Data, digital risk and the ESG agenda

Buildings are changing: no longer passive concrete blocks, they are smart data collection platforms where we live, relax and work. And as the role of technology and data grows, the way we understand the performance of a building is also changing.  

Whether it is the influence of an office on an employee's productivity or the increasing attention paid to the environmental, social and governance (ESG) agenda, the property sector is having to consider new factors in its decision-making. Technology is a powerful tool for dealing with these, but it also brings new digital risks that must be addressed.

First and perhaps most important, technology allows us to measure and understand real estate's impact on the environment, and how to improve it. That understanding is provided by data – data on how much energy a building is using or how much carbon is being produced. This allows us to track and improve performance. As the well-known saying goes, 'What gets measured, gets managed'. Effective use of data means deriving actionable insights and this is a vital factor in understanding and reducing buildings' impact on the environment. 

We can also assess how a building's energy use affects other performance metrics through data gathered from existing systems, new software and, in particular, new sensors. By combining all these insights, we are able to understand how to improve the building's overall efficiency to better meet occupier or customer needs. 

Finally, technology is simply becoming more energy-efficient. Taking light bulbs as an example, LEDs can use 85% less energy for the same output as traditional halogen bulbs. It is not just lighting: all the technologies, whether heating systems or elevators, we use are becoming more energy-efficient, meaning that buildings have less impact on the environment. 

However, as we embrace technology, there are two major challenges to consider: the risks presented by the technology itself, and the need to understand what we are comparing. Failing to address these two points will at best mean a lot of hard work and investment is deemed worthless – and at worst it will stop buildings from operating effectively. 

The first challenge the sector faces is how to address the risks from technology itself. There are a huge number of digital risks that people responsible for buildings must consider. 

Keeping track of this rapidly changing data is challenging, but being able to monitor the data that affects the performance of a building is nonetheless valuable. Reviews, traffic reports or air-quality information may all be used by the consumer to inform their decisions, which means there will be greater incentive to manipulate the data sets for anyone who has an interest in a particular outcome. Property professionals will therefore have to be much more alert to the influence of external data sets on the performance of their buildings. 

For example, what do we mean when we talk about an environmentally friendly building? Would a hypothetical building that is highly energy-efficient but still accounts for significant carbon emissions be considered environmentally friendly or not? If a building moves its data centre off site and invests in carbon offset, is it considered greener than one that does not, even though the actual impact on the planet is arguably no different? Similarly, does a building qualify as well governed if there is no specific process in place to address the vast range of digital risks it faces?

This is where a common framework becomes essential, and RICS is currently working with other organisations to develop the International Building Operations Standard to address this issue. This framework will help us understand building operations so we are able to compare apples with apples – not just within a building, but across the whole sector. 

ESG considerations are quite rightly rising up the agenda – but without digital risk processes being in place at a building level or a consistent framework for understanding building operation at a market level, it will remain little more than rhetoric.