Bringing retailers and landlords together on sustainability

An open invitation to industry

By Adam Siegel, VP sustainability, RILA

On June 9 this year, 13 leading retailers and shopping center developers met at USGBC headquarters in Washington, D.C., to discuss how greater collaboration between the two groups might result in more sustainable shopping experiences for consumers.

Sponsored by the Retail Industry Leaders Association (RILA)’s Retail Sustainability Initiative and the International Council of Shopping Centers (ICSC), this landmark gathering was part of a larger effort to actively identify key sustainability opportunities and challenges that might benefit from closer interaction between landlords and tenants in the retail environment, with an eye towards accelerating sustainability within the retail industry.

In advance of the meeting, RILA, ICSC and our consultant, Paladino and Co., undertook independent discovery processes to identify the key strategies retailers and landlords had implemented or planned to implement, and to better understand the limiters and drivers influencing speed of adoption.

What did we learn? Most importantly, landlords and retailers both want to accelerate their building sustainability efforts. And both recognize that more collaboration is the path towards creating not only more sustainable retail buildings, but more sustainable business models in general.

The pre-discovery process
Prior to the June 9 event, RILA and Paladino and Co. held conversations with more than 50 retailers and landlords. Through that process, we determined that adoption of green building design and operations strategies in the retail industry is following a foreseeable path, and is similar to that of other industries facing landlord/tenant issues. In particular, the commercial office market has mostly addressed the landlord/tenant divide, with landlords taking a “total asset management” approach as a value add to the tenant.

In addition to the barriers inherent in collaboration between retailers and landlords, our discovery process also identified the following external and internal challenges to achieving a stronger sustainability performance in retail:

  • Structural barriers impede progress.  Awareness of sustainable business opportunities is high among both landlords and retailers, yet implementation often lags due to issues outside either’s control. External issues -- also called structural limiters -- included financing requirements, availability of local services such as recycling, or lack of commonly accepted standard practices that create a shared framework for prioritizing green strategies.
  • Sustainability competes for space among other business priorities. Some retailers and developers with smaller footprints are inactive in sustainability because they cannot demonstrate sustainability’s relevance to the business or because pressures make it hard to prioritize sustainability against other critical business needs. As a result, smaller retailers in particular look to their landlords to manage energy efficiency and recycling programs at the center level.
  • Internal collaboration can often be difficult within siloed organizations.  Retailers and landlords with a high degree of internal collaboration across functional groups and roles were more advanced in the adoption of green building and operations strategies, pointing to the need for internal alignment within each organization as important as collaboration between them. As an example, siloed organizations -- whether retailer or developer -- were less likely to have a standard green lease in place when doing so relied heavily on collaboration between departments like Real Estate and Legal. But perhaps most importantly, we learned that there’s currently a great deal of consensus between the two groups on where the key opportunity areas lie. Landlords and retailers are more alike than different in their understanding of what matters the most. That recognition provided a useful basis to our initial in-person meeting in D.C.

Coming together in D.C.
The discovery activity provided the foundation for our solutions-oriented conversation at the June 9 event. At that meeting, both landlords and retailers agreed that as a starting point, successful examples of collaboration, as well as a larger body of best practice and supporting tools from which to draw from, would be a win-win outcome.

The cross-industry discussion brought to light several key building-lifecycle priorities shared by both landlords and retailers, including:

  • Collaborative design and construction practices that capitalize on leading energy efficiency methods.
  • Deal structures designed to incentivize energy and waste reduction in ways that are financially beneficial to all parties.
  • Landlord and tenant operational strategies to continuously improve energy and recycling performance.

The group also honed in on three key opportunities for further discussion and supporting tools and knowledge development:

  • Energy efficiency and recycling as the two resource areas of opportunity with highest payback and importance to both retailers and landlords. 
  • The lease is the primary instrument that outlines responsibility and cost allocations between the landlord and the retailer as it pertains to construction and operations items that include many green building measures. Each party is focused on defining cost and payback for any green strategy the two groups agree to implement, coupled with standard business case models (cost/benefit analysis practices).
  • Standardized design, construction and operations best practices for retail that help guide retailers and landlords alike in accelerating adoption.

A ‘knowledge base’ that addresses the priorities above could be made widely available to industry in the interest of establishing some commonly agreed-upon best practice as a starting point.

Additionally, the meeting identified materials and toolkits to develop and disseminate:

  • Store-level energy and waste measurement and tracking techniques to incentivize reductions.
  • Cooperative structures for green investments (energy & waste reduction), including those in common areas.
  • Onsite power generation models that reduce greenhouse gas emissions at financial gain to all.
  • Sample lease provisions relating to green building obligations for landlords and tenants that landlords and retailers can refer to when preparing their documents.
  • Educational materials for landlords, tenants, and key other industry stakeholders.

Next steps
The dialog we begun on June 9 will continue at both the RILA Retail Sustainability Conference and ICSC’s RetailGreen conference this fall, which will provide ample opportunities to further explore industry needs from the perspective of a broad stakeholder group. Both RILA and ICSC invite members and non-members to participate in this valuable discussion.

Adam Siegel, is VP sustainability, Retail Industry Leaders Association (RILA). Will you join the conversation? Retailers and landlords looking for ways to participate or share resources can contact: Adam Siegel at adam.siegel@rila.org, Rudy Milian at rmilian@ICSC.org and Cathy Edens at cathye@paladinonandco.com.

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