SR Inc. to Convene Corporate/Commercial Real Estate Executives and Drive an Industry Closer to Greater Sustainability

November 12, 2011

The Sustainability Roundtable, Inc. (SR Inc.), the for-profit, shared cost research and consulting firm will bring together corporate/commercial real estate executives and sustainability professionals who represent over 60 member-client organizations at SR Inc.’s Third Annual Summit entitled, “The Change Driving Sustainability” on November 30th and December 1st at the St. Regis Hotel in Washington D.C.

This invitation only two-day event will feature: sustainability excellence award winners; presentations and case studies of SR Inc.’s 2011 Research Program; panel discussions with Federal agency representatives; and, facilitated sessions to develop SR Inc.’s 2012 Research Program.

Management Best Practice Sessions will include:

Portfolio-wide Sustainability Strategies: What strategies do Real Estate Executives use to resource and create sustainable value. (Includes Innovative Finance for Energy Efficiency)

Benchmarking Sustainability: What sustainability KPIs should Leaders adopt and what are the relevant performance benchmarks.

Sustainable Leased Space: How Leaders move to more sustainable leased space? How Tenants and Landlords systematically implement green leases and what provisions in RFPs, LOIs and Leases are used.

Alternative Workplace Strategies: What AWS strategies are successfully adopted to increase productivity and how can landlord’s best respond.

Working with the Federal Government: What are the best sustainability resources available within the Federal Government and how can Real Estate Executives partner with them.

The collaboration of SR Inc.’s member-clients supported by SR Inc.’s analysts, researchers, consultants and advisors is rapidly driving the real estate industry toward greater sustainability with breakthrough management best practices about ‘what works’ to apply the principles of sustainable real estate strategies across a portfolio that reduce operating expenses/occupancy costs; enhance enterprise/asset value; and align with organizations’ commitment to the environment.

If you would like to learn more about SR Inc.’s Annual Summit III or how SR Inc.’s resources and implementation guidance could help you drive your organization closer to sustainability, contact SR Inc.’s Larry Simpson, Executive Vice President – Advisory Services at larrysimpson@sustainround.com.

(The author is Larry Simpson, Executive Vice President, Advisory Services, Sustainability Roundtable, Inc. Additional posts can be found in SR Inc.’s Forum found at http://www.sustainround.com/aboutst/blog/)

 


It’s not Rocket Science or Brain Surgery, its Corporate Real Estate Budgeting for Greater Sustainable Outcomes

August 22, 2011

Summertime, right? Time for vacation with family and to regroup before the blur of activity in the post-Labor Day fourth quarter? Wrong.

For most of you, the month of August is about hungering down in a conference room converted, “war room” with co-workers crunching numbers to prepare your real estate budget for departmental and corporate approval.

As you know, the budgeting season can be a tedious process to track down information, project internal charge-back costs to offset expenses, calculate macro interest rates, collect data from various systems and sources, and project/reconcile budget-to-actuals.

But, you don’t have to go visit a rocket scientist or ask a brain surgeon to know we are still amidst difficult financial times for most companies and budgeting is getting more and more difficult. The challenges you face are how to reduce operating expenses and enhance asset/enterprise value. But, now you’re being asked more and more to align the real estate portfolio with corporate environmental goals while achieving an acceptable rate of return.

How are you going to do find monies in your budget to create a sustainability strategy with so much less? The Sustainability Roundtable, Inc. (SR Inc.) and their most recent research just might have some of the answers.

SR Inc., in their report, “Allocating Resources for Sustainable Outcomes” found that:

  • Sustainability upgrades can have a substantial impact on the enterprise bottom-line to reduce operating and maintenance costs, mitigate carbon impact, improve employee productivity and increase asset value.
  • Capital allocations to improve indoor environmental quality can be more cost-effective and create greater enterprise value than energy conservation and efficiency investments.
  • Determining the relevant metrics and qualifying some sustainability key performance indicators (KPI) is difficult but methods are emerging measure intangible benefits.
  • Base financial models such as simple payback and ROI are inadequate to assess the real costs and benefits of most sustainability projects.
  • Energy performance can be benchmarked, monitored and evaluated, and therefore energy efficiency upgrades are high-priority for innovative finance programs.

But, you don’t own all of your facilities and have little control on the pass through expenses from your landlords in your current lease. SR Inc. has conducted some breakthrough research in a report entitled, “More Sustainable Leased Space,” where the adoption of ‘green lease’ language and other measures can help you achieve greater sustainability and reduce occupancy expenses. The research found:

  • To overcome conflicting priorities and the barriers that hinder the move to more sustainable leased space, leading companies develop a strong business case aligned with corporate goals, conduct total lifecycle accounting, adopt “green” leases, and gather data for sustainability KPIs to benchmark internally and externally.
  • Many corporate tenants pursue LEED-CI or BREEAM interiors to reinforce credibility, provide brand recognition and engage employees/clients. To avoid administrative burdens of formal certification but still obtain the benefits, some choose to ‘design to LEED-CI’ but not certify.
  • To achieve cost-effective sustainable leased space and certification, CRE leaders give preference to those buildings that are ENERGY STAR rated or whose landlord has demonstrated a commitment to sustainability.

SR Inc.’s Vice President of Research and Consulting, Irina Mladenova claims, “overestimating certification costs and setting unrealistically high hurdle rates based on a simple payback analysis are typically the biggest barriers in the move towards more sustainable leased space. When real estate executives hire consultants to lower the documentation and filing cost but do not overpay them and when a life-cycle cost analysis rather than a simple payback analysis is used to establish hurdle rates, the additional costs to achieving green building certification is in fact far less (0-2%) than many real estate professionals assume. And, there is an increasing recognition that green buildings result in significant, yet hard to quantify, health and productivity benefits.”

The challenge to find monies in your budget for sustainable real estate is no longer a cost benefit trade-off. The budgeting process may be arduous but, there is clear evidence that you can achieve a more sustainable real estate portfolio by allocating resources where they will have the greatest impact and implement initiatives that are more about changing behavior than being capital intensive. And, besides, budgeting for sustainable outcomes is a heck of lot easier than rocket science and brain surgery.

If you would like to learn more about how you can create a budget with greater sustainable outcomes you can download SR Inc.’s research: “More Sustainable Leased Space,” (http://sustainround.com/research/leasedSpace.php);  and for a copy of “Allocating Resources for Sustainable Outcomes” please contact Larry Simpson, EVP of Advisory Services at larrysimpson@sustainround.com.

(The author is Larry Simpson, Executive Vice President, Sustainability Roundtable, Inc.  who can be reached at larrysimpson@sustainround.com. Additional posts can be found in SR Inc.’s Forum found at http://www.sustainround.com/forum/ )


The Juxtaposition in Sustainability of the Built Environment

May 23, 2011

“Out with the new, in with the newer”…there is the juxtaposition occurring in sustainability of the built environment.

There is a shift from new to newer technologies; a migration of leadership within some companies from the corporate real estate professionals to chief sustainability officers; and an evolution of not just to embrace best practices but, advance them and to define the future of sustainability in corporate facilities.

New to Newer Technologies

At a recent Green Best Practices Summit in Boston, New England’s sustainability leaders heard from Jim Gorton of Cape Wind, a company who is developing America’s first offshore wind farm off the coast of Massachusetts with 130 wind turbines that will produce clean, renewable energy. Gorton highlighted that less than a month after the federal government gave approval to start construction, a major coal power plant in Massachusetts announced it would shut down by 2014. Gorton said, “the juxtaposition of these two announcements … illustrates where we are going as an industry, and what we have to do to move toward creating a healthier environment and increasing energy independence.”

Migration of Leadership

There is a juxtaposition occurring in many of today’s corporate cultures where the responsibility to develop sustainability strategies has transitioned beyond the corporate real estate department to manage energy consumption, waste reduction and water conservation and others within a company who address corporate social responsibility. Sustainability has reached “C-Suite” prominence with the emergence of Chief Sustainability Officers to coordinate the convergence between environment, economic and social aspects that will result in top-down leadership and more comprehensive corporate environmental stewardship.

The Horizon of Sustainability

But, the most exciting advancement is that companies aren’t just utilizing the principles of sustainability to meet the objectives of occupancy cost reduction, enhanced enterprise value and overall commitment to environmental preservation. Some of the most innovative companies are redefining what sustainability will be as they push the limits to exploit opportunities and minimize risk of what is on the horizon for sustainability.

With the progression of these and other developments, the juxtaposition of today and tomorrow lies with the question each of us must ask ourselves of, “are you ready?” Will you be poised to take advantage of emerging technology, industry best practices and processes to create sustainability strategies that support your organization’s objectives, appeal to your sense of “doing the right thing” and collaborate as a society in the move to greater sustainability?

Are you ready for the juxtaposition of who you are and who you need to be to play your role and move an industry?

(The author is Larry Simpson, Executive Vice President, Sustainability Roundtable, Inc.  who can be reached at larrysimpson@sustainround.com. Additional posts can be found in SR Inc.’s Forum found at http://www.sustainround.com/forum/ )


Carrot or Stick: What Motivates Your Company to Disclose Sustainability Initiatives?

March 21, 2011

Increasingly, companies are publishing information about their greenhouse gas emissions, climate change initiatives, and sustainability strategies because they believe that doing so makes them more attractive to investors. This is the carrot.

A number of organizations promote voluntary sustainability disclosure and reporting, such as the Global Reporting Initiative (GRI) and the Carbon Disclosure Project (CDP). The GRI provides guidelines for reporting, while the CDP compiles voluntary disclosures from over 2,500 companies, including 330 members of the U.S. S&P 500, in response to it’s annual questionnaire issued on behalf of hundreds of leading investors.

Some companies already incorporate information about their sustainability initiatives in their annual reports and Securities and Exchange Commission (SEC) filings. The latter has become a necessity for most, given that in February 2010 the SEC clarified that existing disclosure rules requiring companies to report on issues material to investors also cover climate change risks and opportunities. This is the stick.

Which, carrot or stick, does your company respond to?

Many companies still decline to disclose voluntarily or file with the SEC on the issue of climate change. The extent of non-compliance with the SEC requirements was recently highlighted in a report developed with input from Ceres’ Investor Network on Climate Risk, which outlines generally weak climate disclosure by businesses, and proposes steps for improving such disclosure, especially in the annual 10-K financial filings due by March 31, 2011. The Ceres report comes just after Mercer issued a new study warning that climate change could increase investment portfolio risk by 10 percent over the next 20 years.

Sustainability Roundtable EVP of Research, Michael Gresty, observes that “failure to disclose signals either that companies are unwilling to reveal poor performance that will present them in bad light, which is a red flag to investors, or that they have not assessed the risks and opportunities, which is an even bigger red flag. Since real estate assets are the main source of direct and indirect GHG emissions for most companies, and these correlate closely with their cost of energy, we see the sector leaders in our Sustainable Real Estate Roundtable working actively to measure and manage energy and GHG emissions, and to report on their portfolio-wide sustainability initiatives.” (See SRER report Portfolio-wide Sustainability Strategy for more information.)

A proactive response to the carrot (voluntary) and SEC mandated (stick) disclosure has created competitive advantage for companies that have been developing and implementing successful sustainability strategies. To some companies the underlying driver behind sustainability initiatives is to reduce operating expenses by applying the principles of sustainability that include: improve energy efficiency; resource utilization and waste reduction; procure renewable energy sources; and, space optimization through alternative workplace environments to reduce the overall size and cost of the real estate portfolio — for many companies, the OPEX reduction is ‘carrot’ enough. But, as mainstream investors increasingly use broader environmental, social and governance (ESG) research to mitigate risk and seek alpha, those companies that fail to disclose raise doubts about what they may be hiding, and cede the terrain of transparency to their competitors.

(The post was originally published in the Sustainability Roundtable’s blog found at http://www.sustainround.com/forum/SOR/ and was republished with permission by the author, Larry Simpson, Executive Vice President, Sustainability Roundtable, Inc.)


Benchmarking Corporate Real Estate Data to Drive Sustainability Excellence: “You Can’t Manage What You Can’t Measure”

February 24, 2011

Benchmarking is essential to create a real estate strategy that ultimately can drive sustainability excellence…to get where you want to go, you have to know where you are starting from.

The primary purpose of benchmarking corporate real estate data is to discover areas of underperformance (both relative to relative to leased and owned assets within your portfolio as well as relative to industry standard by building type, industry, and geography), investigate the reasons for this, set goals, and develop improvement initiatives to achieve those goals.

Benchmarking is not usually a one-time exercise. Regular benchmarking on an annual basis is key to achieving goals and continuous improvement.

Throughout the benchmarking process you have to keep in mind the axiom, “you can’t manage what you can’t measure,” and that the purpose is not measurement for it’s own sake, but measurement to manage for greater sustainability.

In a monthly webinar by the Sustainability Roundtable, Inc. (SR Inc.) in October 2010 entitled, “KPIs and Benchmarking Portfolio-wide” we cited sustainability key performance indicators (KPIs) in the most common categories, include:

Operations (energy, water, waste, and space utilization)

Financial (capital investments, savings generated, operational investment of savings, return requirements/criteria)

Environment (indoor air quality, GHG emissions, and land use)

People (sustainability expertise, occupant engagement, alternative workplace options & utilization and occupant absenteeism)

The fundamental barrier to benchmarking is the difficulty to obtain reliable data, both for the assets to be benchmarked and for the benchmarks to be used. The critical steps to start an effective benchmarking program for real estate sustainability are:

Establish KPIs, or review them if these exist already, to evaluate whether or not you’re making progress across key impact areas. If not, select the appropriate common KPIs relevant to the company’s specific business model, product, and needs.

Determine whether the data for these KPIs exist within the enterprise, and if not, implement a longitudinal measurement and collection program to gather and track data.

Create a data repository (not spreadsheets) to collect and analyze the data, determine its completeness and reliability, and assure data quality.

Select the set(s) of external benchmarking data you will use, and ensure that these will be updated and available in the future.

Analyze the data and compare them to the benchmark set.

Publish the results to the teams responsible for data collection, and for facility and asset management. This establishes a baseline.

Set meaningful short, medium and long-term improvement goals, to position your assets and your portfolio where you want them to be.

Some of the more commonly used metrics are:

Energy use (all types, gigajoules per square foot per year)

Water use (gallons per square foot per year)

Waste to landfill (pounds per square foot per year)

Carbon dioxide equivalent, CO2e (pounds per square foot per year)

Air quality (particulates and other pollutants, parts per million)

Some available resources for benchmarking information can be found at:

BOMA’s Experience Exchange Report (EER) service – $279 Per Year

CoreNet Global Real Estate Benchmarking (REB) Portal – $175-275/Building

ENERGY STAR Portfolio Manager – FREE

Climate Disclosure Project – Cost Varies by Level of Inquiry

Corporate Global Reporting Initiative (GRI) Reports – FREE

Michael Gresty, SR Inc.’s Executive Vice President of Research and Consulting, notes that, “each one of the benchmarking steps are essential to create a process that empowers executives and staff with actionable information to support decision-making. Doing this is difficult—if it were easy, everyone would have done it already—but essential to the effective management of real estate assets for greater sustainability. Benchmarking is not an end in itself, but without it, it is impossible for managers to set robust goals to measure progress.”

Corporate real estate professionals who are serious about creating sustainable enterprise value from real estate assets ensure that they have a meaningful benchmarking program in place, and are committed to it long-term because, “you can’t manage what you can’t measure.”

Larry Simpson

Executive Vice President

Sustainability Roundtable, Inc.

larrysimpson@sustainround.com

 

(The post was originally published in the Sustainability Roundtable’s blog found at http://www.sustainround.com/forum/SOR/ and was republished with permission by the author, Larry Simpson, Executive Vice President, Sustainability Roundtable, Inc.)


Creating Enterprise Value through Sustainable Real Estate Strategies

February 3, 2011

Sustainable corporate real estate strategies:

– reduce operational and occupancy costs through energy efficiency and space optimization, AND

– avoid customer, employee, environmental and regulatory risk, AND

– align portfolio management with an organization’s overall objectives.

Sustainable development, which has been defined as “meeting the needs of the present without compromising the ability of future generations to meet their own needs,” is a policy objective and global megatrend that companies must align with to create enterprise value.

The hallmark of corporate sustainability excellence is inclusion in the Dow Jones Sustainability Index (DJSI). The DJSI recognizes that “corporate sustainability is attractive to investors because it aims to increase long-term shareholder value. Since corporate sustainability performance can now be financially quantified, they now have an investable corporate sustainability concept. Second, sustainability leaders are increasingly expected to show superior performance and favorable risk/return profiles. A growing number of investors are convinced that sustainability is a catalyst for enlightened and disciplined management, and thus, a crucial success factor.”

DJSI recognition does not necessarily require a sustainable corporate real estate strategy, but those organizations that proactively incorporate the principles of sustainability into managing their portfolio of leased and owned facilities can make significant contributions to their organization’s overall enhanced value.

The challenge for the corporate real estate and facilities professional is made a bit easier when senior management fully embraces the principles of sustainability and is willing to make the necessary investment that achieves an acceptable internal rate of return. 

The way real estate strategies play a major role to create enterprise value is best highlighted in the Sustainability Roundtable, Inc.’s (SR Inc.) “2010 Corporate Real Estate Management Best Practice Guidebook” which reports the following best practices they originally researched from leading corporations:

  • Portfolio-wide sustainable real estate strategy is an essential component of a corporate response to the sustainability megatrend.
  • Leading real estate executives align with corporate strategy to establish a vision of sustainable real estate; implement effective governance; guidance; short-, medium- and long- term goals; and demand accountability for results.
  • Executives can create sustainable efficiency and value by developing and implementing portfolio-wide initiatives to improve portfolio performance and increase asset value.

Going forward, innovative real estate professionals are being increasingly recognized for taking the lead to exceed goals. To be successful they must implement proven sustainable real estate strategies that: compliment the corporate vision; anticipate long-term environmental impact; meet shareholder demand for financial returns; foster customer loyalty for company products and services; set high standards for the corporate code of conduct; and, maintain employee affinity and job satisfaction.

Michael Gresty, SR Inc’s EVP of Research and Consulting, observes that “today, the corporate real estate function is often by default the internal champion of sustainability initiatives. CRE teams can now do more to secure C-suite buy-in that enables them to maximize value creation rather than simply minimize costs. CRE is experiencing a metamorphosis to become a new source of value and risk management.”

Sustainability is no longer just “a good idea” or “the right thing to do,” sustainability is now an investable strategy as sustainable real estate portfolio management has become an important element in creating benefits for companies and their investors. As the sustainable enterprise value creation dynamic expands, it will have an even more profound effect on improving individual and corporate financial performance, the global economy, and environmental stewardship.

(The post was originally published in the Sustainability Roundtable’s blog found at http://www.sustainround.com/forum/SOR/ and was republished with permission by the author, Larry Simpson, Executive Vice President, Sustainability Roundtable, Inc.)


Aligning Real Estate Strategy with Corporate Sustainability Objectives

January 18, 2011

Fact: According to the recent UN Global Compact-Accenture CEO Study, “93% of CEOs believe that sustainability issues will be critical to the future of their business and 96% of CEOs believe that sustainability issues should be fully integrated into the strategy and operations of a company.”

Impact: Corporate real estate and facilities organizations will be challenged by their senior leadership to integrate sustainability throughout their real estate strategy to operate sustainable facilities as a new way of doing business. While this does not guarantee success, CRE organizations that fail to pursue sustainability principles will be left behind. Said another way, embracing sustainability to manage corporate real estate is no longer an option, it’s an imperative because, “green is the new black.”

The problem then becomes, “what happens when a company’s corporate real estate strategy is not aligned with corporate objectives?” The short answer is, there may be some very difficult conversations between the CRE professional and senior management. But, the longer answer involves missed opportunities to take a leadership position in their company’s movement toward sustainability.

It is becoming increasingly clear that the recognition of senior management’s desire to embrace sustainability and the important role of real estate should be driving CRE strategy and generating measurable results. Because of what is at stake in the importance of achieving sustainability objectives, and the significant risk management and cost savings opportunities, doing nothing is no longer an option. Read the rest of this entry »