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As the COVID-19 pandemic wanes, a new era is emerging for businesses. It is digital. It is sustainable. It is people-centric. And it is agile. Business transformation is no longer a choice in this new reality. Corporate strategies are being rewritten. Business and operating models are being redesigned.

The corporate strategy drivers can create a game-changing opportunity for Corporate Real Estate (CRE) to be a catalyst for change as a key business function. CRE sits at the confluence of the three drivers of digitalization, the future of work and the race to net zero. It also has a significant influence over financial performance and is central to driving operational excellence. It’s no wonder many organizations are bringing CRE to the top of their strategic transformation agenda.

The status quo of global business was already changing long before COVID-19 emerged. The pandemic only accelerated the pace of change and sharpened the direction. It also created a new reality, one in which digitalization and sustainability are the norm and customers are at the center of every interaction. It is a world of complex interdependencies and interactions — one of hyper-competition, unhindered innovation and rapid market transformations.

At KPMG, we believe there are three main drivers now influencing decision-making as corporate strategy leaders plan for the new world.

1. The race to net zero. Sustainability has become a top priority for companies around the world. Indeed, 93 percent of the CRE executives we interviewed said that environmental, social and governance (ESG) factors, sustainability and the race to net zero emissions are now critical agenda items for their organization. They see progress on this agenda as a way to deliver new growth. And they are keen to reduce their company’s carbon footprint across their value chain by becoming cleaner and more sustainable with a lower impact on the environment. One global pharmaceutical manufacturer told us they plan to be carbon neutral by 2030. Another has set greenhouse gas emission (GHG) levels for not only their direct emissions, but also their indirect emissions from the generation of purchased power. Many talked about decarbonizing their real estate and car fleets as a key priority.

2. Digitalization. Companies have been striving to digitally transform for years. COVID-19 made their efforts urgent. And our conversations underpinned the

wide range of ways that digitalization is changing the corporate strategy. All of the executives we interviewed say they are either driving digital disruption, developing new digital products or digitizing their existing processes. One global research and biotech company talked about how they are using digitalization to change the way the business organizes and executes their research activities. A consumer goods player told us how digitalization had opened up new business-to-consumer channels and enabled new business models. Others talked about using data analytics to improve their store concepts based on deep insights on customer behaviors and needs. Some were in the middle of their digital transformation journey. Others, like the maker of smart appliances we interviewed, were already well advanced in leveraging digital and new technologies to achieve business outcomes.

3. The future of work. The way people “work” has changed. Advanced automation technologies like robotics and artificial intelligence (AI) are changing jobs, the nature of the work and the skills requirements. The accelerated digitalization process triggered by the pandemic has spawned new virtual collaboration techniques, allowing people to work from anywhere, leading to greater workplace and workforce flexibility. And that has had broad impacts on almost every aspect of corporate strategy. The executives in our research say that the future of work redefines and reshapes their company’s talent needs and strategies. And they are adapting their corporate strategy in response. One pharmaceutical organization said they were reaching into new markets, closer to universities where competition might not be as fierce. Some are working to capture new talent earlier in their development cycle. Many of our interviewees talked about the impact that brand, sustainability and an attractive workplace had on their talent strategy — and how new work models were influencing their investment decisions.

On the back of bottom-line savings programs instigated by the economic impacts of COVID-19, organizations are now looking to leverage their transformation initiatives to deliver their financial performance and improve their operational efficiency. Recognizing the interdependency of financial performance, operational excellence and the strategic drivers listed above, organizations are using financial performance as a lens through which to view their sustainability and digitalization investments.

At the same time, corporate leaders are looking to achieve performance enhancements across their business and operating models, and in all areas of the organization. They are simplifying and optimizing their processes and eliminating inefficiencies to achieve higher levels of productivity and to identify new cost savings. And, as companies seek to develop and execute new, more agile business models, they are prioritizing their focus on using transformation to support their operational excellence objectives.

The excerpt was taken from the KPMG Thought Leadership publication Strategic importance of Corporate Real Estate - KPMG Global (home.kpmg)