The Business Case for Sustainable Buildings
A Sustainable Buildings Company
The Business Case for Sustainable Buildings December 9, 2010
Davor Kapelina, President & CEO
“Riveting Green Subject Matter” Critic KZF Design and CoreNET Global invite you to a private screening of Sustainability Never Dies. Featuring world renowned Pierce Brosnan (look-alike), Davor D. Kapelina, as Agent CO2– convincing global corporate business leaders on the business case for sustainable buildings.
When: Thursday, December 9 11:30AM to 2:00PM
Agent CO2 in Sustainability Never Dies
Where: KZF Design Headquarters 700 Broadway Street Cincinnati, OH 45202 Cost:
CoreNet Members $25 Non-members $35 Students $10
Attire:
Black Tie, of Course
A Sustainable Buildings Company
Evolution of Sustainable Buildings
Evolution of Sustainable Buildings A small group of forward-thinking architects, environmentalist s, and ecologists ), began to question the advisability of building in the current manner
1970
1987
The term “sustainable development” is born
1993
19 Federal Agencies sign Federal Leadership in High Performance and Sustainable Buildings
The US Green Building Council introduces LEED Rating System
The US Green Building Council is Founded
1995
Energy Star for buildings is launched
1998
Energy Efficiency and Conservation Block Grants program provides $3.2 B for projects to reduce total energy and fossil fuel emissions
2001
First LEED Platinum Certified Building (Chesapeake Bay Foundation)
2006
2008
DOE sets goal for greenhouse gas emissions reductions of 80% by 2050
2009
Sustainable Buildings: Past and Present •
The sustainability movement began as a transformative process; Public sector is now following with legislation.
•
GSA launches series of measures aimed at transforming national building standards: LEED Construction Standard – 2003 Energy Policy Act of 2005 Sustainable Buildings MOU – 2006 GSA Green Lease Policies – 2007 Energy Independence and Security Act of 2007
Where is Sustainability going? GSA’s FY 2010-2015 Sustainability Plan: Zero Environmental Footprint • Mission
Align private sector incentives with public policy Modernize the way the Government sources, develops, and implements new ideas Accelerate innovation in green technology, business practices, and collaboration Attract and retain the best talent in a galvanized Federal workforce Change the culture
• Goals By FY 2020, 30% annual GHG emission reduction from its FY 2008 levels GSA will design all new Federal buildings to: • Deliver energy performance at least 30% below industry standards • Achieve USGBC LEED Gold certification • Meet Energy Star standards
Increase investment in energy and water conservation projects across portfolio of Federally owned buildings to reduce facility EUI to 48,926 BTU/GSF by FY2020 GSA will be introducing new education and awareness initiatives to motivate tenants, contractors, and employees to make behavioral changes to reduce energy and water consumption http://www.gsa.gov/graphics/admin/GSA_Strategic_Sustainability_Performance_Plan.pdf
A Sustainable Buildings Company
Market Trends
Market Trends Increased Spending on Sustainability • According to 300 corporate executives surveyed by E&Y (from firms with revenue of $1billion+) , 70% plan to increase spending on Green Initiatives by 2012. Nearly ½ plan to spend .5% - 5% of their total revenue
Powerful Movement to Building Technology and Enterprise Benchmarking • Smart Building Technology – “Light-Up” Buildings/Facilities • Immediate visualization and tracking of sustainable initiatives
Energy Sourcing • Direct and Indirect alternative energy sourcing (i.e. Solar/Wind) increased materially from 2000-2009 • 70% of grid-tied solar generation not controlled by utility
Increase in Green Buildings • Currently there are 12,423 Energy Star buildings and plants in the US, representing 2,071,944,288 square feet, compared to only 6,245 in 2008.
Hiring CSOs • Over 25% of Fortune 500 companies have CSOs
A Sustainable Buildings Company
Corporate Practices
Emerging Corporate Practices McKinsey & Company survey of 1,946 US executives across various industries and regions (2010)
%
Regulatory risk is NOT the leading reason organizations are addressing sustainability
Emerging Corporate Practices Incorporating sustainability into Corporate Core Values and Mission
“Caring about out communities and our environment…” 2010 added a color coded sustainability rating program for seafood Rec’d Green Building award in TX for their HQ
“Sell Products that sustain people and the environment” Creates a custom sustainability index Creates textile sustainable value network
“…Our vision … through programs and a focus on environmental stewardship, …build shareholder value by making PepsiCo a truly sustainable company.” Creates water stewardship initiatives Creates i-crop to help farmers accurately calculate water use and carbon emissions
Over 1500 companies around the world provide shareholders with sustainability reporting data
Emerging Corporate Practices • Enterprise Level Performance Management • Supply Chain Engagement • Resource Conservation • Procurement Alignment
A Sustainable Buildings Company
Competitive Summary
Competitive Summary Market Leaders • Requires suppliers to track carbon footprint, GHG emissions and waste stream • Goal to reduce GHG emissions 20% by 2012 (achieved 25% so far) • Sustainability 360 Comprehensive view of business and engages more than 100,000 suppliers, more than 2 million associates and millions of customers in sustainability efforts
• Between 2005 and 2009, reduced GHG emissions by 7% • KC focuses on Energy efficiency and renewable energy in their facilities and in their manufacturing processes as the key driver of Carbon emissions reduction • Created sustainable supplier guide
• Set 15% carbon reduction goal to be met by 2020 (11.5% achieved so far) • GHG Emissions reduction strategy focused on improving energy performance • Closely monitors facility energy performance through real-time monitoring technology
Competitive Summary Market Leaders & Growth Due to Sustainability
Launched in 2005, GE’s Ecomagination campaign has seen Green sales quadruple accounting for $20 billion in annual sales and is among GE’s fastest growing business lines. “Clean Energy will have no time horizon. This will be a $150 billion market by 2015 or 2020. And it’s global.” – Jeff Immelt
Toyota’s Prius has gone from 5,800 US sales in 2000 to 1 million US sales by 2010. Worldwide, the Prius has sold 2.2 million vehicles worldwide and had a 10% increase in 2010 when Toyota reported brake problems on many of their vehicles.
31% of total sales from Green Products in 2009 and plans to generate 50% of total revenue by 2015
Plans to reach its cumulative EUR 1 billion investment in Green Innovation target this year
A Sustainable Buildings Company
Sustainable Business Drivers
Sustainable Business Case Drivers “. . . sustainability is a mother load of organizational and technological innovations that yield both bottomline and top line returns” Harvard Business Review Why Sustainability is Now the Key Driver of Innovation September 2009
Sustainable Business Case Drivers
Operating
Legislative
Costs
Locomotive
HR/Workforce Demand
Organizational
Reputation
Utility Costs – Historical Average Average US Electricity Price (cents/kWh), 2004 – 2010** 13
Energy and water efficient buildings reduce operating costs to less than half those of a traditional building by employing green design concepts.*
11.53
12
11
10.22 10
9.91
8.95 9
8.17 8
7
7.61
Residential Commercial All Sectors
6
5 2004
*LEED: Good for Business, Good for the Environment **Source: DOE Energy Information Administration
2005
2006
2007
2008
2009
2010
Utility Source Allocation U.S. Energy Use by Fuel Type (2009) 7% 22%
5%
48%
18%
Coal Natural Gas Nuclear Hydroelectric Other
High Carbon-dioxide emissions per unit of energy output (2x natural gas) requires large quantity of emission allowances or offsets that would have been required by the American Clean Energy and Security Act’s cap-and-trade program. These additional costs will be passed on to energy consumers!
The Move to Grid Parity $300.00
$/MWh
$250.00
$200.00
$150.00
2010
2016 $100.00
$50.00
$0.00 Coal
Offshore Wind
Solar
The cost of coal is rising while the rate of increase of wind power is beginning to diminish on a marginal basis and biomass and solar are beginning to decrease. The overall trend is towards higher coal costs and lower renewable costs in the next 20 years.
Regional Utility Source Consumption Commercial Energy Consumption State
National Rank
Consumption (Billion BTUs)
Ohio
7th
701
Kentucky
25th
249
Ohio’s industrial sector dominates energy consumption, largely due to several energy-intensive industries, including chemicals, glass, metal casting, and steel.
Ohio Statistics (compared to national) http://www.eredux.com/states/state_detail.php?id=1135#commercial
Example Other Op-Ex Drivers Water
Landscaping Case Study
Sustainable Grounds Management & Site Renovation
Landscaping •
Janitorial Waste Stream Recycled Content Procurement
• • •
Reducing or eliminating the use of pesticides Use of organic fertilizers Reduce turf and annual flower expanses that are costly to maintain Mowing impact reduction
Legislation Locomotive Aggressive State-wide Green Legislation (2010)
Companies that exceed legislative requirements and stay ahead of the compliance curve will have a competitive advantage
Energy Labeling
First Mandatory Green Building Standards Code Passed (2010)
Legislative Policy Response Policy makers have responded to data on climate change by adopting methods aimed at mitigating environmental risk Kyoto Protocol • 37 developed countries • Reduction GHG emissions by 5% by 2012 • Creation of carbon credit trading markets
EPA Reporting Requirements
• Energy suppliers, manufacturers, and facilities must report annual emissions
SEC Reporting Recommended Climate Change Risk Disclosure Decreased demand for goods resulting in high GHG emissions Restricted access or cost escalation of energy and other inputs necessary for product manufacturing Recommends that investors refer to climate change databases and companies comply with established reporting frameworks
HR Benefits 6.7% $60 Billion national annual productivity Productivity improvements correlated with improved lighting loss due to building-related illness
“Occupant productivity is the key. It's more important than energy costs and the environmental footprint” - Senior VP, Liberty Property Trust, whose green office buildings in Philadelphia rent for up to 50% more than comparable assets
3.6% Productivity improvements correlated with enhanced temperature control
Productivity gain
Per rentable SF
Wages & benefits @ 250 SF per employee
$312
Overall Productivity gain of 15%
$46.80
Executive productivity gain of 15%
$58.50
By installing skylights, fluorescent light fixtures and additional insulation to improve temperature control, a credit card verification facility in Costa Mesa reduced employee absenteeism by 47 percent and boosted productivity by 5 percent to 7 percent. Sources: EPA / Liberty Property Trust 2009 / McGraw-Hill Construction SmartMarket Report 2009
Workforce Demand 4 out of 5 college graduates believe that it is important to work for a green / sustainable Company 79% of MBA students plan to seek employment at a socially responsible company Recruiters are reporting that highlevel candidates are demanding to know a company’s environmental specs before taking the job
Not seeking out green employers Believe that it is important to work for a green employer
81%
Already working or interning at a green employer
“Companies should clearly communicate their environmental commitments and socially responsible practices throughout all recruiting programs to attract the best talent.” - Jenny Floren, founder and CEO of Experience Source: 2008 Experience, Inc. survey of 2,800 college students / Sustainable Industries / USA Today
Organizational Retention PNC Bank reported a 30% reduction in employee turnover after moving headquarters to LEED certified building.
Corporation
Employee Sustainability Retention Initiative Engages employees to set up specific sustainability programs through communities of practice (COPs) “Small Steps Program” spurs sustainability actions among employees emphasizes committing to one small action, personally. “Green Intel” intranet portal, environmental sustainability network and 81% environmental excellence awards yield benefits for the company. “Intel’s employee engagement has resulted in increased employee loyalty, more company pride, and improved morale” said Carrie Freeman, sustainability strategist.
• Personal Sustainability Project (PSP) has engaged more than 500,000 associates in voluntary sustainability efforts, demonstrating measurable positive results in associates’ lives and in the workplace. • In an agreement with SunPower, HP started an employee program offering joint rebates to install solar electricity for their residences. Libby Reder, head of Environmental Initiatives at eBay, believes their Green Team is an important reason why some employees stay at the company, and according to their recruiters, it also helps them attract the best talent. Source: The Business Case for Environmental and Sustainability Employee Education - National Environmental Education Foundation – Feb 2010
Corporate Reputation Sustainability and Social Responsibility directly benefit your bottom line Corporations with high Sustainability indices experience higher gross margins, higher return on investment and higher cash flows than firms with lower indices Consumers are willing to pay more for ethically made goods Consumers are inclined to support Sustainability-linked brands even in recessionary times There is significantly more price tolerance for brands associated with Sustainability. Sustainability has entered the Mainstream In 2009, more than 200 of worlds Fortune 250 firms reported their sustainability activities, non-reporting companies fast becoming the exception People who shape purchasing decisions according to green sensibilities are no longer a niche audience Sources: PriceWaterhouseCooper University Ontario / Edelman Public/Relations Sources: KPMG / University/ of Ontario /ofPriceWaterhouseCoopers Edelman / KPMG
A Sustainable Buildings Company
ROI Impacts
ROI Impacts – The “Net Net” Adobe HQ Building (3 Buildings – nearly 1M sq ft) Through its early green initiatives and projects launched to meet the LEED-EB specifications, Adobe has reduced:
Electricity usage by 35 percent; natural gas by 41 percent; Domestic water by 22 percent; Landscape irrigation by 76 percent; CO2 emissions by more than 20 percent; Diversion of solid waste through composting and recycling by nearly 90%
Today, savings total $1.2 million annually – equating to an ROI of 121 percent and an average payback per project of 9.5 months. Adobe's LEEDEB Platinum certification efforts, specifically, have had a net ROI of 148 percent while the costs of certification are just 10 percent of one year's savings.
A Sustainable Buildings Company
Enterprise Best Practices
Enterprise Best Practices Implementation of Smart Building Infrastructure
Vendor Coordinated Data Streams for Environmetrics
Benchmarking Performance Metrics Across Enterprise
M&V Strategies Insure that Smart Changes are Affected
Enterprise Best Practices - BPM Dissect
Analyze
Prioritize
Implement
• Performance Components • Occupants/Policies/Physical
• ROI / Value Leverage Return • Using Defined Roadmap/KPIs
A Sustainable Buildings Company
Benchmarking, Optimization Systems, & Methodology
Enterprise Benchmarking Methodology
Gas
Monitoring Software Systems & Device Providers Real-time Monitoring Software:
Metering and Sensor Hardware:
Building Performance Steps Step 1: Step 2:
Step 3: Step 4:
Step 5:
Implement real time visibility of performance metrics (“LightUp” Buildings/Facilities) Analyze operations and policies to identify effective and efficient solutions. . . Internal Benchmarking Optimize based on ROI investment opportunities, and other value measurements Communicate efforts and performance information to help employees and other stakeholders understand the why and how, as well as the results Integrate improved systems and processes. Leverage Platform across the Enterprise
A Sustainable Buildings Company
Carbon & GHG 101
What is a Carbon Footprint? A measure of the amount of carbon dioxide emissions directly or indirectly caused by a building Corporate Examples:
Corporations (S&P 500)
CDP 2008 Emissions (tons of CO2)
American Electric Power
149.4 million
Walmart
21.1 million
Coca-Cola Company
5.2 million
Marriott
3.2 million
Bank of America
1.5 million
Darden
1.1 million
Starbucks
913,000
Xerox
408,000
Metric Ton of Carbon Dioxide 1 Metric Ton CO2
3380 Miles
30 mpg
1575 KWh
1 Metric Ton CO2
International GHG Protocol International GHG protocol sets framework for almost every GHG accounting standard in the world. This protocol breaks down 3 classifications of GHGs as they pertain to a given entity. The Carbon Footprint is the combination of these three classifications.
Scope 1 GHG Emissions
• Result directly from sources that are owned and controlled by a given entity
Scope 2 GHG Emissions
• Indirect emissions which are produced in the generation of electricity consumed by the first order entity
Scope 3 GHG Emissions
• All other indirect emissions which occur as a result of a given entity’s activities, but which are emitted by sources not owned or controlled by the entity
A Sustainable Buildings Company
Why Manage Carbon?
Why Manage Carbon? Improve your bottom line • Expose inefficiencies • Expose new revenue streams Mitigate risk • Hedge risks against energy supply disruptions Stay competitive • Attract new talent and engage employees • Respond to procurement criteria Get in front of legislation/policy • SEC Reporting guidelines • Kyoto • EPA
A Sustainable Buildings Company
Alignment to Performance Management Process
Aligning Carbon with Bottom Line The Nexus of sustainability and profitability lies in carbon measurement Nearly every material aspect of a building’s performance and operational supply chain can be measured in CO2 thereby creating one streamlined metric to gauge cost and performance. •Reducing consumption reduces costs • Renewable generation may yield lower long term LCOE when compared with escalating utility costs
Gas •Weigh gas consumption against electricity consumption to reduce costs improve performance • Gas systems more efficient
Waste •Reducing waste load means less spent on tipping fees • Less transport of waste means reduced gas consumption
Carbon Emissions
Landscaping •Xeriscaping reduces reliance on potable water consumption • More pervious area, and vegetated surface around building reduces cooling needs thus less expenditure • Less requirement to mow means less gas consumed by mowers
Janitorial •Electric hand driers in the restrooms consume electricity but get rid of the reliance on cost and CO2 emissions associated with disposable paper towels
Sample Best Practices
Sample Cost Drivers
Electricity
So What? Top Line Bottom line - Reducing carbon emissions delivers savings - Streamlined carbon management means less spent on overall operations and overall building supply chain - Increased workforce retention and productivity
Risk Management Regulatory Concerns - Potential “risks” lie ahead as business is conducted in increasingly regulated environments - EPA and SEC reporting requirements – what else is coming?
A Sustainable Buildings Company
Questions? Agent CO2 in Sustainability Never Dies
The Business Case for Sustainable Buildings December 9, 2010
Davor Kapelina, President & CEO
“Riveting Green Subject Matter” Critic KZF Design and CoreNET Global invite you to a private screening of Sustainability Never Dies. Featuring world renowned Pierce Brosnan (look-alike), Davor D. Kapelina, as Agent CO2– convincing global corporate business leaders on the business case for sustainable buildings.
When: Thursday, December 9 11:30AM to 2:00PM
Agent CO2 in Sustainability Never Dies
Where: KZF Design Headquarters 700 Broadway Street Cincinnati, OH 45202 Cost:
CoreNet Members $25 Non-members $35 Students $10
Attire:
Black Tie, of Course
A Sustainable Buildings Company
Evolution of Sustainable Buildings
Evolution of Sustainable Buildings A small group of forward-thinking architects, environmentalist s, and ecologists ), began to question the advisability of building in the current manner
1970
1987
The term “sustainable development” is born
1993
19 Federal Agencies sign Federal Leadership in High Performance and Sustainable Buildings
The US Green Building Council introduces LEED Rating System
The US Green Building Council is Founded
1995
Energy Star for buildings is launched
1998
Energy Efficiency and Conservation Block Grants program provides $3.2 B for projects to reduce total energy and fossil fuel emissions
2001
First LEED Platinum Certified Building (Chesapeake Bay Foundation)
2006
2008
DOE sets goal for greenhouse gas emissions reductions of 80% by 2050
2009
Sustainable Buildings: Past and Present •
The sustainability movement began as a transformative process; Public sector is now following with legislation.
•
GSA launches series of measures aimed at transforming national building standards: LEED Construction Standard – 2003 Energy Policy Act of 2005 Sustainable Buildings MOU – 2006 GSA Green Lease Policies – 2007 Energy Independence and Security Act of 2007
Where is Sustainability going? GSA’s FY 2010-2015 Sustainability Plan: Zero Environmental Footprint • Mission
Align private sector incentives with public policy Modernize the way the Government sources, develops, and implements new ideas Accelerate innovation in green technology, business practices, and collaboration Attract and retain the best talent in a galvanized Federal workforce Change the culture
• Goals By FY 2020, 30% annual GHG emission reduction from its FY 2008 levels GSA will design all new Federal buildings to: • Deliver energy performance at least 30% below industry standards • Achieve USGBC LEED Gold certification • Meet Energy Star standards
Increase investment in energy and water conservation projects across portfolio of Federally owned buildings to reduce facility EUI to 48,926 BTU/GSF by FY2020 GSA will be introducing new education and awareness initiatives to motivate tenants, contractors, and employees to make behavioral changes to reduce energy and water consumption http://www.gsa.gov/graphics/admin/GSA_Strategic_Sustainability_Performance_Plan.pdf
A Sustainable Buildings Company
Market Trends
Market Trends Increased Spending on Sustainability • According to 300 corporate executives surveyed by E&Y (from firms with revenue of $1billion+) , 70% plan to increase spending on Green Initiatives by 2012. Nearly ½ plan to spend .5% - 5% of their total revenue
Powerful Movement to Building Technology and Enterprise Benchmarking • Smart Building Technology – “Light-Up” Buildings/Facilities • Immediate visualization and tracking of sustainable initiatives
Energy Sourcing • Direct and Indirect alternative energy sourcing (i.e. Solar/Wind) increased materially from 2000-2009 • 70% of grid-tied solar generation not controlled by utility
Increase in Green Buildings • Currently there are 12,423 Energy Star buildings and plants in the US, representing 2,071,944,288 square feet, compared to only 6,245 in 2008.
Hiring CSOs • Over 25% of Fortune 500 companies have CSOs
A Sustainable Buildings Company
Corporate Practices
Emerging Corporate Practices McKinsey & Company survey of 1,946 US executives across various industries and regions (2010)
%
Regulatory risk is NOT the leading reason organizations are addressing sustainability
Emerging Corporate Practices Incorporating sustainability into Corporate Core Values and Mission
“Caring about out communities and our environment…” 2010 added a color coded sustainability rating program for seafood Rec’d Green Building award in TX for their HQ
“Sell Products that sustain people and the environment” Creates a custom sustainability index Creates textile sustainable value network
“…Our vision … through programs and a focus on environmental stewardship, …build shareholder value by making PepsiCo a truly sustainable company.” Creates water stewardship initiatives Creates i-crop to help farmers accurately calculate water use and carbon emissions
Over 1500 companies around the world provide shareholders with sustainability reporting data
Emerging Corporate Practices • Enterprise Level Performance Management • Supply Chain Engagement • Resource Conservation • Procurement Alignment
A Sustainable Buildings Company
Competitive Summary
Competitive Summary Market Leaders • Requires suppliers to track carbon footprint, GHG emissions and waste stream • Goal to reduce GHG emissions 20% by 2012 (achieved 25% so far) • Sustainability 360 Comprehensive view of business and engages more than 100,000 suppliers, more than 2 million associates and millions of customers in sustainability efforts
• Between 2005 and 2009, reduced GHG emissions by 7% • KC focuses on Energy efficiency and renewable energy in their facilities and in their manufacturing processes as the key driver of Carbon emissions reduction • Created sustainable supplier guide
• Set 15% carbon reduction goal to be met by 2020 (11.5% achieved so far) • GHG Emissions reduction strategy focused on improving energy performance • Closely monitors facility energy performance through real-time monitoring technology
Competitive Summary Market Leaders & Growth Due to Sustainability
Launched in 2005, GE’s Ecomagination campaign has seen Green sales quadruple accounting for $20 billion in annual sales and is among GE’s fastest growing business lines. “Clean Energy will have no time horizon. This will be a $150 billion market by 2015 or 2020. And it’s global.” – Jeff Immelt
Toyota’s Prius has gone from 5,800 US sales in 2000 to 1 million US sales by 2010. Worldwide, the Prius has sold 2.2 million vehicles worldwide and had a 10% increase in 2010 when Toyota reported brake problems on many of their vehicles.
31% of total sales from Green Products in 2009 and plans to generate 50% of total revenue by 2015
Plans to reach its cumulative EUR 1 billion investment in Green Innovation target this year
A Sustainable Buildings Company
Sustainable Business Drivers
Sustainable Business Case Drivers “. . . sustainability is a mother load of organizational and technological innovations that yield both bottomline and top line returns” Harvard Business Review Why Sustainability is Now the Key Driver of Innovation September 2009
Sustainable Business Case Drivers
Operating
Legislative
Costs
Locomotive
HR/Workforce Demand
Organizational
Reputation
Utility Costs – Historical Average Average US Electricity Price (cents/kWh), 2004 – 2010** 13
Energy and water efficient buildings reduce operating costs to less than half those of a traditional building by employing green design concepts.*
11.53
12
11
10.22 10
9.91
8.95 9
8.17 8
7
7.61
Residential Commercial All Sectors
6
5 2004
*LEED: Good for Business, Good for the Environment **Source: DOE Energy Information Administration
2005
2006
2007
2008
2009
2010
Utility Source Allocation U.S. Energy Use by Fuel Type (2009) 7% 22%
5%
48%
18%
Coal Natural Gas Nuclear Hydroelectric Other
High Carbon-dioxide emissions per unit of energy output (2x natural gas) requires large quantity of emission allowances or offsets that would have been required by the American Clean Energy and Security Act’s cap-and-trade program. These additional costs will be passed on to energy consumers!
The Move to Grid Parity $300.00
$/MWh
$250.00
$200.00
$150.00
2010
2016 $100.00
$50.00
$0.00 Coal
Offshore Wind
Solar
The cost of coal is rising while the rate of increase of wind power is beginning to diminish on a marginal basis and biomass and solar are beginning to decrease. The overall trend is towards higher coal costs and lower renewable costs in the next 20 years.
Regional Utility Source Consumption Commercial Energy Consumption State
National Rank
Consumption (Billion BTUs)
Ohio
7th
701
Kentucky
25th
249
Ohio’s industrial sector dominates energy consumption, largely due to several energy-intensive industries, including chemicals, glass, metal casting, and steel.
Ohio Statistics (compared to national) http://www.eredux.com/states/state_detail.php?id=1135#commercial
Example Other Op-Ex Drivers Water
Landscaping Case Study
Sustainable Grounds Management & Site Renovation
Landscaping •
Janitorial Waste Stream Recycled Content Procurement
• • •
Reducing or eliminating the use of pesticides Use of organic fertilizers Reduce turf and annual flower expanses that are costly to maintain Mowing impact reduction
Legislation Locomotive Aggressive State-wide Green Legislation (2010)
Companies that exceed legislative requirements and stay ahead of the compliance curve will have a competitive advantage
Energy Labeling
First Mandatory Green Building Standards Code Passed (2010)
Legislative Policy Response Policy makers have responded to data on climate change by adopting methods aimed at mitigating environmental risk Kyoto Protocol • 37 developed countries • Reduction GHG emissions by 5% by 2012 • Creation of carbon credit trading markets
EPA Reporting Requirements
• Energy suppliers, manufacturers, and facilities must report annual emissions
SEC Reporting Recommended Climate Change Risk Disclosure Decreased demand for goods resulting in high GHG emissions Restricted access or cost escalation of energy and other inputs necessary for product manufacturing Recommends that investors refer to climate change databases and companies comply with established reporting frameworks
HR Benefits 6.7% $60 Billion national annual productivity Productivity improvements correlated with improved lighting loss due to building-related illness
“Occupant productivity is the key. It's more important than energy costs and the environmental footprint” - Senior VP, Liberty Property Trust, whose green office buildings in Philadelphia rent for up to 50% more than comparable assets
3.6% Productivity improvements correlated with enhanced temperature control
Productivity gain
Per rentable SF
Wages & benefits @ 250 SF per employee
$312
Overall Productivity gain of 15%
$46.80
Executive productivity gain of 15%
$58.50
By installing skylights, fluorescent light fixtures and additional insulation to improve temperature control, a credit card verification facility in Costa Mesa reduced employee absenteeism by 47 percent and boosted productivity by 5 percent to 7 percent. Sources: EPA / Liberty Property Trust 2009 / McGraw-Hill Construction SmartMarket Report 2009
Workforce Demand 4 out of 5 college graduates believe that it is important to work for a green / sustainable Company 79% of MBA students plan to seek employment at a socially responsible company Recruiters are reporting that highlevel candidates are demanding to know a company’s environmental specs before taking the job
Not seeking out green employers Believe that it is important to work for a green employer
81%
Already working or interning at a green employer
“Companies should clearly communicate their environmental commitments and socially responsible practices throughout all recruiting programs to attract the best talent.” - Jenny Floren, founder and CEO of Experience Source: 2008 Experience, Inc. survey of 2,800 college students / Sustainable Industries / USA Today
Organizational Retention PNC Bank reported a 30% reduction in employee turnover after moving headquarters to LEED certified building.
Corporation
Employee Sustainability Retention Initiative Engages employees to set up specific sustainability programs through communities of practice (COPs) “Small Steps Program” spurs sustainability actions among employees emphasizes committing to one small action, personally. “Green Intel” intranet portal, environmental sustainability network and 81% environmental excellence awards yield benefits for the company. “Intel’s employee engagement has resulted in increased employee loyalty, more company pride, and improved morale” said Carrie Freeman, sustainability strategist.
• Personal Sustainability Project (PSP) has engaged more than 500,000 associates in voluntary sustainability efforts, demonstrating measurable positive results in associates’ lives and in the workplace. • In an agreement with SunPower, HP started an employee program offering joint rebates to install solar electricity for their residences. Libby Reder, head of Environmental Initiatives at eBay, believes their Green Team is an important reason why some employees stay at the company, and according to their recruiters, it also helps them attract the best talent. Source: The Business Case for Environmental and Sustainability Employee Education - National Environmental Education Foundation – Feb 2010
Corporate Reputation Sustainability and Social Responsibility directly benefit your bottom line Corporations with high Sustainability indices experience higher gross margins, higher return on investment and higher cash flows than firms with lower indices Consumers are willing to pay more for ethically made goods Consumers are inclined to support Sustainability-linked brands even in recessionary times There is significantly more price tolerance for brands associated with Sustainability. Sustainability has entered the Mainstream In 2009, more than 200 of worlds Fortune 250 firms reported their sustainability activities, non-reporting companies fast becoming the exception People who shape purchasing decisions according to green sensibilities are no longer a niche audience Sources: PriceWaterhouseCooper University Ontario / Edelman Public/Relations Sources: KPMG / University/ of Ontario /ofPriceWaterhouseCoopers Edelman / KPMG
A Sustainable Buildings Company
ROI Impacts
ROI Impacts – The “Net Net” Adobe HQ Building (3 Buildings – nearly 1M sq ft) Through its early green initiatives and projects launched to meet the LEED-EB specifications, Adobe has reduced:
Electricity usage by 35 percent; natural gas by 41 percent; Domestic water by 22 percent; Landscape irrigation by 76 percent; CO2 emissions by more than 20 percent; Diversion of solid waste through composting and recycling by nearly 90%
Today, savings total $1.2 million annually – equating to an ROI of 121 percent and an average payback per project of 9.5 months. Adobe's LEEDEB Platinum certification efforts, specifically, have had a net ROI of 148 percent while the costs of certification are just 10 percent of one year's savings.
A Sustainable Buildings Company
Enterprise Best Practices
Enterprise Best Practices Implementation of Smart Building Infrastructure
Vendor Coordinated Data Streams for Environmetrics
Benchmarking Performance Metrics Across Enterprise
M&V Strategies Insure that Smart Changes are Affected
Enterprise Best Practices - BPM Dissect
Analyze
Prioritize
Implement
• Performance Components • Occupants/Policies/Physical
• ROI / Value Leverage Return • Using Defined Roadmap/KPIs
A Sustainable Buildings Company
Benchmarking, Optimization Systems, & Methodology
Enterprise Benchmarking Methodology
Gas
Monitoring Software Systems & Device Providers Real-time Monitoring Software:
Metering and Sensor Hardware:
Building Performance Steps Step 1: Step 2:
Step 3: Step 4:
Step 5:
Implement real time visibility of performance metrics (“LightUp” Buildings/Facilities) Analyze operations and policies to identify effective and efficient solutions. . . Internal Benchmarking Optimize based on ROI investment opportunities, and other value measurements Communicate efforts and performance information to help employees and other stakeholders understand the why and how, as well as the results Integrate improved systems and processes. Leverage Platform across the Enterprise
A Sustainable Buildings Company
Carbon & GHG 101
What is a Carbon Footprint? A measure of the amount of carbon dioxide emissions directly or indirectly caused by a building Corporate Examples:
Corporations (S&P 500)
CDP 2008 Emissions (tons of CO2)
American Electric Power
149.4 million
Walmart
21.1 million
Coca-Cola Company
5.2 million
Marriott
3.2 million
Bank of America
1.5 million
Darden
1.1 million
Starbucks
913,000
Xerox
408,000
Metric Ton of Carbon Dioxide 1 Metric Ton CO2
3380 Miles
30 mpg
1575 KWh
1 Metric Ton CO2
International GHG Protocol International GHG protocol sets framework for almost every GHG accounting standard in the world. This protocol breaks down 3 classifications of GHGs as they pertain to a given entity. The Carbon Footprint is the combination of these three classifications.
Scope 1 GHG Emissions
• Result directly from sources that are owned and controlled by a given entity
Scope 2 GHG Emissions
• Indirect emissions which are produced in the generation of electricity consumed by the first order entity
Scope 3 GHG Emissions
• All other indirect emissions which occur as a result of a given entity’s activities, but which are emitted by sources not owned or controlled by the entity
A Sustainable Buildings Company
Why Manage Carbon?
Why Manage Carbon? Improve your bottom line • Expose inefficiencies • Expose new revenue streams Mitigate risk • Hedge risks against energy supply disruptions Stay competitive • Attract new talent and engage employees • Respond to procurement criteria Get in front of legislation/policy • SEC Reporting guidelines • Kyoto • EPA
A Sustainable Buildings Company
Alignment to Performance Management Process
Aligning Carbon with Bottom Line The Nexus of sustainability and profitability lies in carbon measurement Nearly every material aspect of a building’s performance and operational supply chain can be measured in CO2 thereby creating one streamlined metric to gauge cost and performance. •Reducing consumption reduces costs • Renewable generation may yield lower long term LCOE when compared with escalating utility costs
Gas •Weigh gas consumption against electricity consumption to reduce costs improve performance • Gas systems more efficient
Waste •Reducing waste load means less spent on tipping fees • Less transport of waste means reduced gas consumption
Carbon Emissions
Landscaping •Xeriscaping reduces reliance on potable water consumption • More pervious area, and vegetated surface around building reduces cooling needs thus less expenditure • Less requirement to mow means less gas consumed by mowers
Janitorial •Electric hand driers in the restrooms consume electricity but get rid of the reliance on cost and CO2 emissions associated with disposable paper towels
Sample Best Practices
Sample Cost Drivers
Electricity
So What? Top Line Bottom line - Reducing carbon emissions delivers savings - Streamlined carbon management means less spent on overall operations and overall building supply chain - Increased workforce retention and productivity
Risk Management Regulatory Concerns - Potential “risks” lie ahead as business is conducted in increasingly regulated environments - EPA and SEC reporting requirements – what else is coming?
A Sustainable Buildings Company
Questions? Agent CO2 in Sustainability Never Dies
