Cities, Real Estate, and The Third Pillar – Rosemary Feenan, International director of global research programmes, Jones Lang LaSalle
The term triple bottom line was coined by John Elkington in 1994 – he was inspired apparently by a question posed by the Polish poet Stanislav Lec’s “ is it considered progress, he asked , if a cannibal begins uses a fork”. A slightly disturbing piece of imagery but one that maybe resonates quite well in our current uncertain times….and one Mr Elkington clearly liked as he called his seminal book on the matter of how to combine economic and profit motives with social and environmental good – “Cannibals with Forks”.
As far as the triple bottom line goes in real estate, we have a pretty good handle on the profit and the economy part and an improving understanding of environmental impact, but the third pillar, the social impact of real estate, needs more explicit attention. If the crisis taught us anything at all – as Rodger Hill so neatly put it – it would be how intertwined the fortunes of businesses, the environment, communities and the man in the street really are. The places where these connection occur are cities.
In this vein we need to be able to better evaluate and articulate real estate’s contribution to social good in the cities as well as to improve it. We need to get to what Ed Glaeser of the Triumph of the City fame calls – the moral heart of economics.
There is actually more going on in this field than many probably realise. The push at a strategic level for the elevation of the third pillar has largely been due to actions around corporate social responsibility. But there is also a growing recognition of the new relationship emerging between real estate, cities, and wider society. The power of real estate to change local economies has become a topical issue, as has the impact of the voice of its customers, be they office workers, shoppers or residents, to effect positive change around style, design and even the location of property. Alongside this the responsibility we share for altering our behaviours with regards to all categories of property and its use of resources, binds property, business and society together with a common requirement.
The pull for supporting the third pillar is the uncovering of increased shareholder and asset value, not just in the tangible aspects of energy savings, but with the recognition that quality real estate improves employee productivity and wellbeing as well as supporting the functionality of cities and communities. In this regard the Smart Cities movement has a lot to add to a citizen’s experience of navigation, access and services.
But the third pillar goes way beyond this. The next big thing the real estate market will need to get its mind around is Social Return on Investment (SROI), a newish term for thinking that has been around since the early 1900’s. But now methodologies exist and are being used internationally to measure environmental and social value of an activity that is not currently reflected in conventional financial accounts. The UK cabinet office issued guidance on this in 2007 and now the New Economics Foundation in the UK, and others, like ourselves, are implementing these methods for a number of leading companies.
While the full methodology is not yet commonly used a number of companies are working hard to refresh their community strategies and to ensure that the link between their activities and the communities of the cities which they touch are explicit. But what distinguishes SROI from normal social impact studies is that it seeks to measure to the wider impacts that would not have occurred without the development or intervention going ahead. That could be impacts on long term job creation, skills or provision of community services in cities.
SROI will require the setting up of deeper, wider, more extensive frameworks for impact measurement before any development or regeneration activity commences. In future there will be far fewer places to hide regarding the wider impact of real estate and urban development decisions. The positives are that the benefits of “good real estate “ and its frequent positive contribution to driving overall city success, will be far more visible and quantifiable, the balance is that so will poor decisions .