Sustainability Standards: Clearing Up the Confusion for Real Estate Companies

With most large commercial real estate companies now reporting to one sustainability standard or another, the industry is starting to hits its stride on sustainability reporting. The next wave of reporters - smaller REITS, private firms and their suppliers - has taken note and are starting to test the waters. But there’s good and bad sides to it all. 

The good is REITs (Real Estate Investment Trusts) are increasingly disclosing their sustainability data and improving performance. According to REIT.com, HCP increased its CDP disclosure score to 97 up from 77 and its performance score up to an “A-” from a “D” after just two years of reporting. The company attributes the higher disclosure scores to having vendors and suppliers more involved, implementing safety policies, putting sustainability information out on tenant websites, and introducing an innovative competition among its tenants to measure utility consumption over a three-month period. In short, HCP is learning from its disclosure and implementing meaningful action that has benefits on the ground in terms of enhanced ROI, lower risk and increased tenant retention.

The bad news is the reporting burden is increasing at an alarming rate. The “leaders” are completing two, three or even four different reports annually (e.g GRESB, CDP, GRI) while “laggards" are doing nothing whatsoever, rightly pointing out that the resources needed to research, author and act on the reports are out of reach. I emphasize the subjectivity of “leader” vs “laggard” because it’s hard to say that more reporting is necessarily good, and that less is necessarily a sign a of a poorly run company. In some cases, over-reporting can be as harmful to a company as no reporting at all. To see why, think about the investors for whom this information is intended - they must be extremely confused to see all these different reports on sustainability, none of which represent the facts in the same format. Even worse, the reporting company, in the earnest attempt to satisfy the crush of different reporting standards and investor demands for transparency, is exerting enormous effort and resources. Is that really in their investors’, or tenants’ best interest?