Tag: Commercial real estate

COP26 Impact: Six ESG Mega Trends to Watch in 2022

The trends that set the tone for a more sophisticated ESG environment gathered steam at the Paris Agreement in 2015. Six years later, these trends further intensified and evolved at the 26th United Nations Climate Change Conference of the Parties (COP26), which provided clear direction for ESG-oriented action from governments, business leaders, and the financial industry. Those who have progressively embraced the ESG movement know that companies with strong corporate governance and good business practice are best-positioned for the future.

Down below are six ESG megatrends likely to feature prominently in the actions of companies, investors, and regulators in ways that will redefine the ESG landscape in 2022.

Six Esg Megatrends To Watch In 2022

1. Growing Multi-Sector Collaboration & Finance on ESG Issues

If 2021 taught us one thing, it was that global challenges require global collaboration. Fighting climate change is perhaps the biggest environmental challenge of our time. While governments have always been billed with this responsibility upfront, the good news following COP26 is that private sector players and capital owners have allied to contribute as well.

Apart from world leaders pledging to deliver on climate goals at COP26, more than 30% of the 2,000 largest publicly traded companies in the US have committed to going net-zero by 2050. Over 250 banks representing 40% of financial assets worldwide have joined the Principles for Responsible Banking movement, in which the banking community finances actions to build a socially just and sustainable world. Nearly 300 member companies work together in the Business for Social Responsibility coalition, and the world’s largest investors are joining Climate Action 100+.

Expect more public-private partnerships, collaborations between companies, investors, financial institutions, and industry coalitions to tackle environmental issues, mobilize climate finance, and set standards for responsible business.

2. A New Common Standard for ESG Disclosures

The announcement of the International Sustainability Standards Board (ISSB) at COP26 opens a new chapter in the field of ESG compliance and reporting. The ISSB, which will be formed as a merger of the Value Reporting Foundation (VRF) and the Climate Disclosure Standards Board (CDSB), likely by June 2022, is an important step towards a consistent reporting framework. The board will unite all different frameworks and build a common, global baseline of sustainability standards to better assess the ESG impact of businesses.

A new common standard like this means compliance with ESG regulation will become easier, and companies will be able to honour their roles in realizing the goals of COP26.

3. From Greenwashing to Integration of ESG Principles

The last 5 years have seen a remarkable rise in interest over ESG from investors, asset managers, and corporate boardrooms. That said, private companies and sustainable finance evangelists are being confronted with growing criticism over “greenwashing” as part of their CSR activities and investment portfolios. For a long time, ESG has been used as nothing more than a marketing tool to persuade the public into believing that a company’s products and operations are environmentally friendly.

COP26 presented a reality check for many business leaders and global organizations. With climate change becoming more visible by the day, we expect more and more stakeholders to understand how ESG principles can and should be integrated into investment decisions and corporate risk management. Further, companies that can better measure their ESG impacts and risks will be better equipped to make smarter capital allocation decisions.

Only companies that make the move away from check-the-box exercises to an outcome-driven approach to ESG operations will be able to successfully drive transformation.

4. The Role of the Built Environment Comes to the Fore

For the first time, at COP26, buildings received the attention of governments and policymakers as they looked to remove this huge barrier to a net-zero world, in a session dedicated to cities, regions, and the built environment. The attention was long overdue.

Buildings use about 50% of extracted materials and produce 40% of annual global carbon emissions. And the total building floor area around the world is expected to double by 2060. All countries are rapidly urbanizing, and we need to check the environmental impact of buildings across their lifespan – their operational emissions from heating, cooling, and lighting as well as embodied emissions involving the production and transport of materials used in construction.

The role of the built environment will certainly take centre stage in the quest for reversing climate change and will form a crucial part of ESG considerations for companies. ESG also prioritizes the well-being of occupants, tenants, and employees within the building. This means that good air quality and safety measures are going to be extremely important for ESG-oriented real estate companies. Thankfully, technologies already exist that can help drive down emissions and make the built environment a safer and more sustainable place to live, eat, play and work.

This brings us to our next ESG megatrend…

5. Data and Technology Will Drive Smart ESG Practices

Data and digital technologies grabbed global recognition as ways to speed up climate mitigation and adaptation at the Glasgow Climate Summit. As Commissioner Thierry Breton said in his speech on the green digital transition at the EU Pavillion side event of COP26 – “Connectivity enabled by digital technologies carries the enormous power of cutting global carbon emissions. 5G, Internet of Things, Artificial Intelligence, digital twins, blockchain, satellite technologies, and so many others can help to reduce them by 15% by 2030!”

Data and technology will enhance the ability to implement and measure ESG related practices and assess their impact on long-term value creation. Better visibility and access to information like asset maintenance schedules and resource consumption will play a major role in linking financial performance to ESG indicators.

For example, digital twins allow operators to look at real-time data across a building’s entire assets including HVAC, security, and occupancy systems, which can then be used to cut down costs, optimize resources and reduce greenhouse emissions.

6. The Rise of the CSO: Increased Focus on Metrics & Executive Compensation

Another ESG trend that will continue to grow into 2022, is the dramatic increase in the position of Chief Sustainability Officer (CSO) at companies around the world. According to CSO recruitment firm Weinreb Group’s latest report, of the total 95 CSOs hired in publicly traded US companies since 2007, 43 have been hired in 2020 and 2021 alone. McDonald’s, Walmart, HP, Aramark, FedEx, Morgan Stanley – they all have one.

As companies focus on ESG related metrics, a greater proportion of executive compensation is also becoming performance-based instead of time-based. Even though ESG linked executive compensation can turn into a topic of contention among investors and shareholders, the role of the CSO is expanding and changing. This includes the leap beyond the ‘E’ in ESG to include social justice, diversity, and inclusion at the workplace. Chief Sustainability Officer, Head of Sustainability, Head ESG Officer – we’re expecting more of them in 2022!

Seizing the ESG Moment

If 2020 was the year of awareness and 2021 the year of commitments, 2022 is going to be the year of action. As the foundations are being laid for the trends highlighted above, you can expect to see the extensive implementation of sustainable practices and meaningful collaborations on environmental, social, and governance issues. Energy management for asset maintenance is also becoming the center of sustinable practices.

Stakeholders who fail to seize the ESG moment will likely suffer greater risks and lose out on crucial opportunities compared to ESG leaders in several key areas, ranging from easier access to finance to improved business performance and exploring new business projects.

What are your thoughts on the ESG trends we’re going to see in 2022? How are you preparing to embrace ESG as part of your business strategy? Let us know!

December 14, 2021
Ever-Changing Landscape of Hard Services

To operate effectively, all organisations require a variety of services and it is critical to ensure that individuals, processes and the built environment all operate seamlessly while assisting in an organisation’s everyday operations, increased performance and benefit to the end result by rewarding and recognising the employees.

Organisations have an obligation to deploy certain FM services to comply with regulatory requirements which are determined by the nature, size and location of the organisation. Facility management is a broad term that usually refers to two major aspects: hard and soft services.

We’ll delve deeper into the hard services space and the future of it:

Bridging the gap between the small differentiators and big differentiators

It’s all about trusting and paying attention to the world of technology. While absorbing a lot of information and then looking for small differentiators that can compound into big differentiators, there are lot of things to look for, not necessarily scientific journals, but rather the types of blogs that keep their finger on the pulse of those scientific journals, which you may not know what to expect unless you read it.

So pay attention to those details and try to incorporate them into a broader technology strategy. Many entrepreneurs have a very narrow understanding of the challenges they wish to solve. And it’s often because they are born to be extremely capable individuals who become bored with the type of work they are doing and they want to build something better and you try to help them understand you are on the right track, but you are existing in a traditional kind of space.

Bringing New Regulations and ESG goals into the Hard Services Space

Environmental sustainability and governance issues are the most fundamental tectonic shifts in hard services. So how can you get people into space and continue to make a revenue? That’s less important right now than figuring out how to ensure you’ll be in compliance with the far too late regulation in space. The majority of occupiers now indicate they will make tenancy decisions based on ESG factors. The most significant consideration is how you will persuade the people that your building is a better option than the one right next door.

It’s more of a question of whether we’ll be compliant when this comes up if we don’t do it now as well as if we don’t come up with something, the regulatory climate and economic demand will.

What will not change in the Hard Services?

Materials will not change since there have been some incredible breakthroughs in materials as our society has been so focused on things like digital services. So, unfortunately, in our thoughts enough will change in terms of the materials used.

The term “materials” here refers to the types of materials that make up the actual building itself. It’s like we should deal with challenges knowing that nothing will change. Using technology to track the supply chain of building materials, QR codes and simple optical recognition are all that is required. For tracking purposes, we don’t always require RF, narrow band IOT, or anything like that and now you will start to measure the impact that building has on the supply chain from the beginning.

Taking a look at pre stages of both the consumption and production sides

It’s easy to understand the consumption side. However, not many people are considering the production side. So a lot of the actual production isn’t going to change, not in terms of what is produced, but in terms of how it is transported. You can start to have a real impact by monitoring, measuring and managing.

What’s not going to change in the post construction stage?

The demand for people would be constant, as there is currently a significant shortage of engineering skills in the operational space and the shortage isn’t likely to go away any time soon. So you should consider how you may centralise expertise and provide remote support while encouraging hard services workforce to work in a data first environment and recognising and rewarding them based on their performance.

These hard systems in assets will continue to have trait critical dependencies. There are still four factors which are mechanical, electrical, and plumbing, and the only thing that can be added to that is connectivity, which is somewhat changing as well. It’s no longer like you’ll have power in a building, especially automated systems that are now being deployed. but without connectivity, its capability is very limited. The power from the connection is sufficient to supply us with the information we require. MEP + C isn’t going to change but will only grow and is essential in the next step.

Aspects to consider in the FM space in the short to long term

You can think of augmented reality in the near future for the short term which can be as simple as a user manual or that could be something like troubleshooting guides or might just be a document in today’s world. By providing information and restricting access to only those who need it, it will reduce the amount of minutes or seconds wasted.

Medium term has to be a knock on effect of using augmented reality where it can be applied to machine systems, but it needs to know what to look for.

Considering the long term, it would be the value of decentralised systems and how that can lead to better data transparency allowing for more participants to help improve processes. Introducing building analytics will go along way.

All of the key breakthroughs and approaches in the hard services space are addressed in our blog. To discover more, listen to our podcast episode!

Let us know what you think about leveraging white collar technologies to address future blue collar problems.

November 9, 2021
Takeaways from Deloitte’s commercial real estate outlook for 2021 and beyond
Stepping into the last quarter of 2021, the global economy appears to be picking up pace and faring better than many expected. The commercial real estate industry, which has undergone huge changes during the pandemic, became witness to trends such as remote work, digitalization and cloud applications.

In its CRE Outlook for the year, Deloitte investigated the effects of COVID-19 on some of the fundamental functions impacting the CRE industry, and underlined how overcoming these challenges could lead the way for new opportunities to build back stronger.

We bring you our key takeaways from these functional challenges facing the commercial real estate industry – technology, operations, and talent – and how CRE companies can position themselves for growth in the coming years. Let’s get straight into it!

Technology

COVID-19 accelerated and necessitated the use of technology in the CRE industry. Digital transformation and tenant experience are coming to the fore as main objectives amid the pandemic.

Challenge:

Even though digital technology has helped improve tenant experience, fast-track important tasks and ensure business continuity, CRE companies still struggle with defining digital workflows and digitizing key business processes. According to the report, 56% of the respondents believe the pandemic exposed frailties in their company’s digital capabilities and impeded their plans to transform.

So what can CRE companies do to address their digital transformation hiccups?

Opportunities:

By making digital transformation a priority, CRE companies can tap into a sea of benefits – like happier tenants and advanced business performance. Industry leaders suggest that developing a structured plan with a more proactive approach, including the uptake of various technologies and data analytics, would likely bear substantial results.
- Using IoT-enabled smart devices
Companies can significantly improve tenant experience by optimizing real-time updates about facilities and developing a sense of community using IoT-enabled smart devices and mobile applications.
- Leveraging Cloud Tech
Cloud technology could be the cornerstone for a wide range of functionalities as it offers scalability, data storage, and universal access. Some CRE companies have already ramped up their use of cloud-based collaboration and productivity tools like Realstax and Bixby to lower in-house technology costs and increase flexibility.
- Building Partnerships with Tech providers or Proptechs
REIT (Real Estate Investment Trust) respondents have put a foot forward in this direction, showing more willingness to collaborate with proptechs. On an average, 58% of REIT respondents showed increased intent to partner, compared to 45% of respondents who are developers.

Operations

Cost management and redefining the value proposition of properties became primary goals for the CRE industry during the pandemic. Optimizing the operations function is considered to be essential for companies to build resilience against the volatile business environment.

Challenge:

As demand for leased space reduced significantly, CRE companies faced rising pressures to contain costs. Companies are also incurring higher operating costs because of the additional health and safety measures they need to implement across their portfolio of properties.

Opportunities:

To position themselves for longer-term success, companies should consider the following actions. These are crucial to enhancing business resilience and cutting down costs.
- Streamlining and Restructuring Operations
This involves an in-depth analysis of business processes, identifying opportunities to restructure and reduce inefficiencies which will allow work to get done faster and more cost-effectively.
- Automating or Outsourcing Non-core Operations
For CRE firms, non-core operations may be data collection & processing, maintenance, security, supply chain management, and so on. These should be automated and/or outsourced to gain operational efficiency. The pertinent dilemma – to build or to buy, must be taken care of.
- Deploying Smart building Design and Asset Management Systems
Companies could increase the value of their properties by deploying smart building design and modernizing asset performance management capabilities to render more relevant services to tenants and end users. This may involve using sensor technologies and predictive analytics to monitor facilities remotely and offer reliability-centered maintenance, implement more rigorous cleaning procedures, monitor HVAC systems, and enable data-driven decision making.

Talent

The shift to remote working was unprecedented for the CRE industry. Companies had to provide the infrastructure for employees to work effectively from home, or anywhere for that matter, while prioritizing health and safety.

Challenge:

The pandemic escalated many organizations’ need to reimagine job roles, leadership strategy, talent systems and processes, and culture to attract and retain a skilled and dynamic workforce.

Opportunities:

Some key avenues for CRE companies to improve upon and champion positive change in their workforce ecosystem
- Creating an enabling culture
Companies should adopt an enabling work culture and use the workplace to make employees feel valued, build strong relations, facilitate collaboration, and create more human experiences.
- Talent Transformation
Planning and implementing a talent transformation to adapt to the future of work, and prioritizing diversity and inclusion will provide a competitive edge.
- Three Approaches to the Way People Work
CRE companies could consider three approaches to the way work is done in the future.

Based on these approaches, companies could be progressives, visionaries, or simply traditionalists. The nature of work in the three types of companies is summed up well by the image that follows!

Conclusion

To state the obvious, the pandemic has altered the way we live and work, and it’s been no different for the CRE industry. It has pushed leaders across the globe to rethink their business strategies and goals, forced companies to prioritize cost containment, and amplified the scope of rewards from digital transformation. At the same time, human connection is becoming more relevant than ever, as in-person interactions have reduced significantly in the last year and a half.

From here on out, CRE companies are expected to master a balancing act – ensure business recovery, seize new opportunities, cultivate a cohesive workforce and improve tenant experience. This will require proactive leadership and organizational agility, and increased levels of collaboration among various stakeholders, to be able to adapt and thrive in the future of commercial real estate.

What strategies have you applied to sustain and thrive in the CRE industry this year? Let us know your experience with technology, operations, and talent, and how you are preparing to overcome the challenges posed by the current commercial real estate scenario.
October 11, 2021