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HEALTHY PLACES

What does ESG have to do with office space?

Contact image Arkadiusz Rudzki Arkadiusz Rudzki
Design, price, proximity to schools, the length of the commute: for decades, European home purchasers have weighed up a largely unchanging set of factors when choosing a property.

But those priorities are shifting following spikes in energy prices and amid rising public awareness of the built environment’s contribution to global warming, experts say. Instead, lower-impact features such as air-source heat pumps, solar panels and energy efficiency are increasingly important attributes as consumers seek to cut their expenses while being kinder to the planet.  Energy classifications and certification are also starting to have an impact. 

 

"Even going back just five years, the prioritization of energy efficiency or sustainability features was relatively low, certainly when considered relative to location or proximity to schools,” says Dr Stephen Richardson, a director at the World Green Building Council. “But the cost-of-living crisis, and particularly the energy crisis, have shown people the impact of these truly unprecedented energy price rises. That’s making consumers think much more seriously about what it might cost to heat a home before they purchase."

 

Raising standards across the sector

 

Buildings account for 36 percent of total European Union greenhouse gas emissions, according to official figures. The European Commission is seeking to cut that by doubling renovation rates by 2030 in both the commercial and residential sectors. The commission is also working on proposals that include implementing strict emission limits on new buildings and minimum efficiency standards for existing buildings. The worst-performing residential buildings under the proposals, for example, would need to reach at least class F by 2030 and class E by 2033.

 

Progress differs significantly by country and is often dictated by a complex patchwork of legislation, incentives, consumer interest, history and geography. Portugal, with its ample access to wind and sun, already gets 60 percent of its energy from renewable sources. At 70 kWh/square meter per year, the nation boasts the lowest average energy consumption of residential buildings per square meter in Europe, according to Wunderflats analysis of official EU figures.

 

Sweden, with its comparatively long, cold winters and mild summers, is particularly strong on sustainable heating and cooling and the production of renewables. Germany offers tax breaks for rooftop solar and already contributes 590 watts per capita back into the grid via solar, compared with the European average of 168 watts.

 

Incentives can boost interest

 

Incentives will play a vital role in boosting consumer interest in purchasing and renovating more sustainable homes, Richardson says. The Italian government introduced a particularly generous program in 2020 known as the “superbonus,” enabling homeowners to get 110 percent of their renovation expenditure covered by the government. Renovation rates surged but the scheme was overhauled in February following criticism that it contributed to a spike in inflation. The UK government, too, has struggled to set up an effective set of incentives, with several schemes announced and then scrapped.

 

"There’s still quite a long way to go in terms of understanding how we address these systemic challenges, especially in the renovation space," Richardson adds. "How do you finance it all effectively, give people the support they need, but without these distortions in the market that you sometimes get when you inject public subsidies."

 

Though consumer taste for sustainable building attributes differs by location, they tend to be unified by a preference for what’s visible. A roof covered in solar panels, or a timber building, have long been the images consumers see when they think of sustainable buildings, which drives their interest. “There’s definitely a status aspect to that,” Richardson says.

 

However, the energy crisis has pushed energy efficiency to the top of the agenda, which is a good thing, he adds. “Installing renewable energy sources but then wasting that energy in an inefficient building is not really what we want, so we should ensure people are getting good advice,” he says.

 

‘People have a desire to make a positive impact’

 

These themes extend to what consumers put into their homes, too. "People really have a desire to make a positive impact, and we see that growing more and more," Vanessa Butani, VP of Group Sustainability at Electrolux, told Skanska’s Shaping Sustainable Places Podcast in February.

 

The company is responding by building more efficient products, aimed to help consumers reduce the environmental impact of their lifestyles and their homes. Products include laundry appliances that extend the life of clothes, and refrigerators that can reduce food waste.

 

It all amounts to a lot of choices, which can be overwhelming for consumers. Third-party sustainable building certification schemes such as LEED, WELL and BREEAM have gained traction in the commercial building sector because they weigh up and condense various sustainability attributes into a single rating, which simplifies the process significantly. They can, however, be expensive to attain and in most markets there is little evidence so far that consumers would be prepared to pay a premium for them, which reduces appetite among developers to seek them out, says Richardson.

 

"So much of the process of choosing a home is driven by emotion, rather than logic,” he concludes. “These certifications can support decision making, but they aren’t visible in the way that solar panels are, or other design aspects. In commercial markets people like certifications because they’re making investment decisions, whereas purchasing a home remains a decision of the heart."

 

Get more insights with our podcast on healthy and sustainable homes.

 

But those priorities are shifting following spikes in energy prices and amid rising public awareness of the built environment’s contribution to global warming, experts say. Instead, lower-impact features such as air-source heat pumps, solar panels and energy efficiency are increasingly important attributes as consumers seek to cut their expenses while being kinder to the planet.  Energy classifications and certification are also starting to have an impact. 

 

Tenant and investor perspective 

 

The survey helped us better understand office users’ perspective, but how about tenants’ and investors’ views? Location is crucial for these groups as well. Other important factors include cost, modern design aligned with (employer) brand identity, technology that future-proofs the building and – more and more often – alignment with ESG (environmental, social, governance) criteria. If renting or buying, could the office contribute to tenants’ or investors’ sustainability objectives?

 

The importance of ESG

 

ESG and sustainable development have become one of the main trends in the business world. Sustainable development is attracting more strategic attention from companies, due to topics such as:

 

  • Climate change having an increasing effect on people and societies across the globe
  • Growing social awareness of the impact businesses can have on the natural environment
  • Evolving employees’ priorities and expectations of their employers and/or new regulation

 

Your office can help deliver on sustainability strategy 

 

When buying, designing and building or renting office real estate, it’s worth remembering that this decision may have considerable impact on your company’s ability to deliver on its sustainability strategy. An office that supports environmental, social and governance goals can have a positive impact on this ability, while serving as a physical manifestation of company’s strategy and values, especially if they link to United Nation’s Sustainable Development Goals (SDG), which many companies’ do.

 

Read more of Arkadiusz’s blog posts on LinkedIn

 

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