Are B Corps the secret weapon for landlords’ serviced office portfolios?
At a time when environmental, social and governance (ESG) credentials and aspirations are being heavily scrutinised, achieving B Corp status is a useful differentiator and quantifier to cut through the noise, but should landlords care if their serviced office providers have this rubber stamp accreditation? The short answer is yes, as carefully choosing serviced office providers that align with a landlord’s own values can augment their own strategies.
B Corp certification, which requires companies to undergo a rigorous assessment process to meet high standards of social and environmental performance, accountability and transparency, is certainly an effective way of separating the wheat from the chaff when it comes to ESG credentials. However, landlords should be wary of using this as a panacea for ESG targets without considering the bigger picture.
The truth is that ESG aspirations alone are no longer a unique differentiator in the serviced office market – they are often a prerequisite. B Corp provides pointers for future improvement, rather than a snapshot in time of lofty targets.
Given that the process is so rigorous, it relieves some of the burden on landlords for carrying out their own ESG due diligence on potential serviced office operators. For example, a common problem in a serviced office, from an environmental perspective, is the regular refurbishments and fit-outs to adapt the property to changing occupiers. However, if the serviced office operator is B Corp certified, the landlord can have some comfort that the operator will seek to minimise carbon emissions during any refurbishment and have due regard also to the embodied carbon.
After all, landlords have a daunting challenge ahead of them in meeting the 2030 Minimum Energy Efficiency Standards (MEES) deadline of achieving an Energy Performance Certificate (EPC) rating of ‘B’ or above and it is in their interests to partner with providers who, although not similarly bound by legislative requirements, share this same objective to improve energy efficiency and reduce emissions during the lifecycle of the property.
B Corp status can prove an educational exercise for serviced office providers and occupiers alike. Providers who have achieved this will receive a breakdown of scores relating to five pillars: governance, workers, community, environment and customers.
While the B Corp certification may have been reached, providers will be aware of the areas where there is still room for improvement. Furthermore, B Corp businesses must be re-certificated every three years to allow providers to implement longer-term change and policies, continuing to strive for progress.
A landlord contracting with a serviced office provider with such status can rest assured that the provider must continue to maintain its standards and even seek to improve. Ultimately, the serviced office provider endeavouring to act more responsibly is key to the wider supply chain of the property and of which the landlord is a part.
The B Corp certification goes beyond environmental considerations and ensures that providers demonstrate a dedication to prioritising purpose beyond profit. Measures taken to achieve and retain certification will reassure landlords, particularly those with a wider estate or adjacent properties, that the serviced office providers are creating a community that thinks about the bigger picture and will ultimately attract occupiers that do the same.
While traditionally it has been easy for landlords to hand over a lease for 10 years and not have much interaction with providers/tenants until a rent review or the keys have been handed back, an involved, collaborative relationship between landlords and serviced office providers is increasingly becoming beneficial for the landlords seeking to more actively manage their portfolios.
With the ESG agenda growing exponentially, serviced office providers cannot get by on the bare minimum. Simultaneously, landlords are realising that dovetailing their own ESG aspirations with those of their serviced office providers can be beneficial and these providers can in fact supercharge their own aspirations.
Of course, given the uncertain economic landscape and the fast pace of the office market’s evolution, the financial viability of operators or properties is usually the largest part of landlords’ decision-making. However, it cannot be ignored that demand is growing for assurance that operational decisions are being made with ESG in mind. Balancing fiduciary duties with ESG considerations is more than feasible.
Of course, as with all accreditations, B Corp isn’t perfect, but it is undeniably a numbers game to improve the standard overall. And for landlords, it’s a secret weapon when looking for a partner to operate in their spaces; as to get the accreditation you must have a strong ESG agenda, which can in turn support you, as the landlord, too.
This article was co-authored by Natasha Guerra, chief executive of Runway East and David Rawlence, Partner at Boodle Hatfield. This article was first published by Property Week in August 2023.