As a long-standing member of the Board Governance Committee, I have witnessed and supported Prologis' steadfast commitment to ESG—as a value add to the business and a brand differentiator.Bill Zollars, Prologis Board of Directors
Risk Management Ensures Resilience
ESG is incorporated as a key principle across other functions within the business, including how the company evaluates and mitigates risk. We proactively manage financial, operational, organizational, external and macroeconomic risks through a competitive risk oversight framework that includes:
- Board engagement with executive and risk management teams, including risk assessment mapping and one-on-one interviews between each director and our risk management team
- Executive management committee meetings focused on strategic risks
- A structured approach to capital deployment vetted through weekly investment committee meetings
- One of the strongest balance sheets in the REIT industry
- A dedicated and empowered cybersecurity team charged with addressing the rising challenges of data protection and security
- Rigorous internal and third-party audits that assess the company’s controls and procedures
- A centralized team, closely aligned with their counterparts in each market, dedicated to managing risk globally
Effectively identifying and managing risk is critical to maintaining business resilience and operational continuity. At Prologis, ESG has always gone hand in hand with risk management. Prologis takes a proactive approach to assessing natural hazards and climate exposures across our portfolio, including earthquakes, windstorms, floods and coastal exposure. These assessments allow us to determine the appropriate risk mitigation measures for our portfolio and plan for longer term trends. We take preventative measures to improve the resiliency of our buildings to promote business continuity in our customers’ operations.
In the last several years, we have been fortunate to avoid catastrophic losses caused by natural disaster, but we always seek to be better prepared for the next major event. Because of the scale of our business, we are able to negotiate reduced rates and priority status with nationally recognized service providers. For example, in 2018 several of our properties in Texas were in the path of hail storms that damaged a number of our rooftops and skylights, but the disaster recovery vendors we already had under contract were able to respond within hours to assess the damage and begin repairs. The quick response prevented loss to the interior of the buildings and our customers’ property. Other risk mitigation measures include site selection and enhanced construction specifications, such as increased floor heights in flood-prone areas, resiliency planning, onsite emergency response plans and equipment, safety preparation and comprehensive insurance infrastructure that leverages our scale to cover potential damage.
Guarding Against Natural Disasters
Prologis is vigilant in assessing our exposure to natural hazards affecting our portfolio and commits the appropriate resources to ensure that we are proactive in preparation, protection and response to minimize any impacts to our customers, business and employees.
Mitigation includes facility location planning, building design and significant investment in safety for the protection of our contractors, customers and employees. We incorporate features into our building design to mitigate potential climate risk and exposure. Prologis has a Disaster Preparedness and Recovery Plan to help prepare our employees for potential hazards. The training includes an equal balance on preparedness at home as well as at work.
Life Cycle Assessments
In addition to exploring methods of evaluating the life cycle impacts of our developments, we are also assessing possible climate risk impacts. We review our portfolio in light of factors and assessment points raised by the Task Force for Climate-related Financial Disclosures (TCFD).
Furthermore, our long-standing Cool Earth partnership provides a Life Cycle Assessment of our efforts to reduce or offset the whole-life carbon emissions of our properties. The assessment measures embodied carbon in accordance with the BS EN ISO 14040 series of standards. Prologis reduces embodied emissions by efficient design, specifying low carbon materials and minimizing construction waste. The Cool Earth assessment has helped Prologis developments in the United Kingdom lock in over 2.7 million tonnes of carbon dioxide in forests in Peru and Papua New Guinea. This makes it one of the most successful and effective embodied carbon mitigation programs anywhere in the UK and has led to a lasting global impact.
Safety has always been foundational to our business. Prologis focuses on providing exceptional customer service with state-of-the-art, Class-A real estate and maintaining high safety standards within our construction practices to actively ensure the safety of our employees, customers, suppliers and contractors. In 2018, we enhanced our safety program with a global rollout of a safety hotline available to all internal and external parties.
In 2018, we installed more than 25,000 preventative skylight fall safety devices throughout North America that serve to further protect our customers, our employees and others who work with us. We will more than double the total installations of skylight safety systems in 2019.
We continue to engage with our general contractors as partners in promoting safety. In 2018, we hosted a general contractor safety summit where we identified pathways to further enhance safety across all of our construction projects. We have also increased the number of safety audits across our operations to ensure that our high expectations for safety compliance are met.
Human Rights and Ethics
Integrity is the cornerstone of every action we take. Our word is our bond. This forms the critical foundation of the partnerships we establish with our customers, investors, employees and communities. Stakeholders trust that we conduct business fairly, ethically and in full compliance with all laws and regulations.
Prologis has a long-standing Code of Ethics and Business Conduct and a Global Anti-Corruption and Foreign Corrupt Practices Act (FCPA) Policy, which are applicable to all employees and the board. Every Prologis employee must commit to our Code of Ethics and Business Conduct. All new hires receive extensive ethics training at the commencement of their employment. The company also provides regular ethics training in every country where we do business, as well as in-person FCPA training in Mexico, Brazil, China and Europe. In 2018, 100 percent of our employees participated in such training in their local language. Our Code of Ethics and Business Conduct and our Global Anti-Corruption and FCPA Policy have been translated into 16 languages and can be found on our website, as well as posted on our intranet. Any reported ethics concerns, which can be submitted via an anonymous, 24-hr ethics helpline or through direct communication with management, are thoroughly evaluated by our Ethics Committee, which prescribes solutions to address the concern. Our commitment to doing business ethically and with integrity ensures that we continue to serve our customers and that we are a trusted long-term partner for them, our investors, our employees and our communities.
Prologis’ policies also include a commitment to protecting human rights. We have adopted responsible workplace practices and endeavor to conduct business operations in a manner free from complicity in human rights abuses. In particular, Prologis’ core values and culture of integrity (I), mentorship (M), passion (P), accountability (A), courage (C) and teamwork (T)—IMPACT—embody a commitment to ethical business practices and strong corporate citizenship. It is Prologis’ policy and practice to provide equal employment opportunities to all individuals, free of discrimination regardless of race, gender, gender identity, creed, religion, sexual orientation, marital status, national origin or ancestry, sex, age, physical or mental disability, medical condition or veteran status.
Hotlines Empower Employees to Support Strong Governance
Prologis recognizes that governance cannot just be a top-down, management-led initiative. It requires the support and input from all employees at every level of the company. We’ve created two hotlines to enable employees to express their concerns about either possible ethics or safety violations.
In 2018, Prologis received inquiries directly through our internal Ethics Helpline, a confidential third party-administered hotline for reporting suspected Code of Ethics and Business Conduct violations. Prologis received additional inquiries for suspected violations through regular communication channels with management. Of 14 total inquiries, five were unsubstantiated and three remain an ongoing investigation. For each of the six substantiated inquiries, appropriate action was taken and the matters are considered resolved.
Safety has always been foundational to our business. Prologis focuses on providing exceptional customer service with state-of-the-art, Class-A real estate and maintaining high safety standards within our construction practices. We actively ensure the safety of our employees, customers, suppliers and contractors. In 2018, we enhanced our safety program with a global rollout of a safety hotline available to all internal and external parties.
Guarding Against Corruption
Corruption is an obstacle to trade and undermines fair business practices. Prologis has a zero-tolerance policy for bribery and corruption. We act with professionalism, fairness and integrity in all our business dealings and relationships. Our employees and board members receive regular training—in their local language where appropriate—on our Code of Ethics and Business Conduct, information security, global fraud prevention and the Global Anti-Corruption and Foreign Corrupt Practices Act (FCPA) policy to ensure they remain current on ethical issues and corporate expectations.
Our other anti-corruption practices include:
- 100 percent of global operations are assessed for risks related to corruption.
- Our internal control processes assessed our operations for risks related to corruption, including risks regarding documentation for competitive bidding of contract work, the proper monitoring of actual costs against budgets and forecasts, the comprehensiveness of corruption policies, training and rigor of investigations and enforcement of policy violations, the sufficiency of the “tone at the top” to combat corruption and the conduct of proper third-party due diligence. After the risk assessment, it was determined that Prologis does not have any significant risks related to corruption.
- Regarding legal actions for anti-competitive behavior, anti-trust and monopoly practices, there were no legal actions in 2018, pending or completed, and therefore no outcomes to report.
ESG Governance at Prologis
Building our Sustainable Supply Chain
We hold our suppliers and contractors to high standards. We do this initially through our Supplier Code of Conduct. Furthermore, we engage with a global supply chain risk management evaluator to conduct prequalification assessments of potential suppliers to ensure they meet our standards.
Sustainable Supply Chain for our Customers
As the provider of well-located, modern, efficient logistics facilities, we are a component in our customers' supply chain, and we can serve to help them make progress toward their own sustainability goals. This includes working with customers to gather data on building performance that is used for reporting and to prioritize investments to improve building efficiency. By incorporating ESG concepts into our lease agreements, we were recognized as a Gold-level Green Lease Leader in 2018. These collaborative relationships, which further our joint and individual ESG efforts, help unlock value for both our customers and our business.
Our procurement team is positioning the company to better leverage our data, scale and spend on construction, operations, capital and administrative expenses. We are working to ensure consistent standards and practices across our platform, achieve cost savings and share the resulting benefits with our customers. We typically ensure that the two largest material components of our facilities, concrete and steel, are purchased from local suppliers. Partnering with local businesses allows us to invest in the communities where we operate, spurs local employment opportunities, and reduces shipping and transportation costs and their associated environmental impacts.
Learn More About Governance
For a complete description of Prologis’ corporate governance practices and our approach to risk management, please refer to our Proxy statement and our 2018 Form 10-K, or visit the Investor Relations page on our corporate website.