sustainability

Businesses Are Facing a New Reality. These Are the Ones That Are Succeeding.

They’re taking responsibility for their effect on people and the environment.

By Peter Lacy
View the original article here.

Astrid Stawiarz Getty Images for UN Global Compact

Astrid Stawiarz Getty Images for UN Global Compact

Evidence is mounting to show that the frequency and ferocity of extreme weather events is intensifying on a global scale. From severe droughts to powerful storms, we are living in an increasingly changeable, uncertain, and unpredictable world.

You don’t have to believe in climate change to accept this new reality. Resilience and the ability to manage challenges impacting us and our environment are of far greater importance to both business and society. Take the recent destructive hurricanes in the U.S. and the Caribbean, or the devastating floods in Nepal, India, and Bangladesh that represent a stark example of this new reality and of our growing vulnerability.

The role of business within this new reality is changing. Businesses have a critical role to play in helping solve the challenges we face through providing services and solutions that support society. In fact, businesses that do not adapt their models run the risk of eroding trust and ultimately, forfeiting customer loyalty.

Uncertainty in the world—from extreme events, to declining natural resources, to the changing skills required for employment—gives forward-thinking C-suite leaders an opportunity to adopt conscious capitalism through the incorporation of key elements like trust, collaboration, and stakeholder orientation into day-to-day business practices. And, as consumers increasingly demand that their brands reflect these objectives, companies that want to remain competitive will need to adapt by joining the circular economy.

At its most basic, the circular economy replaces the current wasteful linear economic model. Instead of organizations relying on finite resources, they conduct sustainable business. They find renewable resources. They remove waste at every stage, from sourcing to recycling—creating a business model that restores and regenerates, rather than depletes and throws away. They look at how products are made, who makes them, and where, as well as how those same products are recycled or sustainably retired. In fact, adopting a circular economy model is not simply about products and services but also the way we do business as companies. It presents an opportunity to move beyond simply meeting sustainability standards to a solution that transforms the current model of business and one that can create a competitive advantage for the leaders.

Leading companies are still innovating, but now in a way that takes responsibility for their effect on people, the environment, and the state of our world. And they have realized that—contrary to popular belief—doing so can still be profitable. Accenture research shows a potential $4.5 trillion reward for achieving sustainable businesses by 2030. And a number of companies are already making progress toward this aim.

Rubicon Global, for instance, a pioneering U.S.-based waste management company that connects customers directly with independent waste haulers, is disrupting the current waste disposal model to reduce waste to landfill, while passing on $1 million in savings to its clients across 80,000 locations.

Nike, another leading example, is rapidly transitioning toward its closed-loop vision with a bold target for FY2020: zero waste from contract footwear manufacturing going to landfill or incineration without energy recovery. To date, 70% of all Nike (NKE, -0.43%) footwear and apparel incorporates recycled materials, using 29 high-performance, closed-loop materials made from factory scraps.

As the circular economy and conscious capitalism take hold, the C-suite is taking note: 64% of UN Global Compact CEOs say sustainability issues play a central role in their strategic planning and business development, while 59% of CEOs report that their company can accurately quantify the business value created through their sustainability initiatives, up from 38% in 2013.

The circular economy, a critical aspect of this change, is already happening—so much so that the World Economic Forum Young Global Leaders, in collaboration with Accenture Strategy and in partnership with Fortune, recognize leaders through The Circulars, the world’s leading circular economy award program. The Circulars, presented each year at the World Economic Forum Annual Meeting in Davos, attracts entries from individuals and organizations across business and civil society, from global giants such as Unilever to innovative startups such as Method. A winner at The Circulars in 2015, Method was built on wholly circular and sustainable principles, ensuring 75% of its products are cradle-to-cradle certified, meaning they are designed and produced in a socially and environmentally responsible way. Method has eliminated countless toxic chemicals from homes by using natural inputs.

These are just a few examples of organizations driving value through circular economy innovation—there are many more. In a world in which conscious capitalism is becoming mainstream, the circular economy has a significant role to play in enabling businesses to make the transition whilst continuing to deliver value to customers, shareholders, and society. As more businesses take the lead, the opportunity that the circular economy represents will become a reality.

Many in the Faith Community are taking action to become Sustainable – is yours?

 

PJ PictureBy: Paul L. Jones, CPA
LEED Green Associate
Director, Financial Advisory Services for Emerald Skyline Corporation

 

 

churchHow do you approach your decisions — by thinking primarily of yourself? Or do you consider how your actions will affect the beliefs and lives of others? Some Christians never stop to think that their choices can hurt or destroy someone else’s faith. They justify their behavior, saying God doesn’t convict them for it.

Paul blames the “stronger” Christian for these shipwrecks. He says we’re responsible not only for our actions, but also for the effect of those actions. In the end, we are to care more about the “brother for whose sake Christ died” than about our own wants or desires (1 Corinthians 8:11).

Because our faith is on display before the world, God promises rewards but insists on responsibility. One of the rewards is freedom from condemnation. But that freedom doesn’t mean license to do as we please without considering those who watch our example. Through the Spirit, we must discern the greater good and act on it.

As St. Paul’s teaching relates to climate change and sustainability, Dan Misleh, executive director of the Catholic Climate Covenant, advises, “How we take care of creation will dictate how we care for one another and vice-versa. The Catholic approach holds that we are concerned about both God’s good gift of creation and the impacts of environmental degradation on people, especially those most vulnerable: the poor at home and abroad. As Pope Francis said in Laudato si; “We are faced not with two separate crises, one environmental and the other social, but rather with one complex crisis which is both social and environmental. Strategies for a solution demand an integrated approach to combating poverty, restoring dignity to the excluded, and at the same time protecting nature.’ For Catholics, this is not just about saving the polar bear but also saving ourselves from our own destructive habits.” (From “The Faith Community and Climate Change, A Q&A with Dan Misleh” by John Gehring, Commonweal, April 27, 2017)

In answer to the question, “Are Catholic bishops and clergy rallying behind the Pope’s message or has it been a cautious reception?”; Mr. Misleh replied:

“I think many are embracing the challenges of Laudato si.’ I’m encouraged by the leadership of Catholic leaders like Archbishop Dennis Schnurr in Cincinnati, who is supporting our Catholic Covenant Energies program, in which we bring our education and energy efficiency expertise along with financing to help parishes and schools reduce their energy use, save money and take advantage of the opportunity to educate parishioners, students, and parents about the importance of caring for creation and caring for the poor. I also think of Cardinals Cupich (Chicago), O’Malley (Boston), and Dolan (New York), who have benchmarked all archdiocesan buildings, begun solar installations, and systematically enrolled parishes in energy-efficiency programs.”

Also of note, “during this Year of Creation (2017) — unique to the Diocese of Burlington — Catholics throughout Vermont are encouraged to reflect upon the pope’s encyclical, “Laudato Si’,” and to discover Christ in all living things. From the red clover to the hermit thrush to the Green Mountains, all these gifts that surround us bear the stamp of God and are entrusted to our care, not only for personal benefit but the benefit of all those who share our common home and all those who will inhabit it after us.” (Vermont Catholic, Spring 2017)

The Church of England has created “ChurchCare,” a comprehensive source of information for everyone managing a church building in support of all those in parishes, dioceses and cathedrals caring for their buildings today and for the enjoyment of future generations.” It’s national environmental campaign exists to enable the whole Church to address – in faith, practice and mission – the issue of climate change. As the Archbishop of Canterbury, Justin Welby, is quoted: “Actions have to change for words to have effect.” (See www.churchcare.co.uk)

In another example of faith in action, the Florida East Coast Baptist Association has promoted “Green the Church” to amplify green theology, promote sustainable practices in the member churches and increase the power and potential of the national climate movement.

Although not all churches and dioceses are responding with the same level of commitment, the call to putting faith in action is being heard and answered by many:

  • In addition to evaluating all of the buildings for water use, energy efficiency and greenhouse gas emissions, the Archdiocese of Chicago has done a significant amount of work in making its buildings energy efficient. St. Joseph College Seminary, for example, has high-efficiency lighting control and heating systems and is LEED Gold certified.  The field operations center for Resurrection Cemetery has been heated with a solar system since 1978. The rooftop solar system deployed at Old St. Mary’s School generates an average 40 percent of the building’s energy needs during the summer months.
  • As part of the effort to adapt St Patrick’s Cathedral in New York to the structural and environmental standards required of the 21st century, the building has been integrated with a state-of-the-art geothermal plant. The new plant allows the cathedral and adjoining buildings which total 76,000 square feet to regulate temperature with increased efficiency and a reduction in CO2 emissions. The Cathedral’s new plant is capable of generating 2.9 million BTU’s per hour of air conditioning and 3.2 million BTU’s per hour of heating when fully activated. Richard A. Sileo, Senior Engineer with Landmark Facilities Group, a member of the design team, says in a release: “We conducted a feasibility study and found that a geothermal system let us meet our goals with the smallest impact.”
  • At a more grass roots level, The Record, Archdiocesan news for Central Kentucky Louisville) reports on green practices of parishes and faith communities its September 21st, 2017 issue highlighted in an educational and inspirational event held on September 12th entitled “Caring for Creation: Stories of Success from Several Faith Communities:”
  • The Sisters of Charity of Nazareth (Kentucky) said during the event that they have made significant strides in developing and implementing green initiatives sincethey added a commitment to care for creation to their mission statement in the mid-1990s. The statement reads in part: “Sisters and Associates are committed to work for justice in solidarity with oppressed peoples, especially the economically poor and women, and to care for the earth.”
  • The Congregation of nuns has committed to reduce their greenhouse gas emissions to zero by 2037.
  • They have also committed to becoming a “zero waste campus,” meaning that everything is either compostable or recyclable and nothing is sent to a landfill. They are already performing “waste audits” to determine how to eliminate waste.
  • Francis of Assisi parish has created an Ecological Stewardship committee that has held educational presentations on ecological sustainability, encouraged recycling and reusing cups, instead of foam cups, at parish events (which infuses a sustainable mindset among parishioners); and provided funds to convert lights at its homeless shelter from incandescent bulbs to compact fluorescent lights and is currently working to switch to LED lighting.
  • The parish cluster of St. James and St. Brigid reported at the Sept. 12 event that parishioners created a Creation Care Team last year under the guidance of the Catholic Climate Covenant.
  • The Creation Care Team has focused on decreasing overall energy usage, expanding recycling and supporting the St. James School Green Club, which tends anorganic vegetable and pollinator garden on campus, said Cynthia Dumas, one of the members of the Creation Care Team.
  • The parish bulletin also includes weekly articles on environmental issues and updates about what the care team is doing, Dumas said.

Whether it is at the direction of the archbishop, bishop or other Church leadership, or from the motivation of parishioners seeking to bring sustainability to their faith community, every action that puts into practice the Pope’s teachings on the care of creation contributes to making the world a better place for all. As the mission outreach and communication coordinator for the Diocese of Burlington envisions: “If the Diocese of Burlington’s Year of Creation is successful in raising awareness of and action toward ecological justice, it can serve as an encouraging example for other Catholic dioceses and communities of faith throughout the country and the globe. There are an estimated 1.2 billion Catholics on Earth — just think of what could be achieved if we committed to caring for the created world together.”

Then, as all faiths and faith communities grow in awareness and begins to truly adopt sustainable practices – not just at the parish, but also in the home, at work or school, and make it a priority in our politics – we can change, and quite possibly, save the world.

Faith-based organizations that help religious communities become sustainable include: Catholic Climate Covenant, Florida East Coast Green Union, Forum on Religion and Ecology, Interfaith Power and Light, The Green Seminary Initiative and Green Faith.

The Religions of the World Agree: Being Sustainable Is a Moral imperative; So, How Can We Bring the Ecology of Faith Home

PJ PictureBy: Paul L. Jones, CPA
LEED Green Associate
Director, Financial Advisory Services for Emerald Skyline Corporation

“Climate change is the most serious issue facing humanity today. It is already seriously impacting economies, ecosystems, and people worldwide. Left unchecked, it will cause tremendous suffering for all living beings.” From the International Dharma Teachers’ Statement on Climate Change, 1/8/2014

Because creation was entrusted to human stewardship, the natural world is not just a resource to be exploited but also a reality to be respected and even reverenced as a gift and trust from God. It is the task of human beings to care for, preserve and cultivate the treasures of creation.” Saint Pope John Paul II, The Church in Oceania, 2001, n.31

“For the Church of the 21st Century, good ecology is not an optional extra, but a matter of justice. It is therefore central to what it means to be a Christian.” Dr. Rowan Williams, Archbishop of Canterbury, Church Care, Church of England

“We are convinced that there can be no sincere and enduring resolution to the challenge of the ecological crisis and climate change unless the response is concerted and collective, unless the responsibility is shared and accountable, unless we give priority to solidarity and service.” From the Joint message from Pope Francis and Ecumenical Patriarch Bartholomew on the World Day of Prayer for Creation, September 1, 2017

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‘Ecology’ (from the Greek oikos) refers to the Earth as our home; our place of wellbeing. For Christians, ecological stewardship is the conviction that every gift of nature and grace comes from God and that the human person is not the absolute owner of his or her gifts or possessions but rather the trustee or steward of them. These gifts are given in trust for the building of the Kingdom of God. Christians are called to appreciate the spiritual and theological significance of the Earth and to exercise ecological stewardship of the Earth and its resources. The gifts of creation are not simply there for human use, but have their own dignity, value and integrity.

In April 2016, Muslim leaders delivered the Islamic climate change declaration. From an article announcing its’ release, “Islam teaches us that ‘man is simply a steward holding whatever is on earth in trust’,” says Nana Firman, Co-Chair of the Global Muslim Climate Network. “The Declaration calls upon all nations and their leaders to drastically reduce their greenhouse gas emissions and support vulnerable communities, both in addressing the impacts of climate change and in harnessing renewable energy.”

“Mahatma Gandhi urged, ‘You must be the change you wish to see in the world.’ If alive today, he would call upon Hindus to set the example, to change our lifestyle, to simplify our needs and restrain our desires. As one sixth of the human family, Hindus can have a tremendous impact. We can and should take the lead in Earth-friendly living, personal frugality, lower power consumption, alternative energy, sustainable food production and vegetarianism, as well as in evolving technologies that positively address our shared plight.” From the Hindu Declaration on Climate Change

“In the Jewish liturgy there is a prayer called Aleinu in which we ask that the world be soon perfected under the sovereignty of God (le-takein ‘olam  be-malkhut Shaddai). Tikkun ‘olam, the perfecting or the repairing of the world, has become a major theme in modern Jewish social justice theology. It is usually expressed as an activity, which must be done by humans in partnership with God. It is an important concept in light of the task ahead in environmentalism. In our ignorance and our greed, we have damaged the world and silenced many of the voices of the choir of Creation. Now we must fix it. There is no one else to repair it but us.” by Rabbi Lawrence Troster

So, all of the world’s major religions and all of the spiritual leaders of the world agree: Being a faithful steward in the care of His Creation is a religious and spiritual mandate: It is our obligation. But then we see churches that run the air conditioning full blast – when only a few people are present or we witness waste in water consumption, food preparation and other church, school and ecological waste in related parish activities. I think this lack of prioritization among every pastor, priest, rabbi, imam, swami and teacher, not just the leadership of a few, as evidenced by the failure to make every building occupied by a religious or spiritual institution sustainable.

As Saint James tells us “Who is wise and understanding among you? By his good conduct let him show his works in the meekness of Wisdom.” (James 3:13)

Hartford Institute estimates there are roughly 350,000 religious congregations in the United States. This estimate relies on the RCMS 2010 religious congregations census. Of those, about 314,000 are Protestant and other Christian churches, and 24,000 are Catholic and Orthodox churches. Non-Christian religious congregations are estimated at about 12,000.

According to the Catholic Climate Covenant in their presentation on the Catholic Covenant Energies program, “there are an estimated 70,000 Catholic-owned buildings in the United States.” Considering that the Catholic Church represents less than 10% of all religious congregations in the U.S., the opportunity for reducing the carbon footprint through sustainable practices in our churches, synagogues, mosques, schools, day care centers and other facilities operated by religious congregations is enormous. The Covenant calculates that by implementing proven and affordable conservation measures, Catholic-owned buildings can reduce energy use in buildings owned by 25% saving the Catholic Church $630 million in energy costs, “reducing energy use by an equivalent of 8.7 million tons of coal.”

Now, imagine if all faith denominations practiced what they preached – and not just in the United States but throughout the world! The Church and all religious denominations would then make a real – and positive – impact on the lives of all people, reducing suffering and promoting the cause of social justice. Further, the savings from lower utility bills and other sustainable practices can be diverted to core Church ministries like education, youth outreach and the care of the least in their community. Finally, through the implementation of sustainable practices, parishioners would learn how to be sustainable in their personal lives – saving on their utility bills helps the poor afford other necessities – life food or medicine.

So, what is a congregation to do?

In his book, “Inspiring Progress: Religions’ Contributions to Sustainable Development,” Gary Gardner, provides five capacities in which religion can help meet the challenge posed by climate change and sea level rise:

  1. Engage members of faith-based groups
  2. Moral authority – offer ethical guidelines and religious leadership
  3. Provide meaning by shaping world views and new paradigms of well-being
  4. Share physical resources; and
  5. Build community to support sustainable practices

And then there is the key to the Kingdom, be sustainable. Here are some of the most cost-effective steps any parish can take to begin the process of becoming a sustainable religious community. These steps can help reduce energy bills, tackle climate change and build a more sustainable future.

  • Air seal doors, windows and any other drafty locations which reduces the waste of energy used to heat or cool the facility;
  • Employ energy efficiency technology that optimizes energy performance which includes LED lighting, occupancy sensors, and insulating hot water storage tanks.
  • Be prudent in energy use: adjusting the thermostats 1 degree lower in the church, parish hall or other facilities can cut heating costs 5 percent over the course of a heating season. Setting the air-conditioning a few degrees higher has an equal effect; and
  • Improve water use efficiency by using low-flush toilets and urinals in parish facilities, landscaping with plants that don’t require a lot of water, collecting and reusing water for irrigation, employing detection devices to fix leaking pipes and plumbing (Installing high-efficiency plumbing fixtures and appliances can help reduce indoor water use by one-third, saving on water and sewer bills, and cutting energy use by as much as 6 percent);
  • Choose local suppliers and contractors who employ sustainable practices like energy efficiencies and use of “green” products;
  • Identify and employ wider, imaginative ways – like a temporary farmer’s market, reversible accommodation for classes, meetings and other uses to use church properties when not engaged in worship; and
  • Reduce, reuse and recycle.

Then, pewsthere are larger projects – like replacing HVAC equipment and appliances that are near the end of their functional life; adding solar panels, installing a geo-thermal plant, replacing vehicles with fuel-efficient, electric, hybrid or alternative fuel vehicles and encourage use of mass transit, carpooling and telecommuting.

The Catholic Climate Covenant and its sister organization, Catholic Covenant Energies, a non-profit organization which is working with the Archdiocese of Cincinnati and similar for-profit organizations like Commons Energy which is working with the Archdiocese of Vermont are available to provide financing.

Now is the time for our religions to take the lead in bringing sustainable practices to their properties, to their parishes and to their community… From the first letter of Saint John (3:18), “Little children, let us not love in word or talk but in deed and in Truth.”

3 tips for designing workplaces that support culture, brand, and community

An authentic culture cannot be forced but can be encouraged and supported.

By Hakee Chang, Denise Darrin and Lisa Weeks, Building Design & Construction, 2/2/2017

View the original article here.

workplace culture sustainabilityThe workplace has evolved exponentially over the past decade, from large, uniform workstations and offices to efficient open plans and auxiliary areas. Technology has advanced from desktop computers and landlines, to laptops, and mobile apps. Innovation in technology has driven an increase in employees’ productivity and efficiency, and innovation in design has strategically followed.

However, effective and engaging workplace design doesn’t stop with a response to technological and real estate needs. It must go further, supporting the creation and integration of a company’s culture, brand identity, and overall community.

CURATED CULTURE

The most integrated cultures are co-created by leaders and teams. They are shared, organic, and capable of evolving. An authentic culture cannot be forced, but can be encouraged and supported. Without direct participation and buy-in from those involved, a company’s culture can end up a “mission statement on business card” or a “tagline on a wall” – noticed upon move-in, but quickly forgotten thereafter.

We have been fortunate to see these principles in action with a number of our key clients. In particular, technology companies are dealing with cultural change on almost a daily basis as a result of rapid growth. For example, one financial technology client has an ever-adapting nature and willingness to learn. Their leadership embodies an approach that has allowed exceptionally talented people of various backgrounds to come together with a unified and understood purpose.

The ethos of any company is the driving force. People connect over shared stories and experiences. Our job as workplace designers is to clearly understand the experiences of each and every client. What are their company’s particular drivers and values? How we can create a space that reflects and enhances those values and support the natural curation of their culture?

 BUILDING BRAND AWARENESS

Understanding a client’s brand in the context of external perception and internal practices are two crucial elements to designing a meaningful workplace. Through visioning and programming interviews, we find that office staff often seeks their work environment to “walk the talk.” It has to be authentic and reflect the reasons why they joined the company, and offer opportunities to highlight how their contributions matter.

As a first step, we typically will create overlapping layers of an “experience map” to begin building a workplace design that contributes to the client’s ethos. We map out various use scenarios through points of view, such as anticipating the tour our client may give to a candidate or business partners, an all-hands meeting, or an event for external community engagement. These maps overlap with curated moments where people can connect to individual stories or testimonials that are both inspirational and aspirational.

We recently worked with a technology company whose focus is on physical activity and health, and we incorporated design elements to encourage movement. For example, we designed meeting spaces with treadmills, social and collaboration spaces along popular walking routes, and adaptable spaces with natural light, comfortable temperatures, and views. Since the company offices are spread between buildings within a dense urban location, we leveraged the city as a vital active conduit to tie both the company’s brand and connect staff with their customer base. Allowing workflow through the neighborhood created a first-hand brand awareness that extends beyond the interior office environment.

COMMUNITY GUIDELINES

Technology has allowed the traditional office to transform into a dynamic working environment. The workplace is no longer built on “my” office or “my” desk, but has developed into “our” space: a place for community.

Technology has provided flexibility, choice, and options to employees – giving everyone the ability to decide where, how, and when they work. Yet, the reduction of individual workspace has created a need for smaller neighborhoods within the larger community. To help alleviate the possibility of feeling “crowded” it is essential to effectively distribute varied opportunities for different work styles, while providing adequate support and shared spaces.

All of these factors have prescribed that companies establish community guidelines, the rules of engagement for the workplace. These guidelines address issues from etiquette to functionality.

Our Minneapolis office recently relocated and moved to an activity-based “free address” work environment with no assigned seats to untether talent from desks and empower employees with choice. Etiquette guidelines were created to assist in this new environment, including:

  1. Individuals are expected to clear their workspace of all materials if out of the office for more than four hours, and when they leave at the end of the day, so the location can host another user.
  2. Meeting rooms have different behaviors and etiquette associated with them. For instance, huddle rooms are non-reservable and dedicated to more informal, spontaneous meetings or calls.
  3. Project storage, personal storage, and office supplies have centralized home bases outside of the immediate workstations to prevent duplication and waste.

As an overall goal, the new workspace recognizes the value of a variety of workstyles: from large group meetings to spontaneous interactions to individual heads-down work. The studio supports this spectrum of work with project rooms, huddle rooms, pin-up spaces, and focus rooms.

Community guidelines present the parameters for employees to respect each other and their work places and to follow the “Platinum Rule”: treat others the way they want to be treated.

Beauty and Function: Landscaping for Sustainability

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By: Kendall Gillen, Biologist, LEED Green Associate
Associate LEED Process Management for Emerald Skyline Corporation

Many building owners and managers take into account the interior and exterior of a building itself when considering sustainable initiatives, but just as important is the area surrounding the building. Landscaping can make a tremendous difference in the sustainability and qualification for LEED certification of a project. Sustainability is certainly an integration of many different factors, and landscaping is a significant one.

Through employing different strategies, landscaping can be practical, functional, and aesthetically pleasing. There are different factors that affect the level of landscape sustainability. Two of the most important are the types of vegetation chosen and the amount of potable water required to keep the plants healthy, otherwise known as irrigation. Not only can efficient landscape design provide noteworthy credit toward achieving LEED certification, but it can also provide substantial water-energy savings. This should be a great motivator for owners and managers to look to their landscaping for improvements to their bottom line.

As stated in a study conducted by the California Sustainability Alliance, water is a necessary resource for any landscape to survive and function[1]. However, not all landscapes are created equal. Climate, weather conditions, and vegetation grown can all impact the amount of water required to sustain life. Typically, if non-native plants are chosen, irrigation will be needed because they cannot survive on local precipitation levels alone. Thus, researching plants with a low water need specific to the project’s local climate is of the utmost importance.

Many states have online databases for irrigation friendly plants. Since we are located in the tropical climate of South Florida, here are just a few of the many trees, plants, flowers, and grasses that are ideal for reducing irrigation demand as found by the Florida-friendly Plant Database:

  • Silver Palm
  • Scrub Palmetto
  • Cocoplum
  • Seagrape
  • Jamaica Caper Tree
  • Gumbo Limbo
  • Fiddlewood
  • Crinum Lily
  • Blanket Flower
  • Beach Sunflower
  • Purple Love Grass

All of the above vegetation has a medium to high drought tolerance. There is also a resource listing the Plant Hardiness Zones for the entire nation available through the USDA. Once a project’s Plant Hardiness Zone is found by zip code, one can search for plants that thrive within that particular zone.

Choosing native vegetation is a step in the right direction, however without active management of landscape irrigation with adjustments to precipitation levels, the savings of native vegetation alone could potentially be nominal. To fully benefit from using indigenous and drought-resistant vegetation, the irrigation system must be managed. This is why the integrated process of landscape operation, management, and maintenance is so crucial.

  • Low-volume irrigation systems are a broad classification of systems that provide water more directly to the ground instead of spraying in the air where water can be lost to wind or evaporation.
    • This is a great starting point when choosing a system that fits a specific sustainable project need. By slowly releasing moisture, these systems greatly reduce runoff1.
  • Rainwater collection and re-use for landscape irrigation is another method to decrease water-energy expenditures. This harvested water can also be used for non-potable purposes such as toilet flushing.

The benefits to native vegetation and water efficient landscaping are plentiful. As previously stated, huge savings in water-energy can be achieved as well as the following:

  • Reduces the heat island effect which occurs when dark building and paving surfaces absorb the sun’s energy and re-radiates it throughout the day and night raising the ambient air temperature
  • Conserves natural resources and provides a habitat for native wildlife
  • Improves HVAC efficiency which is achieved through the shade generated by the proper selection and placement of trees and shrubs
  • Minimizes landscape maintenance requirements allowing the building owner to save on labor and materials

Undoubtedly, landscaping can play a huge role in the overall sustainability of a project, whether that is a retrofit or new construction. The take-home message should be to plan ahead and strategize when it comes to landscaping and irrigation. Also, having a water efficient landscape does not necessitate elimination of beauty. Use the abundant resources available online or through a professional and be responsible with water use. Water is in fact our most precious natural resource and it is our obligation to conserve.

[1] California Sustainability Alliance. Water-Energy Savings from Efficient Landscape Design in California. July 2015.

A Green Lease Overcomes a Primary Obstacle to Commercial Properties Going Green

PJ Pictureby Paul L. Jones, CPA, LEED Green Associate, Principal, Emerald Skyline Corporation

One key obstacle to overcome for commercial buildings is the incongruous lease structure. Under the most common commercial lease structures (Modified Gross and Net), the costs of a sustainable retrofit are borne by the owner while the cost savings from reduced utility bills and maintenance costs as well as the improved indoor environment inure to the benefit of the tenant.

The solution is to create a lease structure that equitably aligns the costs and benefits of efficiency, sustainability and/or resiliency between building owners and tenants, known as a Green Lease (also known as an aligned lease, a high performance lease or an energy efficient lease). In short, a green lease facilitates cooperation between landlords and tenants to make their buildings and individual spaces energy and water efficient.

Last month, the US Department of Energy acknowledged property owners, tenants and brokers who are leaders in using green leases to save energy and water in commercial buildings. In a July 2nd National Real Estate Investor article entitled “The Greening of Leasing,” Susan Piperato interviewed Jonathan Saltberg and Jaxon Love of Shorenstein Properties which was one of the “Green Lease Leader” honorees.

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Figure 1 Source: National Real Estate Investor, 7/2/2015; Institute for Market Transformation

According to Jaxon Love: “We survey our tenants annually on sustainability and track interest and satisfaction with our program. In 2014, 66 percent of our tenants indicated that green building operation is important or very important to their company; 68 percent of tenants indicated that our green building operation is good or excellent.”

Further Ms. Piperato reports that Shorenstein Properties has cut energy use by 16.2% and cut carbon emissions by almost 15% which is in-line with industry expectations of a 10% to 20% savings in energy and water monthly.

According to Meaghan Farrell, energy and sustainability service, Jones Lang LaSalle (JLL), “Green leases combine the productivity, comfort and sustainability features that tenants are looking for in office space while supporting landlord priorities of improving the triple bottom line and occupancy rates. In addition to achieving both tenant and landlord objectives, green leases have social, economic and environmental implications for companies operating in today’s global economy. Green leases truly are the future of commercial real estate.” (10 Reasons to Sign a Green Office Lease, Meaghan Farrell, Environmental Leader, 10/22/2014. http://www.environmentalleader.com/2014/10/22/10-reasons-to-sign-a-green-office-lease/#ixzz3GtXfESRz)

Green leases not only bring congruity to the financial requirements necessary to do a sustainable retrofit of a building but also to encourage owners, tenants and their employees who occupy the building to employ sustainable building operations.

The JLL Energy and Sustainability Services team has identified that collaboration by tenants and landlords in negotiating and executing a Green Lease results in the following ten benefits (Shorenstein Properties notes that the collaboration required to create a green lease is the first benefit of the program):

  1. Reduce the utility (power and water) consumption, reduce maintenance costs and save money
  2. Improve working relationships between landlord and tenant
  3. Support tenant and landlord corporate sustainability initiatives
  4. Enhance corporate image/brand (especially important for retailers, manufacturers and large public companies and financial institutions)
  5. Demonstrate vision and thought-leadership
  6. Improve civic relations – with climate change, municipalities appreciate buildings and companies that help the community become sustainable and resilient
  7. Contribute to LEED and other green certifications which is increasingly important for buildings to maintain and improve their competitive position
  8. Improve employee productivity, recruitment and retention through proven that daylighting and other sustainable strategies
  9. Generate additional savings and benefits through waste stream diversions
  10. Do the right thing for the earth and humanity in order by reducing the building’s carbon footprint

As stated by Adam Siegel, VP – Retail Industry Leaders Association (RILA), “Green leasing is a process to identify lease provisions that can potentially be modified to address both landlords’ and tenants’ sustainability goals. These provisions tend to foster efficiency improvements that can save both parties money.”

As reported by the RILA Retail Green Lease Primer, lease provisions that modify a standard lease agreement to a green lease fall into five primary areas:

  1. Provide for improvements to the base building shell and common areas;
  2. Provide for improvements to the tenants’ interior spaces consistent with the building’s permitted uses;
  3. Encourage efficiency investments by allocating the benefits derived to the party that is making the investment;
  4. Facilitate the sharing of energy and water usage and waste generation data increasing required for compliance with municipal benchmarking regulations or LEED/Energy Star certification guidelines; and
  5. Clarify who has the rights and responsibilities to make sustainable improvements in spaces like the rooftop.

According to the Shorenstein Properties team, the Green Lease provisions that they are working to incorporate into all of their leases include: Energy alignment; tenant sub-metering, energy information sharing, building performance certifications and green building standards.

The aforementioned RILA Retail Green Lease Primer (available here: http://www.rila.org/sustainability/issues/Pages/RetailGreenLeasePrimer.aspx) lists 13 specific areas of focus which are provided with the caveat that “Each company should assess the costs and benefits of each term before including in their contracts:”

  1. Extend/lengthen the lease term which reduces waste associated with tenant replacement and improvements;
  2. Expense reimbursement methodology (.In an article published in the September/October 2010 issue of The Leader, Elizabeth King Fortsneger, a CPA and LEED AP, states: “If the goal is to keep both owners and tenants motivated to support the building’s green initiatives, the modified gross lease, net utilities with sub-metering and possibly an expense stop (full service except the tenant pays utilities) may be a viable alternative.”);
  3. Permitted use that define allowable/restricted uses for the leased premises;
  4. Leased premises tenant build-out specifications;
  5. Capital improvement provisions that allow the landlord to amortize and recover capital costs associated with qualifying sustainable improvements to building and common areas;
  6. Include low-cost efficiency project expenditures in the definition of operating expenses for tenant reimbursement;
  7. Align tax benefits and other monetary incentives for building improvements with the investing party (landlord or tenant);
  8. Submeter each tenant space for electricity, natural gas and water with billing of tenants based on the submeter readings where state codes and utility tariffs allow it (According to Mr. Love, “…submetering…gives the tenant direct responsibility for and control over their energy (and water) cost. The economic incentive to save energy is a powerful motivator.”);
  9. Utility data sharing whereby the tenant provides energy and water consumption data to the landlord monthly while the landlord provides the tenant with periodic reports on the performance of the whole building.   As more cities require benchmarking information from landlords, the ability to gather the necessary information from tenants is a necessary condition for regulatory compliance;
  10. Specify sustainable maintenance policies, procedures and materials for use in tenant spaces;
  11. Specify sustainable maintenance policies, procedures and materials for use in common areas;
  12. Define tenant obligations to participate in recycling programs which facilitates the sustainability objective of reducing waste that goes into a landfill; and
  13. Allow rooftop or general access and control to install energy generation systems (solar power) and/or other sustainable improvements.

NOTE: For existing tenants, green lease provisions can be added to the existing lease through a “green lease addendum” that replaces or supplements portions of the lease by adding terms and incentives.

As with every lease, both landlords and tenants need to work together to develop the green provisions appropriate to the property, its use and the tenant space. Quantifying the costs and benefits may require a green diagnostic review/assessment which provides a baseline understanding of the current property operations for inclusion as benchmarked sustainability criteria in green leases, or current lease addenda.

Working with an advisor like Emerald Skyline Corporation whose principals understand both commercial leasing and sustainability can help facilitate the negotiations and the accomplishment of both your investment objectives and your sustainability goals.

If the benefits of a sustainable retrofit are so robust, why isn’t everyone doing one?

PJ PicturePaul L. Jones, CPA, LEED Green Associate, Principle, Emerald Skyline Corporation

A sustainable retrofit includes replacements and upgrades that result in lower energy, operating and maintenance costs as well as improved occupant satisfaction. A sustainable facility will have a small carbon footprint, limited environmental impact and conserves natural resources. They can range from replacing conventional lights to LED bulbs, adding motion-control switches and installing low-flow water fixtures to installing a green roof, replacing the building skin and adding solar panels to all of the above.

When you fully understand the economic benefits of doing a sustainable retrofit which include lower expenses and rent and occupancy premiums resulting in higher NOI as well as reduced cap rates resulting in higher long-term values, you realize how few property owners, managers and tenants have actually made the decision to pursue an upgrade of their building(s), it initially does not compute a United Nations Environmental Program Finance Initiative Investor Briefing entitled “Unlocking the energy efficiency retrofit investment opportunity” reports:

  • Buildings with the Energy Star label had significantly stronger performance than similar unlabeled buildings: 13.5% higher market values, 10% lower utility costs, 5.9% higher Net Operating Income (NOI) per square foot, 4.8% higher rents and 1% higher occupancy rates.
  • A study using Co-star data concluded that LEED-certified buildings and Energy Star rated buildings versus non-rated buildings had 8% higher effective rents (a function of both the rental amount and the occupancy rate) and a 13% sales price premium.

See also my article, “Welcome to Sustainable Benefits – Let’s begin with the benefits of doing a commercial building sustainable retrofit” for additional survey results and case studies that demonstrate the results building owners and managers have realized.

In a 2012 study by The Rockefeller Group and Deutsche Bank Climate Change Advisors, however, reported that approximately $72 billion in capital is needed to be invested in sustainable retrofits to effect profitable energy efficiency in the existing building stock. However, the total spent in 2012 was just $1.5 billion.

Once you understand the relative perspective of the stakeholders in both the investment and the benefits, the resistance to effecting a sustainable retrofit can be understood.   Let’s dissect the framework in which the decision to make sustainable improvements are made and the issues and motivations that cause a property owner not to update and improve their property which are:

  • Short-term investment horizon
  • Incongruous lease structure
  • Capital and operating budget limitations
  • Financing availability, complexity and/or cost
  • Limited knowledge, time and/or motivation to effect energy upgrades

Understanding these investment, operational and financial constraints is the first step in developing solutions that will result in making the sustainability and resiliency of the existing stock of commercial buildings feasible and practical.

Short term investment horizon:

In the era of REITs, CMBS, hedge funds, crowdfunding and private equity, investment hold periods are frequently in the 3 – 7 year range when investors can typically optimize the IRR and other profitability measures or bail on a bad investment and reallocate their capital. As a result, many investors will only consider sustainability measures that have a two-to-three year payback period. Deep energy retrofits with savings of 30% to 50% that result from retrofitting multiple building systems requiring more time and capital to effect are tabled and not done.

Solution: The current and prospective investment environment will continue to reflect hold periods that are relatively short; however, the solution is for investors, owners and managers to realize that a sustainable retrofit enhances the long-term value of the property and will cause investment returns to increase. Including the costs and benefits of upgrading a building is a common way for sponsors to demonstrate the inherent value of a property – especially one that is not fully leased or suffers from functional obsolescence or poor aesthetics and other physical limitations on its marketability to prospective tenants. Many business plans include upgrading a building from one class to a higher class which results in increased rents and lower cap rates. As evidenced by many studies, including sustainability and resilience in the business plan is an increasingly important component in any market-oriented building upgrade. The solution is for sponsors, investors and owners to realize this and to put it into practice.

Future articles will present sustainable ideas many of which can be implemented with no capital investment required.

Incongruous Lease structure

Commercial buildings, a/k/a income properties, are leased to tenants pursuant to a variety of lease structures with the four most common being as follows:

  1. Gross Lease, or full service gross, is a lease where the landlord/owner collects a stipulated rent amount and is pays all expenses including real estate taxes, insurance and operating expenses that are comprised of utilities, repairs and maintenance and management. The room rate paid for a night in a hotel and a lease for a self-storage unit are examples of gross leases.
    • Apartment leases are typically considered to be a gross lease as the landlord is usually responsible for all operating expenses including real estate taxes, building insurance, common area maintenance and utilities, and property management while the tenant is responsible for the unit’s electricity (and sometimes water) and interior maintenance.
  2. Modified Gross Lease is a gross lease where the landlord/owner collects a stipulated rent amount plus a reimbursement of real estate taxes, insurance and operating expenses which exceed an agreed upon amount which is typically an estimate of the building expenses for the initial lease or calendar year. Typically, at the end of the year, the actual expenses are reconciled to the estimate and any increase is passed to the tenant based on its pro-rata share. Most multi-tenanted office buildings are leased pursuant to modified gross leases.
  3. Net Lease is a lease where the landlord/owner collects a stipulated rent amount plus building expenses which include real estate taxes (net), taxes and insurance (double net); or taxes, insurance and operating expense (triple net) depending on the terms of the lease. If the building is multi-tenanted, the tenant pays its pro rata share.   Most net leases are currently triple net. Retail properties are typically leased using a triple net lease.

In a standard Full Service lease, there is no split incentive in the lease structure as any and all savings realized from a sustainable retrofit inure to the benefit of the owner; however, the property manager may not be incentivized to promote a retrofit as it would be responsible for supervising and effecting the improvements without any additional management fees. With regard to an apartment complex, the landlord’s incentive to invest in energy efficiency measures is limited to the common areas – or to improve the competitive position and marketability of the units to prospective tenants.

In a standard Modified Gross lease as well as a Net lease, the landlord/building owner is not incentivized to invest the time, money and personnel resources to effect a sustainable retrofit as the landlord receives no direct financial benefit as the tenant pays the operating expenses and receives all of the benefit of lower operating costs.

Solution: Creating a lease structure that equitably aligns the costs and benefits of efficiency, sustainability and/or resiliency between building owners and managers, known as a green lease, aligned lease, high performance lease or energy efficient lease, will create sustainable and substantial benefits, both quantitative and qualitative, for both tenants and owners/landlords.

  • According to Jones Lang LaSalle, “A green lease need not be complicated. Often it merely requires structuring terms and agreements already in place, such as temperature settings and building operating hours, in a fashion that provides sustainable cost savings with negatively impacting building performance.”

To effect a green leasing program that includes both current and prospective tenants, engaging a consultant that understands both commercial lease structures and efficiency and sustainability retrofits to maximize the sustainable benefits to be derived therefrom.

Green leases will be addressed in detail in a future article.

Capital and operating budget limitations

Many properties suffer from a breakdown in communication and financial planning between building managers and building owners.   Building managers typically operate a facility pursuant to a one-year budget which causes them to budget and implement projects with a short term (1- 2 years) payback period. Consequently, capital improvements that have a longer payback period are not often recommended by management, or if recommended, not implemented by ownership due to a combination of knowledge, time or motivation to consider an energy upgrade or a perceived lack of available capital. This short-term horizon again limits the nature and extent of any efficiency or sustainable upgrades and prevents ownership from reaping all of the economic benefits that inure from a building retrofit.

Further, many times neither building ownership nor building management understand the nature and availability of financing options, tax credits, utility and local government rebate programs. Some of the programs, or a combination of programs, can result in building owners not having to come out of pocket to fund the improvements; however, the unique nature of them requires time which is typically focused on achieving the primary business goals of the organization.

Solution: Engage a sustainability consultant with knowledge of property operations and management as well as the nature of the available financing, credits and rebates – and how to source and evaluate alternatives in order to minimize actual investment dollars and the cost of any financing incurred.  Conducting a life-cycle analysis in addition to other financial analyses will provide ownership with the information needed to make the business decision.

Future posts will present investment analysis tools and methodologies with examples of the real economics of sustainable retrofits.

Financing availability, complexity and/or cost

Contrary to popular belief, energy efficiency and sustainability retrofits benefit from a variety of financing alternatives. However, for real property professionals who work with mortgage loans, mezzanine loans, preferred equity and similar forms of financing, retrofit financing options ranging from equipment leases to ESCO (Energy Service Company) contracts and PACE (Property Assessed Clean Energy) liens is a whole new world. When you add in the variety of tax credits, utility rebates and vendor financing, the options become complex.

Further, the sources for financing a retrofit are not usually the same ones that provide mortgage financing so it is a new arena which makes accessing sources and evaluating options time consuming and prohibitive.

Solution: Engaging a professional who is familiar with the types and sources of retrofit financing as well as the typical structures and issues of which owners should be aware is the easiest and most efficient way to determine and evaluate the options based on the financial and non-financial objectives of the owner.

The various retrofit financing options, examples of tax credits and utility and municipal rebates will be described and explained in future posts.

Limited knowledge, time and/or motivation to effect energy upgrades

In today’s competitive commercial real estate environment that is still recovering from the devastatingly harsh Great Recession of 2007, keeping your focus on the primary business of keeping space leased (as hoteliers say – heads in the beds) and watching every penny to the bottom-line is the first priority of owners and managers.

Even though the results of an efficiency, sustainability and/or resiliency retrofit provide a substantial boost to the net operating income (and cash flow) of a property, it does not become a high priority item due to lack of understanding of the process, the capital, management and labor requirements, the extent of the potential disruption to operations and tenants as well as knowledge of the additional value (rent premiums, occupancy premiums, higher quality tenancy, lower cap rate, increased investment value) and business benefits (reputation, image, goodwill) to be derived therefrom.

Also, many times building management staff, who may have the understanding of the sustainability technology will not have the financial literacy to present a compelling case to ownership.

Further, many energy service providers (who are typically considered to be the expert in facilitating a retrofit) do not know or understand the financing options that are available to building owners. Accordingly, these professionals are not able to property advise an owner on energy project financing.  Accordingly, many owners are not aware of, nor understand, the variety of financing mechanisms available to them.

Solution: Learn enough to realize that it is worth the time to learn about the options that are available, hire a sustainability consultant, architect or engineer to analyze the property, benchmark its energy and water usage and understand other maintenance practices, have the systems retro-commissioned to determine how well they are performing and develop an efficiency, sustainability and/or resiliency retrofit plan. Implement the plan and start realizing the benefits.

Our Sustainable Benefits blog will be your resource to learn and understand the new world we are transitioning into – one in which we leave the world better off for having lived (Emerson).

Welcome to Sustainable Benefits – Let’s begin with the benefits of doing a commercial building sustainable retrofit….

2/12/15

PJ Picture
By Paul L. Jones
, Founder,
Director, Financial Advisory Services for Emerald Skyline Corporation

 

“Who is more foolish: The child afraid of the dark or the man afraid of the light?” (Maurice Freehill, British WW I flying ace).

Figure 1 Empire State Building - LEED Gold

Figure 1 Empire State Building – LEED Gold

Throughout my 36-year career in commercial real estate, commercial buildings have generally been classified from A to C based on location, construction quality and tenancy. Class A buildings represent the cream of the crop. They secure credit-quality tenants, command the highest rents, enjoy premium occupancies, are professionally managed and have a risk profile that supports lower cap rates and higher values. Class B buildings are similar to Class A but are dated yet not functionally obsolete. Class C buildings are generally over 20 years old, are architecturally unattractive, in secondary or tertiary locations and have some functional obsolescence with out-dated building systems and technology. NOTE: No formal international standard exists for classifying a building, but one of the most important things to consider about building classifications is that buildings should be viewed in context and relative to other buildings within the sub-market; a Class A building in one market may not be a Class A building in another.

Based on years analyzing investments in income properties, it appears to me that in the recovery from the Great Recession the commercial real estate market has evolved to include energy efficiency and environmental design as a requirement for improving the marketability of a building – not to mention optimizing its operating income and value.

COMMERCIAL OFFICE BUILDINGS

On December 1, 2014, Buildings.com, in an article entitled “GSA Verifies Impact of Green Facilities,” reported that a study conducted by GSA and the Pacific Northwest Laboratory conducted a post-occupancy study of Federal office buildings, which varied in age and size and had been retrofit to reduce energy and water consumption. The following results were based on a review of one year of operating data and surveys of the occupants which was compared to the national average of commercial buildings: High performance, green buildings:

  • cost 19% less to maintain
  • Use 25% less energy and water
  • Emit 36% fewer carbon dioxide emissions
  • Have a 27% higher rate of occupant satisfaction.

One of the most famous sustainable retrofit projects undertaken was the updating of the 2.85 msf Empire State Building whose ownership directed that sustainability be at the core of the building operations and upgrades implemented as part of the $550 million Empire State ReBuilding program. According to Craig Bloomfield, of Jones Lang LaSalle (JLL), “After the energy efficiency retrofit was underway, JLL led a separate study of the feasibility study of LEED certification” which “showed that LEED Gold certification was within reach at an incremental cost of about $0.25 psf.

Graphics on financial benefits of high-performance buildings

Source: Institute for Market Transformation: Studies consistently show that ENERGY STAR and LEED-certified commercial buildings achieve higher rental rates, sales prices and occupancy rates.

Source: Institute for Market Transformation: Studies consistently show that ENERGY STAR and LEED-certified commercial buildings achieve higher rental rates, sales prices and occupancy rates.

According to the report “Green Building and Property Value” published by the Institute for Market Transformation and the Appraisal Institute, a trend is emerging where green buildings are both capturing higher quality tenants and commanding rent premiums. As indicated by the above graph summarizing four national studies for commercial office buildings back up this trend on rents and occupancy, as “certified green buildings outperform their conventional peers by a wide margin.”

  • According to the EnergyStar.gov website, “Transwestern Commercial Services, a national full-service real estate firm, has generated impressive returns through sound energy management. In 2006, Transwestern invested over $12 million in efficiency upgrades, for an average 25% energy savings. The Company estimates that dedication to energy management has increased the portfolio’s value by at least $344 million.”
  • According to John Bonnell and Jackie Hines of JLL – Phoenix, “In Phoenix, owners of LEED-certified buildings can capture a premium of 29 percent over buildings without this distinction.” The premium for Green buildings had disappeared during the Great Recession and reemergence in the first quarter of 2014 as a result of improving Phoenix market dynamics which is being realized in other major markets as well.

RETAIL

For retail buildings, the tenants are driving the shift to sustainability with green building as consumers become increasingly aware of the environment and the need to reduce, reuse and recycle. According to the “LEED in Motion: Retail” report published by the USGBC in October 2014, “LEED-certified retail locations prioritize human health: among their many health benefits, they have better indoor environmental quality, meaning customers and staff breathe easier and are more comfortable. In a business where customer experience is everything, this is particularly valuable.’ Green retail buildings also out-perform conventional buildings and generate financial savings:

  • On average, Starbucks, which just opened their 500th LEED-certified store, has realized an average savings of 30% in energy usage and 60% less water consumption.
  • McGraw-Hill Construction, which surveyed retail owners, found that green retail buildings realized an average 8% annual savings in operating expenses and a 7% increase in asset value.

It is noteworthy that, according to the third annual Solar Means Business report published by the Solar Energy Industries Association, the top corporate solar user in the United States is Walmart. In fact, almost half of the top-25 solar users are retailers (the others are Kohl’s, Costco, IKEA (9 out of 10 stores are solar powered), Macy’s, Target, Staples, Bed Bath & Beyond, Walgreens, Safeway, Toys ‘R’ Us, and White Rose Foods). Other Top-25 solar users with a significant retail footprint include Apple, L’Oreal, Verizon and AT&T.

In the competitive retail market, the study also noted that being distinguished for pro-active and responsible corporate social responsibility attracts customers and investors.

MULTI-FAMILY BUILDINGS

In a study of 236 apartment complexes conducted by Bright Power and The Stewards of Affordable Housing released last July, 236 properties in two programs, HUD’s nationwide Green Retrofit Program and the Energy Savers program available from Illinois’ Elevate Energy and the Community Investment Corp. One year of pre- and post-retrofit utility bills were analyzed. The researchers found the following:

  • Properties in the Green Retrofit Program had realized a 26% reduction in water consumption – or $95/unit annually.
  • The energy consumption in the Green Retrofit Program was reduced by 18% representing an annual savings of $213/unit.
  • Surveyed buildings in the Energy Savers program had reduced gas consumption by 26% and had reduced excess waste by an average of 47%.
  • The water saving measures in the Green Retrofit program reflected a simple payback period of one year while the energy savings measures had a simple payback period of 15 years.

In an article be Chrissa Pagitsas, Director – Multi-family Green Initiative for Fannie Mae, reports that 17 multifamily properties have achieved Energy Star® certification with two of them, Jeffrey Parkway Apartments in Chicago and ECO Modern Flats in Fayetteville, Arkansas, receiving financing from Fannie Mae.

  • The Eco Modern Flats complex is over 40 years old. With the goal of reducing operating expenses, the project was retrofit in 2010 with energy and water efficiency improvements including low-flow showerheads and faucets, dual flush toilets, ENERGY STAR® certified appliances, efficient lighting, closed-cell insulation, white roofing, solar hot water and low-e windows. As a result of the retrofit, the property achieved a 45% reduction in water consumption, a 23% drop in annual electricity use including a 50% savings in summer electricity consumption while increasing the in-unit amenities, obtaining LEED Platinum certification and increasing occupancy by 30% resulting in a significant increase to Net Operating Income.

Multi-family properties made sustainable gain a competitive advantage in marketing to young professionals and other target audiences who prefer to live in an environment that is healthy and energy-efficient which saves money on utilities.

HOTELS

In a 2014 study conducted by Cornel University, researchers compared the earnings of 93 LEED-certified hotels in the US to 514 non-certified competitors. The study included a mix of franchised, chain and independent facilities in urban and suburban markets with three-quarters of the properties having between 75 and 299 rooms.

The results show that green or sustainable hotels had increased both their Average Daily Rate (ADR) and revenue per available room (RevPAR) with LEED properties reporting an ADR that was $20.00 higher than the non-certified properties (prior to certification, they reported an ADR premium of $169 vs. $160).

The researchers noted that these premiums were realized in price-competitive markets and that the amount of the premium was unexpected. From the results, they concluded that Eco-minded travelers were willing to pay a modest premium to stay at a verified green facility.

Further, the savings realized in electricity and water usage as well as reductions in waste disposal fees and costs as well as reduced maintenance costs go straight to the bottom line resulting in increased Net Operating Income. Here are some examples:

  • The Hampton Inn & Suites, a 94-room facility in Bakersfield, had REC Solar install carport-mounted solar panels which is offsetting 44% of the electricity costs, or up to $8,800/month – adding over $100,000 to the property’s bottom-line.
  • The 80-room Chatwall Hotel in New York completed an LED lighting retrofit project mid-year 2014 which will result in a first year savings of almost $125,000. The cost: just about $1.00 per LED light after rebates.

According to Flex Your Power and ENERGY STAR® statistics, the hospitality industry spends approximately $4 billion on energy annually with electricity, including the HVAC system, accounting for 60% to 70% of utility costs. In fact, excluding labor, energy is typically the largest expense that hoteliers encounter and the fastest growing operating expense in the industry (www.cpr-energy.com). The EPA has concluded that even a 10% improvement in energy efficiency is comparable to realizing a $0.62 and $1.35 increase in ADR for limited service and full service hotels, respectively.

Many studies show that hotels do not realize the full benefit of many energy efficiency measures as guests feel no obligation to employ sustainable practices and wastes the opportunity for savings afforded by the hotel’s energy efficiency measures; however, almost half realize savings in excess of 20% reflecting that many operators have found ways to enlist guest cooperation in saving electricity and water.

According to the US Energy Information Administration (EIA) 2012 Commercial Buildings Survey, the United States had approx. 87.4 billion square feet of floorspace in 5.6 million buildings that were larger than 1,000 sf which also excluded heavy industrial manufacturing facilities. Ninety percent of the buildings that will exist in2035 have already been built – and buildings consume 80% of energy used in cities worldwide and represents almost 20% of all energy consumption in the United States.

Source: US Department of Energy 2013 Renewable Energy Data Book, 1/22/2015

Source: US Department of Energy 2013 Renewable Energy Data Book, 1/22/2015

 

The evidence is clear – building and operating sustainably pays dividends – in improved NOI from cost savings and increased revenues. Attracting higher quality tenants, improving market perception and reducing risk indicates that going Green is becoming a key for maintaining the Class of a building – keys to improving long-term values through lower cap rates.

So, why aren’t more building owners and managers going green? We will seek to discern this matter in our next Sustainable Benefits.

Perhaps the Scientists are sounding too much like Chicken Little

11/5/14

PJ Picture
By Paul L. Jones
, Founder,
Director, Financial Advisory Services for Emerald Skyline Corporation

 
This week, the United Nations’ Intergovernmental Panel on Climate Change issued its latest report on the effects of climate change on the world if corrective action is not taken. The headline in the Miami Herald read “Scientists’ warning is most alarming yet.”

A review of articles on climate change reflects similar headlines and worse – like “Goodbye Miami” or “Florida developers facing environmental woes.”

The alarm bell is ringing – and the headlines are starting to sound like Chicken Little crying “The sky is falling, the sky is falling!” in the children’s books. I know it does to me – and I know that the scientists have done their homework which is the opposite of Chicken Little and all his furry friends – Hen Pen, Duck Luck, Goose Loose and Turkey Lurkey.

In fact, a group of industry experts and sustainability professionals met in London last summer to dialogue about a report being issued by DNV GL, a leading ship and offshore classification, a leading technical advisor to the global oil and gas energy and a leading expert for the energy value chain including renewables and energy efficiency. The report, entitled, A Safe and Sustainable Future: Enabling the Transition, provides an analysis of challenges to sustainability in the global economy, societal well-being and governmental and corporate governance.

In an article published in Maritime Executive (http://www.maritime-executive.com/article/Too-Much-Climate-Change-Doom-and-Gloom-2014-07-12), entitled “To Much Climate Change Doom and Gloom,” participants expressed concern that the messaging around climate change is too much “doom and gloom” and not enough on the opportunities that are arising from addressing the effects of a warming world. Bjorn Haugland, executive vice president and chief sustainability officer at DNV GL was quoted:

“We believe there is a need to put the focus on the opportunities. For corporate leaders and politicians to speak a positive narrative is so important as it directs so much activity in society.

“We believe it is possible to create a thriving economy, it is possible to stay within the limits of the planet and it is possible to create a society for nine billion people to live well if we want to. It is human activity that has taken us into this situation and it is human activity that will take us out of it.”

Much of our perspective on the world, including our economic systems, is based on the belief that the world has an infinite supply of natural capital and a warming planet; however, the headlines about water shortages, famines, super storms, flooding, the hottest year on record, rising sea levels, ice caps melting and other calamities highlight that the scientists are not Chicken Little – the evidence is all around us.

Whether or not the global warming is man-made or from natural causes does not really matter, it is affecting the future for man-kind. Further, resource limitations can be extended – like the Green Revolution in agriculture where research, development and new technology between the 1940s and the 1980s increased agricultural production around the world – saving hundreds of millions of people from starvation.

Challenges abound everywhere, but where there are challenges, opportunity also exists.

DNV GL’s research report highlights 36 “barriers to sustainability” which range from economic and market hurdles to policy, societal and behavioral attitudes and habits – including reactive and short-term thinking, “denialism” and a lack of urgency. (available here: http://dnvgl.com/Images/DNV%20GL%20SSF_20_aug2014_tcm212-595432.pdf)

The Report concludes with Pathways to a Sustainable Future, which is summarized as follows:

“Our vision for a safe and sustainable future is within reach. Humanity has faced, and overcome, grand challenges in the past. Undoubtedly, we can surmount our present challenges too – if we choose to. Changing course will depend on our ability to work together, to act quickly and to harvest opportunities both today and tomorrow.

“We can develop an economy that is sustainable and regenerative, we can rejuvenate our ecosystems, and we can build the stable, equitable and thriving societies that we desire for the future. We are at a moment in time where there is a unique opportunity to shape the future we want.”

The scientists are not Chicken Little. It is time to stop ignoring the headlines which are designed to instill a sense of urgency and realize that the time is now for each of us to act.

It is real estate owners and investors who have the most to lose as the effects of climate change will most definitely be seen in utility bills, property taxes and insurance premiums.   With the new building management technologies, energy efficiency, water conservation capabilities and waste management programs, building owners and managers have the ability to reduce operating costs while making the building sustainable. We know. We see it being done – in both new and existing buildings.

As Glenn Pickett reports in his article on “the Drumbeat for Climate Action Grows,” published in Environmental Leader on 11/3/2014,

“The appetite is all but gone for hearing more about our frightening global forecast and who’s at fault for it. The more time the environmental and sustainability movement spends sharing solutions, the more mainstream these choices will have the chance of becoming….. It’s time for action, and leaders will be rewarded.”

Read more: http://www.environmentalleader.com/2014/11/03/the-drumbeat-for-climate-action-grows/#ixzz3I7KNzYO0

May we all become good stewards of this earth.

On Questioning Assumptions/Making an Immediate Impact

PJ Picture
By Paul L. Jones
, Founder,
Director, Financial Advisory Services for Emerald Skyline Corporation

The nature of our education system is for us to believe that once we learn a topic or draw a conclusion on an issue, we move on to the next subject and never look in the rear view mirror except to use that knowledge to advance in the next course, subject or project. It is easy to fall into this routine, but life and reality do not fit neatly into this sequential thinking process.

For too many people, we have drawn a conclusion on a topic at one point in our lives and never revisit it with an open mind and the benefit of more time and knowledge and wisdom which leads to false beliefs and poor decisions but, the British philosopher and Nobel Laureate, Bertrand Russell, advises us: “In all affairs, it’s a healthy thing now and then to hand a question mark on the things you have long taken for granted.”

Of course, we know this is the case with making the existing building stock sustainable. A common pre-conception is that it costs a lot of money to reduce a property’s impact on the environment and improve the operating performance of a commercial building. Yes, replacing inefficient lighting and HVAC systems, adding solar panels, installing a green roof and changing the windows and/or skin of a building are definitely investments that will save money, but there are many ways to achieve savings without a major investment. YOU CAN MAKE AN IMMEDIATE IMPACT NOW.

Jennifer McConkey, Operations & Sustainability Director at Principal Global Investors, reports in a recently published White Paper: “It seems clear that running efficient building operations, sometimes with no-cost and low-cost improvements, can be the quickest way to implement sustainability into your properties or property investments. Operations can provide the foundation for ‘green’ no matter how old the building.”

An article in the 6/10/2014 issue of EDC (Environmental Design & Construction) Magazine reports, “Implementing green building practices will help reduce environmental problems caused by building construction, use and demolition, as well as the manufacturing of building materials. It also has tangible economic and public health benefits such as lower operating costs and improved occupant health and comfort.”

So, we know that commercial properties consume approximately 20% of the total energy used by the United States. We also know that commercial buildings consume a large portion of water, produce greenhouse gas emissions and generate significant waste. Further, we know that building owners and managers will seek to reduce energy and water consumption as well as greenhouse gas emissions and waste that is taken to a landfill (or the ocean). But, we also know, owners and managers are budget conscious and want to time replacements with the deterioration or functional obsolescence of their systems and equipment. So, what can an owner, manager or tenant do?

Plenty. For ways to start your road toward sustainability and improved operating performance, Jennifer McConkey of Principal Global and BAMCO courtesy of EDC gives us the following free or low cost ideas:

  • Adjust the thermostat to be one degree higher during the cooling season and one degree lower during the heating season;
  • Leaving the lighting in vacant spaces off except during use or installing occupancy sensors which “ensures that even occupied spaces are lit when there is a person the room, further reducing energy consumption;”
  • Establish a pro-active HVAC systems and building envelope maintenance programs. Ms. McConkey reports that “something as simple as replacing worn door seals can cost around $100 per doo, but lead to thousands of dollars in annual savings;”
  • As lightbulbs are replaced, use LED bulbs to help reduce energy consumption;
  • Install VFD (Variable Frequency Drive) on pumps and water features which minimizes energy use during low demand times;
  • Use native or drought-tolerant plants and landscaping;
  • Implement a recycling program (be sure to check local recycling and waste reduction guidelines for materials that are eligible to recycle); and
  • Use sustainable cleaning products and building materials for any tenant improvements or repairs.

Ms. McConkey’s White Paper can be found at the following link: www.principalglobal.com/us/download.aspx?id=96043

The EDC post can be found at the following link: http://www.edcmag.com/blogs/14-edc-blog/post/95677-building-green-5-ways-to-reduce-your-impact-on-the-environment

Remember, reduce, reuse and recycle.

Seek to make a difference! Be well and be blessed, Paul