It has morphed from an obscure acronym to a primary objective for apartment operators. ESG is the short form of environmental, social and governance—as most now know but might not have five years ago—and essentially measures an organization's commitment to environmental and social impacts and evaluates the way it manages those components.

A company's ESG metrics are becoming increasingly important to investors, residents, stakeholders and the public at large. An organization does not want to be viewed as one that doesn't engage in environmentally friendly practices or is tone-deaf to social issues.

Naturally, many organizations were already engaging in ESG-friendly initiatives before the concept was given an official name—but that doesn't mean the effort cannot be further strengthened. For instance, practices that were thought to be environmentally friendly in the past might have been replaced by greener alternatives. Adjusting accordingly can prove crucial, particularly when considering some government-sponsored enterprise (GSE) loans offer improved rates for sustainability and affordability.

So how can operators ensure they are on the right side of the ESG curve? Thankfully, the industry offers several benchmarks to measure ESG performance. A few recommended best practices can quickly translate to successful scores—and more importantly, a truly ESG-centric community.

Measure Your Efforts Through Independent Ratings
Apartment communities can be scored in numerous ways, including reporting to Energy Star Portfolio Manager, International WELL Building Institute and various similar outlets. Essentially, these rating platforms evaluate corporate disclosures, conduct management interviews and review publicly available information about an organization to provide an objective rating of the company's ESG performance. Communities can be certified and awarded for high sustainability marks. It's highly recommended for operators to report to a platform that can calculate your ESG footprint.

Develop an in-house policy
While achieving high marks from an independent outlet is a primary objective, it starts with doing the right things habitually. Multifamily operators are encouraged to develop their own ESG policies to foster best practices, utilizing detailed input from the organization's various stakeholders. These policies can help to boost ESG scores, and include initiatives such as measuring energy consumption, waste tonnage vs. recycling, the diversity of the company's workforce, employee engagement and closely monitoring whether the company is dedicating enough time and resources toward philanthropic efforts.

View cost through a long lens
As with virtually everything, a cost accompanies many ESG efforts. But operators should view these costs not merely as an expense, but something that can be offset by a return on investment and overall value to an organization. For instance, an upfront investment in conservation efforts can reduce an organization's overall utility costs. Likewise, investing in employee engagement reduces turnover and subsequently saves on increasingly high hiring costs and leads to more cohesive, higher-functioning teams.

While ESG might be a relatively new concept—at least by definition—it doesn't figure to be a passing fad. Sustainability, for instance, has been a primary focus of the industry for decades, motivated by the desire to control costs. In current times, the positive environmental aspects of sustainability continue to become more important to those viewing a business, and subsequently should remain a priority for operators.

Conversely, some DEI measures might fade to some extent—but that's a good thing. It would mean organizations have reached a point where they are inherently diverse and provide equitable merit-based opportunities without the need for specific programs for guidance.

Moving forward, the industry can take steps to better track its ESG performance for more accurate scoring. Resources and scoring models are certain to evolve to better measure an organization's efforts. What's certain is that ESG will continue to be a measuring stick that will be used by many to evaluate an organization.