By Tina Perinotto
15 May 2013 — [UPDATED 17 May 2013] On face value, it’s the worst news the sustainable property industry could have wanted to hear.
Stockland, after setting the highest benchmarks in sustainability, after winning the lion’s share of gold stars for effort and achievement in the field – not to mention global accolades – has slashed its sustainability team by more than half.
By Tuesday evening, a day after its much vaunted and much leaked strategic review, more than nine full-time equivalent jobs in the team had been axed, leaving just four-and-a-half full-time jobs from a previous total of about 14.
Let’s not beat around the bush here.
New managing director and chief executive Mark Steinert said on Monday when he handed down his new strategy that there would be consolidation of staff to head office with cutbacks of 10 per cent in overall costs.
Don’t for a minute think that the cuts are an even skim, though. Do the maths and see that the sustainability team has lost close to 68 per cent of its staff.
This is no orderly restructure. It’s a severe culling. And it’s targeted at sustainability.
What does that signal?
The company insists its commitment to sustainability remains strong. It really does. Here’s what a media spokesman told The Fifth Estate in an emailed response to our enquiry on Tuesday:
“Stockland confirmed that it will maintain its industry-leading approach to sustainability as a key part of its refined business strategy, announced yesterday.”
Asked to comment on the loss of jobs, or confirm the numbers, the spokesman declined.
By phone the spokesman said Steinert is “on record that sustainability will remain an integral part of our business”.
By Wednesday morning the Stockland spokesman had called back and insisted that the sustainability team was still strong and would remain strong, and that sustainability would be embedded in people working at the front line dealing with customers to explain the value of environmental efficiencies. He also said that the sustainability message would become more important to the communications role.
“It’s remaining a core function of the team and is being embedded in marketing and part of this is selling the communications around sustainability and what it means to buy into a sustainable community – what the sort of energy savings and water savings are.
“It’s something at the forefront of the company’s thinking, making sure when the rubber hits the road there are people on the ground who can communicate this.”
The sustainability team that’s left will no doubt do its best to meet Steinert’s assurances that sustainability will remain strong, despite each member now ostensibly doing the jobs of three people. And they might just do it. After all, sustainability personnel in general are outperformers – talented, clear-thinking, highly motivated and passionate people who have fought hard to get into the space, often funding their own extra education and training because they want to make a difference.
But what an ask.
That aside, the big question is why Steinert has taken this action. And what it signals to the market, and what it means for the property industry itself.
First, Stockland is not alone.
This argument that we don’t need dedicated sustainability people because “sustainability needs to be embedded in the whole company” is a growing chorus. It’s a response to the overriding political narrative that has slashed climate action and decided “green” is a dirty word.
Post-GFC, when the budgets tighten and the share prices have fallen, several of the new property bosses, with investment banking and stock analyst backgrounds in particular, have taken the axe to something that at first glance doesn’t appear to be core.
It’s the appeasement option. It’s wrongheaded. Especially if you look carefully at the long-form business that property is and the nature of sustainability values.
Now let’s think about what those values are. Let’s ask a person on the street, (they just might be a Stockland customer). They might tell you they think sustainability is about care and concern of the environment, care for the community and their feelings, for your staff, for broader social outcomes, core values of honour and commitment to high quality and standards – care for all the stakeholders in your bailiwick.
Of course, a big swathe of the stock market think sustainability is hogwash. It looks at today’s share price and maybe tomorrow’s – until the long-term nature of sustainability value in property starts to show though, which it increasingly is.
The danger for Steinert is that by devaluing the exact point of difference that has set Stockland apart – its claim to fundamental values of sustainability – he risks brand damage. And brand damage tends to lead to all sorts of other damage.
Stockland, like other companies, isn’t just a builder dealing in shells of cold bricks and mortar. This is a company that builds homes for people, communities for people, retirement villages for old people and shops for them all. Not to mention the offices where workers spend increasing hours of their day.
Without the soft, squishy, caring bits about the environment and people, a property company runs the danger of forgetting who its customers are and the things these customers increasingly clamour for – a bit of soul, a bit of feeling, a bit of community care and concern, and above all a desire to protect the environment that gives us life and quality of life.
A “return to shareholder value” doesn’t get that. No wonder the community doesn’t trust the development industry as far it could throw it. And no wonder it wants to fight every bit of development it can see.
It’s the wrong message to send. Just when we were starting to get the picture that we’re all in this together.
The company made no statement on the axing of its sustainability team and refused to comment on the numbers (but did not deny them). Why? The argument was that it had to reveal to the stock market that it sacked its leading executives because this is material to its operations. But the cuts of 68 per cent to the sustainability team is no less material and should have been just as clearly flagged for the reasons above.
But it’s not all bad news. Not by a long shot.
As every good free marketeer knows, a market failure in one spot is someone else’s golden opportunity. There are great signs that companies that have previously laid low on sustainability are now gearing up their teams to seize a place in the new leadership lineup and with it, the market advantage this will bring.
[UPDATE 17 May 2013: New information is that the remaining team at Stockland will include Greg Johnson and Matthew Napper as environmental sustainability managers, Margot Black and Lauren Cassar as community development managers, a sustainability co-ordinator/Analyst Alexander Jury, and national sustainability manager Ramana James. Davina Rooney is senior manager, operations and sustainability, works closely with some of the team members. It is still unclear what the total full time equivalent jobs are.]
In a separate issue (but is it?), other internal Stockland sources have pointed to the thinning numbers of senior women in the company, which were “already pretty thin”.
In the end, someone in Stockland made bad decisions about the residential market (probably not the sustainability team) and the results are now coming to the fore.
The company issued an earning per share downgrade of 25 per cent for the financial year ending June 2013 on 2012 numbers, partly in response to the earnings impairment of $49 million in the residential business. It expects to maintain its distribution of 24 cents in 2014 “assuming no material decline in trading conditions”.
Mr Steinert said the company would remain a “broadly diversified property group, leveraging its core asset and development strengths in shopping centres, residential and retirement living, while retaining and, over time, increasing exposure to industrial property as a core capability”.
“The group will be tactical in its exposure to office assets, optimising the value of its current portfolio and progressively down weighting.”
Mr Steinert identified five immediate business priorities:
- Improve profitability of the residential business
- Improve retirement living return on assets
- Grow commercial property through development and acquisition
- Reduce overheads and improve organisational efficiency
- Strengthen the corporation through capital reallocation
The full strategy document is available here
See our recent coverage in the lead up to the announcement: