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Implementing meaningful sustainability

Implementing meaningful responsible business attributes within the built environment requires engagement of all levels of the chain – the developer, constructor and operators of facilities. Increasing complexities of roles and knowledge involved means this is no longer possible through a single body or simplified framework across the property lifecycle.

Acclaro Advisory and the SFMI (Sustainable Facilities Management Index) are delighted to be a major contributor to a collaborative approach in partnership with RICS. The aim is to create the new model necessary to transfer knowledge of sustainability through the property lifecycle. Sunil Shah, MD of Acclaro Advisory will be chairing a series of discussions across the globe, with the SFMI team developing and building upon the necessary discussions to develop a single approach for the industry.

Why?

For a long time, collaboration has been key for organisations to deliver sustainability; it has been the subject of many reviews within the property sector from the Latham Review in 1994 through to the present discussions from the Hackett Review. We have experienced a rise in dialogue develop between a client and their major suppliers, together with a governance system between the two stakeholders. Much of this is measured in more complex projects to improve performance and outcomes – great news for the parties involved!

Professional bodies, on the other hand, are showing a different approach to advancing the sustainability agenda. An increasing number of groups are jostling for position and funding. They are focussing on what separates or differentiates themselves from their peers. However this doesn’t promote a sector or an industry in a cohesive way, nor does it show leadership internally or externally. Discussions are blighted by arguments over semantics (the most recent is that experienced on the definition of Social Value), and with so many opinions there is little room to tackle key areas that would give consistency and a common approach for the good of the sector.

What we need is a more joined up structure

RICS have been taking a lead on one area related to Responsible Business. As the appointed Chair of the Forum, I (and our partners at RICS) see the importance of collaboration across the delivery lifecycle for two main reasons. First, is to ensure that as a collective we are working together and that multiple points will drive changes in behaviour and the need to comply. Secondly, simply, is that no organisation knows everything and that to build a practical response spreading over the lifecycle of a property requires a number of actors knitting their specialisms together.

The journey that we have been on in the sustainability sphere has promoted environmental specialisms including energy, waste and water, largely because they were easy to measure and understand. Social aspects have been considered by organisations for a long time, slowly becoming more widespread. For example, it formed a fundamental part of the London Olympics legacy programme.

In fact, volunteering and philanthropy have been easy wins for businesses to prove corporate responsibility with minimal strategic considerations. However, we haven’t had a structured approach. Since 2010, there has been a step change in the role of society within the sustainability framework.

Regulation in supply chain management (through Modern Slavery and Social Value ), the conceptualisation of wellbeing (through mental health awareness and workplace productivity), and increased competition for talent have driven employee development up the agenda.

Looking into the future, we can see the increasing trajectory of societal and community needs as part of the built environment dovetailed into environmental requirements. Assessments of place and occupier services will be based upon the provision of these services and engagement with the community to drive improved satisfaction, a safer environment and a location where people want to work.

Technology will play a significant role in this. The deployment of technology is driving the collection and use of data, but we have yet to answer the question of who owns this data. We are entering into space where knowledge is being captured that can denote the behavioural characteristics of individuals to help provide a tailored working environment. Should individuals be made aware of the data held and how it is used? Protocols are necessary –technology and data are a vital part of our necessary progress. – but a negative perception can damage the brand of an organisation quickly.

The Solution – The Responsible Business Forum

So, RICS has been working with Acclaro Advisory, UKGBC, Arup, Business Services Association and others to capture insight and identify solutions required for a responsible business to operate property assets. This work aims to influence the corporate culture, operational level and interaction with the supply chain to ensure the long-term sustainability of the built environment. See here our opening discussion in the UK, and the finding that we took home from a business leaders roundtable event.

Utilising partners, frameworks, tools and events from across the world, we will look to capture the knowledge, benefits, challenges and risks that will affect the management of property and integrate responsible business practices that will improve society and the environment that we live in.

RICS is calling on strategic thinkers and decision makers across the supply chain who have a desire to embed responsible corporate values in their business, to join the conversation. Together we can deal with challenges and look to shape clear solutions and drive responsible business leadership.

Visit the RICS website and download the RICS Responsible Business Leaders Forum summary report to gain further insight
To get involved in these discussions and for further information on what RICS is doing in this area, contact us or get in touch with Ana Bajri, Property Standards Project Manager, RICS 

Article Image : RICS

 

It is a year since the collapse of Carillion and we have accepted that the facilities management side of their business was not the result of the failure. Important lessons have been learnt from the downfall and progress made by both the Government and the industry towards rectifying problems. This article looks at a number of these areas from the perspective of supplier activities and gives an insight into how the Sustainable Facilities Management Index (SFMI)  can help you to manage these activities.

SUPPLY CHAIN RISKS

One area of real change has been the management of suppliers. In the past, suppliers were used as an extension of the balance sheet to delay or avoid payments should cash flow get into difficulty. As a result, many suppliers have gone into administration, and many more livelihoods have been impacted. Suppliers have recognised the high risks of relying on a single client and vice versa.

The Government is asking suppliers to draw up ‘living wills’ to protect against supply chain risk. The Sustainable Facilities Management Index (SFMI) looks to incorporate these changes into the relevant sections of the assessment to understand how they are being delivered with an ongoing low margin model. The SFMI continues to drive best practice across all aspects of sustainability to the industry and sees these issues as a method to improve the reputation of outsourcing tarnished by bad practices.

SOCIAL IMPROVEMENTS

Greater responsibility is being mandated to clients through regulation such as Modern Slavery Act and the Social Value Act. This is driving a different conversation for both clients and suppliers.  In particular, the role of social value has significantly increased as we look for different metrics to the simple financial ones to base decisions on.

Clients need to understand which social and environmental improvements are necessary and which suppliers can be engaged to help deliver them. This will require a mapping exercise to understand the local community needs. These needs can be aligned with the values of the organisation to develop a longer-term programme.

RESPONSIBLE BUSINESS APPROACH

Developing a deeper relationship with suppliers is necessary to enable two-way dialogue, transfer of knowledge and the understanding of what true value and innovation can be achieved. The SFMI has supported several supplier workshop programmes to help critical suppliers understand the main environmental and social impacts and to foster a dialogue to deliver shared services.

These themes play a fundamental role in a responsible business approach. The SFMI is driving this approach in FM – there is a long way to go, but there are some real cases of best practice out there to learn from. You can read the latest reports and Research from the SFMI here.

If you are an FM service provider, being part of the SFMI in 2019 will give your company the pathway it needs to be managing and implementing key issues that a responsible business needs to address.

Clients that procure FM services can also benefit from the SFMI. Look out for our tools that you can use to quickly assess if your FM is providing real long-term value by managing environmental and social issues responsibly for you.

Joining the Sustainable Facilities Management Index (SFMI) a year ago has given me some unique insight which I hadn’t appreciated before. The Facilities Management (FM) holds great potential to influence the sustainability agenda. There are shining examples of sustainable FM and the SFMI celebrates these in our awards. However, there is a lot of work to be done for many others. Investors, clients, and internal business leaders can all drive the sustainability agenda in FM outsourcing, and now is the time to start.

Corporate Sustainability reporting in outsourced services

In my previous life in sustainability reporting, I admit, I had over-looked the FM sector (as many do). I found that the classic outsourcing corporation did not account for impact within the contracts they deliver. The focus would be on the scope 1 and 2 measurement approach. This boundary-wall approach meant that the measured impacts are minimal and based mainly on office locations. Alongside this, when a major business with outsourcing services responds to a corporate reporting initiative, they would neglect the FM side of this integrated business. Because it would be compared to the heavy industry component (for example) the construction arm. Therefore, the FM business will often fall through the cracks of corporate non-financial reporting, and non-financial risk identification. This historic approach means that many FM businesses have fallen behind other industries in their ability manage sustainability. Times are now changing, and demand for corporate responsibility is rising, so areas for influence are increasing.

So there’s a gap?

There is indeed a gap! An FM manages facilities on behalf of their clients. but are not taking responsibility for reporting on non-financial risk. On the flip-side the client may not be incorporating the FM provider into their sustainability strategy and processes. Meaning a gap in the ability to achieve sustainability targets and running buildings / operations in line with those targets. The gap impacts energy targets at a country and global level, and does not address climate change and energy security. Many do not incorporate the social challenges in the corporation either. For example, employee health and well-being may not be linked through the Facilities management team. Also, there are unrealised savings to be made in energy efficiency and other resource efficiency. The Facilities manager is a problem solver and a pragmatic one at that. They are perfectly positioned to fill these gaps, if they are unleashed and have the resource!

What’s been causing the gap? – A concern for investors and clients

I came into this sector during what can only seem like a dark age in FM. On a media headline level, it seems that in the last few years all hell is breaking loose in the outsourcing sector.  Major outsourcing business have seen share drops (Interserve among a few) and profit warnings, and we have witnessed the collapse of Carillon which brought major clean-up costs to the public purse – one third of its revenue (£1.7bn) came from public FM contracts. Also to private suppliers who will never get paid (there were thousands of them). On top of this, there have also been scandals from the running of the UK’s HM prison’s through G4S, and another major security-based outsourcer has seen regular negative coverage. “So there is a lot of bad press in FM. – What’s your link”, I hear you ask?

I am not naive to think that poor environmental / social management is the cause of these issues. Ultimately, it boils down to the economics of outsourcing. The public and private sector clients decide to outsource services because they want to save money and concentrate on their own business. By outsourcing to a specialist provider, they aim to make efficiency savings under those who do this for a living, and who can incorporate economies of scale.

However, the overwhelming drive to make short-term savings causes a multitude of risk:

  • instability,
  • excessive transfer of risk,
  • low unsustainable profit margins, and
  • a cost focused model that includes many contractual performance stipulations that are weighted in the clients favour which aim to refund money.

It’s a multi-pronged attack on the concept of a sustainable business model. Multiple players are driving this scenario:

1. the customer who wants the cheapest outsourcer at whatever cost. (The UK Government found itself guilty of this after the Carillon inquiry; and

2. The outsourcer whose business model is to undercut the opposition with the aim of rapid market expansion. (We’ve seen how the Carillon model ends up for stakeholders).

So what’s the correlation between profit warnings, the SFMI and E,S,G management?

The “race to the bottom line” is a cause of major systemic issues. Economic sustainability is realistically the bedrock that can drive environmental and social sustainability. What we are seeing at the SFMI is; once those companies fall into this “race to the bottom line” culture, they will start to peel back on their ability to manage sustainability:

  • Reduced corporate Governance,
  • Lack of internal environmental and social impact management, and
  • lack of implementing social value and environmental services into client contracts.

What is left is a stripped back and potentially loss making service with higher risk. By not integrating sustainability into an FM model, it removes them from being part of the solution towards major issues such as climate change. This means a higher risk for investors and all other stakeholders being part of the unsustainable business model. I wouldn’t want to be the supplier of unsustainable business, would you?

Therefore, at the SFMI, we believe that ESG performance of the outsourcer can act as a proxy warning for poor business management.

This year we have seen a number of FM’s fall back in their sustainable FM performance. This simple chart shows 7 large FM providers have dropped from a silver performance level to a bronze (according to the SFMI annual assessment. We are seeing the beginning of a two tiered FM system. Sustainable value added companies (Platinum, gold and silver), and bare basics (Bronze and assessed).

The change of sustainability performance bands for large FM providers

How can the SFMI be used to flag this?

Showing the historic ESG performance based on public data for Carillion against the SFMI criteria

For 6 years the SFMI has been auditing and guiding FM providers so they improve their in-house corporate responsibility agendas, AND (very importantly) to implement sustainability management into their clients contracts. We score companies across a range of 23 topics of sustainability stretching from environmental, social and governance issues against a range of evidence presented. No evidence = no score. Our approach separates the marketing talk from the action.

Therefore, if we start to see FM providers drop in their sustainability performance from year to year, this should raise red flags for those clients and investors who are stakeholders of the company. A provider’s ESG performance can correlate towards the business model  taken by an FM provider. By using an audit based approach rather than a self-reporting approach, we can separate the marketeers from the doers.

Who can get involved, and how?

The SFMI is an assessment for FM providers, however, there are plenty of stakeholders that gain from selecting a sustainable FM business as part of the SFMI.

Clients – Clients who haven’t made the link between their FM and their sustainability goals are missing a trick. Also, if you are selecting your FM contract on cost alone, then you are part of the problem. Using the SFMI is your way of integrating your sustainability goals with your facilities operations, and gaining more value in the long term. Get in touch to speak with us further.

Investors – Seeking to understand the risk in your portfolio is fundamental. The SFMI has been developing a historic database of scoring information that can aid investors in risk management. We do not count carbon, or quantities of water used – We score processes, initiatives and outcomes and how they are implemented in a company and its contracts. This is a unique approach.

FM business leaders – Differentiate your business from the race to the bottom culture. Show your stakeholders you offer value added sustainable FM, with an SFMI audit. By opening your company to a transparent audit against our tried and tested criteria of sustainability, you will gain the path forward. Be a pack leader, not a pack chaser.

A responsible business approach will give long term value to all stakeholders involved.

Contact us today to discuss how we can help you support@SFMI.UK