No More Greenhushing and Stranded Assets: How Can the Commercial Real Estate Sector Meet Net Zero Targets
By Rose Morrison, managing editor of Renovated
Climate change is a global issue that has become too dire to ignore. Many governments are bent on decoupling from fossil fuels as early as possible to mitigate the intensifying greenhouse effect and prevent an apocalyptic warmer future. Regulators have set net-zero goals to decarbonize built environments, compelling businesses to reduce electricity usage at every turn and adopt renewable energy.
These net-zero targets are rigid objectives, not mild suggestions. The laws underpinning them expose erring commercial real estate (CRE) assets to a stranding risk, pressuring industry players to act sooner rather than later. Some fall into the trap of committing greenhushing in pursuit of compliance.
What Is Greenhushing?
Greenhushing happens when a company underreports environmental, social and governance (ESG) information. Business leaders may be reluctant to publicize unfavorable or underwhelming emissions data to avoid upsetting stakeholders when the organization fails to meet climate targets or angering investors when ESG efforts hurt profits.
Although this form of greenwashing isn’t complete dishonesty, lying by omission is counterproductive and may have legal implications. It taints the integrity of publicly available emissions data on upstream and downstream activities, making it more challenging to analyze obstacles to net-zero target attainment for everyone.
What Are Stranded Assets?
In real estate, stranded assets are commercial properties at risk of early obsolescence. Income-generating assets can become liabilities — no matter how valuable they are at the moment — when they fail to meet market expectations and regulatory requirements.
Ungreen properties for lease may find it difficult to attract tenants, who also worry about net-zero targets, as the market favors buildings with sustainable credentials. These assets may also deter investors who judge the long-term financial viability, portfolio diversification and rental income potential of properties based on ESG.
5 Ways CRE Players Are Making Progress With Net-Zero Attainment
Meeting net-zero targets for commercial properties is no walk in the park. Still, it’s doable, and many owners have made inroads into sustainability with these five sound practices.
- Balancing Realism and Ambition
Many commercial property owners want to appear more sustainable than what their energy usage suggests to win the hearts of blue-chip tenants and green investors. Corporate leaders may find the color of money a stronger motivator to jump on the sustainability bandwagon than the hue of a lush carbon sink. However, misrepresentation isn’t the way to go. It’s a myopic approach to capitalize on a movement shaping up to be relevant for decades.
Decision-makers should realize there’s no shame in admitting to being marginally sustainable. After all, not everyone starts from the same place. Companies with net-zero aspirations are of various shades of green. The darker ones are closer to hitting sustainability goals, but the lighter ones are green nonetheless.
Green consumerism and credibility go hand in hand. Unfortunately, trust is hard to earn but easy to burn. Nothing upsets eco-warriors more than greenwashing and now greenhushing, be it intentional or accidental.
Overselling green merits may backfire once the cat is out of the bag. Instead of bragging about outrageous environmental accomplishments, CRE interests must acknowledge how sustainable — or ungreen — they currently are. Then, they should plan big and draw up realistic road maps for net zero.
Authenticity doesn’t always yield immediate revenue. Still, it can help put commercial properties on the radar of corporate tenants with ESG goals. Some green investors with long-term time horizons wanting to venture into real estate investment trusts to diversify their portfolios actively seek assets in the early stages of sustainable transformation to maximize their gains.
- Putting a Premium on Data Collection
Accurate data collection fuels and lends credence to carbon accounting. Investing in smart building technologies is vital in quantifying emissions and generating reliable reports.
Internet-of-Things devices like sensors can monitor energy consumption and other relevant variables, collect granular data and prepare it for analysis. Analytics experts can leverage artificial intelligence to crunch the numbers, spot trends and glean insights from emissions data.
CRE owners should be data-driven when implementing ESG strategies and identifying smart building upgrades to knock one net-zero milestone after another.
- Getting Certified
Most CRE players dipping their toes into sustainability don’t know where to begin. Green building certifications can offer clear-cut pathways to net zero — a common industry challenge — and give them a sense of direction. Certifying bodies can guide commercial property owners in spending their finite resources on vital building design improvements to hit net-zero goals.
The Leadership in Energy and Environmental Design (LEED) is the most recognizable certification for green buildings in the United States. LEED verifies net-zero goals, helping CRE players reach lofty sustainability milestones and adding credibility to their claims.
More importantly, getting certified aids marketing efforts. A stamp of approval from a reputable third party like LEED is a free advertisement when luring investors and tenants.
As of October 2024, less than 11,600 projects have earned LEED certifications for commercial properties in the U.S. Green buildings are in demand and scarce. Owning one of them should make it easy to sell stocks, negotiate for higher rents and stay on the good side of regulators.
- Upskilling Employees
ESG reporting can cause more confusion than clarity when the messenger isn’t up to the task. Sustainability is a new domain, with freshly minted similarly sounding words entering its fast-expanding terminology.
Business leaders shouldn’t expect every audience to understand the nuances of net zero, zero carbon and carbon neutrality when engaging in boardroom discussions and crafting corporate press releases. Reckless verbiage can result in investor alienation, tenant misunderstandings and stock sell-offs.
CRE players should invest in staff training. Educating every member of their communications teams to grasp novel, complex sustainability-related concepts as well as the gist of relevant laws and phrase them in digestible manners is a recipe for success.
Trained copywriters and spokespersons in sustainability don’t commit rookie mistakes. They use plain — but not vague — language and avoid ambiguous terms, such as eco-friendly and natural, when describing something as much as they do jargon. Discerning communication specialists strive to be specific yet accessible to communicate without obscurity.
- Learning to Report Factually
ESG reports aren’t sales pitches. They’re public documents the authorities, bank executives, investors, tenants and other interested parties review when evaluating corporate net-zero achievements.
These papers must be data-based, factual and transparent to withstand scrutiny. CRE players can become immune to greenhushing accusations when they can substantiate their environmental claims with solid, verifiable evidence.
Zeroing in on Net-Zero Targets in CRE
Allowing commercial properties to become stranded assets due to noncompliance with sustainability regulations is unprofitable and ungreen. While consistently meeting net-zero goals is a tough row to hoe, CRE players must refrain from greenhushing and embrace the best practices to stay on course.
About the Author
Rose is the managing editor of Renovated and has been writing in the construction industry for over five years. She’s most passionate about sustainable building and incorporating similar resourceful methods into our world. For more from Rose, you can follow her on Twitter.