This is a case study that's a part of the 2021 REIT Industry ESG Report, an annual report detailing the REIT industry's environmental, social, and governance (ESG) performance details in the publicly traded U.S. REIT industry. Featured case studies showcase REIT leadership and ESG innovation from a variety of sectors and serve as a practical tool for stakeholders to assess the scale and impact of the REIT industry's ESG commitments and initiatives.
Kilroy Realty Corporation (KRC) recognizes that much of its environmental footprint lies in its supply chain—spanning the breadth of the services and products the organization procures to construct and operate its buildings, as well as the services and products that those suppliers in turn procure.
KRC's efforts to better understand, and then address, the sustainability of its supply chain began in 2018, when the organization performed an analysis to identify Critical Tier 1 Suppliers, those suppliers with whom KRC has a direct financial relationship where a disruption would immediately impact day-to-day operations.
"Achieving carbon neutral operations in 2020 was a big milestone, but our work does not stop there. We believe a company’s ESG impacts go beyond the actions of tenants and employees and into its supply chain, which we will continue to invest our efforts. We believe this output should move the needle tangibly in improving our sustainability performance across all operations."
Michelle Ngo, Chief Financial Officer and Treasurer
In 2019, KRC launched its first Supplier Excellence Survey for these Critical Tier 1 suppliers, inquiring about environmental sustainability, corporate responsibility, quality management, procurement processes, and other key ESG impacts. Suppliers then received a personalized report of their results—as well as suggested improvement areas to influence environmental and social outcomes across the supply chain in the future.
In 2020, KRC built on the strong foundation established from past supply chain work to:
- Innovate and evolve its Supplier Excellence Survey to capture more ESG data points and supplier improvement areas.
- Extend the Supplier Excellence Survey to Critical Tier 1 suppliers that support its development efforts.
- Launch supplier training resources around embodied carbon and how to reduce a building’s carbon footprint by leveraging the Embodied Carbon in Construction Calculator (EC3) tool.
- Update RFP language to reinforce supplier ESG excellence as a prerequisite for becoming a part of KRC's supply chain.
KRC's supply chain work has proven to not only improve its environmental footprint, but also serve as an invaluable risk management exercise by deepening the organization's understanding of the suppliers it does business with.
Beyond continuing its supply chain engagement and improvement efforts, KRC has the goal of reducing the embodied carbon of its construction materials 30% by 2030, and 50% by 2050.
Kilroy Realty owns, develops, acquires, and manages real estate assets primarily in the coastal regions of Los Angeles, San Diego, the San Francisco Bay Area, and greater Seattle.