In January 2020, just before the pandemic hit, tech giant Microsoft made a big commitment to sustainability. Company leaders laid out a detailed plan of the steps they would take to reach big goals on carbon and waste reduction, water conservation, and protecting and preserving ecosystems over the next few decades. Its ultimate commitment is to become carbon-negative, water positive, and zero waste by 2030. Going even further, by 2050, Microsoft committed to removing an equivalent amount of the carbon dioxide the company emitted directly or through electricity consumption since the company’s launch in 1975.
These are ambitious goals for one of the largest companies in the world. In order to reach them, it will take continuous efforts and regular progress monitoring. So far, Microsoft leaders have been diligent about regularly reporting on its commitment progress and have been transparent about the process, offering a model for companies, including those in the commercial real estate sector, that are making sustainability promises as well.
Microsoft is one of many companies that have released ambitious sustainability plans over the last few years. The increased attention to things like decarbonization and net zero emissions has been driven by increasingly strict legislation around greenhouse gas emissions, research that spells out the impacts of climate change, and reputational considerations. After all, no company wants to be caught without an ESG strategy these days.
In the real estate sector, these plans mean a lot, considering how buildings are one of the leading contributors to greenhouse gas emissions. It’s also good for businesses’ bottom line. Most of the recent studies on the subject show a correlation between sustainability and financial performance. Many of the commercial real estate industry’s biggest players have made sustainability commitments in recent years. A few of these include major office owner Boston Properties, which has committed to carbon-neutral operations by 2025; the largest owner of life sciences properties, Alexandria Real Estate Equities, has committed to achieving net zero emissions (although no date has been set yet); and the global real estate developer Hines which recently committed to achieving net zero operational carbon in its building portfolio by 2040.
As more companies set their sustainability commitments in stone, the pressure is on to show real progress in their sustainability efforts. While organizations setting these goals to operate in a more sustainable way going forward and reducing their carbon footprint is a good thing for the sector and the world, being transparent about the progress they are actually making toward these commitments is a critical part of the process. Without regular updates on progress, the promises made by companies aren’t going to mean as much, and even worse, could risk being looked upon negatively by potential investors, employees, and clients. “They need to have a robust legal and regulatory framework that’s enforceable, along with good corporate governance so that corporations are doing what they say they’ll do,” said Jeremy Kelly, a director of global research at JLL.
Studies have shown that businesses across the spectrum see ESG initiatives as a top priority. In one recent survey, 86 percent of company leaders polled said they believed their efforts were making a difference in advancing sustainability. While the impetus and drive to develop strong sustainability goals are there, many companies aren’t sure how to meet the commitments they want to make. In the same study, business leaders across industries said they struggle with quantifying their sustainability efforts, with 65 percent polled saying they want to advance their efforts but don’t know how to actually do it. Only about a third of respondents said their organizations have the right measurement tools in place to be able to quantify their sustainability efforts, and only 17 percent are using the measurements to optimize their efforts based on the results.
Progress can certainly be made in terms of climate reporting, but recent findings from KPMG found that sustainability reporting has been steadily growing. According to the report, 79 percent of leading companies around the world provide sustainability reports. Though KPMG found that there have been improvements in companies reporting carbon reduction targets, action is still “too slow” in some areas, and less than half of companies currently recognize biodiversity loss as a risk.
Microsoft’s sustainability plan is far-reaching and is organized into four areas: carbon-negative, water positive, zero waste, and protecting and preserving ecosystems. To reach its carbon-negative goal by 2030, the company will take steps to cut its emissions by half and has enlisted its entire supply chain to do the same. The company will use its own technology to help its customers and suppliers reduce their own carbon footprint and has created a $1 billion fund to invest in tech companies that are helping to advance the development of carbon reduction, capture, and removal technologies. “We’re looking in the low-carbon-material space, in particular,” said Microsoft’s Chief Sustainability Officer Melanie Nakagawa of the companies they are looking to invest in through the fund. “The built environment is a significant source of global emissions. And so whatever we can do to be able to build our infrastructure in a lower-carbon way—with less waste, less water consumption, just less environmental degradation from the building materials we use—that’s really important.”
Since announcing its sustainability plan in January 2020, Microsoft has devoted a section of its website to its sustainability efforts, where it gives broad and detailed overviews of the steps it is taking. The company also shares articles, white papers, and information about its own products it has created that can help companies plan and track their own sustainability targets. But most importantly, the company has released a thorough and detailed annual report of its progress every year since kicking off its plan. All these efforts have not gone unnoticed in the corporate world. At a panel discussion on the steps companies are taking to decarbonize their real estate portfolios during New York Climate Week last month, one participant singled out Microsoft as the company doing the best job of reporting its progress on sustainability. “Microsoft’s not losing any business by sharing that information,” the panelist remarked.
Making a commitment to sustainability is a big deal for real estate companies. The built environment contributes around 42 percent of greenhouse gas emissions globally, and decarbonization mandates are putting more pressure than ever on property owners to take action. Committing to targets like net zero, carbon negative, and zero waste are efforts that take years and require ongoing efforts and attention. Microsoft has provided a model for other companies on how to effectively build a sustainability commitment, communicate it to the public, and be diligent about regularly reporting on progress. There are still improvements to be made in ESG and sustainability reporting, and with industry leaders like Microsoft providing a template on how to do it right, the improvements will hopefully come sooner rather than later.