Leaders can no longer ignore this simple fact: In the United States, the construction and operation of residential, commercial, and industrial buildings produce nearly 40% of all carbon emissions that contribute to global warming. Unchecked, the materials and designs used in buildings can harm the environment and employees? health. Companies of all types are beginning to transform the buildings they use in order to reduce emissions, and many leaders are making it clear that environmental concern is not a fad or a PR gimmick; instead, it?s both a long-term obligation and an opportunity. As WPP CEO Sir Martin Sorrell said in a personal interview, ?Our ?green? approach is not altruism; it?s good, responsible business. CEOs ignore [this issue] at their peril.?
Green buildings may cost more up front, but they deliver high returns over the long term. Consider indicative data: Energy savings in green buildings routinely exceed 20% and reach 50% on hot days. Oxygen-rich air, injected into enclosed space, improves employees? health, increasing productivity. Raised floors cut air-conditioning costs by 70%. Dry toilets save millions of gallons of water. A short-term view will discount or ignore those metrics; a long-term, life-cycle view will embrace them. Former Harvard president and current National Economic Council director Lawrence H. Summers said in a personal interview (before this recession) that Harvard?s green lending program, which provided low-interest financing for energy-efficient projects across the university, is ?one of the very few investments I know of that had a higher return than the Harvard endowment over the last decade. Many of those projects were paid for in three or four years.?
New buildings for Bank of America and Hearst Corporation in New York show the possibilities of green business real estate. Each fits closely to the city?s transportation and utility grids, thus shrinking parking requirements, reducing auto emissions, and placing little new strain on water and power systems. Rainfall cools lobby air and waters a planted roof. Heat recovery units, in tandem with the natural gas supply, eliminate energy loss by recapturing and cleaning exhaust. Coated windows provide insulation while maximizing daylight and filtering radiation. Experience shows that designs that let in daylight and give occupants thermal control result in increased productivity. And such features are already increasing building values. Comparable facilities will fast become the new ?trophy? buildings of our era.
Until recently, green issues were the province of academics and activists, and the exemplar of excessive regulation when environmental impact statements delayed real estate projects. The swift turnabout in public awareness and private initiatives has been prompted by rapid gains in the intelligence on sustainability. Investors, advisers, and other stakeholders can now glean ready insights and comparative metrics. For example, the voluntary Leadership in Energy and Environmental Design (LEED) building certification, only 11 years old, is becoming a standard for financing and marketing major corporate buildings. And Dow Jones?s Sustainability Indexes use economic, social, and governance criteria that focus on long-term shareholder value. These tools, already used by asset managers, aim to set the bar for corporate citizenship.
Green real estate policies and projects generally succeed if they meet four criteria. First, they must be strategic: Leaders need to be able to see how they connect to the business mission. Second, their benefits must be measurable, if not precisely quantifiable. In this new, barely charted realm, even proxy measures such as carbon footprint and sustainability indices can be used to support new directions and pilot projects. Third, the policies must be operational, but they do not necessarily require new programs. If the first two criteria are met, leaders can signal their support for green projects within existing programs. Finally, green initiatives should be aspirational. They count with consumers and rank high on young employees? agendas. But make no mistake: Going green is a hard business issue of cost, competitiveness, and survival. Real estate has significant opportunities to affect the sustainability of our planet. With greater transparency, every organization will be accountable for its environmental footprint, and stakeholders will expect positive results.? ? ?
As business enters a new era of more responsive and responsible capitalism, real estate will become even more central to a company?s global presence, competitive strategy, and ability to retain top talent. The fact is, real estate is never neutral. It can multiply shareholder value or diminish it; help an organization achieve its mission, implement its strategy, and compete effectively; or hinder its market position, organizational development, and long-term growth. Real estate compels leaders? attention?and their mastery of the issues and principles behind their largest assets.