The purpose of this Guidance Note is to provide asset managers, property managers and facilities managers with information about the preparation of an environmental compliance register in relation to real estate.
An environmental compliance register is a collation of legal and other obligations which relate to an organisation, usually accompanied by a brief description of the associated requirements to which the company must adhere.
The legal and other obligations contained within an environmental compliance register should relate to the direct and indirect environmental impacts associated with the activities of the organisation. For a real estate company, the scope of these impacts is likely to be wide ranging.
An environmental compliance register is a central pillar of how an organisation manages environmental risk. A compliance register can be set at any level of the organisation. Whether this is at the company level, the portfolio level of the property level, it is most helpful when the compliance register is aligned to the boundary of an environmental management system, or wider risk management system.
The compliance register should include:
The fundamental importance of an environmental compliance register is to contribute to the overall management of environmental risks associated with a portfolio or property. The very nature of an environmental compliance register is to collate the requirements that an organisation is obliged to meet because they are of critical importance in relation to the protection of the environment.
A compliance register provides a critical role in collating these requirements in a single location, and summarising the obligation they place on the company. A failure to identify and understand these obligations is likely to result in lack of appropriate action and, potentially, a compliance failure.
There are a number of potential consequences of a failure to comply with environmental legal and other obligations. These include:
Penalties relating to prosecution for a breach of the law.
In severe cases, such as in relation to the Environment Act (1995), penalties can include up to two years imprisonment and an unlimited fine, depending on the environmental consequences of the breach.
The record of legal non-compliance remains accessible by stakeholders, including potential commercial partners, investors, regulators and the general public. The impact from a loss of reputation can be detrimental to an organisation in a number of ways, including loss of business, fall in share price or failure to secure support for new developments, for example.
An environmental compliance register is a requirement for environmental management certification schemes, such as ISO 14001. Without an up to date register achieving, or maintaining, certification to such schemes will not be possible.
The table below summarises the key activities associated with preparing and maintaining an environmental compliance register, and highlights where asset managers, property managers and facilities managers are likely to have a responsibility or specific interest.
Step 1: Understand environmental interactions and impacts
Step 2: Identify and map regulatory requirements
Step 3: Identify and map voluntary commitments
Step 4: Identify and map stakeholder expectations
Step 5: Develop and maintain an environmental compliance register
Usually, a property or portfolio’s environmental compliance framework will be specified by an asset manager, in alignment to a wider corporate risk framework. The process of collating and evaluating environmental legal and other obligations is often co-ordinated by a property manager, with input from a facilities manager where required.
Preparing an environmental compliance register generally considers the following steps:
Before beginning the process of collating environmental legal and other obligations, it is important to establish a clear understanding of how business activities interact with, and impact on, the environment. This will help to filter a potentially long list of requirements to those that are relevant to the portfolio or property.
The scope of business activities should:
Identifying and mapping regulatory requirements involves an iterative process, undertaken alongside the process of understanding environmental interactions and impacts.
Alongside the emerging outputs from an environmental aspect and impact assessment, a property manager should consult sources of environmental regulations, guidance and codes of practice to identify relevant compliance obligations. These may include, for example:
A property manager should co-ordinate the process of mapping regulatory requirements and guidance against business activities to determine relevance and understand the associated compliance requirements. This process will evolve over time, so that the list of regulatory requirements and codes of practice becomes more refined and comprehensive.
List of environment related legislation (UK)
Voluntary commitments include a range of obligations that are not legally required, but which a company has chosen to adopt and publicly commit to. These may include, for example:
There are a number of sources of voluntary environmental commitments, including, for example:
A property manager should co-ordinate the process of mapping voluntary commitments against business activities to determine relevance and understand the associated compliance requirements. This process will evolve over time, so that the list of regulatory requirements and codes of practice becomes more refined and comprehensive.
There are a range of interested parties, or stakeholders, whose environmental expectations matter due to their influence on either an asset manager or property. It is important to identify these expectations, and, where necessary, include these within the compliance register.
There are a wide range of stakeholders whose expectations may be important to an asset manager, portfolio or property. These include, for example, occupiers, employees, local communities, investors, local authorities and building users.
Prioritising stakeholders often involves a focus group ranking stakeholders’ importance in relation to their ‘interest in’ and ‘influence on’ an organisation. For those stakeholders who rank as ‘high’ importance, further insight into potential environmental expectations on the organisation should be undertaken. This may be in the form of desk-based research or direct engagement.
Stakeholder expectations that may be of sufficient importance to include in a compliance obligation register may include, for example:
A property manager should co-ordinate the process of mapping stakeholder expectations against business activities to determine relevance and understand the associated obligation. This process will evolve over time, so that the list of regulatory requirements and codes of practice becomes more refined and comprehensive.
In collaboration with a facilities manager, a property manager should design and populate a compliance register with the regulatory, voluntary and stakeholder obligations.
The register should be designed in the form of a simple table, with a list of obligations categorised by source, and a brief one- or two-line summary of the way in which the obligation applies to the organisation and the associated requirement.
Under the co-ordination of a property manager, the obligations register should be formally reviewed on an annual basis. This should involve presenting the register to a senior governance group for awareness and, where necessary, endorsement.
The register should be maintained on an ongoing basis and updated to reflect new obligations as and when they emerge.
The following Guidance Notes contain related information:
CLS Holdings has fully mitigated its UK portfolio against the Government’s upcoming Minimum Energy Efficiency Standards (MEES), which come into force from 2018. The CLS Holdings Sustainability team worked in partnership with EPC assessors to review properties at risk, providing assessors with complete information, giving them full access to properties and upgrading equipment where needed. All UK properties now have Energy Performance Certificate (EPC) ratings of D or above. Read the case study here.
In 2016, Aviva Investors introduced quarterly reports on environmental, social and governance (ESG) matters for all funds. Alongside GRESB ratings, these communicate to investors the ESG performance of each fund, and demonstrate Aviva Investors’ proactive and forward-looking approach to ESG risks and opportunities. The whole process has also increased collaboration throughout the business on ESG. Read the case study here.