– 9 July 2010 – Australia’s commercial property sector can now proudly point to a group of property company sustainability programs that are coming of age. These programs are the mechanisms by which companies can make the environmental performance improvements they need and want, but take time to set up.

Having a group of them advancing in maturity is a significant breakthrough as it sets vital precedent for others to learn from.

With commercial buildings responsible for about 10 per cent of Australia’s greenhouse gas emissions and with a lot of improvement possible in our inefficient building stock, these programs are also going to be core to our nation’s approach to climate change, as well as other environmental challenges such as water.

It was only about five years ago that the leading pack of Australia’s big institutional landlords (which own much of our CBDs) got started with programs to improve the environmental performance of its large office portfolios.

Those companies now have solid management frameworks in place, they have achieved some excellent performance improvements and have even been recognised as world leaders.

Some performance improvement highlights include:

  • Investa Property Group has reduced its electricity use by 22 per cent since FY03/04
  • GPT Group has reduced its greenhouse gas emissions 41 per cent from 111,132 tonnes CO2e in 2005 to 71,434 tonnes CO2e in 2009
  • Stockland has improved the NABERS* Water rating of its office building portfolio from only 1.2 stars out of 5 in 2005 to 3.6 stars in 2008
  • 70 per cent of “waste” in GPT office buildings was recycled in 2009

We have seen Australian property institutions top the real estate and financial super-sectors in the Dow Jones Sustainability Index (See: www.sustainability-index.com/07_htmle/indexes/djsiworld_supersectorleaders_09.html) and several of them have been recognised as among the Global 100 Most Sustainable Corporations in the World at the annual Davos World Economic Forum. (See: www.global100.org)

The Australian commercial property sector was also ranked the top commercial property sector in the world for environmental performance in the recent Global Environmental Real Estate Index by Maastricht University, with GPT ranking as the top company in the global study.

Some of the key sustainability program attributes that Australia’s leading property institutions typically have in place are:

  • A Head of Sustainability and/or a Sustainability Manager – often with supporting teams
  • Board and senior executive commitment and a policy
  • A business case for sustainability relevant to their own business
  • Clear roles and responsibilities across the business
  • A history of several years of publically reporting performance – often using the Global Reporting Initiative (GRI)
  • Budgets for environmental performance improvement projects in assets
  • Staff training programs
  • Established teams of consultants and contractors who are proficient in sustainability
  • Good internal and external communications, and engagement programs for key stakeholders such as tenants
  • Participation in supporting industry programs and ability to win government grants
  • Commitments to voluntary frameworks such as the UN Principles for Responsible Investment and the Carbon Disclosure Project
  • Automated systems for performance data collection, management and reporting
  • A large body of internal knowledge and skill built up over a number of years

These companies (about half a dozen of them) have for the most part now got the right systems in place such that they can focus on driving increasing improvements year on year. There is also a group of another half a dozen or so that are getting close to being set up in the same way – the following pack.

However, there is a still a handful of major institutions that have not advanced particularly far and, most significantly, a huge group of smaller landlords that have very few of the attributes listed above and could take some years to be ready to efficiently achieve the performance outcomes that regulation and the market will demand of them. Lets call these guys the back-of-the-pack like the ocean of participants trailing the serious runners in Sydney’s annual City to Surf fun run.

Leaders, followers and the back-of-the-pack
So what has distinguished the leading pack from the following pack from the very large back-of-the-pack? I would argue that it their sense of purpose, their motivation.

For the leaders such as GPT, Investa, Stockland and a few others, I believe that sustainability was primarily seen as core to their aspirations to differentiate their brands on quality – to their employees, the tenants or their investors. This motivation from this was stronger than from other drivers such as being prepared for regulation or reducing operational costs, although they certainly sought and have enjoyed those benefits too.

The following pack was different in that they didn’t have such a strong sense of purpose as the leaders. They were largely responding to some regulatory and market requirements, aspirations to save costs and a desire to be seen to be up with the leaders. However, it is very difficult to be up with the leaders if you are not really prepared to lead in your own right.

This group, despite leadership aspirations, is typically more reactive than proactive and will experience a longer process of getting over the organisational learning hump to have sustainability running effectively and efficiently in their day-to-day business.

The back-of-the-pack has typically either not been exposed to the information required to really understand what is happening around them with regards to sustainability, such that they can create their business case for it, or they have some deep belief systems in their leadership that makes sustainability unattractive. The companies in this group are now a long way behind the leaders, but they have the advantage of having the path forward mapped out for them, if they can get onto it.

What next?
Despite the success to date, the progress is really in the setting up of sustainability programs. There is an enormous amount of work to be done improving the environmental performance of Australia’s building stock and so we need to drive the advanced programs hard and assist others to get set up in the same way as quickly as possible.

For all companies and for the industry as a whole, there is a big question around vision to be explored. What are we working towards? What will the built environment, our industry and our markets look like in coming years as sustainability continues to unfold? What do we therefore need to do and how do we need to change our organisations to prepare?

This vision will be vital to the follower and back-of-the-pack groups, helping them to finally see where everything around them is heading and to give them some sense of purpose around sustainability.

For the leaders, unfortunately it is as much an indictment on the rest of the world’s progress as a result of their good achievement, that they are leading the world.

They need to continue setting the pace and to influence the rest of the world through their positive achievements. All eyes from Europe to North America and especially Asia where the bulk of the world’s new real estate is being created, should be on the Australian commercial property sector. There is a lot to learn there.

Some References
NABERS is the National Australian Built Environment Ratings System and is the national standard for measuring performance in office buildings in the areas of energy, water, waste and indoor environmental quality. www.nabers.com.au
The Global Environmental Real Estate Index by Maastricht University: www.maastrichtuniversity.nl/web/Main/Sitewide/News1/FirstGlobalEnvironmentalBenchmarkForPropertySectorLaunched1.htm

Three of the better sustainability reports in terms of track records of performance improvement are:

Simon Carter Director, Morphosis www.morphosis.com.au

This article was first posted on a blog at fastthinking.com.au See her