18 November, 2021
In September, CBRE’s research team conducted a survey of over 200 UK clients to establish the ‘state of play’ on the full range of environmental and social sustainability issues which the real estate industry is being asked to tackle including climate change, biodiversity, pollution, waste, health and wellbeing, and responsible business. Respondents included investors, housebuilders, occupiers, lenders and infrastructure providers, working across the full range of real estate sectors.

We draw four main conclusions from the survey results.

Firstly, firms need to review their sustainability strategy’s real estate coverage.

The good news is that only 10% of respondents said their organisation’s strategy was not clear in its real estate implications. But only 13% of our respondents said they had ‘major’ or ‘some’ coverage in their strategies for all of the nine sustainability issues we asked about. Most clients have gaps compared with ‘best in class’ coverage – with biodiversity being a particular weak point.

This suggests that perhaps firms should work backwards from the real estate decisions they are making, to the strategy that have adopted, to ensure that real estate’s contribution is being maximised. Does a firm’s strategy give a meaningful framework for the main types of real estate decisions that it usually makes? For example, does it say what the organisation wants to achieve on water usage or ‘embodied carbon’? If not, it may be time to seek improvements to the strategy.

Secondly, collaborating with counterparties (whether that be your landlord, your tenants, or your banker) will continue to be crucial. Although our diverse respondents had a lot of goals in common, we found substantial mismatches of sentiment between occupiers and landlords.

For example, as Chart 1 shows (below), occupiers placed much greater emphasis than landlords on talent retention, employee wellbeing and brand reputation as drivers of their ethical business strategies.

Chart 1: Main drivers of respondents’ commitment to sustainability goals
Picture2
Source: CBRE Research

We also found that occupiers were actually more willing to pay for certain environmental improvements to buildings than landlords thought. So it’s important to check that decisions reflect the strategy of our stakeholders, not just our own strategy.

Thirdly, we need to refine decision-making systems.

62% of our respondents made decisions taking into account their organisation’s sustainability goals ‘most’ or ‘all’ of the time. That doesn’t sound too bad – but it means that nearly 4 in 10 respondents did not. And when these goals were taken into account, they were more likely to be underweighted in the decision than overweighted.

At the very least, this represents a substantial compliance risk for businesses whose follow-through from strategy to delivery is coming under increasing scrutiny from customers and regulators.

Thus, firms should be reviewing their real estate decision-making processes to ensure that decisions are taking the organisation’s own strategy into account more systematically.

Fourthly: keep it practical.

Hearteningly, our respondents did not see uncertainty about the future as a particularly big challenge in taking action now, nor were they ambivalent or passive about the importance of taking action on sustainability issues.

In fact, the challenges which respondents perceived were much more practical ‘coal face’ issues were not having the right data, the complexity of some of the decisions and the difficulty of balancing (or even understanding) costs and benefits. At CBRE, we’re focused on helping to solve some of these practical challenges.

So, overall, we found that the real estate industry is on the right track, but that there are also clear and specific further opportunities to turn our sustainability commitments into bricks and mortar opportunities.

You can find our full report here.