Creating Enterprise Value through Sustainable Real Estate Strategies

Sustainable corporate real estate strategies:

– reduce operational and occupancy costs through energy efficiency and space optimization, AND

– avoid customer, employee, environmental and regulatory risk, AND

– align portfolio management with an organization’s overall objectives.

Sustainable development, which has been defined as “meeting the needs of the present without compromising the ability of future generations to meet their own needs,” is a policy objective and global megatrend that companies must align with to create enterprise value.

The hallmark of corporate sustainability excellence is inclusion in the Dow Jones Sustainability Index (DJSI). The DJSI recognizes that “corporate sustainability is attractive to investors because it aims to increase long-term shareholder value. Since corporate sustainability performance can now be financially quantified, they now have an investable corporate sustainability concept. Second, sustainability leaders are increasingly expected to show superior performance and favorable risk/return profiles. A growing number of investors are convinced that sustainability is a catalyst for enlightened and disciplined management, and thus, a crucial success factor.”

DJSI recognition does not necessarily require a sustainable corporate real estate strategy, but those organizations that proactively incorporate the principles of sustainability into managing their portfolio of leased and owned facilities can make significant contributions to their organization’s overall enhanced value.

The challenge for the corporate real estate and facilities professional is made a bit easier when senior management fully embraces the principles of sustainability and is willing to make the necessary investment that achieves an acceptable internal rate of return. 

The way real estate strategies play a major role to create enterprise value is best highlighted in the Sustainability Roundtable, Inc.’s (SR Inc.) “2010 Corporate Real Estate Management Best Practice Guidebook” which reports the following best practices they originally researched from leading corporations:

  • Portfolio-wide sustainable real estate strategy is an essential component of a corporate response to the sustainability megatrend.
  • Leading real estate executives align with corporate strategy to establish a vision of sustainable real estate; implement effective governance; guidance; short-, medium- and long- term goals; and demand accountability for results.
  • Executives can create sustainable efficiency and value by developing and implementing portfolio-wide initiatives to improve portfolio performance and increase asset value.

Going forward, innovative real estate professionals are being increasingly recognized for taking the lead to exceed goals. To be successful they must implement proven sustainable real estate strategies that: compliment the corporate vision; anticipate long-term environmental impact; meet shareholder demand for financial returns; foster customer loyalty for company products and services; set high standards for the corporate code of conduct; and, maintain employee affinity and job satisfaction.

Michael Gresty, SR Inc’s EVP of Research and Consulting, observes that “today, the corporate real estate function is often by default the internal champion of sustainability initiatives. CRE teams can now do more to secure C-suite buy-in that enables them to maximize value creation rather than simply minimize costs. CRE is experiencing a metamorphosis to become a new source of value and risk management.”

Sustainability is no longer just “a good idea” or “the right thing to do,” sustainability is now an investable strategy as sustainable real estate portfolio management has become an important element in creating benefits for companies and their investors. As the sustainable enterprise value creation dynamic expands, it will have an even more profound effect on improving individual and corporate financial performance, the global economy, and environmental stewardship.

(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, Sustainability Roundtable, Inc.)

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One Response to Creating Enterprise Value through Sustainable Real Estate Strategies

  1. […] The Green Building Movement Escalates Corporate sustainability is becoming a core consideration for successful businesses around the world and companies will continue their focus on corporate real estate as a contributor to sustainability and social responsibility initiatives. LEED certification will continue to gain weight in the building and facility selection process and increasingly move from the preference category to requirement. The concept of the “Green Lease” will become more commonplace and users will move away from investing in new construction and toward retrofitting existing assets. As of December 2011, total sq. ft. of LEED-certified existing buildings surpassed LEED-certified new construction by 15 million sq. ft. on a cumulative basis  according the USGBC. […]

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