By Tim Reade, Head of CIPFA Property Advisory Services
In February this year CIPFA Property delivered a series of events in its Strategic Assets Network to local authorities around the UK on the importance of social value.
In what some had begun to call a 'post-austerity period' prior to COVID-19, councils have been increasingly looking at ways to identify the true value of their assets. Traditionally they have focused on fiscal measures, especially in relation to income producing assets, measuring things such as rental income, depreciation and capital value growth.
In relation to the operational estate, the cost of running buildings in pounds and pence has formed a large part of the decision making process to determine whether to hold and invest, or repurpose or dispose. But what of other measures? What about environmental value, economic value and social value? In the last few years, with health, wellbeing and environmental impact gaining greater prominence in the national consciousness, other metrics of value are becoming important in how we demonstrate the value of our publicly owned land and buildings.
Environmental value and sustainability
According to the International Energy Agency, buildings and construction constitute 40% of global CO2 emissions, and buildings in the UK follow the same trend. It is clear to see, at a time of global crisis linked to our need to halt climate change, that the built environment is a key area to target the reduction of energy usage and pollutants.
Leading the way is the United Nations who, in 2015, passed resolution 70/1 known as The 2030 Agenda. This resolution saw the introduction of 17 Sustainable Development Goals (SDGs). These SDGs are far reaching and not only focus on matters related to the environment, but also on issues surrounding social wellbeing and economic prosperity. At a worldwide macro level, they have set the environmental and sustainability agenda, which governments globally should now focus on to develop and demonstrate clear pathways for action. But is agenda-setting going to be enough? As we all know, it is one thing to have a plan, and an entirely different thing to ensure it is put into action. It is yet another leap forward to ensure we make it a success. The key to this success will be the ability to measure outcomes and effects. Critical to councils' ability to do this will be an understanding of the current baseline at a local level in order to ensure they have a position from which to measure betterment and progress towards their goals.
At a UK government level, a legally binding commitment to reduce carbon emissions to zero by 2050 is a first step. It is a statement of intent that at present requires significant operational and tactical level teeth to ensure it becomes a reality. This commitment was reinforced in July 2019 in a corporate report issued by the Department for International Development. The report noted that the most effective way to ensure adherence to the 17 UN SDGs at a policy level is for each government department to embed them via implementation in the departmental planning process. In Scotland, we have seen the emergence of the National Performance Framework, which aligns itself quite clearly to the UN SDGs, noting 11 national outcomes (including a sustainable economy and protecting the environment) and 81 national indicators.
For local authorities across the UK, the response to the climate change emergency has been dramatic. At time of writing, over 245 councils have declared a climate emergency and 145 have said they are looking to be carbon neutral by 2030. It's now thought that 80% of the population live in areas where a climate emergency has been declared. Of interest however is the distinct lack of detail as to the financial impact adherence to these targets will have. It is clear that for many councils, what is still yet to be understood is how the declaration of a climate emergency (and a carbon neutral target of 2030 for some) will affect their medium-term financial plans. For those councils with a Housing Revenue Account, one concern in particular is the ability to retrofit existing housing stock while simultaneously tackling safety improvements to high rise buildings required as a result of the Grenfell disaster and subsequent Hackett review.
Establishing a baseline
One of the biggest challenges faced by those charged with delivery of reductions in the carbon footprint of publicly owned buildings, is the ability to ascertain 'ground truth' as to their current position. Although many councils regularly measure energy usage within buildings, this data only forms part of the puzzle that will allow them to establish a baseline from which they can show improvement in managing carbon footprint reduction. Once established, the next step will be to develop strategies and plans that enable environmental value to be recognised in a consistent, accurate and deliberate way. This will then inform decision making to ensure appropriate and considered action around the future use of existing buildings, commercial property investment and capital development projects.
A limited amount of advice and guidance exists in this area. It would be true to say that the private sector is recognising the increasing importance of the need to deliver added value where they are seeking to partner with the public sector. One important question will be the extent to which private sector companies vying for work will begin to increase costs of service provision to account for rising demand from commissioners to ensure mechanisms and metrics demonstrating the ability to show environmental value are delivered. At present it largely appears that this service is being added in at nil or low cost. However this could change as the prominence of the climate agenda continues to rise in what is a highly competitive public sector marketplace.
The impact of COVID-19
Delivery of business as usual has seen a technological step-change in recent months, with many organisations being dragged forward by years, if not decades, in terms of how they are having to deliver their current outputs. Whether this has meant an increase in staff working from home, or a rise in delivery of online services, for many these changes will become normalised post-COVID as increased efficiency and effectiveness is highlighted.
While it would be churlish to suggest the current COVID-19 pandemic has any sort of silver lining, one opportunity relates to current building and energy usage. With huge numbers of staff working remotely from home, the period of lockdown could see a significant reduction in energy use and other office-based service provision. If monitored and measured effectively, organisations could find themselves with data that will better inform the asset challenge process. In addition this data could help organisations establish an accurate carbon footprint baseline for individual buildings.
At CIPFA Property, having moved all of our events and training onto an online platform, it is apparent that most councils have, out of necessity, managed to facilitate home working for large numbers of their property staff. While IT solutions may in these early periods be challenging, it is clear that should organisations see value in investing in more robust IT solutions for staff working remotely, the benefits could be sizeable in the long term. In order to understand the extent of those benefits however the effects need to be measured.
This presents challenges to property teams charged with the delivery of the corporate estate, with many authorities still dealing with the after-effects of austerity. Budgets have been cut dramatically and priorities have been aligned such that for many, the time needed to develop and implement strategies enabling them to take advantage of what might be a relatively fleeting opportunity will be lost. Fortune will favour the bold here. Given that the built environment presents the greatest opportunity to deliver energy reduction and therefore a reduction in emissions, organisations prepared to invest time and resources in the development of techniques and tools to measure the impact of remote working will most definitely be better placed to meet their carbon reduction targets in the future.
Social value and well-being
In 2009, a report by the Commission on Measurement of Economic Performance and Social Progress noted that for too long, EU countries had been focused on GDP as a means to measure national success. It noted the need for better measures of social progress and a requirement to better recognise important indicators of a successful nation like health, relationships, well-being, skills and happiness. As a collective, metrics such as these are generally grouped under the term 'social value'.
Although not a new term, the relevance to property professionals of social value as a metric to inform key decisions on the delivery of property and estates related outputs has been fairly limited. Although in recent years, this has clearly risen. A good example of why this is important is related to mental health. In 2017/18, half of all sick days taken in Great Britain were as a result of work-related stress, anxiety or depression. The three biggest areas of the economy to suffer in ranked order were education, social work and public administration/defence. In all three areas, buildings are critical to the delivery of services. Whether a teacher, nurse, social care assistant or council office worker, the environment in which you spend the majority of your waking hours is incredibly important in its ability to affect not just your productivity but also your well-being and mental health. As property professionals in the public sector, more often than not, many of the key decisions and levers responsible for delivery of a working environment sit with us. But how many of us truly understand how we can design, deliver and use space in ways that maximise occupant mental health and well-being? It stands to reason that where we can, we should seek to ensure that we give appropriate weight to these matters when making decisions about building design, use and service delivery.
One of the most important ways social value is now being recognised and measured is via public sector procurement processes. For the most proactive public sector organisations, including an increasing number of councils, social value is now being listed alongside price and quality as a separate requirement in tenders. Whilst typical stand-alone percentages for social value range from between 5-10%, for the most forward leaning, a weighting as much as 30% is being incorporated. Importantly, this is now allowing public sector organisations to better measure their performance and ability to adhere to and attain their corporate social responsibility goals. Just as important is their ability to hold to account their service delivery partners with Key Performance Indicators (KPIs) embedded in Service Level Agreements (SLAs) that are linked to the Social Return on Investment (SROI) their winning tenders were predicated on.
In England the move toward better recognition of social value is no doubt partly the result of the Public Services (Social Value) Act 2012, or in Scotland the Procurement Reform (Scotland) Act 2014 which encouraged the use of Community Benefit Clauses. Beyond public sector centralised procurement functions however the ability or motivation to measure social value is less pronounced and herein lies the problem. While property teams in councils and other public sector organisations have been able to weather the storm of austerity, it has left them seriously fragile and weakened. With depleted resources (staff, IT, finance) most are focused only on the essentials. It will not be until more stringent requirements around the need to demonstrate social value and wellbeing are mandated that better results can be delivered across the board. That will of course also require improved levels of resource!
Changing the paradigm
Writing recently for the Local Government Chronicle, CIPFA CEO Rob Whiteman noted the need for key decision makers to view all activity in their area through the primary lens of the climate crisis. Making the economy successful in a sustainable way will require a huge cultural shift and a paradigm change of mammoth proportions. As ever, in times of crisis leaders will emerge that create the energy, enthusiasm, focus and drive required. While David Attenborough and Greta Thunberg have been significant catalysts in their ability to change individual behaviour, as significant a challenge is the need to alter the behaviours of our institutions.
This article first appeared in the Terrier magazine
- Speak to Tim Reade and the CIPFA Property team to discuss many of the issues here and how they can be addressed by emailing firstname.lastname@example.org or calling 020 7543 5600