Most facility managers are familiar with or preparing for building performance standards, corporate sustainability reporting and compliance requirements that are applicable to their organizations. Regardless of whether an organization has internal sustainability initiatives, the lion’s share of the burden in making sure a facility is compliant will land on its FM’s shoulders.

More traditionally desirable outcomes such as adding value to an asset, measurable ROI from energy savings, or operational efficiencies and improved occupant comfort and safety will need to be balanced against the costs for noncompliance and from the perspective of cost-avoidance. Within corporate governance, accounting and finance are best suited to chart the financial path forward for their facilities. The cost calculations involved are essentially an accounting problem specific to each facility, its location and ownership. The implementation of compliance will fall to FMs to research, price and project manage the solutions specific to their facility.

Like individuals, no two facilities are the same. Custom solutions are needed to maximize returns on energy savings for each investment in new equipment. Compliance requirements are different across various jurisdictions, so the implementation of solutions will be different as well. Boilerplate solutions and software for data collection will only get a building so far.

Inevitably, new regulations impact corporate profits. This comes at a time when vacancy rates, recapitalization costs and commercial mortgage interest rates have made some facilities worth less than the costs for upgrades and the value of the building’s continued operation.

Part of the challenge in approaching compliance stems from different applicable regulations that are enforceable, and sometimes cross overlapping jurisdictions. The implementation of these policies’ timelines, deadlines and penalties, their oft-shifting regulatory language and pending litigation status can be both messy and confusing. This is especially true for operations staff with limited existing bandwidth.

The inherent complexity is part of the reason why compliance regulations will outlast election cycles, because either:

  • The winning candidate for office has limited ability and authority to influence or restrict regulations outside their jurisdiction or scope,

  • The regulations are implemented by unelected bureaucracies,

  • The regulations can be challenged by unelected special interest groups in front of appointed judges,

  • The regulations were voted into effect by the electorate directly via referendum.

The global and interconnected nature of our financial institutions, businesses and governments has led to serious debate and thorny challenges. Global investments in renewable energy are made by financial institutions, and access to the energy is sold to publicly traded companies in need of meeting compliance goals. Such is the case with Google’s investment in a Taiwan-based solar asset owned by BlackRock’s Climate Infrastructure subsidiary.

Financial institutions that manage state-backed pension funds are accountable to their constituents, beholden to the laws governing finance and beholden to fiduciary responsibility. Many of those financial institutions also manage real estate portfolios and are further beholden to shareholders to deliver returns.

Conflicts abound. In just the U.S. alone, a lawsuit was brought against shareholders by Exxon over their proposals to accelerate carbon dioxide emission reductions. Twenty-five state attorneys general and two energy corporations filed a suit against the Department of Labor regarding ESG investing that will have implications beyond the parties’ respective scope. The U.S. Supreme Court decision overturning Chevron U.S.A. Inc. v. Natural Resources Defense Council upends the authority of federal agencies to regulate markets. Special interest groups like the California Restaurant Association prevailed in their fight against mandated electrification versus the City of Berkeley, and there is pending litigation from the several building ownership groups against the State of Colorado and City of Denver that, as of this writing, has yet to play itself out at the federal level.

What does this mean for global corporate leaders? Budgetary and operational decisions must be made during unpredictable times and within volatile regulatory conditions. Where these conditions exist, decisions based on inaction, reaction or overreaction become more likely. Guesswork and accountability do not mix well.

There are some commonalities to the different regulations and reporting requirements. One of the main intents is to push organizations toward decarbonization via reduction of greenhouse gas (GHG) emissions and toward increases in building energy efficiency. Within the continental U.S., a map from the Institute for Market Transformation shows where building performance standards have been passed or have been committed to. The European Union passed and is implementing the Corporate Sustainability Reporting Directive, with additional regulations impacting organizations and facilities in Europe. Global markets and businesses with operations in Europe will need to comply.

Stateside, GHG emissions reporting requirements are likely to be applicable to publicly traded companies via the Securities and Exchange Commission (SEC), even though the current emissions disclosure rule is stayed. Organizations doing business in California are subject to GHG emissions disclosures. There are some notable differences between the California regulations and the SEC’s. For example, California’s regulations include Scope 3 emissions, covers private companies, but does not cover non-U.S. companies. The SEC’s climate disclosure rule is only interested in publicly traded entities.

Globally, as the larger pieces of the puzzle start to fit together, challenges will remain local. In Colorado, there are overlapping jurisdictions between various city ordinances and the state. Approximately 1,500 buildings in the City of Denver must comply with the city’s Energize Denver Ordinance, yet, because these buildings are also located in the state of Colorado, they will need to comply with Colorado’s Regulation 28. The mandated targets are similar in scope, but not identical, and their timelines for compliance are not quite in sync.

Imagine a facility owned by an entity with operations based in California, listed and publicly traded in the U.S. (SEC), and has operations in Europe (EU CSRD Compliance). That same organization might have facilities that need to ensure compliance with three different sets of regulations. If that same California-based corporation has office locations in Denver, Colorado, now it may have five regulatory bodies to answer to. It is unlikely that an election cycle (or two) will eliminate the need for compliance from an FM’s workload. Global initiatives become local challenges, and vice versa.

Compliance with regulations is necessary for the continuity of business operations and to ensure stakeholder protection, but it is also necessary for FMs to look at the big picture to understand the why as well as the how. FMs can deploy this type of big-picture thinking from a local level as they navigate global thinking. FMs can push past partisan viewpoints to come together and solve the challenges ahead.

What is needed is for civilization to move forward. FMs need to make decisions with the best information they have, with the right intentions and accept that the process will be messy. As stewards of their facilities, FMs have an outsized influence in impacting their community, both locally and globally.

As organizations face the compliance challenges, keeping the 3 Ps of Sustainability: People, Planet, Profit, in an optimal balance will be helpful. FMs would do well to remember that reducing consumption and eliminating waste in all its forms is both sustainable and profitable.

Editor’s note: This article originally appeared in FM Professional, the magazine of IFMA's Corporate Facilities Council.