Why rethinking CSR is vital for real estate strategies

The pandemic has had a significant impact on our entire ecosystem. We have seen global CO2 emissions fall by a record 7% in 2020¹ benefitting the environment. Yet, at the same time, we have seen adverse consequences for the mental health of staff working remotely, with almost half (49%) of those working from home saying they have felt lonely or isolated². Certainly, while previously pushed into the background by the shorter-term financial goals of profitability, the health and economic crisis has made social, environmental and governance (ESG) issues more visible and tangible.

Dealing with these new non-financial issues now needs to be at the heart of corporate real estate strategies since their operating assets are both a major contributor to CO2 emissions and a tool for promoting the quality of working life (QWL). Indeed, the strategic review undertaken by many companies in response to the health crisis is undeniably an opportunity to enhance the role of Corporate Social Responsibility (CSR) to reflect better the social issues that staff now value while contributing effectively to the recovery.

Three major risks of poor CSR policies

While budgetary restrictions represent a challenge in the current circumstances, allowing them to weigh too heavily on enhancing CSR strategies would be unsustainable long term and something that stakeholders would, in all likelihood, not fail to punish. Especially since staff and investor awareness of CSR issues have been exacerbated by the Covid-19 crisis. To ignore this would have significant risks:

• HR risks: recruitment difficulties and the flight of talent in search of meaning and transparency, a challenge that is all the greater now that Generation Z is entering the job market;
• financial risks: disengagement of some partners or investors who are reluctant to be associated with a non-virtuous organisation;
• media and reputational risk: potentially leading to a decline in market attractiveness and a business slowdown in the event of a loss of customer loyalty.

The impact on real estate strategies

Both political leaders and companies in a post-Covid world are now expected to play their part and address these social issues. Of course, there are challenges. There is the multiplicity of workplaces and the new dimension of widespread remote working, making the home an accepted extension of the office.

For the corporate world, office property can serve as a primary lever, giving direction to ESG issues that, in turn, will help innovate and rethink CSR policies to ensure that these environmental and social issues are embedded in real estate strategies as we advance.

Specifically, we see six key areas where office property can make an impact:

1. A reduction in office surfaces to account for a still larger share of distance working, thus reducing the environmental impact proportionally. This strategy will supplement existing moves towards property assets with a high level of environmental performance.

2. More use of the data generated by the building to promote more rational use. For example, by correlating occupants with the supply of catering, cleaning or heating and air-conditioning to combat waste and pointless consumption.

3. Still more new services, delivered directly to the employee’s home, to address psychosocial challenges such as the provision of furniture, meals, and psychological support from qualified professionals. Not forgetting connectivity, since digitalisation, accelerated by the pandemic, is at the heart of the growth of an ecosystem of services tailored to remote working. Not all locations are equally served in this respect.

4. The redesign and modularity of workspaces to offer the best office conditions, reasserting their role as a place for discussion and collaboration.

5. The different workspaces must knit together better to complement each other in the long term, and not just at a time of crisis.

6. Wider use of the benchmarks for CSR reporting and innovation in the real estate sector, to provide relevant governance and indicators.

The multiple crises caused by the pandemic have abruptly changed the rules; once past the shock of the national lockdown imposed in March 2020, more profound strategic reflections began, and that includes rethinking CSR. While nothing is certain, a new balance between general and financial interests seems to be emerging, corresponding to the aspirations expressed by the majority of employees³.

As public authorities prepare for tomorrow’s working standards; businesses, far from remaining stuck in the current environment with all its uncertainties, now need to take the lead and adapt in real-time.

This article was written by Claire Gueydan-O’Quin, Head of Real Estate Consulting Europe, and Morgan Iafrate, Real Estate Consulting Manager at Mazars.

¹. https://www.bbc.co.uk/news/science-environment-55261902; ². https://www.ipsos.com/en/covid-19-pandemics-impact-workers-lives; ³  Mazars study “Stratégie immobilière post-Covid : 15 responsables immobilier livrent leur vision” (in French)