In a recent blog, Grace Hill highlighted the challenges of retaining and attracting tenants in today’s increasingly competitive office market. Tenants now prioritize the health and safety of their workplace and can be more selective of their building because there is so much empty space available. In this environment, owners can gain a crucial market advantage by improving the environmental, social, and governance (ESG) credentials of their buildings. High ESG scores help tenants demonstrate to their employees that they care about their welfare — and signal their corporate values to clients and other stakeholders as part of their brand strategy.
In short, ESG ratings are becoming a vital differentiator for leasing commercial buildings.
But improving a building’s ESG score can be expensive and time-consuming, requiring renovations to the building systems and structure, as well as costly new equipment. So, what can owners do right now — quickly and economically — to enhance their scores? Tenant engagement programs can yield meaningful results. Managers of all commercial buildings can make an impact by working with their tenants to improve building sustainability.
Engagement Programs Directly Boost Sustainability Scores
One obvious reason for developing and implementing a tenant engagement program is that the leading sustainability assessment systems award points for these efforts, producing higher ESG scores. For example, the U.S. Green Building Council (USGBC) administers the LEED program, the world’s most widely used green building rating system. The program for existing buildings is called Building Operations and Maintenance, or LEED O + M. In addition to awarding a point for conducting an Occupant Comfort Survey, the program asks building managers to describe the “education and guidance to encourage tenants to comply” with “the procedures, strategies, and best management practices to be used to achieve the goals.” Tenant engagement is an essential element.
The GRESB Real Estate Assessment system — the leading program for evaluating the broader range of environmental, social, and governance efforts — places even greater emphasis on working with building occupants and other stakeholders such as employees and suppliers. Stakeholder Engagement accounts for 33% of the possible points on the Management Component and 21% on the Development Component, while the Tenants & Community aspect accounts for 16% of the possible points on the Performance Component.
Operating buildings are evaluated with the Management and Performance Components, while development projects are evaluated with the Management and Development Components. In summary, the combined Stakeholder Engagement and Tenants & Community aspects account for 21% of the possible points for operating buildings; the Stakeholder Engagement aspects of the Management and Performance Components combine for 25% of the possible points for development projects.
In addition, ESG rating programs require lots of data about building operations, much of it under tenant control. Tenant engagement programs can help owners collect data needed for comprehensive sustainability reporting.
Tenant Engagement Improves Sustainability Efforts
The importance of engaging with tenants goes well beyond the points that building owners achieve on their LEED or GRESB assessments. Sustainability efforts must inevitably start at the top, and building management must set the tone and expectations. But a robust engagement program can raise tenant awareness about the environmental impact of their behavior and the benefits of adopting sustainable practices. Often, simply raising awareness is enough to motivate tenants to take ownership of building-wide sustainability initiatives and act more responsibly.
Further, tenant engagement programs can encourage tenants to act more sustainably to reduce their own environmental impact. This may include educating tenants on industry best practices for how tenants make more sustainable decisions to minimize recyclable waste and cut energy and water consumption. Financial incentives can foster collaboration between building owners and tenants. For example, owners can offer to share any cost savings realized via the tenant’s actions.
Over time, these programs will help build a more sustainable culture that becomes self-reinforcing. By involving tenants in sustainability initiatives and promoting sustainable behaviors, building owners can create a sense of community and shared responsibility for environmental and social initiatives, thereby making it easier for people to make appropriate choices.
Finally, as the ones who use the building on a daily basis, tenants can help identify and implement sustainability initiatives that will work best and find opportunities for improvement. Indeed, the LEED O + M program manual notes that “as the team is drafting and implementing a new building policy, for example, an approach that draws on the expertise of all project stakeholders—owner, occupant, engineers, facilities managers, financial managers, contractor—may reveal innovative solutions.” Tenant and stakeholder surveys can be an effective method for surfacing innovative options.
In all of these ways, tenant engagement programs can help owners improve building sustainability ratings with relatively modest investments compared to the cost of renovations and new building systems. These programs can also demonstrate a building owner’s commitment to sustainability to investors, regulators, and other stakeholders — and ultimately help attract tenants.
Do you want to know more about tenant engagement programs? Talk to a KingsleySurveys CRE expert today.