Real estate is arguably the world’s most visible industry, impacting the way we live, work and travel, and the way we interact with each other. As a result, our sector is uniquely positioned to create long-term environmental and social value, assimilated alongside creating shareholder value (its traditional purpose).
In a time of accelerating change, real estate is alive to the opportunity for wider value creation and is reorienting its licence to operate. In a post-pandemic world, facing the problems of climate change and social inequality, many in real estate and beyond are asking: is conscious capitalism the new organisational purpose?
Businesses that have grasped the global scale of today’s challenges and opportunities are positioning ESG as core to their purpose. The reported $1.2trn of real estate assets already signed up to Race to Zero (the campaign to achieve net zero carbon emissions) is evidence of the huge momentum coming from around the world.
This momentum is a recognition that real estate cannot operate in isolation and the long-term interests of its investors, customers, employees, suppliers, regulators and communities are inextricably linked to business performance.
Conscious capitalism is an essential next phase in real estate’s evolution
The move towards a wider concept of business purpose represents a change in the capitalist system, acknowledging that the climate crisis and social inequality can unbalance society, threatening productivity, performance and profit.
In his latest letter to CEOs, BlackRock CEO Larry Fink says the foundation of capitalism is “constant reinvention; companies must continually evolve as the world around them changes”. Conscious (or purposeful) capitalism is an essential next phase in real estate’s evolution and trajectory, reflecting the world’s evident problems and stakeholder expectations.
It is time to redefine a strong and consistent position on people and planet, alongside the pursuit of profit, as core to purpose.
While our industry is making leaps in acting on its responsibilities, to be authentic, we need to systematically anchor the culture of positive social and environmental impact into business purpose – the DNA of why our businesses exist. In so doing, we adjust to the changing world around us, embracing a purpose that places ESG at the heart of investment decision-making, and provides a clear North Star to guide broader value creation and risk mitigation.
A purpose-led business demonstrates to the stakeholder ecosystem that ESG is more than an elite charade; it is authentically bound into a firm’s licence to operate. It provides meaning and empowers people to define success in terms of wider environmental and social as well as economic performance, and more effectively achieve all three. And finally, it builds investor trust in the guiding principles behind management of risk and opportunity.
In today’s fast-moving and fragile world, a more conscious form of capitalism aligning profit with people and planet is the most effective way to create a robust and resilient real estate industry that will remain fit for the challenges of tomorrow.
Vivienne King is chair of the Shopkeepers Campaign