The real estate industry has an enormous impact on our planet, with 40% of energy consumption and 30% of global greenhouse gas emissions coming from the construction and operation phases of the building sector. This gives real estate players a huge responsibility (and opportunity) to build and manage their spaces sustainably.

This responsibility is enhanced by many different externalities and shifts happening at the moment: We are in the midst of a climate emergency where there is a big pressure to achieve net zero targets by 2030, with a risk of living significantly different (and harsher) lives if we do not. There are also increasing demands and pressures from investors, employees, consumers and other primary stakeholders to align business goals, services and products with their evolving values and needs surrounding climate change, wellbeing and affordability, amongst many others. Finally, there are many new policy changes that are imposing new regulations at the business, city and international level, forcing us to drive change and impact within our businesses and industries.

As shared living and other specialist real estate experts try to respond to the housing crisis, affordability crisis, loneliness crisis, and climate crisis, it is important to have a holistic understanding of the social, environmental and economic impact your shared living business can have. 

This article will therefore outline the benefits of ESG and social value and how best to embed these crucial strategies into the core of shared living businesses. ‍

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ESG & Social Value in Real Estate

To start off, we will briefly mention what ESG and social value mean in the context of real estate. ESG refers to corporate strategies that have strong environmental, social and governance focuses in place. In terms of the ‘E’ within ESG, this can mean net-zero strategies, modern methods of construction, sustainability certifications, and circular economy building and operations methods. Sitting under the ‘S’ are elements including fair wages, economic opportunities for locals, workplace and resident wellbeing and public engagement. Finally, the ‘G’ can encompass diversity and inclusion in leadership and throughout teams, ethical values, transparency, oversight and other corporate sustainability strategies.

When we talk about ‘social value’ in real estate we talk about the impact that properties have on local communities and society as a whole, and how we can maximise our positive impact and real estate players. According to the definition by the UK Green Building Council (UKGBC), “social value is created when buildings, places and infrastructure support environmental, economic and social wellbeing, and in doing so improve the quality of life of people.”

As we like to say, ‘doing good is good business’. Having ESG and social value at the core of your shared living business has many different social, financial and environmental benefits. For example, you can contribute positively to global climate change goals; attract and retain aligned investors, partners, staff and residents; reduce the risk of having 'frozen assets' and going against regulations and taxations; enhance company vision and culture and enhance customer/staff satisfaction and brand loyalty; and support local communities and contribute to their businesses and economies.

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Where to Begin when Developing your ESG / Social Value Strategy‍

When you’re starting your impact journey, there are two key questions to ask yourself as a business: “What issues are most relevant to your business strategy?” and “What issues are most relevant to your stakeholders?” Often, the answers to these questions may be quite similar. Exploring what is important to stakeholders is of course vital for your ability to generate returns, and can give you valuable insights which you may otherwise be missing. 

A useful exercise to engage in is mapping your business and impact-related priorities and your stakeholder’s priorities and ranking them from low to high (e.g. conducting a materiality analysis and/or stakeholder mapping). This can help you to evaluate what issues are most important to you and can provide you with a rationale on where to put your focus. It’s worth keeping in mind that your and your stakeholders’ priorities may change over time, so this should be an ongoing process.

These insights can then help you in deciding if you’d like to use existing frameworks, create a bespoke measurement strategy, or have a combination of the two. It is important to note that you can bring in existing frameworks (e.g. BREEAM, WELL, GRESB) and measurements into your own framework, and make the decision based on the needs and values of your business and wider stakeholders. 

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Embedding ESG & Social Value into your Shared Living Business‍

In order to genuinely embed ESG and social value into your business, something that is essential from the outset is having buy-in from senior management, and a public commitment on their part to ESG and social value. They need to understand the goals, risks and opportunities, and should communicate their endorsement in a public statement. 

This should go alongside complementary organisational values, which translate into job descriptions. Don’t think of ESG and social value as ‘add-ons’, instead make them part of everybody’s job description, and at the core of your company. To that end, we advise having somebody senior who is ultimately responsible for your strategy, which may or may not be their entire role. 

Then what you need is a strategy that isn’t too complex, with clear outcomes and milestones. This is where you can develop strategies and targets using frameworks such as logic models, theories of change, KPIs, and OKRs. 

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Branding, Communicating and Marketing your Impact Strategy

You can brand, communicate and market your impact strategy in many different ways, on both a B2B and B2C level. For B2B communications, methods include corporate reporting, staff onboarding packages, vision and mission statements, planning applications and investor decks. For B2C communications, you can use social media, website, blog posts, onboarding packages, signage, wayfinding, sustainability events and more.

Some examples include the following: The Student Hotel’s annual impact reports; integration of wellbeing and the WELL Standard into Mason & Fifth’s design, operations and branding; sustainability-focussed social media posts by SameSame; Venn’s ‘Give Back’ events; POHA House’s ‘eco-conscious’ ethos; and Rockfield’s sustainability commitments and ESG pillars, amongst many other inspiring examples throughout the shared living sector!

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The Need for Stakeholder-driven Real Estate‍

ESG and social value strategies are very focused on the needs and interests of wider stakeholders, which can be thought of as ‘stakeholder-driven real estate’. This means creating developments and shared living communities that extend their positive impact beyond their inner circles of shareholders and residents to all of their B2B and B2C stakeholders. This includes residents, staff, management teams, suppliers, local communities, city planners, public officials, shareholders and beyond.

This kind of engagement can help your company identify key ESG and social value issues that are likely to impact your company’s performance and help manage stakeholder expectations and concerns. This not only results in higher employee and customer satisfaction and brand loyalty but also in stronger returns and financial viability. The benefits of this ‘human- and planet-centred’ approach to real estate (also known as the ‘triple bottom line’) can no longer be ignored and must become the primary development model throughout the shared living and real estate sectors.