As Covid-19 began to take hold a year ago, there were concerns that the ESG agenda would be relegated to the back burner as we focused on dealing with the effects of the pandemic.
It seems that, on the contrary, for many this last year has served as a wake-up call for the real estate sector to the urgent need to change our ways to mitigate the effects of climate change. With a number of real estate companies committing to achieving net zero in 2030, we have just nine years to achieve this.
I was therefore delighted to be invited onto this week’s ING Media panel. Our subject was, ‘Building a brighter future: B Corps and the rise of property with purpose’, and I was alongside some real experts in this area, Basil Demeroutis (Managing Partner, FORE Partnership), William Newton (President, WiredScore), Charmian Love (Co-Founder and Chair, B Lab UK), Henry McLoughlin (Director, Capricorn Investment Group) and chaired by Leanne Tritton, (Founder and MD, ING Media).
We had a fascinating panel discussion around how business is changing at speed. It is no longer sufficient just to make a profit as companies are also now required to serve a social purpose. The writing was on the wall when BlackRock’s influential CEO, Larry Fink decreed this in his 2018 annual letter to CEOs.
Since real estate and the built environment are responsible for 40% of global carbon emissions, there is growing pressure to decarbonise. Supply chains will be under increasing scrutiny as a high proportion of carbon emissions are in the supply chain. And real estate companies are suppliers of property so their customers and funders will also be looking closely at supply chains.
As part of all this property companies do need to take a longer term view said Demeroutis. I can also see the transparency of the B Corp process being an issue, as real estate isn’t known for its transparency and willingness to share data.
Once through the B Corp accreditation process, a company’s performance in each area of its business are on the B Corp website for all to see and you have to go through the process every few years so there is constant evaluation and improvement. And if you have any doubt as to whether this is the way forward, McLoughlin confirmed that B Corp accreditation has been a huge advantage for his company in hiring and retaining staff as young people want purpose.
This was borne out by my conversation with Work.Life. They are a young workspace business with a passion for people and the positive impact happy people can have on business success. As operators of physical space, they see themselves as playing an important role within their local communities and on the environment. Co-founder Elliot Gold said, ‘In short – it’s the right thing to do as a young business, a great benefit for our members, and you’ll be left behind if you don’t do it!’
At Mishcon de Reya we have partnered with B Lab since they came to the UK some five years ago and we use their processes in our business. B Lab UK administers the UK B Corp accreditation process so is at the forefront of the drive towards responsible business, supporting an ever-growing global community of like-minded entrepreneurs to build credibility, trust and value by combining purpose and profit, through the B Corp model. B Corp certification involves a legal change to the constitution of a company to back up the fundamental change from shareholder primacy to acknowledging the directors have to run the business not only for the benefit of the shareholders, but equally for the benefit of society and the environment.
As my colleague Alex Rhodes, Head of Mishcon Purpose, explained in his Property Week interview with Liz Hamson, ‘The second part behind that change is actually how you implement it. The B Corp needs to run an impact assessment, where you go through a painstaking process turning every rock in your business over and you assess yourself. It is an independent framework for responsible business. It also allows you to benchmark yourself against peers.’
Right now, there are just a handful of real estate companies with UK B Corp certification so the question is how many others will follow.
In another panel, this week’s London Stewardship event convened and chaired by Patricia Brown provided a great opportunity to reunite Jackie Sadek, Ken Dytor, Tony Travers and myself, all members of the legendary 2020 New York Study Group. Led by Brown, then CEO of the now defunct Central London Partnership, the group visited New York to see Business Improvement Districts (BIDs) in action and to spend time with leading proponent Dan Biederman.
Our whirlwind tour took in some of the key BID areas such as Bryant Park and we were able to see for ourselves what transformational differences they had made to their communities. We came back full of ‘magic and sparkle’, as Jackie Sadek put it, determined to drive forward the adoption of UK BIDs, bringing together public and private sector to improve the fabric of London’s then dire public realm.
As Tony Travers said, BIDs are even more important right now. With local authorities starved of resources, BIDs have become core to the provision of basic services such as street cleaning and regular refuse collection. They will therefore be vital to the recovery of London post-Covid. Alex Jan, chair of the Midtown BID gave a practical example of where the BID can make a real difference. He said that Camden’s budget for refuse collection for the whole borough is £6million. The Midtown BID has £250,000 allocated, which is 5% of the Camden budget for the whole borough. The possibility of BIDs coming together on a collective basis to promote London’s post-Covid recovery, was also mooted.
Ken Dytor raised an issue dear to my heart, the need for a new central London forum, to perform the role of the former Central London Partnership in bringing together public and private sector to effect change, such as the introduction of BIDs. As Tony Matharu, a longstanding member of the board of the Midtown BID said, we should just start and innovate to make London a better version of itself. That resonated with Brown who said that her mantra has always been ‘ask for forgiveness, not permission.’
As we contemplate a return to work in the ‘new normal’ pursuant to the Boris Johnson roadmap, it is worth reflecting on how difficult it is to predict exactly how companies and people will choose to work in the post lockdown world. The numerous surveys carried out over the last year indicate how views have oscillated since the start of lockdown.
Barclays CEO, Jes Staley has recently vowed to bring staff back to the office after Covid-19, saying that working from home was ‘getting old’ now and that Barclays was looking forward to getting workers back to Canary Wharf. This seems to be in contrast to his comments last April when he was reported to have said, ‘the notion of putting 7,000 people in the building may be a thing of the past.’
HSBC, has now announced plans to slash 8.6 million sq ft of office space, equivalent to 40% of its global total. They anticipate moving to a more hybrid working model offering staff flexibility of working from the office and at home. Their CEO has however indicated that they are committed to staying at their Canary Wharf HQ.
Meanwhile, Goldman Sachs CEO David Solomon this week repeated his desire to see the firm’s offices fill up again. ‘This is not ideal for us and it’s not a new normal,’ Speaking at a Credit Suisse conference he said. ‘It’s an aberration that we are going to correct as quickly as possible.’ We will have to wait and see but most businesses expect that some element of flexible working will remain post lockdown.
On the subject of workspace, this week brought news of commercial real estate giant CBRE’s purchase of a 35% majority stake in US flexible workspace operator Industrious. CBRE’s flexible offering, Hana, will be merged into Industrious as part of the deal. Industrious has 100+ locations in more than 50 US cities, while Hana has just 10 locations in the US and the UK.
The Industrious model involves signing management contracts with landlords to operate co-working spaces rather than taking leases itself, a model that other flex providers are looking to move towards. Is this deal indicative of further consolidation to come as the big players look to fast track scale in a sector that is tipped to prosper in the post-Covid world? And, will we be seeing Industrious in the UK anytime soon?
When we do return to offices, which have been left largely unattended for months, we need to take care. CNN report that ‘Lockdown has made London a boomtown for rats’! It will be a particular problem for businesses that did have a rodent problem and have not kept up to date with their pest control plans. Alarmingly, CNN report that, London does not seem to have an overarching rat control plan.
Apparently, the Mayor’s office told CNN that London Councils was best placed to respond to questions on the subject. London Councils said they don’t collect data because it’s the job of each of London’s 32 boroughs. A case of pass the rat (which in Spanish apparently means ’hang out with friends)?
Susan Freeman is a partner at Mishcon de Reya