ESG Research: Established solutions vs. ESG-specific solutions
REspond - Adapting to Sustainability Demands
Building on our exploration of ESG solutions, we highlight the key differences between established real estate solutions and ESG-specific software, reflecting the perspectives of our interviewees, who are evenly split between both groups. This post focuses on how each solution approaches ESG functionalities and caters to the unique needs of the real estate industry. Established solutions often prioritize core business aspects like property, asset, portfolio, or facility management. However, with the growing demand for sustainability in real estate, many have integrated ESG features through in-house development, acquisitions, or partnerships, signalling their adaptation to meet evolving ESG requirements.
Established solutions
“I would say at the core our business is not really ESG focused…” mentioned one of the established solutions we interviewed. Around 83% of the established solution interviewed repeated this sentiment. Established solutions often revolve around property, asset, portfolio, or facility management. However, with the growing emphasis on sustainability in the built environment and the rising demand for ESG features, many software companies have integrated some form of ESG functionality. This achievement has been realized by either developing ESG features in-house, acquiring ESG-specific solutions to enhance their current offerings, or collaborating with third parties (trusted partners) to provide these capabilities to their existing clients.
In the efforts to meet ESG requirements and better serve clients, a clear trend within these established solutions has emerged: acquiring a range of solutions, including ESG-specific ones, to create a comprehensive platform that acts as a one-stop shop for real estate clients. This strategy can be a winning approach because acquiring an already established ESG-specific solution, or another solution outside their core business, is often more efficient. It is typically easier than allocating internal resources to develop new functionalities from scratch. The advantage is that the acquired solution is already fully operational and likely has an existing client base. Consequently, many of the established companies we have spoken with have a preference to acquire ESG solutions that complement their core business and provide data to support core processes, rather than developing ESG-specific functionalities internally. Interestingly, all the established solutions we interviewed with ESG capabilities have incorporated some form of acquired ESG-related technology.
A common example is an established solution acquiring an energy management point solution. Although the client base of the energy management solution may not fully align with that of the established solution, whether due to geographic or market segment differences, the acquisition is still considered beneficial. “And the point there is that (we) acquired (an ESG-specific solution) not just because we wanted to acquire (an ESG-specific solution), even though it was a fantastic product. But also, we saw the ability to take that information, and the intelligence provided and use that to provide data to support processes in other solutions as well.”
Once both solutions are integrated into the same platform, clients from each solution are unified under a single environment but retain access to distinct functionalities. The benefit for the clients of the established solution is that they can now have access to new features and most likely maintain a single source of truth when it comes to their data.
Maturity levels: Challenges and global standards
The maturity levels of established solutions in meeting the ESG needs of real estate parties vary significantly. Of the six established solutions we interviewed, only one has reached a high level of maturity, while half remains in the early stages of development. The high maturity level solution we have spoken to has sustainability as part of its vision statement and tackles numerous ESG challenges from meter monitoring to reporting. Those with lower maturity levels, on the other hand, are still in the process of conducting market research to guide future efforts in adding ESG features to their software. As one interviewee expressed: “When you look at the ESG topic … We're at the beginning of our journey, discovering the needs in the market to take the next steps in order to provide something to our customers. “
The challenges highlighted by the companies that are still in the early stages of maturity, encompass understanding the fast-changing market landscape and predicting its future direction. These uncertainties make it difficult for companies to determine the best approach for incorporating ESG functionalities. Furthermore, the lack of standardized guidelines, particularly on a global scale, often discourages companies from investing in ESG features, as global suppliers struggle to align with varying ESG requirements across different regions.
ESG-specific solutions
ESG-specific solutions usually have specialized expertise in specific ESG areas, serving as subject matter experts on topics like achieving Paris-proof goals or reporting on relevant benchmarks and regulations. The goals and features of these solutions also vary widely. For example, in energy management, some solutions may focus solely on aggregating utility data, others on visualizing that data, and some on proactively using it to optimise daily asset operations. Additionally, other solutions do not focus on energy management at all but instead target areas like green CapEx, benchmarking, reporting, or valuation.
Given these differences, it is no surprise that ESG-specific solutions also vary in how they label themselves. This creates a challenge for potential clients trying to find and understand ESG-specific solutions online. When conducting an online search, you might encounter names like ESG data aggregator, building insight solution, simulation-based asset management, strategic retrofit, ESG reporting solution, or ESG data lake solution, which can be confusing for real estate professionals. At Remit Consulting, we help real estate parties navigate this complexity, guiding them to solutions that align with their specific needs.
Additionally, all of the ESG-specific solutions we have spoken to usually do not focus only on one feature, but a combination of features. This means that a solution that offers an ESG data lake, for example, can also allow users to create their own ESG benchmark, analyse energy consumption, and automate building efficiency and user experience. It is important to note that each solution has its own unique strategy and reasons for focusing on specific areas, as they aim to address particular gaps perceived in the market.
From data insights to holistic implementation
Aligning the various features of the software with your Real Estate ESG strategy can be challenging, making it essential to have a clear vision and plan before selecting a solution. Interestingly, some real estate companies are using ESG-specific solutions to gain a better understanding of their ESG landscape and identify missing data points needed to achieve certain certifications or benchmarks that were not part of their initial strategy. This means that, instead of starting with a well-defined strategy and then searching for a solution to execute it, these companies are leveraging the solution itself to help mature their strategy.
This approach indicates that the selected solution is not only enhancing clients' understanding but also helping them recognize the potential of their current data and the opportunities that emerge once the missing data points are filled. While this was anticipated for solutions that create ESG optimisation scenarios or highlight CRREM (Corporate Risk Real Estate Monitor) pathways and stranding dates, it is also happening with software focused on reporting and benchmarking. As one interviewee mentioned “I think (software name) is really good, especially for people at the early stage, or those who do not fully understand the ecosystem. The platform then helps them not only to identify what data points they need for their display but also how to do those disclosures.”
Additionally, more than half of the ESG-specific solutions we have spoken to adopt a more holistic approach during the implementation phase of their software. This is driven by the unique ESG strategies of real estate companies and the distinct characteristics of their assets. This comprehensive approach is further enhanced by the combination of software and consulting services that some ESG solutions provide. As a result, we have spoken to point solutions that play an active role in creating point cloud digital twins as a foundation for their software, while others offer 3D visualizations or scanned digital twins as optional services. Additionally, one of our interviewees partners up with clients to install hardware for optimal data collection, while another provides consultancy services, helping clients develop multi-year investment strategies and analyse key metrics in their annual reports.
Disclaimer: Please be aware that the information in this article is based on verbal communication with suppliers and has not been independently verified.