Sustainability reporting marks generational change for property

by Helena Morgan
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From the start of the next financial year, sustainability reporting will be made mandatory for real estate investors, occupiers and managers. 

Predicting that this new era in reporting will result in hasty and rushed efforts to collate data, Knight Frank’s head of Environmental, Social and Governance (ESG) Jenine Cranston strongly encourages businesses to exercise proactiveness and start gathering data now. 

“For some time many organisations have been doing voluntary reporting, which has been largely storytelling around what they have been doing for the environment, people and the planet,” says Cranston. 

The head of ESG explains that new mandatory reporting will ask businesses to provide hard data on emissions to accompany the financial statements generally present in a company’s annual report. 

The advent of large businesses outlining what their emissions are via a report with ‘audit-ready’ data is “transformational” for property, Cranston comments. 

“This is the biggest change in financial and company reporting in a generation and will have a huge impact on real estate occupiers, investors and managers,” she says. 

A phased-in approach 

This significant change in reporting is owed to the International Sustainability Standards Board announcing new sustainability standards on 26 June this year. Adoption of such standards swiftly followed with the Federal Treasury proposing the implementation of mandatory climate-related disclosures in Australia. 

Those in the property sector included in this new implementation are told to expect a phased-in approach, with different entities and businesses falling into a respective group.

Knight Frank’s head of ESG Jenine Cranston

If an organisation has more than 500 employees and over $500 million in consolidated revenue, they fall under Group 1 and begin reporting on 1 July of next year. 

Comparatively, if an organisation has more than 250 employees and over $500 million in consolidated gross assets, they are required to start in the financial year 2026 to 2027. Lastly, an organisation represented by more than 100 employees and holding more than $25 million in consolidated gross assets will commence reporting in the financial year 2027 to 2028.

A test of control 

Organisations and businesses will be asked to examine the emissions in properties they own and lease, in addition to the amount and type of electricity used. 

This new reporting seeks to mitigate the effects of the biggest drainer to property’s ecological footprint – the emissions produced by suppliers. Cranston surmised these new reporting requirements will incentivise suppliers to have the lowest carbon footprint and make themselves more desirable and sustainable in the eyes of entities. 

Avoiding a race to the finish line

Cranston underscores the value of gathering data and information months or even years in preparation. 

“If businesses don’t get started now they will find that large businesses to which they supply their services will be demanding to know their emissions and targets, or they could find the data sneaking up on them when it is time to conduct their own reporting,” she says. 

Cranston recommends businesses enlist the services of reporting platforms and increase internal capacity. 

Ease of reporting and use

Knight Frank is already leading the charge in anticipation of the reporting changes – establishing its new ESG Data Management and Reporting solution dubbed Prism. 

This software is not only time effective through relying on AI to digitise large volumes of data, yet also organisationally sound as it provides a primary repository for ESG data. 

The data management also features user-friendly reports and software that produces audit-ready data applicable to mandatory sustainability reporting.

Source of truth

Cranston envisages Prism operating as the main “source of truth” for the emissions data  that real estate owners and investors require for reporting. 

“Prism will have easy-to-use and convenient storage of energy, water and waste data that doesn’t require businesses to manage it, with proven capability to manage data risk and perform at scale,” confirms Cranston. 

Knight Frank’s Australian ESG team will work in conjunction with Prism and offer support and oversight and onboarding to the process to avoid client frustration. 

“We don’t just send you a box of software – we will guide businesses through the entire process from data gathering to reporting,” says Cranston. 

According to Cranston, these changes to reporting are a major turning point in the history of sustainable practice in property, with businesses and organisations acknowledging the necessity of reducing their carbon footprint and displaying these efforts through detailed and accurate reporting. 

Photography supplied by Knight Frank.

The Property Council and Green Building Council of Australia released a framework to assist the property sector in analysing carbon offsets.  

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