The lobby of the new 102,000-sq.-ft. (9,476-sq.-m.), $50-plus-million campus of Thornburg Investment Management in Santa Fe, N.M.
Photo by Robert Reck Photography
Ready for the ‘CSO’ Mantle?
Real estate managers’ preparedness for sustainability
assignments might make or break their careers.
The new 102,000-sq.-ft. (9,476-sq.-m.), $50-plus-million campus of Thornburg Investment Management in Santa Fe, N.M., earned LEED-Gold certification in October. Strategies including daylighting and innovative air-flow systems should help the campus use 40 percent less energy than a baseline building. The project, profiled at SiteSelection.com, was helped by an industrial revenue bond from the City of Santa Fe, and is expected to earn a state sustainable building tax credit
Photo by Robert Reck Photography
E
ven as the science behind global warming research is thrown deeper into doubt by the recent email debacle at the U.K.'s East Anglia University — the presumptive repository of climate change data — corporations know they need a strategy for sustainable growth. Enter the chief sustainability officer (CSO), whose role in the corporate firmament can be a radiant, stand-alone star on the one hand, or merely part of a constellation of senior managers charged with green building practices, enterprise-wide recycling initiatives and related tasks on the other.
CSOs and related titles are on the payrolls of most major corporations — Wal-Mart, Dow Chemical, Coca Cola and Georgia Pacific, to name a few. But do they share a single Green Imperative? No, and it stands to reason that they don't. A global shared-services provider's sustainability strategy will necessarily be different from that of a plastics manufacturer. Their strategies may overlap in some instances, such as a possible mandate to use "green construction" when embarking on new facilities projects. (How to avoid LEED-certification pitfalls is the subject of the sidebar.)
But CSOs, to varying degrees, are charting a new course, determining whether the shareholders', customers' or CFO's agenda comes first, for example. Consider this input from CSOs who participated in a late 2008 survey of sustainability executives by New York–based Hudson Gain Corp., an executive leadership and human resources firm:
- "I can make buildings 100-percent green, but then we won't be in business."
- "Some employees are pushing us to change faster than we are. Younger employees tend to be more green. I think [buying into sustainability] is a generational issue as much as an industry issue."
- "We have an organizational development group that we lean on to move these issues forward."
- "More and more, the Board is discussing [sustainability] and considering it when making decisions."
There's not much in the way of consensus, but then executives in such diverse sectors as automobile manufacturing, food and beverage, financial services, technology and other industries took part in the exercise. Hudson Gain's "Going Green?" report is based on research of more than 1,200 organizations and interviews with more than 60 sustainability executives.
"As executives take on the sustainability role, it becomes more and more strategic, which allows them a seat at the [senior management] table, if they don't already have one," says Hudson Gain Senior Vice President Victoria Zelin. As for corporate real estate executives, she adds: "In addition to being able to incorporate sustainability considerations into locating new sites, they can get into a lot of other things as well. They can now interact with everyone in the organization. It's a natural progression."
Sustainability represents numerous ways for the real estate manager to introduce cost savings, notes Zelin. He or she can easily demonstrate the cost advantages of turning some little-used office space into a video conference and Webinar center and eliminating thousands of dollars in travel expenses, for instance. But more than that will be required for the CSO, or real estate executive with CSO duties, to stand apart.
The trick, says Hudson Gain Managing Partner Roger Thorne, is to leverage the corporate real estate role into a true leadership role with the organization.
"Once people see that you are creating a sustainable organization, then the leadership and strategic importance of your role come to the surface very quickly," he says. "Sustainability is your ticket to your seat at the senior management table. Ultimately, in our view, the chief sustainability officer of a company needs to be the president, because he is responsible for making sure that the business runs on a perpetual basis and does what is necessary to protect its people and the planet and to make sure the types of activities it's involved in respect and promote that agenda."
CSO Checklist
Hudson Gain's "Going Green?" report reveals several skills essential to being an effective and successful CSO, however one arrives at the assignment. They are:
- Communication. "CSOs need to educate and persuade, and they need to mobilize resources and inspire people to action." At the same time, according to the report, "many CSOs warned against making communications the cornerstone of the strategy — if it's all talk and no science, or no action, the initiatives become hollow and tend to fail."
- Technology. "A good CSO candidate needs to be generally familiar with the technology of the organization he or she serves as well as the technology of sustainability (energy, waste, carbon emissions, etc.)."
- Financial Responsibility. "While most CSOs agreed there are long-term benefits that companies often strive for, the great majority cited short-term opportunities to save money with sustainability practices." Wall Street notices improvements to the balance sheet, and that supports sustainability initiatives.
- Measurement. "Gather data, establish your baseline, benchmark to your peers, set goals and continuously improve, measure and start the cycle all over again."
- Innovation. "Most CSOs were very modest about what is happening in the field today and stressed the urgency to find new drivers of sustainability. What is going on now is not enough."
- Ethics. "Keep a balance among the three Ps of the triple bottom line — profits, people and planet — and pursue these with transparency and for the right reasons."
- Supply Chain. CSOs need to be familiar with their organization's entire supply chain, from design and sourcing to production and delivery. "The most advanced sustainability programs are making changes in their own operations, throughout their supply chain and in their suppliers' and customers' behavior."
- Operations, Structure and Culture. "An understanding is required of how structure and culture work in order to have the type of impact required to make sustainability a priority for every department and division in the organization and to be empowered by the Board, CEO, CFO and HR with the right authority and resources to get the job done."
Story in Pictures
A Green Construction Roadmap
Leonard Goodman, LEED®-AP, attorney, Venable LLP, Washington, D.C.
W
hether LEED (Leadership in Energy and Environmental Design) buildings deliver the savings and environmental benefits they purport to or not depends on the building. But this is for certain: LEED projects are here to stay, and they are more than a fad.
"As of fall 2009, the U.S. Green Building Council reports a pipeline of more than 25,000 projects registered for LEED certification and over 3,300 projects already certified," notes Leonard Goodman, LEED®-AP, an attorney with Venable LLP's Washington, D.C., office, who specializes in construction transactions and litigation, who specializes in construction transactions and litigation.
"If you develop, own or invest in real estate, thinking 'green' — as in environmentally conscious — is no longer optional," he argues. "A combination of factors favoring green construction is likely to render conventional buildings noncompetitive in the near future."
Why the upsurge in green building? Federal and local mandates require LEED ratings, and employees and customers increasingly expect their employers, landlords, retailers and hotels to share their sustainability values, notes Goodman.
"Developers and investors are being 'pulled' into green building by tax, permitting and density incentives and especially by the mounting evidence that green buildings will outperform conventional buildings even assuming that the 'first costs' of a green building exceed those incurred in conventional construction," he explains. "This so-called 'green premium' is becoming less a foregone conclusion, however as the green learning curve levels out, more builders and suppliers compete for green work and there is a continued improvement in sustainable materials."
Goodman recommends the following guidelines for corporate real estate managers and others embarking on LEED certification for new construction:
1. Understand your green objectives and options. The selection of the LEED credits and points to target must depend upon the particular goals and motivations driving the pursuit of LEED certification in the first place. Therefore, it is essential at the outset of a project — preferably before a site is even selected — to (a) establish your objectives for pursuing LEED certification; (b) understand the options available under the applicable rating system to achieve the desired level of certification coinciding with your project's program; and (c) clearly communicate realistic objectives to those responsible for designing, constructing, or acquiring green assets.
2. Engage architects/engineers (A/Es) and contractors capable of working collaboratively. "Green" should not characterize the experience level of the A/E, contractors and facilities managers involved with developing and operating your green building. Ideally, one LEED-accredited professional should be associated with each member of the project team. There is an emerging consensus that any cost premium associated with a green project can be minimized or eliminated if each stakeholder is "at the table" when a project's green goals are established. A successful green project, therefore, requires an owner, A/E and contractor able to discard the traditional, linear view of a project's development, in favor of a more collaborative model.
3. Determine if BIM is right for your project. Meaningful collaboration among the project team may require use of Building Information Modeling (BIM), which is revolutionizing the way buildings are designed and built. With BIM, A/Es and contractors generate and exchange information, create digital representations of all stages of the building process and simulate real-world performance. BIM empowers all members of a project team to work together to resolve discrepancies during the design phase rather than in the field. It should facilitate collection of the information required to support LEED certification.
4. Consider pursuing the LEED credit for enhanced commissioning. Commissioning is the process of ensuring that a building's systems perform according to the design intent and the owner's operational needs, and is an important investment for any project, especially for a green project where systems are expected to perform to a high level of efficiency. LEED includes two forms of commissioning: Fundamental commissioning must be satisfied by any project seeking certification; enhanced commissioning is optional. Both require a commissioning authority to review the project requirements (OPR) and basis of design (BOD) and to verify that the installation and performance of the commissioned systems conform with the OPR/BOD and the contract documents.
The additional services the commissioning authority must perform under the enhanced commissioning credit should increase the probability that a project will achieve its LEED goals on time and within budget, and also maintain those performance benefits after construction. Enhanced Commissioning requires the commissioning authority to conduct a design review before the construction documents are 50-percent complete and to review the contractor's submittals. It also requires a systems manual, training of operations personnel and an inspection of the building's operations within 10 months of completion.
5. Opt for LEED's two-phase certification process. Until 2005, all information necessary to establish compliance with LEED's prerequisites and credits was submitted after construction was completed. Now, applicants have the one-time option of submitting "design phase credits" for review when construction documents are completed. These are credits the USGBC can reasonably adjudicate without information collected during construction. Design phase credits under LEED-NC include all Water Efficiency credits, most Sustainable Sites and Energy & Atmosphere credits and approximately 40 percent of Indoor Environmental Quality credits. The two-phase application process affords project teams the opportunity to assess the likelihood of credit achievements, correct any deficiencies or modify the targeted credits before a point in construction is reached that could jeopardize achieving the desired rating or significantly increase the cost of doing so.
6. Do not rely on industry standard forms of agreement. With one exception, none of the major industry organizations have added specific agreements for the design or construction of green buildings to their current library of contract forms. Although the American Institute of Architects has created Form B214 as an addendum to its standard Owner-Architect Agreement, the form only scratches the surface of the A/E's role and its ramifications and in no way addresses the responsibilities of contractors, subcontractors or suppliers. Therefore, owners either must develop proprietary forms of agreement or significantly modify the standard industry forms to properly address and allocate the many unique elements of scope and risk associated with green projects.
7. Consider integrated project delivery (IPD). Owner frustration over project delays and cost overruns as a result of poor communication, upfront planning and problem solving between designers and contractors has led to the development of a new model for the design and construction of buildings — Integrated Project Delivery. According to AIA's California Council, IPD utilizes "highly collaborative, cross-functional teams composed of all project lifecycle stakeholders including the owner, architect, general contractor, engineers, suppliers and security." A comprehensive look at IPD is beyond the scope of this article. However, the congruity between what is required for a successful green project and the purposes and strategies underlying IPD are apparent. For complex projects, IPD's project-centric approach may represent the best means to the intended green ending.
8. Purchase property insurance that covers losses associated with green buildings. Traditional insurance products may fall short of providing adequate coverage for the combination of requirements and specialized materials and systems used in green buildings. Several property insurers already have introduced green endorsements to their standard property forms or specific insurance policies for LEED certified buildings. Programs include, for example, coverage for non-toxic, low-odor paints and carpeting; interior lighting systems that meet LEED standards; water-efficient plumbing; Energy Star-qualified roof and insulation materials; and the additional cost of having a building certified.
"Where it is not already a condition for occupancy or other incentives, LEED certification is fast becoming the standard against which a building's commercial value is judged in the marketplace," says Goodman. "Given the stakes, it is essential for owners, developers and investors to understand what LEED requires, to coordinate their programs and goals with those requirements, and to appreciate and address both in the field and in the contract documents the peculiar risks and challenges of constructing green buildings to achieve LEED certification.
While the requirements and risks may be novel for now, the tools for managing these risks are the same as for conventional projects: clear goals and expectations, careful, upfront planning, and an appropriately skilled and experienced project team with a track record for attention to quality service and workmanship."
