The engine that powers sustainable organisations
An increasing awareness of environmental, social, and governance (ESG) factors has led companies to evaluate and enhance their sustainability performance. Particularly in the real estate industry, the integration of ESG criteria has gained significance. However, ESG data management presents a complex challenge as real estate companies grapple with a multitude of data sources, integration issues, and stakeholder requirements.
Driven by investor and regulatory pressure, the real estate business has been one of the early adopters of ESG. In this resource-intense sector that contributes 50% of global resource consumption, 36% of energy consumption and a large share of the labour market, ESG risks as well as opportunities abound for the real estate ecosystem.
While environmental considerations top the list of ESG concerns in the real estate industry, the social aspects of built environments are growing as another point of focus – especially after heightened public health awareness post-pandemic.
Numerous sustainability certifications and ratings such as:
have proliferated the market of real estate players that want to demonstrate sustainable leadership, whether for compliance, financing, or marketing reasons.
In addition, the EU taxonomy poses a particularity for real estate companies having to report on a portfolio of multiple buildings and projects.
Environmental data challenges in the real estate industry can be summarized as follows:
End-use consumption: ESG criteria for real estate are complicated by the consumption patterns of tenants and occupants, which are beyond the control of building operators and owners.
Data collection on tenant consumption and waste management:
Climate risks and resilience:
Net-zero movement and tracking carbon emissions:
Whole life carbon approach and stakeholder involvement:
Concerning the EU taxonomy, there are specific requirements for buildings constructed prior to December 31, 2020. Firstly, these buildings should have at least an Energy Performance Certificate (EPC) with a class A rating. Alternatively, they should fall within the top 15% of the national or regional building stock when considering their operational Primary Energy Demand (PED).
Compliance with these requirements must be supported by evidence that compares the building's performance to the national/regional stock built before 2021. Additionally, it is necessary to differentiate between residential and non-residential buildings.
Occupational health and safety of construction workers is a major issue in an industry with a large network of contractors and subcontractors. The many layers of subcontracting makes it difficult to detect modern slavery in the labour force.
On the end-use side, designs built with health and wellness concepts in mind require data on:
These aspects are harder to measure and define due to their subjective nature, although industry scoring frameworks or certifications exist to provide guidance on managing the data.
Strong governance of ESG data is the biggest data challenge for corporate governance, and for that matter, all industries. Data collection processes throughout the entire real estate value chain, accuracy, and impartiality of information, ownership, and accountability.
Data is needed for decision-making to drive compliance and risk management, and the challenge lies in design and implementation of an effective data management strategy.