Incentives for Property Investors and Developers to Address Sustainability - Essay Example

Incentives for Property Investors and Developers to address Sustainability By: The UK has experienced increased investments in real estate industry. However, this industry has done little effort in ensuring sustainability. The purpose of this paper is not to underestimate the progress made by real estate investors in the UK in applying sustainability in their processes. There have been considerable efforts by construction companies in the UK towards constructing buildings that have an energy efficient rating greater than E. This paper will suggest more incentives for property investors and developers to address sustainability. 1. Introduction Statistics indicate that very many people in the UK are unpleased with the construction and property industry because of the negative effects it brings to the environment. In addition, the investors in this industry have not been fully socially responsible in terms of promoting consumer protection, equity and access, and ensuring observation of basic human rights. This paper will provide incentives on how to prevent real estate investors from further hostility from the community, by providing interventions that are most effective to address sustainability. 2. Sustainability in UK’s real estate The UK construction industry is a very active player in the country’s economy. As noted in a study by Lorenz (2011), this high-impact industry conducts its activities totally in the public arena. However, a closer analysis of this industry finds out that it does not fully incorporate sustainability into their work processes (Lorenz, 2011). Those who have incorporated sustainability have explored alternative green options for their buildings. Experts argue that green buildings minimize carbon emission because it uses recycled materials, and it has the energy-efficient equipment, and protects the well-beings of occupants. The owners of green buildings are conscious about the daily environment impact of the construction sector (Schwartz, 2011). In many cases, real estate investors in the UK have focused more on conducting ethical investment and have concentrated less on being socially responsible. The investors believe that ethical investment is the answer to the problems such as environmental degradation, inadequate consumer protection, and abuse of basic human rights. However, there is lack of enough literature that can prove these commonalities (Mullerat, 2011). There is need for construction companies in the UK to consider protecting the environment and ensuring less impact that their work practices have on the environment. This can be made possible if these companies treat the employees fairly, give support to the local community, ensure high environmental performance, observe human rights, compete ethically with competitors, and respect the customers. In broader terms, construction companies need to observe business ethics, governance, public relations, relationship marketing, and protection of the environment (McNamara, 2007). As noted in a study by Schwartz (2011), the idea of Corporate Social Responsibility came into existence in the UK during the industrial revolution. CSR during this period was based on the Victorian Philanthropy, which required successful business people and those in authority to assist those who were not yet successful (Schwartz, 2011). This was aimed to improve the standard of living of the industrialists in the late nineteenth century. This was the beginning of CSR, whose main role is to ensure companies achieve success in a manner that the people, and the communities have been respected, the natural environment has not been destroyed, and ethical values have been honored (Schwartz, 2011). This is what is expected from construction companies in the UK. In this 21st century, many organizations are in fear of corporate power, increased government regulation, increased congestion, pollution, and resources shortages. Governments are now focusing more on social needs, and activists are demanding for equality by women, minorities and need for businesses to protect the environment (McNamara, 2007). To deal with all these demands, industry players in real estate need to be corporate and socially responsible. The real estate industry has significant impacts on the environment. Apart from using approximately 20% of energy, the industry emits over 40% of Carbon Dioxide gas and consumes over 90 % of potable water (Mullerat, 2011). This results to air pollution, overuse of water, and emission of greenhouse gasses. More interestingly, a research by Barthorpe (2010) notes that the environmental impact of this sector grows faster than the revenues it generates. Therefore, there is a need for construction companies to address both societal and environmental impacts because of their work processes. One way that is gaining much attention is the construction of green buildings. Many investors in the UK are gradually turning their attention to green buildings. This is validated by research by Schwartz (2011) which concluded that many investors expect green buildings to generate more money than non-green buildings. On the other note, in a survey by Borrie (2015), 80% of respondents argued that they would prefer buildings that increase water, energy, and waste efficiency. Both the tenants and real estate owners are working towards ensuring sustainability. Real estate owners are aware that sustainability is a tool for gaining competitive advantage and an innovation agent for business (McNamara, 2007). Tenants are aware that sustainability would reduce added costs in their lives such as access to cheaper energy, proper water management, and are guaranteed environmental protection (McNamara, 2007). The best ways to address sustainability are: (i) Fair treatment of employees This is a moral responsibility expected from construction companies. Fair treatment of employees will boost the morale necessary to raise a company’s production. The best ways of ensuring fair treatment of employees include: avoiding favoritism towards one employee over another, promotion of employees based on qualification, posting job openings for all the employees to see, listening to an employee, providing every employee with a handbook indicating all the rules, recognizing and rewarding employees on their accomplishments, and equally treating all the employees (Schwartz, 2011). (ii) Supporting local communities Construction companies need to make communities stronger and enrich the lives of the people they serve. For instance, the real estate companies could build strong communities by constructing headquarters that can transform into vibrant town centres that can link neighbours in a connection of economic and social relationships. Furthermore, the real estate companies could create more jobs for the locals that can help raise the economy of the locals (Schwartz, 2011). (iii) Good environmental performance Real estate companies need to respect the environment to ensure survival of the next generation. These companies need to adhere strictly to various legislations set out by the UK government aimed at protecting the environment. In many cases, the process of construction involves the emission of noise and dust from the tools used. Therefore, the companies need to establish their working sites in zones legally allocated to reduce the effects of noise and air pollution (MCallister, 2013). The sites should be far from residential areas. Moreover, as discussed in a study by MCallister (2013), real estate companies need to initiate environmental projects, such as planting of trees or cleaning the rivers, and such. (iv) Observing human rights Construction companies need to observe human rights. They need to accommodate the UK’s human rights codes in their work processes. It is the responsibility of construction company managers to protect their employees from unreasonable discrimination. The companies need to ensure their employees are not discriminated based on their perceived race, nationality, ethnic background, age, sex, gender identity, marital status, source of income, political belief, social disadvantage, and many more other factors(Schwartz, 2011). All employees need to be protected by construction companies. All employees need to access full opportunities and benefits present in the construction firm and need to be treated equally. (v) Ethical conduct Real estate companies need to ensure ethical conduct with competitors, suppliers, and the customers. Leaders of real estate companies need to ensure their companies observe the highest legal and moral standards in their relationship with the people in the business community (Barthorpe, 2010). As noted in a study by Barthorpe (2010), ethical decisions in businesses build trust with business associates and suppliers. To generate ethical decisions in organizations, business leaders have to lead by example. Normally, business leaders are the role models for all employees. The employees copy every work process from the leaders. For instance, if a business leader is always engaging in corrupt activities, it should be expected the employees to follow the lead. Therefore, the source of ethical actions is the leader of the company (Barthorpe, 2010). The communities around construction companies expect the organizations to act in an ethical manner. These communities believe ethical companies enhance the name of the communities as a whole. To act in an ethical manner, construction companies need to make good business decisions based on the code of ethics. In the UK, the players in the real estate industry have established a code of ethics that need to be observed by all investors (Barthorpe, 2010). 3. Most effective interventions Ethical conduct with competitors, suppliers, and customers Investors in real estate need to ensure corporate social responsibility by observing UK’s ethics, morality, and norms (Mullerat, 2011). This will make it easy for investors to manage environmental, social and economic impacts. Construction companies need to be characterized by key attributes. These key attributes are crucial in defining the companies’ identity. In many cases, customers prefer companies that have identities, which reflect what the firms are (MCallister, 2013). To ensure ethical conduct, real estate investors need to be accountable. These investors have to ensure integrity in their undertakings. Responsible investors will take into account sustainability, and will reconcile sustainability and the environment, and society at large (Mullerat, 2011). However, studies note that many firms fail to ensure accountability in their work processes (Mullerat, 2011; Schwartz, 2011). Specifically, Mullerat (2011) used the example of companies in oil and gas, in which their managers agreed to spend more than $500 million on initiatives that could foster community development(Mullerat, 2011). These initiatives have not been effective and many have failed. This study points out that top leaders fail to implement their stated intentions (Mullerat, 2011). Despite accountability being complex, real estate investors need it. It will influence their effectiveness in addressing sustainability in their projects. Leaders are role models for fellow employees. The employees expect leaders to act in ethical manner in order for them to follow the example. Their good ethical behaviours are paramount in developing sustainability in the construction industry. A study by Lorenz (2011) notes that leaders in real estate are the first planetary citizens and have a worldwide capability, and their decisions may affect societies. Leaders have a big role in guiding their businesses towards good ethical behaviour. This requires leaders with unique skills. A study by Schwartz (2011) notes that competent leaders who have strong social responsible practices are in a good position to successfully implement changes in organizational strategies. Leaders with strong social responsible behaviors demonstrate the highest integrity. Additionally, they are very familiar with sustainable development (McNamara, 2007). Many responsible leaders have been able to manage their firms successfully during times of environmental uncertainty. These leaders are characterized by their ability to be innovative, design creative visions, and empower employees to be more innovative (McNamara, 2007). They can motivate their employees to work towards ensuring sustainability and social responsibility. Environmental performance Real estate companies need to respect the environment to ensure survival of the next generation. These companies need to adhere to various legislations set out by the UK government strictly, aimed at protecting the environment. Additionally, real estate companies need to present a comprehensive report to the authorities on how they have managed the environment. As evidenced by Borrie (2015), reporting is the best way of ensuring companies have adhered to legislations aimed at protecting the environment. Real estate investors need to report on the environment they have invested in. A study by Barthorpe (2010) notes the widespread phenomenon of non-reporting by real estate companies. Additionally, there have been increases in number of real estate companies that voluntarily undertake substantial environmental management (Barthorpe, 2010). This will be the case for many years to come because there is no UK legislation that covers on reporting and substantial environmental management. Despite this being a factor that slows down sustainability in real estate, many investors are opposed to passing legislations that cover reporting. The common argument for refusing legislation is that it holds back experimentation (Mullerat, 2011). The UK real estate industry has been having experimentation in the last ten years, and it has proved to lower the level of innovation in environmental reporting (Mullerat, 2011). The reasons for the Netherlands, Sweden, and Denmark have ensured sustainability in the real estate industry is corporate reporting. Therefore, the UK has to follow the example of these countries to ensure sustainability in the construction sector (Mullerat, 2011). Nevertheless, the government receives reporting, but in small coverage. There are very few cases that reporting on the environment has been very advanced. Some of these cases are the British Airways report and Norsk Hydro (Mullerat, 2011). There are very many reports in the UK that concentrates on the environment, but have been partial in its coverage. Sadly, government agencies that deal with the environment have not shown any effort in addressing the issue of partial reporting or demanding for a full report (Mullerat, 2011). It must be noted that, the environmental reports found in the UK have been partially addressed, or even not addressed the significant environmental interactions of the reporting entity (Mullerat, 2011). Experts suggest that environmental reports need to be designed in relation to eco-balance. This means that, the reports need to highlight significant physical inputs, outputs, and leakages such as emissions and wastes from firms (Mullerat, 2011). This will ensure the report covers all the organization’s environmental interactions. There is no need for these reports to be similar to that of German eco-controlling statements, which often identifies all quantities in a single unit of measurement in order to control all losses throughout the firm (Mullerat, 2011, p. 66). Reports in the UK real estate industry need to persuade investigators or authorities that it is a full environmental report. The most important role that environmental reports need to fulfil is to explain the environmental interaction of real estate buildings. The measure of this report is ecological footprint (Mullerat, 2011). The notion of this is that, as real estate buildings stay longer, their total environmental interactions also grows and stays longer. In many cases, the eco-efficiency of these buildings is lesser than the levels of growth. This means that, the resources used by these buildings, the waste it has produced, all emissions to the environment, and such, continue to increase despite some real estate companies recording impressive eco-effectiveness because of their effective environmental management (Mullerat, 2011). . 4. Conclusion Sustainability brings together societal and environmental issues together. Despite the increase in investments in real estate industry in UK, most organizations have failed to apply sustainability in their processes. According to studies, sustainability would be difficult to use in a single company. It is a global concept that demands all stakeholders to come together (Schwartz, 2011). However, this does not translate that a single company cannot apply sustainability. With efficient leadership, complete reporting, and corporate social responsibility, single companies can apply sustainability (Barthorpe, 2010). By definition, sustainability is a simple thing that entails taking care of the present generations and future generations. This simple definition has demonstrated the simple task expected from real estate organizations (Kimmet, 2009). Despite efforts made by real estate firms to ensure sustainability by designing green buildings, this is not enough. There is a need for additional research on this subject matter. The paper has provided recommendations and incentives for property investors and developers to address sustainability. References Barthorpe, S., 2010. Implementing corporate social responsibility in the UK construction industry. Property Management, 28(1), pp. 4-17. Borrie, S., 2015. Overview of UK Real Estate Structures and Transactions. K&L Gates Legal Insight. Kimmet, P., 2009. Comparing "Socially Responsible" and "sustainable" commercial property investment. Journal of Property Investments and Finance, 27(5), pp. 470-480. Kimmet, P., 2009. Comparing “socially responsible” and “sustainable” commercial property investment. Journal of Property Investment & Finance, 22(5), pp. 470-480. Kotler, P., 2011. Corporate Social Responsibility: Doing the Most Good for Your Company and Your Cause. New York.: John Wiley & Sons. Lorenz, D., 2011. Capturing sustainability-related information for property valuation, Building Research, and Information. 39(3), pp. 256-273. MCallister, P., 2013. Handle with care: how useful is the research on green building prices?. In: The Economy of Sustainable Construction Berlin. London:Ruby Press, pp. 338-347. McNamara, P., 2007. Sustainability and Real Estate. Landlords will find it harder to raise rents in energy -inefficient properties. Mullerat, R., 2011. Corporate Social Responsibility: The Corporate Governance of the 21st Century. New York: Kluwer Law International. Schwartz, M. S., 2011. Corporate Social Responsibility: An Ethical Approach. s.l.:Broadview Press. Read More