Investing in Shared Value Developments
23 September 2015 at 11:35 am
Infrastructure shapes not only the city but the communities within it, which is why one of Australia’s largest property developers incorporates shared value in its business model, writes Ellie Cooper in this month’s Executive Insight.
GPT Group defines its core purpose as creating meaningful social and economic impact to sustain the communities that allow its business to flourish.
National Manager for Sustainability, Bruce Precious, said GPT’s business was built on a philosophy of mutual benefit when operations commenced more than 40 years ago.
“We see the very inception of GPT as being realised through a shared value philosophy,” Precious said.
“We implemented shared value before the term started to be used commonly, and it goes right back to GPT’s inception as a listed property trust.”
GPT was the first listed property trust in Australia, and Precious said the Group’s initial strategy was to make the premium property sector available to “mum and dad investors”.
“GPT has been involved in building and managing office buildings in cities and retail shopping centres, and that form of investment wasn’t open to the general mum and dad investors before GPT became a listed entity,” he said.
“By creating the trust, by putting properties into the trust and listing it on the exchange, that allowed retail investors – mum and dad investors – access to that. It opened up a whole new sector of the investment market to those investors.”
Since Porter and Kramer published their defining article, “Creating Shared Value” in 2011, GPT has adopted the term in their practices – described in the first State of Shared Value in Australia report in which they were one of six companies profiled.
Precious explained GPT has three types of property portfolios across the industry – offices, retail shopping centres, and industrial and logistic centre – that all incorporate shared value.
“Shared value closely tied to the success of GPT and the success of those properties. A good example is Australia Square, the office property in Sydney, which was quite unique in many ways,” Precious said.
“The fact that it’s a round building, and the fact that the building didn’t take up the entire block that it was located on, that allowed plaza areas and retail areas that provide services not only for the occupants of the office building but also for the broader community.
“That’s an example of where a building plays an important part in creating the broader city infrastructure that a community enjoys.
“GPT’s properties all play a significant part in building that city infrastructure that has become so important to our economy, particularly as we move more and more to a services economy, and cities are truly the engine of our economy.”
Precious said that for each property to be successful it must have backing from the local community and GPT takes a consultative approach.
“The properties that we develop, own and manage contribute to the broader community piece, they’re not just an office in isolation, they’re truly an integrated part of a city. Similarly, the shopping centres that we have increasingly play a role as the hub of a community that they’re located in,” he said.
“From a very simple perspective of a licence to operate, the community grants us the licence to operate that shopping centre in that catchment area. And if it’s not integrated into what the community wants and needs it’ll fail. It won’t be successful.
“So every shopping centre needs to be well aware and well informed to work with its local community to provide the social needs which generates the business value.
“At the very base it’s providing clean, safe spaces for community to gather in different ways, and we see that continuing to evolve.”
GPT also approaches sustainability and environmental issues through a shared value paradigm. As reported in the State of Shared Value Survey, GPT reduced greenhouse emissions by 46 per cent compared to a 2005 baseline, equivalent to avoided emissions of over 130,000 tonnes carbon dioxide.
“We know that there is a community need to reduce greenhouse gas emissions. The property sector is not the biggest emitter of greenhouse gas, but it plays a significant role in that space,” Precious said.
“It’s material to our business, so our program of reducing greenhouse gas emissions responds to community need, and also generates value to our business.
“By reducing greenhouse gas emissions we’ve reduced our energy bills which is a good business outcome, but we’ve also allowed our properties to rise in prominence from an investor’s perspective.”
Precious said a key benefit of demonstrating a shared value strategy is improved internal and external perceptions of the organisation, and strengthened stakeholder engagement.
“We know that investors, particularly superannuation funds and the like, are increasingly filtering their investments based on social factors. By actively pursuing an outcome like reducing greenhouse gases we’ve fulfilled a social need as well as producing business value,” he said.
“The benefits are spread pretty wide. We know that range of measures is respected and valued by our customers, our tenants. And we also know that it’s the kind of thing that attracts employees.
“If we’re out seeking the best employees for our business we have the evidence that says GPT is benchmarked across the world as one of the leading companies in sustainability. I’ll use sustainability in the broadest sense. We know that our employees value that, so that helps us attract and retain the best people in the market.”
The State of Shared Value Survey findings flagged outcomes measurement as a significant challenge.
“Demonstrating the economic benefits of a strategy is relatively binary. Financial benefits are quantifiable,” the report said.
“Demonstrating social benefits and impact, however, poses a distinct set of challenges and can often require a different approach from traditional measurement frameworks.”
In its submission to the Survey, GPT echoed this finding, and said there is “considerable opportunity” to develop better measurement techniques that will lead to overall enhanced delivery of shared value projects.
“There are so many permutations and combinations of projects that can be seen through a shared value light. How are we going to prioritise and measure the business benefit and the community and social benefit through the shared value program?” Precious said.
“I think creating that measurement framework is the next challenge to allow us to really focus on those projects that deliver us the greatest total value.”