ESG has become a significant business consideration all around the world. The need for ESG has arisen from the issues of climate change, expectations of investors and lenders, and stringent regulatory requirements. Businesses are beginning to formalise ESG-related initiatives on account of tangible, regulatory and reputational risks. Globally, investors and their stakeholders are increasing the use of ESG parameters to screen investments, resulting in private equity real estate investment managers placing greater focus on environmental and sustainability benchmarks.
India has been on track with its commitment under the Paris agreement in terms of reducing the energy intensity and increasing the use of renewable energy. This commitment will come much faster than expected, resulting in more need for ESG compliance, especially in Real Estate that contributes to over 40% of carbon emissions. As developers and facility managers continue to work in sync towards green buildings and statutory compliance, we already see a significant shift with investments mapped toward ESG readiness. Correspondingly, with the increasing involvement of IFMs (Integrated Facility Management) in enabling decisions that make Real Estate ‘ESG ready’, there is promising transformation in the way business is conducted in this age-old industry.
Understanding ESG & IFM
In the real estate sector, ESG is a framework that impacts every phase, right from land procurement to operations. The ESG criteria is a set of principles that a business needs to operate on, and socially conscious investors use to screen potential investments. ESG spans a selection of geographies that can sustain development, using sustainable materials for construction, efficient infrastructure for sustainable operations, ethical governance, and full disclosure of information. With respect to the operational phase of real estate, most buildings are aged or already functional. This is where a large chunk of work can readily generate results. It is the predominant area where Facility Management (FM) plays a critical role.
With tons of commercial and real estate operations active across every market, the need to manage and maintain buildings better has never been a more pressing concern. With an unprecedented paradigm shift due to the onset of Covid 19, the growth of people-centric technology is redefining the way facilities management companies are approaching customer-centric experiences.
Technology and its role
The emergence of sustainable/green buildings has led to an evolution in the curation of the built environment. The facilities management industry today is vital in identifying bottlenecks and creating sustainable solutions in response. As Peter Drucker rightly said, “we cannot manage what we don’t measure.” The use of sensor technology and cloud integration allows real-time monitoring of utilities’ consumptions thereby providing data to perform analytics and benchmarking. Upon acquisition of data, stakeholders can benchmark their portfolio by pursuing global certifications from GRESB, IWBI, etc; further, stakeholders can then take informed steps to plan their investments towards ESG readiness. Energy management, water stewardship and waste management continue to be primary concerns in the Indian landscape. With India pledging renewable energy generation of 500 GW by 2030 and Net-zero by 2070, it is imperative that facilities invest on tangible outcomes within the ESG framework.
The growth for tomorrow is largely dependent on the foundation laid today. The world is evolving, needing real-time attention and action for improved business outcomes. It is the facilities management industry that is empowered in building strategic pillars to carry out operations with a strong data-led and future-ready approach. ESG goals are subjective to multiple factors such as the nature of business, environmental landscape, political landscape, topography, social landscape, financial landscape, and more. While ESG will create rapid change and push businesses toward best practices that are beneficial to everyone in the ecosystem, pursuing it in a structured and scientific method is essential to succeed.