By Neasa MacErlean
No company is an island: its actions, both direct and indirect, often have a big impact not just on its workplace and employees but also on the world around it.
Now, a new approach known as Total Impact (TI) is helping them work out their full effect on society, the environment and the economy.
It looks to build on existing financial reporting, as well as concepts such as corporate sustainability and integrated reporting, and could help to offer a more complete picture of a company’s role in wider society. “What’s new about TI is the methodology,” says Philip Hirst, Director – Upstream Sustainability Services in JLL.
“Exponents of TI are leading the way in collecting data which will be able to tell us, for instance, at a strategic level, whether a real estate business’s total contribution is negative or positive, or at a more granular level, how building managers can reduce crime in their local areas”.
Businesses with purpose
TI is more than just a nice-to-have as corporate reporting remains in the spotlight. The global financial crisis focused attention on the role of banks and investors, including real estate investors, in society. The Governor of the Bank of England, Mark Carney, famously warned investors against being “socially useless“. Support has also grown among business leaders, with the PwC’s latest Global CEO Survey showing that 76 percent of company bosses believe that “business success in the 21st century will be defined by more than just financial profit”.
In the UK, The Crown Estate is setting the pace, using what it calls “Total Contribution” to measure and communicate its impact economically, environmentally and socially. It has published its methodology so that other organizations can follow suit.
JLL has also been piloting a TI assessment of its UK business. Sophie Walker, UK Head of Sustainability at JLL comments: “We’re conscious that society increasingly expects business to be able to articulate its social and economic contribution. For example, as well as understanding our carbon emissions and our corporate community investment, we now know that our supply chains support over 4,000 jobs. We are still in the process of calculating all of our impacts, but we expect that the TI assessment process will prove incredibly valuable in influencing decision making in the future”.
JLL joins several other real estate companies that have also begun measuring their TI including Hammerson, Land Securities, British Land, Derwent London and Intu. Outside of real estate, the Paris-based Kering Group, which owns the Gucci and Puma brands, is going in the same direction through its Environmental Profit and Loss accounts.
“We are seeing more and more clients doing it,” says Hirst, “Buildings are a major component of any business’ impact and so the real estate sector is well-placed to set an example here.” There are many impact areas which can be considered – including energy use, water stress, waste, emissions, property taxes paid, the number of people employed to look after real estate, the way attractive buildings contribute to the local area, how derelict properties encourage antisocial behavior and – very importantly – the well-being of individuals both inside and outside those buildings.
All this information can be useful to a business in its normal decision-making. For instance, an organization could well decide the cost of sprucing up its buildings is worthwhile if it finds that this has other positive impacts, such as improved community wellbeing or local employment.
The hidden experience of the property sector
With its experience of measuring energy usage, the real estate sector is “well placed to understand its TI position better than many other industries,” says Hirst. Indeed, real estate businesses have more experience of working with TI than they might realize. For a start, they are already used to the whole thought process of working out whether a real estate project is justified or not. “When a local authority grants planning permission it is trying to weigh up the overall situation, the TI, of a project,” says Hirst.
Collecting data is far less challenging in most areas than companies might fear – as they already hold much of it. Energy and emissions use is measured by accounting and sustainability departments, for instance. Accounts staff can also help with some of the trickier calculations – such as deciding how to link impacts with the value of buildings. Furthermore, the real estate sector already has considerable insights into its economic impact through measuring impacts like job creation, inward investment, training and skills and taxes paid.
What’s more complicated is measuring factors such as the well-being and happiness of residents as this is more subjective. But it can be done by getting feedback from the individuals involved, particularly through on-street surveys, or increasingly more place-related data is available in the public domain or through smart technology.
But why should any organization take this route if its main fiduciary obligations and reporting are focused on their shareholders? “Your shareholders are also in the environment, in society and in the economy,” says Hirst.
Total Impact may still be in its early stages but as more businesses attach more importance to their footprint, it stands to play a key role in providing the information needed to make decisions with an enhanced understanding of their impacts that previously was impossible.
