Continuing our exploration of topics discussed at BOMA International this year (check out our article on the “flight to quality” here), we are going to dive into one of the most poignant questions asked by the audience.
"How do we get tenants to care about sustainability and their role within that? Even something as simple as recycling seems challenging at the building level."
The question drives at the heart of why decarbonization can be so difficult. Landlords are on the hook for performance, even when they control a minority of what drives emissions in a building.
The panelists’ answers to this question were sincere:
- They have used their tenant engagement apps to publish ESG contacts + policies
- They have put green leases in place
- They have created guides on sustainable operations
- They have hosted a series of webinars on what tenants might be able to do.
While true and valid, we believe this misses some high leverage opportunities. The following are tactics that we’ve witnessed be successful in our clients’ portfolios.
Obviously, the lease structures and responsibilities of landlords and tenants matters a lot here. Some of these will only be applicable in gross lease properties, others in net lease.
Tenant Utility Bill Backs
When tenants are submetered (or even billed pro rate) and landlords are the utility billing provider, there is a built-in touchpoint with tenants every single month.
Despite the opportunity, tenant utility billing is often an afterthought. Bill generation is left up to legacy providers and the process is strictly the domain of property managers.
The result, from the tenants’ perspective, is that utility consumption is divorced from their behavior. Opaque bills are often appended onto the rent statement and paid for by the accounting department without a second thought.
In the background, there are often sustainability teams in tenant companies who are going back and manually transcribing the data out of there.
A premium tenant experience means understanding the tenant’s needs and getting ahead of them.
Tenant portals, in-building rankings, carbon equivalencies are all valuable tools in engaging tenants around their role in sustainability.
Providing Value Upfront
In triple net leased assets, where the tenant pays the utility bills, landlords find themselves having to request data from tenants to meet reporting requirements.
This process is no fun for anyone. Tenants have to put in effort without any clear benefit and nobody likes to do work for free.
Even when there is a green lease in place specifying data sharing agreements, it doesn’t necessarily solve the problem. Landlords would prefer not to have to pull that card to force compliance from tenants.
To address this, landlords can “flip the script” by implementing strategies like shadow metering.
Instead of requesting data from tenants, landlords can meet their reporting requirements without any tenant involvement.
In addition, the real-time data collected through shadow metering can be turned into value add services for tenants.
For example, similar to submetering, they can provide real-time transparency into consumption. This can be enhanced with software & analytics that provide specific insights and alerts to tenants should they, for example, not shut down equipment for the weekend.
Another example is automating the tenant’s own reporting into Energy Star for Tenants. The premise is that by delivering value upfront, tenants are more likely to engage and partner on sustainability initiatives.
Operations & Maintenance
Perhaps the most overlooked way to improve engagement with sustainability is to digitize, automate and improve the other aspects of how the building is operated.
Like in any other realm, it’s hard to focus on sustainability when there are “fires” to put out.
If tenants are constantly submitting tickets because HVAC stops working or elevators are breaking down, they are not going to consider sustainability.
Likewise, if property managers and engineers are spending all of their time dealing with complaints and issues, they are not going to have the opportunity to foster engagement and partnership around sustainability.
The best way to both avoid tenant complaints and to give on-site operators time back is by combining real-time monitoring with work order generation.
Communicating these improvements to tenants can directly lead into conversations around sustainability.
For example, real-time monitoring to get ahead of equipment breakdowns is also used to identify energy optimizations. The landlord has implemented this technology as part of the overall goal to reduce emissions, here’s what tenants can do.
Conclusion
Too often, it seems like tenants simply don’t care about sustainability. In some cases, it is certainly true.
However, before all tenants are written off, the way in which sustainability is presented to them should be re-evaluated.
Are there any touch points, such as submetering, that could be better leveraged to provide transparency and accountability?
Are there any processes that require effort from the tenant upfront, where we could instead be delivering value to them?
Is it possible that they don’t care about sustainability because they are spending time dealing with more basic problems with the building?
These are questions worth asking. Big, audacious goals are being set forth regarding net zero targets. It’s going to be exceedingly difficult to achieve them without tenants doing their part.
Want to learn more? Download Driving Action: The ESG 2.0 Playbook
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