Integrating social and governance outcomes to build better communities

Housing development

With construction costs in Perth up more than 40 per cent in just two years, and in the midst of a crippling housing supply crisis, many in the industry look at me strangely when I suggest that now is the time to consider higher sustainability standards for both their projects and the industry as a whole.

It is worth reminding ourselves that the sustainability performance of the development industry will have a big impact on the future of our planet, in being responsible for around 39 per cent of global carbon emissions. Closer to home, we all recognise the contribution of poor planning in delivering urban heat islands in outer-Perth suburbs, leading to higher energy and water use in a city that is increasingly experiencing bouts of 40-degree days and months without rain.

As a result, there are rising expectations of industry to deliver ‘greener’ suburbs – ones that carefully consider and mitigate the impact our developments could have on the environment. While compliance costs have increased, most developers want to show that they’re considering the future of the planet.

With environmental considerations top of mind, the consideration of social and governance components of ‘ESG’ sometimes take a back seat.

During a period of dwindling labour supply, rising costs, community pushback to density, and increasing environmental regulation, investing in the social and governance factors that are important to your stakeholders may seem absurdly counter-intuitive. But could it be part of the solution to our intractable housing crisis?

Urban developers are at a crossroads: grappling with the dilemma of prioritising fast, affordable housing whilst crafting connected, appealing communities. We’re seeing even the most established players struggle with the demands of buyers, regulators, and their workforces.

With rising stakeholder expectations and economic pressures, prioritising sustainability that goes beyond crucial environmental standards could help future-proof the development industry as it works to avoid a projected shortfall of 25,000 homes in Perth by 2027.  

From a social perspective, urban developers play a unique role in shaping the fabric of future communities, while also enhancing the quality of life of their employees. These don’t always have to be costly, but when done well these enhancements deliver a compelling social licence to operate.

For example, AVID Property Group’s ‘Harmony’ development in South East Queensland set out to improve social sustainability by introducing simple initiatives that were important to buyers – events, competitions, workshops and activities to connect new and existing residents and help build a connected community. Sales increased, and AVID received feedback that buyers saw real value in the sustainability impact that was generated by building a connected and supportive neighbourhood.

Of course, there can be significant financial benefits in doing the right thing too. Incorporating well designed community and social housing in your developments not only results in government funding, but also boosts the reputation of your organisation during a housing affordability crunch. Consider how you might help communicate the impacts of affordable housing to neighbours and potential buyers and be prepared to address the stigma associated with social housing with research that paints a more nuanced picture.

Another critical factor is that social impact doesn’t just reside with your projects. Recognising and embedding the value of diversity in the workforce also works to attract and retain quality employees. John Holland took a strong stance on diversity in its workforce and won the Workplace Gender Equality Agency’s (WGEA) ‘Employer of Choice’ award. These actions helped encourage job applications from demographic segments who had traditionally avoided the building industry because of its lack of diversity.

Embedding genuine social sustainability must be tackled seriously, and with the backing of your workforce and other stakeholders, it can drastically impact the long-term performance and success of your business and projects.

Having people with the right knowledge and experience in sustainable thinking, developing robust strategies and processes, and assessing the genuine impacts of your sustainability initiatives is crucial for strong governance of any business or project.

Hesperia’s sustainability performance is backed by its robust governance. It uses third-party frameworks and certifications, such as becoming a certified B-Corp, to demonstrate its commitment and outcomes on its sustainability initiatives. These certifications demonstrate its ability to measure, implement and manage these initiatives, and substantiates their sustainability performance for its stakeholders.

Meanwhile, the Australian Competition and Consumer Commission (ACCC) has conducted a review of environmental and sustainability claims and is now issuing infringements in ‘greenwashing’. The development industry is not immune, with the Green Building Council of Australia cracking down on Green Star ‘equivalency’ ratings not meeting their standards in response to greenwashing claims.

Robust strategies and accountable management of sustainability commitments can substantiate your claims and avoid the looming greenwashing enforcement. But where’s the best place to start?

There are any number of routes you can take on your ESG journey, but how do you decide what is right for your project or organisation?

The first step is to identify, evaluate and prioritise the ESG-related topics that are most significant to your long-term value creation, as well as financial risks and opportunities.

If AVID had undertaken a materiality assessment for the Harmony development, it may have identified the key sustainability and financial impacts risks and opportunities as:

  • Financial Risks: Poor reputation amongst homeowners; buyers increasingly seeking connected communities reducing demand.
  • Sustainability Risks: Design of precinct contributing to increasing mental health issues in urbanised areas; and on the positive side.
  • Sustainability Opportunities: Developing positive community wellbeing through initiatives to generate a sense of community.
  • Financial Opportunities: Generating a positive reputation for the precinct, driving demand from stakeholders and increasing sales.

Before embarking on the Harmony development, these risks and opportunities would have helped AVID identify which of its sustainability topics were most ‘material’ by testing these with stakeholders and prioritising accordingly.

Although a simple example, the same principles apply to larger development projects or even complex organisations looking to develop ESG strategy.

This could start with executive-level workshops to identify, evaluate and prioritise those topics that are most significant to delivering long-term value creation, as well as environmental and societal risks and opportunities. These would then be tested to ensure they meet the needs and expectations of key internal and external stakeholders.

The results of this engagement are distilled into a materiality map to identify the sustainability and ESG topics your organisation should prioritise to create maximum value and sustainability impact.

Sustainability isn’t a trade-off in our current market – rather, it could be part of the solution. While environmental efforts are vital, they are not the only sustainability risks and opportunities facing the industry.

By identifying, prioritising and testing the full range of ESG that enhance and protect long-term value creation, you are preparing your company or project for the enormous changes we are witnessing in our society, environment and economy.

Integrating environmental, social, and governance considerations in business planning will allow developers to navigate challenges, future-proof their projects and businesses, and continue to build resilient communities in Western Australia.

This article also appeared in The Urbanist magazine.


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