Communicating Sustainability Performance: Shorenstein's Viewpoint

Communicating Sustainability Performance: Shorenstein's Viewpoint

Sustainability reporting is moving from best practice to standard practice in the real estate industry. As the need for climate action becomes increasingly evident, both publically traded and privately held real estate companies are recognizing the business case for communicating their corporate responsibility actions and quantifying the results. Shorenstein’s road to sustainability reporting resembles that of many peers in the industry. In 2008, with increased sensitivity to environmental issues, we began implementing new and creative strategies to operate our properties better. A multi-departmental committee, charged with developing a sustainability program, launched more than 30 initiatives to increase resource efficiency, reduce chemicals and waste and engage tenants. Since that time, we have saved $8.2 million in operating costs and cut carbon emissions equivalent to taking 1,500 cars off the road.

This year, with heightened stakeholder interest in sustainability, we decided to tell our story. It’s the story of implementing “G.R.E.E.N. Initiative” operating procedures, benchmarking utility consumption and helping tenants make an impact, with 13 million sq. ft. of LEED-certified property, 47 Energy Star buildings and a nationwide “Energy Savings Tour” that saved $1.7 million in one year. Looking back on our 2008 baseline, the Shorenstein 2013 Sustainability Report shows how far we have come.

And looking back on the broader real estate corporate responsibility movement shows how far building owners and operators have come. Companies no longer ignore or deny their impact on the planet. Nor can they redeem a tarnished image with a superficial “greenwash” marketing campaign. Today, stakeholders expect transparency. Companies are responding with sustainability disclosures that increasingly approach financial accounting quality in terms of completeness, timeliness, reliability and comparability.

Let’s take stock of the drivers, reporting frameworks and operating platforms that factor into a real estate sustainability reporting strategy.

The drivers

With September’s United Nations Climate Summit proceedings and surrounding demonstrations as a backdrop, let’s consider the motivators. Public disclosure is being driven by three key stakeholder groups: investors, tenants and regulators. These audiences want to know the size of the environmental footprint left by commercial buildings and what actions companies are taking to reduce it.

Investors are recognizing that global climate change presents real risks to asset value, in the form of both extreme weather events and the probability of future carbon regulation. They have also found that sustainable operating practices correlate with strong financial performance, and they increasingly factor corporate responsibility to investment decisions.

Tenants consistently rate green operation as important to their leasing decision. They want to be good stewards of the planet and they understand that the buildings they lease constitute a substantial part, if not the majority, of their environmental impact. Tenants care about indoor environmental health for employee productivity and job satisfaction. Our annual tenant satisfaction survey clearly identifies sustainability as a key ingredient for tenant attraction and retention.

Governments, especially at the local level, are taking bold steps to measure and manage their environmental impact. Buildings use nearly 40 percent of U.S. energy and 13 percent of potable water. Regulations are now in place requiring approximately 50,000 of the nation’s largest private buildings in 11 of its biggest cities to annually disclose utility information, with more legislation anticipated. Additionally, the threat of rising seas and increasingly extreme weather events is driving planning and code departments to consider resiliency in land use planning and development.

The reporting frameworks

Disclosures on corporate responsibility are certainly not unique to real estate. According to Ernst and Young, 95 percent of the 250 largest global corporations as well as a majority of the Fortune 500 produce sustainability reports. As a broader business trend, the concept of materiality is expanding beyond the traditional financial accounting scope to include environmental, social, and governance (ESG) factors. Since its establishment in 1997, the Global Reporting Initiative (GRI) has grown into the most widely adopted reporting framework in the U.S. and internationally. More recently, the Sustainability Accounting Standards Board has been engaging with business and the Securities Exchange Commission to define industry-specific disclosure standards.

In the real estate industry, the Global Real Estate Sustainability Benchmark (GRESB) has gained widespread investor recognition as a source of comparable sustainability data. This year, 637 entities representing $2.1 trillion in real estate assets participated in the GRESB survey. To engage tenants, property managers utilize newsletters, informational factsheets, online resource sites and Earth Day events to communicate efforts and encourage involvement. Energy benchmarking regulations in 11 of the nation’s largest real estate markets have mandated disclosure of building carbon footprints and have made building efficiency public information.

The operating platform

Good sustainability reporting flows naturally from an effective sustainability program. Walking the talk on corporate responsibility is essential. Fortunately, it isn’t that hard. A program should be operationally-focused and consist of strong policies, effective training, good data, smart efficiency investment and tenant engagement. Here are the foundational components upon which Shorenstein’s sustainability program is built:

  1. Policies: Put in place building management policies for energy and water management, recycling, cleaning, pest management, landscaping, and indoor environmental quality. Such policies are required by the U.S. Green Building Council’s (USGBC) LEED for Existing Buildings standard.
  2. Training: Once policies are established, give your teams with the knowledge and tools necessary for proper implementation. Training ensures competency and fosters a corporate culture that embraces sustainable operation. You can develop an in-house training program leverage or external support. The USGBC’s Green Associate credential is an effective means for employees to demonstrate green building competency.
  3. Data: You can manage what you don’t measure. Put in place systems and processes for gathering and analyzing performance information. This does not necessarily require huge outlays of capital for sophisticated software platform (although many great, affordable systems exist). The EPA’s Energy Star Portfolio Manager is free and provides robust tracking of energy, greenhouse gas emissions, and water—the majority of the data inputs needed for sustainability reporting. Furthermore, it is the de facto standard disclosure tool for municipal energy benchmarking compliance.
  4. Investment: Good data will tell you where the biggest efficiency ROI opportunities lie. Invest in proven technologies and better operating practices. Start with the low-hanging fruit, and then climb to the higher branches. Technologies such as VFDs on motors, replacement of inefficient T12 and metal halide lighting, occupancy sensors, low-flow aerators and restroom fixtures payback very quickly, sometimes in a matter of months. Operating practices such as matching HVAC operation to actual occupancy hours and reading water meters daily or weekly have a small price tag but can have a huge impact. ASHRAE’s (formerly the American Society of Heating, Refrigerating and Air Conditioning Engineers) level 1 and level 2 audits can uncover bigger opportunities such as building management system tuning. Energy and water systems must be maintained and frequently calibrated to ensure actual operation is consistent with design parameters. Commissioning and retro-commissioning can often be subsidized with utility incentives.
  5. Tenant engagement: Occupants control the majority of a building’s energy, water and waste. They decide lighting levels and schedules, indoor temperature, and whether electronic devices are left on or turned off after hours. Provide building occupants with the information, tools, and incentives that empower efficiency. You can use lobby events, electronic communications or printed materials (double-sided on recycled paper, of course). Review the green leasing basics, and be sure that brokers understand the mutual benefits. Most people want to choose environmentally-friendly behaviors. Outreach efforts will translate into lower operating costs and higher tenant satisfaction.


The growing body of sustainability reports in the real estate industry, and across the economy more broadly, suggests that investors and managers understand the alignment of financial and environmental performance. It’s about market competitiveness, risk management, and reputation. Together, we are building a sustainable future because it is good for the planet, and good for business.

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