You’d think that Melissa Schulz would be feeling pretty good right now. The company she’s worked for as general manager sustainability for nearly four years, Vicinity Centres, recently slam dunked every other shopping centre in the country with a massive solar panel commitment. It will not just save tonnes of carbon but line investors’ pockets with a few more rays of sunshine – of the folding kind.
Champions of sustainability in the built environment who look longingly to retail property as the last Mount Everest to scale – not so much because its owners don’t care or don’t want to go greener, but because it’s so hard – could see Vicinity as the new poster child.
Out of a complicated background that incorporated several shopping centre vehicles including the troubled Centro after the dark days of the GFC, Novion, Gandel and Colonial First State, Vicinity has gone through an evolution that’s attracted fresh blood along the way, including former Grocon chief executive Carolyn Viney, now executive general manager development, and another former Grocon executive, David Waldren, now national head of design. Schulz’s own background includes ANZ and Transburban.
In an interview with Schulz about the company’s new sustainability profile the first question must be why shopping centres are so hard to make highly sustainable, compared with, say, big office towers?
Schulz is open about the difficulties but also the opportunities.
First, we know, is the model – both the function of these generally massive facilities and their investment structures. As Frasers Property retail chief Peri Macdonald put it at The Fifth Estate Tomorrowland summit last year, it would be easy to achieve a high degree of sustainability and energy efficiency if all you’re doing is creating a sealed box that no-one comes to.
But try to achieve highly efficient HVAC in a building that’s designed to attract as many visitors as possible and you have a vastly more difficult task.
Then there’s the investment model. In office buildings, the tenants take long leases and they’re invested in the profile of the building and, because of this, so are the landlords.
Not so much in shopping centres, where the biggest user of the building is the shopper who’s interested in the thing they’re buying, not so much the space they’re buying it in.
Consumers are on the move
Schulz knows consumers are on the move: their sensitivity to eco and ethical issues is on the rise and this will impact on the retailers and their landlords.
A recent survey from The Australia Institute, for instance, shows around 76 per cent of people surveyed want action on climate.
HP Australia and Planet Ark also showed in September that 90 per cent of Australians are concerned about the environment, “yet just half think they are doing enough to preserve it”.
Even more interestingly, consumers are not only looking to businesses and brands to take the lead when it comes to environmental sustainability, the survey report said, but more than two in three consumers, and three in four businesses surveyed, would be willing to pay more for environmentally friendly products.
Surveys such as these must give big outfits like Vicinity the confidence to move up a notch in how they tackle sustainability.
“The absolute evidence is that that consumers are becoming more sustainably minded and we are starting to see retailers respond to that, particularly with Millennials,” she says.
“The issue is finding credible information. People want to do the right thing, but it can be tricky; the focus for the consumer is on the product itself and the decision can be overwhelming.”
For instance, is it OK to buy an organic cotton t-shirt made in Bangladesh because it’s cheap, or is there a modern slavery risk? Ethical analysts will add further questions such as how do the modern slavery issues weigh up against the idea that making the t-shirt provides work for people previously on or below subsistence level and that cheap labour has lifted millions out of poverty in places like China?
That’s hard enough.
Right now, says Schulz , sustainability ratings for shoppers are “out of sight and out of mind… out of their realm.”
That’s a challenge but also an opportunity for Vicinity.
“How we can communicate our credentials directly to the consumer and also, possibly, the credentials of the retailers?” These are ideas that are exercising the mind, but still in their infancy, she says.
Some retailers though are starting to connect the dots and matching their physical selling space, with their brand, with Green Star Interiors ratings.
“A couple of the banks are doing it and a couple of smaller retailers as well, for example Kathmandu.
“Historically and still, probably, a lot of things like Green Star Interiors has had greater visibility and focus from the investment community. “For Kathmandu it’s simple – the notion sits with their brand.”
For Vicinity the drivers are clear, Schulz says.
“Sustainability has three main focus areas us. It’s about committing to a handful of opportunities where we feel we’ve got a big chance of doing well, having an impact”.
For the company it comes down to three pillars of action.
Low carbon smart assets
One pillar is around low carbon smart assets focused on resource efficiency, mainly energy, Schulz says.
Programs are designed to reduce energy use and move to renewable energy, most dramatically highlighted with the company’s announcement this month that it will increase its solar investment to a massive $75 million solar portfolio rollout adding an additional 31,000 MWh of solar energy for the centres, and linking to Power Ledger so surplus can be traded with neighbours.
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Waste is another big resource issue in centres and much harder to crack, Schulz says.
It’s not so much the consumers in the food courts creating the waste; it’s the retailers themselves, Schulz says.
But how to incentivise change is difficult. The cost of dealing with waste is rolled into rents so finding a financial incentive is hard. Likewise, how to measure waste generated by each tenant – with attempts to do so fraught with difficulties and evasion techniques.
“We’re increasingly starting to see improvements in technology like waste compactor bins where we can measure each tenant’s waste generation but even that is difficult,” Schulz says.
“But when we trialled it, it’s encouraged dumping in the loading docks rather than putting into the correct bin.”Financial incentives are still on the cards, “but we need to be sure we have a level of accuracy before we go down that path and assess before and after improvements..”
A second pillar, Schulz says, is around climate resilience. For the company this is no matter of notional interest but something that can have direct impact on stakeholders – customers and investors both.
In a portfolio of around 80 centres around the country, this means dealing with quite a diverse range of weather patterns and potential storms, floods and extreme weather.
“Our aim is to understand the impact of those events so centres can remain open or quickly open to support the local community and make sure our consumer can access the retail community. This is also about supporting our retailers – they rely on us to enable them being open for trade,” Schulz says.
This has involved using CSIRO tools and scenarios analysis to make assessments of centres with higher risks.
“Our approach was to do a risk assessment and use the results of that to identify where we want to prioritise.”
The lessons of Cyclone Debbie in the Whitsundays
The Whitsundays for instance were hit by Cyclone Debbie in March last year. “We used the learnings from that to make some improvements.” Such as: “making sure the radios were charged ahead of the event. Making sure we had diesel.
“The cyclone passed and then everyone needed food and needed the shopping centre to open quickly.”
Climate change in the future is another big focus area for communities
The pressures for financial disclosure are a factor driving performance and strategies, and part of this is climate resilience, which is particularly acute for shopping centres, which are seen as a place of refuge, especially in very hot weather.
Resilience, Schulz says, can be as simple as making sure HVAC equipment at the end of its life is replaced with something that can stand up to extreme heat – “because if the system can’t cope it’s pretty dire”. It also means including generators that can be switched on in case the grid goes down. That’s where solar can also kick in with some extra power.
A third pillar of sustainability, Schulz says, is around social sustainability and with quite a few centres in areas that are socially vulnerable the aim is to come up with strategies that acknowledge the centres are part of their local community and to make decisions about their role within those communities.
If there are multiple problems it won’t help to deal with everything all at once, Schulz says.
“We recognise we operate in dozens of communities around Australia and our approach to community investment is to find a common theme and focus on a single issue. That’s not to say other issues are not important but we believe in being quite focused and can hopefully move the dial on chosen areas.
“For instance, through research the team found youth unemployment was higher than average in some communities we operate in and that’s reflected youth related sometimes anti social issues. This can impact on consumer perceptions of our business as well.
“An area we thought it’s important to focus on as a large employer is disengaged and unemployed youth – it made a lot of sense.
“A good program can do a lot of things,” she says. “It’s about choices the business makes and how that can impact on day-to-day business activity.” Not to mention the lives of the people within the communities.
The Beacon Foundation runs preventative programs for young people to “open their eyes to jobs and skills and catch them before they become disengaged”.
“The group runs mentoring programs with corporate partners to provide work, matched to our footprint.”
Other programs developed with Beacon is “Vicinity Uncovered”, a school program where centre or office staff talk to young people about their career journeys.
“Not everyone knew what they wanted to be when they grew up.”
Part of the program gets young people together to design shopping centres of the future with prizes for the person most likely to be a future CEO. This one “has really connected to our employees,” Schulz says.
The future will be greener
According to Schulz there is no doubt that the shopping centres of the future will be greener than the current crop.
There is big interest, she says, in Fraser’s Burwood shopping centre being refashioned from a former brickworks site. It’s directly pitched to a strong environmental profile including striving for the tough Living Building Challenge standard.
Biophilic design being trialled at the centre will “absolutely play to the future of consumer expectations,” and the expectations are that, at Burwood, it will lead to increased dwell time and foot traffic. There is no way she thinks this is a gimmick, she says, but the trouble is there is not much research into that space – certainly not compared with greener office buildings – so it’s a wait and see time.
“Everybody will be watching.”
But if the feeling is that Brickworks will prove what everyone expects it to prove – that highly ambitious greener centres will pay off – will others follow?
“I hope so,” Schulz says.
There’s a caveat. In many ways it’s easier to build a high achieving green centre from scratch and a lot harder to refurbish to that standard.
Most centres don’t have that luxury. Generally Vicinity refurbishes or at best can demolish part of the centre.
“It’s very rare we can impact on 100 per cent of a centre,” Schulz says.
And with industry leaders flagging there is very low capacity for new shopping centres, the big question is what everyone does with the existing crop.
As Schulz says, this is very much a wait and see time.