01. Executive Summary
Hammerson has committed to becoming Net Positive by 2030 in four areas with the greatest material sustainability impacts for our business: carbon, resource use, water and socio-economic impacts. These targets include Scope 3 impacts from the tenanted areas of the portfolio. To achieve this, Hammerson recognises that we will need to work collaboratively with the businesses that lease property across our estate.
Aware of the barriers currently impeding retailer and landlord collaboration, we approached sustainability charity Bioregional to design and facilitate a workshop to explore the relationship between landlords and retailers, gain insights into these barriers and develop ideas for encouraging collaborative action.
In late January 2019, retailers and food and beverage businesses that lease property across the Hammerson estate, met to explore how landlords and retailers can collaborate more effectively to deliver shared sustainability goals and ambitions. Bioregional facilitated this workshop under Chatham House Rules. This report summarises the key findings and sets out actions that all parties might take to drive more sustainable outcomes. A full report which explores these concepts in more detail is also available on request by emailing email@example.com
The role of retail landlords and tenants is critical in changing the way we consume resources, in order to enable people to live within the Earth’s means and help people to lead One Planet lifestyles.
We applaud Hammerson for leading the way and initiating collaboration opportunities with retailers, exploring how they can overcome challenges and barriers within retail leasing and enable everyone to reach their common sustainability goals. Ultimately, the sector needs to provide the facilities, products and services for everyone to be able to consume sustainably, and businesses cannot do this alone.
02. Disruptive trends that are impacting on collaborative action:
During the workshop many conversations referenced the wider context within which retailers and food and beverage businesses are operating. It was recognised that the significant disruption the sector is experiencing is impacting directly on the businesses themselves and on the relationship between retailers and landlords. Drawing on the workshop discussions, four key issues emerged which frame the challenges landlords and retailers have in collaborating on shared sustainability goals and ambitions.
Mutual understanding of the impacts these issues are having on both retailers and landlords and the commercial challenges they present needs to be further developed and discussed. Until this is achieved, they will continue to form a barrier to landlords and retailers pursuing more effective collaboration.
Until this happens, challenges will remain that undermine both parties’ ability to deliver sustainable solutions on the ground; more sustainable outcomes will remain optional.
Yet now more than ever, businesses need to collaborate to develop the innovative solutions required to address the increasingly complex sustainability challenges we face.
Consumers are increasingly expecting businesses to be doing the right thing when it comes to sustainability. Many of these issues require partnership working, therefore addressing them will be easier if there are positive pre-existing relationships.
When viewed through the lens of sustainability, a whole new set of challenges also emerge. As we increasingly move to more resource efficient production of goods and services (which is vital if we are to meet the needs of consumers without causing detriment to our planet), this will require retail businesses to rethink how they interact with their customers and this has implications for their space needs.
03. Opportunity Areas
From the discussions that took place, Bioregional identified four opportunity areas to focus on. Many, if not all, participants were experiencing challenges within these areas which were impeding their ability to embed more sustainable practices within their store portfolios. Participants shared and discussed emerging ideas for solutions in the four opportunity areas. This paper draws on these discussions to develop a series of ideas for collaboration to take the agenda forward.
Collaboration to solve emerging challenges
New sustainability issues are reaching public awareness more quickly and frequently. However, neither landlords nor retailers can effectively address these on their own; as yet there are no consistent processes in place to support regular, ongoing collaboration. But there are some examples where collaborative action is being led by a landlord supporting and encouraging leaseholders to act on sustainability issues that are relevant and meaningful for their consumers.
All Hammerson-owned centres will have a thriving Sustainability Innovation Forum that is led by on-site Hammerson employees. Retail brands at each centre will attend regularly and participation and engagement with smaller, independent retailers will be supported and encouraged. Through ongoing support of centre-based Sustainability Innovation Forums, better solutions can be developed and quickly scaled up.
Circular approach to fit-out
Workshop participants recognised that the current approach to fit-out is linear and wasteful. There are many reasons why fit-out operates in a linear way, but participants acknowledged that in future a more circular, resource-efficient solution is required. The opportunities presented by a service- or leased-based approach were explored.
Widescale adoption of circular solutions for the fit-out of leased spaces. The assessment criteria for fit-out will include sustainability as standard, alongside other criteria such as aesthetics. Design guides will be driven by circular principles including service-based models, and all involved in the fit-out process will work to adopt a circular rather than linear approach.
Data sharing: energy, water and resource use
The role of real-time data in helping businesses meet their carbon reduction and resource efficiency targets will become increasingly important. There are clear benefits to landlords and tenants sharing this data to enable shared action and shared learning on how to reduce energy or water use or improve recycling and reduce waste to landfill. But currently data sharing is not standard so these benefits are lost.
An agreed understanding by landlords and retailers that both benefit from sharing data, making it easier to achieve shared sustainability objectives. In the longer term, a single platform, accessible by all organisations, will facilitate data sharing on energy, water and resource use across the economy, making data sharing commonplace. In the short-term, however, an agreed understanding that data can be shared will lead to identification of the most mutually effective way of making it happen.
Embedding sustainability in the leasing process
During the lease negotiation process, there are missed opportunities to embed sustainability in lease clauses. Factors contributing to this are explored in the report; two which stand out are that many involved in lease negotiations are not knowledgeable about sustainability and that the process is adversarial, leading to sustainability-related clauses being bargained away.
Adoption of sustainability clauses in lease agreements will become the default or preferred option for all parties. For this to become the norm, there will need to be more standardisation of the clauses included in leases, alongside guidance on how much scope there is to negotiate these clauses.
This report aims to start an ongoing dialogue on the underlying causes preventing the current retailer-landlord relationship achieving high sustainability outcomes, as well as identifying clear actions and solutions to address this. It focuses on what needs to be in place in order to meet the IPCC’s global warming limit of 1.5°C1.
The report also considers the significant current disruption of retail, as well as the wider changes forcing businesses to address significant environmental and social challenges of today, such as climate change and the impacts of consumption.
It is increasingly important for landlords to provide retail space that supports retailers’ business objectives. These include the most efficient use of energy, water and materials and providing healthy, pleasant environments for retail staff to work in and customers to spend time in.
In essence, to meet the sustainability ambitions of the retail sector and achieve the necessary climate change targets, retail is going to have to shift from a traditional linear, product-based approach to a more circular service- based approach. The shift to sustainable consumption and production is extremely challenging and will require extensive collaboration between key parties in the sector, shared ideas, piloting innovation and strong employee engagement if the sector is to deliver on sustainability by 2030.
05. Next Steps
When considering the next steps, Hammerson and Bioregional have focused on key areas of interest which should be explored further as potential pilot projects. It is recognised that the approach taken would need to be collaborative, engaging retail and food and beverage tenants and other relevant third parties but would initially be led by Hammerson.
The aim of this next phase is to undertake some early testing of these ideas and identify those which have significant support from key stakeholders and are feasible to explore in more detail. Possible pilot projects need to have wide support as well as the potential to address the significant retail trends, challenges and opportunities we have identified within this summary. The possible pilot projects are as follows:
Opportunity area 1: On-site collaboration through sustainability forums and networks. Develop/implement innovative pilots in response to new issues to enable the centre to respond quickly to issues that are of significant importance to the visitors to the centre and to address centre-specific issues relating to energy use (carbon), resource use and water use across the estate.
Opportunity area 2: Reviewing the current fit-out model and processes and identifying opportunity areas to pilot circular solutions and service options for key fit-out elements that are suitable for a wide range of retailers and food and beverage outlets.
Opportunity area 3: Initiating the conversation with energy providers and retailers on data sharing.
Opportunity area 4: Examining the lease process in detail, identifying key stakeholders involved and determining the key interventions that have the potential to influence how sustainability is integrated into retail spaces on the ground.
Sector Opportunity: As identified in the key trends for the retail sector as a whole, retailers are having to review and refresh retail space, presence and experience to respond to evolving consumer need and expectation. In response, another area that could be explored as a potential pilot project is for Hammerson and their tenants is to carry out collaborative visioning of the shopping centres of the future; how they would operate more innovative, sustainable consumption and production business models.
We would like to thank the representatives from the following organisations who attended the workshop and made such a valuable and positive contribution:
Bill’s Restaurants; Clarks; Cos; Costa Coffee; Debenhams; H&M; Hoare Lea; John Lewis & Partners; Marks and Spencer; New Look; Pret A Manger; Selfridges; Starbucks; and representatives from Hammerson and Bioregional.