What is ESG?
ESG is an abbreviation of Environmental, Social and Governance. For instance, Environmental, how a business minimises the impact to the environment while operating activities; Social, how a business protects and benefits its stakeholders; Governance, how the leaders oversee the risk, monitor its moral and strategize the business. Generally, ESG will be written in an ESG report also known as Sustainability Report, which is published by a corporation or a company or an organisation.
Profit is the primary goal of every business and the investors will only care about their returns and business growth. However, businesses cannot only focus on making profits and ignore the impact that business could bring to the environment, as well as benefits to the workers, public and investors.
The company must understand the impacts of the business and offer a comprehensive framework and strategy. As a result, ESG serves as a direction and a guide for managing, controlling, and avoiding risks in day-to-day operations to achieve inclusive growth and sustainable development.
The effects of ESG
As the world modernises and knowledge is accessible at everyone’s fingertip, more and more people are aware of the term ‘environmental, social and governance’ (ESG). With this, an increased amount of investors and buyers would prefer to purchase real estates that are sustainable. Today’s topic would be a discussion of how ‘ESG’ affects corporate real estate.
The ESG has rapidly become a business necessity and deeply affected the business strategy, direction and sustainability. Businesses are now under increasing pressure to demonstrate excellent ESG credentials to stakeholders (such as investors, authorities, consumers, employees, and shareholders).
Environmental
According to the World Green Building Council (WGBC), buildings are directly and indirectly responsible for 39% of global energy-related carbon emissions, which lead ahead of transportation and industrial activities. Air pollution, Greenhouse Gases (GHG) and physical waste can harm the natural environment seriously.
People have recently given the most attention to environmental issues. All businesses today are eager to move in the direction of energy saving and carbon reduction. Every business aims to reduce the usage of resources that are harmful to the environment (such as materials, exhaust emissions, wastewater treatment, greening strategies, etc.) while continuing to grow the business successfully.
Therefore, to achieve the goal of energy saving and carbon reduction, most of the businesses will focus on using the building which has certified GBI and MSC status. Green building is the process of designing and constructing buildings while implementing methods that are resource-efficient and environmentally-conscious at every stage of a building’s life cycle, from sitting to design to construction to operation to maintenance to renovation to deconstruction. The design of the building considers economy, usability, durability, and comfort. As nothing more than a result, the business can achieve its viability without relocation for a longer period of time and increase brand recognition.
Social
In terms of social, stakeholders will consider the employees, business culture, and satisfaction of customers. Businesses, for instance, must adapt to the working conditions and retaining of their employees, in order to optimise the work-life. It is critical that workers feel at ease in their workplaces, and the current decoration and interior design effect has improved and work pressure has diminished, which can enhance productivity. Perhaps a different layout and interior style might make the workplace more inviting. Decentralised offices, coworking offices, comfortable offices, compact, straightforward offices, etc. In addition to interior design, businesses can choose a building with a better environment and location. For instance, a location with minimal office density, easy access to public transportation, additional services and amenities nearby, etc. Meanwhile, every business is concerned about privacy or data protection. Safe and secure is a commitment as well as a feature. Before deciding to rent a space, businesses will evaluate the safety. A good location is critical for business to satisfy the customers. Perhaps the business’s location affects customer attractiveness and retention, and accessibility.
Governance
In terms of governance, the internal system of directorship, financial control, strategic execution, policy implementation, and how an organisation anticipates and manages risks are more important. Stakeholders will also take into account how a company may operate to accomplish environmental and social goals without reducing profits and raising costs. A healthy financial is essential for businesses’ operation in the long-term or expansion in the future. Moreover, Multimedia Super Corridor (MSC) status is also a consideration, because it can benefit the business when MDEC promotes some activities. For instance, tax exemption and financial incentives, unrestricted local and foreign knowledge worker employment, competitive telecommunication rate, freedom from internet censorship, etc. As a result, companies will always look for decent GBI and MSC buildings with affordable rental rates.
How do we help?
ESG can have an indirect impact on the corporate real estate market by affecting the factors that determine business strategy and direction when selecting offices(s). It is our responsibility in corporate real estate as the industry expert to help businesses choose their ideal workplace and requirements to further market exploration in order to fulfil and boost the ESG performance.