The role of landlords in meeting ESG objectives for the serviced office sector - Boodle Hatfield

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18 Dec 2023

The role of landlords in meeting ESG objectives for the serviced office sector

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The continuing rise of environmental, social, and governance (ESG) considerations in today’s market cannot be overstated. Now, when considering deals the emphasis is not just on profitability, but also on the sustainability and ethical considerations of all parties.

For example, when Runway East took on 20,000 sq ft at The Hickman in Aldgate East, they worked closely with landlord GPE to ensure that the fit-out was done to a Ska Silver rating. The Hickman was the world’s first SmartScore platinum rated building, so it was important to create a flexible workspace that matched this wider sustainability goal.

B Corp status, a seal of approval reflecting a brand’s commitment to social and environmental accountability, has emerged as a valuable differentiator in today’s market, but the pressing question for landlords is, should they prioritise this certification when choosing serviced office providers?

Going for green

The simple response is yes, absolutely. In an age where ESG credentials are no longer an added bonus but often an expectation, a B Corp certification ensures that a serviced office provider is genuinely committed to reaching and maintaining these standards. For landlords, partnering with such providers can enhance their own sustainability efforts, however using B Corp serviced office providers is not the one solution to a growing web of ESG demands and they themselves must pay more than lip service to ESG commitments.

B Corp’s rigorous assessment process of course emphasises present accomplishments, such as existing employee benefits, diversity and inclusion policies, and of course environmental management. However it also acts as a development tool, encouraging companies to go the extra mile by offering guidelines for future advancements.

One immediate advantage for landlords is the alleviation of the need to perform extensive ESG assessments on potential providers. Knowing a serviced office provider has already met B Corp’s exacting standards provides confidence in the provider’s sustainability efforts. This is particularly crucial when considering frequent property modifications that come with changing occupancies, which can have significant environmental impacts with regular refurbishments and fit-outs. Any B Corp certified provider should be looking to minimise or offset carbon emissions when adapting properties for changing tenants, which will ultimately reduce any increase in the building’s embodied carbon.

Moreover, the looming 2030 Minimum Energy Efficiency Standards (MEES) will require properties to attain an energy performance standard of B or above, no easy feat. Engaging with a B Corp certified provider may minimise the challenge for landlords, as while they are not bound to the same legislation and targets, such providers will inherently aim for the most advanced energy efficiency and carbon emission reduction throughout a property’s lifecycle.

Considering the supply chain

Yet, the B Corp stamp signifies more than environmental consciousness. It underscores a company’s holistic approach to ethical business, encompassing governance, workers, community, and customer relations. For landlords, this provides assurance of a serviced office provider’s dedication to a broader vision, fostering a community that is not solely profit-driven. In this way, the landlord becomes a link in a supply chain that is committing to improvement and responsibility.

The modern landlord-provider relationship has evolved. Whilst landlords might have historically been more hands-off, there’s an increasing recognition that a collaborative approach, especially with providers who share their ESG values, can yield significant mutual benefits. This harmonisation of objectives can supercharge both parties’ sustainability goals.

Certainly, in the fluctuating terrain of today’s economy, and given the rapid changes in the office space sector, financial viability of potential tenants remains paramount in landlords’ decisions. Nevertheless, the demand for an ESG-centric approach in operational choices is palpable. The good news is that profit and ESG considerations are not mutually exclusive; with a B Corp certified provider, they often go hand in hand.

For providers, becoming B Corp certified is a no-brainer. The annual fee of certification is gradated depending on the company’s revenue, and as there is a wider trend of companies seeking out B Corp-certified providers for office space it is not long until this fee is paid back many times over.

While no certification is without its flaws, B Corp stands out as a beacon for genuine ESG commitment. For landlords, this certification can be a strategic tool, guiding their selection of partners who will not only operate within their spaces but also amplify their sustainability aspirations. In the intricate dance of real estate, choosing a B Corp certified serviced office provider might just be the perfect step forward.

This article was co-authored with Natasha Guerra, CEO of Runway East – a B Corp certified business and  first published in New Start Magazine in December 2023.

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