Today's companies can't think about the E of ESG without the S

Social and environmental goals must be considered together to make real estate more sustainable

In the last decade, ESG planning across real estate portfolios has focused on reducing carbon emissions – a necessary and ongoing undertaking to ensure buildings play their part in a low carbon future.

The S in ESG – the social - has, on the whole, been far less prominent. Yet the start of the 2020s has seen a dramatic shift in attitudes towards understanding, measuring and maximising the social value of buildings, that is the short- and long-term value they create for the communities around them.

Employees, consumers, shareholders and wider society are now more vocal about expecting companies to do better at making a positive difference – and they’re calling out those that don’t.

This has big implications for the real estate industry. The built environment, all those spaces where we live, work and socialise on a daily basis, needs to make a positive impact on the world around them, and find their own sweet spot between profit, purpose and people.​

It doesn’t mean that social goals will suddenly leapfrog environmental ones; the risks and challenges posed by climate change require urgent action to decarbonise all areas of business including real estate and supply chains.

Instead, environmental and social goals must be intertwined within holistic sustainability plans. Many companies already recognise this. In JLL’s new research on social value, 93% of respondents said environmental and social goals within the built environment are intrinsically linked and require a coordinated approach.

Areas such as nature and biodiversity are prime areas. Take for example, companies that fund and maintain green spaces around their buildings. This has both social benefits for employees by providing them with areas to chat and relax during breaks, which helps to improve their mental health and wellbeing.

At the same time, these spaces give local communities easy access to nature while also helping to boost local biodiversity and provide opportunities for carbon offsetting on the environmental side.

Companies that manage such projects successfully can unlock big competitive advantages, from building powerful links with the community to a stronger brand profile.

Making good on commitments

While tackling environmental and social goals in tandem sounds simple, the reality can be quite different. Up to now, companies have typically approached these goals in silos, often with different corporate sponsors, budgets, and strategies.

Most organisations are much further ahead on the environmental side than they are on the social, partly because it’s currently much easier to gather and monitor environmental data. JLL research shows that one in five companies have adopted leading edge practices in their response to the climate crisis but less than one in ten organizations can say the same on the social side.

The focus on social value will only increase in the coming years and it’s an area companies need to get right. Conducting activities considered hostile or even harmful to local communities will bring reputational, financial, and regulatory consequences. Even doing nothing can have negative repercussions and will ultimately far outweigh the necessary investments required by corporates to meet social value expectations and obligations.

Furthermore, there’s a definite gap between ambition and action – especially when it comes to showing tangible results. Many of today’s social value initiatives don’t have a clear roadmap in place and equally many companies don’t have the capabilities to accelerate the impact of their social value. This is risky. Those who promise much, but fail to deliver, could face accusations of ‘social washing’ – much like companies that fall foul of greenwashing on the environmental side.

It’s taken time for companies to develop sustainability plans on environmental commitments. It’s not a case of starting over to better incorporate social value but instead evolving existing plans to identify opportunities where they can make a positive difference or even stop activities which are doing harm, whether through lease negotiations, building operations, placemaking or procurement.

Truly holistic sustainability plans will take collaboration too – and that goes well beyond just landlords and their tenants. Other stakeholders such as local community groups, local authorities and suppliers all need to be actively involved in initiatives from the start to maximise their value.

Real estate has a big opportunity to create a more responsible and sustainable future. The decisions we take today will have huge consequences for both people and planet decades down the line.

Find out more about what Social Value looks like for today’s companies in our Responsible Real Estate: Social Value report. For more information about how JLL can help your business to understand more about social impact and develop a holistic sustainability plan, contact one of our experts.

Joana Malato, Director, Sustainability Services, JLL