Apartment Investor/Operator CSR Strategy: Water Conservation

Kenneth Morgan, Laurel Casey, Brad Lawler, Michelle Morehead Stotz, and Andrew Settle

Introduction:

Our company is a publicly traded Real Estate Investment Trust (REIT) specializing in the development, acquisition, and management of apartments throughout the United States. The company owns and operates over 75,000 apartment homes and distributes at least 90% of cash flow directly to its shareholders via quarterly dividend payments.

Corporate Environmental Strategy:

The company’s Corporate Environmental Strategy is to “create a better way to live - for our residents, our associates, our shareholders, the communities in which we do business, and our planet at large,” mainly by either taking advantage of opportunities such as increased efficiency or by mitigating risks such as maintaining a positive brand. Though still a work in progress, the company has undertaken several successful initiatives in CSR, including paying living wages, reducing energy usage, and prioritizing shared pace for residents.

Problem:

Following a discussion with the company's VP of Corporate Responsibility, our group has chosen to focus on its initiative to expand efforts to engage residents in water reduction initiatives. The company has seen only a 0.6% reduction in water use since 2015, primarily because it has no control over how residents use their water and because residents pay their own utilities. Simply put, there is little incentive for the company to invest in water saving fixtures if the resulting savings do not hit the bottom line and allow it to increase distributions to investors.

Recommendation:

Following class study of UCLA’s successful Engage Mechanism experiment (20% reduction in electricity use), our group decided to recommend a strategy that combines private information and public social status regarding consumption of water. Under such a strategy, residents would be able to monitor water consumption in real-time, disaggregating use between different fixtures and appliances in the apartment home. Results would be public, introducing an element of social pressure and status. Our group also suggests adding an element of gamification by awarding those who reduce consumption the most with reserved parking spaces or gift certificates to further incentivize reduced water use amongst residents. Finally, our group suggests that the company frame water conservation in terms of residents’ health and consider providing quality, efficient appliances under a flat-rate water pricing system if appealing to residents.

Discussion Questions:

·       The UCLA study was on younger, progressive, and highly social students. Do you believe that residents would also experience a social incentive despite being older and not knowing their neighbors as well?

·       Do you believe that residents would be willing to make their water use publicly available?

·       Is a $5-7 a month savings in water incentive enough for residents to use less water if they are educated and aware? If not, how much gift card value is necessary to incentivize new behavior?

·       How much additional monthly rent would you be willing to pay for high efficiency appliances?

·       Would you prefer to pay a reasonable flat rate price for water or would you prefer to have water individually metered?

·       How would you rate your water use? Please see the picture below for water conservation ideas.