Real estate and construction is probably not the first sector that comes to mind when you think about environmental sustainability. The construction process consumes large amounts of natural resources and energy, and can create significant waste. While the progress of development continues to add to our quality of life, the built environment is responsible for approximately two-fifths of global energy use and a third of carbon emissions. This means that, from design to demolition, the buildings in which we live, work and play have a huge impact on the environment.
Organisations cannot be expected to operate as purely social enterprises; they have a responsibility to their shareholders, investors and employees to make a profit; making decisions based purely on altruism is not a viable long term strategy for the vast majority. What is important to the market is that your organisation has a position on and demonstrated approach to its corporate social responsibilities.
So why invest in environmental sustainability?
Well, for one, it can save money, particularly in the long term. Nearly three-quarters of real estate and construction businesses cite cost management as the principal driver behind adopting more sustainable practices. The long-term savings from improving energy efficiency—such as installing insulation or timer lights—are well-documented. Landlords have a clear incentive to follow suit. Installing micro generators like solar panels can not only make a business or household self-sufficient in energy but may also enable them to sell excess electricity back to the grid.
Aside from reducing utility bills, there are other considerations for owners and developers. Property values often closely track 'greenness' and retrofitting buildings to make them greener can open the door to tax credits and incentives in an increasing number of countries.
Sustainable access to raw materials is imperative for construction companies. Approximately half of businesses in the sector say the cost and availability of raw materials is important to their growth strategy with technological advances in alternative, more sustainable raw materials having a huge impact on the efficiency of production and therefore the environment.
One example of this is modular housing, which is gaining traction as way to save time and money, and reduce wastage. Some financiers remain hesitant to fund projects that propose to use this technology and the challenge is having these innovative, more sustainable options become the norm. The financiers need to be educated on the future cost benefits, so more support is available for early adopters of such technologies, allowing viable case studies to be created for others to follow.
Of course, there can be significant upfront costs and risks involved with green projects, from budget overruns to regulatory complexity. Owners and developers need to map out the potential benefits when looking at project viability, measured against costs. Many of these may be longer-term and therefore harder to quantify, but this does not mean they cannot make robust, informed forecasts. The lower long term costs and higher returns associated with environmental sustainability are hard to ignore, but it's even more compelling when the market demands sustainable products.