RICS Sustainability Report 2022: Are we making progress?

What does the built environment need to make progress towards decarbonisation? Here are five things we learned in our webinar.

A lot of discussion but little meaningful action

It seems that the real estate industry is not prepared for a shift towards more sustainable practices. In reality, ‘we are not willing to change’ says Olivier Elamine, CEO, Alstria Office REIT-AG. Discussing and reporting on sustainability issues has become more of a tick-box exercise and there is little meaningful action. This is highlighted in RICS’ 2022 Sustainability Report with a significant share of construction sector professionals stating they make no measurement of embodied carbon across their projects. Perhaps real estate firms across the industry are focusing too much on acquiring green certifications, such as BREEAM and LEED. Measurement of carbon and social needs are key examples of other issues that should be considered.

Olivier explains in the webinar that the real estate industry is not immune to the wider macroeconomic challenges. Every real estate industry executive is conscious of higher energy prices, inflation and rising costs. As a result, there is more focus on dealing with the current economic crisis while sustainability and climate change have become more of a long-term ambition.

Catriona Brady, Director of Strategy and Development, World Green Building Council, suggests that we have not seen much change in the industry because sustainability professionals do not agree on a theory of change. Catriona points out that it is the ‘private sector leaders, the industry who can set the scene for that regulatory change’. Furthermore, it is up to the experts working in the industry and on key built environment projects to demonstrate what kind of change is needed and what government policies can set this in motion.

Richard Wilkinson, Deputy CEO, CTP Invest, recommends that it is up to all of us as consumers of the construction industry to demand that the sector adopts more sustainable practices. Otherwise the industry will continue business as usual because there is no real incentive to change.

It is a matter of cost

Richard suggests that perhaps there has not been much change around decarbonisation because no one is willing to pay for the extra associated costs. Indeed, occupying a green building or one that is built with less embodied carbon will pose an extra cost to firms who are then likely to pass these costs on to the consumer.

Industries often require some kind of regulatory impulse or a tax advantage to change their behaviour. This is being adopted in the automotive industry and the same principles could be applied in the real estate sector.

We need a change in processes

Catriona recommends that there needs to be a change in process across all stages of the value chain. When it comes to buildings, professionals should be thinking about ‘designing for repairability’ and putting more focus on ‘adaptability’ and ‘improved maintenance’. Embedding key principles of the circular economy is crucial. The sector must focus on making waste valuable. Buildings and infrastructure assets are banks of materials, which in many cases are taken down or re-purposed before they are at the end of their functional life. Professionals should consider what financial and social value is already captured in the materials and question whether these material and components can be re-used or re-purposed.

There is an opportunity ‘to create a business case’ suggests Catriona. To motivate the key actors in the private sector, we need to emphasise the potential ramifications of not doing anything, the financial, social, and reputational damage. Indeed, the costs of not taking any action can be huge. Buildings not seen as either green or sustainable are at risk of becoming stranded assets and could face higher maintenance and insurance costs. There could be reputational risk for firms who do not act while ESG policies could also be put under scrutiny.

Bring renovation of the existing building stock into focus

To successfully decarbonise, there is a need to focus on renovating the existing building stock. Catriona states that awareness is a key piece of the puzzle. The whole global built environment must be educated on the importance of shifting away from demolition. This ‘will require a mass rollout of education and training at all stages of the value chain’.

Olivier suggests that a lot can be done by changing the planning process. Deciding what to build and what not to build is in the hands of policymakers. Changing the urban planning regulations is likely where the most attention is needed. With respect to building permits, there is a need to question why we need that building and why we can’t do without it. Subsequently policymakers need to ensure that life cycle analysis that compares demolition with reconstruction is completed.

Policy and the right incentives are more important than ever

Policy does not seem to be keeping up. ‘Governments have been notoriously slow in implementing carbon tax, for instance’ says Olivier. For the real estate industry to decarbonise, it will need a push from regulation. Richard agrees and suggests that policymakers need to incentivise the key players in the industry that are trying to do the right thing. The other option would be to disincentivise or make it impossible to partake in activities that could be detrimental to the environment.

Catriona states that governments must strengthen their Nationally Determines Contributions. There needs to be an increase in environmental and social commitments around the built environment and these must be cascaded down to city level.

Better or even more collaboration between the policymakers and the industry is crucial. Setting net-zero goals, standards, minimum energy or social standards for buildings might not be enough. The sector will need additional guidance. Data and knowledge sharing is important to define the key issues and barriers, so the right policies and guidance can be set in place.