Sustainability is increasingly top of mind for investors and occupiers as they search for their next property.
Let’s explore the factors fuelling this focus – and how two of our member organisations are embracing those expectations.
Industrial facilities go green
It boasts superior natural light penetration and 410kW of rooftop solar. Cascading native landscaping with rainwater irrigation and 4 electric vehicle (EV) charging spaces.
Oh, and it also has a 5-star Green Star rating.
It reads like the spec sheet for a boutique residential development. Instead, it’s the sustainability credentials of Axis Alexandria – Goodman’s flagship multi-level industrial facility in South Sydney.
Axis Alexandria signals a new type of development. One that puts sustainability at the forefront of design.
But it certainly won’t be the last.
‘Investors see industrial as a high-performing asset class,’ explains Emma McMahon, General Manager of Sustainability at Goodman. ‘And they expect the same level of Environmental, Social and Governance (ESG) credentials they’re used to in the commercial office space.’
Emma Larsson, Senior Director Operations and Group ESG Officer at ESR, agrees. ‘Investors recognise the financial implications of climate change and are seeking resilient assets. Nobody wants a stranded, unmarketable facility!’
Positive pressure from all sides
Investors aren’t the only ones crying out for sustainable facilities. Tenants and governments are too, meaning that all sides are pushing for a greener industry.
‘ESG-conscious tenants seek out energy-efficient, green-certified facilities. Many of them have their own ESG agendas that drive their decisions when leasing space,’ explains Emma Larsson.
‘These facilities usually come with first-class amenities too, which help businesses attract and retain staff – and boost wellness and productivity. So, it’s a win all around.’
Case in point: ESR’s Higashi Ogishima Distribution Centre in Japan, which won the Best Industrial and Logistics Project award at the 2024 MIPIM Awards.
It has the highest sustainability certification on two separate rating systems: CASBEE and the Building-housing Energy-efficiency Labelling System (BELS). What’s more, it provides a suite of human-centric amenities, like an onsite childcare centre and a bowling alley.
The proliferation of such facilities, driven by customer demand, is perfectly timed with research revealing that the built environment generates roughly 40% of annual global energy-related carbon emissions.
This explains why governments are stepping in to deliver initiatives that support the transition – including strategies to combat obstacles that hinder progress, like greenwashing.
‘Regulatory bodies worldwide continue to rightly push for greater ESG disclosure and transparency,’ says Emma Larsson.
‘The EU is at the forefront. But Australia isn’t far behind, with the Australian Securities and Investments Commission (ASIC) receiving an additional $4.3 million in funding in 2023 to continue its surveillance and enforcement efforts against greenwashing.’
Sustainability in industrial: What does it look like?
By all accounts, greening the industrial sector is important. But what does that really mean in practice?
By examining the projects of WIN member organisations, we’ve found a blend of familiar technologies and certifications as well as new-to-market ideas. These include:
- Onsite renewable energy generation
- Renewable energy via offsite power purchase agreements
- Purchasing of Green Power and Renewable Energy Certificates (RECs)
- Native, water-saving landscaping
- A shift to hybrid or fully electric equipment
- Greater uptake of next-generation technologies, like virtual reality
- Green leasing, whereby tenants and landlords are collectively responsible for a building’s environmental performance
Many of these initiatives are already heavily embedded across Goodman’s portfolio.
‘We’ve installed over 60MW of rooftop solar on approximately 170 of our properties in Australia, with a further 27.9MW committed,’ explains Emma McMahon. ‘That’s the equivalent of taking 30,000 passenger vehicles off the road.
‘We’re targeting a 5-star Green Star Buildings rating at our facilities, which allows us to demonstrate our approach to Environmentally Sustainable Design (ESD) via third-party certification.
‘We’re also partnering with our supply chain to achieve lower embodied carbon solutions associated with concrete and steel – and engaging with our customers to optimise the use of the solar PV we’re installing on our rooftops. ‘
ESR is also intensifying its focus on renewable energy.
‘In the transition to a low-carbon and climate-resilient future, we’ll keep pursuing partnerships with tech providers to innovate and implement low-carbon solutions,’ explains Emma Larsson. ‘Like ESR’s partnership with Mitsubishi Fuso and DTFSA, which will help us accelerate the electrification of Japan’s logistics supply chain.’
Strategising for success
What’s the key to meaningful, long-term change? Strategy. Something both ESR and Goodman have embraced.
At ESR, that strategy is known as the ESG 2030 Roadmap.
‘Our roadmap underscores ESR’s commitment to enhance our synergies and accelerate long-term sustainable growth across the three key pillars of our ESG Framework,’ explains Emma Larsson.
‘Our ESG Framework is aligned to six of the Sustainable Development Goals (SDGs) from the United Nations 2030 Agenda, the United Nations-supported Principles for Responsible Investment (UN PRI), and other global ESG frameworks, standards and industry best practices.’
It’s important to remember that goals are the foundation of good strategy, and Goodman has those in spades.
It’s made a global commitment to reduce greenhouse gas (GHG) emissions, aligned with the Science Based Targets initiative (SBTi). The targets are aligned with the objectives of the UN Paris Agreement and include a 42% reduction in absolute Scope 1 and 2 emissions and a 50% reduction in per square metre Scope 3 emissions.
By adopting comprehensive strategies, industrial property companies are setting a clear course towards sustainability, rooted firmly in evidence and best practices.
Sustainability in industrial: What’s next?
Looking to the future, one goal remains high on the agenda of ESG managers across the sector: decarbonisation.
‘Around 11% of global emissions are associated with embodied carbon in construction,’ explains Emma McMahon. ‘At Goodman, our goal is to focus on measuring and reducing embodied carbon in all new developments. We then offset the remainder to deliver a carbon-neutral development.
‘That means ensuring all emissions generated during the extraction, processing and use of materials are accounted for, reduced and offset up to the point of practical completion.’
It also means a growing focus on Scope 3 Greenhouse Gas (GHG) emissions, which are indirect emissions produced by tenants and contractors in the supply chain.
‘Scope 3 GHG emissions can account for more than 90% of a company’s total GHG footprint,’ explains Emma Larsson.
‘Although they are the hardest to measure and decarbonise, we can expect mandatory reporting of Scope 3 emissions to become more commonplace across the globe – making this a new area of focus for the industrial sector.’
From powerhouse projects like Axis Alexandria to clever partnerships reimagining the boundaries of green technology, the drive towards sustainability in industrial is no longer about just keeping pace. It’s about setting the pace – as ESR and Goodman demonstrate.
As Emma Larsson puts it, ‘Walking the walk is one thing. But it’s so much more powerful if you can talk it as well!’
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