Foreword. Quintessentials

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2 Foreword In twelve years, Ethical Property has grown from two people with a vision to a family of five companies and one charity, operating in four countries and employing over seventy people. Central to our success has been holding fast to our faith in the Ethical Property model. Built around strong management, transparency and a firm conviction that it is possible to make money whilst doing good, we have worked hard to ensure that the values with which we set up the business are as strong as they were twelve years ago. With our expansion into Belgium, France, the Netherlands and perhaps even Kenya, and the creation of new service companies such as Ethical Property IT, the need for a shared set of values looms large. In the interest of strong and transparent governance, we have chosen to enshrine the very essence of our ethical model in the Quintessentials five essential principles for running a successful Ethical Property company. These principles allow us to provide clear guidance to anyone wanting to join the Ethical Property family, and also offer a way to make accountable family members who might later stray from the path. Who should we rent our properties to? How do we balance social, environmental and financial returns? What are the principles of good governance for an ethical business? And how much time should we dedicate to social auditing and reporting? It is questions such as these that the Quintessentials are designed to answer. The Quintessentials lay out a number of governance and management practices that are considered best practice for a member of the Ethical Property family. All members of the family must adopt and adhere to them in return for the right to use the Ethical Property name. The Quintessentials are based on a set of five fundamental management principles, policies and practices that are designed to ensure that members of the Ethical Property family meet their common aim. Quintessentials 1

3 The Triple Bottom Line Investment in the Ethical Property family offers its investors an appropriate financial, social and environmental return. Ethical criteria for tenancy and other services Property and other services provided by the Ethical Property family is only made available to organisations that meet our ethical criteria. The Code of Practice for the management of the company The Ethical Property family always provides property in accordance with its ethical principles. The Governance Procedures All members of the family maintain a high standard of governance, transparency and honesty in their business and manage their business in a way that safeguards its ethicality. The Reporting Procedures Adherence to the four objectives above is reported in the Social Accounts, which form an integral part of the strategic business planning process. Conforming to these principles, and meeting the targets laid down, is seen as a model for running a successful Ethical Property company. These practices and targets are as much a recipe for business success as a set of ethical standards to be met. Ethical Property family members are then expected to be guided by the Quintessentials in the running of their business, to aspire to the targets they set, and to meet them in so far as they are best able. We want to build a family of organisations that share the same values and philosophy and are able to work together and support each other. Through adherence to the Quintessentials, we feel the possibilities for strong collaboration will be greater. Working as one, we will be better positioned to help others to join us in achieving our aim of supporting the development of the social change movement by making the better use of property for society and the environment. We also hope that by sharing with you our knowledge of how best to run a successful ethical business, we can in some small way bring wider benefits to all. Jamie Hartzell Founder of the Ethical Property family February Ethical Property Company Quintessentials 3

4 Quintessential 1: The Triple Bottom Line We aim to ensure that investment in the Ethical Property family offers its investors an appropriate financial, social and environmental return. Social and environmental returns Family members should aim to maximise social and environmental returns offered to shareholders and report these returns in the Social Accounts according to the Reporting Procedures. The central social and environmental aims of any ethical property family member are: To support and strengthen the most progressive and innovative social change organisations and to ensure that the range of organisations supported is as diverse as possible. To make as positive as possible a contribution to the environment, by minimising environmental impacts, and in particular greenhouse gases, through the company, property and customer supply chains and by developing and supporting new positive environmental initiatives. To make as positive as possible a contribution to tackling inequality, by investing in deprived areas, making properties as accessible as possible and being an outstanding equal opportunities employer. To be honest and transparent to all stakeholders in all areas of the business and to treat honesty and transparency as a guiding principle of managing the business. Social and environmental returns are integral to the business model and should be fully incorporated into the business planning process, and given equal weight as financial returns. Social and environmental returns are expected to support and complement financial returns in the long term and not to detract from them. Ethical Property Company Quintessentials 5

5 One person working at senior management level should be given overall responsibility for environmental and social performance. Financial returns Financial returns accrue to shareholders through dividends and any rise in the share price. The company s policy is to aim to offer an overall average return to shareholders of around 5% per year. One person working at senior management level should be given overall responsibility for financial performance. Dividends A significant proportion of the financial return should be paid through an annual dividend. Dividends should be paid in either one or two payments a year except in the very first year of establishment of the company when it may not be necessary to pay a dividend. The year on year value of dividends should be maintained in real terms. The company s business position will be considerably strengthened if it is consistent in paying a dividend every year. Determining the share price All family members should have a mechanism by which shareholders and potential shareholders can determine the value of their shareholding. This mechanism should be spelt out in a written pricing policy. This policy should be made available to all shareholders. Initially, the company s share price is likely to be set at net asset value per share (in other words shareholders funds, or net equity, divided by the number of shares in issue). In some cases the price may be set at a discount or premium to net asset value. The company should value its property portfolio sufficiently often that shareholders are able to buy or sell shares at a price that reflects its true value as closely as possible, whilst not wasting shareholders funds on the valuation process. Every property held should be valued as a minimum once every three years. In between valuations, the company should consider applying a recognised index to its portfolio value in order to give an estimate of likely current value. As the company grows and share trading mechanisms become better established, share price is more likely to be set at the price at which recent share trades have taken place. Family members are not always in a position to control their share price, as it is based on the market value of its property portfolio, however management decisions that affect the asset value of the property portfolio should maximise its financial value without compromising the social and environmental objectives of the company. Share trading The company should make every effort possible to create a market in the company s shares. This ensures that shareholders can buy and sell shares whenever they want to. The aim of this market should be that no shareholder should wait more than three months to buy or sell their shares at a fair price. However, the company should not list on any recognised stock exchange, as this is likely to greatly jeopardise the Triple Bottom Line of the company. Speculation in the company s share should be avoided. Speculation is considered to be taking place when shareholders or their agents are taking a short term position in the company s shares in order to profit from them, rather than because they are interested in being a member of the company. The company should be managed on the basis that shareholders intend to hold their investment for at least 5 years. 6 Ethical Property Company Quintessentials 7

6 Dividend Waivers All shareholders should be entitled to waive their dividends in order that they can be used by the company to develop further its social and environmental objectives. Any dividends waived should be held in a balance sheet fund and should not be distributed as dividends to other shareholders. This fund can be used only for activities that cannot be considered as part of the company s core business. The fund should predominantly be used for activities that can be considered to offer high social and environmental returns, but cannot be immediately judged to be of financial benefit. However it is expected that these activities should prove their financial worth within a maximum of three years and from that point be incorporated into the core business of the company. The dividend waiver fund is then a kind of ethical development fund. Any activities that do not prove their financial worth within three years should no longer be supported by the fund. The fund can also be used for offering short term rental subsidies to tenants facing short term hardship. There is no requirement to end this element after three years and it can continue indefinitely. Use of the dividend waiver fund must be fully reported in the company s Annual Report. 8 Ethical Property Company Quintessentials

7 Quintessential 2: Ethical criteria for tenancy and other services We only work with organisations that we think are delivering substantial social change. We therefore aim to ensure that property and other services provided by the Ethical Property family is only made available to organisations that meet our ethical criteria. The criteria fall under three headings: 1. Essential/Preventative qualities 2. Desirable/Undesirable qualities 3. Preferred/Discouraged qualities Desirable characteristics (it is better to) Be a social change organisation. Be an organisation with long-term prospects and opportunities. Have diverse and transparent funding sources. Be a good mix with other groups in the centre. Be an organisation that understands, supports and practices a self-help culture akin to that of the Ethical Property family. Undesirable characteristics (it is best not to) Be an organisation receiving money from unethical businesses. Be an organisation in any way undemocratic or discriminatory towards its stakeholders or employees. Be an organisation that lacks the support of the community it serves. Organisations that fail to meet the essential criteria or possess a preventative quality will not be offered space in a centre. Organisations with desirable characteristics will be given preference over those with undesirable characteristics. The preferred and discouraged criteria will only in a very few cases affect the choice of whether an organisation is offered space. Rather, the company would wish to engage with the tenant organisation to develop the preferred qualities and to lose the discouraged qualities once the organisation is in occupation. Essential criteria (you must) Have a defined social purpose that accords with the company s overall objective of building a sustainable society and a sustainable environment. Be a charitable or non-profit organisation, a social enterprise, an ethical business, or a business of strong local benefit to the regeneration of an area. Preventative criteria (you must not) Be an unethical business. Be a government organisation or department, national or local, with the exception of specific projects that enhance the activities of other non-governmental tenants of the Centre occupied. Be an organisation which has the promotion of one particular faith or philosophy as its objective. Preferred characteristics (You should be working towards) Equal opportunities policy and practice. Environmental policy and practice. What we mean by social change Discouraged characteristics (You should be moving away from) A differential between the highest and lowest paid worker of more than 6 to 1. Any staff member not being paid a living wage, which is higher than the minimum wage. Local, regional or national government funding of over 50% of turnover. A social change organisation recognises that certain problems within society are structural they can only be solved if some aspect of society is changed. The change required could be in the law, in the political or economic system, or in societal behaviour or attitude, or some or all of these. The problem will not be resolved until the cause is addressed. 10 Ethical Property Company Quintessentials 11

8 We like to work with the social change organisations that we see as the most effective at addressing the cutting edge social issues of the day. We support organisations working for a better world through: Civil rights Promoting participation in national or local political life, especially by marginalised people. Community arts Using the arts to empower communities. Environment Working for solutions to environmental problems. Ethical finance Investing and lending based on financial, social and environmental criteria. Global justice Opposing corporate globalisation and promoting equal distribution of economic resources. Health Working to improve human or animal health and nutrition. Homelessness Working to eradicate homelessness and to support people who lack a fixed, regular and adequate residence. Human rights Working to realise the universal rights to which every person is entitled because they are justified by a moral standard that stands above the laws of any individual nation. Local business Providing services and employment to the local community through trading, particularly in areas of high deprivation. Local community Working to strengthen bonds and identity in communities, particularly those deprived of a minimum standard of well-being and quality of life. Organisational support Providing support or representation for groups working on the issues described here. Overseas development Providing support to poorer communities in developing countries. Peace and conflict resolution Working towards the elimination of hostility and violent conflict. Refugee and minority issues Supporting refugees and minorities or working to remove the conditions that restrict their civil rights and tackling discrimination. Women s rights Working to realise the freedoms inherently possessed by women of all ages, which may be ignored, illegitimately or institutionally suppressed by law, custom, and behaviour in a particular society. Unethical business By an unethical business we mean one causing damage to the environment or creating greater inequality; engaged in the manufacture or sale of armaments, petroleum, cars, pornography, tobacco, or with a poor human rights or employment rights record or other activities determined by The Guardian as unethical from time to time. 12 Ethical Property Company Quintessentials 13

9 Business of strong benefit to a local area By a business of strong social benefit to a local area we mean one that contributes to the sustainable development of its local area by: Furthering the sense and practice of local ownership amongst the people in the area; Providing local jobs that are reasonably paid and that contribute to building self-esteem; Providing a useful local service known to be of need to the local community and that stands to lead to a better quality of life for that community; Building a sense of local community by creating a positive local identity and breaking down barriers between different sectors of the community. Religious organisations We welcome organisations which are inspired by their faith to contribute to building a sustainable society or a sustainable environment, provided that they do not also actively promote that faith as part of their activities. In addition, we do not generally work with organisations which benefit only followers of one particular faith or philosophy, but would consider doing so if their aim is to provide culturally appropriate support for an entire community rather than to discriminate in favour of a particular faith group. Political parties We do not have a blanket rule about political parties. We assess each application from a political party or other political organisation against our criteria on a case by case basis. How the criteria are enforced The company should make a brief assessment of every potential tenant when first starting work with them. This only needs to extend to a formal assessment if the organisation is not already known to the company or if there is cause for doubt that the organisation meets the company s ethical criteria for tenancy. If the potential tenant is not known to the company, or if there is cause for doubt, an assessment should be made of the potential tenant s website, annual report and accounts or similar documents. References should also be sought from organisations known to the company. In the case of doubt remaining, the directors of the company will collectively be asked for a further opinion on the suitability of the tenant. On taking occupancy, tenants must sign a lease that requires that: The tenant will on request provide the landlord with information about the tenant s aims, activities and finances. The tenant will comply with the landlord s reasonable ethical regulations as set out in documents such as the Code(s) of Practice, the company Annual Reports, Share Issue Prospectuses and other documents defining the ethical position of the company. Once tenants move in, the company will request further information from time to time. In particular tenants must complete a short questionnaire once a year as part of the annual Social Accounts. If tenants are considered to no longer meet the ethical criteria, action should be taken for their removal either by mutual agreement or by cause of infringement of the lease. Every organisation must supply a web address and a brief description of their work when they first apply for space. This is best done through a form that sets out the organisation s space requirements, called a basic needs questionnaire. 14 Ethical Property Company Quintessentials 15

10 Quintessential 3: The Code of Practice for the management of property We aim to ensure that we always provide and mange property in accordance with our ethical principles. It is important that all the terms of this code are broadly met for it to be clear that property is let on an ethical basis. Rental discount The company should aim to set rents at a discount to the commercial rate. This discount can be measured in two ways: By comparing the current market commercial rent for the property on a fully repairing and insuring basis with the rent charged by the company less the cost of all services. By comparing the commercial charges for similar serviced offices premises in a similar location. This discount will vary with market conditions, but for commercial rent it should be no less than 5% and no more than 30%. For similar serviced offices it should be from 0% to 10%. It is good practice to regularly survey comparable premises and ensure that prices offered are competitive. Lease terms Lease terms should be at least as favourable to the tenant as the standard commercial lease, and more so in areas where the law might be considered unreasonable or weighted heavily in favour of the landlord. Leases should be designed to offer tenants long term stability, predictability of costs and flexibility. Rent rises should be linked to inflation and/or cost of living increases. The lease should offer break clauses to the tenant but not the landlord. Assignment and sub-letting should be allowed so long as ethical criteria for tenancy can still be enforced. Ethical Property Company Quintessentials 17

11 In multiple occupancy buildings, the company should be responsible for buildings insurance, upkeep of the fabric and the exterior of the property as well as the communal areas, major building maintenance and management of the service charges. These costs should be apportioned equitably between tenants. In single occupancy buildings, the tenant may take responsibility for upkeep of the fabric of the property, but the company should assist the tenant with this through long term maintenance planning and a sinking fund. Leases should encourage and if possible require tenants to uphold the company s ethical principles. Tenants should be required to complete an annual questionnaire as laid down in the Reporting Procedures. Property management The purpose of the property management service is: To support tenants in their development as effective social change organisations, by providing wellmanaged, good quality office space and other facilities and at an affordable rent, with flexible and supportive lease and space arrangements. To seek to foster contact and the sharing of ideas and resources between tenants and to provide facilities and services that will strengthen their operations. Properties should be managed so that they offer a high quality of service in terms of security, both on and off the premises, health and safety, energy and water efficiency, waste minimisation, green commuting, Internet and Communications Technology (ICT), and sharing and co-operation between tenants. All properties should meet or exceed legal standards for fire, security, environmental performance, property and plant maintenance, cleaning, ventilation, temperature and noise. Property management should prioritise tenant satisfaction, and should give full consideration to how to keep tenants fully satisfied with and supportive of the company. Communication with tenants Properties and services should be managed in a manner that is transparent to tenants and other stakeholders. The company should keep an open dialogue with tenants at all times. The property management team should as far as practicable be available to tenants and tenants issues and complaints should be promptly dealt with. One or more common forums should be established in which tenants can meet and air their views collectively. This forum should also act as a way to develop the centre and the services within it, as well as to come to agreement on property management issues. To increase the visibility of social change organisations. To make our properties sustainable, ecologically sound and energy efficient, healthy and secure, accessible to all, and having a positive impact on the surrounding community. To support the emergence and development of small social change organisations. 18 Ethical Property Company Quintessentials 19

12 Quintessential 4: The Governance Procedures We aim to ensure that all members of the Ethical Property family maintain a high standard of governance, transparency and honesty in their business and manage the business in a way that safeguards its ethical nature. The Governance Procedures are broad management guidelines that each member is expected to strive to meet and to successfully move towards over time. Family members should aim to be regarded as leaders in ethical investment and in delivery of property to the social change sector. Code of Corporate Governance Family members are expected to adopt the principles of good corporate governance for a public company. The Guardian will determine if a family member should accord to the Code of Corporate Governance of the country of the family member or of another country and this will be specified in the Ethical Contract. Threats to ethicality The key risks to the ethicality of a family member are: Control An organisation, individual or group of individuals with a controlling or influencing interest might push the company off its ethical path. On the other hand, those with influence over the company can play as great a role in safeguarding the company s ethicality as in threatening it. No one organisation or individual should then be allowed to acquire too great a stake in the company. Maintaining a good relationship with parties with larger amounts of control can do more to keep the company on course than knock it off course. Quintessentials 21

13 Mission drift A wide range of factors, in particular staff and board changes, could lead to a change in the culture of the organisation and so a drift from the mission over a period of time. The company should remain true to its mission at the same time as innovating and pursuing new opportunities. Reputational risk The company might come to be regarded as unethical, due to a gradual change in the climate rather than any change within the company itself. The company should consider the way it is regarded by the media and the general public and ensure that that image reflects the actual values of the company. In particular the company should ensure that it is not subject to criticisms of hypocrisy, a lack of transparency, or being regarded as predominantly a profit making company. A threat to ethicality is most likely to arise if the company fails to deliver on its promises. All projections of performance should then be diligently and prudently considered and consistently reported in all shareholder prospectuses, annual reports and marketing materials. Any variations from projected performance should be carefully anticipated, and fully reported and explained to all stakeholders at the same time and as early as possible. Maintenance of a high level of transparency in business and succession planning is essential to keeping the company on mission. This transparency is enshrined in the Social Accounts, which must also remain a key business planning tool rather than just a report. Diversity of shareholders In order that no single shareholder or group of shareholders acquires undue influence in the company, there should be as many shareholders in the company as possible. No shareholder should hold more than 10% of the company. Where possible, shareholders should be individuals rather than companies or institutions. The total share capital held by all institutions should not exceed 40% of share capital. Communication with shareholders All stakeholders should be encouraged to share, understand and support the company s values and objectives. All shareholders should be kept well informed about the company s plans and performance. The opinion of shareholders should be sought through AGMs and other events. All enquiries from shareholders should be dealt with promptly and consistently. Every effort should be made to communicate to shareholders the current value of the shares, and any significant events that are likely to affect that value or the management of the company in general. The Managing Director should consider meeting with large shareholders on at least an annual basis. A questionnaire seeking shareholders opinion on the company s progress towards its objectives should be sent to all shareholders at least once every five years. The Board and the Senior Management Team Keeping the company on mission is the responsibility of the Board, assisted by the Senior Management Team. The Managing Director leads the Senior Management Team and is responsible for making recommendations to the Board. The Board of the company should consist of both Executive and Non-Executive Directors. There should be more Non- Executive Directors than Executive Directors on the Board. Consideration should also be given to whether the Non- Executive Directors are also Independent Directors, as defined in the Corporate Governance Code, and there should also be more Independent Directors than Non-Independent Directors on the Board. Non-Executive Directors are required to resign and stand for re-election by rotation at least every three years. A procedure for planning the succession of the Managing Director, Chair and other Board members should be in place. This procedure should identify the key skills these individuals offer the company and how their replacements would be selected. 22 Ethical Property Company Quintessentials 23

14 The Board should at all times be aware of the strengths and weaknesses within the company and should act swiftly and appropriately. It is the Senior Management Team s responsibility to ensure that the Board are kept fully informed of the company s activities and in particular that the structure, content and conclusions of the Social Accounts are reviewed annually by the Directors. Public relations There should be clear lines of responsibility within the company for the production and approval of marketing materials, the handling of media and other stakeholder enquiries, and the reviewing of media coverage. All media matters and stakeholder enquiries should be dealt with promptly, precisely and consistently. In addition, the board should remain aware of changes to the media climate for ethical investment, and use of the term ethical in general, and should respond accordingly. Directors shares All board members should be invited to purchase shares in the company. However, directors should not trade shares if they are party to information on company or share performance that is not available to all shareholders. This is most likely to occur between the year end and the distribution of the Annual Report to all shareholders. The Staff Staff should be encouraged to participate in the strategic direction of the company. This could be achieved through an annual strategy day for all staff. All staff members, and in particular the more senor staff members, should understand the company s values and be able to apply them. Job descriptions and adverts should emphasise the need for strong values in staff and directors that reflect those of the company. The senior management team should involve senior staff in decision making processes where appropriate. Terms of employment for staff and directors Staff salaries should be at least equal to and preferably higher than the going rates paid by non-profit organisations for the post, and where private sector rates are higher, between the charity rates and the private sector rate. As a rule, salaries for lower paid posts are lower in the private sector than the non-profit sector, whereas salaries for higher paid posts are higher in the private sector than the non-profit sector. Respecting the condition above will then reduce the differential between the highest and lowest paid staff member in the company. All staff members should receive an ethical and extensive benefits package on top of salary, for example: Most staff should have the option of being on a permanent contract. For more than three staff: An ethical pension could be provided, with the employer contributing 6% of salary on top of pay; annual training allowance; option of a company bicycle. For more than 20 staff: The above plus employee share ownership scheme. Remuneration of Directors The fee paid to Non-Executive Directors should be modest and calculated on the basis of six to nine days work a year at a normal consultancy rate for a non-profit organisation, with 10 to 12 days a year for the Chair. Tenants The Senior Management Team should at all times be aware of tenants opinion on the overall strategic direction of the company and in particular should review and act upon the annual Social Audit questionnaires submitted. The company should find ways to keep staff aware of social change issues. 24 Ethical Property Company Quintessentials 25

15 Suppliers and partners The company should actively monitor its ethical supply chain and ensure it uses the most ethical suppliers possible. A best of sector approach should be adopted, i.e. for each kind of service purchased the most ethical supplier in that category of service should be identified and used. All business partners that the company chooses to work with should as far as possible share the company s values and any agreements drawn up with those partners should only commit the company to a long term relationship with that partner in so far as it shares the company s values. Where the company chooses to form a closer link to any particular organisation, for example through a joint venture or similar arrangement, it should be considered to what extent the organisation meets the requirements of the Quintessentials. Banks are likely to be the company s most important suppliers. Where possible, borrowing should be undertaken from the bank with the strongest ethical policies and with a management philosophy most similar to that of the company. A diversified borrowing should also be considered in order to reduce dependency on any one bank. 26 Ethical Property Company Quintessentials

16 Quintessential 5: The Reporting Procedures We want to ensure that members of the Ethical Property family report openly and transparently to stakeholders on whether or not they have adhered to the objectives of the Quintessentials. The Reporting Procedures determine how company activities and performance are reported in the Social Accounts. It is essential that all members produce Social Accounts, which should be included as part of the annual report and financial statements. Any prospectus and any other materials produced should also accord with the Reporting Procedures. Recognising and overcoming failure is a central part of the business planning process. The Social Accounts should highlight all areas of failure as well as all areas of success. Strategies for overcoming areas of failure should be devised and reported. Every effort should be made by a family member to meet the targets specified below. Every family member should undertake an external, independent audit of its Social Accounts within five years of the founding of the company. Indicators and targets An indicator should be devised for every aspect of the company s social, environmental and financial performance. Each indicator should be used to demonstrate the company s performance in the Social Accounts. Where it is not possible to devise a meaningful quantitative indicator, a qualitative report should be provided. A quantified indicator is preferable to a qualitative one and where a qualitative indicator is used consideration should be given to devising a quantified indicator at a later date. Once a quantified indicator is in place, it is possible to devise a quantified target. A numerical target should be used where possible. Targets can be based both on improvements in the company s past performance, on targets set by recognised external bodies or on targets devised and set by The Guardian. Targets should be regularly updated and improved in relation to changes in society as a whole. In some cases both Best Practice and Satisfactory targets are given for individual centres. As a guide, all centres should be within Satisfactory targets and more than 50% within Best Practice targets. Anything below Satisfactory requires immediate explanation and action to address the problem. The Social Accounts The format of the report should follow that prescribed by The Guardian. Currently, the reporting format is set by the report of the Ethical Property Company in the UK. Means of reporting new areas of work not covered here should be devised and discussed with The Guardian. Performance compared to all targets should be clearly stated in the Social Audit and reasons for not meeting the targets should be explained. Both quantitative and qualitative reports should clearly set out the aims of the company in the area reported, to what extent they have been achieved, where and why the company has failed to achieve them, and how this will be improved upon in the following year. The areas that should be reported on, and the indicators and targets that should be used, are as follows: 28 Ethical Property Company Quintessentials 29

17 Area to be reported Indicator that should be reported on Target Full list of all tenants with a short description of what they do Adherence to ethical criteria 100% adherence For the company Composition of the board Age, ethnicity and gender of board. Number of executive and nonexecutive directors. More non-executive than executive directors and more independent than non-independent directors Ratio of salary of highest to lowest paid worker The ratio If under 100 employees: Under 5:1. If under 20 employees: Under 4:1 Employee rights and benefits offered Equal opportunities performance Means of travel to work Means of travel during work hours Pension provided. Permanent contracts. Holidays allowed. Employee share ownership. Over 20 staff: % male/female. Over 100 staff: Ethnic distribution. % travelling by car alone, car share, bike, walking and public transport % of trips made by above means and also by plane 6% employer pension contribution. 100% of staff. Minimum 25 days a year in addition to statutory holidays. 5% of retained profits for the year distributed as shares to employees. 50/50. 0% by car, moped or park and ride Satisfactory target: 5% 0% car and plane travel Satisfactory target: 5% The property portfolio Renovation, improvement and major maintenance works to improve environmental performance Works undertaken A five year plan covering works required to ensure that any building: Meets the operational performance targets detailed below for energy, water use, carbon emissions, waste and recycling and means of travel to work. Uses materials that are non-polluting, certified, sustainably sourced and natural. Encourages health and well-being Uses passive building systems as opposed to mechanical or electrical ones 30 Ethical Property Company Quintessentials

18 Area to be reported Indicator that should be reported on Target Environmental improvements Works undertaken A five year plan covering works required to improve environmental performance of the properties. Renovation, improvement and major maintenance works to improve disability and general access Choice of electricity, gas or water supplier Electricity and gas use Generation of renewable energy Carbon dioxide emissions Works undertaken Name and carbon emissions of chosen supplier Both total energy consumption and consumption per square metre of floor area per year, in Kilowatt hours Both total energy generated and generation per square metre of floor area per year, in Kilowatt hours Kg of carbon dioxide per square metre of floor area per year A five year plan covering works required to ensure that any renovation allows easy access to the building for all members of society, not only those with a disability. The choice of supplier should be determined by the carbon emissions from the supplier s overall mix of fuel sources, not the stated mix for one individual tariff. Once the supplier with the lowest emissions is chosen, the tariff of that supplier with the lowest emissions should be used if possible. Where a tariff is more than 10% more expensive than other tariffs, the tariff with the next lowest emissions can be used. 120 (One hundred and twenty) In a normal gas heated building, this is likely to be 60 for gas and 60 for electricity. Total energy use of 170 (one hundred and seventy) is considered a satisfactory target for one centre. Targets are for the year 2006 but should be reduced by 3.5% every year thereafter. 10% of energy consumed should be generated by the company from renewable sources (eleven point one). This target is based on a target of 60 for gas and all electricity being purchased from 100% renewable sources. Where electricity is purchased from renewable sources, the percentage of the supply which is NOT from renewables should be included in these calculations. Renewable sources are energy from wind, solar photovoltaic, solar thermal, organically grown locally produced biomass and hydro. Targets are for the year 2006 but should be reduced by 3.5% every year thereafter. The 11.1 carbon dioxide target is equivalent to a 3.0 carbon target, using a conversion factor of Carbon dioxide emissions of 16 (sixteen) are considered a satisfactory target for one centre. 32 Ethical Property Company Quintessentials 33

19 Area to be reported Indicator that should be reported on Target Water recycling and use Litres per person per day 8 (Eight) 15 (fifteen) is considered a satisfactory target for one centre. A full range of water-saving and water recycling measures should be installed namely either waterless urinals, or cistermisers on standard urinals, rain/grey-water harvesting, dual-flush toilets (4 litre/2litre), lowflow showers (6 litres a minute), energy-efficient (Grade A) dishwashers, and spray taps. Waste and recycling Reduction or re-use of consumption of disposable items.recycling all recyclable items, including water 100% of what can be recycled is recycled The tenants Number of tenants Their areas of work by issue The type of organisation Issue areas into which tenants can be classified are specified Charity, non-profit, cooperative or trading organisation. Even distribution of issues Even distribution of type Their size Annual turnover 20% of tenants with income under 50,000 ( 50,000) a year. 75% of tenants with income under 500,000 ( 500,000) a year. Their means of travel to work Their means of travel during business hours % travelling by car alone, car share, bike, walking and public transport % of trips made by above means and also by plane Less than 5% of all tenants travel by car, moped or park and ride. The satisfactory target is 20% Less than 5% of trips made by car travel, moped or park and ride. Less than 5% of trips made by plane. The satisfactory target is 20% Social measures Investment in deprived areas Government index of poverty area by area 50% of centres in poorest 25% of areas 100% of centres in poorest 50% 34 Ethical Property Company Quintessentials 35

20 Area to be reported Indicator that should be reported on Target Tenant satisfaction With the quality of office space With the communal services and facilities With overall management of the centre With the fora for common discussion provided Questionnaire (in standard agreed format) with 1 to 5 score Questionnaire with 1 to 5 score Questionnaire with 1 to 5 score Questionnaire with 1 to 5 score 4 or more 3 or above is considered satisfactory for one centre 4 or more 3 or above is considered satisfactory for one centre 4 or more 3 or above is considered satisfactory for one centre 4 or more 3 or above is considered satisfactory for one centre With the rental charges Questionnaire with 1 to 5 score 4 or more 3 or above is considered satisfactory for one centre With the opportunities for sharing and the support services With the improvement of the visibility of the tenants With the impact of being located in an Ethical Property centre in terms of fulfilling a tenant s strategic objectives With the extent to which tenancy supports a tenant s day to day operations With the extent that the Ethical Property Company s practices are consistent with the values it proclaims Questionnaire with 1 to 5 score Questionnaire with 1 to 5 score Questionnaire with 1 to 5 score Questionnaire with 1 to 5 score Questionnaire with 1 to 5 score 4 or more 3 or above is considered satisfactory for one centre 4 or more 3 or above is considered satisfactory for one centre 4 or more 3 or above is considered satisfactory for one centre 4 or more 3 or above is considered satisfactory for one centre 4 or more 3 or above is considered satisfactory for one centre 36 Ethical Property Company Quintessentials 37

21 Area to be reported Indicator that should be reported on Target Financial performance Dividends Net asset value per share Dividend waivers Volume of share trading Liquidity of shares Spending on repairs and maintenance Empty space and lost rent Actual dividend as a % of forecast dividend Shareholders funds divided by shares in issue Percentage of shares on which dividends are waived % of shares presented for sale that were sold within 6 months The percentage of shares presented for sale in the year that were sold. Thus if all shareswere sold by the year end, liquidity would be 100%. If there are sellers on the market at the year end, liquidity is less than 100%, whereas if there are buyers on the market liquidity is over 100%. % of rent spend on repairs and maintenance, including depreciation Number of square metre months for which no rent was received for the year, as a percentage of the total square metre months in a year. 100% or more A steady increase over time. 10% or more 100% 90% 10% or more of rental income Additional capital expenditure as required to adequately maintain each property Under 2% a year Property values Increase over book cost A steady increase over time. Return on all property investment Rental levels and discounts Rental income after maintenance and insurance costs divided by book cost 1. The commercial rent for the property 2. The commercial charges for similar serviced offices premises for non-profit organisations in a similar location. More than 7% 10% to 30% discount when comparing like with like The same or less, when comparing like with like 38 Ethical Property Company Quintessentials 39

22 The role of The Guardian The organisation entrusted with protecting the Ethical Property name is termed The Guardian. The role of The Guardian is to ensure that the members of the Ethical Property family exercise their responsibilities effectively and efficiently. The Guardian will notify any family member of a breach of the Quintessentials and will take appropriate action should a breach of the Quintessentials not be remedied within a suitable period of time. The appointed Guardian is currently The Ethical Property Company in the UK, although it is expected that the company will exercise its authority in a collaborative manner with other family members. At a later date it is envisaged that as the family grows a new organisation, Ethical Property International, will be created to fulfil The Guardian role. This organisation would be governed by a board that represents all the family members. Joining the Ethical Property family Any organisation wishing to join the Ethical Property family must apply to The Guardian. In order to become a member of the family, that organisation must make a commitment to adhere to the Quintessentials in its articles. The following text, or a similar text approved by The Guardian, should be included in the articles: The applicant must also sign the Ethical Contract in which it undertakes to abide by the Quintessentials, and recognises that it can lose the right to use the Ethical Property name and logo if it does not. In addition to signing the Ethical Contract, the family member will need to sign a Statement of Undertaking that it will adhere to the Quintessentials. This statement may allow the family member to be temporarily exempted from meeting certain parts of the Quintessentials for a specified period of time, if so agreed with The Guardian. Enforcing the Quintessentials Each family member will be expected to seek advice from The Guardian in the planning of its business. In addition, the documentation such as the Annual Report produced by that member will be reviewed by The Guardian and any issues arising will be raised with the member s Board. In the case of more difficult issues, The Guardian will work with the member to try to find a way to improve performance. If, and only if, it is felt that the member is unable and unwilling to resolve the issues and improve performance, and if that under-performance is considered damaging to the Ethical Property name, then The Guardian may choose to consider the Quintessentials breached. Under these circumstances, The Guardian will withdraw from the member the right to use the Ethical Property logo, company name and domain name. The Board of Directors of the company will manage the Company in accordance with the Quintessentials. The Quintessentials, as amended from time to time, contain management principles, policies and practices relating to shared financial, social and environmental objectives adhered to by all members of the Ethical Property family. 40 Ethical Property Company Quintessentials 41

23 The Hard Commitments In the Ethical contract, certain undertakings in the Quintessentials are regarded as Hard Commitments. Whilst The Guardian would expect most breaches to be remedied within 18 months, the Hard Commitments should be remedied within three months. The Hard Commitments are: Paying a dividend each year; Establish a mechanism for the trading of shares in the company of the Family Member; Letting to ethical businesses; Not renting at a premium to the market rent; Establishing a common forum in which representatives of the tenants can regularly meet with representatives of the company of the Family Member; Revealing to shareholders, within a suitable time frame, any matter having a significant impact on the running of the business of the Family Member; Producing an annual Social Audit Report that meets the Reporting Requirements. Keeping the Quintessentials up to date The Quintessentials can from time to time be varied or updated where it is felt that this further develops the Ethical Property family s aims and objectives. Members of the family can propose amendments to the Quintessentials though the final decision lies with The Guardian. Any changes to the Quintessentials will be posted to the website of all family members within two weeks of them being agreed. In addition, shareholders of all family members will be notified of any changes to the Quintessentials once a year as part of the notification of the AGM. The Ethical Property family Ethical Property is an international family of organisations working together with the common aim of supporting the social change movement by making better use of property for society and the environment. We achieve this by providing well managed office space at an affordable rent and on flexible terms; by making our properties as ecologically friendly and accessible as possible; by providing services such as IT and training that helps social change organisations to grow; by providing property advice services that as far as possible are free at the point of delivery; and by fostering the sharing of ideas and resources between organisations. Ethical Property Company Ltd The Old Music Hall Cowley Road Oxford OX4 1JE Ethical Property Foundation Development House Leonard St London EC2A 4LT Ethical Property Europe Mundo-b Rue d Edimbourg Brussels Ethical IT The Old Music Hall Cowley Road Oxford OX4 1JE Étic Foncièrement Responsable 24 rue Robert Desnos Vaulx-en-Velin Ethical Property Nederland The Hub Amsterdam Westerstraat MA Amsterdam 42 Ethical Property Company Quintessentials 43