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Why Green Building is Good Business
Gil Friend, 23 Jan 05

Gil Friend is a systems ecologist and business strategist, and is the CEO of Natural Logic, an environmentally-focused strategy, design and management consultancy, as well as a regular contributor to Worldchanging's Sustainability Sundays.

Speaking of assumptions about the cost of green: I witnessed an interesting conversation this week. At a design charrette for a proposed new office building, the lead architect challenged the client with a goal: a building 60% more energy efficient than the prevailing community standard. The cost estimator said, "Can't be done within budget." The mechanical and electrical engineers said, "Can't be done at all." The "green building" consultant said, "Can be done. We've done it. And here's a list of other buildings that have done it."

Which could have been the beginning of a useful and informative conversation, except the players continued doing laps of the field, saying much the same thing. "Can too." "Can't either." Another example - sadly, all too common - of business decisions based on assumptions, not facts.

The fact is that a key part of the green building revolution now underway has been the revolution in economics. Two years ago, a LEED™ "Gold" building might have cost 20% more on a first cost basis. (Still a good deal, given that reduced operating costs would typically provide a 10-20% per year return on investment (ROI) on that incremental investment.) Today, with several years of learning curve behind them, practitioners are finding a different story.

An analysis of 33 green buildings conducted for the State of California by Greg Kats of Capital E found a range of zero to two percent incremental first cost, and handsome ROI from lower operating costs, but- and this is key - essentially no correlation between greenness and cost. The most significant correlates, in our experience, are whether greening - and stakeholder inclusion -- are integrated into the project from the very beginning, or whether they're added in (or slapped on) later. Some cases in point: Toyota recently opened a 626,000 square foot LEED Gold building in Torrance CA that came in, according to California Construction, "on a budget ($90 per ft. for shell and interiors) that would be consider[ed] modest for speculative development, let alone a corporate headquarters proves that green can be 'mainstream.'" Herman Miller's C1 and MarketPlace buildings cost less than local comparables.

As Robert Pitts, Toyota group vice president for administrative services, says:

"Every decision along the way also had to make good business sense and fall within budget guidelines… We wanted to show that building an environmentally sensitive office complex does not have to be limited to small or unique projects - or ones with inflated budgets."
"Rating buildings in this way reveals how inefficient traditional buildings and building processes are," The Economist observes. "'We can sometimes waste up to 30 cents on the dollar,' says Phillip Bernstein, an architect and professor at Yale University. 'It's not just the consumption of energy, it's the use of materials, the waste of water, the incredibly inefficient strategies we use for choosing the subsystems of our buildings. It's a scary thing.' In part, he says, this is because the construction industry is so fragmented. Designers, architects, engineers, developers and builders each make decisions that serve their own interests, but create huge inefficiencies overall." And there's the key. My colleague Bill Reed, one of the developers of the LEED rating system observes that the key to successful projects with successful economics is three "E"s: Everyone, Everything, and Early. Engage all stakeholders; consider every aspect of the project in an integrated way; start early in the development process.

Guess what? It's as true about business strategy, product design, industrial processes, food system and transportation infrastructure as it is about buildings.

As Neal Pierce of the Washington Post comments,

"It seems obvious: the reason only a tiny percentage of new American buildings and retrofits aren't green isn't cost. It's lack of ingenuity or knowledge of new construction techniques -- architects and builders wed to the 'same-old,' lenders leery of anything unconventional.

"The fault also lies with national leaders unwilling to tell us in clear terms that a nation secure economically and environmentally and against foreign threats, means energy savings across the board -- efficient and sustainable buildings included. It's a message our current president apparently doesn't comprehend, at least won't articulate."

But that's a story for another time.

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No the reason is if you construct a building and something goes horribly wrong you go to jail.. that tends to put a huge ass damper on peoples willingness to try new ideas right off the bat.

As a reason builders tend to be very very conservative. Thier lives as well as others depend on it.

Posted by: wintermane on 23 Jan 05

It's also the banks. If your bank holds $50 billion in mortgages on commercial property, you will do anything to protect that investment. So you'll lobby to make sure that the building codes discourage experimentation in green technologies, because a green building, with its lower operating costs, will make your other buildings less valuable.

Posted by: Patrick Di Justo on 23 Jan 05

The owners of the buildings are the ones who decide first whether or not their building will be a LEED building. The architects and engineers can't do that on their own. They try to make it as efficient or green as possible, but the process needs to be initiated by the owners. Designers can make their case for a green building, but their decisions are guided by the owner's wishes.

Owners decide not to go for green for many reasons. One is liability. Two is the desire for a faster and cheaper design schedule. This one is perhaps the most largest stumbling block and one of the biggest causes of poorly designed buildings.

I don't think national leadership is in a position to take action yet. Many state and local governments are taking action, when they see that their area is ready to build all green. The country, as a whole, is not ready to have green buildings mandated. Not enough people know about the many advantages nor are building codes in most areas ready for it.

Posted by: Jacqui on 24 Jan 05

Ok, I just found an exception to the rules stated above. The US GSA is planning that all their new courthouse buildings and renovated office buildings will be at least LEED Certified, if not Gold or Silver.

See Studies on LEED Buildings.

Posted by: Jacqui on 24 Jan 05



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