sustainability

Beauty and Function: Landscaping for Sustainability

KG Resize
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

Making a Difference

5/28/14


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

 

 

What is the purpose of life? Why are we alive?

These are questions I have asked myself off and on for all of my life – but especially in times of change….of transformation. Do you ever take a minute to ask yourself these questions? Are you living life to the fullest – and not in a hedonistic way?

We all get consumed by the world, with tending to the details at hand, with solving the problems that arise and with the people who mean the most to us. But what are we doing to fulfill our destiny here on earth. We are only given a short time – no more than 120 years and most between 60 and 80 years. It passes so quickly. So what will be our legacy?

Our top priority is to provide for our families. And, this is true. But providing for our family is more than putting a roof over the head and food in the stomach. More than providing a loving environment…even though these are great accomplishments in and of themselves, we also want to provide a better life for the next generation than we have experienced in ours.

We accomplish this by ensuring our families have what they need to survive and prosper – a good, moral code of ethics, a strong belief system, a quality education and as many opportunities as we can provide.

However, what if all of your efforts were for nothing, naught – because you and the rest of humanity failed to steward the resources that were at your disposal such that the life we seek on this planet is sustainable.

Yes, imagine a world where, because the prior generations were gluttonous in their need for comfort, lazy in their search for more efficient ways to provide modern amenities and greedy in their lust for profits that they squandered the rich bounty of resources that Mother Earth provides. This may not be the world we leave for our children but it could be for our children’s children’s children.

We do this by choosing to ignore the reality that all of our natural resources are limited. Yet, until we are able to populate space stations and other planets, these resources are to last until the end of time.

If we do not take to heart the teachings of all major religions and the cry of the scientists regarding climate change, we risk becoming known as the generation who failed to leave the world better off for having lived….we will have failed.

So, it is our responsibility to learn, think and act in a way that promotes the sustainability of our lives, of our businesses, of our planet….

For most, it is following the principles of reduce, reuse and recycle. Families will increasingly be able to use solar energy, buy local food at a farmer’s market, monitor their use of energy, recycle their plastic, glass and metals, and employ other ways to steward the resources at their disposal – which will simultaneously enable them to reduce their overhead leaving more funds for better things than leaving the air conditioning on high when no one is home.

For those of us in real estate, we have a greater opportunity – and responsibility -since commercial real estate accounts for almost 20% of the nation’s annual greenhouse gas emissions (Energy Star) and “the built environment accounts for 39% of total energy use in the US and 38% of total indirect CO2 emissions.” (From Energy efficiency and real estate: Opportunities for investors” commissioned from Mercer Family Fund by Ceres).

Consequently, owners, investors, developers, managers and advisors in real estate – commercial, residential, industrial, hospitality and institutional, have a significant opportunity to provide for their children and all life on this planet – simply by becoming good stewards of the real estate for which we are responsible or have the ability to improve.

Believe it or not, “a 10% decrease in energy use could lead to a 1.5% increase in net operating income (NOI) with even more impressive figures as the energy savings grow” (Energy Star). One of my mentors, Jim Klingeil, taught me over 30 years ago that a dollar saved is ten dollars earned (based on a 10% cap rate). The savings are better now – at today’s cap rates….

The benefits extend beyond the savings in utility costs, they influence tenant desirability and retention, employee morale and our good will in the community. So, becoming a good steward by making your real estate or your business or your home sustainable is now good business – and good for the soul.

Watch in the coming weeks for our Blog, Sustainable Benefits, with food for thought, practical ideas and news you can use….

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

Hotel Continues Sustainability Efforts

Boston’s Westin Copley Place upgrades its HVAC system and reaps savings.

By Paul Lin
View the original article here

February 14, 2014

Excluding labor, energy is typically the highest cost that hoteliers face and is the single fastest-growing operating cost in the hospitality industry.[1] According to Flex Your Power and ENERGY STAR statistics, the hospitality industry spends approximately $4 billion per year on energy, with electricity accounting for 60 to 70 percent of the utility costs. And the HVAC system accounts for more than 50 percent of a lodging property’s energy costs.[2] All of which significantly affect the bottom line.

The Environmental Protection Agency has calculated the associated cost savings and concluded that even a 10 percent improvement in energy efficiency is equivalent to increasing average daily room rates by 62 cents and $1.35 for limited-service and full-service hotels, respectively.[3]

Energy Efficiency and Hotels’ Bottom Line

In the hotel sector, reducing energy costs while continuing to meet the diverse needs of guests, owners and corporate requirements is challenging but by no means impossible. Energy efficiency provides hotel owners and operators cost savings that benefit the bottom line. Efficiency also improves the service of capital equipment, enhances guest comfort and demonstrates a commitment to climate stewardship. Environmental friendliness can be a market strength for a hotel brand, which can lead to a better reputation among consumers.

A report by Deloitte, “Risks and Rewards for Building Sustainable Hotels,” cites that both financial incentives and consumer demand are likely to encourage the hospitality industry to continue developing more environmentally friendly hotels, resorts, spas and convention centers. According to the report, “Travelers are increasingly considering sustainability in making travel plans. Business travelers increasingly consider a hotel’s sustainability in making their selections, and 40 percent of those surveyed are willing to pay a premium for it.”[4]

Companies in the lodging industry have realized that environmentally sound practices not only help the environment but can also lead to cost reductions, business expansion and profit growth.

Westin Copley Place

One such company, Starwood Hotels and Resorts Worldwide, is dedicated to integrating enlightened environmental practices and sustainability principles into all aspects of its business strategy. By collaborating with hotel owners, franchisees, suppliers and business partners, the company actively works to reduce the environmental impact of hotel operations. The company recently set a target of reducing its energy consumption by 30 percent and reducing its water consumption by 20 percent by the year 2020. The goals are company-wide and apply to Starwood-owned and managed hotels.

Westin, one brand of Starwood Hotels and Resorts Worldwide, incorporated a number of sustainable elements during a renovation of Westin Copley Place in Boston. This 803-room, 37-story hotel is not only determined to provide guests with a phenomenal stay, but the management also understands its responsibility to the environment. The hotel is a recipient of the prestigious Green Key Award in 2010 and one of four hotels in Massachusetts to be recognized as a Green Seal certified hotel.

Glenn Ralfs, Westin Copley Place’s director of engineering and an industry veteran, is constantly on the lookout for ways to improve energy efficiency. He recently participated in an upgrade to the hotel’s HVAC system by installing energy-efficient motors to the heating and cooling systems in the guestrooms. This entailed replacing existing motors with Regal Genteq Eon 42 ECM motors in all 803 guest rooms as a way to provide improved guestroom temperature resulting in a more satisfying guest experience.

Hydronic fan coils are heating and cooling devices that utilize hot and/or cold water as a thermal source. That water is typically provided by a central system, consisting of a boiler, chiller and other ancillary equipment. Fan coils are extremely quiet and reliable, have low operating costs and remarkably long life cycles. The Westin Copley Place utilizes a two-pipe system which circulates chilled water to provide cooling and an electric strip for heating.

“The benefits of this system are threefold: increased guests’ comfort, energy savings and motor controllability,” says Mike Rosenkranz, Gexpro energy specialist. Gexpro, an electrical distribution company, specializes in energy efficiency solutions which range from lighting, power quality, solar, energy management, drives and motors. Gexpro teamed up with JK Energy Solutions, a provider of energy efficiency services, to engineer a turnkey solution to help the Westin Copley Place achieve its energy efficiency goals.

The designers expect the guestroom energy management system is 80 percent more energy-efficient than the previous HVAC system and plan on saving the property an estimated 400,000 kWh annually. Additionally, due to the high kWh savings, the property expects a return on investment in approximately 2.3 years.

“In a hospitality property, unlike in some other commercial buildings, updated HVAC systems must be achieved with a high priority on quiet operation and good air quality to complete the guest experience,” says Ralfs. “Additionally, as the director of engineering, I need to be knowledgeable of ways to reduce our energy costs and consumption; ECM motors are an excellent way to meet all of these objectives.”

 

  1. www.cpr-energy.com/energy-awareness
  2. Joel Hill, “Boosting HVAC energy efficiency,” Lodging, February 13, 2013.
  3. www.energystar.gov/ia/business/EPA_BUM_Full.pdf (accessed 10/10/13).
  4. The Staying Power of Sustainability, Deloitte Publication, 2008.

Green Is the New Black: Levi’s, Nike Among Marketers Pushing Sustainability

View the original article here

Responding to a consumer behavior shift By Joan Voight

Levi’s boasts of designer jeans made out of used plastic bottles. Nike tempts runners with knitted sneakers that it claims cut manufacturing waste by 88 percent. These products may be the tip of a marketing iceberg, as new research shows a growing pool of global consumers are demanding that mainstream brands be sustainable.

“It’s not about offering a niche green product,” said Jonathan Kirby, vp of global men’s design for Levi Strauss. “We’re working to build sustainability into everything—from the cotton fields to our supply chain, to our stores, to our designs across product lines.”

Case in point: Each pair of Levi’s Waste<Less collection of jeans, launched in Spring 2012, is made from about eight recycled plastic bottles, Kirby said.

Nike takes a similar approach with the FlyKnit shoes it debuted last year, which are marketed as a high-tech advancement using yarn instead of leather uppers for a better fit and a reduction in waste. “FlyKnit is a great example of our innovation and commitment to products and services that are better for athletes, our planet and our investors,” said a company rep. “We’ve seen a strong response from runners and it’s safe to say it’s going to be a big [sales] year for FlyKnit.”

Numbers confirm that shoppers are increasingly seeing green. More than a third of global consumers, including 40 percent of millennials, view style, status and environmentalism as intertwined, per a 2013 survey by brand consultancy BBMG. These consumers love shopping and overwhelmingly desire responsible consumption. “For them, sustainability has changed from being ‘the right thing to do’ to being ‘the cool thing to do,’” said Raphael Bemporad, BBMG’s chief strategy officer.

Target is tapping into the trend with its “Sustainable Product Standard,” unveiled earlier this month. Household cleaners, beauty and baby products that pass the standard will be advertised with the “Choose Well” designation and get unique product placement, said a company rep. “This new standard is a first step toward sustainable innovation in our full product assortment,” she said.

In contrast, consumer goods companies like Unilever, Johnson & Johnson and Procter & Gamble are playing catch-up, with green initiatives focused mainly on the supply chain, said Bemporad.

J&J, for instance, recognizes 34 of its consumer items as sustainable through an in-house “Earthwards” evaluation, which includes R&D, marketing and the supply chain. The plan is for “marketing to leverage Earthwards’ claims for brands, such as Neutrogena and Johnson’s, in ways that relate to the products’ core benefits,” said Paulette Frank, vp of sustainability for Johnson & Johnson Consumer Companies. “We’re still learning how to communicate and engage with consumers on our product sustainability improvements,” she added.

But the CPG giants risk becoming outdated as green design and marketing become the new normal in their categories. “It’s the ratchet effect,” said Nigel Hollis, chief global analyst at brand consultancy Millward Brown. “Look at the way Method spurred Clorox to launch the Green Works products. Once one brand in a category incorporates sustainability in a way that benefits the consumer at a fair price, it is tough for competitors not to respond in kind.”

 

The Alphabet Soup of Transparency Tools

How do EPDs, HPDs, and PTDs fit into LCA?

By Christopher Curtland , Buidlings, 3/17/2014
View the original article here

Green certification shouldn’t feel like a game of Scrabble, but if you pursue certain tools, you’ll score a bonus in sustainability.

There are a growing number of acronyms in the industry, so it’s important you don’t get them jumbled. Learn how Environmental Product Declarations (EPDs), Product Transparency Declarations (PTDs), and Health Product Declarations (HPDs) differ.

Lifecycle assessment (LCA) is factored into all three, and they could help you achieve LEED status or other designations.

 

Declarations of Disclosure


EPDs, HPDs, and PTDs were developed by SCS Global Services to effectively promote transparency, accuracy, scientific credibility, and comparability across several interior products.

While there is some overlap among the tools in terms of ingredient disclosure, they vary in how they report the impact of those ingredients on lifecycle, occupant health, and other criteria.

EPDs are summary reports of product-related environmental impacts based on a cradle-to-grave lifecycle assessment. HPDs are disclosures of product content and potential health hazards from chemicals of concern.

“There are two types of EPDs – basic for those seeking LEED v4 credits, and ‘full transparency’ EPDs that provide more comprehensive information based on advanced LCA,” says Stowe Beam, managing director of SCS’s division of environmental certification services. “HPDs enable companies to communicate the safety of potentially hazardous chemicals.”

PTDs are for products that undergo a health hazard assessment. They go a step beyond HPDs by disclosing intentionally added ingredients, including heavy metals. They acknowledge materials on six authoritative lists (see below) and indicate whether the ingredient level triggers an exposure warning notification based on the content.

“It’s a marriage between ingredient and exposure disclosure,” says Dean Thomson, president of the Resilient Floor Covering Institute. “PTDs also detail recycled content and VOC emissions.”

 

How to Use Them to Your Advantage


Think of these tools as nutritional labels for interiors products. They are all voluntary, so if a manufacturer has pursued them, you can feel confident in their commitment to sustainability.

Instead of using these designations as the basis for an apples-to-oranges comparison, they’re more apt for comparing Red Delicious to Granny Smith. The tools may seem the same at first glance, but their differences outweigh the similarities.

 

Ingredients and Health Risks

 

  • PTDs reference several hazardous materials identified by these six authorities:
  • International Agency on the Research of Cancer Terminology
  • National Toxicology Program
  • Occupational Safety and Health Administration
  • California Proposition 65
  • EPA’s Toxic Release Inventory
  • REACH Substances of Very High Concern

 

After digesting the alphabet soup of disclosure, ask yourself three key questions:

How is the product being sourced and delivered? Shipping a sustainable product overseas likely defeats its purpose.

 

How will the product be used? Cleaning solutions, wear and tear, room temperature, and moisture can significantly affect a product’s performance.

 

What happens at end-of-life? If a manufacturer offers recycling and disposal services, that’s a bonus. You don’t want the product to end up in a landfill.

And remember, these tools are meant to make your life easier, not harder.

“EPDs, PTDs, and HPDs present a product’s ecological impact in a way that is

easy to comprehend,” explains Dave Kitts, vice president of environment at flooring manufacturer Mannington. “Lifecycle assessments are very detailed and granular. They have a scientific feel and are hard to understand. These tools standardize environmental information for an average reader.”

 

Chris Curtland is assistant editor of BUILDINGS.