The Business Case for Greening Your Facilities

April 25, 2007

All over the country, facility managers and corporate real estate executives are making strong commitments to sustainability by acting right at home – greening their own facilities. Consider these examples …

All over the country, facility managers and corporate real estate executives are making strong commitments to sustainability by acting right at home – greening their own facilities. Consider these examples …

In 2006, Adobe Systems, a software maker in San Jose, CA, achieved LEED-EB Platinum certification for all three buildings at its headquarters. At 1 million square feet of total office space, these three projects represent the largest such effort in the world to date. To demonstrate its commitment to environmental stewardship, an important public issue in Northern California beginning in 2001, Adobe decided to invest $1.1 million over 5 years to turn its three existing towers – ranging in age from 3 years to 10 years, and totaling almost 1 million square feet of space in offices and 940,000 square feet in garage space – into an environmentally friendly campus.

In that 5-year period, Adobe reduced electricity use by 35 percent, natural-gas use by 41 percent, building-water use by 22 percent, and irrigation-water use by 75 percent. Adobe now recycles 85 percent of its solid waste. Through saving energy and buying green power, Adobe reduced pollutant emissions by 26 percent. By the company’s own reckoning, the projects they’ve undertaken have resulted in an overall 114-percent return on investment. Retrofit and upgrade projects include reduced lighting energy use, the addition of motion sensors to turn off lights and HVAC equipment when spaces are unoccupied, installation of variable-speed drives on pumps and fans to match supply to demand real-time metering to reduce electricity bills by avoiding power use during peak periods, upgraded building automation and control systems, and recommissioning of major energy-using systems.

An early LEED-EB Platinum project was the California Environmental Protection Agency headquarters building in Sacramento, CA. Owned and managed by Thomas Properties Group LLC, this 25-story, 950,000-square-foot building completed its certification in 2003 with a series of projects that reduced energy use by 34 percent, diverted 200 tons per year of waste from landfills, and increased the building’s asset value by about $12 million. Total investment was about $500,000, with annual energy and water savings of $610,000. The building received an ENERGY STAR® rating of 96, in the top 4 percent of all energy-efficient operations in the country.

In 2006, the 6-story, 336,000-square-foot, state-owned Department of Education building, also in Sacramento, CA, received a LEED-EB Platinum designation. Completed in 2003, this building had earlier received a LEED-NC Gold certification as a newly constructed project. It is the first major project in the world to receive both designations at this high level. It has an ENERGY STAR rating of 95, with energy use about 40-percent less than required by state code. The building features more than 100 different sustainable solutions to improve energy efficiency, indoor air quality, water conservation, and resource conservation.

The National Geographic Society operates a four-building headquarters complex in Washington, D.C., with buildings ranging in age from 20 to 100 years old. With a $6 million retrofit, the organization added $24 million to the building’s value, receiving a LEED-EB Silver designation in 2003.

The JohnsonDiversey Corp. headquarters in Sturtevant, WI, was certified LEED-EB Gold in 2004. The 3-story, 277,000-square-foot building contains 70-percent offices and 30-percent labs. Built in 1997 with sustainability in mind, it was fairly easy to fine-tune existing systems to receive the LEED-EB designation. With a $74,000 LEED-EB project cost, JohnsonDiversey saved about $90,000 in annual energy costs, reduced water use by more than 2 million gallons, and documented employee recycling rates above 50 percent.

One recent institutional commitment to LEED-EB deserves note: In December 2006, the University of California, Santa Barbara campus, agreed to use LEED-EB to assess 25 buildings over the next 5 years. Jon Cook, acting director of physical facilities, said, “We believe that performance under the LEED system is a key indication that we are achieving our goals” of taking care of the environment and of the health of employees and building occupants.


What’s going on here? In all of these cases, facilities managers and executives have discovered the business-case benefits of “going green.” In addition to saving energy (something which every organization is trying to do today, from Wal-Mart to your corner grocery store), these organizations are realizing savings on water use, chemical use, waste disposal, and other environmental measures.

If you own or manage buildings, you know that each dollar saved on energy adds $10 to $12 to the value of your building by increasing net operating income. If you think a 3-year “payback” on energy efficiency is too long to wait, try this way of thinking instead: A 3-year payback on a $100,000 investment adds $333,000 to $400,000 to the value of your building immediately. That’s right, a 330- to 400-percent return on investment – immediately! Do the math and stop talking “engineer speak”; instead, talk like the savvy investor you undoubtedly are when your own money is involved.

But, there’s more to the story: The positive public relations and employee relations give benefits that are hard to measure. In one project I looked at, the first LEED Silver-certified hotel in the country – the Vancouver (WA) Hilton, executives estimated that the value of the publicity they received upon opening was worth 10 times the extra cost of LEED certification.

What about employee retention? It costs $50,000 to $150,000 to replace a key employee (try hiring even a receptionist in less than 3 months in most large companies today). In today’s people-short economy, your valuable employees can literally walk down the street, get a 10-percent raise from a competitor, and not have to change their commuting or child-care arrangements. They want to stay with organizations that walk the talk of environmental and social responsibility; they want to see action, and a LEED-EB certification is one way to show you are serious about benchmarking your performance with the top organizations in the country.

You can also show your concern for energy conservation and carbon-dioxide emission reductions by participating in the ENERGY STAR program, which, to date, has certified more than 3,200 buildings for their efficiency. However, it does not have quite the overall sustainability cachet of a LEED rating.

As of April 2007, 356 projects representing more than 100 million square feet of building area had registered to certify their facilities under the LEED-EB program. You need to get this important benchmarking exercise into next year’s budget and start putting your organization’s sustainable intentions to the test.

There are other business benefits to be realized. Measuring your indoor air quality; making sure that non-toxic paints, sealants, and carpets are used in remodels and upgrades; and improving ventilation are key elements in risk management. Insurance companies are now looking at LEED certification as a risk-mitigation tool. Last fall, Fireman’s Fund became the first major company to offer a discount on commercial insurance for green buildings. Maybe you and your CFO should take a look at potential insurance cost savings and reduced risk of a successful lawsuit for “sick building syndrome” as a justification for a LEED-certification program for existing buildings, future tenant improvements, and any new buildings you’re planning to build or lease.

But, wait, there’s more! (Does this sound like a 1980s Ginsu knife commercial?) What about productivity enhancements? Every year, you’re going to spend $300 to $600 per square foot per year on people. Getting 5-percent improvements in productivity added to company revenues would just about pay for the entire rent on your building. Getting even a 1-percent improvement is equivalent to reducing your energy bill to zero. Productivity is the “low-hanging fruit.” Shouldn’t the COO of your organization be asked if he or she wants to cut rent and energy bills to zero? There’s plenty of back-up data to support the contention that this is entirely possible (just Google “Carnegie Mellon University” and “Ebids,” and you can download all this back-up information).

Did I remember to say that, if you’re a public company, Wall Street is interested in what you’re doing to green your company and make your operations more sustainable? One of my developer clients is in that position. After getting hammered with this question from analysts, the chief investment officer put out the word to the design and construction team: Form a task force and come back with every possible answer to that question. Wouldn’t you rather be in front of the curve than behind it, driving the sustainability train at your organization rather than getting run over by it?

What about your carbon footprint? Still think that has something to do with shoe size? The Conference Board reported last fall that 75 percent of 92 member companies surveyed (the largest companies in the land) were already measuring this in preparation for the day (not long distant) that there will be a “cap and trade” system for carbon-dioxide emissions. If you’re a large energy user, you need to start thinking about how to cut net energy use by 50 percent over a rather short time period, and then about how to cut it 50 percent again. If not for cost reasons, you’ll need to take this move to shrink your carbon footprint.

Energy and utility savings, reduced maintenance, enhanced building value, productivity gains, health-cost reductions, lower insurance costs, improved public relations and marketing, reduced risk of lawsuits, improved investor and stakeholder relations, greater employee retention and easier recruitment, peace of mind when top management calls: You can fill in the numbers. The business case for green buildings and greener facilities is clear.

The rationale is evident, the evidence is strong, and the choice to respond is yours. Understanding and articulating the business case for greening your facilities has never been more important to you, your career, or your organization. Put the case together for your top management; you might be surprised at how they react.

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