29 May The State of The Sustainability Market
Industry leaders sound off on the trajectory of the U.S. green building market
The past two-and-a-half decades have seen a boom in sustainable development, countless new green building jobs, and an ever-expanding definition of the term “sustainability.” Here, industry leaders reflect on how far the U.S. green building sector has come—and where it’s set to go in the future.
Spring 2018 | Written by Calvin Hennick
When the U.S. Green Building Council (USGBC) was founded 25 years ago, the Leadership in Energy and Environmental Design (LEED) rating system was spearheaded by half a dozen volunteers. Few corporations had any staffers in full-time sustainability roles. Green building products were difficult to come by, and it was virtually impossible to find information about the recycled content or chemical composition of materials. Sustainable development efforts were focused almost solely on commercial office space, with green building considered impractical for sectors like manufacturing.
All that has changed. Today, hundreds of thousands of LEED APs (Accredited Professionals) and Green Associates apply their knowledge on projects around the globe. Each day, 2.2 million square feet of building space achieves LEED certification. The marketplace has shifted so drastically that, in some cases, environmentally friendly products have entirely supplanted more damaging materials. And innovation and leadership are coming from virtually every industry.
Even more fundamentally, the very definition of “sustainability” has morphed over time, coming to encompass elements far beyond greenhouse gas emissions, energy consumption, and water usage.
“How we talk about sustainability has evolved,” says Kimberly Lewis, senior vice president of market transformation and development in North America for USGBC. “In the early days, people were saying, ‘Build green, everybody profits.’ We were trying to grab the business community and incentivize growth through policy. Then, as more disasters started happening, people started looking at the stability of our infrastructure and systems, and it became a conversation around how we need more resilient communities—how we need to not just build, but we need to be more proactive and make our communities last. Then, the conversation turned to how buildings need to be more regenerative, how they need to give back. Now, people are talking about wellness, health, and social equity, how the benefits of green building can be shared with all.”
“We’ve moved our focus beyond just being a building design and construction system, to focusing on existing building operation and maintenance, continuous and ongoing improvement, and we’ve transitioned from not just the building but to community and to the city scale for performance,” she adds.
Lewis points out that, although the sustainability marketplace has not completely transformed in the past several decades, it is still very much in flux and the leaders are still committed. Performance metrics are becoming more important. Concerns about resilience in the face of a changing climate are magnified with every major storm that floods streets and shuts down businesses. And conversations about sustainability are increasingly focused on factors outside the physical footprint of the building, touching on things like human health, safe and equitable communities, and leveraging the supply chain with diverse hiring practices.
Just as it would have been impossible in 1993 to say with any certainty where the sustainable development market would stand today, it’s difficult to predict what major changes will unfold in the future. But one thing is for sure: The changes of the next 25 years will be driven by the many thousands of green building professionals who have been attracted to the field over the course of the past quarter century.
“We’ve seen the built environment evolve, and we’ve seen sectors change and lead,” Lewis says. “But it began with the people. Over time, we have embraced a mantra of—all buildings in, all people in!”
Here, some of today’s industry leaders share their thoughts on the state of the sustainability market—past, present, and future.
Customers have come to expect that businesses are taking steps to implement sustainable practices—including in building design and operations. And while consumers largely haven’t shown a willingness to pay more for green products, businesses risk alienating their customers if they’re seen as being irresponsible stewards of the environment.
Scott Jenkins, General Manager, Mercedes-Benz Stadium, Atlanta, Georgia: What’s really driving sustainability is the demand of our customers, and the expectations they have for us. It matters that our brand is responsible. It matters that we protect air and water and promote public transit, because our customers expect us to. When we surveyed sports fans across the country, around half of them expected us to operate in more environmentally friendly ways. It’s becoming an expectation by consumers, and therefore it makes good business sense for us to pay attention to it.
Rob Zimmerman, Director of Sustainability, Kohler, Kohler, Wisconsin: When I started, there was no such thing as high-efficiency plumbing fixtures. Now, pretty much all that’s sold by Kohler and other manufacturers carry the EPA’s WaterSense high-efficiency label. They’re all at least 20 percent more efficient than they were 10 years ago, and in some cases, they’re substantially more efficient than that. If you ask most consumers, they don’t even know that it’s happened. We’re using substantially less water today per capita than we were in 2005, and most people don’t know that. Their toilet works, and that’s all they care about.
What we get from the consumer research is that consumers expect that companies are doing this stuff. But they don’t want to be inconvenienced. They want what they want, but they expect that we’re going to give it to them in a form that’s environmentally friendly and as efficient as it can be. We’ve never had a period where a significant portion of the marketplace is saying, “Either you provide me with this type of product, or I’m going somewhere else.” It went from never getting those questions, to the expectation that everyone is doing it.
Reductions in water and energy use remain central to green building efforts, but expanding views of what constitutes “sustainability” are pushing the marketplace to develop products and practices that promote human health, business productivity, vibrant communities, and other benefits.
Brett Phillips, Vice President for Sustainable and Responsible Investments, Unico Properties, Seattle, Washington: Whether it’s somebody’s home, or place of work, or a healthcare facility where people are recovering from treatment, the built environment and the things we surround ourselves with and things like access to natural light have a huge impact on people’s bodies and their well-being. For many organizations, people are their biggest investment. Someone from a very well-known technology company said, “Do you know what a 1 percent increase in productivity does for our bottom line?” We’d be silly not to be looking at things like indoor air quality and natural light. Those things are real, and they move the needle. That’s where I think the next evolution of this industry moves—it doesn’t move away from conservation and resource reduction, but it brings that along, and it starts to evolve the conversation to also include people’s health, wellness, and productivity.
Ben Myers, Director of Sustainability, Boston Properties, Boston, Massachusetts: The sustainability circle of consciousness has grown from a purely environmental focus to a broader view of externalities, including environmental, social, and governance issues. Since the early days of LEED, we have examined how our buildings impact the environment through operational energy and water consumption, waste streams, building material selection, and greenhouse gas emissions. Today, there is an even greater focus on how buildings impact occupants, the lives inside. Our portfolio of energy- and water-efficient green buildings must also provide superior indoor environments, daylighting, views, and fresh air. Social and governance issues often extend beyond the boundaries of buildings, to the company itself and how it operates. The social and governance components of sustainability include issues such as diversity, health, safety, and employee training.
Katarina Tesarova, Vice President of Global Sustainability, Las Vegas Sands Corp., Las Vegas, Nevada: Through the LEED standard, USGBC opened our eyes to a more holistic view of sustainability. It showed that there’s more beyond electricity and water. That’s what we’ve learned, that there are things like indoor air quality and materials that we need to pay attention to. One thing that’s already started is, we’ve moved from sustainability of the infrastructure to sustainability of people, communities, and even overall humanity. There is definitely a big shift.
Previously considered almost solely the domain of commercial office buildings, LEED and green building practices have spread across a wide swath of sectors. This growth has not only directly increased the number of certified buildings, but has spread knowledge and passion about sustainability to new corners of the business world, and made sustainability more visible to people outside the green building industry.
Jenkins: To solve environmental issues, we have to have broad adoption. Sports venues are anchor institutions in their communities. Eight years ago, the Green Sports Alliance was launched. Back then, there were only a small number of LEED venues. Here we are in 2018, and it’s the norm now. I think any professional sports team, or even collegiate campus that was to build a new sports venue, would really be missing the boat if they didn’t adopt an environmentally friendly approach. The real promise with sports is the visibility it provides. That takes it from just an environmental initiative, into a broad brush that crosses all walks of life in a visible way. I think the opportunity to engage and rally people is the real potential of the intersection between sports and sustainability.
As the business benefits of green building practices become more evident, corporations are continuing to add full-time sustainability positions and embed a focus on sustainability into other roles throughout the business—helping to drive innovation and spur further adoption.
Myers: The influence of full-time staff members working on sustainability issues is significant. Many of the people I know that work in sustainability are among the most talented people in the real estate industry. They are change agents that must understand the many layers of real estate: legal, leasing, development, construction, and property management. To be successful, you need the determination of a startup founder and the perspective of all stakeholders that influence the full life cycle of the built environment.
The business case for energy efficiency is strong. There’s a correlation between reduced operating costs and profitability.
Jim Hanna, Director of Datacenter Sustainability, Microsoft, Redmond, Washington: I think the primary driver for continued sustainability progress is going to be relevance to business success. We’ve gotten really adept at measuring the traditional metrics around carbon footprint, but translating those metrics directly into business metrics has led to the continued relevance of sustainability within businesses.
More and more people are coming into sustainability roles from very diverse backgrounds. I love this. We’re seeing people come from supply chain, operations, engineering and design roles—all of these traditional business functions are really leading sustainability initiatives. That’s such a powerful movement.
Whereas green building materials were once hard-to-find niche products, they are now often the “default” or “standard” options in their product classes—a development that sustainability leaders attribute to LEED and other standards that reward the use of sustainable materials.
Phil Ivey, Global Sustainability Leader for Floor Covering Division, Milliken, Spartanburg, South Carolina: USGBC has changed the face of building materials and building practices. To a large extent, sustainability has been incorporated into building standards overall—not just green building standards. I’ve been asked multiple times why floor covering seems to be ahead of other products, and I point back to 2005, when we had a sustainability assessment that came out for carpeting—similar to the way that LEED is a scorecard for entire buildings. It really pushed us ahead. We went from worrying about regulatory compliance to going way above and beyond what the government said you had to do.
Phillips: You look at things, from carpet, to paint, to adhesives, even to the cleaning products—it’s phenomenal how much has changed. It’s been a painful process, being someone who’s at the end of that supply chain. But we are light-years ahead of where we were 10 to 15 years ago. I think we’ll continue to make more and more progress. Whether you’re doing an individual home project or you’re building a corporate headquarters or a healthcare facility, there are more and more options at the ready. The real story around materials is a human story. It’s about human health for the people that are installing the material, and the people interacting with that material after it’s installed. That’s where this conversation is going. It’s very hard to tell somebody, “I’m going to use something that’s going to expose you to something that’s unhealthy for you.”
Increasingly, the green building market is being—and will continue to be—driven by measures that demonstrate an ability to improve the environmental performance of a building over time. As performance tracking continues to mature, ongoing assessment will continue to become more important.
Hanna: The measurement of actual performance is the next logical step and smart evolution of green building. We are promising our customers that, if they move from on-premises servers to the cloud, that will significantly lower their environmental footprint. Building green data centers and having them verified by USGBC is a part of that promise to our customers.
Tesarova: We track our performance very closely, and that provides accountability. When you’re on the business side, in order to do anything that requires capital, you have to get approval. If you spend this money to enhance efficiency, there has to be some kind of return on that. You need to be able to show results—that there’s good feedback from our guests, or we’re seeing savings on our utility bills. Once you have one LEED hotel or one LEED-certified building, you have to look into the operations. You can’t have a green building and just go back to operating it the way you did before.
Myers: There’s always the danger of diluting sustainability, or greenwashing. The antidote to greenwashing is accountability. We’re seeing this in the transition from a labeling and certification era to an ongoing performance measurement era. It’s a transition from “black-and-white” sustainability to “vivid color” sustainability, where collection methods and technologies support the synthesis of massive real estate datasets. We’re hopeful that the outcome will be more meaningful sustainability analysis, building performance benchmarks, and actionable discoveries that help drive the continuous improvement of our in-service portfolio.
Although climate change remains a contentious issue in the national political arena, extreme weather events in recent years seem to have underscored the importance of sustainability for affected cities, states, and private organizations. As the negative consequences of climate change continue to be felt in a tangible way, society may begin to respond more actively—including through new regulations.
Jenkins: It’s not the 100-year flood you’re worried about anymore. It’s the 500-year event. I think people are starting to realize that climate change is happening, and it’s happening at somewhat alarming rates. It impacts kids’ ability to get outside and play. It impacts people’s ability to have playable fields in a drought. I hope people start to connect the dots and say, “What I decide to do is impacting this.”
Zimmerman: Drought is a periodic thing, but we’re heading into a period of much more sustained water scarcity. There’s going to continue to be a push for water efficiency. At some point, the water and wastewater systems as designed will no longer be viable. That’s already the case in some parts of the world. I hate to say this, because in the private sector, you like to think that capitalism works. But I don’t think things will change until they’re regulated. I’ve seen so many examples of, when the building code changes, then people figure out how to do it. It’s hard to imagine getting where we need to go without some sort of intervention.
Phillips: Polling shows that the American public identifies and acknowledges climate change as an issue and accepts the science. It’s well over 60 percent, if not 70 percent. That’s a significant majority. That’s a big change, a major change in acceptance from where we were. But how does that translate into policy change? Climate still ranks relatively low on national priorities that Americans identify with. Things like healthcare and taxes are ranked much higher on their list of priorities, and climate usually ranks somewhere between eighth and tenth. While we’ve made ground on acceptance, I think there needs to be a greater urgency.
In order for the green building market to continue to grow, the sector will need to find new ways to connect with the public and talk about sustainability in ways that feel relevant to people’s everyday lives.
Sara Neff, Senior Vice President of Sustainability, Kilroy Realty, Los Angeles, California: We have an “invisible buildings” problem. Buildings account for 40 percent of carbon emissions and the impact on our health is enormous, but people just don’t think about them. Until customers start complaining, and until people who move into homes and rental units say, “I’m not going to move in unless you’ve done this,” or “I’ll pay more if you’ve done these things,” it’s not going to work.
Last year, my daughter started coughing herself to sleep every night. We took her to the doctor, and they put her in a breathing mask, and that wasn’t really helpful. She finally got diagnosed with asthma. And I wondered, “Does this have to do with the fact that I live next to a freeway?” I got a standalone air filter, and her symptoms were gone in two days. But I hadn’t made the connection, and I do this for a living. That really drove home—if I’m not making this connection, no one is making this connection.
Zimmerman: We’re seeing that consumers are getting smarter about this. Because of social media, and because of the explosion of information that’s out there, consumers have more power than ever. If they start a movement around sustainability, it can spread really quickly. We’re seeing companies taking a stand on social issues, taking a stand on political issues. You’re seeing that more and more. To the extent that those kinds of things are meaningful to consumers, they can vote not only with their dollars, but with their shares and their likes. That’s how movements get started, and that’s how markets can change. Consumers have a lot of power, and they’ve got to use it.