How to involve your tenants in your ESG strategy

Successfully implementing an ESG strategy isn't a linear journey with a clear beginning and end. Rather, it's an ongoing process of analysis, collaboration, and refinement.

Moreover, your ESG doesn't exist in a vacuum. It has implications for the wider world, and especially for the people who live or work in your properties.

Without involving those people in your strategy and working alongside them to make your buildings more sustainable, success in ESG is nearly impossible.

With that in mind, we're sharing some ideas about how you can effectively involve your tenants in your ESG strategy. Let's dive in!

Assess Current Performance, Risks, and Opportunities

Before incorporating tenants into your ESG (Environmental, Social, and Governance) strategy, it's crucial to evaluate potential risks and identify opportunities for collaborative optimization.

Examine key factors such as energy efficiency, water conservation, waste management, accessibility, air quality, and community engagement. Conduct a thorough analysis of the associated risks and opportunities, and brainstorm strategies to engage tenants effectively.

For instance, say you manage a residential property. After some analysis you notice that tenants are underperforming in terms of energy conservation. Instead of adopting an accusatory or pushy approach, you opt for collaboration. You use a tenant communication platform to organise workshops and raise awareness about the benefits of energy conservation and share energy-saving tips.

Or maybe you oversee a commercial property where tenant businesses are already excelling in ESG due to their independent strategies. In this instance, you can find ways to align your ESG strategy with theirs without conflicting with their existing initiatives. To achieve this, you could consult with the business's ESG representative to ensure synchronisation.

By aligning your ESG criteria with those of your tenants, you engage them more actively in achieving broader ESG goals.

Communicate and educate

Property and community managers occupy a unique position to educate tenants on various facets of ESG. However, it's crucial to emphasise the "why" behind your ESG strategy.

Without understanding the broader context and rationale behind initiatives like energy conservation or waste management, tenants may become apathetic or even resistant.

Prioritise education over antagonisation. Ensure tenants don't perceive ESG initiatives as accusations of wrongdoing. Effective communication is paramount to convey that this is a collaborative journey toward mutual benefits.

Be transparent about how ESG initiatives can reduce energy costs, create safer and more communal living and working spaces, and empower tenants to make small changes that contribute to the greater good.

Negotiate ESG-Friendly Lease Terms

You can directly involve tenants in your ESG strategy through lease agreements that include ESG-related responsibilities and obligations, often referred to as ESG clauses. These lease terms establish measurable goals and benchmarks.

According to research by Savills Investment Management, 73% of institutional investors anticipate that green lease clauses will become a standard inclusion in tenant and real estate investment manager agreements by 2029.

Compliance with ESG frameworks can lead to increased rental premiums, improved access to bank loans and institutional investments, and even reduced interest rates. It's no surprise that green leases are gaining popularity.

But on top of those benefits, they’re also a handy way to ensure that your tenants are actively participating in your wider ESG strategy.

Let's explore the elements typically included in ESG clauses:

Property Use, Supply, and Management

ESG clauses may grant landlords the right to use sustainable energy sources for power, heating, and water. Costs associated with these sustainable sources should be clarified within the clause.

Lease agreements may also stipulate a commitment to separate waste and use recyclable products for cleaning and maintenance, though specifics can vary.

Construction and Maintenance

Landlords often facilitate sustainable property use by providing amenities like sustainable heating, cooling systems, bike storage, or electric charging stations. The ESG clause should outline tenants' responsibilities in utilising these facilities and aligning with ESG goals.

Data and Monitoring

Some green leases may obligate tenants to share data related to energy and water supply, waste disposal, and other ESG metrics.

This is facilitated through the use of an effective data monitoring dashboard. If you’re not already, you should be using a digital platform where you consolidate different data points into a clear and digestible overview.

Chainels is one example of such a platform. The tenant experience app allows you to consolidate different data and analytics on energy and water use, as well as metrics like footfall and turnover.

Encourage Community Engagement

While the environmental aspect of ESG is crucial, don't overlook the social dimension. Many ESG frameworks assess how effectively communities are managed and how services are provided to tenants. Collaboration opportunities abound in this regard.

Community Building

A strong sense of community positively impacts tenant satisfaction and engagement. Property managers can foster community by:

• Organising events and activities like movie nights, potlucks, and game nights.
• Creating shared spaces, such as community gardens or lounges.
• Encouraging tenant communication and interaction through apps.
• Involving tenants in property management decisions, such as advisory committees or surveys.

Local Economy

Involve tenants in your ESG strategy by promoting the local economy. Encourage them to post job openings and offer discounts to residents and workers in your properties, supporting local businesses and bolstering the community.

Up your ESG game

Implementing an ESG (Environmental, Social, and Governance) strategy is an ongoing, collaborative journey that requires assessing current performance, addressing risks, and seizing opportunities.

Effective communication and transparent education are essential to involve tenants in this journey, ensuring mutual understanding and alignment.

ESG-friendly lease terms and community engagement initiatives foster a sense of shared responsibility, promoting sustainability within and beyond property boundaries.

By stimulating the local economy, tenants and property managers can contribute to a greener, more equitable future. Together, this collective effort propels us toward a sustainable, prosperous world, one step at a time.