Sustainability in 2020 – the year ahead

Sophie Walker, UK head of sustainability at property consultancy JLL, writes about why 2020 could be a watershed year for sustainability within the built environment sector.

2019 saw the climate crisis hit the national agenda in an unprecedented way; environmental issues were brought to the forefront of the minds of the government, businesses and public alike. A key moment for me came in June when the UK Government became the first major economy to set a legally binding net-zero carbon emissions target of 2050.

The response was noted across multiple industries, yet, with limited time remaining, it is clear that we are still not moving fast enough. In 2020, meaningful, collaborative action must be taken to reflect the urgency and scale of change required.

The wave of net-zero carbon commitments

The first wave of net-zero carbon commitments we saw in 2019 will reach a crescendo in 2020, with some big announcements from both Microsoft and Sainsburys already this year. This is reinforced by a recent letter from the founders of the World Economic Forum which called on all businesses who were attending Davos this year to make public commitments to achieving net zero carbon goals by 2050 or earlier.

Ultimately, delivering these commitments will require a shift in the whole value chain; a change in the approach to sustainability investment; and net zero carbon governed at the Board table as with any strategic, urgent business priority. In 2020, we will see many businesses will start to consider environmental performance as important as financial and reputational value.

Meanwhile, there is also pressure to act from an increasingly demanding public who require transparency and honesty about the progress that is being made. With many businesses having set tougher decarbonisation goals than those dictated by legislation, this year we also expect to see more in the way of pathways from leaders setting out how these will be achieved.

A rise in sustainable investment

If a commitment to sustainable operations is genuine, investment decisions must also be made with the likely environmental, ethical and social impact in mind. Along these lines, institutional investors have joined Blackrock’s Larry Fink in his call for CEOs to behave with a sense of purpose and focus on sustainability. This new emphasis sets a precedent for impact-oriented decisions in real estate. To avoid the risk of green-wash or ‘purpose-wash’, however, the industry first needs to agree on a framework to measure impact.

What’s more, with a Conservative government supported by a predominately blue-collar electoral commission, we anticipate incentives for investment in the more deprived areas of the country as the focus on social sustainability increases. 2019 saw the highly-regarded Stirling Prize awarded to Goldsmith Street, a social housing project in Norwich that managed to achieve sustainability but for minimal outlay. This could be telling for our expectations in the future.

From a residential standpoint, the impact of pollution on public health is already becoming more prevalent in the minds of prospective homeowners, with one in two people taking air quality into consideration when deciding where to live. As such, we anticipate that real estate occupiers and investors will consider consumer demand for a healthy living environment in their future decision-making.

Real estate’s response to these challenges

In terms of both air pollution and carbon emissions, central and local governments are already taking a stronger position on the regulatory trajectory of commercial buildings, housing stock and air quality in cities overall. However, one of the main challenges the real estate sector is faced with to reach net-zero carbon goals is how to approach retrofitting older buildings, as this could mean needing to update traditional energy systems, as well as changing internal layouts and facades.

Urgent action is needed by building owners to evaluate the most cost-effective way to transition existing assets to net-zero carbon, particularly when we consider there are a maximum of two refurbishment cycles left before 2050.

As for new buildings, achieving net-zero carbon in construction and operation will require a focus on a building’s lifecycle in the earliest decision-making stages, with the circular economy coming to the fore. Materials with low embodied carbon will need to be prioritised over the cheap and inefficient, while we will also see companies increasingly embracing designs that simply require less.

And whilst net zero carbon solutions will dominate the industry’s response in 2020, sustainability leaders in the sector will not lose sight of the opportunity to address biodiversity net gain, improve social value, address social inequality and drive greater diversity & inclusion into their workforces and supply chains.

A united front

Finally, with the UK hosting the COP26 UN Climate Change conference in Glasgow later this year, we can only anticipate that public, corporate and political attention on environmental issues will continue to grow. While this is by no means negative, we have reached a critical point where businesses must take united steps to improve the sustainability credentials of their industries. Time is of the essence, and the focus needs to be on translating ambition into action: rewriting the rulebook to deliver meaningful and lasting change.