The Economics of Green: Getting to the Bottom of Green Facility Management and the Bottom Line
As more organizations adopt green building practices, speculations about the positive financial impact of going green are becoming increasingly substantiated. The U.S. Green Building Council’s (USGBC) family of LEED Rating Systems recognize building practices that are environmentally responsible, healthy for building occupants, as well as profitable. The new LEED for Existing Buildings (LEED-EB) Rating System guides the process of operating and upgrading buildings in a sustainable way over their lifecycles, and affords a new opportunity for existing buildings to cash in on the benefits of operating green.
While the heart of any green building project is minimizing the impact that the built environment has on the natural environment, green buildings also offer healthy, productive workspaces that cost less to operate and maintain than conventional buildings. National Geographic Society received LEED-EB Silver certification for their headquarters complex in Washington, D.C. Christopher Liedel, Chief Financial Officer, stated that “The conservation initiatives (of LEED-EB) reinforce the organization’s positive image because they are in line with the Society’s mission.” Significant financial benefits were a byproduct of their commitment to the environment, and the value of the headquarters complex has increased by $4 for every $1 invested.
Prior to embarking on any project that includes upgrades to building systems and changes in operational procedures, building owners, financial decision-makers, and facility managers need to consider the financial impact of these changes. Fortunately, many organizations have served as pioneers, and now a growing body of data on the costs and benefits of operating green in real buildings exists. This means building owners can be confident that environmentally responsible choices can also be fiscally responsible. The National Geographic Society is just one of several LEED-EB projects that have documented substantial financial benefits following certification.
Reduced Costs Through Energy Efficiency
Sustainability measures that reduce utility costs have a very short payback schedule, sometimes as little as six months. This means that investing in energy and water efficiency upgrades is a low risk way to simultaneously save money and lessen the building’s environmental impact. Building projects that have achieved LEED-EB certification have been reaping the benefits of reduced utility costs.
Energy consumption is a major contributor to environmental problems, from local air pollution to global warming. This is why the LEED-EB Rating System includes 20 credits in the Energy & Atmosphere category related to maximizing energy efficiency and renewable energy in buildings. For many commercial buildings, energy is the single largest operating expense. Energy efficiency brings with it both environmental and financial benefits.
Thomas Properties Group, LCC, manages the California EPA Headquarters in Sacramento, CA. The building was LEED-EB certified earlier this year after implementing a number of sustainable operations procedures and building upgrades. These measures included high-efficiency task lights and motion sensors, improved air handlers and HVAC equipment, and photovoltaic panels for on-site energy generation. Following these and other upgrades, annual energy use dropped 1.5 million kWh. Prices for electricity in California tend to be among the highest in the nation. Based on average California energy costs for commercial buildings of 11.08 cents per kWh in 2004 and 12.13 cents per kWh in 2003 , a 1.5 million kWh reduction in annual energy use would have saved nearly $350,000 over the last two years alone.
Water Efficiency Savings
Water efficiency is another way buildings can save on utility costs while minimizing their environmental impact. JohnsonDiversey spent $21,000 on system upgrades to minimize water use in their LEED-EB Gold facility. This was accomplished by establishing an irrigation system that uses only captured rain and recycled site water. Water is collected and held in an on-site retention pond. Water pumped from the pond is used for irrigation, negating the use of potable water for irrigation needs. They also reduced water use inside their building by installing aerators in lavatory faucets and replacing valve diaphragms in toilets and urinals. Overall, JohnsonDiversey expects annual savings of about $10,000 due to reduced water use. The savings associated with water use are not as dramatic as energy efficiency savings, but they do pay off over time, and might be especially sensible in regions where water is less readily available.
Savvy Waste Management
Commercial and industrial buildings in the U.S. account for 35 to 40 percent of solid waste streams . For municipalities and large organizations, waste disposal can be a major cost stream. Organizations can take advantage of the growing market for recycled materials by establishing recycling and reuse programs. The industry, with $236 billion in gross annual revenues, accounts for about 2.7 percent of the U.S. gross domestic product.
Those willing to investigate and implement sensible recycling programs can substantially reduce waste disposal costs. Thomas Properties Group (California EPA Headquarters) diverted 56 percent of the 365 tons of waste generated in their building through an aggressive recycling program in 2002. Their program includes paper recycling receptacles at every work station, an on-site compactor for dry recycling material, a vermicomposting center for food waste generated by the building’s cafe, and distributing recycling information to building occupants through their web site. Getting building occupants informed and enthusiastic is important because successful recycling programs require the support and participation of individuals.
Significant savings have been the result of these efforts. At just $0.01 per square foot, Thomas Properties Group spends 80% less on waste removal than the average building in downtown Sacramento (a savings of $45,000 per year). Another $65,000 is saved annually by using dry recycling cans instead of lined ones, $25,000 is saved through the use of reusable cloth bags for large recycling bins, and $2,000 is saved as a result of their vermicomposting program.
Increased Occupant Health and Productivity
An oftentimes-overlooked economic benefit of green buildings is the increased productivity of building occupants. The salaries and benefits of staff members are typically the largest expense an organization faces (Figure 1), and can cost as much as 72 times that of building energy costs.
The indoor environments of buildings significantly influence occupant health, including conditions such as communicable respiratory illness; allergy, asthma, and sick building symptoms; and worker performance. Green design features such as daylighting, thermal controls, and low-VOC wall coverings, carpeting, and furniture improve the health and comfort of occupants, which, in turn, reduces absenteeism and increases productivity. Nationwide, improvements in indoor environmental quality could result in savings or productivity gains of $37 billion to $208 billion annually.
Buildings that have quantified productivity and absenteeism following indoor environment improvements have found productivity increases of up to 16% and decreases in absenteeism by 25%. Because many of the upgrades that improve occupant comfort also improve energy efficiency, utility bill savings are also realized.
Addressing Funding Barriers
Green operations and upgrades can be a sound investment. Despite this, organizations might face real or perceived financial barriers as they consider implementing sustainability actions. Facility managers and others interested in promoting sustainability within their organizations should prepare themselves to address these potential barriers.
When funding limitations are a factor, the flexible approach LEED-EB uses helps organizations get started with sustainability actions without mandating large up-front investments. LEED-EB is intended to serve as a long-term roadmap to sustainability, allowing facility managers to implement changes to their buildings on a timeline that matches funding availability or the existing replacement schedule for equipment. For example, one credit in the LEED-EB Materials and Resources category involves installing light bulbs that have low mercury content. Under the requirements of this credit, organizations must establish a low mercury content policy that pertains only to acquisition of new light bulbs. Regardless of their mercury content, existing bulbs do not need to be replaced prematurely, but can be replaced incrementally as funding allows or once they reach the end of their performance life.
LEED-EB also offers a number of environmental actions that require little or no capital investment. By addressing the processes associated with building operations, organizations can earn points towards certification without spending money. Green cleaning credits, for example, simply require your organization to pay attention to the cleaning methods and storage procedures for cleaning equipment and chemicals used in the building. Credits such as these can be implemented immediately, while others that require a capital investment can be postponed until funding becomes available. Planning to integrate green equipment upgrades into the existing upgrade schedule minimizes the green premium (because equipment will only be replaced when old equipment is at the end of its life), establishes a long-term plan for achieving sustainability, and lets organizations eventually capitalize on savings associated with green building upgrades.
Investing in sustainability does, at times, require capital expenditures. However, perception of increased expense is often greater than the actual cost. The demand for green products has gained momentum, bringing costs down to a level comparable to conventional products. Programs like LEED further build the market for green products and services, resulting in green premiums that are non-existent or a small increase over conventional products. Comparing estimates between green and standard products for equipment you are considering purchasing for your building will reveal just how much, or little, green alternatives add to short-term expenses. Finally, organizations should look into federal and state programs that might offer tax incentives or low-interest loans for sustainable improvements to their buildings. These incentives can make upgrades more economically feasible.
To Learn More About LEED-EB
Please visit the USGBC and LEED home pages for more information about LEED-EB.
Training workshops on LEED-EB are offered around the country. You can find times and locations on the USGBC’s Events Training Calendar.
Stay tuned to FM Link
The USGBC will be providing a series of practical articles on LEED-EB implementation for facility managers. Articles will address topics like Green Cleaning, Green Site Management, Energy Efficiency, Energy Star and LEED-EB, Measuring and Monitoring for LEED-EB Success, Implementing LEED-EB in Your Organization, and other topics of interest to facility managers.
