The optimist in me started 2020 with something of a spring in my step due to record levels of public engagement on climate action and sustainability issues. From the UK parliament, to Davos, to local community organisations, climate action and businesses’ responses were coming thick and fast.
However, there was a lingering worry as to whether we would sustain the progress we need, at the pace we need, as we started the crucial 'decade of delivery' for the UN's Sustainable Development Goals (SDGs).
That concern was reflected in analysis by PwC not long before. In the third and largest analysis of published reporting on organisational engagement with the 169 targets underpinning the 17 SDGs, it explored the public reports of over 1,000 companies to find out how businesses are engaging with the goals.
For organisations in this sector, whether in real estate development, surveying, engineering, architecture, fit out, management or financing, to what extent are the SDGs your reference point to explain and drive your strategy? If you can’t answer that, you may not be alone.
Companies are not struggling to identify at a top line level with the goals. Decent Work and Economic Growth (SDG8) remains the most popular goal identified by business for the third year and Climate Action (SDG13), appears in the top three goals mentioned by business.
Yet only 14% (157 of 1,141 companies) mention specific SDG targets. How companies are reflecting their focus in their published reporting is a good indication of whether they're really considering the SDGs at more than a superficial level and whether they are integrating the goals into their business strategy. Our CEO survey in January underlined this, with real estate CEOs surveyed by PwC seeing climate change as more of a reputational issue than a strategic opportunity.
While the figures in our SDG survey cut across many sectors, rather than the RICS member constituency specifically, it's worth noting that individual organisational environmental commitments feed through in strategy for buildings, energy and locations, so looking at the results for other sectors is highly relevant to the clients of RICS members. It would also be highly unusual for the real estate and construction sectors to buck the survey’s trend overall. So, here's the rub. While companies are starting to prioritise goals they believe are relevant to them, there’s little evidence of holistic thinking on how the goals are approached. With only 1% of our sample measuring their progress against a quantitative ambition in relation to an SDG target, it suggests that companies still aren't looking in enough detail at what sits behind the goals and are not thinking about how to set sensible targets against which they measure their performance.
The business case for a more detailed examination of long-term opportunities for action in the sector and how that can reveal both operational innovation and cost efficiencies has been accelerated by how the sector has had to respond to the pandemic and its implications for the future. We could face a $600trn loss by the end of the century due to climate change. That will hit the global economy harder than COVID-19.
At the height of the response to COVID-19 in April and May, 81% of chief financial officers in the engineering and construction sector were considering cost reductions in response to the crisis, and 60% say they are planning to defer or cancel investments, particularly in areas such as facilities and capex, operations, and workforce. It brings the challenge for the sector into sharp focus.
The transition to a decarbonised built environment represents a generational challenge and is becoming a mainstream concern for real estate investors and asset managers. Progress in identifying and integrating energy efficiency and climate performance in property valuation has been slow and inconsistent.
Building and construction activities account for more than a third of energy-related carbon dioxide emissions. In addition to greater sustainability, the upsurge in investments in environmental, social and governance factors calls for rethinking how real estate supports communities.
The extraordinary human and economic impact of COVID-19 has acted as an accelerator for disruptive forces on how we work, live and plan. Public expectations of a business’ responsibilities to its employees and society has been heightened, and redefined. Don’t expect that to change.
This is not an either ‘respond to COVID-19 or SDGs’ discussion – the two are inextricably linked. We’ve seen action in several economies to attach sustainable or low-carbon transition targets to government relief and support for business.
Integration within investment decisions and strategy is how wider societal responsibilities and commitments become relevant and real to how companies navigate the post-pandemic world and the SDGs. It contains the key to identifying and prioritising now, practical long-term action (and avoiding the threat of inaction) to build recovery plans that sustain growth and social impact (employment, pay and inclusion, and wellbeing as just a few examples).
Collaboration underpins the sector’s collective progress and contribution to wider societal recovery. It echoes RICS work with the UN Global Compact which examined how the sector could use the SDGs to overcome ‘siloed thinking’ about action on sustainability across the real estate development, use and recovery phases.
According to the report: “Recovery represents the final phase of a building’s life cycle. It happens when the building and its associated facilities are at the end of their economic and/or physical life.”
A joined-up approach across infrastructure and the built environment is central; it provides real opportunities and points to how policy responses to the pandemic and recovery could incentivise companies and sectors to ‘build back better’. For example, cities could slash greenhouse gas emissions by an additional 35% through start-up and corporation innovation, while helping create a $5tr market for cleantech solutions.
With 17 goals, and almost 170 targets, the SDGs are a framework that can be used as the overarching lens through which organisations think about, plan and conduct their business, making them part of decision-making processes and embedding them into the organisation's strategy, culture, values, relationships and employee engagement.
If you're looking for sustainable direction on climate action and you want to build back better, there's no better place to start.