Let’s give social impact the attention it deserves in commercial schemes

In recent years, ESG has become a non-negotiable in real estate development, with a particular emphasis on environmental sustainability (the “E”), involving efforts to decarbonise the built environment, create urban greening and enhance biodiversity. There is also a well-established path through governance (the “G”) via BREEAM, NABERS, WELL, WiredScore and other accreditations.

However, the social (“S”) component remains less quantifiable and more challenging to define. With this challenge comes opportunity, and I see this as an important industry theme for 2024.

Contractors have a decent record when it comes to engaging with the communities where they operate, encouraged by on-site Section 106 planning obligations. Some traditional developers are content with that baseline as the focus on community impact is not yet a central part of their thinking.

This is a missed opportunity; it is possible to unlock substantial untapped potential by focusing on the social aspects of a development project. A mindset shift has the power to initiate mutually beneficial outcomes that create value for both the development and the communities it serves.

Two in five Gen Z and Millennial employees have rejected job offers that did not align with their values

The primary catalyst behind this transformation in the commercial space is occupiers who are looking to improve their own ESG credentials, to align with their employees’ evolving preferences. How occupiers engage with communities influences their ability to attract and retain talent, as many new entrants to the workforce select employers based on their commitment to purpose-driven initiatives.

According to Deloitte, approximately two in five Gen Z and Millennial employees have rejected job offers that did not align with their values, while those content with their company’s societal and environmental impact are more inclined to stay.

A changing policy landscape provides further impetus for prioritising social value, with the Social Value Act 2012 requiring social value to be assessed as part of the tender process for major government outsourcing contracts. This has spurred the creation of the national TOMs (Themes, Outcomes and Measures) framework, a useful tool to help organisations maximise positive impact and measure the value delivered.

Developers stand to benefit twice; engaging in socially responsible practices is morally commendable and strategically advantageous, creating opportunities to forge stronger and more enduring relationships with occupiers. This is good business sense – fostering positive social and environmental impact will help secure long-term leases and support value.

That all-important human touch

It may be unclear how bricks and mortar can deliver social impact but, with fresh thinking, there are various ways to help. By way of example, our team is acting as development manager at One Exchange Square, overseeing the sustainable transformation of a 1980s building into a net zero carbon office space.

The project’s social value commitments encompass a procurement strategy that pledges to invest £15 million locally during construction, a school outreach initiative, an apprenticeships and training programme, efforts to bridge socio-economic gaps by offering work placements to disadvantaged groups, adherence to a fair London living wage, ethical labour practices in the supply chain, a dedicated community manager, and partnerships with charitable organisations.

Taking it further, we are donating surplus steel from the existing building to the Oasis Academy in Lambeth for a new teaching space that they are constructing. We are also creating a “menu” of material components they can utilise in the future (cladding, partitions, doors, windows and furniture).

This initiative has garnered significant interest from potential occupiers at One Exchange Square, as it establishes a human connection that resonates with them.

Resource and material sharing are practical ways to make a difference, and this collaborative approach can extend into the occupation phase. For example, incorporating a community space within a building that local groups can utilise can be a tangible way to embed social value. M3 regularly advises clients on commercial schemes including auditoria and high quality collaboration spaces.

These spaces appeal to commercial tenants, as well as charities, educational institutions, and not-for-profit groups who welcome access during off-peak times for meetings or events. This approach also contributes to sustainability by maximising the use of workspaces in a hybrid era.

Occupiers can contribute another type of social value by leveraging their professional expertise on a pro bono basis. For instance, a financial services organisation can provide specialised financial skills locally. This form of engagement is another way for bricks and mortar to deliver lasting social value after construction is complete. The best developments will provide a thoughtfully designed and welcoming physical environment that facilitates effective ongoing outreach by occupiers.

Placing social value prominently on the agenda will be essential in 2024 where ESG-led developments need to create a point of difference

Determining who takes ownership of social value initiatives within developments is a crucial consideration. Contractors are well suited to overseeing the codified elements, but leadership is needed to drive innovation from the earliest RIBA stages.

Some large, forward-looking clients are already tuned into this need. They have the scale to employ a dedicated team to set a social agenda and need capable project managers to implement their strategy. For other clients, with a leaner footprint, their development manager plays a pivotal role by setting strategy, educating and showcasing that projects with a social value focus are more attractive to occupiers.

The financial investment need not be large; what truly matters is the commitment of effort, creativity, time, and care. Placing social value prominently on the agenda will be essential in 2024 where ESG-led developments need to create a point of difference. Striking the right balance between community needs and commercial interests requires thought, and development managers will need to work hard to ensure a harmonious integration of community impact and commercial objectives.

The three elements of ESG are inherently interlinked, and we cannot afford to allow the middle “S” to become an afterthought. Social sustainability means championing thriving communities, and it is a central tenet of responsible business practice.

Unless we start talking about it more and sharing examples, we cannot mature beyond current standards. Socially impactful real estate will become steadily more crucial over the next few years and, as an industry, we will have to up our game.

Alex Groot is project director at M3 Consulting