Why ESG is no longer just a passing thought for landlords


James Shannon, Chief Product and Technology Officer at essensys informs us about Environmental, Social and Corporate Governance (ESG) and its importance to Property landlords.

The notion of environmental monitoring has been on the back burner for some time. For years it has merely existed as a checklist activity to tick off without much thought. Businesses have traditionally treated it as a gimmick USP, with no clear idea of what it is they’re trying to achieve.

However, amid the current climate crisis, measuring the sustainability of a business is more vital than ever. Multinational tenants are now held accountable for their Environmental, Social, and Corporate Governance (ESG) compliance. They will not lease or license a property unless they can obtain the environmental data they need from the landlords and report it accordingly.

The government’s prioritization of environmental monitoring has seen the process evolve – and now, data relating to sustainability can be converted into action. For instance; rooms now have to meet criteria to ensure they meet standards and minimum productivity thresholds in regards to temperature levels, lighting, carbon dioxide levels, and in some cases, smart office spaces can now inform staff that they should leave the room if a certain carbon dioxide level is breached. Landlords and companies must be aware of the need to be proactive to differentiate themselves from other buildings and businesses and create ESG strategies to attract tenants that place environmental issues at the forefront of their agenda.

The impact of indoor air quality

While the monitoring of air quality within the workplace is a fundamental aspect of ESG policy, CO2 levels, humidity, and temperature all impact productivity and health of employees. And when it comes to productivity, tenants have become far more expectant. No longer will they accept leasing an empty office space that does nothing other than provide a space for desks.

Scientific evidence points to the fact that optimal performance in the office and fresh air go hand in hand. Overcrowded, poorly ventilated workspaces and long meetings in compact boardrooms equals a CO2 hotbed. High levels of CO2 result in 23% impairment in decision making, slower reaction times, loss of concentration, impaired attention spans and increased drowsiness.

Poor air quality is also linked to the spread of illness, a significant concern in the wake of the COVID-19 pandemic. Humidity and temperature also play a part in the survival rate of viruses, with low humidity directly compromising the body’s natural defense system.

The Office for National Statistics’ last pre-pandemic recording of sickness absence in 2018 and found that 141.4 million working days were lost because of sickness or injury in the UK. Minor illnesses such as colds and coughs accounted for 27% of these illnesses, equating to 38.5 million days.

By monitoring CO2, landlords and employers can provide a safer, more productive environment, with employees proven to work up to 60% faster in lower CO2 concentrations. By reacting appropriately to these levels and monitoring the air quality in general, companies can prevent sick building syndrome and enhance worker performance – and crucially, be prepared to prevent and react to another instance like the pandemic.

Attracting and retaining talent

Thanks to the pandemic, workers are genuinely starting to prioritize physical and mental well-being in their careers. According to Gallup’s State of the Global Workplace report, workers across Europe are less satisfied than the rest of the world regarding environmental protection within their own country, with only 46% satisfaction compared with a global average of 62%.

Employee preferences on wellbeing and sustainability are essential for talent attraction and retention. Companies must prioritize these wishes to halt resignations and minimize the risk of losing their top talent to competitors. Organizations with high employee engagement are 22% more profitable. However, only 33% of employees feel engaged. So, environmental awareness will maintain a steady workforce and employee satisfaction and boost company performance.

The role of sensors    

Collecting data is key to meeting room productivity scores, and sensors play a crucial role in collating such information. Temperature sensors, through digital signage, are an effective way of prompting when meeting rooms become too stuff or the air quality isn’t high enough or indicating that a meeting should be canceled if carbon dioxide levels are too difficult. It is important to note that access control systems, sensors, and digital signage work better when friction is removed, and they operate together, sharing information and communications. When integrated together, these systems add more value than when working in a silo to ensure room productivity levels are met.

Of course, while the world of work is returning to some degree of normality after Covid, the shift in thinking is switching to ‘how do we keep another similar outbreak from happening again. Population monitoring in spaces, room temperatures, access control, and air quality are all aspects of maintaining a safe distance, and sensors will play a key role in collecting actionable data on each measurement to maintain safety. We will see a shift towards integrated systems becoming more integrated as a standard offering from landlords next year as they continue to seek to drive ESG compliances and innovations.

Why ESG will no longer be a passing thought

By implementing ESG standards, landlords can retain tenants, optimize staff well-being and productivity, and help to preserve the environment while being cost-effective. The market is shifting, and environmental impact is high up on tenants’ agenda.

COP26’s journey towards net-zero is set to demand cooperation and a level of commitment from corporations and the public alike. So ESG will see a further push towards becoming an essential element of business models. PwC has stated that by 2025, almost 60% of mutual fund assets in Europe will be ESG related, with COP26 set to increase the growth and influence of ESG investments.

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A shift in investor priority and emphasis on corporations adopting sustainable and ethical business models for the transition to net-zero further exaggerates the need for landlords to keep up with the tenants’ ESG demands and expectations. ESG can no longer be a passing thought.  

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James Shannon

James Shannon is Chief Product Officer at essensys

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