. The Paris Agreement was signed at the 2015 COP, and six years on, with more signs of climate change emerging, now would be a good time to check in on those promises, and hold parties accountable for missing goals. 

In addition to forcing the postponement of various major world events, the pandemic may have had some incidental positive impacts. Some of the programs nations have put together to tackle the economic fallout emphasize moves towards sustainability as a way to boost their economies.  

In the business world, companies are being forced to take more responsibility for the state of their supply chains, including not just the environmental impact, but also human rights issues. On the local level, COVID-19 has raised awareness about air quality in offices and access to outdoor spaces for employees, Katie says. It has also pushed employees to voice their concerns about their company’s attitude on issues that matter to them, including the environment.  

So yes, the momentum is shifting towards a greener future: but only if we all keep pushing it that way. 

Final thoughts: The corporate real estate sector has been slow to adopt sustainable practices as a whole; but individuals who continue to demand change are the key to dragging the industry towards a more climate-friendly future. 

This article is based on What’s Next in Corporate Real Estate, a podcast offering insight into the changing world of work and corporate property. Presented by Michael Creamer, Chairman of Global Occupier Services, EMEA, episodes feature industry experts discussing how they navigate the modern corporate real estate landscape and what drivers are impacting change throughout the industry. Subscribe to get future episodes in your preferred podcast app. 

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