In the United States, more and more commercial buildings are boasting a green business certification. Bloomberg reports that two-thirds of office buildings in Chicago now hold LEED or Energy Star certifications, the highest rate among the country’s 30 largest real estate markets. More than half of the buildings in San Francisco, Atlanta, Houston, and Minneapolis-St. Paul meet one of these standards, too.
The rise in popularity of green business certification represents a shift in real estate development. As global warming becomes a business-critical concern, developers and occupants are looking for buildings that go beyond aesthetics to deliver sustainable performance. And it’s no wonder that construction is a hot spot for sustainable innovation as, according to the U.S. Green Building Council (USGBC), buildings alone represent nearly 40% of carbon dioxide emissions in the United States.
What “Sustainable Building” Means
Sustainability, of course, is just a concept. Each certification program has its own definitions and criteria. In the United States, the common choice is LEED (or Leadership in Energy and Environmental Design). With LEED, designers and engineers have significant leeway in how they meet the standards. Some consider this a benefit, as it encourages designers to be creative and innovative. And there is no doubt that sustainability is a field in which rapid innovation is desperately needed.
Others, however, have criticized this lack of structure. According to Forbes, this latitude has led to accusations of greenwashing. In particular, critics have noted that LEED gives points for add-ons like bike racks and that certification can be awarded based solely on data provided by the building’s designers.
Other programs have more concrete requirements. The US government’s Energy Star certification was originally designed for appliances, but has since expanded to include buildings. To achieve the certification, a building must operate in the top quarter of energy efficiency among similar buildings without reducing comfort or quality. Almost 30,000 facilities in the United States now have an Energy Star rating. Many of these have other certifications as well.
And across the pond, the BREEAM (or Building Research Establishment Environmental Assessment Method) program dominates the green building certification scene. While LEED relies on design teams to honestly report their data, BREEAM uses its own assessors. Some may find this increased rigor a benefit, while others may see it as just more red tape. For UK-based developers and real estate investors, BREEAM comes with an added bonus: It’s built off of British building codes. This can make it easier to check off all the regulatory boxes.
Some developers and investors may be interested in more than just environmental excellence. Programs are increasingly taking a holistic approach. The German Sustainable Building Council’s DGNB System, popular throughout Western Europe, gives points for attention to a building’s sociocultural impact.
Social and Economic Benefits of Green Certification
Speaking of the S in ESG, sustainable buildings may lead to gains in the human capital arena. BREEAM conducted a survey of clients and construction personnel. More than 70% of respondents believed that certification yielded corporate social responsibility benefits. One-third reported community benefits and improved employee productivity. While these numbers are encouraging, they do come with caveats. The survey was based on self-reporting, for example, and it was curated by BREEAM rather than a neutral third party.
There are also potential implications for the bottom line. LEED-certified buildings have nearly 20% lower maintenance costs than similar buildings made with conventional materials and techniques, according to the USGBC. Retrofitting projects also pay off. After the first year, operating costs can reduce by as much as 10%. As occupant demand continues to shift the market toward sustainability, green buildings may also become more valuable holdings.
Perhaps green certification programs were a novelty at one point, but not anymore. In some markets, certification is so common that a building stands out when it’s not officially green—and that makes it less desirable to many potential tenants.
In this way, green building certifications are an effective demonstration of the union of market forces and sustainable choices. And with green construction projected to contribute 1.1 million jobs by 2018, according to USGBC, the economic benefits of this rapidly growing market reach well beyond individual property owners and managers, making a further case for it as a force for social good.