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Integrating Sustainability into the Capital Planning Process

Company management should evaluate and prioritize green options while remaining aligned with their organization's overall business mission.

November 2010
With detailed information about the costs and benefits of potential green investments, companies can effectively evaluate which initiatives will ultimately provide the greatest results over the short- and long-term. Based on its overall business goals, each company will have different values and, therefore, different strategies. For instance, one firm may focus on investments that will deliver the greatest improvements to the quality of the indoor work environment, while another may make its top priority those investments that provide operational cost savings or significantly reduce the impact of carbon emissions.

The many potential greening initiatives a company can undertake compete with a myriad of other capital and operational investments. These include systems renewal, building renovations, and new construction. While companies may analyze opportunities to improve building sustainability, ultimately these investments will need to be assessed in relation to other building requirements.

Short- and Long-Term Deliverables
Companies that are just beginning the process of integrating green programs into their capital plans may choose to initially focus on relatively low-cost initiatives. These can deliver short-term paybacks by reducing energy and natural resource consumption - with the priority based on cost savings and other desired benefits.

As these firms make progress, and see results, they may go on to evaluate sustainability opportunities that can provide both short- and long-term environmental, social, and economic benefits. Such assessments may be conducted in support of major building renovations, large-scale master planning programs, or the acquisition of a long-term property holding.

By combining this information with detailed data about overall requirements across a building portfolio, companies can get a holistic view of facility needs - allowing them to improve operational conditions and maximize efficiency, while promoting a sustainable built environment. Finding this data and making these decisions can be a daunting task, but here are a few simple steps to follow when considering facility and sustainability upgrades.

Questions to Ask
The first step in identifying the best investment strategy for sustainability is an objective evaluation of a company's current state of sustainability and its options for change - including estimated costs and potential benefits. Company management should determine the answers to several questions before establishing a sustainability framework.

First and foremost, what are the company's strategic business goals and real estate objectives, and what is its corresponding sustainability commitment? Is there a balance between them? Basically, where does the company want to be in terms of sustainability while staying within its corporate agenda? It is important to remember sustainability is not a "one size fits all" process. Different organizations will have very different approaches to sustainability.

Ask Area Development
If you have questions about specific tips for introducing sustainability into your company's capital plans, submit them below to Ask Area Development and the article author will respond.
When deciding on corporate or sustainability initiatives, keep in mind that reaching the highest level of green performance or energy efficiency is most cost-effective when timed to coincide with new construction, renovation, or major infrastructure renewal. Also, the savings are greatest when improvements are made when systems are as close as possible to the end of their useful lives.

Once the company's objectives are decided, it is time to determine the starting point, i.e., what types of assets and equipment are already in place? Where can sustainability be improved easily? And where is the most work needed?

There are many factors to consider when determining the starting point of a sustainability plan. Climate can affect sustainability drastically; those in warmer climates will need to consider cooling systems, while those in colder climates will focus on heating. Other aspects of climate such as annual rainfall and cloud cover can also determine the type of sustainable technology that is best for a particular facility. The location of a facility - rural, suburban, or urban - will also play a role in determining sustainable technology needs. Urban buildings might contain more equipment, and assets are compressed and configured in a smaller space; rural buildings, on the other hand, are less densely occupied. Other factors to consider are type and use of buildings, age and existing condition, corporate mission, community initiatives and partnerships, as well as internal and external mandates.

Financial and Other Metrics
Financial metrics will obviously have an impact on how a company evaluates its sustainability initiatives. When a firm looks at its deferred maintenance, maintaining facilities, and keeping them going through their lifecycle, it would normally look at an in-kind or conventional replacement. If there are green alternatives, companies should consider several financial metrics while evaluating each option.

The lifecycle of systems, along with the cost of operation over that lifecycle, is an important factor; keep in mind that many sustainable alternatives include a payback over time resulting from reduced energy and other operational costs. One easy way to evaluate the cost of green alternatives is to determine the cost as a percentage of current asset replacement value. If the cost of making a facility sustainable starts approaching the value of the facility itself, it obviously is not a financially viable alternative.

Ask Area Development
If you have questions about specific tips for introducing sustainability into your company's capital plans, submit them below to Ask Area Development and the article author will respond.
A company should also consider "the triple bottom line." The triple bottom line includes the financial impact on the company, the facility's impact on the environment, and the company's social responsibility. If a capital plan that includes green initiatives can hit all three areas of the triple bottom line, it may be the best alternative.

While financial metrics are important, it is also necessary to have metrics that define and measure both current and future building performance. There are several green ratings systems that can be employed as whole building guidelines, including the Leadership in Energy and Environmental Design for Existing Buildings Operations and Maintenance (LEED®-EB O&M), Green Globes® for Continual Improvement of Existing Buildings (CIEB), Green Guide for Health Care (GGHC), and BRE Environmental Assessment Method (BREEAM).

A typical facilities condition assessment (FCA) gathers data on facility condition, the lifecycle of different systems within the facility, code compliance, functionality, and efficiency, among other aspects. Integrating sustainability into the FCA process using, for example, LEED-EB O&M requirements as a guideline, adds several metrics to the assessment: energy efficiency, water conservation, indoor air quality, waste management, and renewable energy potential, to name a few.

Green Opportunities
After the performance metrics have been established, the company can identify green opportunities, while also looking at the overall facility condition. Common green opportunities include high-efficiency lighting controls and sensors, automated building management systems, water-conserving plumbing fixtures, organic and indigenous landscape maintenance, materials with recycled or bio-based content, and low or no harmful chemical content. This part of the process involves objectively capturing data and identifying the green options, not deciding which of these options are most aligned with the company's capital planning objectives.

Once the opportunities have been identified, the next step is to evaluate them in the context of the overall capital plan. When evaluating the options, it is important to take into account initial cost differences between the conventional and sustainable alternatives along with the savings over time; for many resource-saving alternatives, the initial investment may have a rapid payback period or a more prolonged ROI (return on investment). The best way to evaluate all the options is to develop a list of parameters that represent important priorities for the company. These may include cost, potential energy savings, impact on overall facility condition, mission readiness, as well as other issues of strategic importance. Using these parameters, company management can make an informed, data-driven decision regarding the alternatives.

Following this approach will allow a company to determine the current state of its facilities' condition and sustainability, the alternatives for sustainable upgrades of facilities, the cost and payback of these upgrades, which upgrades are the most important, and how to incorporate the upgrades into an established facilities capital plan and budget. With the right framework and tools in place, an organization can evaluate the sustainability of its existing facilities, plan to reduce its environmental impact, increase its energy and water efficiency and cost savings, and promote a healthier built environment. Whether a company already has a sophisticated sustainability program or is newly engaged in this effort, it is desirable to evaluate and prioritize green options while remaining aligned with the overall business mission.

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