How to Quantify the Value of ESG Strategies

5/16/2024

With any facility management initiative generally, but specifically with health and wellness strategies, the six-million-dollar question is always, “What is the value of doing this?” For facility managers, value must be quantified in actual dollars. What is the return on investment for this strategy? How does it add specific value to our organization, our facilities, and our people?  

Further, as environmental, social, and governance (ESG) targets become priorities at every level of organizations, including facilities, it is incumbent upon facility managers to determine how existing operational strategies fit within ESG parameters. But it’s also important to identify and develop new strategies that can improve ESG across an organization.  

Health and wellness strategies fit the bill of both the former and latter. Many health and wellness strategies – like focusing on good indoor air quality and acoustics – are already on facility managers’ radars. But others may be new and can be implemented with low cost and huge payback, adding value to the organization.  

Whatever strategies are in place, again, the goal is to quantify the value. A new system called Social Performance By Fitwel endeavors to do just that. Specifically, as its name implies, the system helps organizations optimize the S in ESG and develop, implement, and quantify the value of strategies that specifically relate to social performance.  

We recently spoke with Zach Flora, executive vice president of growth for Fitwel, about Social Performance By Fitwel, its goals, and how facility managers can best use it to add value to their facilities. (Answers have been edited for length and clarity.) 

FacilitiesNet: Can you explain the basics of Social Performance for Fitwel? How can facility managers implement it in their own operations and to complement existing ESG priorities/plans? 

Zach Flora: Social Performance is the first-to-market solution to help companies integrate what they are doing to optimize assets for people into their S initiatives for ESG, and thus integrate those people-first strategies into investment decisions.  

Social Performance can be used to assess an entire portfolio or fund to see what assets are performing the best. These assets will then have an efficient and shorter path to achieve asset certification for Fitwel. Alternatively, companies who already have Fitwel certified assets can use Social Performance to glean better insights and data to leverage Fitwel for other assets and improve overall portfolio performance. 

The role of facilities managers is to support people and improve the productivity of the buildings they manage. They are ensuring the functionality, safety, performance, and sustainability of the buildings and on-site infrastructure to improve the quality of life of people who use the space. Facility managers are central to integrating operational and maintenance processes, reducing environmental impact, planning for natural disasters, and mitigating risk. Challenges like climate change adaptation, occupant safety, and ESG planning are often influenced by and integrated into building operations by facility teams.  

Related Content: ESG: The Facility Manager's Role

In Social Performance, one strategy is emergency preparedness plans. Having an emergency preparedness plan is directly tied to ESG because there is tangible value to be gained at the asset-level in preparing for emergencies. It is an evidence-based strategy that is proven to mitigate risk and protect the safety and health of the building occupants. Facility managers are at the forefront of ensuring the asset has implemented appropriate emergency preparedness plans, that building teams are informed, and that occupants are informed and knowledgeable about the plan.   

FacilitiesNet: How can Social Performance help facility management build bridges to other departments in an organization?   

Flora: Facility managers wear many hats, and their role requires them to work with other teams. A part of that requires effective communication and an understanding of shared goals. It is also being able to provide evidence-based solutions to inform decision making within these cross-functional groups. Social Performance and the data found at the portfolio and asset levels allows facility managers to propose solutions backed by evidence — both from a value and people perspective.  

Facility teams could go to asset management teams and provide data on where their buildings are performing well and generating value from the people's perspective and where there are opportunities to create value and manage risk. Social Performance can equip facility teams with a road map to say this is where we are today and this is where we could be with the right interventions, and this is how I can ensure these new interventions get seamlessly integrated into our current processes. 

FacilitiesNet: Why is it so difficult to quantify the S in ESG? 

Flora: Historically, it has been easiest for commercial real estate to measure the financial impact of Environmental strategies — emissions avoided, energy saved, materials recycled, etc. The industry now has years of data linking these metrics to ROI and improved performance.  

Social has been historically harder to quantify and systematically define because the industry has not collectively decided what those metrics and strategies should be, and many social strategies are categorically difficult to quantify. 

Related Content: Understanding the Financial Benefits of Health and Wellness Strategies

Fitwel set out to define the Social category for commercial real estate. Using a body of 7,000 research studies, we support the ability of companies to positively impact occupant health and measure how those interventions mitigate risk and create value. Social Performance by Fitwel created a standard set of metrics and evidence-based interventions that can be used to define, measure, and improve a company's S initiatives and performance. 

FacilitiesNet: What do you see as the return-on-investment story with Social Performance? How can facility managers pitch this to the C-suite as a financially viable initiative?   

Flora: Using the climate change resiliency outcome area as an example, one strategy that can be implemented is Flood Prone Zones. The strategy provides insight on how to protect assets and occupants in flood prone zones with information on how that strategy creates economic value and improves the health of the people at that property. The research shows us that for every dollar invested in flood mitigation, companies can anticipate a $7 return on investment. 

Social Performance is a tool that allows the real estate industry to look across their portfolios and identify the link between asset performance and asset value and risk from the people's perspective. Facility managers are tasked with this every day — to promote long-term cost management and manage risks to the asset, employees, and occupants. They are also tasked with leveraging technology to drive operational efficiency. Social Performance allows facility teams to gain insight to areas of risk and value creation that are tied to people and have not been previously measured or managed by leveraging Fitwel’s online platform. The information gleaned from Social Performance will not only allow facility teams to achieve their goals of contributing to a strong bottom line and operational excellence, but it will also provide the company a portfolio-wide data set to ensure this information is gathered and utilized across all assets. 

Greg Zimmerman is senior contributor editor for the facility group, which including FacilitiesNet.com and Building Operating Management magazine. He has more than 19 years’ experience writing about facility issues.