Aligning Real Estate Strategy with Corporate Sustainability Objectives

Fact: According to the recent UN Global Compact-Accenture CEO Study, “93% of CEOs believe that sustainability issues will be critical to the future of their business and 96% of CEOs believe that sustainability issues should be fully integrated into the strategy and operations of a company.”

Impact: Corporate real estate and facilities organizations will be challenged by their senior leadership to integrate sustainability throughout their real estate strategy to operate sustainable facilities as a new way of doing business. While this does not guarantee success, CRE organizations that fail to pursue sustainability principles will be left behind. Said another way, embracing sustainability to manage corporate real estate is no longer an option, it’s an imperative because, “green is the new black.”

The problem then becomes, “what happens when a company’s corporate real estate strategy is not aligned with corporate objectives?” The short answer is, there may be some very difficult conversations between the CRE professional and senior management. But, the longer answer involves missed opportunities to take a leadership position in their company’s movement toward sustainability.

It is becoming increasingly clear that the recognition of senior management’s desire to embrace sustainability and the important role of real estate should be driving CRE strategy and generating measurable results. Because of what is at stake in the importance of achieving sustainability objectives, and the significant risk management and cost savings opportunities, doing nothing is no longer an option.

The imperative to align corporate real estate to the C-suite’s commitment to sustainability results from:

1.      Plant, Property and Equipment, of which the net value of real estate is a significant component, often comprise 20-50%+ of a company’s assets on the balance sheet;

2.      Buildings and facilities account for 70% of electricity consumption and 40% of greenhouse gas (GHC) emissions; and,

3.      Owned and leased CRE portfolios house a company’s most precious resource, its staff, and they enable operations. Therefore, it is critical that they be managed in the most efficient manner possible.

But, the most important underlying reason to achieve sustainability and corporate strategic alignment goes well beyond sustainability and its relationship to alternative workplace strategies. It is the fact that it makes good business sense by accelerating near and long-term value creation.

The key measurements that CRE professionals should use to measure progress toward achieving their sustainability goals are highlighted in a proprietary report from the Sustainability Roundtable, Inc. (SR Inc.) entitled, “Sustainable Corporate Real Estate Roundtable: Management Best Practices Guidebook 2010,” that cited key performance indicators from their members that include:

• Energy use and cost

• Energy efficiency

• Renewable energy use, and purchase of renewable energy credits (RECS)

• Scope 1, 2 and 3 CHG emissions

• Water use, reuse and recycling

• Waste and recycling

So, for the CRE professional, the alignment quotient isn’t just to avoid stressful conversations with senior management or create a marketing opportunity to promote that the organization is “going green.”

The overarching rationale is that aligning a real estate strategy with corporate sustainability objectives is all about creating enterprise value, reducing operating costs and risk, and enabling overall corporate identity that allow “sustainability issues to be fully integrated into the strategy and operations of a company.”

(The post was originally published in the Sustainability Roundtable’s blog found at http://www.sustainround.com/forum/SOR/ and was republished with permission by the author, Larry Simpson, Executive Vice President, Sustainable Rountable, Inc.)

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