On April 1st, the Global Real Estate Sustainability Benchmark (GRESB) opened its annual three-month reporting period. This year’s survey has an abundance of changes, both content related and structural. Some of these will be easier for you to adapt to than others, but it appears that all are focused on improving the reporting process and results.
Change is Good!
The GRESB leadership team has been working with key stakeholders over the past year to revise the survey. GRESB aims to improve investor visibility into data coverage by clarifying the boundaries between fully-managed spaces and indirectly-managed spaces, such as triple net lease properties. With a focus on the performance indicators, typically the most time consuming element of the survey response, revisions have been made that better represent the data that real estate companies collect as part of their business.
For 2014, there is increased focus on performance improvement through policy and planning, transparency and disclosure, external assurance, and social aspects of corporate strategy. This focus aligns with similar trends we see in sustainability reporting frameworks and programs such as GRI, Just, and LEED v4.
In general, we believe the revisions support four primary objectives: (1) better reflection of reporting realities, (2) increased application of principles of materiality, (3) emphasis on social aspects, and (4) business optimization beyond compliance. These objectives are supported by the 2014 scoring methodology, which has increased the relative weighting for performance indicators, disclosure, and stakeholder engagement.
There are both subtle and obvious variations from last year’s survey, some requiring more effort to implement and report. The following list identifies some of the most notable highlights.
Reflecting the Realities of Reporting
- Square footage. GRESB’s goal is to increase the reported area by aligning survey questions to organizations’ reporting metrics. However, REITs and other real estate companies experience challenges with obtaining and reporting asset area-metrics in a consistent peer-to-peer format. While GRESB will not solve this issue, the survey now asks for clarity about the area being reported, such as is it gross or net square footage and is it total or leasable. Respondents can also now report the number of units (particularly for hospitality or residential), if it makes sense for the portfolio.
- Asset type classification. GRESB delineates multiple categories where utility data can be allocated to address the level of effort it takes to acquire portfolio-wide data (especially utility data from tenants that pay their own bills). These include common areas, vacant spaces, tenant spaces, and others, to accommodate available data. Now, directly and indirectly managed properties are reported in different locations. This change separates the data coverage achieved between fully-managed properties (for which utility bills are available, performance improvements are within the landlord’s control) and indirectly-managed properties such as triple net leased (for which landlords have little to no operational control and therefore limited access to data).
- Energy costs. Energy and water data costs are no longer required; just consumption data. This seems appropriate, given that variation in rates and currency value across regions, portfolios, and countries makes cost data less meaningful for benchmarking.
- Asset-level data collection. GRESB will soon (pending as of April 1) release an asset-level spreadsheet that will allow reporters to upload data collected (by property-type) directly into the performance indicator tables. The GRESB technical team hopes that this will reduce some of the calculation effort by clearly indicating required data in the table, and auto-populating the final performance indicator matrix. We’re excited to see it!
Principles of Materiality
- Policy, disclosure, and materiality. GRESB and other reporting systems are increasingly focusing on governance, policy, disclosure, and implementation of strategic initiatives that align to corporate goals because the way the organization conducts business is material to investors. This year’s survey requests more detail about these material aspects. If policies and plans are already in place, reporting should not result in significantly more effort to complete the survey. While there are a few places for written narratives, generally GRESB asks respondents to link or upload related documents such as specific policies or long-term strategic plans. Note: respondents who indicate the existence of associated documentation are not required to provide them as part of the original submittal, but may be asked to produce them during GRESB’s validation process to receive credit for the question.
- Sustainability and business strategy. Respondents can increase their score by describing how sustainability is incorporated into the organization’s business strategy through a brief narrative (Q1.2).
- Supply chain and materials. Aligning with current industry trends, this year’s survey requests additional detail about supply chain issues, including information about materials, paralleling programs such as LEED v4 and Declare. We anticipate this aspect will become even more detailed in future surveys, as the emphasis on materials and resources becomes more investor-driven.
- External assurance. This year, external validation at different levels will result in higher scores. Third-party reviews, not just of data but of the entire report, is also possible. There are multiple opportunities for an organization to demonstrate that it is ‘walking the talk’ through external assurance at various levels (from a ‘check’ for partial credit to a detailed audit for full points) across a number of categories, such as a sustainability report, a section in an investor’s report, a data management system, or performance indicator data (Q7.2, Q20.2, Q21.2). This is a trend that we believe will become more encouraged or mandatory in future reporting frameworks, because it unambiguously demonstrates accountability to shareholders.
Reporting Social Aspects
- Stakeholder engagement. This year, there is additional information requested about internal and external stakeholders. For example, what initiatives are underway to improve employee satisfaction scores, as noted in the survey your organization issued this year (Q34.2)? Is there a program to improve tenant satisfaction (Q37.2)? Is there a stakeholder engagement policy in place (Q10)? What are the impacts of new construction on the local community, and what efforts are being made to connect with stakeholders and reduce negative impacts (Q42.2, Q42.3, NC4.1, and NC14)? We suggest determining the boundary of your report; this will allow you to make decisions about which questions to answer in detail.
- Health and Safety. Health and Safety (H&S) continues to represent an important aspect of the survey. Various questions related to H&S are included again this year, pertaining to employee policies and programs (Q11, NC13.1), employee physical check-ups and workstation evaluations (Q35.1, Q35.2), H&S of the community (Q42.1, Q42.2), and supply chain/construction (NC 12.1, NC 13.1, NC 13.2). Make sure you read through the requirements carefully to identify the types of information requested, as increased detail has been added. For instance, points are awarded for new construction practices that focus on improving the health of occupants (NC9).
Optimization Over Compliance
- Pipeline projects. GRESB now asks for data about pipeline projects (RC-NC2), such as the gross asset value of projects under construction or major renovation, certification standards that project teams pursue, and organization-wide strategies for major construction projects (NC1).
- Certifications. The survey differentiates between certifications for new and existing buildings, which allows organizations to clearly report progress on efforts to optimize existing assets (Q29.9), and now includes net-zero energy reporting (NC8.2).
- Intensity calculations. To encourage continuous improvement of building portfolios,the survey includes requests for evidence that the organization is not only collecting data but using it strategically to create meaningful results. Organizations can now report energy use intensity (EUI), water use intensity (WUI) and GHG intensity against a preferred denominator, which is typically square footage for the real estate industry (Q24.2, Q25.2, Q26.2). Intensity calculations are not required, nor scored, but can be a valuable baseline indicator for your organization to set reduction targets.
- Benchmarking and optimization. There is more focus on establishing improvement plans based on results. For many sections, there are follow-on questions requesting links to or uploads of supplemental documents, such as policies or implementation plans, or ratings through other benchmark programs (Q30). Not sure where to start? Benchmarking programs such as ENERGY STAR and the ICSC Property Efficiency Scorecard (for retail landlords) can help relate performance to asset class-specific data sets.
- Innovation. Finally, respondents are encouraged to submit innovation case studies, demonstrating a sustainability leadership role. The case studies will not be scored individually, but will support responses to other questions.
Get Ready to Report!
In addition to the changes we have discussed above, take the time to read this year’s GRESB survey requirements, and get started with your response if you haven’t already. The July 1st deadline will be here sooner than you think! Our next blog post will provide a sample schedule to help you stay on track.
Subscribe to Paladino’s blog or check back often over the next few months as we take a deeper look into the survey details, provide tips to help you gather and coordinate your data, and give our recommendations for quick wins to improve your score.
Brad Pease, AIA, LEED AP BD+C is Director of the firm’s Signature Buildings Practice.
Lexy Relph, PE, LEED AP, is a Sustainable Business Consultant.