Get Credit Where Credit Is Due: ESG Reporting and Why It's Important
“Sustainability” and “ESG” are not just marketing buzzwords – in fact, it’s safer from a legal perspective to think of ESG information as legal disclosures – and it's not just large companies with Environmental, Social, and Governance (“ESG”) committees considering these "non-financial" (but with potential for financial impacts) performance indicators.
Sustainability and ESG are not interchangeable terms, although if you’re working with a small management team, these responsibilities often fall to the same person or team. For this post, we’re thinking of environmental sustainability at your leased brick-and-mortar location as a key aspect of your “E” profile.
As more companies reckon with the real, long-term financial risks of climate change, the ability to quantify, adjust, and report data like building emissions, water use, and food waste is more in demand than ever. Why is it so important for companies to put hard numbers behind their sustainability stories? And how can Property Works help you develop and share your sustainability steps?
With buildings making up 40% of greenhouse gas emissions, there are not only huge opportunities but increasingly required responsibilities that building owners as well as tenants can and should undertake to reduce and report on their environmental impact. These are just some of the interested parties you should consider while assessing your own sustainability data strategy:
We are seeing regulatory action in the U.S. at state, local, and federal levels of government. We’re particularly watching for adoption of building performance standards, such as Maryland’s Building Energy Performance Standard and environmental or ESG data reporting requirements, such as the SEC’s climate information disclosure rule, expected to be released in April 2023. International regulations may apply to global franchise brands as well.
Capital Providers and Investors
Given the financial risks posed by climate change, investors are taking a much closer look at how companies plan to mitigate those risks, including risks of physical damage, costs due to changes in laws and regulatory requirements, and loss of consumers or capital due to market preference for environmentally resilient brands. A sustainability strategy is no longer a nice-to-have or satisfied by a solidarity statement on a website. The cost of changing nothing but marketing verbiage can have repercussions for how much investment a venture can attract.
As noted at the top of this post, it's not just ESG committees looking at companies' sustainability strategies anymore. CFOs and others in the C-suite have realized the long-term impact environmental change will have on the balance sheet, and the numbers are moving many to action like never before.
Customers continue to show interest in the sustainability practices of the brands they patronize. Failing to have a sustainability strategy—or failing to communicate that strategy effectively to an educated market—can mean lost revenue and bad press.
Insurance companies are signaling concerns about physical damage due to climate impacts, which may impact availability of coverage and premium pricing. How insurers will seek to mitigate those risks remains to be seen, but we’re expecting climate resilience information to become a crucial component of acquiring coverage for insured parties. Even if this is primarily a building owner concern, owners may request relevant data from their tenants.
Landlords and Tenants
Just as we may see significant financial costs associated with not addressing climate change, we also have a chance for significant financial savings or market advantages for businesses that plan ahead for “E” actions and reporting. Certain investments in sustainable options today can pay for themselves and beyond in the long-term, from making a simple in-store lighting switch and taking advantage of a utility company discount, to undergoing more extensive retrofits and pursuing certifications like LEED. Tenants should be on the lookout for lease language related to sustainability practices, as more landlords are reserving the right to make environmentally conscious building improvements or requiring tenant compliance with waste reduction policies.
How can Property Works help you develop and share your sustainability steps?
Our robust, proprietary software is designed to track every facet of lease management, including metrics such as water and power usage based on billing data. This data can provide information on building emissions and resource use and support measuring the effectiveness of efficiency features installed at your locations. We’re currently collaborating with sustainability industry leaders in exploring what data we already track for clients that will be useful in clients’ reporting on “E” data and what new data would be most helpful for us to collect for clients for these purposes. We’re looking forward to partnering with our clients on sustainability design as well!
In addition to unit data trackable in the Property Works software, we're also equipped to track any building performance language that may pop up in leases. And as we build upon our ESG reporting and support capabilities, we are equally invested in helping more companies design and achieve sustainability goals through collaboration and sharing best practices. For inspiration, take a look at organizations like Drawdown Georgia and the Institute for Market Transformation, two groups coordinating with businesses to crowd-solve climate challenges.
Interested in learning more about how Property Works can help you know, change, and report your environmental impact? We're passionate about this and we can't wait to learn how we can support your sustainability story. Reach out now to get started.
About Property Works
Property Works has been an industry leader in real estate and lease portfolio management for over 20 years, providing support to companies with multi-unit locations across a range of sectors including restaurant and retail. Since 1996, we’ve handled the portfolios of numerous Fortune 500 companies, as well as small businesses.
Contact us at firstname.lastname@example.org for more information on the benefits of partnering with us.