Who’ll take the first steps towards increased sustainability?
The energy demands of real estate will need to be reduced by 70% over the next 30 years if we are to comply with the Paris climate agreement. (Source: Dutch Green Building Council) This sustainability increase will by no means be easy to achieve, however. One of the underlying roadblocks is the vicious circle of blame in which building owners, tenants, consultants, and developers transfer the responsibility for taking initial steps to each other. Thankfully, more and more of the parties involved are looking to break the cycle so how can that be done?
In a circle of blame, the parties involved in the building process expect someone else to take the initiative for extra sustainability measures. As a result, everyone ends up waiting for the other to act and, in the meantime, does only what is legally required. Building owners wait for the demand, tenants cannot find a sustainable offer, real estate developers are given insufficient budgets, and consultants remove sustainable solutions from the plan as the intended owners cannot see the demand.
The real estate sector has become highly specialised and fragmented over the years. Where a single stakeholder would previously take on multiple roles (owners developed, built, and acted as consultant), now there are specific parties involved. This increases the importance of communication and enhances the chance of diverging interests. But there’s also a great deal of new knowledge available related to sustainable materials, building processes, partnerships, and climate impact. And there is a large and urgent problem for all stakeholders: the CO2 footprint must be reduced as quickly as possible. This means that all stakeholders have to make a choice to up or out: if you don’t take responsibility, you’ll no longer matter.
The circle of blame is basically the theory of split incentives on steroids. A split incentive involves the contrast between tenant and owner: tenants wish to live or work in a more sustainable way but not pay the price, while owners do not see the benefits of increasing a building’s sustainability as someone else benefits from the savings.
The circle of blame involves more parties than the split incentive. It is often found in the development of new buildings, which – in fact – is the perfect time to be thinking about sustainability.
Split incentives and the circle of blame both come down to the same thing: insufficient communication on the needs and options, and no party stepping forward to take responsibility for the process of increasing sustainability. There is no problem owner.
But there is hope. An increasing number of parties involved in the real estate sector are finding innovative solutions. Check out our whitepaper if you would like to know what’s possible. It provides more background, various solutions, and the views of experts from leading companies such as Avignon Capital, KPMG, and Aedes.
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