Achieving Net Zero: The Role of Flexible Workspaces | Sam Pickering – Executive Director of Sustainability at The Instant Group

Frank Cottle [00:01:51]: Sam, welcome to the Future Work podcast. I’m really excited to have you here today. And I gotta say, I’ve been a fan of instant offices, really since Rob Hamilton started it in 1992 or three. I knew Rob very well and have always admired the progression that instant has taken. And now with its association with IWG and others, it’s amazing to see the growth you’ve had. So, you know, I just wanted to plug instant up there upfront for you because I really am an admirer of the company. I had a question for you. A lot of your work is around sustainability. How do you think, what do you think the goals of the flexible workspace industry are for sustainability? We talk about net zero a lot, but what is net zero for the flexible workspace industry?

Sam Pickering [00:02:50]: Yeah, I think it’s really interesting. And thanks, Frank, for having me on. I’ve been doing sustainability for a long time and…

Frank Cottle [00:02:57 ]:  you look pretty sustainable. I’ll admit.

Sam Pickering [00:03:03 ]: That’s very kind. My children would tell me differently, sadly, Frank, but I’ve been doing it for a long time and ultimately it’s an ever changing world. And I think the word net zero is overused. It really is. And what net zero really is from an office perspective is not dissimilar between a flex space and a traditional space. It is basically a very efficient space that doesn’t use gas. So it’s fully electrified. And in simple terms, it has a renewable energy supply. That’s the operational side of net zero. As you progress and get slightly more complicated around it, you then start to involve things which encompass by embodied carbon, which is ultimately the stuff that you purchase or build your space, and the carbon emissions related, be it brick, be it a furniture piece of furniture or.

Frank Cottle [00:04:03 ]: Anything like that, I think that pretty much makes sense. But I have a question. When you say fully electrified, with the electricity coming from totally 100% renewable sources, the tenant in most spaces of which a flexible workspace generally is, has little to say with the building. Aside from the choice of building. They can always choose a building that’s going this way over the source of power in the building. And while it may be 100% electricity, how does a center, a business or a co working center influence the building to only use renewable energy as their source, if in fact they even can?

Sam Pickering [00:04:55 ]: Yeah, and I think it’s, you know, that in the end is a. Is a big problem that often sits outside of the control, obviously of a flex operator. But any occupier of any building anywhere, because I guess there are two ways to look at that, Frank. To be honest, one is occupiers of space bu a flex operator or bu an occupier of a traditional space, start to demand from landlords, ultimately their landlords, the building that they’ve chosen, that they procure renewable energy supply. And where you can’t do that, clearly, if you’re already in that building, you therefore, what I would suggest is you really focus on reducing your energy consumption as much as you can through better energy efficiency equipment, but also better controls and operating that space. The wider kind of macro level piece is, is then around. Actually, you’re going to be reliant on the infrastructure that is well outside of your control, which is the makeup of the grid electricity. And so if you look across the world, the makeup of grid electricity, there are very few grids that are all brown energy, as it were, made from coal or gas or whatever it is. There is always a makeup of green. And so as time goes on, and the makeup of renewable energy for purely economic reasons, because it’s cheaper to produce in certain locations, that will improve anyway. So you’re sort of getting that for free, as it were.

Frank Cottle [00:06:23 ]: Well, I live in Texas, in the United States, and Texas has a statewide grid that manages its energy, of which about, depending on who you talk to, 25% to 35%. The grid’s power on a good day, I suppose, comes from renewable energy, even though Texas is a massive brown energy exporting state, the largest one in the United States by far. So even in states like Texas, in places like Texas, there is a migration inside of the grids. But that’s not a decision that, as you point out, that a tenant or an occupant, whether it’s a co working or business center or whether it’s a corporate or anybody for that matter, can make, can impact in really any way aside from how they happen to vote their government structure. I wonder what percentage if, and this would be a wild guess for you so far, put you on the spot, but make the guess anyway. The flexible workspace sector, depending on the market, controls about three to 4% or two to 3% of the total commercial office space overall. If we were to go net zero, 100% net zero, what impact on total energy do you think we would have?

Sam Pickering [00:08:04 ]: It’s a really interesting one, that, and it’s a growing sector, growing in different ways in different markets. And I take nothing away from the research that you would have heard from instant group anyway, but I think it’s slightly more nuanced, Frank, that when we talk about net zero and we specifically look at renewable energy. I think you’re so beholden, as you rightly said, both to what the landlord does, decisions on purchasing he or she does, and then the macro levels that it will be lost in the wash of real estate as a whole and those sorts of things in terms of the impact that on specifically renewable energy. I think the thing that really excites me about flex and this particular sector and clearly I’ve been doing this not as long as you Frankly I became part of Instagroup about five years ago when they acquired my company incendium consulting. But the thing that really excites me is this, when it comes to sustainability as a whole, is two factors. The first is utilization of space, and so invariably co working flex space, whatever you want to talk about it is anecdotally and through research far better occupied than traditional space, especially in, in the world we’ve moved to very quickly to hybrid working.

Frank Cottle [00:09:33 ]:
Agreed.

Sam Pickering [00:09:34 ]: And so that is one thing, it’s better utilized. So carbon intensity, regardless of it’s the most inefficient building in the world. It’s got gas and everything like that because it’s properly occupied and lots of people are in there. It is therefore less carbon intensive per occupant than the most efficient building in the world that has renewable energy and everything else that only has 20% occupancy. And I see that a lot from the corporate clients we work with and then the flex operators that I also more and more begin to work with. The other thing is then when you look at, and that particular metric is missed in real estate, we look at everything per square foot, per square meter, whatever you want. The other bit shorter lease lengths are coming in. People want more flexibility to move out of space when they don’t want it traditional or whatever it might be. And with that you tend to get this new occupier comes in, strips out what was there, fits it out in the way they want, which is not dissimilar from what was there before. So you’ve got that embodied carbon piece I was bringing about. And I think when you add all those up, if I can interrupt, what.

Frank Cottle [00:10:42]: You’Re saying is a big part of the carbon footprint isn’t just the energy consumption, but it’s in the materials that come through flipping at the fit outs.

Sam Pickering [00:10:53 ]: Exactly.

Frank Cottle [00:10:54 ]: And how is that measured?

Sam Pickering [00:10:57 ]: So that’s measured. I mean it’s really complicated, I hate to say it, but carbon emissions reporting, and this is slightly embarrassing because I’ve been doing it for so long, is like the wild, wild west. I hate to say it, because it is basically, if you took a chair, if I take a simple example of a chair, the way you build that carbon footprint is ultimately the materials is used in making it the way it’s made. That is the factory, is it powered by gas, renewable energy, whatever, like that. And then when it’s then turned into a chair, how it is then transported to your particular site, to the warehouse before it comes to you, and all of that is built into a carbon footprint. So that’s the initial bit you’ve made it, that’s what it is. That’s the carbon footprint. Then it’s that carbon, a bit like any financial statement, is amortized through the life cycle of that particular chair. And so often if you look at that stripping out and fitting out, that chair is used by a corporate for five years, is often stripped out. Now some of that is reused, might be resold, but quite a lot of it ends up in landfill. And so if you look at a flex space and the serviced office sector, different businesses sit on the Same chair in short periods of time. Invariably could be year, could be two years, but could also be weeks.

Frank Cottle [00:12:10 ]: Also have, as you’ve pointed out, higher utilization.

Sam Pickering [00:12:14 ]: Yeah.

Frank Cottle [00:12:15 ]: As a result of which their serviceable life might not be any longer, might even be shorter than a chair in an ordinary corporate. So instead of having a five year life, it might have a three year life and still end up in the landfill.

Sam Pickering [00:12:30 ]:Yeah, but I think, you know, if you look at it, paper use and all those sorts of things, you’ve got to be realistic with this. I mean, we’re not going to sit on the floor. So I think invariably if you bought a chair, it’s poorly utilized in a traditional space. And I’m talking generally, you know, I can get picked apart by anyone, but if it’s poorly utilized for a three, four year period and then it goes to landfill, or you use a chair that’s really well utilized for three years, but it’s utilized 80% of its time, then the maths is pretty simple on that. I’m talking high level, but conceptually that’s why I’m excited about it.

Frank Cottle [00:13:07 ]: Yeah, I can see that. I’m a data freak, number one. So I’m always like, well how do you figure out the metrics and how do you really, aside from voodoo statistics, really calculate any of this? I’m sitting in a Herman Miller chair that is predominantly aluminum and covered in leather. So immediately when you said Cher, I thought, well I wonder if they figured out the methane from the cattle from the, that goes to create the leather, the electricity that goes into the aluminum, you know, all of those sorts of things. That was the bad news. The good news is I’ve been having had this Same chair for about 25 years and it’s still perfect.

Sam Pickering [00:13:55 ]: See, you’re solving the problem, Frank.

Frank Cottle [00:13:58 ]: So quality, you know, unfortunately my butt size hasn’t changed too much. So quality and buying things you really use rather than just have, maybe that’s part of the solution. Overall, net zero is a goal of everyone in some way where I think all people that have any consciousness of our planet are seeking to do something, even little things, and seeking to find a path to that. When does it get in the way of business? I’ll use a good example. I’m a big co working operator. I’ve got hundreds of thousands of centers, no names here around the world. I’m negotiating with landlords. Am I going to focus on how net zero and energy conscious it is the landlord is, or am I going to focus on the price I get so I can sustain a value to my own shareholders? It’s a bit rhetorical question, I think, there. And we don’t see, and we’ve been operating as you know, in this industry since 1979. We don’t see a big demand from the corporates, the customers, certainly not the small customers that says, well if you aren’t doing x and y, I’m not going to do business with you. They’re more concerned about the flexibility benefit that they achieve, which contributes to net zero, I suppose in many respects than they are how you might have done something good overall. We don’t see a lot of requirement there. Are you seeing it at instant? Because we’re not. But you might be.

Sam Pickering [00:16:06 ]: Well, I mean we are definitely. We launched last year something called the Sustainability Index, which is the sort of first rung in the ladder around looking at sustainability within the space. It’s simply taking, can you provide us with the data? We’ll validate it against global greenhouse gas protocol and we’ll give you a report that allows you to report those emissions to your clients occupiers. Whatever. The reason I set that up and I came up with it with my team was because we work with some of the biggest, but also some small SME type organizations, Fortune 50 down to SME’s. And basically what’s happened is as they sign up to externally reporting their emissions, Allwork.Space is always sat there at the end of the year as something that we would estimate. You simply wouldn’t get data from any of those operators. And so we would estimate it.

Frank Cottle [00:17:05 ]: Well, the data you get is self reported and not audited, so it’s suspect to begin with.

Sam Pickering [00:17:13 ]: Well, yeah, we just wouldn’t get any data. You asked any. You’ve sort of alluded to some big players, any of the big players, any of the operators, you wouldn’t get it. So that was kind of immaterial in the risks associated with compliance requirements and corporate reporting. And when I talk about corporate reporting, to put it into context, and you love your percentages, but the MSCI, who’s kind of one of the big kind of critical decision support tools and sort of research companies, they’ve sort of evaluated that ultimately 60% of public companies globally report their emissions related to electricity and gas. Now that is 73% everywhere. Because I know you’ll challenge me on the US and it’s about 45% in the US. So that’s where we sit. So immateriality doesn’t matter. It’s like less than a percent, less than half percent, probably in the old way of a portfolio makeup. Now, as things are moving and corporates are taking, wanting more flexibility and businesses are wanting more flexibility in their space, that proportion of your portfolio in flex is more material. And so the requirements simply for compliance requirements and to comply with your own internal sort of, and this is from an occupier perspective, reporting requirements, that becomes more material, that data is important. And so I think that is what really we’re seeing is driving potentially, and I’m not seeing it totally, but we are seeing demand for those that have the sustainability index tick going up as it’s beginning to take hold. That is beginning to drive purely from a compliance requirements, the need to get this data. And it’s the first rung in the ladder. Is it fully and just about sustainability? Absolutely not. But if you’re an operator looking to differentiate space in a way that isn’t just cost isn’t just the fit out, it’s the other cherry on the top that helps people make informed decisions.

Frank Cottle [00:19:18 ]: Well, you know, I’m going to date myself, which I already done that. But in the nineties in the United States, we had what was referred to as the Clean Air act. And this was all of the states, their air quality management districts got together and tried to clean up the air with pollutants. And if we look at net zero, well, what was the pollutant? Well, it was carbon. So that was really a precursor to a carbon reduction programs. And I actually wrote the definition of what a telecommuting center was for the Clean Air act for the us government, and we were telecommuting, as opposed to at that time, co working in business centers, etcetera. And the government required every company that had more than 50 employees at a single location file a report, and every company over another size hurdle, I forget what it was. Now, had to have an active telecommuting program as an option in place. And today we could refer to that as a remote work or a hybrid work program. And the simple reality is, the biggest reduction in pollution, or carbon footprint, if you will, came from a reduction in the number of cold starts of automobiles commuting to work, and the pollution created during the commuting process by automobiles overall. And the simple deduction was if a person can work within five minutes of their home, and if there is, in fact, a car pooling option for them. So six people was the magic number, could take the Same vehicle with a single cold start, which creates 90% of the pollution that your car creates, is created while it’s warming up, so to speak, in the first few minutes. That that was the biggest impact. And so the locations, and this bodes well for flexible workspace and distribution of work. The locations of the co working or teleworking centers to be within proximity to the residences of the actual workers. Let’s get rid of commuting had more impact than any other single item overall. And I wonder, in the net zero approach, how much attention we are paying to that sort of a program and making that work overall, basically how much we’ve remembered from what we learned in the nineties. I will mention as soon as the government lost the will to enforce that program in the mid, late nineties and didn’t force the corporates to do it, they all stopped. They all just said, yeah, too much hassle. Okay. Yeah, it was a will of the people to cause the government to create a program that forced a level of compliance that actually worked. And it was a very effective program for seven or eight years. And then again, the government changed the will of the enforcement program. And it just went, yeah.

Sam Pickering [00:23:06 ]: And I think, you know, for me, with sustainability, it’s always looked at as, you know, having done it for a long time before that, I served in the british army. And so I say that because I’m not a tree hugger, as it were. I look at this from a Business ConText, and what you’ve just described is the other bit that really excite me, excites me about flexible working as a whole. And this is accelerated massively. And people, individuals, employees, look at working and the fact they might commute for 2 hours in 2 hours back to sit on calls all day, when actually they were probably closer to some of their employees, colleagues, where they started their journey. This is what the sector has to offer, which is a different choice metric around where you work. That of course it will be about the ease of getting there, how you might get there, what you might do when you get there, the decor, the ability to collaborate, meeting, whatever it might be. And then the choice around that carbon metric is hugely important. Do you drive, do you walk? Have you got everyone coming from 5 miles as opposed to going to your headquarter building, that’s 100 miles. All of these is the fabric of what we do around working that will make the massive impact in terms of sustainability, net zero, whatever you want to call it.

Frank Cottle [00:24:34 ]: Again, when we started in this industry, we were building buildings and trying to decide where to locate them. And we paid ridiculous amount of money for this amazing marketing report to help us understand where to put a building. And it all became captain obvious sort of stuff. But one of the metrics that came out is the amazing findings of this report was that people would rather work five minutes from their house and 30 minutes from their clients, then 30 minutes from their house and five minutes from their clients. Ta da. Okay. And so the reality is people prefer this, but the challenge is a lot of people live in suburban or semi suburban environments where there’s not enough density for to justify the building of a corporate headquarters, even if you could, from a zoning point of view, or enough density to populate an economically successful co working or business center at scale, because you have to have a certain scale to make centers successful. It’s been proven time and again, and most of the flexible workspace industry is concentrated today in central business districts of major cities. So how do we break out effectively recognizing that a certain amount of scale is necessary to make the business or to create the support services economically and make it all work.

Sam Pickering [00:26:13 ]: Yeah, and I think you’re beginning to see this change in terms of the discussion. Certainly we have from the work we do with occupiers who are beginning to grapple with this whole piece as well, in terms of where their headquarters buildings are, how people want to work, what functions need to be where, and it’s still playing out. Nobody’s got the solution. But I think all the things you’ve talked about, the reality is the flexible consumption of space, in whatever form that is, is going to be the way that people use space. And I think you will begin to see that spaces, in whatever form it is, start to build a network well outside the CBD’s, closer to where people live, because that is what employees will over time begin to demand. And you start to see that more and more in different sectors. And I think the one thing for me, regardless of whether you believe in sustainability or the sector takes it seriously or finds it difficult to engage with or it’s not relevant in your particular locality, state, country, whatever the reality is, this is going to be one of the drivers that, that lifts the sector up and makes it far more viable, scalable and all the things you’ve just sort of talked about. And I think if we can get behind this in a partial way or certainly just build it into the way we talk about the sector as a whole in terms of part of the solution to what is a macro problem, I think it’s a hugely exciting piece really.

Frank Cottle [00:27:51 ]: No, I agree. And I think by the way, the flexible workspace sector overall is much more compliant, much more focused, and much has a greater, not anxiety, has a greater desire to move in this direction than do the conventional buildings, primarily because of the differences in cost. We’re all about flex. They are bastions of concrete and steel with anachronistic financial support behind them. Overall that is very slow to move. I mean, the term landlord, for crying out loud, we should have put a bullet in those guys centuries ago. Let’s hang the landlords. That would have been the great revolution. Overall, I think that as you transition though from net zero, which is a incalculably large topic, you translate to wellness and the fact that individual centers or locations within the flex sector can impact wellness directly more than they can impact net zero. So they can try at one thing, but I think they can actually accomplish lot more along the wellness line. How important do you see that? Or how do you see those two things tying together? I mean there’s the obvious, you know, a less polluted facility is a, is a better facility, you know, who argues that? Nobody does. But how do you rectify wellness into this entire process?

Sam Pickering [00:29:39 ]: Yeah, I mean I, they’re different, but they’re linked to a degree which is, is in the end this is around how you differentiate space to give people the right choice. And we’ve done this partnership with the International World Building Institute, the IWBI, who’s a us organization well standing. And I wanted to do that because I needed all the research behind it as opposed to sustainability, which I know inside out, it’s governed by various protocols. So, you know, well being and as we’ve sort of developed this product which is basically taking what is a very comprehensive look, mainly focused, and I’m going to generalize this and I hope the IWBI don’t, don’t give me a call straight afterwards. But it is really focused on landlords in terms of new builds and big refurbishments, with tens of millions of dollars being spent on it. Lots of consultants helping you to design it the right way, use the right things, have air quality and all these sorts of elements within it. What we try to do is well, being without a doubt, for operators is hugely important because it’s business to consume, consumer, obviously business to business. But ultimately, even if you’re outsourcing some of your space to a flex operator, you want it to comply with your own headquarters because otherwise it seems very unfair for your employees. And if I’m an individual sole trader, I want to know when I go to this space, Frankly, the air I breathe is of good quality and the lighting is going to be alright and all these types of things. But at the moment, there is no way of taking the nuances of that problem you’ve talked about in sustainability, one floor or partial of a floor in a great big building, and taking those nuances out. So it’s relevant to actually what the operator controls and therefore they can do everything they can to tick off the key things that will provide the healthiest building they can, or working space they can for the occupants based on the challenges they have around control. And so well being for me has got a much bigger take up than sustainability for some of the problems you’ve set up, you talked about, but also just some of the feelings around sustainability, it’s such a big problem, I can’t solve it. But actually, well being, employee productivity, people are really buying into. And so that’s where we’re really excited about this partnership because I think it will not only differentiate specific spaces with those that sign up to a rating, but I think again, it will elevate the whole sector in terms of well being within a sector that has never been able to, even though people have focused on it, and a lot of operators do a lot of things on well being. This just ties it together with a recognized, basically research and certification brand that gives them and consumers and occupiers the clarity that this is a good space.

Frank Cottle [00:32:43 ]: Well, you know, in the flexible workplace sector, corporates are an important part of the market. But the greatest part of the market are the small and medium enterprise businesses and the professions, legal, accounting, financial services, etcetera, government plays a role also on a growing role, but not as much. And then startups are the big part of the business, but also the most volatile part of the business, the biggest churn factor as we go through on things. So as we break down the customer base, you’re really talking about 2020. 5% of the customer base of the flexible workspace industry might, could, should have this focus on behalf of their employees. And yet the decision making, the location decision making process for most of those companies is still in great part left to the employee based on where the employee lives in proximity. I’m going to go back to my cold start theory. The most good that can be done by the corporates is to ensure that their employees are within walkable, bikeable or minimum transit time to whatever facility they’re using will have more impact than the building that they’re in. And that’s going to be, that’s my story and I’m going to stick to it for a while. That the buildings themselves are important, but the getting to the building is the most important thing as we go through here and creates the greatest well being for the employee. Five minute commute, a 35 minutes commute. Even if the 35 minutes commute is on public transportation, the hassle factor of it diminishes the well being substantially versus walking, cycling. Walking cycling is the ideal, of course, but so many employees can’t afford to live in proximity to the central business districts where so many of the corporate employers and or flexible workspace operators are located, they have to commute in some way. So that’s. I don’t know how to solve that. I think everybody’s trying to figure out how to solve that right now. The post Covid world is so aggressively seeking a solution to that. And so that’s. I don’t know, that’s just where it goes from my point of view.

Sam Pickering [00:35:40 ]: I think it does. I think it does. I think that’s, sadly a long way off for the reason we sort of talked about before. And so, but therefore, if you’re going to an office and whether you’re a big corporate or an employee, a sole trader, which, you know, makes up quite a lot of the demand for flex space, the knowledge that what happens within the office space and working space, you go into being a meeting room, co working space, whatever, knowing that key wellbeing elements have been implemented in the way it’s operated, I think is hugely important in that because the health and wellbeing and productivity of employees is a big, big opportunity for operators and a really key part of demand, even if I put my personal sort of choice metric on my head.

Frank Cottle [00:36:31 ]: Well, I think you’re right. I think everybody, everybody prefers good over evil, if you will. Or most of us, a few, you know, psych, pathological people out there that like the evil part. But, you know, we all prefer good over evil. And wellness and net zero or reduction in carbon footprint is, you know, on the good side of the ledger always. No question of that. You guys have a fair amount of data that you have put together you’re compiling? We have some ourselves. Would you be interested or willing to provide your data, your reports, through all work? And we’d be happy to publish them and distribute them to our millions of readers worldwide because I think this is an important topic and it’s a knowledge sharing topic. This is something where the more we all know, the better we all will do. Sifting fact from fiction is critical and that comes from data. Data becomes information, which becomes knowledge, which allows us to take action. So get that data. Is that something that you all be willing to do, Frank?

Sam Pickering [00:37:48 ]: As always. You know, we’re big fans, so let me take that away and we’ll come back to you.

Frank Cottle [00:37:52 ]: Okay, perfect. Perfect. That would be good. Well, we’re starting to run out of time here, Sam, it’s really been great. Appreciative of you sharing your knowledge and sharing your views on things, not only on behalf of intimate, but honestly, more importantly, on behalf of yourself and your long term focus on this topic. So we’re really grateful to you for that and look forward to helping in every way possible to help our industry achieve net zero in every way we can.

Sam Pickering [00:38:24 ]: Fantastic. Thank you, Frank.

Frank Cottle [00:38:25]: Take care.