In the second of our interview series with ESG experts, Sam Pickering discusses who is responsible for gathering sustainable data, how portfolios are currently planned, the impact of hybrid working on the route to net-zero, and how corporates will measure sustainability as more staff work from home.
WHO IS RESPONSIBLE FOR FLEXIBLE WORKSPACE SUSTAINABILITY DATA?
There are very clear methodologies on how to estimate emissions data as defined by the Greenhouse Gas Protocol (GHG) but, in simple terms, collecting and reporting sustainability data should be the responsibility of the operator or landlord. Data is invariably provided through meters, invoices, reports or financial statements.
This data tends to be based on either a whole floor or a building depending on the submetering or sophistication of the buildings. Granular data of a particular space occupied by a customer should be apportioned by the operator based on the tenant’s square footage for key emissions categories such as electricity, gas, water, and waste consumption, using the GHG Protocol.
From an operational perspective, the most sustainable office is a space that already exists. However, if you look at a net zero building, it is a building that is fully electric, supplied through a certified renewable source and achieves a low energy intensity performance.
The availability of renewable energy varies significantly within markets globally but is becoming more achievable. In the UK, for example, renewable energy credits (RECs) coupled with a ‘guarantee of origin’ provide surety of the electricity supply of a particular building and the renewable energy sources, i.e. wind, solar, etc.
A low energy intensity performance can be achieved relatively easily within a space by specifying energy-efficient technologies whilst incorporating better controls and automation. This leads to an energy-efficient space that is well operated and removes human intervention.
There are complications with shared services with the landlord or other tenants but the principle for a ‘net zero’ building in operation is well defined.
Do net zero flexible workspaces currently exist? Part of the frailties of the flex sector is that there are limited performance standards around net zero or sustainability in general. There are numerous for construction but the nuances of the flex sector make this more complex.
It is, in part, about how much of a particular office you will control. If you have control of the entire building, it provides more insight into selecting the right sites and helps identify those that won't achieve the required performance to achieve net zero. But occupiers of flexible workspace don’t have this level of control when taking several desks nor is the supply of sustainable flexible workspace currently able to meet that demand.
However, organisations requiring flexible workspace are not asking the right questions. Occupiers don't know what ‘good’ looks like and, as a result, operators don’t understand their needs. Sustainable requirements are not being articulated properly by property agents and many businesses. Operators and occupiers alike are settling for band-aid solutions such as good recycling and LED lighting and don’t align to standards that achieve currently defined net zero office space standards.
HOW ARE PORTFOLIOS CURRENTLY PLANNED?
Portfolio planning is changing hugely – many organisations are moving to a more flexible or agile portfolio which reduces risks and utilizes space better. While flex space may now be a small proportion of an overarching corporate footprint, it may grow to represent approximately 30% of the total corporate portfolio - we are already seeing this change in our clients. When you then overlay each approach, the biggest impact that the corporate real estate function has is fit-outs. In a traditional building fitout, you take a lease, design, fit-out and operate a building for a period of time before stripping everything out at the end. The environmental impact of this is huge but is currently not generally evaluated or incorporated into portfolio strategies or project evaluation.
This is where flex conceptually has a much lower environmental impact than the traditional lease space. Businesses will not have a negative environmental impact by stripping out an office, fitting it out, and then operating it because it already exists and can be occupied by others with limited changes at the end of a lease.
As you look at portfolio planning, companies are generally working from home, flex or an office. Headquarters or major offices tend to be poorly utilised, with some businesses reporting only 50 – 60% utilisation. But if you reduce the space by 50% and place more people in flexible workspace or at home your actual carbon intensity (from having space and utilising it properly) reduces significantly.
Over the next three years, impact reporting will become more robust and, in turn, businesses will have to start reporting on the fit-out process which will make a huge impact and drive change. In terms of flex provision when portfolio planning, the net zero focus is ranked as highly as agility. Evaluating the sustainability performance of all workspaces is becoming more prominent for all the corporates we are currently working with as they move towards a net zero future by 2020, 2040 or 2050.
WHAT IMPACT DOES HYBRID WORKING HAVE ON THE ROUTE TO NET ZERO?
As a general observation, property portfolios are shrinking as businesses embrace agility. However, businesses can’t simply replace their space with flexible workspace or homeworking and then claim that emissions are down because they are still being consumed elsewhere. As transparent reporting matures, emissions data is going to be vital to understanding the full extent of a portfolio’s impact. As an example, many corporates are now estimating the amount of energy it takes for us to work at home and then taking ownership of these emissions and including them within annual reports. Some businesses are even considering giving people a loan to green their homes in place of commuting.
We are also seeing more technology platforms that look at commuting patterns. An employee might commute 2 – 3 days per week or they might change from a train to a car because they have a local hub. How corporates utilise this data and then encourage employees to do the right thing is where the challenge lies.
There are numerous environmental benefits to businesses revaluating where employees work, from commuting & business travel to reusing space as opposed to individualising everything. But will corporates really start to ‘green’ employees? The fact they are talking about it is encouraging.
The crucial aspect is that no one has all the answers. Sustainability relies on businesses being transparent about what they have done and the benefits it has for the environment. This is not an individual challenge but one to learn from each other.
HOW WILL CORPORATES MEASURE THE GREENNESS OF EMPLOYEES' HOMES?
Many businesses are talking about measuring the ‘greenness’ of employees’ homes, but very few have achieved this at scale. We have been working with a financial sector organisation that wants transparency in reporting at its core moving forward. This organisation has recently established 100% renewable energy across the property portfolio, all of which is from a certified source and aligns with best practices. They are now looking to expand this and developing a concept of allowing employees to buy renewable energy for their homes through the same scheme. This will benefit many employees from having a renewable energy source for their homes but also provide cost reductions due to the volume involved. This is one example of many concepts we are currently working on but it still feels like we’re just at the beginning…
At the moment, the priority is getting corporates to take responsibility. Businesses cannot let everyone work from home and then ignore those emissions. In theory, corporates would estimate these emissions by requesting employees’ energy bills on a monthly basis and segmenting them by how big and how often their office spaces is used. Then, over time, businesses can submeter space to make it far more efficient and transparent and start to think about green loans and other initiatives to reduce home emissions. There is a long way to go, but the discussions have started.