In the drive for net zero, organisations and leaders are under increasing pressure to deliver against targets. But within the housing sector, this is far from the only matter executives have to deliver on. From the housing shortage to building safety to rising energy costs, there is a plethora of substantial challenges that need to be prioritised.
The case for sustainability
The argument for sustainability to be prioritised is particularly strong though as it cuts across nearly all of housing’s challenges. If we build houses that are carbon neutral, invest in building safety initiatives that also positively impact energy usage and proactively communicate the right behaviours, then we are both addressing immediate problems whilst ensuring longer term benefits for residents and the organisations they rent from.
The sector also has a duty to step up and play a signification role in the effort to combat global warming. Housebuilding is a significant net producer of carbon emissions and large numbers of homes owned by landlords are energy inefficient, making them increasingly expensive for tenants to live in and a major source of carbon emissions.
So how can organisations ensure sustainability remains high on the agenda?
It’s a challenge that’s impacting all sectors and one that was discussed at our recent sustainability event in Manchester. Our client and keynote speaker, Sarah Jones, Environment Manager at Siemens, noted that linking executive pay to corporate sustainability results is a solution proving to make a real difference in the drive for net zero – something that Siemens already has in place.
And they’re in good company.
A recent report by PWC found that c.60% of FTSE companies now have some sort of ESG measure as part of their executive level incentive pay plan. Other companies adopting the carrot (not stick) approach include household names like Shell, Apple and Unilever.
Social housing has been known to follow some way behind the private sector in terms of adopting new initiatives, but this feels like an area where quicker action could – and indeed should – be taken. If you’re considering rolling out such initiatives, I’d encourage you to consider these four points and how this would impact your organisation:
- Set short-term targets, expect short-term results
If targets are set related to annual (rather than long-term) bonuses, could this result in short-term solutions? Analysis by ISS showed that only 1% of organisations with ESG targets link them to long term incentives, potentially resulting in a “quick fix” rather than meaningful long-term strategies. This is particularly important within housing where a long-term view is needed.
- Ensure targets go beyond business as usual
Targets need to encourage activities that would not have happened anyway, otherwise, there is a danger that the organisation will just be paying more without seeing any extra benefits. Boards should set additional sustainability goals for the executive team, ensure they are embedded in the organisation’s strategy and monitor progress against them.
- Communicate with all stakeholders
Effectively communicating the importance and details of sustainability targets to residents and employees should form part of any incentive scheme. Whilst there will always be objections to anything that might be classed as “big brother” activities, providing information on practical steps that can be taken to reduce energy usage must be a positive step.
- Incentivise appropriately
Typically, where ESG targets are linked to executive incentive pay, they will account for c.10% of the total. Whilst this is not insignificant, it might not be enough to put sustainability at the forefront of strategic thinking and more radical steps might need to be taken, even potentially including penalties for not achieving medium to long term targets.