Core values shape business for one of UK's largest landlords

In partnership with the Crown Estate.

Andy Wells of The Crown Estate, pictured at Glenlivet.

The Crown Estate manages a large area of Scotland and the man responsible is Andy Wells, its head of property north of the border. As the estate’s management duties are transferred to the Scottish Government, he discusses its “total contribution” approach to the way it does business.

What does responsible business mean to the Crown Estate?

It’s part of our DNA. We have 1,000 years of history and although the 1961 act gave us primarily a commercial responsibility, that is always balanced with good management.

That balance is reflected in our core values – commercialism, stewardship and integrity.

What does commercialism mean in practice?

It’s about growing the asset value and delivering revenue to the nation, while taking a long-term view. We are a net contributor to the Exchequer; we manage assets to generate financial value for the nation but we do it in a responsible way to deliver a wide range of public benefits.

Is it a tricky balance between commercialism and stewardship?

It can be challenging. Sometimes we have to take a primarily commercial decision and sometimes stewardship is the predominant consideration. Integrity is the value that runs right through that decision-making process and everything we do. We have to show we are open and transparent, a good landlord and good to do business with.

If we are good to do business with, that should benefit those who are based on or in our land and property assets – their ultimate viability and prosperity as businesses is good for us. It’s a mutually beneficial relationship.

How does that work in practice with local communities?

The long-term sustainability of communities and how they can support viable businesses is a key part of our strategic thinking. We work very closely with communities and want to build strategic partnerships. The idea of partnership and collaboration is very important to us and we are embedding it further into the business.

That might mean as part of a lease, that a mooring association manages a harbour or a development trust makes decisions about how to best use a piece of land for the local community. When it works well, it’s a win-win situation; the local community has much more say over what happens and it is more cost effective and efficient for us as we cannot manage all the assets we own directly.

It’s about putting local people in charge but with the added reassurance that the Crown Estate is behind them and supporting them; we are a backstop if necessary. It’s about adding value to communities as well as delivering commercial value.

The 1961 act says what we do must be “with regard to good management” – and good, responsible management is what the Crown Estate is all about. Behind every property we rent is a family whose kids go to school. That school is at the heart of a community with services and facilities. Without all of that, you don’t have the family paying the rent – so we have to support sustainable communities. In turn, that adds value to our asset.

Where does patient capital come in?

We understand some rural communities are fragile and can struggle, so we look at where we can deliver long-term benefits and sustainability. That might mean holding on to a property and renting it out locally because that is in the best interests of the community – rather than selling it and it not being occupied all year round.

Patient capital is also very relevant in offshore renewables. We have put investment into tidal power to get the industry up and running – through our £10 million investment in Meygen – for the broader benefit of Scotland. It’s all about a balanced portfolio delivering regular revenue, but also revenue coming through in ten, 20 or more years’ time.

What does “total contribution” mean and how does it work?

Total contribution is the approach we use to measure and communicate our impact economically, environmentally and socially. We wanted to measure what we did more effectively and to make ourselves a more sustainable business.

Historically it has been about hitting Treasury targets and growing our asset value – but by growing our asset value, we add a lot of additional value. It was about how to measure that too, so we could make balanced judgements.

For example, what if a course of action added significant financial value but clearly had a negative impact on the environment or a community? We might take a view that the financial benefit was offset by the negative impacts.

It’s about looking at the net position after considering the positives and negatives.

How do you measure that?

It is complex, but it has evolved since the first total contribution report in 2013 to look at how we impact on our six “business capitals” – financial, physical and natural resources, our people, our know-how and our networks.

For example, if we pay to send employees on training courses, it’s a cost to the business and has a negative impact on our financial capital.

However, if that training delivers enhanced know-how and skills that lead to better networks and relationships which enhance the performance of the business, it comes back in as a positive.

It’s as much about the process as the end result and it really cuts to the heart of what is responsible business. We have more than 60 different metrics we use for total contribution, all of which involve some quantitative data.

Where does natural capital analysis fit in?

We are exploring how we can build in natural capital accounting with partners including the Scottish Government, Scottish Natural Heritage, Scottish Land & Estates and the Scottish Wildlife Trust.

We would like to carry out a natural capital analysis on one of our assets and then work out how we can apply that across Scotland – not just for us, but for the benefit of everyone.

What will happen when the Crown Estate is devolved to Scotland as a result of the Smith Commission proposals?

We are confident that we can continue our positive engagement with Scottish communities.

There are some challenges in splitting off from the rest of the UK business with its deep pockets (largely thanks to London real estate) but the commitment to our core values, customer service and strategic partnerships will remain across our very diverse range of assets.

Are there limits on what you can do?

Yes, as we were created by an act of parliament, we have to refer back to our vires; there is always a degree of interpretation but as long as we don’t trade and operate using what are clearly our assets, we have some flexibility. We need to show we are deriving some value from the asset but we can define that in many ways.

What does the future hold?

It’s got to be about making the changes in Scotland work and that will be determined by the quality of relationships we can build at local level, right across the country. In turn, those relationships are underpinned by our core values – commercialism, stewardship and integrity (and increasingly, collaboration). Those values have stood the test of time and will remain critical in the future.

Tobermory, Isle of Mull

The Crown Estate has worked in partnership with the community-run Tobermory Harbour Association (THA) since it was formed in 1983.

From re-organising moorings in Tobermory Bay to becoming a premier marine tourism hub, the Crown Estate has supported the THA’s ambitions by sharing skills, knowledge and experience alongside direct support for the Harbour Association headquarters and an investment of £320,000 in new pontoon facilities.

In Phase 6, the THA is applying to make it a statutory harbour authority with management control over the whole bay.

The THA also has ambitious proposals to expand facilities for the increasing numbers of leisure boats and cruise ships, as well as improvements for the local fishing fleet and larger vessels.

The Crown Estate has assisted by discussing a new leasing arrangement for the bed of the bay, and has given direct support for feasibility studies and funding strategies.

Glenlivet Estate

The Crown Estate, which owns the 23,000-hectare (230sq km) Glenlivet Estate inside the Cairngorms National Park, has worked closely with, and provided office space for, the Tomintoul & Glenlivet Development Trust. The Crown Estate contributed £40,000 to a development project under the umbrella group the Glenlivet & Tomintoul Landscape Partnership, which then secured £2.34 million in Heritage Lottery Funding for 16 projects, including the restoration of Blairfindy Castle and the Scalan Seminary Mills, woodland improvement and a computer mapping tool to assist land use planning.

This continues a long-standing supportive relationship between the Crown Estate and Glenlivet. Andy Wells first joined the Crown Estate as Glenlivet estate ranger in 1990 and has been involved in an enormous range of projects, including: wildlife recording (over 5,600 records have been registered); hundreds of tours for school groups and education resources, including teaching children about trees and the carbon cycle; regular woodland creation; rural skills training for pupils and army cadets, allowing them gain practical experience of countryside engineering and conservation work; and conservation work for the black grouse, water vole and sand martin.

This article appears in the WINTER 2016 edition of Vision Scotland. An online version can be found here. Further information about Vision Scotland here.