By Chris Lotspeich, founder and Principal at Second Hill Group
The built environment is where most sectors of commerce most directly impact the Earth. Every business has a building, and must pay overhead to keep the roof up. Buildings account for roughly 40% of U.S. energy use and pollution. Industrial facilities contribute roughly another 30% of these impacts. This discussion explores best practices in sustainable infrastructure—here defined as commercial and industrial buildings and facilities—and considers the barriers to growth and wider adoption of these approaches.
Sustainable infrastructure performs the same functions and serves the same purposes as conventional structures, but with a smaller ecological “footprint.” Because it is more resource-efficient and incorporates fewer toxic materials and better ventilation, sustainable infrastructure provides healthier indoor and outdoor environments.
Optimized design and operation reduces environmental impacts throughout a facilities’ life cycle and across the supply chain of materials, components and operations. Cutting-edge practices are represented in high-performance installations that deliver energy and water services such as light, comfort, lavatories and production output at reduced cost and pollution. The best facilities mimic natural systems in their resource efficiency, elegant frugality, innovative design, and invigorating interiors that foster greater occupant health and productivity.
The most exciting developments in this field are the expanding range of exemplary installations of all types and applications; the continued adoption of green design into mainstream practice, exemplified by the rapid market penetration and sustained triple-digit growth of the LEED green building standard; and the growing acknowledgement of the compelling economic benefits and strong business case for sustainable infrastructure. The next two years will see more of the same.
Green design is hot, and it’s not just for buildings anymore: industrial facilities are reaping the benefits, and even earning LEED certification. Factories and similar installations are often energy- and resource-intensive, providing larger-scale opportunities for improvement than commercial buildings. These advances do not require new technology, but instead careful attention to design integration. Among the most impressive recent examples is Texas Instruments’ new microchip factory in Richardson, Texas that reduced energy use 20%, water use 35% and emissions even more, yet cost one-third less to build. Similar examples of leapfrog improvement have been demonstrated in other industries ranging from wineries to refineries.
The green building industry is perhaps the most successful example of an industry reorganizing itself for dramatic performance improvements without a government mandate. In the late 1990s a broad coalition of stakeholders formed the U.S. Green Building Council (USGBC). Interest in environmentally-friendly design and construction was not new and numerous innovative projects existed. But there was no consensus about what building techniques and technologies were “green” and no standard guide to the most effective and broadly replicable approaches.
In 2000 the USGBC created the Leadership in Energy and Environmental Design (LEED) rating system, which provides a menu of design features and accepted best practices that earn points toward certification. Within three years 6% of new commercial buildings in the U.S. had applied for LEED certification. Applications continue to grow by about 200 percent annually.
Today LEED represents the thickening wedge of new ideas entering the market mainstream. It defines the most effective approach for first-time practitioners of sustainable design. LEED evolves and expands but is not perfect. Some applicants try to reach the lowest score needed for certification and no more. Most folks in the industry still have little experience with green techniques. Yet LEED has unquestionably changed the game for the better.
The rapid market penetration of this innovative approach has been driven not so much by environmental considerations as by the added value of better buildings. Green buildings need not cost more than conventional versions, and can even cost less with excellent design. LEED buildings cost an average 2−7% more to build, ranging from little or no extra cost for lower-scoring buildings to 20% more for the highest-scoring examples. The primary variable in initial cost is the skill and attention of the design-build team. Typically 85% of a facility’s life-cycle cost is for operations and maintenance. On average green design cuts O&M costs in half due to energy and water savings, so additional up-front costs are soon paid back. There is evidence of a “green premium” boosting sales and leasing revenues, but the data varies on a case-by-case basis.
The most compelling financial result is an average 5% increase in occupant worker productivity (in cases up to 16%) in a wide range of contexts. This is the most valuable, though least predictable, green building benefit. Labor costs are roughly one hundred times higher than energy per square foot, so a 1% productivity increase would pay the entire annual energy bill.
Best practice buildings use local, renewable and nontoxic materials; are tailored to their specific location and purpose; maximize use of available daylight and climatic conditions; and use only as much fuel as is necessary to provide a pleasant, healthful interior environment. Comfortable, passive structures that draw all their energy from earth, water and sun exist in every climate.
The Challenges with Standard Buildings
Why do standard buildings perform so poorly in comparison? The primary obstacles to improvement are organizational rather than technical, economic or legal. If a camel is a horse designed by a committee, then most facilities are camels. Buildings are manufactured products designed and built in a collective production process comprising a sequence of discrete steps: conception, architectural and engineering design, construction, occupancy, and demolition. Participants come from different disciplines, departments, and companies, each with their own self-interest. Most participants engage in only one or two steps in the process and rarely meet all other participants, even those whom their decisions affect. No one alone determines the outcome, yet everyone influences the result.
Consider four participants in a standard building process: owner, architect, construction contractor, and tenant. Most owners are concerned with minimizing capital costs and complying with building codes rather than specifying environmentally beneficial standards, particularly for a structure they intend to lease or sell. Even if the architect can do green design, she has little incentive to work harder for her low bid or fixed fee to sell the idea to clients who don’t ask for it. The contractor seeks maximum profit from his low bid and therefore has an incentive to install the least expensive equipment regardless of how inefficiently it operates. The tenant has little say in the matter and is stuck with high utility bills. The result is a relatively inefficient building that costs more to own and operate.
Even within the same company, managers from different departments face competing incentives. Quite often one department (e.g., production) funds a new facility from its budget, while another (e.g., facilities) pays the utility bills from a different pot of money. If a project manager’s bonus is tied to completing construction on time and under budget, she is more likely to cut corners and slash initial costs—even if that means buying cheaper, lower-quality heating, cooling and lighting systems that cost someone else more to run.
Much of this wasted energy and money results from minimizing first cost instead of cost of ownership in fast-track design and construction. High-efficiency design and equipment can cost more up front. Penny-wise, pound-foolish shortcuts and cost-cutting degrade performance and increase energy bills for a facility’s lifetime. Design firms often use outdated rules of thumb and copy old plans to save time and effort, and rarely measure and improve the performance of previous designs unless asked. Mechanical systems are sized for peak loads that rarely occur, and often lack the ability to efficiently vary their output to heat or cool the facility in real time. This frequently results in oversized equipment that runs inefficiently at partial loads.
Efforts improve infrastructure after it is built are hindered by nonsensical financial hurdles. Upgrades are commonly held to higher return on investment (ROI) standards than are purchases of new equipment. Most facilities cap retrofit payback periods at two years or less—effectively a 50% ROI at least, compared to 10%–15% ROI (or up to a 7 year payback) requirements for new capital assets. These standard practices undermine competitiveness and shareholder interests. Even if a facilities manager improves efficiency and reduces his utility bill, his reward might include a reduction in his budget the following year.
A Better Way
These obstacles can be overcome with management strategies that align the incentives of design-build process participants to reduce total cost to facility owners and occupants. These include specifying environmental and cost performance criteria; rewarding greener design and operation; integrated design workshops that gather process participants as a first step; and increased awareness of proven best practices.
It is possible to produce a good, environmentally efficient building without any individual championing the cause. But success in green building is more likely when an entrepreneurial leader shapes the design-build process. This person is usually the owner, but it could also be a project manager, an environmental expert, or an architect—a change agent with the credibility and authority to steer the process and work in a new way with a wide variety of people, the majority of whom have little or no experience with green design because it is not yet common practice. These champions are pursuing not just product innovations—the buildings themselves—but innovations in the process and in organizational behavior. And they achieve these by making a few important changes, most of which do not involve fancy new technologies.
One of the most effective techniques is a charrette, an integrated design workshop convened at the earliest phase of a project. In this setting, participants from every stage of facility design, construction, occupancy, and even demolition or recycling come together to learn about new approaches and technologies, and to explore how their decisions affect one another and the performance of the building. Guided by the owner and expert consultants, the group can identify opportunities for improvement and obstacles to progress, overcome resistance to unfamiliar technologies and techniques, and work to align conflicting incentives.
Implementation plans should define the desired outcome and quantify it wherever possible. Specify premium-efficiency equipment, oblige participants to satisfy LEED criteria, and require building system performance to exceed benchmark metrics for energy and water efficiency, renewable and nontoxic resources, and other aspects.
Owners can change the way designers and builders are compensated to reward green design, acknowledging that it usually takes more time and effort than standard practice. Performance-based fees reward measured savings in the building’s operational costs compared with conventional designs.
Integrated whole-systems design yields particular leverage. Careful attention must be paid to the interactions between the component parts of the facility’s systems. High-tech windows with special coatings and gas insulation cost more than conventional glass but better maintain interior temperatures, saving on more expensive cooling and heating capacity. Efficient lighting emits less heat, reducing air conditioning requirements. Using larger ducts and pipes, which cost a bit more up front, reduces friction in the flow of air and fluid, enabling the use of smaller fans and pumps. The result is a heating and cooling system that is less expensive both to build and to run. Life-cycle costing or cost of ownership analysis helps preserve design integrity and focuses on long term value rather than myopic component-level cost cutting.
Considered individually, many of these changes are incremental improvements. Taken together, they add up to radical product and process improvements. Entrepreneurial leaders in sustainable design identify the key leverage points in the building and in the process where a coordinated suite of small changes will yield the greatest synergy. Sustainable infrastructure does not result from business as usual. But business as usual is getting greener, one facility at a time.
Chris Lotspeich is founder and Principal at Second Hill Group, an independent consulting and research practice on business, environment, energy, and security issues. Chris was a 2002–2003 Batten Fellow at the Darden School of Business at the University of Virginia. From 1994 to 2001 he was a Senior Associate at Rocky Mountain Institute in Snowmass, CO, where he worked on six continents and led numerous resource efficiency surveys at industrial facilities and on a Navy warship.