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Commercial real estate ESG – Steering clear of greenwashing

Kinexio

13 January,2025

1 min read

The commercial real estate industry is in the midst of a digital revolution. Now, even the more cautious CRE leaders are poised to leverage technologies that enhance operational efficiency, tenant experiences and ESG strategies.

But, amid the pursuit of ESG goals, companies must navigate carefully to avoid greenwashing—misleading or superficial claims about their environmental practices. In this article, we explore the transformative potential of digitalisation in commercial real estate and propose strategies to ensure genuine and impactful ESG commitments.

Is property digitalisation the way forward?

Digitalisation is fundamentally transforming the commercial real estate landscape, ushering in a new era of efficiency, connectivity, and innovation that promises a multitude of exciting benefits. At its core, digitalisation empowers property managers and owners to harness advanced technologies such as Artificial Intelligence to do more with less and reallocate resources.

One of the most significant advantages of digitalisation is its ability to enhance operational efficiency. IoT sensors embedded throughout buildings can monitor and optimise energy consumption, heating, ventilation, air conditioning systems, and lighting based on real-time occupancy data. This not only reduces energy costs but also minimises the environmental impact a commercial space has by ensuring resources are used efficiently.

Moreover, predictive maintenance powered by AI can detect potential equipment failures before they occur; preventing costly downtime and improving overall reliability.

Beyond operational efficiencies, digitalisation improves the tenant experience by offering seamless communication and interaction. Digital platforms enable tenants to manage their leases online, submit maintenance requests effortlessly, and receive instant updates on building amenities and services.

Employees spend an average of 30-40% of their time searching for information kept in filing cabinets. A paperless system can reduce this time, leading to a 50% increase in productivity. By embracing digitalisation, commercial real estate entities can significantly enhance operational efficiency and sustainability.

Reducing physical waste not only lowers costs but also supports broader environmental goals, making digitalisation a crucial strategy for modern commercial real estate management.

A sense of community is crucial, as timely, relevant, and helpful communication fosters both community spirit and tenant loyalty to a destination. This, in turn, motivates tenants to take better care of their spaces. Regular reminders about turning off lights, closing doors to conserve heat, and recycling, especially when delivered through a frequently used tech platform, subconsciously encourage tenants to embrace ESG initiatives.

By collecting and analysing vast amounts of data on property performance, tenant preferences, and market trends, real estate professionals can make informed decisions regarding investment strategies, lease negotiations, and asset management. This analytical prowess not only optimises financial outcomes but also positions property owners and managers as proactive leaders in the dynamic commercial real estate market.

The dangers of greenwashing in CRE

Greenwashing, defined as the practice where companies misleadingly exaggerate their environmental credentials, has been flagged by The United Nations as a significant barrier to combating climate change. According to a 2021 European Union study, nearly half of the environmental claims made by businesses online were found to be overstated, deceptive, or outright false.

In the commercial real estate sector, the stakes are high, and setting clear sustainability targets is imperative. Stakeholders are confronted with substantial challenges in terms of investment and adopting new technologies necessary to achieve net zero objectives. Achieving these goals requires significant upfront capital to retrofit existing buildings and incorporate cutting-edge energy-efficient systems.

Reliable data allows stakeholders to make informed decisions regarding which buildings to retrofit, the most effective technologies to implement, and how to allocate resources efficiently.

Accessing accurate data is critical for the global real estate industry to effectively tackle these investment challenges. The scale of transitioning to net zero emissions is immense, with McKinsey estimating an annual investment requirement of $1.7 trillion until 2050.

3 ways to maintain authenticity in ESG commitments

Transparent Reporting and Metrics: Leverage technology to gather and report accurate data on sustainability efforts. Use standardised metrics to track energy usage, waste reduction, and carbon emissions. Transparent reporting from centre management and tenants builds credibility and accountability.
Integrated ESG Strategy: Develop a comprehensive ESG strategy that aligns with your business goals and values. Integrate ESG considerations into all aspects of your operations, from property management to tenant engagement. A holistic approach ensures that sustainability efforts are genuine and impactful.
Stakeholder Engagement: Engage with stakeholders, including tenants, investors, and the community, to understand their expectations and concerns. Involve them in your ESG initiatives and communicate progress regularly. Meaningful engagement fosters trust and collaboration.

ESG integrity is key

The transformative power of digitalisation in the commercial real estate industry is unmistakable. By harnessing advanced technologies, companies can achieve greater operational efficiency, enhance tenant experiences, and make significant strides in sustainability.

However, it’s crucial to approach ESG initiatives with integrity and avoid greenwashing. Embrace digitalisation not just as a tool for growth but as a catalyst for positive change in the real estate sector.

FAQ

What is greenwashing, and why is it a concern in ESG strategies?

Greenwashing involves making deceptive claims about a company’s environmental practices to appear more sustainable than they are. In ESG (Environmental, Social, and Governance) strategies, greenwashing undermines trust, misleads stakeholders, and can lead to legal and reputational risks. Ensuring transparency and authenticity in ESG commitments is crucial to avoid the pitfalls of greenwashing.

How can companies ensure their ESG strategies are genuine and avoid greenwashing?

Companies can avoid greenwashing by setting clear, measurable ESG goals, regularly reporting progress with transparency, and engaging in third-party audits to verify claims. Implementing digital tools like Kinexio can facilitate accurate data collection and reporting, ensuring that sustainability initiatives are both genuine and impactful.

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