Building Green

High performance facilities could become an industry standard, but corporate benefits come from an early commitment.

By Christopher Park

If your company’s environmental focus is still in the future tense—as in “going” green—we believe you’re in danger of learning that your competitors have already picked up and “gone.” We find this increasingly true in one area of our consulting business: helping our clients drive value through design, development and operation of high performance facilities—or green buildings.

Buildings are long lead-time items. But, faster than you can say, “sustainability issues are moving up the priority list,” you can bet someone has just built or retrofit a high performance facility that offers a healthier workplace environment, lower energy consumption, reduced carbon footprint and a tax incentive or two. In short, we believe staying ahead of the green building curve is now part of a major market shift toward sustainable development, design and operations.

Contributing to the current momentum are lowered costs, enabled by technology advances and the increased experience of suppliers, designers and builders. We also expect to see the growing number of projects driving unit cost reductions, though short-term premiums on some materials and services may sprout up as demand rises.

The bottom line is that we believe green building is materially affecting the real estate market, and it’s not hard to foresee a time when traditional buildings quickly devalue while green buildings become the new minimum standard. Whether driven by market forces, regulations (building codes) or both, we’re seeing increased evidence of the direct benefits of adopting an aggressive green building stance.

Many reasons to get on board
One key factor in the accelerating interest in high-performance building—and other sustainability and corporate responsibility activity—is the diversity of interests served:

• There are real and material operating cost and efficiency savings available for a lower capital premium than existed even a few years ago
• There’s wisdom in acting now on matters likely to become the subject of new regulatory actions and code requirements—why wait to manage risks?
• There are brand equity, PR and marketing benefits, too, from the attention given to new sustainability efforts, such as landmark green building programs
• There’s a large and growing number of tax and other federal and state government credits, incentives and subsidies associated with supporting green development and building investments
• Improved employee recruiting and retention is a consideration due to the importance of environmental and corporate responsibility issues to newer workers.

Given that green building activities are accelerating, consider the potential value for leased and owned facilities. With the operating cost benefits flowing through to tenants, for example, it’s possible that green buildings may become the minimum de facto requirement for new lease deals.

In the owned portfolio, capital cost reductions combined with demonstrated operating cost savings, emissions reductions and positive PR make green building a “must have” for new facilities. And the approach to developing the business case for evaluating new construction versus retrofit is changing rapidly, as energy and emissions factors come into play, commodity prices rise, emerging green technologies gain traction and incentives play a bigger financial role.

As high performance building standards evolve, it’s likely the requirements will get stricter, more independent verification will be required and some level of standards customization in the U.S. Green Building Council’s Leadership in Energy and Environmental Design (LEED) certification and other models may be needed to account for geographical and cultural differences.

Emerging public/private consortium models such as the Clinton Climate Initiative may drive materially improved return on investment through the establishment of purchasing standards, volume sourcing, lower cost of capital, additional credits and incentives and leveraged suppliers, among others. Models of this type may serve to both accelerate and simplify the green buildings journey for those organizations choosing to capture the benefits of sustainable activities.

Is your organization ready?
Tackling green buildings now is a natural fit for any corporate strategy that incorporates improved social and environmental performance. High performance buildings require a new approach, a set of metrics related to productivity, energy efficiency, emissions management, natural resource use, waste and effect on human/workforce activity. And importantly, the development of these types of high performance facilities require functional involvement well beyond the real estate group. Driven in some cases by a CRO or CSO agenda, green buildings have value impact on human resources, marketing, finance, strategy, communications and more.

In our experience, buildings represent the largest share of energy use and GHG emissions for most organizations, so being aggressive in this area will help achieve broader goals such as carbon neutrality and net zero-impact footprints. We believe green building and development issues relate directly to strategic issues such as global footprint, location strategy, energy and natural resource availability, risk management, and even compliance. Therefore, green development and building activities must be coordinated with the broader sustainability, corporate responsibility and climate change efforts in your company.

Now isn’t too soon to start evaluating your current portfolio against future needs for new and retrofit construction, and to begin incorporating green building activity into the broader agenda of governance, risk management and sustainability issues.

Reevaluate any projects in the planning stages or on the boards. Put the projects that are underway through a “green value engineering” exercise, and consider existing buildings for green retrofit using some of the newer delivery models available. Real estate and facilities have a critical place at the strategy table, because building and development issues affect governance—and performance—at the highest levels. Now is a great time to bring the “green” message home.

Christopher Park is a Principal with Deloitte Consulting and the leader of the U.S. firm's Enterprise Sustainability practice.