The climate for change. What ESG really means in the Real Estate industry?

Sustainable development and the implementation of its goals by companies (ESG) are becoming more evident in the strategies and business activities of such enterprises – and warehouse developers and their clients are no exception to this trend. Piotr Miodek, the Commercial Director of 7R, tells us more in this interview about what these changes mean for the market.

What has been driving this interest in ESG in the warehouse market, and what is the main current focus of such activities?

Piotr Miodek: Companies – including tenants and investors – are being encouraged by new regulations, as well as their shareholders, customers, partners and competitors, to minimise their negative impact on the environment, the climate, society and, ultimately, the economy, and at the same time increase the positive impact they have. Therefore, everyone has their own path to take – at the right pace for themselves and their industry. However, the most important common goal everyone in Poland now has in this regard is to abandon coal-fired energy, as well as to reduce their carbon footprint, by such measures as reducing local emissions. When it comes to warehouses, in order to achieve this, clients are mainly switching to alternative, cleaner energy sources. Some are opting to install photovoltaics, others are going for innovative gas cogeneration, while some are even ending their use of gas completely. As part of our ESG policy, we take care to identify, analyse and respond to these various customer needs and goals.

How advanced are warehouse tenants in their ESG strategies?

Customers are beginning to understand how important ESG is. We can see that companies and industries are at very different stages of ESG development. Therefore, for those who expect this, we try to act not only as a developer, but also as a ‘green guide’. We develop our facilities in a pro-environmental manner, because we understand the environmental, social, economic and business importance of such developments. Therefore, as standard, without any additional payment, we offer a range of solutions that make the building more friendly to the environment and employees (including thicker insulation, non-heating façades adapted to the local conditions, photovoltaics, the use of rainwater for watering vegetation as well as rest areas for employees). We show companies how much such facilities can reduce their carbon dioxide emissions (even by around 400 tonnes of CO2 a year for a 20,000 sqm warehouse) and energy consumption (by up to 50% per year). We talk to our clients about how this will positively affect not only their future environmental and energy assessments or audits, ESG ratings and reporting obligations, but also and above all, about how much less of an impact their building will have on the surrounding environment.

What do clients expect from developers?

On the one hand, solutions that help them to meet their ESG requirements and that provide tangible benefits; and on the other, understanding and, in a way, help in implementing their sustainable development strategies. Tenants and investors are beginning to measure and reduce the environmental impact of their operations and supply chains, including during the construction, leasing and building operation stages. Therefore, they are looking for partners who will help them to do this, who will not only provide green solutions and buildings, but also not burden them in terms of their environmental and social footprint, because they have a similar approach to responsible business. Otherwise, they risk higher utility bills and a faster decline in the value of their properties, as well as higher capital costs and greater legislative, market and reputation risks for their activities.

Nothing that we do – whether positive and negative – happens in isolation from the environment. Is it the same for companies?

Of course. Our ESG policy is not only about green construction. It also involves ethical sales, strong cooperation and a sound information policy. We pay attention to the expense, and we advise against solutions that make no sense or would involve unnecessary costs and risks for the customer or the environment over the long term. When we see that customer expectations are based on incomplete or false marketing messages and amount to greenwashing, we pay close and honest attention to this, providing advice on the best solutions – for both the customer and for the environment. One example is the use of rainwater recovery in and around a building. While this popular solution is excellent for irrigating green areas, its use in sanitary facilities carries the risk of more frequent and bigger service and operating expenses in the future – and the customer simply has to know about this. In our opinion, this is what responsible business and partnership should look like in practice.

What new ESG solutions can we expect to see take off in the future in the warehouse market?

I see significant growth potential in the increased use of heat pumps in warehouse buildings. The possibilities for storing renewable energy generated on the plot on which the building stands also promise to be interesting, such as from photovoltaic installations. Clean energy stored on sunny days could be used by the tenant or owner to power the forklifts or charge the electric fleet on days with less favourable weather conditions.