Executive summary: Green Impact Environmental assessment and financial performance 1. Introduction: sustainabilty and ratings systems Sustainability has become increasingly important in the marketplace. The business world is changing and the ability to integrate environmental and social responsibility is becoming an indicator of good management, resulting in increased competitiveness and a better reputation. Sustainability in the marketplace includes corporate social responsibility, corporate citizenship and environmental responsibility. Yet there is still skepticism when it comes to the term sustainability in the business case, because of a lack of a standardized process for assessing and rating organizations. Several different approaches exist today1, to try and capture different issues such as what indicators to use and how to measurement value. Although this increases market succes, the scope of these tools remains limited and the metrics inconsistent. The interrelationships between technical, functional, environmental and social criteria on the one hand and financial on the other have not been widely understood. That is why the report analyses financial performance in existing rating systems and the concept of integrated reporting. 1 Green building certificate programs such as Green Mark, BREEAM, HQE, Green Star and LEED. 1 2. Financial performance in existing rating systems In Europe, there are certain obstacles when trying to prove that sustainable buildings command a higher value. First, there is a lack of guidance. The second problem is a lack of data where markets are not responding at the required pace. In North America too, the valuation of commercial properties is complex and multifaceted. Although literature2 suggests that a third-party green label is a good investment, results can still vary and teasing out the exact factors that cause this is a complicated matter. Still, studies show that green-labeled buildings generate a rent premium and higher occupancy. The parisian dilema shows that not all certificates are properly assessed. In Paris, green buildings and new buildings are barely undistinguishable due to the inherent complexity of renovations with new construction projects. Today, the rating systems are management tools, rewarding buildings with environmentally friendly project teams. These tools are evolving towards performance based tools, based on measurement and monitoring of energy and water consumption, carbon emission, etc. Performance based tools will better inform stakeholders on their financial benefit and make for a value differential. This value differential will cause greater resilience and competitiveness for the company. Six mains drivers have been identified in favor of performance based tools; a financial driver, a reputational driver, a legal driver, a physical driver, an ethical driver and a market driver. Only two systems, DGNB and CASBEE explicitly reference financial performance, but certain footnotes have to be made. First, the notion of value equals ‘return’, rather than ‘premium’ or ‘differential’. Secondly, the benefits are seen in an end user perspective and there is no link between functional attributes, economis analysis, social performance and CSR 3 reporting. 2 3 Green Gauge by Jones Lang Lasalle. CSR Corporate Social Responsibility. 2 3. Integrated Reporting Simplifying all reporting under one consisting banner has become more attractive since the Financial crisis of 2008. Because financial statements have become increasinly detailed and business models have changed, traditional financial statements don’t reflect the current corporate situation anymore. Integrated Reporting could help to find the relationship between rating systems, accountability and reporting frameworks. This kind of reporting will benefit both company -strategically and operationally- and stakeholder -increased understanding of the company- and allow them to make better informed decisions. By gathering all the relevant data this Report focusses on transparant value creation. However, before this is possible a lot of decisions have to be made concerning frameworks, standards and riskmanagement. Today, the closest example of a uniform sustainability reporting framework is the GRI Guidelines4, currently developing the 4th generation framework, setting minimum standards and appropriate minimum disclosures. But the GRI is a voluntary standard and lacks any regulatory mandate. In this vacuum, a proliferation of competing sustainability-related frameworks have arisen5, but to help guide the development of the framework, a series of guidance notes can help companies to practice Integrated Reporting. The Integrated Report is built on financial statements, sustainability, governance, remuneration and other reports relevant to the company and will include much more information about environmental and societal long term value creation. The financial, manufactured, human, intellectual, natural and social capital contribute to this value creation. 4 GRI Guidelines: Sustainability Reporting Guidelines by Global Reporting Initiative (GRI). Examples are AccountAbility (AA), International Standards Organisation (ISO), Greenhouse Gas Protocol, etc. 5 3 The guiding principles underpinning the preparation of an Integrated Report include a strategic focus, connectivity of information, future orientation, responsiveness and stakeholder inclusiveness and conciseness, reliabiltiy and materiality. It must be said that at this stage, there is no overall ‘best practice’ Integrated Report, but different companies do excel in certain areas, such as sustainabilty or stakeholder engagement. Today, it is unclear when there will be a widespread international adoption of a common framework for Integrated Reporting. Howerver, companies that already implement this will have the significant advantage of being ahead when this framework is up to date. Such a uniform framework would allow for benchmarking and evaluation activities that are currently impossible. 4. Conclusion Several studies have tried to link performance and environmental performance of buildings in one-off pieces of research. The conclusion of this research is that a green label has its importance in affecting the market rents and values of commercial space, thus having positive effects. Also, this gives a company a competitve advantage and a better reputation towards its clients. 4