Read the first post in this series: Optimising Energy Performance in Buildings: An Introduction.
Employee engagement, investor pressures and business drivers such as carbon neutrality is encouraging many organisations to make bold commitments. Beyond these commitments is a need to better understand carbon emissions for an organisation and how to mainstream efficiencies and behaviours into the culture. This article will look at developing a strategy and plan from this business case to take the programme beyond a short-term initiative.
What is driving the change in corporate behaviour?
Let’s start by looking at the drivers affecting energy performance in buildings.
Employees are increasingly becoming a major driver, with corporate responsibility and putting purpose over profit necessitating the right culture to attract and retain talent. This starts at the recruitment phase, by attracting individuals who align with the values of the business.
Regulation has certainly played a major role in the past 15 years, raising awareness and providing data to enable informed decisions to be made. But a lack of enforcement and incentives for implementation has seen much of the early ambitions on savings fade away. Costs are also anticipated to increase significantly by up to 100% due to the rising cost of fuel together with the additional costs to maintain and upgrade the infrastructure. We are seeing this shift already in the proportion of energy bills related to consumption and to overhead charges.
Investors are also taking a keen view. The Task Force on Climate-related Financial Disclosures (TCFD) sets out requirements for financial disclosure of climate risks which all stock market listed businesses need to respond to. Property is one of the biggest risks to an organisation, with climate change negatively affecting the book value.
Many of the changes are coming top-down. Regulation will play a limited role if low enforcement continues, with investors, cost and employees placing pressure on larger organisations who cascade down the supply chain. The traditional barrier for most organisations has been the ability to translate these drivers into actions and then communicate the results. How to do this is via a strategy which has defined targets that align with the business.
Developing a Strategy
Building a strategy requires knowledge from a range of departments and activities within the organisation from operational management and implementation, strategic changes at an organisational level, procurement ethos and structure of contracts together with external factors such as client and market demands. Much of this will depend very much upon the culture of the business and its approach to both risk and returns, together with its maturity on the sustainability curve.
A critical output is the ability to measure, track and value the impact of sustainability activities on core business and financial metrics. To do this requires an understanding of the underlying drivers and provision of a single-measure performance indicator to communicate the value of these sustainability activities.
The first step towards developing a strategy is to perform a materiality review – looking at a matrix that links the importance of sustainability to both the business (e.g. delivering value) and external parties (e.g. managing risks). The process of understanding the business and stakeholders is often underestimated but can provide a very clear insight into how value can be generated in conjunction with improved sustainability performance. A starting point for the materiality review can be taken from the SFMI assessment which has defined 23 material issues for the FM sector, but which can also be used as a good starting point no matter what sector your business is in. Data will be required to support the review together with interviews to provide the supporting context.
Incorporating supply chain activities within the materiality review is important, helping to bring in the wider impacts of the operations and therefore the potential additional value – this will also mean understanding them as stakeholders with regards what can be achieved.
Plotting the matrix will essentially be a series of dots, with those in the top right quadrant typically identified as those which are important to stakeholders and will also deliver the greatest value to the organisation. That is the starting point, because each of these will need to be developed and implemented, with progress and value communicated through a series of actions or defined targets.
The resulting outputs of this review, the actions implemented, and the value captured will help to communicate to the senior management in a language that they understand.
Changing the Corporate Culture
Responding to market pressures such as carbon neutrality and removal of single-use plastics, without being part of a wider strategy, will not change the corporate culture, but will only reinforce the idea of task-based activities being the sole remit of the facilities management team.
The value and benefits of a company-wide strategic approach need to be communicated in a language which is understood and connects directly into the reporting measures. This doesn’t have to be about just costs, with employee engagement and investor pressures also significant – graduates raising the organisations sustainability performance at jobs fairs provides an evidence that can be captured, but needs discussion with HR.
In many cases, to achieve the value there will be shared responsibilities and outcomes which will help both parties – ‘what’s in it for me’. The move towards employee engagement programmes is a prime example of this, helping reduce turnover and improve satisfaction.
The imperative is not just internal or the remit of one particular department, but with the wider business including procurement and supply chain management, which will have a key role. It is this activity that our third article will focus upon.