Theme 5 Sustainable business models

Market Transformation, Lead Market Approach (BM-M)

Managing And Reporting Carbon Footprints: An Audit Of Critical Elements Elmualim A.A., Kwawu W., United Kingdom

Market Implications Of Operational Performance Variability In Certified Green Buildings Gabe J.S., New Zealand

A Case Study With Environmental Lcc In The Swedish Building And Construction Sector Noring M., Hochschorner E., Sweden

New Economic Incentives For Sustainable Building: Energy Saving Certificates And Energy Performance Contracting Sellier D.S., France

Linkage Building Environmental Assessment Tool To Property Appraisal - Casbee For For Market Promotion (tentative Version) Takai H.T., Murakami S.M., Ito M.I., Ikaga T.I., Iwamura K.I., Yamaguchi N.Y., Endo J.E., Japan

Twelve Years Of Environmental Work In The Swedish Construction Industry Thuvander L., Gluch P., Gustafsson M., Baumann H., Sweden

Achieving Large Scale Uptake Of Sustainable Residential Renovation In New Zealand Easton L.M., Saville-Smith K., New Zealand

Client Strategies For Driving Innovation In Low Energy Building Femenias P., Kadefors A., Sweden

The Business Of Green Housing: A Strategic View Kam M., Prasad D., Hes D., Australia

Cities As Market-makers: Policy And Financing Strategies For Sustainable Real Estate Markets Kontokosta C.E., United States

Study On Preferences For Energy-saving Facilities In Green House On The Basis Of A Questionnaire-type Survey Ooka R.O., Kurosawa T.K., Japan

Understanding Trends In Characteristics And Achievement Of Leed Platinum Buildings: Application Of The Green Building Information Gateway Todd J.A., Pyke C., Rohloff A., United States

Global Challenges Of Sustainability Business Innovations In Built Environment Sivunen M., Kajander J.K., Heinonen J., Junnila S., Finland

Implementing Green Building Policies And Assuring Environmental Benefits In Singapore Chong W., Anggadjaja E., Ang K.S., Moossa N.M., United States, Singapore

Sustainable Innovations And Its Routinization Langar S., Pearce A.R., United States

The Role Of Environmental Efficiency In Finnish Real Estate Market – A Market Study Kyyhkynen A.M., Finland

The Labelling Landscape. Natureplus® – An Ambitious Pan-european Initiative. Schmitz-Günther T., Welteke-Fabricius U., Germany

Full Service Energy Efficient Renovation Business For Swedish Single-family Houses Mahapatra K., Gustavsson L., Sweden

Factors That Have Influenced Education Sector Projects In Nz Since 2008 Bretherton J.E., Spencer T.A., Curtain B., New Zealand

Assessing The State Of Existing Residential Real Estate – Developing, Piloting And Results. – Tila-arviointi. Karhu T., Saarinen J., Finland

Sustainable Procurement (BM-P)

A Nordic Guideline On Sustainable Refurbishment Of Buildings Almås A.J., Bjørberg S., Haugbølle K., Vogelius P., Huovila P., Nieminen J., Marteinsson B., Norway, Denmark, Finland, Iceland

Achieving Sustainable Retrofit: Human Barriers And Solutions Thurairajah N., Bichard E.M., United Kingdom

Sustainable Building Renovation And Refurbishment With Applications Of Vacuum Insulation Panels Gohardani N., Gudmundsson K., Sweden

Sustainable Building Process Häkkinen T., Nykänen V., Finland

Five Years Later: Revisiting The Construction Client As Change Agent Haugbølle K., Olsen I.S., Vogelius P., Denmark

Procurement And Sustainability In Construction Works – Two Cases Of Construction Works Projects With Sustainability Demands Regarding The Phase Of Procurement Persson U., Sweden

Strategising Sustainable Procurement In A Political Environment Vogelius P.E.V., Haugbølle K.H.H., Olsen I.S.O., Denmark

Green Public Procurement In Poland – Criteria For Thermal Insulation Products Bekierski D., Poland

Estimating Energy Consumption During Construction Of Buildings: A Contractor’s Perspective Chini A.R., Shrivastava S., United States

Calculating Life Cycle Cost In The Early Design Phase To Encourage Energy Efficient And Sustainable Buildings

Hofer G., Herzog B., Grim M., Austria

Value Driven Management Decisions And Eco-efficient Technologies For Building Sustainability Philimis P., Sofou S., Hadjimitsis D., Themistocleous K., Paraskeva P., Cyprus

Design Competition For A Near Zero Energy Building – Implementation, Results And Lessons To Learn Rintala T., Nissinen A.N., Finland

Parallel Commissioning. A New Way Of Planning For A Sustainable Settlement. - The Case Of Brøset, Trondheim. Bohne R.A., Wyckmans A., Norway

Financing and Incentives (BM-F)

Sustainable Construction In The Recession Naoum S., Mulholland Z.E., Fong D., United Kingdom

Swedish Architects’ Perceptions Of Hindrances To The Adoption Of Wood Frames And Other Innovations In Multi-storey Building Construction Hemström K., Mahapatra K., Gustavsson L., Sweden

Built Environment Professionalism In A Changing Economy Hill S. , Lorenz D., Dent P., Lützkendorf T. (Germany, United Kingdom, Germany

Sustainability Reporting and Rating in the Construction and Real Estate Sector Lützkendorf T.P., Lorenz D., Germany

Climate Change: What’s In It For A Bank? Roles Of Financial Institutions In Mitigation Effort Tobing H.L.Y., Prasad D.K., Merson J., Australia

Low-energy Versus Conventional Residential Buildings: Market Stimulants, Investment Cost And Profit Lind H., Zalejska-Jonsson A., Hintze S., Sweden

Managing and reporting Carbon footprints: an audit of critical elements

Abbas Elmualim Senior Lecturer School of Construction Management and Engineering, University of Reading UK a.a.elmualim@reading.ac.uk

Wisdom Kwawu Research Associate School of Construction Management and Engineering, University of Reading UK w.e.k.kwawu@reading.ac.uk

Summary Concern for the environmental impact of organisations‟ activities has led to the recognition and demand for organisations to manage and report on their carbon footprint. However, there is no limit as to the areas of carbon footprints required in such annual environmental reports. To deliver improvements in the quality of carbon footprint management and reporting, there is a need to identify the main elements of carbon footprint strategy that can be endorsed, supported and encouraged by facility managers. The study investigates carbon footprint elements managed and reported upon by facility manager in the UK. Drawing on a questionnaire survey of 256 facility managers in the UK, the key elements of carbon footprints identified in carbon footprint reports are examined. The findings indicate that the main elements are building energy consumption, waste disposal and water consumption. Business travel in terms of using public transport, air travel and company cars are also recognised as important targets and objectives for the carbon footprint strategy of several FM organisations.

Keywords: facilities management, sustainability policy, carbon footprint and environmental impact.

1. Introduction Following the implementation of the Climate Change Act in 2008 [1] the UK government has committed to reducing the UK‟s carbon emission targets to 34% by 2020, and 80% by 2050, based on 1990 levels. Although the act is meant to move the UK towards a low-carbon economy by improving sustainable development and carbon management, like many other countries, it faces many challenges in meeting its carbon reduction target. These challenges include dealing with the built environment which accounts for nearly 40% of limited natural resources consumed, and 40% of waste and greenhouse gas (GHG) generated [2]. The UK government is using regulatory and legislative requirements to encourage businesses to reduce or manage their GHG emissions, through efficient management of energy and waste [3, 4]. As a consequence, businesses in the UK are increasingly incorporating within annual reporting mechanisms, their strategies for mitigating their GHG emissions, as part of their environmental responsibilities [4, 5]. Hence, besides bottom line financial results, the reports now contain statements about environmental impacts and responsibilities. Within businesses, compliance with these requirements and abatement action is often the responsibility of facilities managers [6, 7]. A major concern for facilities managers, however, is that there appears to be no uniformity in the key issues that need to be addressed in the annual environmental impact reports and actual practice [8]. There is no consensus on the issues that need close monitoring in carbon footprint management strategies. A good starting point is to audit carbon footprint strategies that are reported in organisations‟ annual reports.

The environmental reports, often, seek to establish sustainable frameworks for integrating sustainability concerns into core business strategies [4, 7] and stimulate good carbon management practices within the organisation. Professional facilities management activities have a significant influence over how facilities are used and therefore tasked to manage and report on carbon footprints. Thus facilities managers are at the forefront of implementing their organisation‟s vision and commitment towards carbon footprint management strategies. Carbon management may mean different things to different organisations, however the lack of general agreement on the key elements to report on suggest a growing need to identify key elements addressed in annual environmental responsibility reports and make it more uniform. This paper examines the common critical issues addressed in carbon footprint reports, through a literature review and a questionnaire survey of the facilities managers. Identification and prioritisation of key issues will lead to improvement or development of good sustainable practices for carbon footprints management and reporting. In addition, key elements addressed in environmental impact and responsibility reports reveal how facilities managers are engaging with reducing carbon emissions.

2. Importance of Carbon footprints It is now widely recognised that GHG emissions are producing measurable climate change and there is an urgent need to reduce the production and effect of GHG [1, 9]. Of the GHG generated, 85% are carbon dioxide, produced from burning fossil fuels for electricity, building heating, manufacturing and transportation. It is the most significant contributor to climate change and much of it is due to population and economic growth in both the developing world, mainly China and India, and the developed world [10, 11]. The Intergovernmental Panel on Climate Change (IPCC) report [10] concluded that global warming and climate change was “unequivocal”, and the main driver producing the rise in temperature was human activities. Pérez-Lombard et al. [11] present a review of building energy consumption, concluding that 20%-40% of total energy use in developed countries was due to the energy consumption of buildings, making energy efficiency strategies a priority for energy policies, building regulations and certifications schemes. 2.1 Carbon footprint definition The term „carbon footprint‟ has many interpretations, ranging from direct carbon dioxide emissions to full life-cycle GHG emissions and there is no consensus on how to measure or quantify a carbon footprint [9, 12]. Wiedmann and Minx reviewed a number of carbon footprint definitions and concluded that carbon footprint is a “measure of the exclusive total amount of carbon dioxide emissions that is directly and indirectly caused by an activity or is accumulated over the life stages of a product." Wiedmann and Minx emphasised that the activity include the activities of individuals, populations, governments, companies, organisations, processes, industry sectors etc, while the products include goods and services. Other authors have defined carbon footprint as “a measure of the amount of carbon dioxide emitted through the combustion of fossil fuels” , “a measure of the impact human activities have on the environment in terms of the amount of GHG produced, measured in tonnes of carbon dioxide” or “technique for identifying and measuring the individual GHG emissions from each activity within a supply chain process step and the framework for attributing these to each output product” [cited in 12]. Hence carbon footprint is used as a generic term for carbon dioxide or GHG emissions. Increasingly, tackling carbon footprints as a way of abating climate change, is becoming significant in all aspects of business activities due to the impact of legislation and regulations [3, 13-15], emphasis on Corporate Social Responsibility (CSR) [4, 16], and Customer and Stakeholder demands and values [8, 16]. The UK government and the European Union are constantly introducing new climate change policies and regulations that encourage businesses to achieve improved energy efficiency, reduce their carbon footprints and produce environmental impact reports [17]. In addition, the narrative reporting requirements under the 2006 Companies Act encourages UK firms to discuss non-financial issues like environmental matters, employees and social issues. Chen and Bouvain [18] investigated CSR reporting in the USA, UK, Australia, and Germany and concluded that emphasis on environmental issues diverged considerably depending

on institutional arrangements. Other studies advocated issues covered in CSR reports are varied, country- and industry-specific” [5, 19, 20]. For example, KPMG [5] highlighted the fact that “carbon footprint reporting is not as common as might be expected” but a significant number of UK businesses did report on their carbon footprints compared with others. The KPMG report [5] concluded that, within the carbon footprint reports reviewed, much of the emphasis was on individual operations and not supply chains. A growing concern is that, within carbon footprint reports, companies are measuring too many issues of which many do not converge. Awareness of these key issues would enable further understanding of carbon footprint reporting and the adoption of carbon footprint reporting standards.

3. Determining which elements of carbon footprint to report Regardless of the lack of adequate reporting on issues relating to carbon footprints, a number of environmental responsibility reporting frameworks and standards like the GRI and the UN Global Compact are emerging [18]. Chen and Bouvain [18] suggest that the use of these standards and frameworks for reporting only affected certain environmental and workers issues. However, the key issues concerning carbon footprint management have not been yet highlighted, although Carbon footprints (carbon emissions) are now becoming a very significant metric for organisational management and sustainability goals. A question of practical significance is which key issues are critical for reporting? From an environmental perspective, the Global Reporting Initiative [21, 22] suggests the following as some of the key issues that should be included in company reports:

Energy consumed and saved Water conservation, used and reused GHG emissions - initiatives to reduce CO2 and other harmful GHG emissions. Waste by type and disposal method, materials used including percentage recycled Transportation

The purpose of this framework is identifying and emphasising issues that offer significant carbon reduction as well as need further action to achieve carbon reduction. Most importantly, there is an underlying assumption that there is a set of values that can be applied to manage carbon emissions and sustainability in general. However, from a practical perspective and within a national set of carbon emission targets, often, individual institutions and businesses decide how to reduce, review and report progress on their own carbon footprints. This paper seeks to identify the key carbon footprint issues from the perspective of facilities managers as one sector of great impact is the built environment. 3.1 Energy consumption and GHG emissions The rise in energy consumption and CO2 emissions has made energy efficiency management strategies a primary goal for many organisations and institutions. For instance, Nousiainen and Junnila [8] found in their study of environmental objectives and demands of end users organisation that energy efficiency, waste management and reduction of greenhouse emissions are the important for end-users of buildings. A number of studies suggested that building energy use is the largest energy end use both in the residential and non-residential sector, comprising lighting, heating, ventilation and air conditioning [2, 11, 23, 24]. For instance, for building energy consumption, the HVAC averages for 48%, lighting averages 35% and other office and electronic equipment average 17% [23]. This suggests that building energy consumption is a critical activity that impacts on CO2 emissions and therefore a key area for reporting carbon reduction management. 3.2 Waste disposal and recycling Managed waste disposal and recycling can help reduce environmental impacts and carbon emissions. Disposal of products that can be reused, recycled or repaired is a waste of the considerable quantities of energy and resources used in producing or processing them [25]. Similarly excessive packaging uses additional energy to produce, transport and disposed of. Hence although waste disposal and recycling cannot reduce carbon emissions directly, it has an impact on the environment from a sustainability perspective. Recycling uses less energy and

produces less pollution than it would take to make a new product. For example, only 8.3% of the energy used in producing aluminium cans from raw materials is required to recycle and produce new cans from used cans. Similarly 315kg of CO2 is saved per tonne of glass bottles recycled after taking into account its transportation and processing [26]. The management of waste disposal and recycling is influenced by the sectors individual businesses‟ waste management strategies [27, 28], hence a potential issue for carbon foot reporting. 3.3 Water consumption Similar to waste disposal and recycling discussed previously, water consumption does not directly impact on carbon emissions. However, substantial amounts of energy are required to make it sterile for commercial and domestic use [29]. Another issue is the harvesting and recycling of grey water, which makes up 50% to 80% of wastewater all over the world, to treat lawns and gardens. Hence a potential issue for carbon footprint reporting. 3.4 Transport Road transport, shipping and air flights are significant contributors to energy demands and GHG emissions with large parts of the emissions emanating from fossil fuels used [30, 31]. Businesses and individuals regularly use of some forms of transportation like commuting to work, business travels and public transport.

4. Research design and data collection The study of carbon footprint issues addressed in environmental impact reports formed part of a larger annual survey investigating how facilities professionals were engaging with sustainability issues. The research aims to establish the level of understanding and opinion towards economic, social and environmental sustainability issues among facilities management professionals. 4.1 Research Design An online self-administered questionnaire survey was considered the most appropriate method of examining the level of understanding, and opinions toward carbon footprint issues reported in environmental impact reports, among facilities management practitioners. Questionnaire surveys have been used in investigating perceptions and opinions of respondents in several industries in the UK [5, 7]. Elmualim et al. [7] used it to investigate the barriers and commitment of facilities management profession to the sustainability agenda. As with previous three annual surveys (Elmualim, 2010), prior to administering the questionnaire online, news items about the survey were published in FMWorld magazine and on the BIFM website to raise awareness about the survey among the BIFM members. The questionnaire was then piloted among a small number of practicing facilities managers. The results of the pilot study was discussed by a focus group organised by the project‟s steering committee, comprising twelve practising facilities managers and one academic. The questionnaire was accepted as the main data collecting instrument. In order to have a broad spectrum of facilities management professionals participating in the survey, accessibility to the online survey instrument was open to all BIFM members and non-members for a period of one month in May 2010. No names or identifying information were requested on the questionnaires, and all respondents were assured of absolute confidentiality. 4.2 Data collection The questionnaire instrument involved 20 closed questions and 5 open questions. However, to identify the key issues addressed by carbon footprint management strategies, opinions and perceptions were sought by asking respondents to simply select key carbon footprint issues managed and reported in their carbon footprint reports. Informed by literature reviews, interviews and case studies, the ten key carbon footprint issues considered relevant to managing carbon footprints were Waste disposal and Water consumption, Building energy consumption, Commuter

travel, Supply chain emissions, Commercial travel, Business travels - Company cars and Business travels – Public transport, Business Air travels and Non-building energy consumption. To identify the key issues of managing and reporting carbon footprints activities, the data captured was entered into a Microsoft Excel database and analysed using descriptive statistics. A total of 268 respondents completed the survey online compared to 251 respondents in 2007, 168 in 2008, and 222 in 2009. 4.3 Limitations As with all self-administered questionnaire surveys there are a number of limitations associated with the online questionnaire surveys like inability to prompt for explanations and the uncertainty of the profile of respondents. For example, there was no support for respondents who had difficulty in understanding some specific questions. Similarly, respondents could not be prompted to explain their views or reasoning behind certain responses. Prompting respondents will have enhanced the quality of the information provided. To overcome this shortcoming a series of case studies were conducted to complement the survey findings. The online platform does not allow for verification of respondents‟ profile. However, it is hoped that majority of respondents are FM professionals with a genuine interest in sustainability issues.

5. Survey results 5.1 Demographic characteristics of respondents Among the respondents, more that 90% were members of the BIFM with over 63% having full membership, an indication of them having at least five years of management experience and three years of FM experience. More than 50% of the respondents worked in in-house facilities management departments, while 25% worked in organisations outsourced as FM service providers and 9% in independent FM consultants. Clearly majority of the respondents provided FM services in one form or another, hence were well-informed about the opinions, needs and wants of FM professionals engaging with the sustainability practices and strategies. 5.2 Perceptions of carbon footprint management and reporting Of the 268 respondents who completed the survey, a total of 178 (66%) respondents answered the question on carbon footprint management. Of these, 90% selected building energy consumption as the key issue addressed by their carbon footprint management strategies. A further 81% and 67% of respondents selected Waste disposal and Water consumption as important issues addressed by carbon foot management respectively. Other issues selected by the respondents were Business travel - Company cars (53%) and Business travel - Air travel (43%). The least covered aspects include Supply chain emissions (21%); Commercial transport (21%); and Commuter travel (20%). Table 1 shows the ranking of the issues addressed by carbon footprint management

Table 1 Ranking of issues addressed by carbon footprint management strategies

Carbon footprint issues

Number of

respondents (%) Ranking

Building energy consumption 160 (89.9%) 1

Waste disposal 144 (80.9%) 2

Water consumption 119 (66.9%) 3

Business travel – Company cars 94 (52.8%) 4

Business travel – Air travel 77 (43.3%) 5

Business travel – Public transport 66 (37.1%) 6

Non-building energy consumption 54 (30.3%) 7

Commercial transport 37 (20.8%) 8

Supply chain emissions 37 (20.8%) 9

Commuter travel 35 (19.7%) 10

Ranked according to the issues most selected by the respondents, building energy consumption, waste disposal, and water consumption are the main carbon footprint issues managed by the respondents. The issues least selected were commuter travel, supply chain emissions, commercial transport and non-building energy consumption. Table 2 shows a comparison of the issues over a four year period.

Table 2: A comparison of issues addressed by carbon footprint management strategies between 2007 and 2010

% of respondents (Ranking)

Issues 2007 2008 2009 2010

Building energy consumption 85.0% (1) 88.0% (1) 84.6% (1) 89.9% (1)

Waste disposal 75.0% (2) 80.0% (2) 73.1% (2) 80.9% (2)

Water consumption 72.0% (3) 68.0% (3) 66.9% (3) 66.9% (3)

Business travel – Company cars 69.0% (4) 58.0% (4) 38.5% (4) 52.8% (4)

Business travel – Air travel 53.0% (5) 48.0% (5) 38.5% (4) 43.3% (5)

Business travel – Public transport 45.0% (6) 32.0% (8) 27.7% (7) 37.1% (6)

Non-building energy consumption 0.0% (10) 40.0% (6) 29.2% (6) 30.3% (7)

Other supply chain emissions 41.0% (7) 33.0% (7) 15.4%

(10)

20.8% (8)

Commercial transport 37.0% (8) 17.0% (9) 16.9% (9) 20.8% (8)

Commuter travel 31.0% (9) 15.0%

(10)

23.1% (8) 19.7%

(10)

Source: [adapted from 32, 33, 34].

Table 2 shows that over the last four years, building energy consumption, waste disposal, water consumption, Business travel – Company cars and Business travel – Air travel remain as the key issues on which data is collected, measured and reported in environmental reports as part of their sustainability activities. Significantly, the percentage of respondents who selected Business travel - company cars and Business travel - public transport increased by 14% and 11% respectively in 2010. However, Business travel - company cars is still ranked fourth while Business travel- public transport is ranked sixth. The percentage of respondents who identified commuter travel, supply chain emissions and commercial transport has generally declined compared to a 2007 baseline (Table 2). Non-building energy consumption (i.e. street and outdoor lighting, water and sewage treatment, and other miscellaneous end-uses) has also declined from 40.0% in 2008 to 30.3% in 2010.

6. Discussion As 66% of respondents answered questions relating to carbon footprint management and reporting, this indicates that every two out three respondents was aware or involved in carbon footprint management. Nearly 90% of these respondents indicated that building energy consumption was an environmental quality concern in terms of managing carbon footprints. This also implies that majority of the respondents‟ perceptions are largely directed towards both the environmental

impact of building energy use, utility use and non-building energy use. The results also correlated with previous study reports (see Table 2). Although this finding supports previous reports, it is in sharp contrast to the idea that industry and transportation are the main energy consumption or associated carbon emission sector [31]. A reason might be that the built environment (commercial and residential) consumes as much as 45% of generated energy to produce power and heat [11, 35]) and associated GHG emissions. The results indicate that among the respondents, addressing the impact of building energy use on the environment is the most critical element in managing carbon footprints. Often this involves addressing strategies, collecting and measuring data on building energy use like heating, cooling, ventilation and lighting. The results also support the fact that energy efficiency is a cost-effective carbon footprint management strategy. Waste disposal is ranked as the second critical element addressed with respect to carbon footprints reports (Table 2). This result indicates that in order to reduce carbon footprints, respondents are adopting and reporting on more environmentally responsible waste disposal like reducing, recycling, and reusing strategies for waste materials. Clearly, reuse, recycle, and reduce (possibly repair and recover) strategy is one way that respondents reduced carbon footprints. In addition, repair and recover strategies. However a reason may be the liability and cost implications of regulations put in place by the government regulations and directives. Also by managing waste disposals, less waste is sent to landfills reducing carbon emissions from transporting the solid waste materials. Water consumption was highly ranked as a critical issue for carbon footprint management as it indirectly influences carbon emissions. This finding implies water consumption is now a critical issue as it recognised a limited natural resource. Harvesting and recycling of grey water has a great potential to conserve water and reduce sewage treatment plants and hence energy. Clearly the results indicate that less than half of the respondents selected business travels as a top priority in managing their carbon footprint, even though transportation is major contributor to GHG emissions [30, 31]. This might be due to the fact that transportation can be a very emotive issue as everyone uses some form of transport daily and that business without transportation cannot be encouraged. This view is further reflected in the least number of respondents considering commuting as a very critical issue for managing carbon footprint. This may be due to the fact that, often, businesses do not reflect on how far employees travel from and how much it contributes to carbon emissions. Clearly encouraging employees to find the lowest impact commuting options like homeworking and using public transport could go a long way to reduce carbon footprints. Furthermore, if business travels are pooled together, carbon footprint could be reduced when travelling in groups. Interestingly, non-building energy consumption such as street and outdoor lighting and water and sewage treatment systems were highly rated than commuting and supply chain emissions (Table 2). A reason might be that street lighting and sewage treatment are often the responsibility of government or local government or facilities landlords. The results also indicate that not much is considered of the supply chain GHG emissions as supply chains can be very complicated especially where several products, services, are used in producing the organisations final product.

7. Conclusion In the UK, concern for the social and environmental impact of business activities, encouraged by tightening legislative requirements and reputational risks, has led to businesses reporting on non-financial issues such as carbon footprint in their annual reports. However, a lack of consensus on key issues relating to the management and reporting of carbon footprint means a wide range of activities and issues are included in the reports. Hence, the questionnaire survey was conducted, among facilities managers, to identify critical carbon footprint issues or activities that were managed and reported upon within businesses. The study findings indicated that building energy consumption, selected by majority of the respondents, is the most popular carbon footprint issue addressed in environmental impact reports. Building energy consumption will continue to dominate the management of carbon footprints due to

the significance of buildings and associated energy needs to business operations. Furthermore, the variety of energy consumption activities that occur in buildings and facilities means it offers business opportunities to manage their carbon footprints. Majority of the respondents identified management of waste disposal and recycling as a critical issue addressed within the reports. Clearly, reusing, recycling, and reducing waste material within businesses is viewed as one way of reduced carbon footprints in directly. The third most popular issue, selected by the respondents, is water consumption. Other issues identified by the respondents were business travels and non-building energy consumption. The least popular issue identified by the respondents is commuter travels. In general, the critical issues identified in this study reveal how facilities managers are engaging with reducing carbon emissions. The critical carbon footprint issues identified can help lead to improvement or development of good sustainable practices for carbon footprints management and reporting.

8. Acknowledgement The authors would like to acknowledge the contribution and support of the British Institute of Facilities Management.

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Market implications of operational performance variability in certified green buildings

Jeremy Gabe Department of Property University of Auckland Business School New Zealand j.gabe@auckland.ac.nz

Summary This paper examines the effect on the first 450 LEED green building certifications when credits for simulations of potential energy performance are replaced with two models of measured post-occupancy energy performance. Many LEED buildings are likely misrepresented to the market as a result of differences in measured energy consumption relative to certified potential. Two reasons for this misrepresentation are presented. First, the precision of contemporary energy simulations is less than the narrow thresholds for awarding LEED credits. Second, many buildings are sensitive to the loss of a single credit because their designs only meet minimum requirements. Similar outcomes can be expected in most countries because the mechanism for awarding and weight given to energy efficiency credits in green building certification is often similar to LEED. These results present a conflict of interest between building owners and those who value building performance. Eliminating this conflict is one of multiple benefits that are likely to result from a change in certification process that involves a level of ongoing performance assessment.

Keywords: commercial buildings, LEED, assessment, energy performance, energy modelling, market behaviour

1. Introduction

The property industry uses voluntary self-regulation to further the delivery of environmentally benign and natural resource efficient buildings, which are often called green buildings. Beginning with the UK Building Research Establishment Environmental Assessment Method (BREEAM) in 1990, voluntary certification tools have sought to stimulate commercial property markets for green buildings around the world. Using a small number of prerequisites and a variety of optional standards (commonly called “credits”), commercial building owners can obtain third-party certification for a building that conserves natural resources (energy, water, and materials), creates a healthy working environment, and reduces environmental damage relative to conventional building standards. The suite of tools under the Leadership in Energy and Environmental Design (LEED) brand, developed by the industry-led United States Green Building Council (USGBC), are the dominant voluntary assessment systems in North America. In most markets, certified green buildings currently occupy a low proportion of the market for commercial building space [1]. However, about one-third of firms in the global US$4.7 trillion construction market are “largely to fully dedicated” to green building [2], so there are high expectations for growth. Despite this emerging interest in green building procurement, commercial buildings are long-lived assets, so the market for green building space will take time to mature. Investors, developers, owners and tenants appear willing to pay for the benefits of green building certification. Stated preference studies often find that green building is perceived as an important future direction for the industry [2,3]. With ten years of green building certification in the United

States, property scholars have begun to investigate the revealed preference of premiums paid and occupancy rates for certified commercial property. Using hedonic regression, most have concluded that LEED certification provides statistically significant increases in property value, rents and occupancy rate [1,4]. More specifically, the market is willing to pay for two main classes of benefits. First, green building can deliver “intrinsic benefits” – improved operational performance through reduced costs, increased revenue, or reduced risk [5,6,7,8,9,10]. Alternatively, a green building can provide “market signalling” value, where a credible signal is the sole source of added value. There are a variety of motivations behind market signalling, such as qualification for tax credits, strategic market differentiation, perceived legitimacy, delaying regulatory pressure, and increased competitiveness [10,11,12]. Recent research has attempted to understand the relative contribution of these two drivers in the business case for green building. Data on LEED-certified buildings have been fit to models of decision making, tentatively concluding that organisations first choose a level of certification (market signalling) and then choose how many credits to adopt over the necessary threshold as a result of pursuing intrinsic benefits [10]. The distribution of credits obtained above minimum requirements for a signal is skewed towards the minimum (Figure 1), suggesting that market signalling is the dominant driver. Anecdotal reports on the dominance of signalling are common [13]. The primacy of signalling may have unwanted side effects. signalling can lead to “misdirected attention” on credit requirements, potentially leading to sub-optimal performance outcomes and barriers to innovative solutions [14].

A potential weakness in the certification of buildings is that the process almost always takes place at the design or as-built stage of a project – ongoing assessment and re-certification is rarely performed. In studies comparing design objectives to operational outcomes, green buildings have been shown to deliver on the magnitude of operational resource efficiency at the societal scale, but there is high variability in performance at the individual building scale [15,16].

Fig. 1. Frequency of total credits obtained across all LEED-certified buildings (New Construction version 2)

up to 1 September 2006 (the sample set in this study). Dashed lines indicate signalling thresholds.

Given the observed variability in performance at the individual building scale, this paper models how the histogram of certification scores (Figure 1) could change if post-occupancy resource consumption is used in place of simulated resource efficiency potential. Because of its use in both pre-occupancy and post-occupancy studies, the LEED for New Construction certification system (predominantly in North American markets) will be examined. After an introduction to the process of green building certification and more detail on the findings of post-occupancy studies, models will attempt to describe how Figure 1 could be amended to account for operational variability. The findings and implications for the property industry are then discussed.

2. Green Building Certification Tools and Energy Performance Most certification tools worldwide have three to five distinct certification levels, with higher levels achieved by implementing a greater percentage of optional credits. LEED for New Construction (version 2) features 69 optional credits in total and four distinct certification levels: a “Certified” rating is given to buildings that obtained 26–32 credits; a “Silver” rating to those that obtained 33–38 credits; a “Gold” rating to those that obtained 39–51 credits; and a “Platinum” rating to those that obtained over 52 credits. Certification occurs at distinct phases in the building procurement process, which is split into the design stage, as-built stage, and operational (in-use) stage. In most cases, once a building has been certified at a particular phase, it retains its assessment for the life of the building. Exceptions to this are in-use phase certifications, such as the National Australian Built Environment Rating System (NABERS) or LEED for Existing Buildings: Operations and Maintenance, where updated performance data is required every year or every five years respectively. As a result, operational stage tools function in a similar manner to financial reporting practices [17]. Operational energy efficiency is an important component of certification schemes, and has been the subject of prior study [15,16]. Energy efficiency factors in nearly one-third of all optional credits in LEED for New Construction [16]. Of relevance to this study are eleven optional credits obtained through simulation of operational energy consumption potential (in dollars) relative to a baseline (standard-compliant) building (Table 1).

% Cost

Reduction

(new building**)

15 20 25 30 35 40 45 50 55 60 >65

LEED credits 1 2 3 4 5 6 7 8 9 10 11*** * Version 2.2 references an updated standard (ASHRAE 90.1-2004), and reduces the percentage savings required for

each point. No building in the dataset for this paper used version 2.2, thus the percentages above are for versions 2.0

and 2.1.

** Existing buildings undergoing major renovations require 10% less reduction than new buildings. For example, a 15%

energy cost reduction in an existing building is awarded 3 credits.

***This eleventh point is given consistently by the USGBC as an “innovation” credit.

Simulated operational energy consumption is divided into two categories. “Regulated energy” consists of services that all commercial buildings share because of statutory building codes – space conditioning, ventilation, lighting, and hot water supply. The remaining consumption is “unregulated energy” (sometimes called “process loads” or “plug loads”) that represents all tenant- or building-specific services such as computers, specialist equipment, lifts, and miscellaneous devices that use wall sockets. In LEED for New Construction versions 2.0 and 2.1 (which all buildings in this paper used), energy efficiency credits are given for regulated energy efficiency potential only. Unregulated demand was not required to be simulated. Consequently, energy consumption figures from LEED simulations are not intended to indicate total building consumption without an assumption regarding unregulated energy.

Table 1. Optional energy credits in LEED for New Construction (version 2). Reductions are relative to ASHRAE 90.1-1999* standard for new buildings [18].

Newer versions of LEED (beginning with 2.2), reference a new simulation methodology that requires unregulated energy to be considered in the model. However, this does not require buildings to simulate unregulated energy demand. Those that do not can simply assume unregulated energy will make up 25% of total building energy. Unregulated energy consumption can thus be calculated as 33.3% of the regulated energy consumption potential (resulting in a total building energy split of 75% regulated and 25% unregulated). This assumption regarding unregulated energy was used in a study by Turner and Frankel [15] that compares simulated energy consumption potential to measured energy consumption for LEED-certified buildings. Gross energy consumption of their entire population (N=121) of buildings met this potential relative to the compliance baseline, but the distribution was highly scattered at the individual building level; over half the projects deviated more than 25% from expected consumption. Similarly high variability has been observed in buildings marketed as energy-efficient in the UK [19] and New Zealand [20]. An alternative study [16] applied more rigorous statistical analysis to the Turner and Frankel dataset, and concluded that there was a very weak relationship (radj

2=0.11) in the expected trend that an increase in LEED energy efficiency credits earned leads to a decrease in energy consumption costs post-occupancy. Their study also provided more rigour to Turner and Frankel’s conclusion that, on average, LEED buildings performed better than “conventional” equivalents, but approximately one-third of LEED buildings consumed more energy than a non-LEED equivalent.

3. Modelling This study aims to understand the implications of observed resource consumption variability on the business case for green building – particularly the value of market signalling. Data on energy consumption variability in LEED-certified buildings studied by Turner and Frankel [15] is used in two models of a hypothetical situation where the 11 credits awarded for simulated energy efficiency potential are adjusted for observed consumption. The sample set used in these models contains the first 450 LEED-certified buildings (all buildings certified prior to 1 September 2006), of which data on credits earned were available for 448. Results are presented relative to the original distribution before adjustment (Figure 1). On average, each building in the dataset earned 4.4 credits for proposed operational energy efficiency (out of a possible 11). The median was 4 credits. Fifty-eight buildings (13%) opted not to pursue any credits for operational energy efficiency. Two models are produced. The “advanced model” assumes that the variability observed by Turner and Frankel [15], both in distribution and magnitude, is representative of the dataset. The “simple model” controls for uncertainty in comparing simulated and measured energy performance, and limits adjustments in energy efficiency scores to one credit. This latter model could also represent a scenario where simulation improves (such as better modelling of unregulated loads). 3.1 Advanced Model One dataset from the Turner and Frankel study (reproduced below as Figure 2) compares simulated and measured data from 71 “medium energy use” buildings. Data is presented in the metric used to award energy efficiency credits – proposed energy consumption relative to code compliance (see Table 1). Figure 2 contains buildings that would have gained zero optional energy efficiency credits, so this model for re-distribution of energy efficiency credits will include all of the first 450 LEED-certified buildings with credit data available (N=448).

To model changes in energy efficiency credits, each of the 71 data points in Figure 2 is translated into a credit differential – defined as the total number of credits based on measured savings minus the number of credits based on proposed savings. Credits are awarded based on the thresholds in Table 1. To account for the discrepancy in credit thresholds between new and existing buildings, it is assumed that half of the buildings in the sample are new and half are existing buildings undergoing major renovation. As a result, the model calculates credit thresholds to be exactly in-between the new and existing building thresholds; for example, the model awards one credit for energy savings at 10% improvement relative to the baseline standard, two credits for 15% improvement, and so on. Publicly available data does not indicate whether a building qualified for LEED as a new building or existing building undergoing renovation.

Fig. 3. Distribution of “credit differential” for the 71 buildings in the Turner and Frankel comparative dataset. Credit differential is the number of credits awarded from measured savings minus the credits awarded from proposed savings.

Fig. 2. Comparison between proposed (simulated) and measured energy savings (relative to ASHRAE 90.1-1999 standard). Source: Turner and Frankel [15].

A positive credit differential indicates actual savings were underestimated in the simulation, while a negative credit differential indicates actual savings were overestimated. The resulting distribution of credit differential is presented in Figure 3. The mean is 1.13 credits gained, median is 1 credit gained, and standard deviation is 3.92. To use the distribution of credit differential in a re-calculation of the energy efficiency credits awarded pre-occupancy, the distribution in Figure 3 was assumed to be normal (with mean of 1.13 and standard deviation of 3.92). Each building was assigned a random number in this normal distribution by R, the statistical computing software. This random number was then rounded to the nearest integer, and represents the credits gained (if positive) or lost (if negative). Summing this value with the original number of credits obtained for energy efficiency represents the adjusted number of credits earned using measured energy performance. The resulting re-distribution of total credits gained is presented alongside the original distribution as Figure 4. Dashed lines depict thresholds between distinct certification levels. A number of buildings fall below 26 credits and would hypothetically be subject to “losing” certification. In total, 94 buildings (21%) experience a demotion in their certification (25 of these lose certification, and 2 are demoted two thresholds, from Gold to Certified), while 46 buildings (10%) are promoted to the next threshold (none are promoted two thresholds). Only 69 buildings (15%) experience no change in their energy efficiency credits. More buildings gain credits than lose them (median credit differential was 1) because there is more capacity to gain credits. Four buildings are hypothetically eligible to earn more than 11 credits (assuming the 12th credit is awarded at 65% savings) while 15 buildings have their credit loss capped because they cannot lose more credits than they gained originally (these are buildings that exceed the baseline standard for energy efficiency). An event not considered in this model is the loss of certification (from any certification threshold) that would hypothetically result from failing to meet a LEED prerequisite of compliance with the minimum energy efficiency standard. There are two key assumptions that should be noted. First, the source data in Figure 2 – which is only of “medium energy use” buildings – must be assumed to be a representative sample across

Fig. 4. Resulting distribution of total LEED credits obtained following the advanced model that adjusts proposed energy efficiency credits to measured energy efficiency credits.

all the building types represented in the first 450 LEED-certified buildings (which include “high energy use” buildings such as laboratories or hospitals). Second, the model accepts the assumption made by Turner and Frankel regarding unregulated energy demand; the expected regulated energy consumption for each building is inflated by 33% to account for unregulated energy demand equal to 25% of total building energy consumption. These assumptions reflect limitations in publicly available data to model accurately a re-distribution of energy efficiency credits. As such, this version of the advanced model must be seen as a work in progress. However, energy savings in use may be slightly overestimated. Turner and Frankel observed high energy use buildings are more likely than medium energy use buildings to consume more energy than expected [15]. Since the model applies a relationship derived from medium energy use buildings to all buildings, the set of high energy use buildings amongst the first 450 LEED-certified buildings are likely to have their energy savings in-use overestimated. In addition, the assumption regarding unregulated energy consumption may also overestimate energy savings. In an appendix, Turner and Frankel discuss an earlier study (unpublished) they conducted on energy modelling and found that when buildings did simulate unregulated energy consumption, the median percentage was below 15% of total building energy (compared with the standard assumption of 25%). The authors claim that using a lower percentage than 25% would not change the overall conclusions of their study [15], but the standard assumption may effect an overestimate of energy savings when using their dataset to re-distribute energy efficiency credits. Figure 5 shows the potential “loss” of energy savings if lower percentages of unregulated energy are assumed. For example, if a new building measures 24% energy savings (2 credits) when assuming 25% of total building energy is unregulated energy, this improvement reduces to an energy savings of 14% (zero credits) if only 15% of total building energy is unregulated energy. More accurate data may thus lead to fewer credits awarded when measured energy consumption is used in place of simulations.

3.2 Simple Model This model is informed only by the finding that buildings were just as likely to outperform their simulated energy efficiency estimate as they were to underperform it (hence, on average, the

Fig. 5. Potential error in estimating measured energy savings that results from different assumptions for unregulated energy consumption as a percentage of total building energy consumption

entire population of buildings meets its potential savings). It does not attempt to take into account the magnitude of variance away from expectations, assuming that improvements in simulation (or adjustments to LEED criteria) can limit variance to one credit. Only the 390 buildings in the dataset that obtained points for energy efficiency are included; the 58 buildings that did not attempt points are excluded from adjustment, with no change to total credits earned. By assuming a maximum variance of one credit, this model effectively limits the variance between proposed and measured energy efficiency to +/- 5% energy savings relative to the baseline. To stay consistent with using the median between credit thresholds for new and existing buildings as the modelling threshold, a minimum of 10% energy savings is needed for one credit. One-third of the point-earning buildings is assumed to gain one credit as a result of exceeding expectations of energy efficiency, another third is assumed to lose one credit as a result of underperforming expectations, and the final third is assumed to have no change. To randomly apply these adjustments, the 390 buildings were arranged by the USGBC “project number” (given to a building when they register interest in certification). In the resulting list, buildings 1, 4, 7, and so on gain one credit, buildings 2, 5, 8, and so on lose one credit, and the remaining buildings are left unchanged. Six buildings in the dataset obtained all 11 credits for energy efficiency and are ineligible to gain another credit, so no change in total credits was assumed if one of these buildings was assigned to the group that gained one credit (this affected two buildings and was inconsequential to any conclusions drawn since that one credit would not affect their certification level). The resulting re-distribution of total credits is presented, alongside the original distribution, as Figure 6. Dashed lines depict the thresholds between distinct certification levels. Since some buildings that obtained 26 credits (the minimum required for certification) are expected to lose one credit, those buildings would hypothetically be subject to “losing” certification. In total, 61 buildings (13.6%) experience a demotion in their certification (19 of these lose certification), while only 3 buildings (0.7%) are promoted to the next threshold.

Fig. 6. Resulting distribution of total LEED credits obtained following the simple model that adjusts proposed energy efficiency credits to measured energy efficiency credits.

4. Discussion This study shows that one key component of green building certification – measured operational energy efficiency – is difficult to predict pre-occupancy to the precision that LEED certification awards optional credits. Post-occupancy comparisons between measured and potential energy consumption are highly variable; the advanced model that attempts to account for the magnitude of observed variability finds that only 15% of buildings perform within the range of energy savings advertised by their energy efficiency credits. As a result of the weight given to energy efficiency, approximately one-third of certified buildings are misrepresented in the market. The advanced model shows that one in every 5 LEED buildings is certified at a higher level than it performs, while one in every 10 would qualify for an increase in certification level. The actual number of misrepresented buildings may be higher if building water consumption projections – another core part of green building certification – show similar variability, or if the hypothesised overestimate of energy savings in the advanced model is confirmed. One result could be decreasing price premiums as tenants (who may place higher value on intrinsic benefits relative to market signalling) become aware of uncertainty in the expected link between certification signals and performance. Although these models examined LEED certification, which is predominantly used in North America, the findings are applicable around the world because local certification tools use similarly precise thresholds for awarding energy efficiency points. For example, New Zealand’s Green Star certification tool awards an optional credit for each 5% of potential energy savings above a baseline figure of regulated energy consumption (identical to LEED). The current version of Green Star in Australia uses an even more precise threshold, awarding a credit for every 4.5% improvement in energy consumption-related greenhouse gas emissions against a baseline figure. An often suggested improvement to green building certification at the design and as-built phase is to improve the accuracy of energy consumption modelling. The simple model, which constrains variability to one point and has a far greater percentage of buildings experiencing no change, can be used to hypothesise the effects of this change. Misrepresentation does decrease, but by much less than one might expect given the relatively large decrease in variability. With the maximum gain or loss constrained to one point (the largest differential in the advanced model was eight points), misrepresentation is only cut to 14% - just under half the total number of buildings misrepresented in the advanced model. A gap between modelling accuracy and credit thresholds can thus explain some of the misrepresentation, but not all. The other cause is likely be the primacy of market signalling as an incentive to pursue green building certification. Although LEED thresholds are arbitrary, many users approach them with a compliance mindset and aim for outcomes at (or only slightly above) minimum requirements [10,21]. This behaviour exposes the building to the risk that the loss of a single credit is likely to result in the building falling below its certification threshold. The simple model, where variability is constrained to one point, is a good example of this risk; of the 64 misrepresented buildings, nearly all (61) would have their certification demoted (or removed). Even in the advanced model, where, on average, a building gains one point, there are more demotions (94) than promotions (46). 4.1 Opportunities for innovation Green building councils are interested in innovation towards long-term building performance outcomes as well as provision of credible differentiation labels. This study reveals that, though the latter is likely to be a stronger driver in the current market, market differentiation presents a risk to credibility. Currently, claims made by green building owners are credible until proven otherwise, motivating owners not to disclose performance data. However, as knowledge spreads, green building claims may be treated as “greenwash” until performance data proves them credible (reducing the value of market signalling, one of the key motivations behind green building procurement). An opportunity exists for green building councils to use green building differentiation in a strategic manner to leverage innovative behaviour towards maximum performance outcomes

and mitigate this conflict. One possible strategy is providing less certainty about perpetual certification by renewing design and as-built assessments with performance measurements. To minimise the additional burdens of re-certification, perhaps only credits based on operational resource consumption would be re-assessed. This places green building assessment in-line with financial assessment, where a business plan (or prospectus) is followed up by reporting of actual results to the market using accepted accounting principles. Figure 1 can be seen as an aggregation of business plans, while modelling results (Figures 4 and 6) are attempts to simulate the performance of these business plans. In a scenario involving ongoing performance adjustments, it may be optimal for design teams to pursue an insurance strategy (exceeding the minimum credits as a means to mitigate the risk of underperformance) in order to maintain certainty on differentiation. This creates a more efficient market for consumers because design-stage certified buildings are likely to maintain its chosen level of differentiation even if they are in the set of buildings that underperforms in operation. Concern towards “misdirected attention” at credit definitions, rather than innovation [14], could also be reduced. Another positive side-effect of performance assessment is an incentive for increased communication between building design teams and end-users – an often-suggested solution to variable performance outcomes [19,20]. As for the conflict of interest between building owners and tenants, less certainty of perpetual certification increases risk to owners (who may lose certification or face demotion), but may ultimately be to their benefit. As the advanced model shows, buildings, on average gained one point. Although this gain may be an artefact of poor assumptions for simulating unregulated energy demand, the possibility of future advancement can incentivise ongoing improvements. Facilities managers are often looking to reduce energy and water costs and the reward of additional certification credits may make future investments in resource efficiency more attractive. Most green building councils do have a strategic vision for performance assessment, but performance-based certification has consistently been developed later than design and as-built assessment. The first potential set of accounting principles and methodologies for rating the ongoing performance of these buildings, the LEED for Existing Buildings: Operations and Maintenance tool, was only introduced in 2008 –eight years after LEED for New Construction was first available. Neither New Zealand nor Australia has yet introduced an equivalent performance-based tool; though the Australian market does have an opportunity to integrate NABERS with Green Star (the tools are separately administered).

5. Conclusion Through two models of re-allocating credits for energy efficiency performance in LEED-certified new buildings, market behaviour and optimism with the precision of contemporary energy consumption simulation were shown to contribute to the potential misrepresentation of up to one-third of certified buildings. This introduces a conflict of interest between building owners and those who value building performance. Eliminating this conflict is one of multiple benefits that are likely to result from a change in certification process that involves a level of ongoing performance assessment.

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A case study with environmental LCC in the Swedish building and construction sector

Maria Noring PhD student fms, KTH Sweden maria.noring@abe.kth.se

Elisabeth Hochschorner PhD fms, KTH Sweden elisabeth.hochschorner@abe.kth.se

Summary The Swedish building and construction sector contributes greatly to negative environmental impacts, while its environmental protection measures are marginal. Life cycle costing (LCC) has been used successfully for procurement and investment decisions, but its use within the Swedish building and construction sector is limited. This paper combines LCC with an environmental approach employing monetised environmental impacts. The prototype developed was evaluated in a case study. The aim was to investigate the cost items that could be educed, how the results were perceived, the problems encountered and the kind of results that can be obtained using the tool. The case study, at a Swedish housing company, showed that data about the investment (costs and quantities) were readily available. Data on quantities are important for deriving the environmental impact. A greater understanding of external costs as a valuation of the environmental impact is needed in order for the results to be used efficiently. However, it is important to bear in mind the crucial importance of sensitivity analyses, e.g. varying the interest rate or future cost changes, and of dividing internal and external costs in order to avoid double-counting.

Keywords: Environmental Life Cycle Costing, building, construction, environmental costs

5. Introduction

The building and construction sector has a great impact on the environment. In Sweden, 20% of total greenhouse gas emissions are caused by the sector. Many of the hazardous compounds used in Sweden (16%) also derive from the construction of buildings [1]. There are a number of tools for decision making for building and construction purposes, such as BREEAM [2], LEED [3] and EcoEffect [4]. However, these tools do not include financial aspects. Another approach is to use Life Cycle Costing (LCC), a method that has been in use for almost a century. It started out as a method for military procurement and has since been adapted for use in public and private pro-curement. The aim of LCC is to estimate the present value of the costs during a product’s life cycle rather than accounting [5]. Studies have shown that LCC users regard the method as important for decision making, although its use is not very widespread [6, 7]. A literature study [8] has shown that previous case studies do not focus on tool development, but rather on tool use in different con-texts and environments. One of the findings from that analysis of case studies was that a single standard would be desirable, but that several exist, e.g. [9]. Traditionally, external costs (i.e. costs not borne by producers or consumers but by society) are not included in LCC but these are included in some studies, e.g. [10, 11, 12, 13, 14, 15]. Among these, [14] applied LCC to the building industry and derived the environmental cost from the global mar-ket for carbon dioxide. No other environmental impacts were considered. Another study [12] de-

veloped a LCC for waste management systems in which a weighted Life Cycle Assessment (LCA) complemented a financial LCC. LCA is a tool for environmental assessment of products and services, and data from LCAs are useful for estimating external environmental costs of materials, energy, etc. LCAs are standardised in [16], and described in textbooks, e.g. [17] and several scientific papers. Methodological differ-ences between LCCs and LCAs are discussed in e.g. [5] and [12]. This paper deals with environmental LCC, with the aim of showing how environmental impacts can be included in LCC. The paper presents results from a project designed to facilitate the use of LCC within the building sector, carried out together with some partner companies in that sector. The present paper describes the development of an environmental LCC and its testing within the Swedish housing and construction sector. The questions examined were: Which cost items could be educed? How were the results perceived? What problems were encountered? What kind of results could be obtained using the tool?

6. Background

A number of case studies using LCC have been performed on the building sector [18, 19, 20], and LCC has been used for several decades in e.g. public procurement. Some efforts have been made to combine LCC with environmental impacts to gain a wider perspective on decision making. One study [11] uses a streamlined LCA approach to gather environmentally related costs during the manufacturing process. External costs are thus not included. In contrast, [10] combines full LCC with full LCA, while [12] uses a combination of financial LCC and environmental LCC, where the environmental LCC consists of a monetary weighted LCA. The weighting sets used are ECON’95 [21], EPS 2000 [22] and EcoTax’99 [23]. The definition of environmental costs thus differs between the different approaches. Most tools include only direct and indirect internal environmental costs, e.g. emission taxes or costs for environmental management systems (EMS) [13, 11, 15]. Others also include contingent costs, i.e. costs that might occur, such as fees or other risk-related costs [15]. The practical use of LCC within the Swedish building sector is rather limited, despite the extensive theoretical applications and the fact that many professionals apply a life cycle perspective in decision making [7]. A later study by [24] confirms these findings. A large proportion of professionals believe that the method is useful and important for decision making, but few apply a holistic approach and include all life cycle phases. The use of an environmental approach with a life cycle perspective is also reported to be extremely limited [7]. There are a number of tools for decision making within the building and construction sector, developed for different occasions and needs, e.g. [25, 26]. The challenge is to develop tools that will be used by practitioners. The study by [24] revealed that there are some core issues affecting the extent of use. The major reason why LCC is not widely used seems to be lack of knowledge concerning the tool, while increased customer demand is the reason cited for increasing its use. This indicates the need for a user-friendly tool, which should be developed in cooperation with the industry.

7. Method

The method used to meet the goal of developing and testing an environmental LCC tool consisted of continuous communication with selected companies as project partners. During tool develop-ment, feedback was sought from the companies by meetings and e-mails. The tool was iterated in several rounds and the final result tested in a case study, as described below.

8. Case study

8.1 Tool construction

The environmental LCC tool is an Excel-based prototype developed in an iterative process with some companies engaged within the project. The first version was based on a survey and inter-views performed within the project [24]. This version was then tested by the partner companies, which also made suggestions on improvements, e.g. regarding the functionality of the tool and the best materials to include in the prototype. The framework for the tool is now set, although it is still at prototype level, meaning that the database is not yet complete. The tool is divided into the dif-ferent life cycle phases of a building, starting with the planning and design phase. This is followed by the construction phase, the operation and maintenance phase and lastly the disposal phase. Within each phase, internal costs are separated into conventional costs, such as investment costs, salaries, material and equipment, and environmental costs, such as costs for energy and waste treatment. Added to this are the external environmental costs caused by use of materials, fuels and energy. All costs (both internal and external) are discounted according to the interest rate cho-sen by the user. The calculation is described in equation (1).

( ) ( ) ( ) ( )1 2 3 40

1 1 1 1

1 1 1 1

t T

t t t tt

LCC C C C Cr r r r

=

=

= + + ++ + + +

∑ (1)

where C1= internal and external costs during the planning and design phase C2= internal and external costs during the construction phase C3= internal and external costs during the operation and maintenance phase C4= internal and external costs during the disposal phase r = the interest rate chosen t = time of the event. In the case study, external environmental impacts were assessed using a database for life cycle assessments, Ecoinvent 2.0 [27], and characterised by the ReCiPe impact assessment method [28] as provided in SimaPro 7.2.4 [29]. The values generated on environmental impacts were then monetised using a Swedish weighting method called Ecovalue [30]. Ecovalue was chosen since it is based on willingness-to-pay studies within a geographical area relevant for Swedish conditions. It thus captures the population’s valuation of impacts affecting welfare and not only the direct costs for e.g. cleaning or decontamination measures. Ecovalue consists of an upper and lower value for each category in order to reflect the span in valuation studies. However, our project partners re-quested that only one weighting-set be used, as they found more than one confusing. In this case study the upper values were chosen in order to simplify the calculations and since the valuation studies are probably undervalued. The set was derived to be complementary with LCA data from ReCiPe [28] or CML [31]. This provides the opportunity to include a large amount of materials, processes and compounds. However values for several impact categories are still lacking in the weighting set, such as ecotox and noise, which limits the extension of the external impacts. The weighting of LCA data is described in equation (2), where a is the factor from CML, b is the weight-ing factor from Ecovalue and NPC is the net present cost for the external effects originating from one unit of material.

( )0

*

1

t T

tt

a bNPC

r

=

=

=+

∑ (2)

Since the environmental impacts are derived from LCA data and a weighting set based on willing-ness-to-pay studies, and the theoretical assumption is that all costs related to the production, use and final disposal of a material are included in the value, there is a theoretical risk of double-

Table 1 Summary of data on the two options examined in the case study.

counting as some of the external costs are internalised, e.g. in environmental taxes and fees paid by the company. Therefore, the results from the internal and the external parts of the tool must not be combined in this stage of the tool.

4.2. Case study

The case study tested the environmental LCC tool developed in terms of the results provided and its usefulness and user-friendliness. The case study was performed at a Swedish housing com-pany belonging to the public building sector. The company is an interesting study object since it owns a large proportion of the houses in Stockholm, many of them built during the mid-20th cen-tury and thus in need of extensive renovations. The company is also responsible for constructing new houses. The object analysed in the case study was chosen by the company since it was rather non-complex and the work had already been agreed, which meant that there were a lot of data available. This object was a residential building built in 1950 in the suburb of Kärrtorp, south-ern Stockholm. The building consists of 22 apartments, varying from one to four rooms. There are also three premises for businesses to rent. As the building is about 50 years old, there is a renova-tion need, e.g. the windows are original double glazing with wooden frames. These had served their time, so a decision was taken to replace them with energy-saving triple glazing in aluminium frames. It was also decided to provide extra insulation of the façade using a 5-cm layer of insula-tion covered with plaster. For the purposes of the case study, the option of just repainting the old windows and having no extra insulation was considered. The functional unit for the two options was thus renovation of the façade and windows. Data for the two options are presented in Table 1. A limited number of materials were involved, especially in option B, where the windows were only repainted. The case study was performed during half a day at the company. The person represent-ing the company performed the calculations using available data and went through the tool with as little assistance as possible from the researchers. During the case study both the handling of the tool and related data and the actual results originating from the data and calculations were studied.

9. Results

9.1 Cost items that could be educed

The case study at the housing company included two suppliers already chosen by the company. These suppliers were able to provide the company with data, which it compiled into a sheet show-ing desirable data and their units. This proved to be very helpful during completion of the form. As the tool is divided into the life phases of a building, the case study followed these phases. During the planning phase, which consists of planning and design, one cost item was identified and con-

Characteristics Option A Option B Life length 50 yrs 50 yrs Interest rate 4% 4% Specifications Extra insulation

New plaster New plaster

Change windows to triple-glazing with aluminium frame

Repaint window frames

Dispose of old windows

sisted mostly of salaries. No environmental costs, internal or external, were found, since the plan-ning process did not calculate materials, energy or electricity. The cost of planning was a little lower for option A compared with option B. The second phase, production and construction, in-cluded several more items. Among the internal costs, salary and materials were the main items, but environmental costs such as electricity use and fees for disposal of old windows also arose. Option B included the same cost items, but these were lower, with the exception that the fees for disposal of windows were not relevant. Since option B only consisted of repainting and new plas-ter, less environmental impacts were identified. Transport costs were included in both options. During the operation and maintenance phase, option A only included costs and environmental im-pacts from heating. Option B was assumed to require at least two repaintings during the life time. Earlier estimations of the energy use had already been made, which provided easy input, and op-tion A was expected to need less energy than option B. 9.2 How the results were perceived

During completion of the tool paperwork, the presence of the researchers appeared to assist to some extent. The person from the company asked several times where to enter different data and numbers. However without too much help, he was mostly able to pick the relevant box. The tool worked and when asked about it, the company representative stated that it was easy to use and easy to collect data about costs and materials, but that it was unclear what the external costs really meant. The company representative had experienced an interest from the suppliers on asking for the data, which he found somewhat surprising. A ready-to-use form to give to the supplier was suggested, in order to simplify the data collection process. Some materials were missing, but since this was only a prototype, that was not regarded as critical for the case. One part that could have been included was future changes in energy costs. When asked what the results could be used for, the representative said that if he knew more about the external costs they might be useful. The company already uses building material assessment (byggvarubedömningen.se), but that occurs later in the building process and is a tool for choosing building material from a toxicological per-spective. 9.3 Problems encountered

The case study revealed that some materials were not represented in the database, for example different foams and sealants. However it was easy to find data on different types of transport, which were provided for several different options and versions. The company was also able to es-timate the distance driven by lorry with the help of supplier data. The hardest part to estimate was the disposal phase. Since the expected life length of the aluminium windows is half a century, it is almost impossible to estimate what will happen. One option is to continue using the windows, but then the actual life length would be longer than accounted for. If the aluminium windows continued to be used, it is also unclear what would happen with option B and whether there would be an urgent need for replacement. In any case, predictions of the materials to be used and their life length are practically impossible. Therefore, the last phase was left untouched in the case study. 9.4 Results that could be obtained using the tool

The results show that the alternative actually chosen (option A) was the most expensive one, at least in terms of internal costs (Table 2). Option B had the highest environmental impact, probably due to higher energy use during the operation and maintenance phase (Table 3).

Table 2 Internal conventional and environmental costs and total internal and external costs in different phases, option A, in Swedish SEK.

Table 3 Internal conventional and environmental costs and the total internal and external costs in different phases, option B, in Swedish SEK.

10. Discussion

The case study showed that the environmental LCC tool developed here works in practice. It is possible for a person working in a housing company to understand what data need to be included and how. There were some materials missing in the prototype, but this was not essential for the function of the tool. The case study also showed that the results gained can be used for decision-making when choosing between different materials, components or structures, since the tool pre-sents the costs, both internal and external, in a clear way. It is important to remember that the re-sults should not be used in isolation, but in combination with other analyses. Thus, the results from the tool show what the overall costs are and the potential environmental impact. The estimated and monetary weighted environmental impact should be seen as an indicator of the impacts of different options rather than an actual cost. The calculations showed how cost items were distributed over the life cycle and also where the environmental impacts were located. In option A the highest cost lay within the construction and production phase. In option B these costs were naturally much lower, since that option only in-volved repainting. As option A generated a higher level of insulation, the energy costs will be lower during the rest of the life cycle compared with option B. The environmental impacts followed the same pattern, since most material was used during the construction and production phase in op-tion A. However the higher energy use in option B gave a higher aggregated environmental impact, which also affected the total impact during the life cycle. So far, the external costs should be seen as an indicator of the environmental performance of choices and not of actual costs deriving from those choices. The benefit of presenting the envi-ronmental impacts in monetary units is that the effects on different parts of the environment can be

Phase Internal conventional costs

Internal environmental costs

Total internal costs

External costs

Planning and design 140 000 0 140 000 0 Construction 5 548 317 85 577 5 633 894 1 611 056 Operation and maintenance 0 4 600 785 4 600 785 3 640 432

Disposal 0 0 0 63 Total 5 688 317 4 686 362 10 374 679 5 251 551

Phase Internal conventional costs

Internal environmental costs

Total internal costs

External costs

Planning and design 125 000 0 125 500 0 Construction 3 002 163 57 692 3 059 856 534 205 Operation and maintenance 398 806 5 949 291 6 348 096 4 708 609

Disposal 0 0 0 0 Total 3 526 469 6 006 983 9 533 452 5 242 814

added up and compared. It also allows the external effects to be compared with what is actually paid by the company. In the future there is a risk of some of the external effects becoming internal-ised in the form of taxes or fees. This might be an indicator of the expected level of such effects. It is important to perform a sensitivity analysis by using different interest rates and to be aware that prices can change. The prototype contains a limited number of materials, a fact that also should be borne in mind. The results from the case study are thus uncertain and should be interpreted with caution. By adjusting the interest rate in the prototype, it is possible to see the potential variations in outcome. Larger costs in the future will have a greater impact on the final result if the interest rate chosen is low than with a high rate. The prototype tool uses the upper level of the weighting set, but both the minimum and maximum levels should be used for a proper analysis. A difficulty experienced during tool development was choice of materials. Within the database used there were often several similar materials and products to choose from and in this prototype only a handful were selected to serve as examples. The case study revealed that the materials chosen were perhaps not always the most suitable. During tool development, representatives from com-panies within the housing and construction sector were asked to suggest suitable materials. These materials had to be relevant for the sector, but many suggestions given were perhaps on a more detailed level than needed. An example was the suggestion of including phthalates, the content of which is not very easy to estimate. Instead materials containing phthalates were included. How-ever, the choice of materials might be crucial for the final result. Knowledge about the database and how the assessments have been performed might give more reliable results. This case study did not test the variability in choosing materials from different databases. The end result was thus associated with a number of uncertainties, but could still be interesting as an indicator and comparison of alternatives. The initial results indicate that option A is more ex-pensive than option B, both regarding internal and external costs. Energy use did not have a major impact on the outcome. A major difference was the overall environmental impact from the con-struction phase, where aluminium had a great influence, followed by glass. Note, however, that option B was a fictive alternative constructed for the specific purposes of the case study.

11. Conclusions

An environmental LCC was developed and tested within the Swedish housing and construction sector. Using this tool, it was possible to educe costs for different phases in the building’s life, and to estimate the potential external costs. The results from analyses with the tool showed costs in different phases, divided into internal and external costs. This was easily understood by the partner companies after an additional explanation of these external costs. Another finding was that the tool can be used not only for comparisons, but also for identifying hotspots in the phases. Problems occurred when data were missing in the databases, which stresses the need for further studies with a life cycle perspective of environmental impacts from building and construction materials. Another problem arising in the case study was making predictions for the disposal phase.

12. Acknowledgements

The authors wish to thank the partner company for participating and providing data and engagement. The financial support from Formas is gratefully acknowledged.

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New economic incentives for sustainable building: Energy saving certificates and energy performance contracting

Mr. Dominique Sellier, Director of Advance Planning and Ecological Transition ARENE : Paris Regional Agency for the Environment and New Energies France d.sellier@areneidf.org Summary Energy saving certificates or so called white certificates and energy performance contracts provide two key economic and financial tools aimed at saving energy, with special emphasis on the building sector, which in France accounts for 25% of all greenhouse gas emissions and 43% of final energy consumption. With the goal of a 75% reduction in greenhouse gas emissions by 2050, the objective set for the energy retrofitting of buildings is quite ambitious: 38% decrease in energy consumption averaged across all buildings by 2020. The paper proposes to evaluate, based on return of experience from real cases, the economic and technical conditions of development of this two innovative instruments, and which serve to complement the range of market mechanisms for energy sustainable construction and refurbishment. Keywords: white certificates, energy saving certificates, energy performance contracting, ESCO 1. Energy saving certificates (ESC) 1.1 Description of the tool Since January 1st, 2006, French public authorities have required energy retailers, such as major suppliers EDF, GDF-Suez and district heating networks, but also energy companies selling domestic heating oil, to realize energy savings. The first objective set for an initial period of 3 years, extending until the end of 2010, was to reach a total volume saved of 54 TWh (cumulative discounted). The accounting unit adopted herein is called the "cumac", which stands for cumulative discounted and represents the average final energy savings generated by a given operation throughout its life cycle, before being discounted to present value at 4%. The nationwide goal has been divided first by type of energy (electricity, gas, fuel oil, etc.) and then among retailers prorated based on their respective market shares in the residential-tertiary sector. To achieve this objective, energy retailers (also called "contractors") have directly adopted energy savings measures, primarily among customers, whether public authorities, corporations, social landlords, hospitals or property managers (commonly referred to as "eligible clients"). In exchange for these savings efforts, "contractors" are awarded "energy saving certificates" (ESC) to validate the savings derived from actual steps like installing an individual condensing boiler, a heat pump, roof insulation, etc. As of January 1st, 2011, 195 fact sheets on standardized energy savings steps had been published, in large part aimed at the building industry, with 60 targeting the residential sector and 90 in tertiary applications. While fewer in number, a handful of incentive-driven actions, listed as "special operations", were being negotiated on a case-by-case basis with agency officials. The competent authority responsible for ruling on these certificate requests and for validating the certificates issued is the DRIRE Office (Paris Regional and Interdepartmental Agency for Energy and the Environment).

As this initial three-year period winds down, should the "contractor" fail to achieve the mandated savings quota, it will either buy back a share on an exchange market or pay a non-compliance penalty set at €0.02 per kWh cumac for the certificates not supplied. The negotiated average price per MWh cumac varies between €2 and €7, with an overall average on the order of €3.20. Yet the price of these certificates should rise once the "contractors" start anticipating the constraints added during the third period, which will be even more demanding about identifying sources of savings. For the first period (2006-2009), nearly half the certificates issued related to investments on boilers, totaling more than 300,000 installations, on both the individual (condensing or low temperature) and collective sides. The most challenging component still lies ahead, as building insulation works accounted for fewer than 4% of the certificates issued. Potential savings are substantial: in the Paris Region, the 68.4 TWh cumac awarded by the competent authority between 2006 and 2009 (95% of certificates were filed by contractors located in this region) correspond to an annual energy savings of 5.5 TWh, i.e. equivalent to half the annual output of a 1,450-MW nuclear reactor! As such, total consumption reduction for the first period amounted to just 7.7 TWh/year, i.e. an amount below 1% of residential and tertiary sector consumption combined. The emphasis during this period was to demonstrate that the system could function adequately and for operators to get acquainted with this type of tool. For the second 3-year period, initiated after a short transition phase in 2010 and extending from January 1, 2011 through the end of 2013, the nationwide objective was increased fivefold, to 345 TWh, of which 255 TWh were earmarked for conventional energy retailers and the remaining 90 TWh for new players using the certificate exchange, i.e. automobile fuel suppliers. The objective here is to incentivize the personal transport sector and trucking industry to develop alternative energy sources or pursue fuel savings investments. Moreover, the certificate eligibility threshold has been raised from 1 GWh to 20 GWh, a move that requires combining actions and limits the administrative costs associated with processing certificate applications. 1 GWh cumac corresponds to either the roof insulation of 7 single-family homes, the installation of 7 individual condensing boilers, 4,350 Class A compact fluorescent lamps or 500 m2 of attic insulation for an office building. Generally speaking, projects involving multi-family dwelling units that bring together contractors and eligible clients with the aim of generating joint savings or more comprehensive strategies (adopted within the scope of a building owner's energy savings program) receive strong backing by public authorities. From their standpoint, public agencies or social landlords are eligible to file an ESC application either under their own name, or via a contractor as part of a partnership, or through an intermediary operator. This partner would be responsible for: identifying the set of eligible actions, collating works invoices, calculating the cumulative discounted kWh, and forwarding these elements to the DRIEE Office for eligibility validation of the various operations. As a final stage, certificates are recorded in the national "Emmy" register, which centralizes the accounting function for all certificates awarded and received. 1.2 Outlook for sustainable building During the first period, more than 80% of energy savings actions were conducted in the residential sector, with over 75% of these consisting of a change in heating system. For example, in excess of 300,000 low-temperature or condensing boilers were installed in single-family homes. Notwithstanding, these measures involved on average barely 1.5% of the nation's total number of

single-family dwellings, which demonstrates the tremendous savings potential left to be tapped. Moreover, the savings source related to heat recovery, through the insulation of building attic space or walls, has hardly been targeted and accounts for less than 5% of the certificates awarded and less than half a percent (0.5%) of all primary residences in all of France. These Certificates can be used to finance energy efficiency enhancement programs for both public facility owners and individuals: 10% of the insulation costs for walls or roofs may be defrayed by reselling a certificate at an average cost of €0.35 / kWh cumac. For a regional authority, certificates allow coordinating the energy conservation action plan by defining a set of energy performance criteria to be satisfied for any type of building work. In this manner, the certificates serve to measure efforts expended and lay the groundwork for a protective strategy featuring reduced energy consumption. ESC provide the sole financial instrument capable of rallying professional intermediaries, materials distributors (e.g. builders, installers) around the cause of energy savings. This instrument builds awareness among clients as to the stakes involved and has the prescriptive power to promote the best techniques for achieving high energy efficiency. From an overall perspective, these certificates have expanded the professional competences of major energy companies in the realm of individual services and advice, with an emphasis on helping guide energy conservation work. Energy suppliers and distributors are now in a position of earning revenue not only from every kilowatt-hour sold, but also from selling more effectively and at lower quantities. Another stated objective for the future, through this mechanism, is to help fight energy poverty by intensifying actions aimed at achieving energy savings among lower-income households. The expansion of this market has also spurred creation of intermediary firms such as Geo-plc to facilitate the issuance of contractor certificates and thus showcase the energy recovery actions undertaken on the part of eligible clients. By implementing this kind of mechanism, public authorities were focusing, beyond strict adherence to regulatory obligations, on utilizing the energy savings sources present in a disparate fashion across sectors such as construction and transportation. Moreover, the tool has demonstrated its capacity to harness these sources; the gradual raising of thresholds should motivate operators to recover not just the easy savings but the hidden kWh as well. Still unknown to the general public and relatively complicated to apply and monitor, this economic mechanism has yielded considerable leverage in stimulating energy savings progress where conventional, regulatory or fiscal tools have proven ineffectual. 2. Energy performance contract (EPC) 2.1 Description of the tool The EPC stands out from other economic instruments by its guarantee of results over time, through the efforts of a third-party subcontractor, in improving energy efficiency. European directive 2006/32/EC established the EPC as a "contractual agreement between the contract beneficiary and the supplier regarding a measure intended to enhance energy efficiency, whereby investments in this measure are approved in order to attain the contractually stipulated level of efficiency gains". The scope of investments and services included in these EPC may vary considerably. Three major types of EPC can nonetheless be distinguished, namely:

- zero investment, actions are devoted exclusively to improving operations at current energy facilities through, for example, better programming or regulation;

- with investments, focusing on energy equipment and systems (outside the building shell); - with investments, on the building shell.

The investments made by suppliers can thus be dedicated to installing new equipment, rehabilitating existing energy infrastructure or insulation work. It should be noted that energy supply services by an ESCO (energy service company) could be included herein, but this is not mandatory. The guarantee of results implies an agreement between parties on both an initial state and reference consumption, as the basis for calculating recorded energy savings. Such an agreement also presumes contrasting approaches that allow verifying actual consumptions, for the purpose of controlling and measuring performance over the course of the contract. This partnership thus implies that the contracting party procures the resources necessary to oversee implementation of these mechanisms, as opposed to delegating responsibility. Joint oversight must be adopted, by clearly naming an energy supervisor and through monitoring systems capable of assisting in the verification of energy and environmental performance, with the goal of nurturing a spirit of mutual trust between parties. While short of a self-financing solution, this EPC tool still proposes an economic model according to which savings generated and guarantees are able to partially reimburse the allocated investments. Several conditions must be met with regards to EPC, namely: - reaching a shared assessment between the building owner and contractor, relative to both the

project's initial energy situation and an evaluation of pertinent savings sources, with a reference situation that includes possible use-related variations;

- establishing a reference protocol, along the lines of IPMVP (International energy Performance Measurement and Verification Protocol), to examine EPC results;

- constituting a "pool" of buildings deemed of high priority, given a mix assembled of some buildings with high energy savings potential and others whose savings are more difficult to realize and seemingly less appealing for an external operator;

- defining with precision the scope of intervention, i.e. limited to technical building management, energy equipment plus the eventual production of renewable energy, building shell insulation;

- for a public building owner, validating the contracting procedure via, among other things, a PPP type partnership contract. The PPP formula guarantees remuneration based on performance objectives, since this type of contract actually includes all or part of the financing, design, construction and operations & maintenance;

- planning the performance measurement and verification procedure; - assessing contractual penalties should performance not meet the guaranteed threshold. 2.2 Application examples For the Paris Region alone, potential EPC development for existing structures corresponds to half the total energy savings objectives through 2020, i.e. a 19% reduction, according to a proactive scenario developed by the Arene Agency [1]. The Paris Region's denser urban layout than the rest of France, centered on the Paris metropolitan area, allows on the whole achieving greater energy efficiency: the average primary energy consumption amounts to approx. 360 kWh/m2/year, vs. 400 kWh/m2/year for the entire nation (these figures account for total building energy consumption, including heating, domestic hot water, air conditioning, and specific electricity uses.

Potential energy savings are considerable, with the most substantial sources being found: • for residential, in the sector of single-family dwellings and private housing cooperatives (with relatively high average consumption rates per m2 of floor area), i.e. between 200 and 350 kWh/m2/year, particularly whenever electric heating is involved; • for tertiary, in the office sector, showing very high average consumption rates per m2 of floor area, on the order of 300 kWh/m2/year, with increased readings for specific electricity uses such as lighting, information technologies or, on the retail side, cold food storage. At present, roughly thirty EPC are in place throughout France, and these comprise investments on energy systems renewal or, even better, on building shell renovation. One of the first EPC contracts signed in the housing sector related to the heating system renovation of 231 subsidized units in Vitry-sur-Seine, sponsored by the social landlord Logirep with a commitment to reducing energy costs by 40%. The current reference consumption is rated "E", according to the energy performance diagnosis (EPD), with a consumption rate above 230 kWh/m2/year. Commissioned to a consortium led by Bouygues Bâtiment (Paris Regional Office) and ETDE for an estimated contract amount of €4 million, this energy renovation project will entail: insulation of facades, floors and decks; renewal of heating equipment and doors/windows; and installation of solar sensors for domestic hot water. After 4 years of project work, since the 40% savings threshold has not yet been met, the contractor has agreed to reimburse the difference to the social landlord. 2.3 Outlook for sustainable construction The advantage with the EPC tool is to circumvent difficulties associated with obtaining the considerable financing required to perform heating system rehabilitation, with the downside being a delay in critical building owner investments, thus making it necessary to push back the deadline for achieving greenhouse gas emission reductions. Thanks to EPC, public or private property managers are now able, for the very first time, to benefit from a contractual guarantee to yield energy performance improvements for the priority segment of existing structures. Given the relative complexity of its contractual design, this type of tool will require streamlined procedures in order to gain more widespread acceptance, in addition to standardized contracts and building owner assistance, notably with regard to housing cooperatives, regional authorities and the private tertiary sector. Conclusion The ESC and EPC mechanisms applied to the building industry offer two distinct and complementary tools. A standard EPC fact sheet has been drawn up for existing residential buildings, within the scope of typical ESC operations. These incentivizing tools lie within the range of economic and financial measures, such as subsidies, low interest green loans and tax credits. Both innovative and inspired by market mechanisms, EPC and ESC expand the line of economic and financial instruments to help lead the building industry to greater sustainability along the path towards "carbon neutrality". References: [1] ARENE. “The energy performance contract: An efficient tool for the Paris Region”, Note

technique février 2011.

Linkage Building Environmental Assessment Tool to Property Appraisal －CASBEE for Market Promotion (tentative version)－

Hiroaki Takai Design Management Department, TAKENAKA Corporation Japan Takai.hiroaki@takenaka .co.jp

Masato Ito Vice-Chief, Real Estate Business Development Department The Sumitomo Trust and Banking Co., Ltd. Japan itoma@sumitomotrust.co.jp

Shuzo MurakamiDirector, Building Research Institute, Dr. Eng. Japan murakami@kenken.go.jp

Toshiharu IkagaProf. , Faculty of Science and Technology, Keio Univ. Dr. Eng. Japan ikaga@sd.keio.ac.jp

Kazuo Iwamura Prof. , Faculty of Urban Life Studies, Tokyo City Univ., Dr. Eng. Japan iwamura@iwamura-at.com

Nobuhaya YamaguchiGeneral Manager, Regional Development Department, Urban Planning & Development Division, Shimizu Corporation Japan n.yamagu@shimz.co.jp

Junko EndoNIKKEN SEKKEI Research Institute (NSRI) Japan endouj@nikken.co.jp

Summary Building Environmental Assessment Tools (BEAT) are widely used in the construction industries of many countries. CASBEE (Comprehensive Assessment System for Built Environment Efficiency), BEAT in Japan, has been used as a supporting tool for DfE, a communication tool between clients and architects, a green building promotion tool by local governments, and a visualizing tool of building performance. However generally, CASBEE is mainly used as an environmental design tool, and is not yet widely used as a tool that promotes green property to the property market. On the basis of the above, connections are investigated between building items and site items in CASBEE, and CASBEE for property market promotion version is developed. It easily explains the linkage between environmental performances assessed in CASBEE and property appraisal to the market players and can be easily used. We show assessment items of CASBEE for Property Market Promotion (Draft). This tool has two aspects. One is the aspect of evaluating environmental performance. The other is the aspect of disclosing environmental performance value (Index). This tool reflects UNEP FI PWG’s support for concise metrics.

Keywords:Sustainable property, Property market, Environmental added value, Pricing factor determination, Linkage to property appraisal, UNEP-SBCI, Sustainable Building Index, CASBEE for market promotion

1. Introduction CASBEE (Comprehensive Assessment System for Built Environment Efficiency) is the Building Environmental Assessment Tool widely used in Japan. CASBEE has been adopted by 23 local governments nation-wide (as of March 2011). Number of buildings to be applied to local governments is over 4,800. CASBEE for New Construction has been certainly promoted, but it has become a big issue to the use of existing property appraisal. ”CASBEE for Property Appraisal Manual (2009 Edition)” has been published in February 2010 to cope with this issue. In this manual,

environmental added value and theory are considered, and this tool pays attention to relevance of CASBEE items and pricing factor determination. However, there are opinions from persons concerned with property appraisal, that this manual is too detailed for practical use. Improvement for the convenient use is expected for the next new issue. And, we sometimes take inquiry about the evaluation compatibility between CASBEE and LEED et al., when overseas investors and foreign tenants examine Japanese property. Furthermore, in UNEP-SBCI and UNEP-FI-PWG, there is movement to propose the world common metrics, such as carbon emissions. On the basis of the above, we have connected building items and site related items in CASBEE, and studied CASBEE for property market promotion version, that easily explains the linkage to property appraisal to market players and can be easily used. 2. Background of study and Image of CASBEE for Market Promotion 2.1 Background of study (1) The present CASBEE has been precisely made as a DfE （Design for Environment）

communication tool, but is not widely used as a tool that promotes green property to the property market.

(2) “CASBEE for Property Appraisal Manual (2009 Edition)” has been developed in February, 2010 to cope with this issue. There are opinions from persons concerned with property appraisal that this manual contains too much to consider on a practical level. Improvement is expected for the convenient use.

(3) We sometimes take inquiry about the evaluation compatibility between CASBEE and LEED et al., when overseas investors and foreign tenants examine Japanese property. Evaluation by common items with LEED, BREEAM et al. and compatibility has been desired.

(4) UNEP-SBCI, United Nations Environment Programme - Sustainable Buildings and Climate Initiative, proposed the world common metrics, such as energy use, GHG emissions, water use, recycled waste, indoor environment, biodiversity and economics.

(5) In UNEP-FI PWG (United Nations Environment Programme - Financial Initiative Property Working Group), there is movement to request every BEAT party concerned to develop rating tools that is simple, not expensive, and compatible.

2.2 Image of Market Property Promotion Version On the basis of the above, CASBEE for Market Promotion is expected to be as below. (1) Encompass items proposed by UNEP-SBCI (2) Items are compatible between CASBEE and LEED and other rating systems (3) The number of assessment items is reduced as small as possible. (4) It establishes the linkage to property appraisal. (5) It effectively utilize the framework of existing laws and standards (ex. Building health standards,

Housing performance indication system and Recycling law) (6) It establishes a mechanism to use widely by property market players (7) It does not necessary require a full version CASBEE assessment. (8) First, this tool will target for existing and new-construction office buildings, and then next,

houses and other building types will be subjected. 3. Concept Simple, comparable and compatible systems are crucial to our decision on investing in green buildings. They would also need to cover common metrics which UNEP SBCI proposed. In addition, we could connect such systems to property appraisal. With this in mind, a very simple version of CASBEE has been studied to be launched in Japan. In

some sense, such a study might be necessary for other rating systems in the world. In future, rating systems could be in such form: Every system could share “Common Metrics”. Every system may include each country’s particular items, such as earthquake resistance in Japan. Every system could connect to property appraisal. And rating systems for DfE and for investors could coexist; planners and contractors need elaborate systems. But, investors need simpler systems. 4. Outline of Sustainable Building Index (UNEP-SBCI) In 2009 Common Carbon Metrics (CCM) was launched at COP15. Without global consensus is causing confusion in the market, and undermining efforts to fully implement sustainable building practices. The UNEP-SB Index will provide a globally consistent framework to understand, measure, report, and verify actual building performance on core sustainability issues. The Index is

Fig. 1 Image of CASBEE for Market Promotion

Image of CASBEE for Market Promotion

Creating simple, comparable, compatible system Covering common metrics Connecting to property appraisal

Rating Systems in the World (e.g. BREEAM, LEED, Green

Star…)

CommonMetrics

6 items by UNEP SBCI

Current CASBEEapprox. 110 items Image of

CASBEE for Market

Promotion(about 20

items)

Sharing “Common Metrics”

Including each country’s particular items Connecting to property appraisal Coexisting of “For DfE” version and “For Investors” version

Rating Systems for DfE

in the World

CommonMetricsCASBEE for DfE

CASBEE for Market

Promotion

RatingSystems

for Investors

In future, rating systems could be…

not intended to be a rating system, but rather intended to steer and focus building industry stakeholders on the primary issues agreed upon by the leaders and decision-makers of this sector.

The Index shall focus on measurable, reportable, and verifiable indicators, be applicable to existing residential and non-residential buildings and facilitate both top-down and bottom-up aggregation of the performance of building stock. The Index shall include aspects of the buildings’ impact and benefits with regard to:

- Energy/Greenhouse Gas Emissions - Water - Materials - Social Issues (Indoor environment quality) - Biodiversity and Land use - Economics

Table 1 Items of Sustainable Building Index (UNEP-SBCI)

5. Assessment Items of CASBEE for Market Promotion (Draft) This tool has two aspects. One is the aspect of evaluating environmental performance. The other is the aspect of disclosing environmental performance value (Index). Clearly indicating environmental performance value is required from the property market, and it is important to disseminate such idea. And this tool now refers to the partial criteria of CASBEE, but furthermore aims to refer to the global common standard or index that will be commonly used by many Building Environment Assessment Tools. Table 2 shows assessment items of CASBEE for Property Market Promotion (Draft). Five items, namely Energy/GHG, Water, Materials/safety, Biodiversity/Site, and Indoor environment, are classified as main categories of this tool, including five of the Sustainable Building Index. The each item of the five categories contains the prerequisite item. “Soil Environmental Quality / Regeneration of Brown Field”, “Public transportation access”, and ” Measures to Risk of Natural Disaster” contribute to Biodiversity/site, as assessment items related to the site quality. The outline of proposed main assessment categories, currently under investigation, is described as follows. 5.1 Energy / GHG In a new construction building, energy calculation performance evaluation as a building is shown. In an existing building, actual energy data is evaluated by positioning on DECC data et al. We are studying both showing the demand-side energy (secondary energy) and the supply side energy (primary energy).

Issue Indicator UnitEnergy Intensity kWh/m2/yearCarbon Intensity kg-CO2e/m2/year

or kg-CO2e/o/year

Materials Use of recycled materials inconstruction

% by mass

Indoor air pollutions level Pollutant level/m3

Lighting for suitable task LuxNoise dBThermal comfort PMV Index

Yes/No(Target: Zero or positiveimpacts on biodiversity)

Economics Annualized total life cycle cost US$/m2/year(calculation)

Energy／GHGemission

Water Storm and sanitary waterharvested and treated/used on

Mlitre/m2/year

Indoor EnvironmentQuality (IEQ)

Biodiversity andLand Use

Land site previously built on andavoided green field site

Table 2 Items of CASBEE for Market Promotion (tentative version)

GroupUnit of

MeasurementMethod of Measuring and

Assessment（Draft）points

Prereqmeets the requirements of Energy conservationLawStandard of present CASBEE

prereq

1MJ/m2/year

kWh/m2/year

kg-CO2/m2/year

New item（evaluated by new simulation tool, BEST(*1) etal.）

15 - 25

2MJ/m2/year

kWh/m2/year

kg-CO2/m2/year

New item（toal energy consumption data evaluated bypositioning on DECC(*2) data et al.)

1 - 5

3 % New item 1 - 5

Prereq New item prereq

1 m3/m2/year New item 1 - 5

2 m3/m2/year New item 1 - 5

PrereqStandard for earthquake resistant after 1981or Seisimic Index of Structure(Is)>0.6or other Index

prereq

1 Standard of present CASBEE 1 - 5

2 Standard of present CASBEE 1 - 5

3 year Standard of present CASBEE 1 - 5

4Standard of present CASBEE

New item 1 - 5

Prereq New item prereq

1 % Standard of present CASBEE 1 - 5

2 Y/N New item（Standard draft of CASBEE for Sustainable Site）

1 - 5

3 New item（Standard draft of CASBEE for Sustainable Site）

1 - 5

4New item（Standard draft of CASBEE forSustainable Site：flood, subsidence, tsunami,landslide et. Al

1 - 5

PrereqConfirmation of measurement documentis available

prereq

1 Standard of present CASBEE 1 - 5

2 Standard of present CASBEE 1 - 5

3 Standard of present CASBEE 1 - 5

maximum100

points

Items of Sustainable Building Index proposed by UNEP-SBCI (draft)*1 BEST: Building Energy Simulation Tool*2 DECC: detabase for energy Consumption of Commercial buildings

IndoorEnvironment

Indoor Environment Standard ofbuildings, offices, and Division ofsmoking and nosmoking areas

Daylighting

Natural Ventilation Performance

Perceived Spaciousness & Access toView

Biodiversity/Site

Avoiding from immigrant Fauna & Flora（specified, not specified, careful）

Preservation & Creation of Biodiversity（Conservation, restoration, management ofEcological Resources, Quantity & Quality ofGreening for the present）

Soil Environmental Quality /Regeneration of Brown Field

Public transportation access

Measures to Risk of Natural Disaster

Water

Target setting and Monitoring

Water Intensity (calculated)

Water Intensity (measured)

Material /Safety

Earthquake-resistance

Exceeds of earthquake-resistanceSeismic Isolation & VibrationDamping Systems

Recycled Materials Use（number of itemsof structural and non-structural recycledmaterials use for the present）

Service Life of Structure material

Ease of MEP Renewal /Increace Self-sufficiency Rate of Power

Items

Energyconsumption

/GHGemissions

Target setting and Monitoring

Energy Intensity/Carbon Intensity(calculated)

Energy Intensity/Carbon Intensity(measured)

Renewable energy

5.1.1 Target setting and monitoring (prerequisite)

- Target setting of energy consumption: New construction buildings will fill the target value (MJ/ m2/year). Existing building will fill the actual value and target value next year (MJ/m2/year) .

- Monitoring: Level 3: grasp actual annual energy consumption, and be able to compare with benchmark building by energy consumption intensity et al.

5.1.2 Energy consumption intensity

a) New construction buildings (calculated data): primary energy consumption in condition with standard operation

b) Existing buildings (calculated and measured data): primary energy consumption in condition with standard operation, and primary energy consumption in terms of measured data from the power consumption and gas consumption

c) More, convert to demand-side energy (secondary energy) (kWh/ m2/year) and CO2 emission intensity also shown

5.2 Biodiversity / Site Soil Environmental Quality, in addition to Brown field regeneration, Public transportation access, and Measures to risk of natural disaster are related to the site.

5.2.1 Avoiding from invasive species Fauna & Flora (specified, not specified, careful) (prerequisite)

Avoid from invasive Fauna & Flora (specified, not specified, careful). Study this determination method. And study the method that evaluate planning and measurement to increase Fauna & Flora. It is important to consider at the planning and implementation, but also continuing maintenance is required, such as invasive species from entering after the completion.

5.2.2 Preservation & Creation of Biodiversity

a) Net/Gain Rate of Biodiversity b)The moment, Action for conservation, restoration, management of Ecological Resources

evaluated by additional points method - Grasp the characteristics location, setting planning policy - Save or restore flora and fauna, soil, water - The amount of green: evaluation of Greening Index on site -The quality of green: Green-friendly native species conservation, Green according to the

conditions of site planting, Green according to the ensure small wild animal habitat - Management and utilization of biological resources: Necessary equipment to the maintenance of

green, Environment and facilities where users and neighbours get close to nature

5.2.3 Soil Environmental Quality／Regeneration of Brown Field

- Level 4: As a result of legal survey, the site is given the required notification area in the case of change of land shape. And notification of the plan and removal of pollution are carried out

- Level 5: As a result of voluntary survey, the site is given the required notification area in the case of change of land shape. And notification of the plan and removal of pollution are carried out

or Cancel the designated area by detoxifying action of voluntary effort

5.2.4 Public transportation access

GHG reduction by public transportation access is evaluated. This item is evaluated in a train station of a bus stop within 15, 8, and 5 minutes, et al.

5.2.5 Measures to Risk of Natural Disaster

Grasp of various disasters and hazard maps, and land-use plan based on it are evaluated. Disasters are flood, subsidence, tsunami, landslide et al. 6. Issues to consider future 6.1 Target of this tool - Property transaction participants can use this tool, including global participants - Information is disclosed, and it's easy to understand from a third party - Clarify the part to be possible to evaluate market participants voluntarily, and the part of the

outsourcing - The part of the outsourcing can be evaluated relatively simple and inexpensive 6.2 Assessment Method - Tools to use in making investment decisions - Guarantee the accuracy of the assessment - Expansion of building types to be evaluated - Consistent with the full version CASBEE by case study - Development of soft program 7. Conclusion This tool has two aspects. One is the aspect of evaluating environmental performance. The other is the aspect of disclosing environmental performance value (Index). Clearly indication of environmental performance is required from the property market, and it is important to realize the spread of this movement. This tool now refers to the partial criteria of CASBEE, but it aims to cover the global common standard or Index that may be used in every Building Environment Assessment Tool in future. On the other hand, it must be investigated to demonstrate a correlation in the result of assessment with CASBEE full version. This tool will be published, tried in the market then revised reflecting opinions form various property market participants. REFERENCES [1] Japan Sustainable Building Consortium: CASBEE for New Construction (2010 Edition) [2] Japan Sustainable Building Consortium: CASBEE for Existing Building (2010 Edition) [3] Japan Sustainable Building Consortium: CASBEE Property Appraisal Manual (2009 Edition) [4] UNEP SBCI: Sustainable Buildings & Climate Initiative, Draft Briefing on the Sustainable

Building Index, May 2010 [5] UNEP FI PWG: Responsible Property Investing: Metrics for Performance Measurement,

Second in a Series of Toolkits on Responsible Property Investing [6] UNEP FI PWG: An Investors’ Perspective on Environmental Metrics for Property, May 2011

Twelve years of environmental work in the Swedish construction industry

Liane Thuvander Assistant professor PhD Chalmers University of Technology Sweden liane.thuvander@ chalmers.se

Associate Professor PhD Pernilla Gluch, Chalmers University of Technology, Sweden, pernilla.gluch@ chalmers.se Associate Professor PhD Mathias Gustafsson, Chalmers University of Technology, Sweden mathias.gustafsson@ chalmers.se Associate Professor PhD Henrikke Baumann, Chalmers University of Technology, Sweden henrikke.baumann@ chalmers.se

Summary Over the last two decades the Swedish construction sector has made much effort to develop green building practices. This paper is based on results from three questionnaire surveys, carried out in 2002, 2006 and 2010, that investigate environmental attitudes, management and performance in the Swedish construction industry. A comparison between the results makes it possible to identify trends and institutionalizing processes that contribute as well as hinder sustainable development within the industry. The aim of this study is to empirically explore the development of environmental practice over time. The questionnaires are directed to environmental managers or alike at companies within construction, real estate, consulting engineering and architecture with at least 50 employees (20 for architects). The total number of companies included in the survey is 534 in 2002, 542 in 2006 and 458 in 2010. The response rate varies from 41% to 45%. Three general, positive trends can be identified. 1) Many, but still not all companies carry out environmental management activities especially related to an EMS. 2) Companies perceive a growing pressure, i.e. interests and expectations, from different stakeholders. 3) The practical environmental activities of a technical nature in the companies are getting more intensive and of greater variety. The results show that the Swedish construction sector perceives the environmental work as a consequence of self-regulation rather than as a green business opportunity. Green business seems to be a strange phenomenon in the sector, as it is difficult to establish a market without offering green products, innovations, technical development, cooperation with researchers, etc. To make a difference and change the attitude and to understand that environmental work can be much more than self-regulation, norms need to be changed. Keywords: questionnaire survey, construction industry, environmental attitude, environmental

management

1. Introduction 1.1 Field of study

Over the last two decades the Swedish construction sector has made much effort to develop green building practices. Researchers within the field have provided theoretical knowledge on how to design green buildings and analytical environmental management tools have been developed to guide the practitioners. Information campaigns have raised the general environmental awareness

among building practitioners. In Sweden, a questionnaire survey of the Swedish construction sector has been conducted three times (2002, 2006 and 2010) investigating environmental attitudes, management and performance. Results of the 2002 survey showed that many companies actively worked with environmental issues, many companies educated their personnel, implemented environmental management systems and established environmental policies [1]. The 2002 survey also showed that the sector focused on a few aspects like handling of environmental hazardous substances and waste. Further, companies preferred management measures on an overarching organizational level whilst it was more difficult to achieve acceptance of measures of technical nature within the companies. Another result from the 2002 survey indicated a lack driving forces such as a green market and that companies were better in planning than following up of their environmental work. Gluch et al. [2] concluded from the survey in 2006 that there is an environmental inertia within the Swedish building sector, i.e. it is slow. The sector was struggling with energy aspects and use of non-renewable resources, the companies continue to have a preference for waste management and environmental activities of a managerial kind and they, like in the 2002 survey [1], perceived that they have accomplished most results concerning use of toxic substances/chemicals and waste management. Companies within the building sector have especially put much effort into measures related to Environmental Management Systems. Gluch et al. [2] reveals five possible reasons to this inertia. First, the notion that the market for green products and services are dysfunctional does not stimulate innovation and new approaches. Second, the lack of cooperative actions between actors involved in the building process limits the possibility to view the products and services out of a holistic perspective. Third, for goals and goal setting to have a motivating effect it is important to provide information of whether one has achieved the goals or not [3]. Fourth, the perception that banks and other financial institutions have little or no effect on the environmental work hinder that the issues are considered on the business agenda. Last but not least, little or no cooperation with R&D departments creates poor foundation for the development of pioneering green ideas, innovative green technique and new green business opportunities. These experiences raise several questions before the 2010 survey and invite us to investigate the environmental practice of the Swedish construction sectors in a twelve years perspective, i.e. the time frame covered by the surveys 2002, 2006 and 2010. The following questions are of our interest: Did the industry‟s efforts to develop green building practices contribute to any changes or not? What are the main fields of environmental actions over time? Is it still going slow? 1.2 Aim and scope The aim of the paper is to empirically explore the development of environmental practice of the Swedish construction sector by examining environmental attitudes, management and performance over time. More specifically the aim is to identify trends of environmental actions and attitudes.

2. Research method and data

2.1 Survey x 3 - questionnaire and data collection The paper is based on data generated from three structured questionnaire surveys carried out 2002 [1], 2006 [2] and 2010 [4], with the objective to investigate environmental attitudes, management and performance within the Swedish construction industry. The term „construction industry‟ is here used in a broad sense, including architects, technical consultants, construction companies and property owners and managers. The general structure of the survey covers the industry‟s definition of its environmental challenge, attitudes towards this challenge, and the response and performance from environmental measures taken. The first survey in 2002 was a modiefied version of the environmental barometer 2001 [5], a questionnaire survey with focus on the producing sector and leaving out the construction sector. In the 2006 survey, minor adjustments were made based on the experiences from 2002 year‟s survey hanges were made mostly concerning wording, for example, client/customer instead of consumer.

Due to its actuality, in 2006 a section concerning energy declarations directed to real estate firms was added. In 2010, further adjustments were made based on experiences from the previous surveys and because of a changed way of distrubtion of the questionnaire. The section on energy declarations, questions on background information and genereal view of sustainable development, as well as questions perceived as repetitive were removed. All three questionnaires were pre-tested on industry representatives. The questionnaire contained a total of 32 questions in 2002, 39 questions in 2006, and 24 questions in 2010. Keeping the questionnaire as intact as possible has been a deliberate move in order to be able to make comparisons over time. In 2002 and 2006, the questionnaires, were sent out by mail to each company in the statistical population together with an introductory letter and directed at environmental managers or alike. In the 2010 survey, the questionnaire was sent out by e-mail to environmental managers or alike using the online software SurveyMonkeyTM. 2.2 Statistical population For all the three surveys the companies were selected from Statistics Sweden‟s Business register according the Swedish Industrial Classification industry codes (corresponding to the European industrial activity classification – NACE). The surveys 2002, 2006 and 2010, then, cover all companies with at least 50 employees within technical consultants, building constructors, and property owners and managers, and companies with at least 20 employees within architecture (2006 and 2010). The addresses of the companies were also obtained from the Business register. According to the Statistics Sweden, in 2002 about 549 companies had a core business that falls into one of these categories, in 2006 it was about 620 companies and in 2010 about 543 companies. However several of these, especially among the technical consultants, did not belong to the building and real estate sector, for example IT consultants and energy suppliers. After a correction the final populations were stated and the questionnaires were sent to, see Table 1. The response rate varies from 41% to 45%.

Table 1 Total number of companies, response and response rates

2.3 Data analysis In the surveys 2002 and 2006, the data has been entered manually, stored in and analysed by us-ing the statistical data programme SPSS®. In the 2010 survey, the data was entered by the re-spondents directly in the database of the online software SurveyMonkeyTM. From there, the data has been exported and analysed in SPSS®. In order to secure reliability and validity of the study a statistician has been consulted both during data collection and analysis.

3. Results 3.1 Perceived environmental problems - Stakeholder pressure Clients together with managers are the most influential stakeholders on companies‟ environmental work in all three surveys (Table 2). Also the final customer and the employees are considered as important stakeholders. Further, the owner/shareholders of the company as well as the mother company are stakeholders with an increasing influence. Generally, in 2010 more stakeholders have been identified as influential.

Year of survey Total number of companies

Responses Percentage of answers (%)

2002 534 217 41 2006 542 246 45 2010 458 195 43

Seen out of an environmental research as well as environmental knowledge perspective, we notice in the 2002 and 2006 survey a very low influence on the companies‟ environmental work that researchers, environmental organizations, mass media and politicians are assumed to have. However, in 2010 the trend has changed and all these stakeholders are assumed to have increasing influence. Other stakeholders, worth to be mentioned, are unions and local citizens/groups which had very little importance for the companies‟ environmental work in the 2002 and 2006 survey but were perceived as quite influential in 2010. In all three surveys neither financial actors, such as banks, insurance companies and financial analytics nor controlling instances such as accountants are perceived as influential on the companies‟ environmental work.

Table 2 Companies’ rating of stakeholders’ influence on environmental activities in the company

2002 (%) 2006 (%) 2010 (%) Managers 49 50 52 Customer/client 52 51 50 Final customer 40 38 43 Employees 38 31 39 Owners/Shareholders 31 30 37 The mother company 28 21 33 National authorities/regulators 22 27 22 Trade associations 21 19 20 Politicians - 7 18 Local citizens/groups 2 4 18 Environmental organizations 9 8 17 European regulators 7 15 17 Unions 7 4 15 Competitors 19 17 14 Research institutions 6 3 13 Consumer/tenants 15 15 12 Suppliers 14 15 12 Mass media 7 5 12 Accountants 5 9 8 Insurance companies 2 3 4 Banks 1 1 3 Financial analytics - 1 1

3.2 The companies’ response to the environmental challenge, The companies‟ response towards their environmental challenge can take different expressions; employing personnel and create environmental working groups, carrying out managerial as well as technical measures are some examples.

3.2.1 Staffing and environmental personnel

A majority of the companies have some kind of personnel that handles environmental issues within the company and the number has increased from 75% in 2002 to 81% in 2006 and 83% in 2010. Still, in 2010 there are about 17% of the companies without personnel or department that handles environmental issues. Most respondents answered in 2002, 2006 and 2010 that the number of environmental personnel has been the same during the last four year period (Table 3). In 2002 the number of environmental personnel was increasing fairly or much in the companies, in 2006 it had stabilised in to a level of approximately one person per company. In 2010 the number of environmental personnel was again increasing fairly or much in the companies.

Table 3 Changes in number of environmental personnel during the last four years period

2002 (%) 2006 (%) 2010 (%) Decreased much 1 1 0 Slightly decreased 6 7 4 No change 45 67 56 Slightly increased 30 18 29 Increased much 18 6 11

How influential the environmental work is in the company is partly connected to which formal position the environmental manager has. The 2010 survey shows that half of the environmental managers (50%) are members of the board which is a considerable increase comparing to 2006 when 34% and 2002 when 43% did and indicates that the environmental issues are after a declining in 2006 on the way to be handled as a regular part of the companies work.

All the respondents in the 2010 survey think they have, at least partly, enough knowledge in order to influence practice (85% in 2006 and 88% in 2002) or strategic decisions (97% in 2010, 85% in 2006 and 76% in 2002). The relatively large share of the respondents in 2002 (28%) and 2006 (25%) which were not in a position that they have authority to stop environmentally damaging processes and/or influence strategic decisions decreased to less than 10% in 2010. Thus, the discrepancy between knowledge to influence and actual authority to do so is condensed. 3.2.2 Managerial measures

The environmental work in many of the companies within the construction sector work in accordance with an environmental management system (EMS), more or less with the same comprehension in 2010 and 2006 (70% respectively 73%). But his is a large increase since 2002 when 46% had an EMS. Table 4 shows that the managerial activities that are carried out in the companies largely are related to the EMS. For example, in all three surveys, companies‟ most important activity has been to set up a written environmental policy. Also, they have implemented routines to secure the observance of environmental laws (increase from 74% in 2002 to 88% in 2010), established an order of accountability (increase from 69% in 2002 to 83% in 2006 and stabilized 2010), and formed environmental goals as part of continuous improvements as well as measurable goals (increasing number from 2002 to 2010).

Table 4 Environmental management activities related to the EMS

2002 (%) 2006 (%) 2010 (%) Written envrionmental policy 91 93 94 Routines to secure the observance of env. laws 74 81 88 Measurable env. groals 69 76 84 Established an order of accountability 69 83 83 Env goals as a part of continuous improvements 71 80 82 Plan of action to achieve env. goals - 71 80 Env considerations integrated in strategic decisions - 72 77 Environmental audits 49 64 70 Env. training program 67 65 67 Initial environmental review 75 71 67 HSE data annual report 36 50 61 Environmental indicators to measure env. performance 25 35 52 Benchmarking 25 26 39 Separate HSE report 21 23 26

Considering that an overwhelming majority of the companies say that they have set measurable environmental goals still less perform activities that in turn measure the environmental performance. However, this discrepancy has diminished in 2010 where 52% of the companies had indicators to measure environmental performance, in comparison to 2002 with 25% and 2006 with 35%. Also, environmental audits are on the way to be applied more frequently (49% in 2002 and 70% in 2010). The importance of an initial environmental review is decreasing both in ranking and percentage (ranking 3 in 2002 and 10 in 2010). Besides activities related to the EMS the companies foremost carry out activities that aim at transferring environmental information and demands between actors that takes part in the supply chain (Table 5). Another communicative move is to develop checklists and guidelines.

Table 5 Environmental management activities related to purchasing and market

2002 (%) 2006 (%) 2010 (%) Env. demands on suppliers 79 87 76 Env. evaluation of suppliers 76 81 73 Implementation of checklists & guidelines 51 63 Implementation of material guidelines 56 Implementation of checklists 74 Env. information to customers 46 50 47 Building product declarations - 50 24 Environmental declarations - 44 36 Energy declarations - 35 51 Cooperation projects 33 24 53 Eco-labelling 14 14 23 Use of LCA 15 14 32 Green marketing 11 8 20

3.2.3 Technical measures

Waste separation has been the most common measure to reduce environmental impact in Swedish building industry during the last twelve years (Table 6). Compared to 2002 and 2006, in 2010 all companies show a higher level of activity concerning all kind of technical measures taken. In 2002 and 2006 many of the companies emphasised energy as a major problem for the sector to handle, however there were a low percentage of companies acting to reduce the energy use. In 2010, energy reduction in production and by transports is performed by 85% of the companies. Also, in 2010 there is a change from being devoted to handle already generated waste to performing waste minimising measures and recycling measures as it was in the previously years. Environmental projects are getting more popular within the companies as well as space management and implementation of cleaner technology.

Table 6 Environmental activities of a technical nature in the companies.

2002 (%) 2006 (%) 2010 (%) Waste separation 87 90 95 Material recycling within the company 62 62 86 Reduced energy use of transports 49 52 85 Reduced energy use in production 35 45 85 Actions to reduce solid waste 54 67 84 Reduced travelling 34 83

Environmental projects re. products/services 55 57 82

Substitution of hazardous inputs 63 75 81 Substitution of non-renewable materials 37 76 Reduced energy use of products/services 42 75 Implementation of cleaner technology 34 41 67 Reduced material use of products/services 32 32 67 Space management 35 38 66 Actions to reduce emission to air 43 40 64 Actions to reduce noise 44 35 59 Reduced water use in production 19 21 51 Selective demolition 46 41 49 Green open spaces to foster biological variety 18 41 Actions to reduce emission to surface water 15 14 31 Re-use of waste from other companies 12 9 29

3.3 Results from the companies’ environmental activities

An indication of the success of the environmental work is obtained by looking at what extent environmental activities have had effect on environmental performance and business. 3.3.1 Environmental improvements

Environmental activities have had most and increasing impact from 2002 to 2010 on energy use, waste, and use of hazardous substances, the last one on more or less the same level as 2006 (Table 7). In 2010, environmental activities even have had a considerable impact on use of non-renewable materials, risks of environmental accidents and transports.

Table 7 Effect of environmental activities on environmental problems

2002 (%) 2006 (%) 2010 (%) Use of energy 20 25 49 Waste 24 36 40 Use of hazardous substances 29 33 32 Use of non-renewable resources 11 15 30 Risk of environmental accidents 9 20 27 Emissions to air 11 15 19 Use of water 10 13 17 Contaminated soil 7 7 13 Noise 4 9 10 Landscape damage 2 2 8 Smell 3 3 6 Waste water 6 6 5

3.3.2 Business effects

Similar for all three studies, companies in the building sector consider that environmental activities mostly bring long-term benefits to business or benefits for the principal stakeholders, such as staff, management and owners/shareholders. Table 8 shows that a majority of the companies answered in all three surveys, that the environmental activities have had a positive impact on especially company image, whereas environmental activities have had a negative impact on short-term profits, cost savings and productivity. The effect on the competitive advantage has been the same during the whole period, however its ranking dropped from 4 (2002 and 2006) to 7 (2010). It is noticeable that bureaucracy, a new activity added in the 2010 survey, is by far considered having the most negative impact (33%).

Table 8 Effect of environmental activities on business (positive/very positive)

2002 (%) 2006 (%) 2010 (%) Company image 74 79 85 Pleased personnel 61 69 77 Pleased management 67 63 78 Long-term profit 56 52 64 Pleased owners/shareholders 53 55 63 Product image 46 49 61 Competitive advantages 58 58 58 Cost savings 39 45 52 Sales 43 40 48 Recruitment 33 33 47 Market advantages 39 36 44 Market shares 33 26 36 Productivity 19 18 27 Short-term profit 15 15 27 Improved terms of insurance 9 12 14 Improved terms of bank loans 6 6 12

3.4 Obstacles and attitudes

Obstacles for carrying out an effective environmental work can be divided into internal and external obstacles, where the external are out of the company‟s immediate control and the internal are easier for the company to have an effect on. External obstacles that companies experience as hindering are foremost lack of market incentives, lack of cooperation, no competitive advantages but also lack of technical solutions and no regulatory incentives (Table 9). This perception has risen quite much since 2002. An internal obstacle that many companies emphasize is that environmental work is too costly, with a significantly increase in 2010. Also lack of educated personnel is mentioned as an obstacle for effective environmental work. On an overall level, the construction sector experiences that obstacles are more pronounced now than four years ago (up to 50%), which is an enforced trend since 2006 where obstacles were perceived between 5 and 10% more compared with 2002.

Table 9 The extent, which obstacles have influenced environmental activities in the companies (little/some/quite much/much), in brackets figures for perceived obstacles as much/very much

Obstacles 2002 (%) 2006 (%) 2010 (%)

external No demand for green products/services 62 (24) 74 (24) 83 (29) Lack of willingness to cooperate from customer 57 (9) 61 (11) 80 (13) Lack of willingness to cooperate from suppliers 60 (7) 63 (11) 80 (11) No competitive advantages 59 (21) 74 (31) 80 (30) No technical solutions available 56 (9) 62 (8) 79 (13) No regulatory incentives 57 (12) 53 (16) 79 (16) Lack relevant information - 61 (8) 71 (10) Lack of clear regulations 60 (14) 61 (13) 70 (6) Lack of reliable information 51 (7) 61 (6) 69 (8) Lack of willingness to cooperate within the sector 47 (8) 55 (10) 67 (10) No regulations 44 (8) 43 (9) 64 (12) Cultural heritage demands - 31 (3) 48 (7)

internal Lack of educated personnel 70 (15) 76 (10) 88 (14) Lack of knowledge on available tools 62 (9) 73 (10) 86 (9) Too costly 61 (18) 73 (19) 86 (26) Lack of financial resources 60 (12) 62 (14) 76 (15) Communication difficulties - 59 (13) 70 (6) Insufficient organizational structure - 63 (15) 67 (12) Lack of management support 50 (12) 57 (13) 60 (11) Counteracting organizational structure - 43 (8) 59 (6) Organisational difficulties 67 (15) - -

4. Discussion and conclusion A comparison between the results from 2002, 2006 and 2010 makes it possible to identify trends and institutionalizing processes that contribute as well as hinder sustainable development within the construction industry. The survey enables us to see whether the industry‟s efforts to develop green building practices have contributed to any changes or not. Out of the results, three general, positive trends can be identified. 1) It is obvious that environmental management activities, and especially related to an EMS, today are in many companies, but still not all, a common and an integrated part their environmental work. 2) It is also obvious that companies perceive a growing pressure, i.e. interests and expectations, from different stakeholders. This is in line with the first survey where the respondents expressed a belief in an increasing stakeholder influence in the future. 3) It is apparent that the environmental activities of a technical nature in the companies are getting more intensified and of greater variety, i.e. not only focus on a few aspects such as waste management or handling of hazardous substances. The results of the three surveys illustrate quite clear that the Swedish construction sector perceive the environmental work as a consequence of self-regulation (follow ISO standards, guidelines, etc) rather than as green business opportunities. This belief in self-regulation seems to be a kind of taking responsibility for society instead of shaping green business. The increased stakeholder pressure could also be interpreted as compensation for democratic insight in national regulation when self-regulation is pertained. Similarly, the understanding that environmental work mainly gives benefit to improved company image and is costly also supports the prevailing argument that environmental work follows the logic of self-regulation. The question is, why should be there a lack of green business potentials within the construction sector either in the nature of eco-efficiency/resource efficiency (should lead to short-term profit which the respondents not really can se) or green product development. Possibly, the companies are getting more interested in green marketing when self-regulating activities gets more bureaucratic? What can they win by cementing their belief in self-regulation? Green business seem to be a strange phenomenon for the actors in the sector – it is difficult to establish a market if the actors can‟t offer anything such as green

products, innovations, technical development, cooperation with researchers etc. Finally, to make a difference and change the attitude of the actors in the Swedish construction sector and to understand that environmental work can be much more than self-regulation, norms need to be changed – and this can be done in many different ways! 4.1 Some comments on validity and reliability of the study

There is always a risk in surveys that intend to measure peoples‟ attitudes and values that the respondents may answer as they believe they should answer and/or tries to place themselves and their companies in a favourable light. It is therefore important to acknowledge that these surveys do not present an objective truth about the companies‟ environmental work but rather measure what the respondent perceive as their environmental challenge, problems and so forth. There is also a risk, since the survey, is directed to environmental managers, that they in general have a larger interest in environmental aspects and therefore is not representative for the overall values within the company.

5. Acknowledgement

The authors gratefully acknowledge the financial support of Centre for the Management of the Built Environment (CMB).

6. References [1] BAUMANN H., BRUNKLAUS B., GLUCH P., KADEFORS A., STENBERG A.-C., and

THUVANDER L., “Byggsektorns miljöbarometer 2002”, CMB-report, ESA Report 2003:2, Chalmers, Sweden, 2003.

[2] GLUCH, P., BRUNKLAUS, B., JOHANSSON, K., LUNDBERG, Ö., STENBERG, A.-C., and THUVANDER, L., “What makes it slow? A questionnaire survey of environmental attitudes, management and performance”, 4th Nordic Conference in Construction Economics and Organisation, Luleå University of Technology, 13rd-15th June, Luleå, 2007.

[3] Locke, E.A. and Latham, G.P., “Goal setting: A Motivational Technique That Works”, Prentice halls: Englewood Cliffs, NJ, 1984.

[4] GLUCH P., BAUMANN H., GUSTAFSSON M., and THUVANDER L., “Miljöbarometern för bygg- och fastighetssektorn 2010 – en kartläggning av sektorns miljöarbete”, CMB-report, Chalmers, Sweden, forthcoming.

[5] NILSSON A. and HELLSTRÖM D., “Miljöbarometern 2001”, HandelsConsulting AB, Internal report of the Swedish Business Environmental Barometer 2001, Göteborg, Sweden, 2001.

Achieving Large Scale Uptake of Sustainable Residential Renovation in New Zealand

Lois Easton Director Lois Easton Consulting New Zealand nz_kereru@yahoo.co.nz

Kay Saville-Smith, Director, Centre for Research and Social Assessment, New Zealand. Kay.Saville-Smith@cresa.co.nz

Summary A programme to address New Zealand’s poor housing stock was developed to encourage renovators to make more effective investments in the sustainability of their dwellings. Specific material was developed for homeowners, the home retrofit and renovation sector and local government to assist them to make sustainable choices and improve dwelling thermal and resource performance. The response of renovators to that information was monitored and research undertaken on renovation activities and motivations. That research found that the programme affected the choices that homeowners made with regard to their renovations, and resulted in a more supportive local government policy environment for sustainable renovations. Keywords: Retrofit, house performance, market transformation

1. Introduction The poor performance, particularly as relates to energy and water efficiency and indoor environment quality of New Zealand’s housing stock is well established. The 1.6 million dwellings in New Zealand are mainly detached, timber framed houses with poor thermal efficiency and similar design across New Zealand’s variable climate – from the moist warm north, to the cold dry south. Most of those dwellings are owner occupied. Consequently, the choices made by owner occupiers regarding renovation can have a profound impact on the overall dwelling stock. A research consortium, Beacon Pathway, researched approaches and developed tools and information aimed at increasing the uptake of sustainable renovation and retrofit over a five year period. Previous analysis of renovation practices in New Zealand identified poor industry supply of sustainable renovation options to consumers and both low awareness of opportunities to improve the sustainability of a dwelling during renovations among owner occupiers. The HomeSmart Renovation Project was developed and implemented to explore how those practices might be changed.

2. The HomeSmart Renovation Project The HomeSmart Renovation project was developed as a transformational research programme. It was directed at facilitating owner occupiers to, firstly, retrofit and operate their homes to achieve a High Standard of Sustainability and, secondly, to better understand the technical, market economic and social dynamics of sustainable renovation. 2.1 Beacon’s High Standard of Sustainability In order to provide a framework for Beacon to measure the influence it is having on the sustainability of houses at a national level, and to provide a useful benchmark against which individual households can evaluate their home’s performance, Beacon has developed benchmarks for a High Standard of Sustainability® (HSS) in homes [1]. These benchmarks have focused on five key aspects of dwelling sustainability:

• Energy Use • Water Use • Indoor Environment Quality • Waste • Materials

Underpinning these five technical aspects of dwelling sustainability are the issues of affordability and future flexibility. When considering the individual household benchmarks at which the HSS performance indicators should be set, affordability was a significant consideration [1].. The benchmarks have therefore been set at levels where many of the features used to bring about their achievement are:

• low cost (eg simple measures such as fitting of draught stoppers and use of low-flow shower heads)

• have a payback period of less than the expected life of the product 2.2 Key Components of the HomeSmart Renovation Project The HomeSmart Renovation project: • Undertook case studies of sustainable renovations, monitoring and reporting on their

effectiveness; • Developed consumer and industry information about ways to improve the sustainability

of houses; • Worked with the retrofit and renovation sector to increase their capability around

assessment and implementation of sustainable renovation; • Developed specific information on renovations targeted to individual homeowners based

on the condition of their house; and • Worked with local government to improve plans, policies and processes to support and

promote sustainable renovation. 2.3 Case Studies of Sustainable Renovations Nine houses in Wellington were selected as case studies, representative of New Zealand homes from the 1960s and early 1970s, a major home building era in New Zealand, with a legacy of about 400,000 homes. Housing in this era is known to be difficult to retrofit for energy efficiency.

The houses, all owned by the occupiers, were located in a middle income suburb of Porirua, and included a variety of house design and sizes. Houses with a Rateable Value of more than $410,000 were excluded [2]. Before any changes were made, the nine houses were all monitored for energy and water use, temperature and humidity, and the amount of waste produced. This data was compared to post-renovation data to evaluate the effects of the changes. In the first part of 2007 the homes were renovated with energy, waste and indoor environment quality improvements. Each home had a different combination of features installed, to allow comparison of their effectiveness. The homes were then monitored for 15 months following the renovations to enable a clear comparison between the before and after performance of the homes [3] The research and information gathered provided a core of material which was used to develop the assessment and advice components of the HomeSmart Renovation project. 2.4 Recruiting into HomeSmart Renovation Project Owner occupiers were recruited from different climate zones in New Zealand. 750 dwellings across five different climate areas were targeted and it was hoped that recruited householders would also represent households in different income strata. To participate homeowners were required to have an intention of undertaking renovation activity within the following twelve months. Any actual renovations were to be paid for and undertaken or commissioned by the homeowners. During the late 2008-mid 2009 recruitment period 676 households expressed interest in participating. Of those, 432 became what were defined as active participant households. That is, households that had an In-house Home Assessment, been sent a Home Renovation Plan and had at least one-post plan interview. 2.5 HomeSmart Renovation Project Procedures and Information The first stage of the programme, ahead of recruitment of participant homeowners, was the development of the assessment and information material to be used in the project (called the HomeSmart Renovations Procedures). This was developed building on the information gained from the Papakowhai case studies [3], [4] and through working with key informants from the retrofit and renovation sector to ensure the assessment and information material was as practical as possible. Beacon Pathway partnered with four community retrofit organisations, located geographically across New Zealand. These organisations, as well as inputting into the development of the Procedures were responsible for the on the ground delivery of house assessments and provision of the resulting advice. These organisations were: Community Energy Action; EcoMatters Environment Trust; Energy Options; and Energy Smart. Eight procedures were developed providing information for a range of participants in the value chain including industry assessors, installers, project managers and the homeowner. These are outlined in Table 1:

Table 1: HomeSmart Renovations Procedures Developed Procedure Purpose Audience Industry Partner Support Material

Business Case and Marketing Support

To provide advice and support to people generating promotion around the HomeSmart Renovation project with view of unifying and clarifying external messages. The information includes an outline of the benefits of sustainable renovation, information on target audiences, sample letters, sample PowerPoint presentations and sample flyers.

Industry partners, marketing specialists, funding providers, local authority partners

Industry In-Home Assessment Tool

To provide in-home assessment which collect sufficient information to develop a individually tailored renovation plans for homeowners.

Industry partner assessors

Renovation Plan Builder To develop consistent Renovation Plans and packages as an output of the in home assessment.

Industry partner assessors

Training Support

To ensure understanding of sustainable renovation assessment and enable accurate and consistent home assessments and renovation plans to be delivered by a range of providers.

Industry partner assessors, project managers, installers

Best Practice Guidelines and Project Management Manual

To guide implementation and ensure quality of installation.

Installers, project managers

Homeowner Support Material (“Homeowner Kit”)

Home Manual

To provide information to homeowners on operating their home and the technology within it. To also provide assistance with choice of products for installation.

Home owners and occupiers

Project Management Manual

To provide training and tips on project management and common errors during the renovation from a homeowner perspective.

Home owners

Renovation Plan

To provide homeowners with a prioritised and justified plan for improvements required to bring their home up to a High Standard of Sustainability - outlining the key attributes of the house which will affect performance, a rationale in relation to these for improvements to be made and a prioritised list of packages with some indicative costings to undertake these.

Home owners

2.6 Monitoring and Evaluation The research methodology for the HomeSmart Renovation Project drew data from a mix of administrative, monitoring and survey sources supported by an attempt to establish and recruit to a sample frame which addresses issues of both household income and climatic differences. Table 2 sets out the data specification of the HomeSmart Renovation Project.

Table 2: Summary of Monitoring Methodology HomeSmart Renovation Project

Data Source Instrument Provider When Who/What

Participants

Self complete application and registration questionnaire

Householder via questionnaire

Pre-retrofit All participants

Dwelling In Home Assessment

In Home Assessment Tool

Partner assessor Pre-retrofit All assessed dwellings

Renovation Plan Renovation Plan Partner assessor Pre-retrofit All assessed dwellings

Retrofit Installation

Householder Survey

Surveyor Post-retrofit All installed dwellings

Administrative data

Reticulated energy

Householder via energy bills or by through supplier

Pre and post retrofit

All assessed dwellings

Administrative data

Reticulated water Householder via water bills or through supplier

Pre and post retrofit

All assessed dwellings if separate water billing

Direct monitored data

Temperature Direct monitored Pre-retrofit Post retrofit

183 dwellings- temperature

Direct monitored data

Water Direct monitored Pre-retrofit Post retrofit

16 households installed water meters

Direct monitored data

Humidity Direct monitored Pre-retrofit Post retrofit

122 dwellings Fuginex tabs1

Participant survey Householder telephone survey

Surveyor Pre-retrofit Post retrofit

All assessed dwellings

Direct monitoring of consumption patterns in relation to water and energy was limited to a sub-sample of dwellings but all householders were asked to provide reticulated energy data by way of permissions to access billing data from the household’s supplier. Water data, except where meters were installed, was only provided in areas in which the local authority meters water. Within the HomeSmart Renovation project this was households in Auckland, Nelson and Christchurch. Owners of monitored dwellings without water meters were also approached in an effort to install water meters. In all, 16 were installed. Overall, water data was acquired from 79 householders. In relation to energy and water billing data, this was collected from suppliers where householders agreed that the project team could access energy and/or water billing records.

3. Results This section provides a profile of the households that participated in the HomeSmart Renovation Project and their dwellings. It then presents research findings around the performance of their dwellings, their renovation actions and the motivations that underpinned

                                                            1 These tabs change colour when exposed to humidity in excess of 75% relative humidity over an extended period of time (at least 4-8 hours).

them as well as their perceptions around the usefulness of the HomeSmart Renovation Project tools in the context of their renovation plans. 3.1 The Households The participants in the HomeSmart Renovation Project had a profile distinctly different from New Zealand households as a whole. They tended to be concentrated in the middle age and earning cohorts. Their incomes were higher than the New Zealand income pattern and they tended to be free of both young children and of older household members. In summary, the key characteristics of the participant households were: • Almost two-thirds were aged 31-50 years (64.7 percent). • 64.3 percent had household annual incomes in excess of $70,000, and 79 percent of

households have household incomes in excess of $50,000. • The largest single proportion of households had only two people, but 61.4 percent are

households with 3 or more people. • The vast majority (90 percent) of households had no household members aged 65 years

or more. • The vast majority (75.7 percent) of households had no children in the household aged 5

years or less.

3.2 Dwelling Age Almost half the dwellings assessed had been built prior to 1957. 15.6 percent of dwellings were built in 1978 or subsequently. Figure 1 compares the age profile of HomeSmart Renovation project dwellings to the age profile of the national stock. The HomeSmart Renovation project houses have an older age profile than the national stock. The bulk of the HomeSmart Renovation project dwellings are in an age cluster spanning the 1950s through the 1970s. There were also a small number of dwellings being renovated that were less than twenty years old.

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lin

gs

HomeSmart Renovation Houses 0.5% 0.9% 1.4% 4.9% 5.1% 13.1% 6.3% 5.8% 15.9% 17.5% 14.7% 7.0% 5.4% 1.4%

National Stock 0.0% 0.1% 0.2% 1.7% 3.5% 5.1% 3.5% 5.6% 12.1% 16.3% 17.4% 11.8% 13.0% 9.7%

pre 1880

1880 1890 1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 2000

Figure 1: Age of National Stock and HomeSmart Renovation Project Dwellings

3.3 Dwelling Condition A multitude of research has found that high proportions of New Zealanders tend to assess their dwellings as in Excellent or Good condition and that those assessments are over-inflated. In 2004 a matched data set of dwellings subject to both independent house condition surveying by the Building Research Association of New Zealand (BRANZ), and householders participating in an associated repairs and maintenance telephone survey, found that while 27.8 percent of dwellings were reported by householders to be in excellent ondition only 16.8 percent met a House Condition Score of ‘excellent’ when independently

able 3 provides a comparison of New Zealanders’ self assessment of their house condition

Table 3: Comparison of Assessed Dwelling Con

n ss lling Con

csurveyed [5]. Tacross a number of studies including the HomeSmart Renovation project.

dition Across New Zealand Studies

Study and Year Perce tage A essed Dwe dition

Excellent Good Average Poor Very Poor

2004 Repairs and Maintenance Survey [6] 27.8% 50.9% 18.8% 2.3% 0.2%

Recent Movers Survey 2008 [7] 45.6% 37.4% 15.2% 1.7% 0.1%

High Energy User Survey 2008 [7] 32.7% 43.4% 19.7% 3.6% 0.6%

National Older People Repairs and Maintenance Survey 2008 [8]

46.1% 42.7% 10.2% 0.8% 0.3%

HomeSmart Renovation Project 2010 13% 39.3% 35.1% 10.2% 2.3%

What is striking about the interviewees in the HomeSmart Renovation project is the skew of assessed house condition towards Average and lower house condition categories: Just under half (47.6 percent) the participants considered their dwelling to be in Average or worse house condition. The evidence from the HomeSmart Renovation project suggests that

articipants may have a somewhat more realistic understanding of their dwellings than New

tal eficiencies were found, including only 16.4 percent of dwellings being fully insulated.

in Table 4.

welling Deficiencies in ons Hous

Number ellings % D gs

pZealanders in general. Despite this, the In-Home Assessment process found that of a series of fundamendDeficiencies in the dwellings in the HomeSmart Renovation project are set out Table 4: Assessed D HomeSmart Renovati es Assessed Problem of Dw wellinNo ceiling insulation 32 7.2% <75% ceiling insulation or <76mm thick

ed replacement g of doors needed

138 32.1% External maintenance 250 57.9%

216 50% Roof leaks 27 6.3% Damp under floor 99 22.9% Ponding underfloor 25 5.8% No underfloor insulation* 189 41.2% Window frames ne 41 9.5% Draught stoppin 234 54.2% No cylinder wrap 228 52.8% No fire alarms

*where able to be retrofitted

3.4 Temperatures in Monitored Dwellings The deficiencies in house condition are associated with poor thermal performances. Some 183 dwellings were monitored for temperature and humidity over the course of the HomeSmart Renovation project. Of those, 163 completed a 1st wave interview and 161 completed a 2nd wave interview. A number of temperature loggers were not retrieved or failed to download requisite data. Consequently, winter living room temperature data was captured for 163 dwellings and 151 dwellings provided winter bedroom temperature data. For living rooms in summer, data for 156 dwellings are available while 166 dwellings provided bedroom summer temperatures. The data confirm previous research showing that New Zealand dwellings tend to be cold. Partly in response to the costs of heating cold house, the New Zealand Household Energy End-use Project [9] also found that New Zealanders have a pattern of limited heating – usually later in the day into the evening – and spot heating. Living rooms tend to be heated but not bedrooms. Among the HomeSmart Renovation dwellings, the average winter living room temperatures in the morning from 7am to 9 am are a little under 14° C, rising to almost 16° C over the period 9am to 5 pm. Between 5pm and 11pm average living room temperatures are closer to 18° C but then fall again over night with the night average being just over 15° C (Table 4). Over the whole 24 hour period the average temperature of winter living rooms is 16° C. Table 4: Median, Mean and Minimum Average Living Room Winter Temperatures (n=163)

Period Minimum Mean Median

Morning 7am-9am 8.78 °C 13.98 °C 13.88 °C

Day 9am-5pm 9.85 °C 15.91 °C 15.87 °C

Evening 5-11pm 11.86 °C 17.79 °C 17.85 °C

Night 11pm-7am 10.05 °C 15.26 °C 15.29 °C

24 hours 10.63 °C 16.01 °C 16.07 °C

Although those winter living room temperatures do not meet optimal temperatures for health, they are considerably higher than average New Zealand winter bedroom temperatures. Table 5 shows that average temperatures in bedrooms over winter through twenty-four hours were well below 16° C at 14.4° C. The highest average bedroom winter temperature is found between 5pm and 11pm at 15.2° C but bedrooms are coldest in the mornings, on average in winter, 13.2° C. Table 5: Median, Mean and Minimum Average bedroom Winter Temperatures (n=163)

Period Minimum Mean Median

Morning 7am-9am 7.98° C 13.18° C 13.42° C

Day 9am-5pm 8.13° C 14.57° C 14.64° C

Evening 5-11pm 8.45° C 15.18° C 15.38° C

Night 11pm-7am 8.26° C 14.00° C 14.10° C

24 hours 8.24° C 14.43° C 14.61° C

3.5 Damp and Mould in Renovators’ Dwellings Of the 676 householders that initially signed-up with the HomeSmart Renovation Project, 380 completed a preliminary questionnaire. The data from that questionnaire provides the clearest indication of mould and damp among householders seeking to renovate their homes. Respondents to the preliminary questionnaire reported as follows: • 31.5 percent used dehumidifiers; • 47.1 percent had mould or damp related stains on more than an occasional basis; and • 13.7 percent reported that their home’s interior walls or ceilings had black stains or

mould on them ‘always’ or ‘often’. In addition, 320 householders reported on the extent of musty or artificial smells in their dwellings. Those smells are frequently a sign of poor ventilation and/or damp. Only 43.4 percent reported that after a week of closing up the house, such smells were never evident. 13.4 percent reported smells throughout the house, while over a third reported them in some rooms. The impression of widespread moisture and damp in New Zealand homes that emerged from the preliminary questionnaire is reinforced by the data emerging from the In-Home Assessments. Those assessments were undertaken by the independent providers working with the HomeSmart Renovation project. Data is available for 500 households from the In-Home Assessment process. Those assessments found that 63.2 percent had mould or mildew evident inside the house. Of those 316 dwellings, 57.9 percent had mould in the bathrooms and 55.7 percent had mould or mildew in bedrooms. Mould and mildew were also evident in kitchens, living rooms, laundries and wardrobes, but the incidence of each was less than 10 percent of dwellings. In-Home assessors also reported that 55.4 percent of householders found that moisture formed on bedroom windows on winter mornings either ‘always’ or ‘often’. Less than a quarter of householders found that condensation on bedroom windows was a rare event or entirely absent in winter. 3.6 Surface Humidity in Monitored Dwellings Humidity at the surface was measured in 122 dwellings using Fugenex humidity gauges. Those gauges incorporate a single-use indicator strip. A blue dye is released into some, or all, of the indicator strip if moisture levels exceed a set threshold (moisture levels in excess of 75 percent relative humidity) for a period of at least 4 hours. Each gauge comes on an adhesive backing so householders are able to install these easily themselves. Householders installed the humidity gauges themselves following the instructions provided. The first was to be installed in their main bedroom (the bedroom where they had a temperature logger already) and the other outside the bathroom door of the main bathroom in the house. Householders were asked to check the gauges regularly. If the indicator strip on the humidity gauge changed colour to blue, householders were asked to leave it in place for 2 days then remove it from the wall, note the date it was removed on the gauge and return it, sealed in the plastic bags provided. In all a total of 133 strips in 73 households were triggered – indicating an instance of relative humidity levels in excess of 75 percent for a period of at least 4 to 8 hours in around two-thirds of the dwellings with humidity gauges. Sixty-seven households returned a bathroom

humidity gauge and sixty-six returned a bedroom humidity gauge. Table 6 sets out the pattern of humidity gauge activation based on gauges returned from the 122 households. Table 6: Humidity Gauge Activations by HomeSmart Renovation Study Areas

Research Area

Humidity Gauges

Households with Gauges Installed

Households with Gauges Activated

Proportion of Households with Gauges Activated

Auckland 29 21 72.4%

Bay of Plenty 13 9 69.2%

Wellington 26 18 69.2%

Nelson/Marlborough 9 6 66.7%

Canterbury 31 12 38.7%

Dunedin/Southland 13 6 46.2%

3.7 Renovation Activities Many owner occupiers in New Zealand are serial renovators [7]. This is certainly the case for the HomeSmart Renovation project participants. More than half (60.3 percent) of the householders reported that they had invested in excess of $2,000 in renovation work in the year prior to interviewing. 82.8 percent report that they intend to invest in excess of $2,000 in renovations and retrofits in the coming year. Table 7 shows these households have a strong orientation towards insulation in their future renovations. Table 7: HomeSmart Renovation Household Past and Intended Renovations (n=432)

Renovation Activity* in Previous Year Valued in Excess of $2,000

Prior 1st Interview % Households

Intentions at 1st Interview

% Households

1st & 2nd Interviews % of Households

Install ceiling insulation 15.5 31.0 24.8 Install underfloor insulation 13.9 32.4 18.3 Install heat pump 9.5 8.8 8.0 Install wall insulation 9.3 15.0 12.3 Install double glazing 6.9 15.0 9.3 Full exterior repaint 5.1 3.0 3.8 Replumbing 4.9 4.4 2.0 Roof replacement 4.2 4.9 2.8 Replace bathroom whiteware 3.9 3.7 3.8 Rewiring 3.7 1.9 1.8 Replace bathroom cabinetry 3.5 3.9 4.3 Install dual flush toilet 3.5 3.0 3.5 Install ventilation system (forced air type)

3.2 2.5 2.8

Carpeting 3.2 2.1 2.0 Adding rooms 3.2 2.1 2.3

3.8 Impact of the Plan Despite have this typical pattern of serial renovation, the pattern of renovations undertaken by HomeSmart Renovation Project participants show that they have a distinctly different profile of renovation activity from the renovation activities reported by participants in other New Zealand research exploring renovation behaviours and investments. As the previous section noted, both previous and intended renovations reported by the HomeSmart Renovation Project were strongly directed to improving the thermal performance of their dwellings. This contrasts with the activities of the serial renovators that emerged among the households participating in Beacon’s High Energy User Survey and Beacon’s Recent Movers Survey [7]. Those surveys show that general populations to be directed to more cosmetic renovation activities despite there being considerable evidence that many of their dwellings were performing inadequately. Interior repainting and/or wallpapering attracted the highest proportion of Recent Movers (45.7 percent) and High Energy Users (19.7 percent). That activity occupied only 2.8 percent of HomeSmart Renovation Project participants in the year prior to their Wave 1 interview and 3.5 percent of householders in the period between their Wave 1 and Wave 2 interviews. Similarly, among the households in the Recent Movers and High Energy Users Surveys only 13.6 percent and 5.6 percent respectively installed ceiling insulation. By comparison, 15.5 percent of HomeSmart Renovation Project households had in the year prior to their Wave 1 interview and 22.9 percent between Wave 1 and Wave 2 interviews. 3.9 Perceptions of the HomeSmart Renovation Assessment and Plans Among the 432 participants in the 1st interviews, 46.1 percent of the householders reported that they have amended their renovation focus because of the HomeSmart Renovation Plan. In addition, 61.8 percent of those in this phase of the interviewing reported that they had acted on the recommendations of the HomeSmart Renovation Plan. That is consistent with the relative high satisfaction levels expressed by householders with the assessment process and the HomeSmart Renovation Plan itself in the 1st interviews, although there was a persistent desire for greater specification around the plan recommendations. At the 1st interviews, 87.5 percent of householders reported that they saw the assessor as having Good or Excellent competency. With regard to the HomeSmart Renovation Plan: • 86.8 percent of householders reported that the plan was comprehensive. • 81.7 percent of householders reported that the plan was good or excellent at identifying

key priorities. • 76.4 percent of householders reported that the plan provided new and useful information. • 74.6 percent of householders reported that the plan provided detailed recommendations. • 69.7 percent of householders reported that the plan helped with decision-making.

Many householders had had a relatively short period of time participating actively in the HomeSmart Renovation Project when they undertook the 1st interview. Those householders remaining in the project showed consistently high levels of satisfaction with the various elements of the HomeSmart Renovation Project.

Of the 400 householders in the 2nd interviews: • 87.5 percent reported that the In-Home Assessment had been useful. • 70.8 percent found the newsletters useful. • 70.5 percent reported that the Homeowner Manual was useful, but 4 percent had not

read it. • 68.5 percent found the Project Management Guide was useful, although 2.8 percent had

not read that document.

3.10 Household Actions There are significant differences between those householders who entered the programme wanting to undertake renovations and those householders that actually went on to undertake renovations. In comparison, those householders who undertook renovations, the householders that did not act on the renovations plan at all were: • less likely to live in a dwelling older than 1957 • more likely to be living in a dwelling in the mass housing/state housing typology • either more likely to see their existing house as in average or worse condition or more

likely to typify their dwelling as in ‘excellent’ condition • more likely to self-identify as a high energy user • more likely to be in a one or two-person household • more likely to be residing in Climate Zone 2. Table 8 outlines the proportion of households acting on recommendations from their in home assessment. The high proportion acting on insulation possibly indicates the increasingly heightened awareness of insulation in New Zealand driven by central Government promotion, a network of community and private sector providers and subsidised programmes. Table 8: Proportion of Households Acting on Dwelling Issues Identified as Requiring Action

In Home Assessment

Required Action Households Acting on

Requirement % Households Acting

on Requirement

Ceiling insulation (n=191) 125 65.4

Underfloor insulation (n=176) 99 56.3

Heating (n=226) 107 47.3

Wall insulation (n=214) 71 33.2

Double or secondary glazing (n=255) 62 24.3

Thermal curtains (n=156) 12 7.7

Bathroom extractor fan (n=111) 8 7.2

Rangehood kitchen extractor (n=104) 7 6.7

Pelmets (n=241) 2 0.8

4. Discussion 4.1 Participant Focus for Improvements The dwellings renovated in the HomeSmart Renovation Project were somewhat warmer than those recruited into the New Zealand Household Energy End Use Project (HEEP) study and monitored between 1997 and 2005 [9]. In the HEEP study, 98 percent of dwellings had average living room temperatures over 24 hours of less than 18°C. By contrast a lower proportion, 80.4 percent, of the HomeSmart dwellings did so. Similarly in the HomeSmart Renovation houses, 87.8 percent had average winter bedroom temperatures over 24 hours less than 18°C while 98 percent of HEEP dwellings did so. This suggests that renovation programmes of this sort may have an only muted impact on the stock as a whole. HomeSmart Renovation participants had a pronounced desire to improve their dwelling performance, particularly in relation to comfort and warmth, but they tended to focus on insulation issues. There is less evidence in this group of householders of a focus on other aspects of performance. Even among renovators within the project there was, despite advice in their renovation plans, a relatively limited response to performance issues. Certainly the idea of what constituted improved performance was relatively narrow. The programme was designed to encourage renovators to invest in changes that would make their dwelling more sustainable. There is little doubt that the programme did prompt a different pattern of renovation to that seen in the past. There was more emphasis placed on interventions that have been demonstrated to increase the thermal performance and energy efficiency of dwellings. The extent to which these types of programmes can, in themselves, engender the stepwise change needed to see a substantial improvement in the sustainability of New Zealand’s housing stock is, however, more questionable. It is clear, for instance, that these renovators may have been living in older dwellings than most New Zealanders. But they were not living in colder dwellings. The proportions acting on plan recommendations and assessments of required action varied from 65.4 percent of those from whose ceiling insulation was recommended to 6.7 percent of households recommended to install a range-hood or kitchen extractor. It would appear that the insulation message is increasingly grasped, but the issue of dealing with humidity is less clearly understood among householders. Similarly, opportunities for water and electricity saving are also less likely to be taken advantage of. Relatively small proportions either took up or reported that they intend to take up solar water heating despite the majority of dwellings having a suitably orientated roof. Take-up of water saving options was also relatively limited. The lack of focus on those issues by renovators, combined with their water use patterns, confirms the importance of charging users directly for their reticulated water use if household water demand is to be minimised. It can be concluded then, that although support through In-Home Assessment and subsequent Renovation Plans both stimulated and shaped renovation action, the opportunities for further resource efficiency and dwelling performance gains are still considerable. It is clear that householders still feel anxious about purchasing products and services. While many found both the In-Home Assessment and Renovation Plan helpful, participants in the course of interviewing and in other communications with the programme frequently sought advice on selection between products and service providers. It appears that, in the interaction with the market, householders feel particularly vulnerable.

4.2 Uptake of the HomeSmart Renovations Approach Following the conclusion of the HomeSmart Renovations project, the Auckland Council has engaged with the idea of sustainable retrofit. The Auckland Council is the largest municipal body in New Zealand, and has jurisdiction over approximately a third of New Zealand’s population. Based on the HomeSmart Renovation project, the council set up a pilot programme in part of the region (Retrofit Your Home). This involved training the council building compliance staff in the assessment and renovation plan development, and providing for 200 home assessments in the 2010/2011 financial year. Additionally a financial assistance package was put in place, to enable those homeowners to access a $5000 low interest loan towards the implementation of their renovation plan. The pilot programme put in place has been sufficiently successful that the council has now expanded the programme, and the amount of financial assistance to extend to all households within the municipal area. Following the launch of the Auckland Council Retrofit Your Home programme, other local governments have become interested in adopting the HomeSmart Renovations model of supporting sustainable retrofit. A number of other Councils are now looking at trialling the tools and approach. The opportunity to include a sustainable evaluation and retrofit as part of repairs to houses damaged in Christchurch due to a series of severe earthquakes, is now being piloted. Over 100,000 houses were damaged in earthquakes which occurred in September 2010, February and June 2011. The HomeSmart Renovations tools have been adapted for earthquake damaged houses and are being piloted in initially 10 houses, with a second stage pilot of 1000 houses proposed. Like houses in the rest of New Zealand, the earthquake damaged Christchurch homes are generally poorly insulated, unhealthy and inefficient. The rebuild programme creates a tremendous opportunity to deliver a better standard of housing for Christchurch residents, as well as greater resilience to future challenges such as the impacts of climate change.

5. Conclusions The HomeSmart Renovation Project was, as well as a research project, designed to pilot a method of intervention to drive uptake of sustainable retrofit and renovation in New Zealand. The research findings indicate that the methodology is effective, and this has been widely disseminated by Beacon through media releases and research symposia. One outcome of this research has been the engagement of the Auckland Council with the idea of sustainable retrofit. The support of the largest Council in New Zealand for the approach has helped gain the interest of other municipal bodies within New Zealand and the HomeSmart Renovations approach and tools are now being trialled for inclusion as part of house repairs in earthquake shattered Christchurch. It appears at this stage that the project has been successful in developing a methodology which is able to be easily picked up and used by local governments in New Zealand.

6. Acknowledgements This research was funded by the Foundation for Research Science and Technology (FRST) and Beacon Pathway Limited. This project has involved a wide project team who have dedicated many hours and substantial effort. They include: Ruth Fraser, Lorraine Leonard, Michael Webb, Joseph Cook and Lydia Fraser from CRESA; Nikki Buckett, Michael Camilleri and Lynda Amitrano

from BRANZ; Verney Ryan, Andrea Blackmore, Nick Collins and Vicki Cowan from Beacon Pathway; Marta Karlik-Neale and June Gibbons from URS; Phil Hancock and Ingrid Downey from Energy Smart; Steve Hanna and Jeff Crump from Energy Options; Aaryn Barlow from Eco Matters Trust; Gary Robertson and Katie Nimmo from Community Energy Action; and the many hundreds of householders who participated in the project. Their participation and involvement is very gratefully acknowledged.

7. References [1] EASTON L., and HOWELL M., (2008) A High Standard of Sustainability for New

Zealand Homes. Proceedings of the World Sustainable Building Conference: SB08, Melbourne.

[2] BUCKETT N., FRENCH L., ZHAO Y., HANCOCK P. and BURGESS J. (2007). Beacon Renovation Project – Stage 1 Report. Unpublished Report for Beacon Pathway Limited. Auckland.

[3] EASTON L. (Ed) (2009). Papakowhai Renovations: Project Summary and Case Studies. Report TE106/18 for Beacon Pathway Limited. Available online at : http://www.beaconpathway.co.nz/existing-homes/article/reports_and_presentations_-_papakowhai_renovation_project

[4] BURGESS J. (Ed), BUCKETT N., CAMILLERI M., FRENCH L., POLLARD A. and HANCOCK P. (2009). Final Performance Monitoring from the Papakowhai Renovation Project. Report TE106/15 for Beacon Pathway Limited. Available online at: http://www.beaconpathway.co.nz/existing-homes/article/reports_and_presentations_-_papakowhai_renovation_project

[5] CLARK S.J., JONES M., and PAGE I.C. (2005). New Zealand 2005 House Condition Survey, BRANZ Ltd Study Report 142. Judgeford, Porirua.

[6] SAVILLE-SMITH K., (2005). National Home Maintenance Survey 2004: The Telephone Interview Data. Technical Report prepared for BRANZ Ltd.

[7] SAVILLE-SMITH K. (2008). House Owners and Energy – Retrofit, Renovation and Getting House Performance. Report EN6570/3 for Beacon Pathway Ltd. Available online at www.beaconpathway.co.nz

[8] SAVILLE-SMITH K., JAMES B., and FRASER R. (2008). Older People’s House Performance and Their Repair and Maintenance Practices: Analysis from a 2008 National Survey of Older People and Existing Datasets. Centre for Research Evaluation and Social Assessment, Wellington.

[9] ISAACS N., CAMILLERI M., FRENCH L., POLLARD A., SAVILLE-SMITH K., FRASER R., ROSSOUW P., and JOWETT J., (2006). ‘Energy Use in New Zealand Households: Report on the Year 10 Analysis for the Household Energy End-use Project (HEEP)’. BRANZ Study Report 155. BRANZ Ltd, Judgeford, New Zealand.

Clients’ strategies for driving innovation in low energy building Paula Femenías

Ass Prof Chalmers University of Technology Sweden femenias@chalmers.se

Anna Kadefors Assoc Prof Chalmers University of Technology Sweden Anna.kadefors@chalmers.se

Summary In Sweden, in the last decade, construction of energy efficient new buildings using passive standards or other low energy solutions has increased remarkably. Low energy buildings that not long ago were considered as difficult to realise now seem realistic and feasible. This paper is based on case studies of three different client organisations which all have the ambition to make low energy construction part of their normal production: one larger government sector client, one municipal client and one private housing developer. The purpose is to describe and discuss directives, strategies and drivers of these clients to engage in low energy construction, their methods and processes to reach their objectives and their achievements and continued challenges. The government sector client is driven by political directives to engage in sustainable and low energy construction and management. They perceive a responsibility to be a competent client in order to fulfil their directives and to be attractive as an employer, but have no long history of innovation. Their objectives for sustainable and low energy building have been restricted by their specific and heterogeneous property stock and a highly politicised decision process for new investments. The municipal client is driven by political directives, but also by strong personal and organisational commitments to keep and extend their commission from the city to be leading in the field of innovative sustainable building. They have successfully engaged in several low energy demonstration projects. At present they widen their interest to include other aspects of sustainable construction as well as the urban level. They also aim to engage other local clients in innovation for sustainable development by setting the sustainability requirements for some parts of land to be developed in the city. Finally, the private developer has strictly commercial drivers to low energy construction, but exploits opportunities created as municipalities seek to promote low-energy and low cost rental housing. The municipal client seeks continuously to raise and extend their ambitions for sustainable construction, while the private developer’s ambitions are conditioned by external demands and project profitability. The clients in this study experience that they stimulate development among consultants and contractors through their procurement of low energy buildings. In the case of the municipal client, they also influence other property developers. The results might challenge the view that the slow pace of innovation in construction can always be attributed to conservative and risk aversive clients. Further, contrary to findings in many previous studies of demonstration projects and innovation in project-based industries, these clients have strategies that extend beyond the individual project and allow for step-by-step testing and development. The case studies also show that a combination of political initiatives supporting sustainable building and ambitions developed within the client organizations can be highly effective in driving change. Also, different clients may fulfil partly complementary roles in this process.

Keywords: construction clients, innovation, demonstration projects, low energy buildings

1. Introduction In recent years, energy efficiency has been high on the agenda in the Swedish building sector. New production of low energy housing, defined as using 25% lower energy use than the building regulations require, has increased considerably, especially in Western Sweden were new production of low energy multi-family housing was 24% of the total production in 2010 [1]. The number of new construction using passive house technology, i.e. buildings with high insulation levels, tight building envelope and controlled air-flows, is also increasing [2]. The breaking point for low energy construction corresponds with the strengthened building regulations from 2006, but is most likely the result of several correlating factors. In Western Sweden, the regional authorities have sustained the development through a programme for energy efficient construction since 2007. One of the projects they have supported is the opening of Sweden’s first passive house centre in Alingsås, inaugurated in late 2007. Other influencing factors are the increased collaboration between public and private actors and research institutions, and numerous successful low energy projects using passive house technology where the first was built in Lindås in 2001. Still, a Nordic comparison claims that regarding the totality of new constructions, Sweden lag behind Norway and Denmark in number of low energy construction [3]. Western Sweden has a slightly higher percentage of new low energy construction than Sweden in average. With the upcoming strengthened European directive on energy efficiency (European Directive, 2010/31/EU) the building sector faces major challenges. This especially concerns renovation projects which lag behind contemporary actions for energy savings taken in new construction [4]. 1.1 Aim, approach and research questions

This research project focuses on the role of the construction client in development and innovation of sustainable construction. In construction, the client specifies product requirements, decides the organisation of the design and production process and, often, plays an important part in leading and controlling this process. Through their key position, the construction client can have a strong influence on the propensity for innovation of the entire industry [5], [6] However, relatively few clients have so far chosen to assume a strong position in the innovation system of the construction industry, and the rate of innovation in construction is low compared to for example manufacturing [7]. In this paper we discuss client strategies to handle contemporary challenges set by political objectives for climate change and sustainable development. We take a broad perspective on the concept of innovation, recognising that it is an industry where much (although not all) technology and service content can be considered mature. The empirical basis consists of case studies of three different types of clients: one large, nation-wide government client with a long tradition, one special purpose municipally owned organisation which is a combination of a client and an urban developer, and a small, innovative private developer and owner of energy efficient residential buildings. The case studies are based on interviews, documents and presentations by the organisations at workshops within the research project. The directives and driving forces that these organisations have to engage in low energy building are analysed, as well their strategies and processes to handle these issues and their wider contribution to development. A short theoretical framework uses theory from construction innovation and project-based organisations. 2. Innovation in project-based environments and in firms In many industries, projects are seen as tools for enhancing and organising innovation. Thus, it may seem as a paradox that the rate of innovation and R&D expenditure in a project-based industry such as construction is low [7], especially since many studies have shown that impressive results may be reached within individual project [8]; [9]. However, it is typical for project-based industries such as construction that much innovation and development work is carried out within the projects and it is common that projects are designed specifically to develop or demonstrate new technology. Organisational structures for driving innovation in the permanent organisations,

on the other hand, tend to be less elaborated and employees develop their competences primarily in their project-based assignments [10]; [11]. Information dissemination and retrieval has been found to be strongly linked to individuals and their networks, while it is difficult to spread knowledge to a wider audience [8]; [9]. Further, links between temporary project activities and more long-term, continuous processes in the permanent organisations involved in a project are also weak [12]. This implies that the system for learning from project experiences is seldom well developed. Individual employees and organisational units, perhaps supported by external funding agencies and industry-level organisations, may easily initiate innovation in projects, but the commitment on a general management level to learn from and implement the results is often lacking. Similarly, top management initiatives often face considerable difficulties in influencing project level operations [10]. Decentralisation allows project managers to resist or pay lip service to management initiatives that they do not approve of. Thus, the same organising principle that allows new ideas to flourish also prevents their diffusion [12]. Clearly, the problems of construction are related to remembering rather than to generating knowledge [13]. There seems to be a general lack of systematic evaluation in the industry, so that good practice and technology is not distinguished from bad experience. In effect, there are examples of new solutions which have gained very quick and wide acceptance but which have later been found to be hazardous or unsustainable, resulting in very high remediation costs. It has been argued that the project focus has been too prominent and that the role of firm level processes and strategies needs to be put in focus if we wish to understand and enhance sustainable innovation in the construction industry [14]; [10]. However, despite that user influence and co-production is often emphasized and the long-term risks are often born by clients, previous studies of project-based organising have primarily focused on supplier firms [10]; [11]. The general innovation literature often builds on the resource-based view of the firm, focusing not so much on market drivers for innovation as on the on the ability to identify, assimilate and commercially exploit knowledge from the environment. This absorptive capacity [15] is seen as a byproduct of the firm’s own R&D activities. Through research and development, employees acquire domain-specific knowledge which allows them to identify new knowledge in the environment that is important for conceiving and designing future products. Over time, a firm develops processes and policies that facilitate knowledge acquisition, sharing and exploitation. Thus, routines are here seen as the fundamental building blocks and memory of the organisation, forming organisational capabilities. The higher the rate of change in the environment, the more vital is it for a firm to develop dynamic capabilities for systematic modification of routines to continuously assess and update the operating routines [16]. For the purpose of this paper, we primarily need to establish that there are aspects of both exploration and exploitation in knowledge evolution, and that the process can be described as a repetitive cycle involving external stimuli and feedback, generation of variation, evaluation and selection, replication, and retention/routinization. 3. Case studies . 3.1 Älvstranden Utveckling AB Älvstranden Utveckling AB is a municipally owned developer with the purpose to develop land and properties that formerly belonged to the harbour in central Gothenburg, now owned by the city. Älvstranden has 38 employees and acts both as an urban developer agency and as a construction client. They have developed a successful model where they work in close collaboration with the planning administration, private and municipal clients and developers, and from early stages in the planning process. Over time, Älvstranden has become responsible for a wider geographic area, also outside the harbour.

3.1.1 Directives and strategies to deal with sustainability Älvstranden acts on directives from the city of Göteborg, their owner. The directives say that Älvstranden should position the harbour area as a strategic area of growth, have a comprehensive

view on development issues and focus on long-term value and a sustainable society. They should actively search for new knowledge, analyse trends in development and actively share their experiences. The city’s objectives for a good urban environment guide their work. These are translated into a strategic plan and specific objectives. Älvstranden actively works on their company branding which describes the passion to develop the harbour areas into something that the citizens can be proud of. 3.1.2 Development and innovation processes

Älvstranden’s interpretation of the owner’s directive is that they should act as a role model and catalyst for change. Still, they have no specific R&D department, manager or budget. The construction project division is actively engaged in development and the employees find the directives open to their own initiatives and interpretations. The construction project division has as their informal strategy to always take a step forward in each new project in order to develop their own competence and set an example for other developers. Most of their development work takes place in projects. Through three consecutive demonstration projects between 2004 and 2008 they have managed to go from standard production, according to current regulation, to passive house standard. The construction project division has 8 employees, six engineers (manager, project leaders and environmental manager), one urban planner and an environmental coordinator. The division has strong environmental competence but recognises a lack of competence to meet the increasing involvement in urban planning, notably concerning social issues. There is also a real estate management division which carries out development work, e.g. regarding energy efficiency and decreasing carbon dioxide emissions but also develops routines for the technical property management. There is sometimes a conflict between the objective to test new innovative technologies in construction projects and the long-term management of stocks, which is facilitated if building systems are similar and standardized. The employees recognise a lack of resources to properly capture, document and communicate experiences from their development projects. Much is up to the non-formalised but well functioning internal personal communication within a small organization. 3.1.3 Methods and processes to address sustainability Älvstranden has no explicit innovation policy dictating what areas, what knowledge or which technologies to develop. All employees take part in scanning the environment. They collaborate with research institutes, universities and government initiatives in different kinds of projects. The employees are encouraged to network, take part of activities and also initiate such. There is extensive communication with citizens and other actors, both by information events and through a blog. The process of elaborating new ideas for development projects is a combination of scanning of the environment, discussions in which they make use of their extensive networks, and trials in student master thesis. If there is good result from a master thesis, Älvstranden can proceed to develop the idea in a construction project. In this way, Älvstranden has systematically developed their knowledge and competence through demonstration projects. In each new demonstration project only a few aspects are unknown, thus limiting the risk of the project and allowing for evaluations. In their first sustainable demonstration project, Älvstranden took a starting point in the environmental ambitions for construction set up in the Building/Living dialogue, a governmental initiative to set ambitions for sustainable building in collaboration with the industry. All materials were to be environmentally declared and the goal was to have an energy ambition of 35% lower than the regulations, which was achieved. A main result from the project was that Älvstranden needed to improve their knowledge in LCC in order to be able to question the calculations of the consultants and the contractor. For the second demonstration project, the results from a master thesis showed that a better

climate envelope, windows and walls, for higher energy efficiency was supported by LCC. The thesis also indicated a potential for heat exchange, but Älvstranden decided to delimit the demonstration project to the building envelope, leaving the heat exchanger to the third project. The third demonstration project was based on two master theses studying different building types from an LCC, LCA and energy perspective, and also local renewable energy systems. From these results Älvstranden decided to enhance the building envelope from the earlier project even further, and complement with heat exchangers, and leave out the radiators. The result was one of the first, and the largest multi-residential blocks built according to passive house principles in Sweden. 3.1.4 Further challenges At present Älvstranden extend their ambitions from individual energy efficient buildings to sustainable urban planning. They claim that energy use in individual buildings could be lowered from about 60 kWh/m2 and year to 45 kWh/m2 and year, but that further efficiencies on the building scale would not be optimal from a local energy system perspective. Instead, Älvstranden collaborates with the local energy provider to develop an optimal system making use of buildings to stock and balance heat demand (energy smart buildings). Älvstranden also has the ambition to develop LCA and material use in coming projects. In the urban development, Älvstranden faces challenges to deal with new issues such as water management, bio diversity etc., as well as social values in the built environment. Älvstranden has the ambition to support innovation for sustainable and climate friendly construction locally and nationally. Through their model for commercial urban development, Älvstranden can have direct influence on what is constructed on their land, as they set the conditions for the developers. This has been possible as their land is attractive, and as they involve the developers early in the process. However, Älvstranden has also been able to influence the development of more sustainable building in Gothenburg on a wider level. They have been involved in the development of voluntary programmes for environmental construction in the city, a process in which their experiences have been very valuable. At this stage they search for solutions to engage other local municipal clients more actively in innovation and development. Älvstranden earned considerable attention for their ‘passive house’, which they were not prepared for. Still, they experience that compared to other Swedish initiatives they do not really get the wider national and international attention they merit for their advances in energy and environmental issues. Thus, theyy feel that they would need external support to externalize and disseminate their experiences. 3.2 The Swedish Fortifications Agency The Swedish Fortifications Agency is one of the largest real estate owners in Sweden, with a history dating back to the early 17th century. Their main role is to manage the Swedish defence estate such as buildings, airfields, naval bases and training areas. Their property is very diverse and ranges from statutory protected national heritage buildings to modern special purpose defence facilities. The stock they manage has however been substantially reduced in the last two decades as a result of downsizing and changes in the Swedish defence organization. Property investment decisions for projects over € 2 Million are made directly by the Swedish Government, and the building volume varies significantly between years as a consequence of political decisions. However, there are always smaller refurbishment projects going on. The Fortifications Agency has about 700 employees, of which 24 are found in the construction project division.

3.2.1 Directives and strategies to deal with sustainability

The Fortifications Agency receives a governmental appropriation with directions each year. Their directives are to supply the Swedish defence with high quality built infrastructure in a cost and resource efficient way. As for other government real estate owners, consideration should be given to sustainable development and environmental values (the 16 national environmental objectives) and architectural values (as described in the government policy for architectural quality). The overall goals do not indicate that the Agency should have a leading role in development.

Based on these directives, the Fortifications Agency decides upon a strategic plan. A new plan has been developed in the autumn 2010 with objectives for 2012 – 2019. One of the new objectives is that the agency shall develop their role as construction client in order to support increased efficiency and quality in the construction sector. Other specific objectives are to develop LCC, environmental issues, energy efficiency, renewable energy resources, and eco-cycle adapted use of resources. The agency works actively to be attractive as an employer as they face a large generation shift in the coming years. 3.2.2 Development and innovation processes

The agency does not have any specific R&D manager, department or budget. Still, the construction project division perceives a strategic will to engage in development and top management support for their operational level initiatives. They also feel that engaging in development is a part of their responsibility as a public client. The interviewees at the construction project division identify three types of development projects related to different drivers. First, there are initiatives originating from political decisions, such as energy efficiency and architectural quality. Second, some development initiatives are part of the Agency’s long-term strategic plans and initiated by the board, such as eco-cycle adaptation of buildings, and projects to cut costs. These two kinds of development projects are formalised and monitored by top management through steering group and reference groups, are granted a budget and results are posted on the website. A third category of smaller development projects are initiated by the managers at the construction project division and reported in the annual business plan, for example, BIM, low-energy projects etc. Further, due to the technically advanced and specific character of some projects, development and innovation is also carried out in construction projects in collaboration with contractors and material suppliers. There are few formalised procedures to capture and disseminate knowledge and experience in the organisation. Within the construction management division, knowledge exchange is informal. They also have division meetings twice a year and sub-division meetings four times a year. The division is small and project managers know of each others’ projects and exchange experiences about various defence-specific constructions. There is also some specialisation, so that similar projects are assigned to the same manager. The whole Fortifications Agency, however, is a large organisation covering a vast geographic area, and information exchange between the construction management division and the real estate management divisions is difficult. There are specific development leaders appointed both in the real estate divisions and in the construction project division, but their contacts with top management and each other are largely informal and there is no system for making the results of their work known to the rest of the organisation. Only the large development projects are reported on the intranet. Thus, there are many local initiatives in the real estate management divisions that are not disseminated. 3.2.3 Methods and processes to address sustainability

Employees at the construction management department have established contacts with numerous industry level organisations in Sweden and within the Nordic countries, but they co-operate with research institutes and universities mainly through master theses and recruitments. They sometimes organise courses which are open for external participants, and the interviewees think the Agency is generous in supporting their employees with continuous education. The construction project division has engaged in defining objectives set up by top management, interpreting what eco-cycle building and sustainable building actually means for their activities. They have had the ambition to try out a low energy building concept since a few years. The dependence on political decisions however makes it difficult for them to plan development more long-term, and they had to wait for more than a year to find a suitable project to test and demonstrate low energy building technology. In addition, the Fortifications Agency has a heterogeneous stock which is a challenge both in a technical respect and to the replicability of experiences from demonstration projects. Another issue that counteracts the ambitions of the

Agency, is that their client, The Defence, has not showed interest in low energy building or energy efficiency measures in the existing stocks. The Defence does not have any political directives or economic incentives to save energy. In 2010, the Agency started their first low energy projects, a garrison with housing for soldiers and a rescue station. In the garrison, the ambition was to reach an energy consumption of 55 kWh/m2 and year. An important issue was how to set requirements and find ways of incentivising energy performance within the limitations of public procurement. 3.2.4 Further challenges The Fortifications Agency is still at the beginning of their development process towards more sustainable building. Their challenges remain on how they can define sustainable building for their diverse stock and their activities, when most existing knowledge in the building sector is related to residential buildings and office premises. Another main challenge related to implementation of results from their first low energy projects. Although the experiences from the demonstration project of the garrison were to be applied on coming projects, the representativeness of this project is still questioned by the managers of the construction project division.

3.3 The Company The Company is a private property developer in the housing sector. They only build and own rented apartments in fast growing parts of larger Swedish cities. The Company was founded in the early 1950s as a construction contractor firm and developed into a commercial property owner with large holdings in a middle sized Swedish town. Since 2005, the Company has transformed into a developer and owner of residential property, in order to respond to business opportunities created by shortage of residential flats for rent. This process has been led by the managing director, who has a background as an architect and also has experience of working abroad for several years. The company currently has 18 employees. 3.3.1 Directives and strategies to deal with sustainability

The Company is owned by an US holding company The objectives are to be one of the leading real estate managers in the rented apartment market in metropolitan areas in Sweden, and to double their capital every fifth year. The company finds that they in short time have been successful in their development towards these goals, something which they attribute to three areas of strength: capital, energy efficiency and environmental focus, and ‘conceptual’ building. The ‘conceptual’ building method is an internally developed industrialised building method with standard apartment layouts, prefabricated parts and short construction periods. These layouts are designed to be very functional in terms of user qualities, thereby allowing for lower rents. In developing technical solutions, the managing director relies on his personal experience of energy efficiency reaching back to the 1980s. They have invested considerable capital in development and used non-conventional methods to reach their goals. For example, they sometimes have to take the full responsibility for new technical solutions that contractors or consultants will not guarantee. Initially the company has had an over-capacity in management, but intention is that there will be a balance as the production and development of stock increases in coming years. Further, the company has knowledge of foreign markets and they manage to procure building components as well as contractors to competitive prices abroad. For construction they have signed a long term Design-Build contract with one contractor.

3.3.2 Development and innovation processes

The company has few employees and there is a close interaction between the top management and other levels of the firm. They have not set up any formal processes for knowledge management and internal communication is mainly face-to-face .

All employees are engaged and interested in development, and the level of education is high. Notably, project-level development is discouraged, and all development work is carried out on the firm level. Employees take courses primarily in management. They have received some support from government and industry associations for measuring and evaluating the performance of their buildings. Otherwise, they do not collaborate with universities or engage in national networks. At one time, they wanted to become involved in an industry-wide initiative (the Building/Living dialogue) but were considered too small. This has however changed and they are now invited to such arenas. However, while they have initially been open with dissemination of their experiences as a way to get publicity, the Company has recently decided to change their strategy for external communication to protect their business. 3.3.3 Methods and processes to address sustainability The high ambitions for energy efficiency and environmental performance are strictly commercial and have both strategic and financial backgrounds. First, when municipalities distribute land and building rights there is often a competition, and to be allowed to participate a small and unknown company has to present a more innovative proposal than the established actors. Second, the investments in low energy technology generally have a short payback time. The Company is currently constructing a new low energy multi-family residential building on land distributed by Älvstranden. The low energy concept the Company presently uses resembles passive house ideas (called “Egenvärmehus”) and has been developed based on the managing director’s earlier experiences. In order to scan the environment for new possible areas to invest in, they invite external consultants to study specific areas. They have investigated renewable resources such as solar energy but so far this has not been found commercially interesting. 3.3.4 Further challenges The Company’s plan for the future is to grow and stay competitive. They have developed a low energy concept that works and does not have any incentives to go further in terms of energy efficiency (their new low energy buildings use about 45 kWh/m2 and year). Incentives to develop other environmental issues (renewables, material use etc.) could come from municipalities, competitors proposing more sustainable building, or demands from customers. 4. Discussion 4.1.1 Directives and strategies to deal with innovation in general and sustainability

Älvstranden Utveckling is an unconventional hybrid between a semi-public city planning agency and a construction client. We may understand their existence in the context of the widespread criticism to traditional expert-based planning regimes, calling for new processes and institutions better adapted to collaboration with commercial developers and other actors e.g. [17]. Älvstranden is highly dependent on political decisions. On the company level, their ambitions for innovation seem to origin in a company culture to be leading, as means to safeguard and extend their commission from the city, but also driven by personal interest among employees. Their increased involvement in urban development has set them in a position where they have to develop new competences in fields they do not master, an issue they currently work on. The Fortifications Agency represents a traditional type of Swedish government sector client. Its development mirrors the general downsizing of client functions during the 1990’ies, further accentuated by the reduction in the Swedish defence. This might explain why, contrary to some other large government sector clients, the Agency does not have any organisation explicitly orientated towards R&D activities. Last years, the Agency has received more explicit political directives to engage in environmental protection. They have no official directive to be leading. However, they feel a responsibility as a large public client to be a competent client also to attract new staff and provide interesting working tasks.

The Company builds on a strong Swedish tradition of owner-builders, but is significantly more innovation-orientated than these usually are. This allows the organisation to compete also on a national level, and their ambitions for growth are higher than those of the traditional local owner-builders. Accordingly, the proportion of firm-level staff (in relation to project-level staff) is significantly higher. In terms of innovation drivers, the Company has much in common with commercial firms in general, since they are dependent on their ability to establish a sustainable competitive advantage. For this to be possible, however, it is not sufficient to demonstrate high quality and low costs to potential tenants. The Company first has to obtain land in attractive locations, and is thus dependent on local governments rewarding high energy performance. For them, innovation is strictly commercial, but on a market shaped by political concerns. The Company’s business strategy fits well with the one of the municipal urban developer Älvstranden. 4.1.2 Development, innovation and methods and processes to address sustainability The three companies give examples of different processes to handle innovation. The Fortifications Agency is in a process of slowly rebuilding its client function after the 1990s downsizing. It can be seen as a process of regaining an absorptive capacity. To some extent, collaboration with external organisations seems to replace internal resources. However, knowledge from contemporary examples of low energy and passive house projects is of smaller value for the Agency, since they have a heterogeneous building stock which calls for a wider repertoire of models to address energy efficiency as well as sustainability. The Fortifications Agency is mainly top-down governed and processes are slow. The Agency gives their personnel a high freedom in initiating development work and participating in industry activities, but compared to Älvstranden top management support is passive. The culture emphasizes competence, efficiency and reliability rather than innovation. In order to avoid uncertainties, they engage in longer investigations before proceeding to actions. The Fortifications Agency resembles the Company in stressing operational needs and performance as the primary basis for innovation. Älvstrandens ability to reach high ambitions seems to rely on high competence among their personnel, support from top management as well on financial resources which might explain why they can involve in more uncertain projects. They mainly carry out innovation in projects. Älvstranden share similarities with the Company in ambitions and competence. However, firm level control is much less developed and project level freedom is high. The rate of innovation at Älvstranden could be regarded as higher than what would be commercially wise. However, their ambitions are also constrained by the market since it is only when there is a high interest from investors that Älvstranden is able to put up high formal requirements. Regarding knowledge management, Älvstranden have a high capacity regarding all stages in the knowledge evolution cycle except for knowledge retention/routinization. The strategy to be a role model and to further invest in development projects is hard to reconcile with high retention which work in opposition to efficient property management. The importance of a high internal competence to identify and absorb external knowledge can be understood when comparing Älvstranden’s strategies regarding low energy technology and urban planning. Their progression is much more evident in terms of building energy performance compared to urban planning which is more complex. In the case of urban development they seek to replace internal sources with external ones. The high internal competence of Älvstranden enables them to successfully retrieve knowledge through networking, collaboration with academia etc. and by carrying out innovative projects. However, these competences are dependent on individuals and informal knowledge sharing. A lack of routines for retention and repositories of knowledge makes their further use of experiences and their contributions to development in the building sector at large vulnerable, not only to changes in staff but also to political decisions that could change their directives or even put an end to their activities. In the Company, the organisation is small and formal routines are not well developed, but many project management routines are embedded in the technical system. Also, the product is repetitive and there is a long term relation to a contractor, reducing needs for formalisation. Interestingly,

development work is carried out on the firm level while project-level initiatives are not welcome, illustrating and confirming the proposition of Dubois and Gadde [12] that a tighter coupling between firm level strategy and project activities constrain project level freedom. The company covers all stages in the knowledge evolution cycle. 5. Concluding remarks This research project provides insights in innovation and development processes in Swedish construction client organisations. Our studies have had a more general approach to innovation and development among clients. An observation is that ambitions for low energy construction and sustainable building have a prominent role in their objectives. The study suggests that construction clients can take a leading role in innovation for low energy and sustainable building. Client leadership for low energy and sustainable building has an impact through procurement of consultants, contractors, downstream suppliers, and as in the case of the municipal developer through contracts with other developers and clients. However, clients can also manifest their leading position by constructing demonstrating examples, and, once again in the case of the municipal developer, by involving in the development of local ambitions for more sustainable building together with local authorities and in dialogue with other local municipal and private client organisations. Our study shows that client leadership for innovation is utterly dependent on political decisions but also on market conditions and on organisational characteristics. The governmental and the municipal clients in our studies are directly dependent on political decision for their activities. The private developer is mainly driven by commercial interests but is indirectly dependent on political decision regarding requirements for land use and its effect on the property market. The municipal developer has high ambitions for innovation and wants to be leading in the field. Their high ambitions are almost an over-interpretation of their political directives driven by employees. The level of innovation they can require from investors as a municipal land owner will be dependent on the market. As long as their land is attractive they can keep the ambitions high. Regarding organisational characteristics that can support innovation, the municipal developer favours project-level initiatives which seems difficult to comply with high retention, while the private developer favours firm level development with focus on high retention and replicability. Top-management support for innovation will be important in either case. It could be argued that in the case of the private developer, as in the case of the governmental client, too much top management can be restrictive for project level initiatives which will work against innovation. The conditions for client leadership for low energy and sustainable development in a long-term perspective will be challenged by political decisions but also by the fact that innovation in these organisations is dependent on personal knowledge and ambitions. A developer as Älvstranden, will be important for the development in the sector as a whole. The private developer will not push the limit further than what is financially interesting at present, but together with Älvstranden they could be complementary in a wider innovation system. A basic assumption in innovation literature is that the driver for innovation and knowledge development is to gain sustainable competitive advantage, and that the core competencies of a firm therefore are those that are the most difficult for others to imitate. We alsoHowever, recognise that few construction clients function as traditional companies in the sense that they directly compete with each other. This implies that barriers to collaboration and knowledge spill-over between clients and projects should be low, and that different types of clients may have partly complementary roles within a wider innovation system. Still, some knowledge sharing might be necessary to establish collaboration with other knowledge provider firms, or to persuade customers about the relative merits of the product or service that the firm supplies. In the absence of competition, we could rethink the incentives to innovate, as well as the implications for knowledge sharing between clients and projects, and that different types of clients may have partly complementary roles within a wider innovation system. . Both Älvstranden and the private developer agree that the limit for energy efficiency on the building

level has been reached at about 45 kWh/m2 and year under present conditions and with available technology. The processes to develop new building practices are slow. From the first initial idea to retention and further development of new innovation areas there is a time span of several years. Älvstranden have shown example of a rapid development relying on LCC and energy calculations. Energy use in new construction is an area with limited complexity and short pay off. To proceed in sustainable development of the built environment the next challenges are on a larger scale, the neighbourhood and the city, have to address social and cultural issues that are more difficult to define and handle, and should include energy issues in a wider perspective including material use, resource efficiency, transports etc. What would be needed is more explorative approach to innovation, as we could see in the 1990s projects for sustainable building. The development today has reached good results regarding energy but has developed in a technology lock with passive house concepts regarded almost as the only possible solution. The problem is that explorative and experimental property development is not very compatible with efficient property management. Such challenges could be tackled by a developer like Älvstranden and by using their step-by-step method to delimit the uncertainty of the unknown variables. Älvstranden would then prepare the way for stronger political directives. We also recognise that few construction clients function as traditional companies in the sense that they directly compete with each other. This implies that barriers to collaboration and knowledge spill-over between clients and projects should be low, and that different types of clients may have partly complementary roles within a wider innovation system.

6. Acknowledgements

This research is funded by The Swedish Research Council for Environment, Agricultural Sciences and Spatial Planning in joint call 9 (2009) with Centre for Innovation in Construction - Sustainable development of the built environment. 7. References References should be listed in the order in which they appear in the paper and provided with a reference number in square brackets [1] using an overhanging indentation of 10 mm. References should be made in the paper using the appropriate reference number in square brackets. In the list of references, the author’s names are uppercase and are followed by the initials. The titles of books, journals and proceedings should be in italics. Titles should be in lower and upper case as shown below. The year of publication and the page number(s) should be given. [1] WAHLSTRÖM, Å, JAGEMAR, L, FILIPSSON, P and HEINCKE, C., Markandsöversikt av

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The Business of Green Housing: A Strategic View

Margaret Kam

PhD Candidate Faculty of Architecture, Building and Planning University of Melbourne Australia margkam@bigpond.com

Professor Deo Prasad, Faculty of the Built Environment, University of New South Wales, Australia, D.Prasad@unsw.edu.au Dr Dominique Hes, Faculty of Architecture, Building and Planning, University of Melbourne, Australia, dhes@unimelb.edu.au

Summary There is a persuasive business case evolving for green building. Recent times have seen increasing efforts to collate data on the financial costs and benefits of green building to demonstrate and justify further adoption. However this financial perspective represents only one dimension of a project and business performance. This paper explores the wider business context of green housing production. It argues that a strategic view can be applied to facilitate broader interpretations of green housing production as it relates to overall business development and performance for practitioners operating in the residential building industry. The paper examines: (1) factors affecting green housing adoption in the Australian residential building industry and state of the industry; (2) if and how a strategic green business view can be effectively applied as an intrinsic part of building practices in this sector and; (3) the validity of an adapted strategic management framework, conditions for application and where improvements can be made to facilitate adoption. Research findings suggest that strategic thinking and management can enable small and medium sized firms to develop their own green business case and business models suited to their markets of operation and which can accommodate clients/customers of varied financial circumstances.

Keywords: Costs, benefits, value, strategic thinking, Balanced Scorecard perspectives, green business models, market transformation, Small-Medium Enterprises

1. Introduction There is increasing evidence to demonstrate that green buildings are economically, environmentally and socially viable even within strict commercial parameters [1], [2], [3]. However there is still much scepticism and debate among practitioners in the residential building industry as to how this can be achieved in practice. The business case for green buildings has established a relationship between green buildings and business performance to justify adoption [4], [5]. While this argument has been more widely applied in the commercial and institutional building sectors, particularly in the instance of green organisations occupying green buildings, it is less readily applied in the residential building industry to justify adoption and implementation of the green housing concept. The Australian residential building sector is not transitioning as quickly to green building when compared with the commercial and institutional building sectors [6]. This can be attributed to a number of characteristics inbuilt in this sector. Some of these include a short term view, split

incentives [7], traditional segmented organisation of the building process, price competition [8] and an industry structure comprising a large number of very small businesses [9]. In particular, the industry still places much emphasis on initial costs over long term returns. This reflects a narrow and inadequate representation of housing production. Practitioners in this sector lack a strategic view which is necessary to shift this sector forward. However it is this strategic thinking that can potentially align and determine how green housing projects can be translated into business development to enable this sector to adopt a more progressive approach to remain competitive in the marketplace now and in the future. This research on the Australian residential building industry examined the broader business context of green housing for a range of adopters to determine if and how strategic green business thinking and a strategic management tool can be adapted and applied in the industry. Small and medium sized practitioners would then be better positioned to identify when green building pays and where value can be easily added to build their green business case in their housing markets.

2. Factors Affecting Green Housing Adoption and Diffusion The first phase of the research examined two questions: What are the critical factors affecting a lack of a more rapid adoption and diffusion of the green

housing concept in the Australian residential building industry from a business perspective? Could a strategic green business case, which has become a persuasive argument to justify

green building in the commercial building sector, be effectively applied as an intrinsic part of building practices in the residential building industry?

This exploratory phase comprised two research components. The first component involved an examination of six innovative green housing projects in different housing market segments. Interviews were conducted with architects, developers and builders and documentary evidence was collated to identify critical success factors in these projects. The second component examined the state of green housing in the Australian residential building industry through an analysis of a national industry survey. This survey involved an electronic questionnaire, which was sent to the membership of the Housing Industry Association, a peak body in the Australian housing industry. The survey elicited 1072 responses. Together the two research components represented a broad spectrum of adopters in the industry. The factors or conditions derived from the findings of this exploratory first phase were grouped into six main categories. 2.1 Costs, Benefits and Value Added The relative economic (dis)advantage of green innovations remained the most significant attribute affecting adoption by practitioners in both the case studies and the survey. Despite the espoused benefits and value added from green housing industry practitioners still placed a high emphasis on short term costs over longer term benefits. Practitioners relied on perceptions rather than quantified data from practical application. As such, they were uncertain of the extent of cost increases and ultimately the economic feasibility of green housing projects. This uncertainty pointed to a lack of measurement and evaluation of green innovations in housing projects and/or the difficulty in accessing useful measured data Kam and Prasad [10]. Even for green innovators cost increases were difficult to determine as they were not systematically assessed or assumptions were not made explicit. One case for example estimated a cost premium of up to 25 per cent. However, green innovators did recognise the wider effects, notably the value added from green housing projects for their firms such as green branding for example. They viewed green housing products not as ends but a means to wider ends. This involved reconciling both short term capital expenditure and profit with long term investments and value creation for their businesses. This reflected a strategic view. 2.2 Market Barriers With the exception of environmentally conscious clients/customers, practitioners generally perceived that clients/customers would be unwilling to pay more for green innovations. A key

finding was that the client/customer‟s financial capacity affected their purchase decision and the nature of green innovations adopted and level of integration achieved. This was evident in the project homes market and at the lower income end of a market where clients/customers would demand only low cost green options. This echoed Randolph et al [11]. The lack of demand for green homes was also exacerbated by a lack of systematic valuation methods that consolidated value added benefits with the economic value of a home. A higher price premium upon the sale or resale of a green home was identified as a necessary condition for increasing demand. Wilkenfeld [12] found that an increase in value would be possible. Market segmentation was a significant factor in explaining the receptiveness of clients/customers to green innovations and the likely successes of green housing projects. With the exception of green innovators, industry practitioners were generally not able to identify value propositions they could deliver, that would establish new and/or enhance existing relationships with their customers and enhance their image and reputation through eco-branding. For example, the quality clients/customers demand in a home such as a healthy comfortable indoor environment was not equated with passive design features that add value but not necessary add extra costs. Industry practitioners lacked clarity of how they could market green homes to their clients/customers in different markets. This would indicate a necessity for practitioners to better interpret and understand their market/s of operation. 2.3 Project Delivery Process Green innovators demonstrated the importance of green project experiences for learning and identified requisite process characteristics for successful projects. However the mainstream building industry adopted and implemented green building principles and innovations in an ad hoc manner. This did not reflect a cumulative process of application across multiple projects or changes in their business operations and development. This group focused on integrating green innovations into existing operating processes rather than invest in innovation processes. Practitioners were limited in their understanding of how green housing projects can affect broader innovative or operational changes in their firms or across the housing supply chain. The linear and fragmented project delivery process and traditional building performance measures restricted the role and limited practitioner power to influence others in the process as well as communication of green housing benefits in the process. Practitioners relied on short term relationships and did not make strategic choices based on cumulative project experiences. This demonstrated a need to foster innovation processes in firms for application of green innovations across multiple projects. 2.4 Capabilities Green innovators demonstrated the necessity for continuous learning to develop capabilities that would support green housing projects. These could include for example, a practical knowledge and skill base or a green marketing capability. Industry practitioners identified the lack of awareness, technical and practical knowledge of and skills in green building as a significant barrier across the housing supply chain. Another was the lack of easy access to reliable, updated and timely information on how to cost effectively implement the green housing concept. Others included the lack of business processes that would support the cost effective implementation of green housing principles and innovations; the lack of project evaluation and feedback mechanisms which implied that there was limited learning and continuous improvement for practitioners across projects and; time and cost restraints in projects which limited practitioner ability to undertake research and development in green building critical for an innovative firm culture. This pointed to a need for firms to develop and strength internal capabilities that support green building over time. 2.5 Building Industry Characteristics The characteristics of the residential building industry were more implicit in explaining the slow progress in green housing adoption. A main characteristic was the government‟s dominant influence in the industry through regulations imposed for greener housing. Industry practitioners

generally adopted a reactive approach to them by adopting only minimum requirements. They typically adhered to regulations, industry standards and accepted practices rather than innovate for green housing. While green innovators recognised that regulations would be needed, to shift the laggard end of the industry, they also viewed that this limited innovation and trailed what would be need for a more radical industry shift towards green housing. The bottom-line mentality and price competition in project delivery also perpetuated a more regulated industry. The industry was short sighted and focused on short term gains over long term investment. This suggested that practitioners lacked strategic focus and management for green projects. This could also be explained by an industry structure that comprised a large proportion of small firms which lacked the financial resources and power to compete with larger firms. Furthermore, the linear project delivery process, traditional roles, traditional performance criteria and a heavy reliance on tried and proven methods meant that green innovations would need to be compatible with existing practices. For example, practitioners adopted incremental approaches and chose proven principles and features like energy efficiency and insulation. This affirmed that the tradition-bound nature of the industry remained a significant barrier to green housing. 2.6 Change Agent Role The form, level and cost impacts of regulations for green housing on different housing markets and for different practitioner groups were a major concern. First, practitioners cited that it was difficult to reconcile local and state level regulations as they were conflicting and inconsistent in some instances. Second, the higher costs of green innovations would affect housing affordability for different client/customer groups. This would have greater effects on some practitioners such as speculative developers for example that have to manage a higher level of uncertainty and risk on financial returns in projects. They were under pressure to achieve economies of scale in green housing projects. Third, practitioners were uncertain of how what form of regulatory intervention would be most effective to drive market transformation and innovation in the industry. To support regulations, incentives that targeted first costs and increased the economic feasibility of green innovations for clients/customers were cited as an effective approach. However financial incentives for practitioners in the form of tax incentives or other concessions based on a rating or star value was found lacking. Moreover, practitioners questioned the ability of rating systems to assess innovative solutions that may not be integrated in the systems‟ criteria. Practitioners also viewed that there was a lack of disincentives for poor building practices. The high importance placed on technical training, practical „how to‟ knowledge and hands-on application to cost effectively deliver green homes implied a need for continuing industry education and training. This initial research demonstrated that green innovators in the case studies and innovators in the survey were in a process of building a green business case to justify green housing projects. However the remaining majority of practitioners in the survey demonstrated slow progress and a lack of strategic view and management. This indicated that there was an opportunity to apply a strategic green business framework, to facilitate a broader interpretation and analysis of green housing production as it relates to a practitioner‟s business performance, to move the industry forward.

3. A Strategic Green Business View and Adapted Framework 3.1 What is the Green Business Case? A strong business case has evolved over the last decade for green buildings [13], [14], [15], [16], [17], [18]. This has paralleled developments in theory and research in the green business field. A dominant argument is that business benefits in the form of financial benefits rather than values-based reasons are needed to build the business case for sustainability based changes [19]. Methods to calculate costs and to translate and measure benefits have been developed that support this argument [20]. The close relationship between green products sold by a firm and the environmental responsibility

of the processes that produce the products provides the basis for a business case for green building. As an extension of a company‟s processes, products and branding, green buildings can contribute to a company‟s strategic performance and human resource development [21]. This business case has been more effectively applied in the commercial building sector particularly in the instance where green organisations occupy green buildings. There is a more explicit relationship between green buildings and business strategy. Studies have shown that higher premiums, higher occupancy rates, higher resale value and the lower operating costs of green buildings align with a firm‟s profitability [22]. One problem with the application of the business case for green building is its varied effectiveness as an argument to justify adoption in different market contexts and under different conditions. Yudelson [23] shows that the benefits that businesses can accrue from green building can vary by the type of ownership, type of use, level of investment and similar drivers. It follows that one of the biggest problems of the business case built on espoused costs and benefits for residential building sector is that these are often unequally distributed between those who pay for the project and those who benefit [24]. In the instance of home owner-occupants, or practitioners who build and occupy their homes, the business case would be more compelling. 3.2 Why a Strategic Green Business View Within the green business field much attention has been placed on the development of green business strategies to achieve green competitive advantage for firms. These strategies marry environmental and social responsibility with economic performance and how they do business. This has typically focused on large corporations [25], [26], [27], [28]. However Senge et al [29] contend that the strategic integration of environmental sustainability is also applicable to small and midsized businesses (SMEs < 500 employees) which constitute 98 percent of all businesses in the United States, Canada, and Europe. In Australia, the size of firms are divided into four categories: (1) Very small firms (1-9 employees); (2) small (10-49 employees); (3) medium (50-149) and (4) large (150 or more) [30]. Hart [31] observes that few companies have incorporated sustainability into their strategic thinking. Rather environmental strategy tends to comprise largely of piecemeal projects targeted at controlling or preventing pollution. Hart [32] advocates that companies need to develop a vision of sustainability as a governing logic that goes beyond current internal operational focus on greening to a more external strategic focus on sustainable development. It can be argued that the ability of a strategic green business approach to create new markets and competitive advantage for firms would need to be examined in different industry contexts or business environments. Yudelson [33] notes that most businesses use some variation of the theory of competitive advantage as introduced by Porter [34]. Porter [35] identified three approaches to competing and success in the marketplace: (1) differentiation, (2) low cost and (3) focus. These strategies can explain if and how a firm can create and maintain a sustainable green competitive advantage. Orsato [36] asserts that a firm‟s ability to attain this advantage is contingent on internal capabilities and the context in which it operates. Strategically, a firm may be reactive to a changed business environment or proactively seek new opportunities. Yudelson [37] notes that a firm‟s competitive response to the growing green building market is dependent on strategic clarity, capability, capital and character of the firm. A conscious choice among strategies is preferable to having no strategy. 3.3 The Balanced Scorecard and Green Building

The “Balanced Scorecard” (BSC) proposed by Kaplan and Norton [38] is one example of a strategic management framework that has been developed to account for other perspectives of a firm‟s performance beyond just the financial. The four-perspectives of financial, customer, internal business process and learning and growth can improve the measurement of an organisation‟s intangible assets and function as a tool to describe and implement an organisation‟s strategy. More generally, the scorecard is a management system that can motivate and facilitate improvements in critical areas of business such as product, process, customer and market development. It can help identify where and how the business can develop [39], [40]. It is this application of the BSC as a

strategic management system that is useful as an approach to conceptualise green building as part of ongoing business development. The usefulness of this framework for green building lies in its ability to amalgamate the three domains of economy (profits), environment (planet) and society (people) with how it can directly affect a firm‟s financial performance or indirectly through influencing broader perspectives that can create value for a firm. These perspectives enable firms to track financial results while monitoring progress in capability building and acquiring intangible assets for future growth. Most importantly, it has the ability to reconcile a firm‟s long term strategy with its short-term actions [41]. This framework has been applied to identify the potential links between green buildings and organisational performance such as profitability, customer satisfaction and innovation in order that green buildings can be viewed as a source of competitive advantage for an organisation [42] [43]. It can also be argued that the scorecard perspectives would provide a useful framework with which to explore further the application of a strategic view to green building in the residential building industry. 3.4 A Strategic Green Business Framework

The categories identified in the first phase of the research and described in section 2 and the argument in section 3 indicated that the BSC perspectives would be useful to further examine practitioner adoption of green housing in the Australian residential building industry. The BSC framework was extended to the realms of green housing. It was proposed that the adapted strategic approach and management framework as shown in Figure 1 above would enable identification of the conditions in which investments in green housing projects can increase the competitiveness of firms in existing markets or create new market spaces. Practitioners can explicitly and systematically gain insights into the relationship between green building projects and their firm‟s performance. This can lead to answers to the important question of „when does it pay to be green?‟ as posed by Orsato [44] to maximise the profitability of a business whilst being socially and environmentally responsible. As shown in Figure 1, the framework comprising green financial, green customer, Internal green

Fig. 1 A Strategic Thinking and Management Framework for Residential Building

Green Customer Perspective

Internal Green Business

Perspective

Green Learning and Growth Perspective

Strategic Perspectives:

Question and Issues

Green Building

Products/ Services

Firm Processes

Strategic Insights

Build

ing

Ind

ustry

Chan

ge A

ge

nt

Low

Cost

Diffe

rentia

tion

Competitive Environment

Strategic Focus/Options

Green Housing Adoption and Diffusion

Green Financial Perspective

business process and green learning and growth perspectives could facilitate the process of aligning investments in green building with the context and capabilities of a firm that produce them. It could provide a reference point to ground the development of green business models. The distinction between products and services and organisational processes in sustainability strategies as proposed by Orsato [45] in his Competitive Environmental Strategies (CES) framework can also be applied to understand where green building can be a source of competitive advantage for a firm. As a product, the production of green homes does not necessary imply that changes occurred in a firm‟s processes. Inversely, changes to a firm‟s processes that is the sets of interlinked activities involving people and equipment in housing production, does not automatically imply that best practice green homes would be produced. Practitioners need to identify and select strategic options and formulate specific strategies for projects suited to their housing market contexts. This would require a choice in order to sustain their business activities. What this could mean is that firms may not progress through increasingly greening stages as proposed in a number of stage models that depicts a continuum from beginners to proactivists [46]. The building industry context and change agents in the industry form part of the external competitive environment that is significant in creating the conditions that can facilitate firm adoption of green housing. Based this environment and firm context, a firm‟s strategic focus could be based on low cost or differentiation [47]. The bottom of Figure 1 illustrates that practitioners can apply a strategic thinking process [48] to green housing adoption in the residential building industry context. Tovstiga [49] describes this strategic thinking as delivering insight. It is a systematic approach that involves sense making to balance rational analysis and intuition, experienced based judgement and knowledge.

4. Discussion The proposed framework and associated propositions was tested in a third research component that comprised a series of seven focus group interviews that focused on the perceptions and practices of a „Greensmart‟ group from the Housing Industry Association. This group comprised practitioners that were in the decision process for the adoption and implementation of green homes. A total of 50 SMEs were interviewed across the seven groups. The findings are now presented and considered together with the first phase of the research to answer the question: How can strategic green business thinking further green innovation integration and the

adoption and diffusion of green housing? The discussion will examine how each green strategic perspective is valid for green housing, conditions under which strategic thinking is useful and can be applied, and identifies opportunities or improvements that can be made to facilitate this process. 4.1 The Green Financial Perspective – A Question of Alignment and Measurement The financial perspective figured as a dominant argument to justify the adoption and implementation of green housing in the Australian residential building industry. However the effective use of this perspective to justify adoption was limited by the inability of practitioners to understand „how‟ they could translate the costs and benefits of green housing projects into measurable financial benefits in their business performance. This was a main concern particularly for small firms that were simply trying to stay in business. For example, practitioners still struggled with perceptions of high cost premiums and with identifying where value can be most easily added in the housing delivery process. With the exception of green innovators in the industry, the lack of measurement and evaluation of green innovations implied a lack of green financial measures. These measures would be necessary to reinforce the links and assess how green building projects as a component of any strategic choice or business strategy could effectively increase market share, improve cost performance, manage risk and create competitive advantage for a firm operating in the industry in both the short and long term. The research concluded that approaches to how this could be achieved needs to be demonstrated and documented, for example the creation of new markets, development of new product/services or processes or new pricing strategies. Cost benefit data needs to be proven credible and in a

format that can be easily interpreted and compared by practitioners to assist their decision making process for green building projects. The high importance industry practitioners still allocated to the costs and benefits with the risks involved demonstrated the importance of this perspective in making strategic choices to adopt green housing for SMEs that operate in the residential building industry sector. So in answering the question „How can strategic green business thinking further green innovation integration and the adoption and diffusion of green housing?‟, it became clear that there needs to be a continual process to establish and reaffirm the costs and value of green innovations over time. More importantly they need to be explicitly aligned with profitability for practitioners to strengthen this perspective. 4.2 The Green Customer Perspective – Identifying and Delivering Value Propositions The varied characteristics of different housing markets in which practitioners operated and competed was identified across the industry groups as governing their perceptions of if and how their firms could profit from green housing projects. For example, practitioners that operated in the high-end custom homes market could differentiate themselves by green housing products that can accrue a premium, from environmentally conscious clients/customers that would demand them. On the other hand, those that operated in the project homes market relied on a low cost approach to selling green homes. Practitioners‟ concern for the type of client, housing affordability, project size and other segment attributes demonstrated the importance they placed on identifying where and how they would need to position themselves in marketplace either through low cost or differentiation strategies. This implied that SMEs encompassed a customer perspective in their decision process for green building. The research found that the customer perspective in a strategic approach could enable practitioners to identify and deliver unique value propositions and gain a green competitive advantage. This reflected Tovstiga‟s [50] argument that being different from competitors is no longer enough, firms must also differentiate themselves on their ability to create and deliver unique value to clients/customers. This would need to be supported with more market research and analysis in different housing market contexts. Practitioners could more explicitly apply what Yudelson [51] refers to as segmentation/targeting/positioning (STP) to compete and market green homes in the residential building industry. This approach would require practitioners to identify: who are the biggest potential clients/customers and the most profitable; aspects of green homes clients/customers value and their motivations in different segments and; where they can position themselves to build competitive advantage. 4.3 The Green Internal Business Process Perspective – Start the Innovation Process In this research, green innovators demonstrated that they were undergoing an innovation process to drive client/customer demand for green housing. The integration of green housing principles and innovations in multiple projects, and cumulatively building on project experiences over time, indicated that they also identified green housing as a future client/customer need. Innovators recognised that they need to develop and/or use new products, services and/or processes to reach new markets and customers for future firm profitability and growth even in the face of uncertainty and incomplete information. Some examples were new construction methods, new design and financing services and sales capabilities. They adopted a strategic view to reconcile the short and long term views for their business. The remainder of the industry considered green innovations from the perspective of how to integrate them into existing projects and operational processes without major modifications. Their decisions to adopt and implement green innovations relied on their compatibility with existing processes and the efficient and timely delivery of housing. They focused on short term value creation based on generic measures of cost, time and quality rather than identifying green attributes that can create value for clients/customers in the longer term. The research showed that there needs to be a greater culture of innovation to increase adoption of green housing.

4.4 The Green Learning and Growth Perspective – Developing Capabilities and Climate for Action

The research showed that green innovators developed capabilities, systems and climates to support the innovation process. They captured broader benefits from implementing green housing projects that would support future green housing projects. This reflected a mutually adaptive process between practitioners‟ business processes and their building products. First and foremost, practitioners identified the need to develop a green knowledge and skill base as necessary to facilitate a more cost effective delivery of green housing. This would require further education, training and hands-on experiences. Second, practitioners would need to develop information system capabilities [52]. However this was less to do with the development of technological capabilities than to do with the accessibility, comparability and credibility of economic and technical information that would function as strategic databases to assist timely decision making on investments in green building and green business development. Third, green innovators were differentiated by their level of green commitment. This was motivated by altruistic reasons and by a business argument to cultivate a firm climate for learning, growth and innovation in green building based on project experiences. As indicators of a shift in the way practitioners do business, these capabilities, systems and climates indicated that there was a level of strategic thinking applied to green housing production, even if this was not expressed as an explicit and formalized green business strategy. Green innovators exhibited a strategic focus over a project focus. They affirmed that this is critical for an industry shift to greener housing. 4.5 The Building Industry Context – The Need for a Green Innovation Culture The inability of the building industry to innovate explained the slow progress in green housing production in the Australian residential building industry. The industry‟s dominant focus on cost competition would indicate that efforts to improve the cost effectiveness and value of green homes can significantly strengthen the green business case. This economic justification was particularly important for practitioners in the industry that indicated they conformed to traditional building processes and proven methods. Although small firms have greater flexibility to innovate in the building industry [53], small practitioners viewed that it was difficult for them to reap green building benefits, as they could not cost compete with larger practitioners with greater financial resources and capabilities. They also found it difficult to implement green housing projects in a disparate and fragmented industry where they had limited power to influence others in the process and where project contexts varied significantly. To create a green innovative culture at a general industry level, small practitioners in particular, would need to be more resilient by being more market orientated and develop new managerial capabilities in this competitive environment. These could emphasise green marketing and strategic management to establish and manage continuing relationships beyond individual projects. This would create an infrastructure for green housing. Rather than react on short term market developments, practitioners need to adopt a long-term oriented vision with a focus on quality based green competition rather than on traditional building performance criteria. 4.6 The Change Agent – Facilitating Industry Shift Change agents such as the government and industry bodies have a dominant role in influencing competition and innovation in the building industry environment. The research indicated that regulations and incentives that would increase the cost effectiveness and value of green homes for clients/customers as well as demonstrate profitability for practitioners can effectively facilitate adoption in existing markets in the short term and potentially in emergent markets in the longer term. Practitioners‟ main concern with regulatory policy remained one of what form regulations should take, their associated cost impacts on different housing markets segments, their alignment and consistency and their effects on how the residential building industry would develop. The industry‟s dominant concern for the financial impacts of regulations as shown in the research established that the effectiveness of regulations and any other type of policy and tools to advance

green housing would need to improve the concept‟s economic feasibility over time in a variety of market contexts. Most importantly initial costs still need to be lowered in the short term. To enable practitioners to apportion costs, imposed regulations or other policy types, need to more explicitly account for their varied impacts on different housing market segments. Greater attention needs to be paid to housing affordability in particular as well as on different housing types. For example, how can policies increase green housing adoption in the first home buyers market where affordability is a high priority? Should greater efforts be placed on improving the existing housing stock over new housing? In a strategic approach, practitioners would need to be more proactive in their engagement with change agent efforts to become a leader in the field. They could choose to exceed regulations as demonstrated by green innovators, rather than meet minimum compliance, typical among most practitioners in the Australian residential building industry.

5. Conclusions In examining the residential building industry from a green business view, this research demonstrated that practitioners in the industry have articulated important strategic questions and issues, which correlated with green perspectives of an adapted strategic management framework. Different adopters in the industry demonstrated they were at different phases of a strategic thinking process. This process was more explicitly shown by green innovators that developed strategic insights and strategic options that could potentially enable them to gain a green competitive advantage in their housing market segments. It was more implicit in the general industry that was struggling with the decision to adopt green innovations in the first instance. Unlike the commercial building industry sector, the large proportion of small firms in the residential building industry were less complex and limited in resources. This meant that the feasibility of a strategic view and management framework for this industry was less to do with deriving objectives and measures to align different business units. It was more to do with engaging practitioners in a strategic thinking process for decision making in green building that could enable them to drive the strategic direction of a firm whether there may or may not be explicit formalised green strategies. Several main conditions governed the effectiveness and application of the framework: First, there was a need to distinguish perceived and actual costs and benefits between products and/or services for clients/customers and firm processes; Second, practitioners may not systematically progress through increasing green phases or necessarily create new markets. Rather they may make a choice to remain at one stage or rely in what strategies have proven effective to operate in existing markets rather than make radical structural changes; Third, practitioners need to develop and/or use systematic assessment methodologies to determine project performance and assess implications for their firm‟s performance. In particular they would need to identify what can add or subtract economic, environmental and social costs and value through stages of the building life cycle. Fourth, practitioners need to recognise the potential for mutually adaptive innovative effects between green building projects and their business or firm as encompassed in the strategic perspectives. A more rapid transformation would rely on firms that transcend existing conditions by adopting what Orsato [54] advocates as a sustainable value innovation strategy. This involves a process that would create additional value to clients/customers at lower costs and generate new market spaces. Practitioners would need to redefine how products/services are produced and consumed. The question for the firm would shift from if green housing pays to when and how it pays. There remain great opportunities in the residential building industry as small firms are more flexible and can be more market oriented and strategically innovative.

6. Acknowledgements The authors would like to thank the Housing Industry Association for access to their industry survey data and for access to their membership to conduct interviews for this research.

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[26] HART S.L., “A Natural Resource Based View of the Firm”, Academy of Management Review, Vol. 20, No. 4, 1995, pp.996-1014.

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[28] REINHARDT F., “Bringing the Environment Down to Earth”, Harvard Business Review on Green Business Strategy, Harvard Business School Publishing Corporation, Boston MA, 2007, pp.41-64.

[29] SENGE P., SMITH B., KRUSCHWITZ N., LAUR J., and SCHLEY S., “Risks and Opportunities: The Business Rationale for Sustainability”, The Necessary Revolution, Nicholas Brealey Publishing, London, 2008, pp. 101-118.

[30] BUSINESS ONLINE ASUTRALIA, SMEs – Small and Medium Enterprises, Sydney, www.businessonlineaustralia.com/boawww1/bizcompliancecostwwwB1.htm, accessed 14.9.2010.

[31] HART S. L., “Beyond Greening: Strategies for a Sustainable World”, Harvard Business Review on Green Business Strategy, Harvard Business School Publishing Corporation, Boston MA, 2007, pp.99-123.

[32] Ibid. [33] YUDELSON J., Green Building Through Integrated Design, McGraw Hill, 2009. [34] PORTER M. E., Competitive Strategy: Techniques for Analysing Industries and Competitors,

New York, 1980. [35] Ibid. [36] ORSATO R. J., Sustainability Strategies: When Does it Pay to be Green?, Palgrave

Macmillan, Hampshire UK, 2009, pp.23-42. [37] YUDELSON J., Green Building Through Integrated Design, McGraw Hill, 2009. [38] KAPLAN R.S., NORTON D.P., “The Balanced Scorecard: Measures that Drive Performance”,

Harvard Business Review, Vol. 70, Jan-Feb, 1992, pp.71-79. [39] KAPLAN R.S., NORTON D.P., “Putting the Balanced Scorecard to Work”, Harvard Business

Review, Vol. 71, Sep-Oct, 1993, pp.134-147. [40] KAPLAN R.S., NORTON D.P., The Balanced Scorecard: Translating Strategy into Action,

Harvard Business School Press, Boston MA, 1996. [41] KAPLAN R.S., NORTON D.P., Strategy Maps: Converting Intangible Assets into Tangible

Outcomes, Harvard Business School Press, Boston MA, 2004. [42] HEERWAGEN J. H., “Green Buildings, Organizational Success, and Occupant Productivity”,

Building Research Information, Vol. 28, No. 5, 2000, pp. 353-367. [43] KAM M., PRASAD D., “Cost and Value in Sustainability Building Practice: An Exploration of

Perceived and Actual Impacts on Organisational Performance”, In Proceedings of the Second International Conference on Construction in the 21st Century: Sustainability and Innovation in Management and Technology, Hong Kong, December 10-12, 2003, pp.689-694.

[44] ORSATO R. J., Sustainability Strategies: When Does it Pay to be Green?, Palgrave Macmillan, Hampshire UK, 2009, pp.23-42.

[45] Ibid. [46] Ibid. [47] PORTER M. E., Competitive Strategy: Techniques for Analysing Industries and Competitors,

New York, 1980. [48] TOVSTIGA G., Strategy in Practice: A Practitioner’s Guide to Strategic Thinking, John Wiley

& Sons, London, 2010, pp.11-15. [49] Ibid. [50] Ibid. [51] YUDELSON J., The Insider’s Guide to Marketing Green Buildings, Green Building Marketing,

Portland, 2004, pp.31-32. [52] KAPLAN R.S., NORTON D.P., The Balanced Scorecard: Translating Strategy into Action,

Harvard Business School Press, Boston MA, 1996, pp.134-136. [53] PRIES F., JANSZEN F., “Innovation in the Construction Industry: The Dominant Role of the

Environment”, Construction Management and Economics, Vol. 13, 1995, pp. 43-51. [54] ORSATO R. J., Sustainability Strategies: When Does it Pay to be Green?, Palgrave

Macmillan, Hampshire UK, 2009, pp.205-207.

Strategic Insights

Cities as Market-Makers: Policy and Financing Strategies for Sustainable Real Estate Markets

Constantine Kontokosta, PhD, PE Director / Clinical Associate Professor New York Univserity Schack Institute of Real Estate / NYU Center for the Sustainable Built Environment USA ckontokosta@nyu.edu

keywords: green building, sustainable, real estate, policy and regulation, finance,

investment, diffusion, innovation

Not for citation or distribution with permission of the author

© 2011 Constantine E. Kontokosta

Dr. Constantine Kontokosta SB11 Helsinki Conference New York University Not for Citation or Distribution

Abstract There has been an exponential increase in the number of green buildings constructed in the United States over the past decade. The emergence of various eco-labeling systems, such as the USGBC’s LEED rating system and the US EPA’s Energy Star program, have served to heighten awareness of the environmental and social impacts of new construction, both within the real estate industry and among the general public. By 2010, there were more than 2,000 LEED-certified properties in the US, increasing at an annual rate of growth of approximately 50 percent since 2000. Spurred by new regulations and financial incentives, in addition to growing market demand, real estate owners and developers have begun to shift design standards for new buildings to meet a minimum standard of energy and resource efficiency, although obstacles remain to the widespread integration of green practices [1]. Despite the increased awareness and understanding of the benefits of sustainable design, the adoption of green building policies – codes, statutes, or plans that require, incentivize, or otherwise encourage sustainable buildings – has occurred incrementally (See Figure 1). Collectively, cities that have adopted such policies can be categorized as “innovators” in the framework of diffusion, meaning that substantial opportunity remains to enact – and improve – new green building policies [2]. The policies that have been adopted, such as Local Law 86 in New York City, tend to vary significantly with respect to the type and size of buildings affected and, most importantly, the measure of sustainability used [3]. While a vast majority of city-level policies utilize the LEED rating system, emerging alternatives and a growing demand for performance-based metrics may shift policy structures in the future. This article presents a brief summary of ongoing research on the diffusion of green building policies [4]. This research builds on an original database of green building policies created by the author for every major US city – the Green Building Regulation Database (GBRD) – and uses innovative econometric methods to explore the spatial diffusion of green building policies, the determinants of policy adoption, and their effect on market penetration of green development. Supplemental data for the work comes from such sources as CoStar, the US Census, and the Bureau of Economic Analysis, among others. Preliminary results show that green building standards at the city level can be effective in encouraging green building development [17]. However, several questions remain to explored, which form the focus of my ongoing research work. First, it is necessary to determine the optimal mix of incentives and regulations – “carrots and sticks” – that balance efficiency goals with constrained municipal budgets. While regulations raise the baseline level of construction and design standards, they can also raise costs and, in the aggregate, limit new development and constrain innovation. Incentives may encourage developers to pursue more sustainable projects, but they are typically only effective when designed to offset costs associated with sustainable design and to respond to non-capital costs, such as administrative hurdles and knowledge exchange. Second, the potential exists for regulations to create a market mindset of “teaching to the test”, where developers build to the required standard (LEED Silver, for example), but have little incentive to exceed the mandate. Regulations may also focus the market too closely on one rating system or set of design criteria, thus incentivizing the attainment of a particular certificate at the cost of encouraging innovative solutions to achieve performance goals.

Despite the energy savings and value proposition, lenders, owners, and investors have been reluctant to invest in an energy retrofit, largely due to continued uncertainty around the extent of cost savings and the competing investments jockeying for limited capital resources. There are

Dr. Constantine Kontokosta SB11 Helsinki Conference New York University Not for Citation or Distribution

now a number of financing mechanisms that have been developed to overcome the first-cost limitations of a retrofit, including energy performance contracts (like the one used on the Empire State Building) and Property Assessed Clean Energy (PACE) bonds. All have some limitations, and most exist because of persistent information asymmetries between technology providers and building owners.

It has become clear that the only way to get to scale in the building retrofit market – and achieve environmental goals while securing significant risk-adjusted returns – is to tap into traditional mortgage and lending markets. To do this, the real estate community needs a better ability to understand what actually is involved in a building retrofit, the capacity to predict with some certainty the energy savings for a particular building without having to do a full energy model, and some way to collateralize building enhancements.

While it will take some time to generate sufficient data to inform and improve decision-making, there are a number of initiatives already underway that will help prime the pump and reduce risk for first-movers. For commercial buildings, the Obama Administration’s Better Buildings Initiative will provide up to $2 billion in FY2012 through the Department of Energy for credit enhancements and loan guarantees for private sector retrofit loans. Similarly, New York City’s nascent Energy Efficiency Corporation is set to provide similar options for New York building owners, as well as facilitate other financing mechanisms to scale-up retrofitting of, initially, large-scale commercial buildings. The multi-family residential sector has seen even more activity. The FHA and Fannie Mae recently announced their new Green Finance Plus program, which allows owners of affordable rental housing to refinance existing debt to increase capital available for energy efficiency upgrades. The Community Preservation Corporation in New York has had a similar residential product for years, and it conducts building energy audits as part of any new mortgage application.

It is time now for a re-examination of current policy efforts and their effectiveness in achieving energy efficiency goals. Public policy has the tremendous potential to achieve market transformation by helping to overcome the current financial, regulatory, and behavioral barriers to greater energy efficiency in buildings. What is needed is the political leadership to support policies that push the public sector to prioritize energy efficiency, encourage the private market to develop new solutions and ideas through incentives and knowledge-sharing, and create rational goals for carbon and energy use reductions that are continually monitored and measured against actual data on building performance.

Dr. Constantine Kontokosta SB11 Helsinki Conference New York University Not for Citation or Distribution

References [1] Hoffman, A.J. and R. Henn. 2008. “Overcoming the Social and Psychological Barriers to Green Building,” Organization & Environment 21: 390-419. [2] Rogers, E.M. 2003. Diffusion of Innovations, 5th Edition. New York: Free Press. [3] Simons, R.A., E. Choi, and D.M. Simons. 2009. “The Effect of State and City Green Policies on the Market Penetration of Green Commercial Buildings,” Journal of Sustainable Real Estate 1: 139-169. [4] Kontokosta, Constantine E. 2011. “The Spatial Diffusion of Green Building Policies,” paper presented at the “Strengthening the Green Foundation” Conference hosted by The Federal Reserve Bank of Atlanta and Tulane University. [5] Ryan, Bryce and Neal C. Gross. 1943. “The Diffusion of Hybrid Corn Seed in Two Iowa Communities,” Rural Sociology 8:15-24. [6] Schneider, Mark and Paul Teske. 1992. “Toward a Theory of the Political Entrepreneur: Evidence from Local Government,” American Political Science Review 86:737-747. [7] Mintrom, M. 1997. “Policy Entrepreneurs and the Diffusion of Innovation,” American Journal of Political Science 41: 738-770. [8] Polsby, Nelson W. 1984. Political Innovation in America: The Politics of Policy Imitation. New Haven: Yale University Press. [9[ Meseguer, Covadonga and Fabrizio Gilardi.2009. “What is New in the Study of Policy Diffusion?” Review of International Political Economy 16: 527-543. [10] Shipan, Charles R. and Craid Volden. 2008. “The Mechanisms of Policy Diffusion,” American Journal of Political Science 52: 840-857. [11] Simmons, Beth A., Frank Dobbin, and Geoffrey Garrett. 2008. “Introduction: The International Diffusion of Liberalism,” in The Global Diffusion of Markets and Democracy. Edited by Simmons, Beth A., Frank Dobbin, and Geoffrey Garrett. New York: Cambridge University Press. [12] Berry, William D. and Brady Baybeck. 2005. “Using Geographic Information Systems to Study Interstate Competition,” American Political Science Review 99: 505-519. [13] Meseguer and Gilardi, 2009; Weyland, Kurt G. 2007. Bounded Rationality and Policy Diffusion: Social Sector Reform in Latin America. Princeton: Princeton University Press. [14] Navarro, Mireya. 2009. “Bloomberg Drops an Effort to Cut Building Energy Use”, The New York Times, December 4, 2009. [15] Cox, David R. 1972. “Regression Models and Life-Tables,” Journal of the Royal Statistical Society. Series B. 34: 187-220. [16] Rincke, Johannes. 2007. “Policy Diffusion in Space and Time: The Case of Charter Schools in California School Districts,” Regional Science and Urban Economics 37: 526-541. [17] Fuerst, Franz, Constantine Kontokosta, and Pat McAllister. 2011. “Taking the LEED? Analyzing Spatial Variations in Market Penetration Rates of Eco-Labeled Properties,” Paper presented at the American Real Estate Society 2011 Annual Conference.

STUDY ON PREFERENCES FOR ENERGY-SAVING FACILITIES IN GREEN HOUSE ON THE BASIS OF A QUESTIONNAIRE-TYPE SURVEY

Space for a portrait of the presenting author If you do not wish to provide a photograph, then leave the space for a portrait empty.

Ryozo Ooka Professor Institute of Industrial Science The University of Tokyo Japan ooka@iis.u-tokyo.ac.jp

Space for a portrait of the co-author. Wrap the picture in front of the text. Then it is easy to place to this box.

Tetsuya Kurosawa The Sumitomo Trust and Banking Co. LTD Japan kurosawa@sumitomotrust.co.jp

Summary With the surge in environmental consciousness, the demand for energy-saving facilities in the residential sector is increasing. Thus, the role of green house with energy-saving facilities is becoming more important. However, energy-saving facilities have yet to become widely popular because of their high initial cost. In order to make them more popular, a high quality policy to guide consumers to act with environmental consideration is demanded, and it is necessary to grasp quantitatively the public’s preferences, in terms of energy-saving facilities, and their environmental consciousness including the effect of cost. In this study, the cost payback period of the energy-saving facilities which people find acceptable is analyzed using conjoint analysis on the basis of a questionnaire-type survey.

Keywords: Environmental economics, Questionnaire survey, Energy saving, Ecological house, Conjoint analysis

1. Introduction With the surge in worldwide attention on environmental problems, the need for green action, such as efforts to conserve resources and energy, has become more urgent in the construction industry. So far, many approaches, including highly insulated and airtight constructions, have been developed. But in order to forge a low-carbon society, it is also necessary to promote the spread of such technology. As economic incentives are thought to be effective as well as regulation, a well thought out policy to promote action by the public with the emphasis on environmental consideration is needed in the residential section. Therefore, first, it is necessary to quantitatively grasp the public’s value consciousness regarding environment considerations, including their expense. Such results should then be reflected in the environmental policy. Installing energy-saving facilities which are one of the environment-conscious facilities is often forsaken because they cost more than general facilities. However, if the added values afforded by energy-saving facilities, such as their environmental friendly image and reduced environmental load, are evaluated, it is possible that they could affect the purchasing decision. In this study, using a questionnaire-type survey designed to examine the relationship between initial cost and added value, we quantitatively determine the level of affordable cost when buying energy-saving facilities and analyze the purchasing action branch.

2. SUMMARY OF QUESTIONNAIRE SURVEY

2.1 Summary of Survey Table 1 shows the questionnaire survey conditions. The target subjects are potential new house purchasers, so visitors to a model house exhibition park near Tokyo were chosen. The survey was carried out in such way that subjects were targeted in the field, and their answers recorded on the spot. 487 questionnaires were completed, which is sufficient for comparison with similar research in which conjoint analysis was used[1]. Table 1 Summary of survey

Target subjects potential purchasers of new houses →Visitors to a model house exhibition park

Period Holidays in September and October, 2008 Sample size 487 sample

2.2 Contents of Questionnaire Table 2 shows the contents of the questionnaire. Conjoint analysis (Q6) used a grading form. In the case of product purchase, the best product is generally chosen from various products compared. But before the candidates are chosen, we decide which are preferable based on budget and efficiency criteria. As energy-saving facilities are not widely popularly, the decision whether or not to buy energy-saving facilities is strongly affected by preference. The pros and cons of purchase should be considered. Therefore, first analysis concerns which ones can be considered candidates, the purchase desire is questioned using five grading forms (ranging between “want to buy” to “don’t want to buy”) as shown in the conjoint analysis in Figure 1. The other questions concern the Price Reasonability Index by Consumer's Evaluation [2] (PRICE2), which is one of the marketing research methods (Q7), affordability to pay for environment-conscious facilities (Q3), interest in an environment-conscious houses (Q4), environmental knowledge (Q5), preference if some energy-saving facilities were introduced (Q8), and daily environmental behavior (Q9). Table 2 Questionnaire contents

Contents of questionnaire Q1, 2 10~13

The respondent attributes (sex, age, job, size of family, income, financial loan)

Q3 Affordability to pay for environment-conscious facilities Q4 Interest in an environment-conscious houses

Q5 Environmental knowledge (Three questions about environmental terms, five about energy-saving facilities)

Q6 The relationship people feel between reducing CO2 emissions, initial cost, reduction in running cost and maintenance (using Conjoint analysis)

Q7 The price people feel is (too) high or low if buying certain energy-saving facilities (using PRICE2)

Q8 Preference if buying certain energy-saving facilities were introduced Q9 Daily environmental behavior (nine question)

Q Yearly reduction in CO2 emissions

Initial cost (million

yen)

Monthly reduction in running cost (thousand yen)

/ (cost pay-back period)

Yearly maintenance

want to buy neither don’t want

to buy

6-1 Amount absorbed by 20 cedars 0.5 - (can't) 0.5

6-2 Amount absorbed by 20 cedars 1 6 (14 years) 1 6-3 Amount absorbed by 20 cedars 2 12 (7 years) 2 ・ ・ ・ ・ ・ ・

Fig. 1 The form of profile of conjoint analysis at questionnaire Table 3 Factors and levels of conjoint analysis

Factor Level 1 Level 2 Level 3 Yearly reduction in CO2 emissions (kg-CO2) 280 560 840

Initial cost (million yen) 0.5 1 2 Monthly reduction in running costs (thousand yen) - 6 12

Yearly maintenance(frequency) 2 1 0.5

2.3 Profile Design of Conjoint Analysis [3] In conjoint analysis, four factors are considered, which arise at the point of purchase for energy-saving facilities, namely “initial cost”, “reduction in running cost”, “reduction in CO2 emissions”, and “maintenance”. Table 3 shows three levels for these factors. These levels are decided based on the values when energy-saving facilities are used. The values shown here are calculated from the energy load of a model family living in Tokyo and the initial costs as of 2008. They are shown as the difference between energy-saving facilities and normal facilities. In questionnaire, the reduction in CO2 emissions was represented as equivalent to the amount of CO2 absorbed annually by a typical cedar tree. The combination of four factors and three levels means that the number of profile is theoretically 34 =81. But as experimental design L9 was used, the number of profiles is reduced to nine, and Q6 includes nine sub-questions.

3. RESULT OF QUESTIONNAIRE SURVEY

3.1 Respondent Attributes Figure 2 shows the respondent attributes. As many couples and families attended, the gender ratio was virtually even. Those in their thirties accounted for half of all respondents, and if added to those in their forties this group accounted for over 70%. Considering the target subjects for this survey, the proportion of over-sixties was relatively high. However, they came with their children’s household, so this presents no problem. The majority of visitors were office workers and housewives, who together accounted for 80%. “Others” mainly represented officers and the self-employed. There was no evident bias in the population, which was well represented.

male female no response

～25s 25s～30s 30s～35s 35s～40s 40s～45s45s～50s 50s～55s 55s～60s 61s～

company worker house wife civil workerpensioner technical personnel part-time workerstudent

Fig. 2 Respondent attributes

3.2 Environmental Knowledge Figure 3 shows the results for environmental knowledge (Q5). Respondents were asked three terms concerning the environment and five concerning energy-saving facilities. This question was cross sectional data, to enhance reliability and use in case of division of respondent’s category. category.

Fig.3 Environmental knowledge Fig.3 Environmental knowledge

ig.4 Daily environment-conscious behavior

ig.4 Daily environment-conscious behavior F

F

other

40% 60% 80% 100%0% 20%

geothermal heat pump system

fuel cell

heat pump water heater

PV system

thermal insulation

carbon tax

renewable energy certificates

heat islandknow know only the name don' know

frequently turn off the light

use of fluorescent lamp

frequently stopping the shower

continuous bathing

cleaning of filter of air conditioner

use of wind shade during cooling

use of curtain during heating usually occasionally neither rarely never

3.3 Daily Environment-conscious Behavior Figure 4 shows the results of daily environment-conscious behavior (Q9). This question was cross sectional data, like Q5.

3.4 Interest in Environment-Conscious Houses (Green House) Figure 5 shows the results concerning interest in environment-conscious houses (green house). The form was a five grade question ranging between “want to live” to “don’t want to live”. For this question, it is necessary to consider that factors affecting purchase decision, such as the performance and cost of environment-conscious houses, was not represented. But as positive answers accounted for 95% (64% responded as “want to live” while “somewhat want to live” was 31%), almost all respondents seem interested in environmental action.

very desirable somewhat desirableneither not particularly interestednot interested at all no response

0% 20% 40% 60% 80% 100%

Fig.5 Interest to environment-conscious houses (green house)

3.5 Affordability to Pay for Environment-Conscious Facilities Figure 6 shows the results concerning affordability to pay for environment-conscious facilities. In this question also, factors were not represented. Therefore the purpose of this question was to determine the affordable cost of the environmental image. “Would not pay” recorded only 2%, reflecting the high interest in environmental action as found in the previous chapter. “Over 2 million yen” registered under 25%, which clarified the reason why expensive products such as PV systems are not more widespread under present conditions. The largest proportion (33%) answered “0.5 – 1 million yen”, so it is considered that one million yen is the cutoff price for widespread popularity. The average from these responses was 1.256 million yen.

would not pay ～0.5 million yen 0.5 ～1 million yen1 ～1.5 million yen 1.5 ～2 million yen 2 ～2.5 million yen3 million yen ～

0% 20% 40% 60% 80% 100%

Fig.6 The affordability to pay for environment-conscious facilities

3.6 The Affordability to Pay for Environment-Conscious Facilities per Respondent Cate-gory

Figure 7 shows the results concerning affordability to pay for environment-conscious facilities, which were classified according to category based on the results from Q5, Q9, and the respondent attributes. A T-test was conducted to examine any significant differences across all respondents. The affordability to pay for environment-conscious facilities for those with “highly environment-conscious behavior”, “annual income over nine million yen” and “two households” was significantly high, while for those with “annual income under 5 million yen” and “living alone” was significantly low. Paradoxically those with “low knowledge” were also significantly high, but in this point, it is likely that they didn’t have enough knowledge to evaluate their environmental actions. One

tendency that matched general opinion was evident in that households with large family budgets spent relatively more money enjoying life, whereas households without a large family budget did not. In addition, as an index to the degree of financial affordability, “annual income” was considered more effective as an index to evaluate affordable payments than “amount of loan”, because the short-term economic burden is substantial for environment-conscious facilities.

0.6 

0.8 

1.0 

1.2 

1.4 

1.6 

1.8 

high low high low high low high low 3 or more

2 1

(million yen)affordability to pay

total environment-conscious behavior

environmental knowledge

income financial loan number of family members

10% significance5% significance

Fig.7 The affordability to pay for environment-conscious facilities per respondent category

3.7 The Relative Importance of the Purchasing Decision Factor In conjoint analysis, as the value of four factors (Table 3) was an interval scale, the magnitude relationship was clear. There were some profiles under Q6 which also distinguished the magnitude relationship. In order to improve reliability, respondents whose answers deviated from the magnitude relationship or who answered “neither” in all were removed. Then, 227 samples of 487 samples collected were retained. As Q6 has nine questions, a total of 2,043 samples were used. Figure 8 shows the results of the conjoint analysis. The biggest influence level on the purchase decision was the “initial cost”, accounting for 37.9%, next was “reduction in running costs” at 36.4%, then “reduction in CO2 emissions” with 13.1%, and the smallest was “maintenance” at 12.6%. “Initial cost2 and “reduction in running costs” were almost the same, accounting for 75% of the total. In the case of energy-saving facilities, economic influence is considered most important for the purchase decision. However not only are these factors important, but it is also necessary to take into account the economic rational over the whole lifecycle. In addition, the degree of influence of “reduction in CO2 emissions” was one third of that for “initial cost”. But as it the main non-economic factor, it was evaluated highly as an added value.

Factor Level Weight Range (%) Influence level Yearly reduction in

CO2 emissions (kg-CO2)

280 -0.060 0.106 13.1560 0.046 840 0.013

Initial cost (million yen)

0.5 0.162 0.306 37.91 -0.017 2 -0.144

Monthly reduction in running costs

(thousand yen)

- -0.219 0.293 36.46 0.075

12 0.144

Yearly maintenance (frequency)

0.5 -0.066 0.102 12.61 0.031 2 0.035

13.1%

37.9%

36.4%

12.6%

Fig.8 Degree of Influence on purchase decision

3.8 Calculation of the Cost Payback Period [Note 1] Table 4 shows the result of the regression analysis whose objective variable was the grading scale value, using the results from Q6. The correlation coefficient “R” was 0.54. Bearing in mind the scale form used only had five grades and some respondents answered “want to buy” or “don’t want to buy” for all questions, there were thought to be enough levels. Table 4 Results of regression analysis

Partial regression coefficient Value T-Value

Intercept 0.4854 17.91* Reduction in CO2 emissions (1/tCO2) 0.0087 4.33*

Initial cost(100,000 yen) -0.0193 -17.47* Reduction in running cost(1/100,000 yen) 0.0168 21.51*

Maintenance(1/frequency) -0.0048 -6.52*

multiple correlation coefficient "R": 0.54 *: 1% significance objective variable: grading scale value, partial regression coefficient: conversion in around 15 years

Table 5 Proposition value of energy-saving facilities

Yearly reduction in CO2 emissions

(kg-CO2)

Monthly reduction in running costs (thousand yen)

Recital

Improvement in insulating ability 72 0.4 Q value : 2.7→2.4

Heat-pump water heater 416 4.1 APF 2.7

PV system 1017 7.7 3 kW system Geothermal heat- pump water heater 663 5.3 APF 5.2 (air conditioning)

2.7 (hot-water supply)

Fuel cell 490 3 electricity generation efficiency: 35%total efficiency: 85%

Such purchases could be made when the scale value was over “neither”, which was only when the grading value indicated the possibility of purchase. Table 6 shows the maximum price to pay for energy-saving facilities, which was calculated so that the grading value become exceeds 50% based on the values of Tables 4 and 5. In addition, Table 6 and Figure 9 show the cost payback period, which was calculated using the maximum price and reduction in running costs of the energy-saving facilities (the value of Table 5). Table 6 Comparison of proper price and cost pay-back period

Regression analysis Present

Maximum price (thousand yen)

Cost payback period (years)

Initial cost (thousand yen)

Cost payback period (years)

Improvement in insulating ability 35.3 7.4 250 52.6

Heat-pump water heater 472.3 9.6 400 8.2

PV system 1,440.5 15.7 2,100 22.8 Geothermal heat- pump water heater 825.2 13.1 1,400 22.2

Fuel cell 353.7 9.8 800 22.2

present regression analysis

Fig. 9 Comparison of cost payback period As per figure 9, since the present price of a heat-pump water heater was already within the price range preferred by respondents, the necessity of a price cut was considered small. On the other hand, as cost payback period of the other facilities which respondents sought was between about ten and fifteen years, there was some estrangement at the present pricing. In order to make use of energy-saving facilities more widespread, it was considered necessary to promote pricing such that cost payback period was less than 15 years.

40

50

60

0

5

improvement of Insulating ability

heat pumpwater heater

PV system Geothermal heat pump water heater

Fuel cell

10

15

20

4. CONCLUSION 1) Questionnaire-type survey was conducted among potential purchasers of new houses to

investigate their consciousness towards environment-conscious facilities. 2) 95% of respondents were interested in environmental action. 3) The affordability to pay for environment-conscious facilities was significantly high among those

with “highly environment-conscious behavior”, “annual income over nine million yen” and “two households”, but was significantly low if “annual income of less than five million yen” and “living alone”. Like is generally perceived, the main influences were considered to be the degree of environmental-consciousness and family budget.

4) In terms of energy-saving facilities, “economic” factors were considered to represent about 75% of the influence on purchase decision, while “reduction in CO2 emissions”, which is an environmental index, accounted for 13.1%

5) The cost payback period preferred by respondents was within fifteen years. Note 1 The cost payback period only considered the facility’s cost and the amount of reduction in running costs, so the rate of discount was not considered. References [1] A. Hagishima; J. Tanimoto; H. Takazono. Basic Investigation for Quantification of the Effect of

Environmental Quality on preference of Detached Housing. Journal of Environmental Engineering, Architectural Institute of Japan. 586(1) 2004, 53-59

[2] Yahoo Value Insight. PRICE2, Research Solution. (Reference: 07/2008) http://www.yahoo-vi.co.jp/method/b02.html

[3] Y. Kimiyama. Revised Edition Conjoint Analysis. Data Analysis Institute, 2006 [4] T. Kurosawa; R. Ooka. Study on Spread of Energy Saving Equipment on the Basis of

Questionnaire (Part. 2) Analysis of the environmental consideration and cost pay-back time. Annual Meeting. The Society of Heating, Air-Conditioning and Sanitary Engineers of Japan. 2009

Understanding trends in characteristics and achievement of LEED Platinum buildings

Joel Ann Todd Environmental Consultant USA joeltodd@cpcug.org

Dr. Chris Pyke U.S. Green Building Council, USA cpyke@usgbc.org Adam Rohloff CTG Energetics, USA arohloff@ctgenergetics.com

Summary Over the past decade, there has been significant research and development in the field of building assessment and certification. This has resulted in the implementation of a variety of different certification systems around the world. There has been little quantitative analysis, however, of the set of projects that have achieved certification under these systems and how their priorities and strategies have evolved over time. Further, there has been little analysis of how the subset of projects that achieved higher levels of certification differed from the projects that achieved lower levels of certification. This paper analyzes data from a global dataset of LEED-certified projects to explore these issues, with a focus on the subset of projects that have achieved the highest levels of LEED certification, specifically Platinum.

Keywords:LEED, U.S. Green Building Council, Platinum, high performance

1. Introduction The U.S. Green Building Council’s LEED Rating System offers certification for projects of many different types. Certification is based on the number of points awarded for achieving credits within the rating system as follows for the versions of the rating system addressed by this paper (LEED for New Construction versions 2.1 and 2.2):

Platinum 52-69 points Gold 39-51 points Silver 33-38 points Certified 26-32 points Since 2000, LEED has certified 8,189 projects in 130 countries. Of those projects, 3,335 were certified under the New Construction (NC) Rating System, and 184 of these achieved the highest certification level – Platinum. This paper presents an initial analysis of these Platinum projects to begin to explore how they are similar to and differ from other LEED-certified projects. The analysis in this paper covers projects certified under LEED (NC), versions 2.1 (launched in 2002) and 2.2 (launched in 2005). The newest version of LEED, LEED 2009, was launched in 2010 and there is not a sufficient number of Platinum projects certified under LEED 2009 to warrant analysis. Under LEED NC 2.1, 699 total projects were certified at all levels, of which 47 were certified Platinum. Under LEED NC 2.2, 2,626 total projects were certified at all levels, of which 137 were certified Platinum. The differences between versions 2.1 and 2.2 of LEED include refinement and improvement of credit requirements but not changes to the overall structure. A crosswalk between the credits in the two systems was performed to ensure similarity for the analysis. LEED NC 2.1 and 2.2 includes credits in the following categories:

Sustainable Sites, which addresses project location, access to alternative transportation, site development, stormwater control, heat islands, and light pollution.

Water Efficiency, which addresses overall water use reduction from landscaping and domestic water consumption.

Energy and Atmosphere, which addresses energy performance, commissioning, refrigerants, renewable energy, green power, and measurement and verification.

Materials and Resources, which addresses building and materials reuse; use of recycled content materials, local materials, rapidly renewable materials, and certified wood; and construction waste management.

Indoor Environmental Quality, which addresses indoor air quality, ventilation, low-emitting materials, control of environmental tobacco smoke and indoor chemicals/ pollutants, contollability of systems, thermal comfort, and daylight/ views.

Innovation in Design, which includes the LEED Accredited Professional and credits which can be earned for exemplary performance or innovative strategies. This category of credits is not included in this analysis since the content varies widely.

More information on the LEED Rating System can be found on the USGBC website. The analysis is based on a USGBC database that compiles information from the LEED Online system on certified projects.

2. Findings: Characteristics of LEED platinum projects

2.1 Size

Figure 1 illustrates the distribution of projects by size and certification levels. Overall, 74% of all LEED-NV v2.1 and v2.2 (together referred to as v2.x projects) fall under 100,000 SF (9,290 m2).

Figure 1 Certification level by project size, LEED NC 2.1 and 2.2

In LEED NC 2.1 and 2.2 combined, Platinum projects tend to be smaller than projects at other certification levels, with 88% of platinum projects falling below 100,000 SF (9,290 m2). as shown in Table 1. Table 1 Median Project Size by certification level (LEED NC 2.1 and 2.2 combined)

All Certified Silver Gold Platinum 114,263 (SF) 104,975 (SF) 116,734 (SF) 120,173 (SF) 86,723 (SF) 10,615 (m

2) 9,752 (m

2) 10,845 (m

2) 11,164 (m

2) 8,057 (m

2)

A closer examination of these smaller platinum projects in Figure 2shows that 75% of all Platinum projects are below 75,000 SF (6,968 m2), and most of those are under 25,000 SF (2,323 m2). The distribution of the other certification levels at this size class match each other more closely

Figure 2 Projects by size and percent of all certification level projects, LEED NC 2.1 and 2.2 combined

2.2 Ownership

Figure 3 shows certification levels by type of owner. For Platinum projects, non-profit organizations make up the largest percentage (34%); for all other certification levels, for-profit organizations make up the largest percentage (32-38%). Federal and local governments make up a smaller percentage of Platinum projects than other certification levels. Silver projects are most heavily dominated by government owner-types, while Gold projects are most heavily dominated by for-profit organizations.

Figure 3 Certification level by type of ownership, LEED NC 2.1 and 2.2 combined

2.4 Year of certification

Figure 4 presents the number and percentage of projects that achieved each of the certification levels under LEED NC 2.1 and 2.2 combined from 2006 through March 2011 (only three projects certified under LEED NC 2.1 prior to 2006). Although the number of Platinum projects increased consistently during this period, the percentage of Platinum projects decreased or remained constant attributed to substantial increases in total project count at other certification levels (data for 2011 are complete only through March 2011). There has been a slight increase in the percentage of projects achieving higher levels (Platinum and Gold) compared to lower levels (Silver and Certified). Gold-level projects most notably increased from 29% to 48% of all projects from 2007 to 2011. The total number of projects in 2006 (21 projects total) is too small to be able to compare 2006 certification level trends with other years, but illustrates the exponential growth of LEED projects over this time period.

Figure 4 Project certification level by year, LEED NC 2.1 and 2.2 combined

3. Findings: Credit achievement

3.1 Credit achievement by LEED version, LEED NC 2.1 and 2.2

Most credits in LEED NC 2.1 and 2.2 are worth a single point for achievement; some credits include several possible levels of achievement and, therefore, additional points are available within an individual credit. In the latter case, the percent of projects achieving a credit can be higher than the total percentage of available points achieved, since not all projects will achieve all of the points available. This section presents results for each of the rating systems analyzed.

3.1.1 LEED NC 2.1

LEED NC 2.1 was launched in 2002. A total of 699 projects have been certified under NC 2.1, of which 47 achieved Platinum level (at least 52 out of a possible 69 points). In Figure 5 the solid line indicates the number of Platinum projects achieving each credit and the shaded area indicates the percentage of available points achieved. The figure shows that there were only a few credits that were not achieved at high rates by most Platinum projects. It also

shows that the when Platinum projects earned a credit, they achieved a high percentage of maximum points available to that credit.

Figure 5. Aggregate credit achievement, LEED NC 2.1 Platinum projects

Figure 6 shows that Platinum projects consistently achieved higher percentages of available points (lighter shaded area) compared to all projects (darker shaded area).

Figure 6 Percent of available points achieved by all projects vs. Platinum projects (LEED NC 2.1)

Selected findings from these figures are detailed in the Tables that follow.

Table 2 Credits with lowest achievement rates, Platinum and all projects – LEED NC 2.1

Credit % of Projects % of Maximum Points

All Plat Diff All Plat Diff

MR3.1 Resource reuse 4% 20% 16% 3% 16% 13%

MR6 Rapidly renewable resources 5% 36% 31% 5% 36% 31%

MR1.1 Building reuse, shell 10% 9% (1%) 5% 6% 1%

EA2.1 Renewable energy 12% 70% 58% 9% 60% 51%

WE2 Innovative Wastewater treatment 13% 60% 47% 13% 60% 47%

SS3 Brownfield redevelopment 22% 36% 14% 22% 36% 14%

EA5 Measurement and verification 24% 62% 38% 24% 62% 38%

SS5.1 Protect/Restore Open Space 25% 77% 52% 25% 77% 52%

In the one instance of a larger percentage of all projects achieving MR1.1, the Platinum projects still earned a higher percentage of the maximum points available to the credit (on aggregate). Other than the credits listed above, only three credits were achieved by fewer than 80% of Platinum projects, as shown in Table 3: Table 3 Additional credits with Platinum achievement rates less than 80% -- LEED NC 2.1

Credit % of Projects % of Maximum Points

All Plat Diff All Plat Diff

SS2 Development density 40% 51% 11% 40% 51% 11%

IEQ3.2 Pre-occupancy IAQ 60% 77% 17% 60% 77% 17%

SS4.1 Access to public transportation 60% 79% 19% 60% 79% 19%

SS 4.1 was the only instance in which a higher percentage of all projects achieved a credit than Platinum projects and all projects achieved a higher percentage of available points.

Five credits were achieved by nearly 100% of Platinum projects, as shown in Table 4: Table 4 Credits achieved by all Platinum projects – LEED NC 2.1

Credit % of Projects % of Maximum Points

All Plat Diff All Plat Diff

EA1.1 Optimize energy performance 87% 100% 44% 93% WE3.1 Water use reduction 89% 100% 82% 100% MR5.1 Local/regional materials 94% 98% 83% 94% IEQ4.1 Low emitting adhesives, sealants 99% 100% 84% 94% WE1.1 Water efficient landscaping 88% 100% 88% 100%

EA1.1 contains the largest amount of maximum available points in the NC v2.1 rating system with 10 points that are awarded in one-point increments. The difference in achievement of this credit can be mainly attributed to the percentage of the available points received by projects that earned this credit. Platinum projects achieved 49% more of the points available to this credit than all projects on average. This was the largest difference in percentage of point achievement for the rating system..

3.1.2 LEED NC 2.2

LEED NC 2.2 was launched in 2005. A total of 2,626 projects have been certified under NC 2.2, of which 137 achieved Platinum level (at least 52 out of a possible 69 points). As Figure 7 below demonstrates, there were a few credits that were not achieved at high rates by

Platinum projects, as shown by the solid line. As the shaded area indicates, the Platinum projects also achieved a high percentage of available points for all credits with the space between the line and shaded area indicating points available that were not achieved.

Figure 7 Aggregate credit achievement, LEED NC 2.1 Platinum projects

Figure 8 shows that Platinum projects using LEED NC 2.2 consistently achieved higher percentages of available points, in addition to achieving more credits, compared to all.

Figure 8 Percentage of available points achieved by all projects vs. Platinum projects (LEED NC 2.2)

The credits that were achieved by fewest projects were similar for Platinum and all projects, with a few exceptions, as shown in Table 5:

Table 5 Credits with lowest achievement rates, Platinum and all projects – LEED NC 2.2

Credit % of Projects % of Maximum Points

All Plat Diff All Plat Diff

MR1.3 Building Reuse (shell) 2% 5% 2% 5%

MR3 Resource Reuse 6% 28% 5% 24%

MR6 Rapidly Renewable Materials 6% 28% 6% 28%

EA 2 Renewable Energy 14% 78% 10% 65%

MR1.1 Building Reuse (walls,floor,roof) 13% 23% 10% 18%

WE2 Innovative wastewater treatment 13% 52% 13% 52%

SS3 Brownfield redevelopment 17% 18% 17% 18%

EA5 Measurement and verification 22% 66% 22% 66%

For Platinum projects, the top 25 credits were achieved by at least 80% of all projects (with one exception – SS4.1 Public Transportation Access, achieved by only 69%); an additional 3 credits, not in the top 25, also were achieved by 80% or more Platinum projects. For all projects, these top 25 credits were achieved by 49-95% of projects; only the top 10 credits were achieved by 80% or more projects.

In addition to comparing Platinum projects with all projects, it is useful to compare them with the other certification levels (Gold, Silver, and Certified). Figure 9 shows that Certified and Silver projects consistently achieve below the average achievement level of “all” projects, Gold projects consistently achieve slightly above “all” projects, and Platinum projects consistently achieve the highest levels. This trend would be expected, but the data reveal that in no case did a lower certification level achieve a greater percentage of available points than those with higher certification levels.

Figure 9 Percent of available points achieved by certification level,( LEED NC 2.2)

3.2 Credit achievement by credit category

The previous section explored the similarities and differences between Platinum projects and all projects achieving LEED certification under NC 2.1 and 2.2 with respect to individual credit achievement. This section explores patterns of credit achievement by credit category,

to determine if Platinum projects differ from all projects in terms of their ability to address specific site, water, energy, materials and indoor environmental quality issues.

Figure 10 presents the percentage of Platinum projects that achieved each credit and the percentage of available points that was achieved by Platinum projects. It shows that when a credit was earned by a project, all of the maximum points available were earned in the Sustainable Sites and Indoor Environmental Quality categories. Platinum projects achieved signficantly smaller % of available points in Materials & Resources (56%) as compared to other four credit categories (83%). Platinum projects struggled particulary with building materials (structural and non-structural) reuse-related credits.

Figure 10 Platinum project credit achievement by credit category (LEED NC 2.2)

Figure 11 shows that Platinum projects and all projects were similar in their achievement levels in Water Efficiency and Materials and Resources categories. Platinum projects showed a similar pattern of credit achievement in Energy and Atmosphere for credits achieved, but within each credit, Platinum projects gained a consistently higher percentage of points available. It also indicates that Gold projects have a pattern of achievement that is closer to Silver projects than to Platinum projects. The achievement pattern of Platinum projects is different from all others.

Figure 11 Credit achievement level by credit category and certification level (LEED NC 2.2)

4. Discussion

This initial analysis of projects certified under LEED NC 2.1 and 2.2 indicates that Platinum projects are different from projects certifying at other levels in ways other than total point achievement. These differences include:

Platinum projects are increasing in number but are not increasing as a percentage of total projects certified because other levels of certification are seeing larger increases in number of projects.

Platinum projects tend to be smaller than projects at other certification levels. Approximately 75% of all Platinum projects are below 75,000 SF, and most of those are under 25,000 SF.

Platinum projects are most often owned by non-profit organizations (34%) while projects at other certification levels are most often owned by for-profit organizations (32-38%). Platinum projects are less likely to be owned by Federal or local governments than projects at other certification levels.

Some of the greatest differences between Platinum projects and all projects was seen in the credits that were achieved by very small percentages of all projects. For example, under LEED NC 2.2, 80% of Platinum projects achieved the credit for renewable energy while only 14% of all projects achieved the credit; 67% of Platinum projects achieved the measurement and verification credit while 22% of all projects achieved the credit; and 52% of Platinum projects achieved the innovative wastewater treatment credit while 13% of all projects achieved the credit.

Platinum projects were most similar to all projects in achievement of Water Efficiency and Materials and Resources credits and percentages of maximum available points. Platinum projects achieved far more credits and a larger percentage of available points especially in the Energy and Atmosphere category. Platinum projects had the most difficulty in achieving Materials & Resources credits.

Analysis of the database cannot provide the reasons for these differences and similarities, but the findings indicate areas in which interviews with project teams and analysis of strategies employed to achieve the credits would be useful.

5. Conclusions

The LEED database provides a very useful tool for beginning to understand more about the similarities and differences among projects that have received LEED certification. It would be useful to conduct similar analyses of LEED 2009 projects when data become available. Specific issues for further exploration include the relationship between ownership and size, as well as the relationships among ownership, size, and specific building types, and the reasons for differences between Platinum projects and all projects on specific credits and credit categories. Finally, it would be useful to compare findings for LEED projects with findings from projects that certified under other systems in use around the world.

Global challenges of sustainability business innovations in built environment

Matti Sivunen Research Aalto University School of Engineering, Real Estate Business REB Finland matti.sivunen@tkk.fi

Juho-Kusti Kajander Researcher Boost Brothers Ltd Finland Juho-kusti.kajander @boostbrothers.fi

Researcher Jukka Heinonen, Aalto University School of Engineering, Finland, jukka.heinonen@aalto.fi Professor Seppo Junnila, Aalto University School of Engineering, Finland, seppo.junnila@aalto.fi Summary The climate change mitigation is one of the greatest challenges of sustainable society. It has boosted the fastest growing new investment market in the world with over 140 billion dollars yearly investments. Inside the market, the built environment is assessed to offer wide scope of the most cost effective sustainability business innovation opportunities. Paradoxically, the climate opportunity in the real estate and construction sector (REC) has not activated sustainability business innovations (SBI) with required speed. The latest research seems to imply that the industry utilizes traditional R&D process that is not most suitable for fast radical innovations. The study was set to investigate what are the challenges of sustainability business innovations in REC industry in Europe and what are potential SBI solutions to tackle these problems. Three groups of international professionals were interviewed to give more specific understanding of sustainability innovation challenges in built environment. Unexpectedly, the main findings of this paper suggest that SBIs in REC have several industry specific major challenges. The key challenges appear to be complex REC industry value network, team building, high R&D-intensity, and commercialization management. In addition, the following themes were identified: SBIs in REC industry are constrained by project business orientation, fundraising and internationalization issues and lack of regulation, standards, customer pull and incentives. Moreover, several potential solutions were identified such as national policy decision-making round table and SBI valuation investor tools. In the future, it would be highly interesting to study further the role of VC and policy decision maker in creating SBIs in built environment. Keywords: Sustainability business innovations (SBI), real estate business, construction, built environment

1. Introduction The climate change mitigation is one of the greatest challenges of sustainable society. Climate mitigation has boosted the fastest growing new investment market in the world with over 140 billion dollars yearly investments [1]. Inside the market, built environment and especially the real estate and construction (REC) industry is assessed to have the largest potential for profitable environmental burden reduction [2]. There is a lot of evidence to support the belief that in order to rapidly increase sustainability in built environment the radical innovation is essential. In fact, innovation has recently been emphasized in general environmental economics literature and has

been defined for example as technical environmental innovation, eco-innovation [3] or sustainability business innovation (SBI) [4] – innovations that bridge the gap between business, social, and environment factors to achieve sustainability. Perhaps the most challenging aspect of the climate mitigation is the short time frame for corrective actions, specifically in built environment for example to produce almost zero energy buildings by year 2020 – in ten years [5]. Paradoxically, the latest research suggests [4] that despite the sustainability opportunity there is little SBI activity in REC industry. In particular, there is a lack of fast customer-oriented radical innovations that are expected in sustainability markets. In addition, the very few radical SBIs already in the market face great challenges in being accepted by investors and other stakeholders [6]. The study was set to investigate what are the challenges of sustainability business innovations in REC industry in Europe and what are potential SBI solutions to tackle these problems. First, a thematic framework for SBIs in REC industry is utilized to identify relevant themes, and then several professionals from public and private venture financing organizations, REC industry companies, and research organizations are interviewed to increase the understanding of challenges specific to SBI in REC industry. Moreover, we analyse the challenges at venture capital (VC), company, and policymaker perspectives, and several SBI experts are interviewed to identify potential solutions for these challenges. The paper is divided into three sections. First, we briefly review the key themes of innovation challenges in earlier literature. Second, the empirical data from interviews and observations are discussed. Finally, the key research implications are presented with suggestions for future research. 2. Challenges to innovation 2.1 General and REC industry’s innovation challenges General business innovation challenges have been widely studied in last decades. The literature review concluded that key challenges to innovation are related to efficient team building, innovation strategy and processes, organizational culture, and lacking resources for innovation. For example, West and Callagher [7] have documented that the key challenges of innovative companies are building and motivating the best and brightest team for the innovation, exploring a wide range of external sources for innovation, integrating those sources with company's resources and capabilities, and maximizing returns on intellectual property. Moreover, several studies [8-10] have investigated business innovation processes and suggest that a low level of customer and value network integration into the innovation process represents a challenge to business innovation, especially service-oriented radical innovations. Holmström [11] argues that large size of the organization per se is a great challenge to business innovations as it often leads to bureaucratic internal organization of the firm and myopic management behaviour due to concerns for reputation in the capital market. Therefore, small companies innovate disproportionately compare to large companies, and contrary incumbents often fail to innovate due to their bureaucratic organizations that compromise innovation incentives. Moreover, Chesbrough and Crowther [12] have identified not-invented-here (NIH) syndrome and lack of internal commitment as main hampering factors of business innovations. Several studies suggest that there are various industry specific challenges to innovation in REC industry. Construction innovation is traditionally identified as technical innovation that increases the feasibility and quality of construction projects [13-14]. Innovation in the REC industry is often classified as a cost-intensive investment with very indefinite returns due to the risks associated with R&D and great variations in both demand and profits [15-16]. In addition, recent studies [15-17] suggest that the lack of innovation management competencies and tools – especially related to promoting new ideas and making conscious strategic decisions about the direction of the firm's innovation activity – present a challenge to innovation in REC industry. Innovations in the REC industry have a tendency to be incremental in nature, and lead to radical transformations only over the long-term.

2.2 SBI challenges Earlier literature does not contain extensive studies concerning SBIs especially in REC industry, and the studies have focused on the role of the regulatory authorities. For example, Dewick and Miozzo [18] research the relationship between innovation and regulation in the context of energy efficiency and REC industry. They find that besides the inherent conservatism in the REC industry, additional barriers inhibiting the diffusion of new SBI include capital costs, the failure of the market to account for social and environmental costs and savings, and the perceived cost-effectiveness and performance of products over a 50-year lifetime. Moreover, few recent studies have looked at why radical sustainability innovations often fail in REC industry in spite of their strong ecological and efficiency benefits. For instance, Rennings et al. [6] have examined SBI challenges in the context of power plant construction. The authors identified high investment costs as a barrier for introducing radical product innovations. Recent studies have also looked at the policy decision-maker challenges concerning the development of policy processes for sustainability innovation. For instance, Foxon and Pearson [19] argue that the incorporation of dynamic innovation systems thinking beside traditional linear innovation models and the need for a long-term strategic framework to address sustainability concerns has direct implications for the development of sustainable innovation policy. Moreover, increasing demand of new sustainable innovations is also recognised as key challenge for policy makers to promote new SBIs. Utilizing public procurements methods or reinforcing standards and regulations are identified as key tools increasing SBI demand [20]. According the latest research need of new SBI decision-makers tools is critical. For example in Finland, the consequences of current ecology policy activities are recognised as development of organizations present processes and slightly the diffusion of new SBI, but not generating new sustainability innovations [21]. Fundamentally, regulation dictates innovation adoption. Relaxed climate policy is a challenge to radical innovations and has led to the era of incremental solutions [6]. Furthermore, Kajander et al. [4] investigate the current approach in REC industry to produce SBI and why it does not seem to produce new innovation with required speed. Almost hundred innovation projects in the industry were scanned to find out whether they contain the major components of an innovation process – radical innovation target, and strong customer and value network integration into the innovation process. The results implied that sustainability innovations process in the built environment lacks some of the key components of an innovation process as none of the scanned projects included all three components. Moreover, the sustainability innovation processes in REC industry were actually found to resemble traditional R&D processes instead of innovation processes. 3. Empirical data and research design The empirical data was collected from three-round interview and analysis process. Some preliminary results from round one and two interviews will be published forthcoming LCM2011 conference in Berlin. In round-one, we collected data through theme interviews from venture financing organizations that invest in SBI in built environment. In round-two, we interviewed five representatives – 2 CEOs, 2 chairman of the board and a technology director – from REC industry companies active in SBI. In round-three, we interviewed three professors from Europe’s top Universities to validate our findings on neutral environment and against findings in innovation research from round 1 and 2, and to investigate the challenges at policy level and explore potential solutions to overcome SBI challenges. The target of the first three interviews was to find out what are the key challenges of SBIs from venture financing organization’s point of view and how they differ from general innovation challenges. The challenges identified from earlier literature were used as grounding structure of semi-structured interviews. The three interviewed VC experts come from venture finance organizations based in Finland that have altogether over 480 Meur of funds allocated in investments in SBIs in built environment, especially in renewable energies and energy saving technology companies in Finland but also other European countries.

The round-two five interviews were conducted by interviewing REC industry companies active in SBI. The target of these interviews was to find out what the key challenges of SBI are from the innovator’s point of view and how they differ from general innovation challenges. All the offices of the interviewed professionals were located in Helsinki Metropolitan area. Each of the theme interviews lasted approximately two hours. Interviewed companies are presented in Table 1.

Company Company’s scope Market area Turnover Ownership A Sustainability engineering

company Nordic countries

70 MEUR Publicly-listed

B Development and manufacturing steel structure solutions

Global 610 MEUR Publicly-listed

C Indoor environment products, systems and services

Global 150 MEUR Privately-held

D Modular products for buildings Finland 1 MEUR Privately-held E LCM Services Finland 4 MEUR Privately-held

The target of the three round-three interviews was to validate the challenges identified from earlier interviews on neutral environment and against findings in innovation research. Moreover, secondary target was find out what the SBI challenges are from policy decision-makers’ point of view, and finally, identify potential solutions to overcome SBI challenges. The interviewed three SBI researchers came from distinguished universities – IMD, EPFL and EHTZ – in Switzerland. Each of the researchers had over 20 years of experience in the area of venture financing to SBI innovations, construction and real estate innovations, or commercialization of SBI. Researchers had also strong experience from the industry e.g. commercialization of successful SBI’s around Europe in role of entrepreneur and VC, and managing the leading global innovation consultancy company. Each of the semi-structured interviews lasted approximately three hours. 4. Results 4.1 Round-one interviews: venture financing organizations investing SBI In round-one interviews all of the respondents stated complex REC industry value network as the key challenge to SBI. Taking new SBIs, especially radical, to the market is difficult due to REC industry value network fragmentation, as multiple stakeholder commitment and acceptance are required to go further in the innovation process. Team building was also brought up by every respondent as a particular problem of SBI especially in terms of lack of multidisciplinary entrepreneurial teams capable to manage complex value networks and innovation. Moreover, the interviewed experts underlined that SBI in REC industry typically needs a long-term research and development (R&D) background for innovation. Finally, pending regulatory decisions regarding energy efficiency standards was generally seen as a barrier to SBI in REC industry. In addition, some respondents mentioned SBI company local market orientation and consumer environmental awareness building as constraints on SBI in built environment. These interviews suggested that the key challenges to SBI in built environment from venture investor’s perspective are complex value networks, team building challenges, long-term R&D requirement and linkage with pending regulatory decisions. 4.2 Round two interview: active SBI companies in REC industry In round-two interviews, the REC companies described several challenges inhibiting their SBI activities, which are summarized in Table 2. Most of the challenges identified in round-one interviews were present at the interviewed REC industry companies active in SBI. However, the companies also brought up challenges, which were not discussed in earlier literature or round-one interviews.

Table 1 Interviewed companies in round-two

Complex value network in REC industry was mentioned as a challenge to SBI in every company interviewed. SBI activity within REC industry was regarded as a challenging long-term process that requires formidable investments and managerial tools to build and manage networks in a fragmented environment, especially in the case of radical innovations.

Company A B C D E Complex value network X X X X X Team building X X X X X R&D and commercialization management X X X X X Project business orientation in REC industry X X X - - Internationalization of SBIs - - X X - Fundraising X - - X X Regulation and standards X - X - -

As table 2 shows, all interviewed company representatives argued that SBI team and competence building is a critical challenge especially concerning attracting the professionals who are development-driven and building teams with multidisciplinary competencies. In addition, several challenges related to processes and tools of R&D management, as well as commercialization of research results were present at all interviewed companies. Furthermore, some of the respondents pointed out SBI challenges related to project based operations in REC industry, internationalization of SBI, fundraising for SBI, and lack of a common understanding on sustainability, innovation and environmental standards. 4.3 Round-three interviews: Policy decision-makers in REC In round-three interviews findings from earlier two rounds were verified as applicable also in Switzerland, and further suggested to be key challenges, more generally, for SBI in Europe. All interviewees argued that fragmentation and long value chains means complex value networks, which may become critical challenge to diffuse new SBI’s inside the REC industry. Moreover, all of the interviewees mentioned marginal competition, focus on incremental innovation, lack of commercialization competence, and convincing property investors and local policy makers of SBI benefits as challenges. Interestingly, new regulation, followed by incentives and customer pull, were identified as primary drivers of SBI production and implementation. Interviewees argued that regulatory development and sustainability promotion is primarily a duty of the government. In addition, firms should actively lobby for new regulations and thereby increase the demand of new SBIs. Lobbing was mentioned to be one of the key challenges in REC industry, as lobbing is not currently focused on increasing sustainability, but maintaining current business benefits. Especially production of radical SBI was identified as highly dependent on the speed of developing and setting new regulations. All interviewees argued that correctly arranged incentives are critical drivers of SBI as concrete out of pocket costs and benefits are crucial both b2b and b2c SBI. Moreover, regulatory authorities should develop tax credits, subsidies and other concrete benefit schemes to end users of new SBI and companies should create and visualize win-win-win situations and schemes for value networks. Finally, customer pull, in terms of consumer organizations and awareness and communication via media, was identified as potentially substantial driver but having currently relatively small role in practise on SBI. In addition of identified challenges, interviewees presented some potential decision-makers solutions to increase SBI activity in REC industry. First, creation of national round table decision making concept for multiple public, private and 3rd sector stakeholders might be a potential solution to tackle complex value network. Round table would aim to develop and diffuse SBIs and effectively coordinate investments to focus areas and, therefore, could radically develop SBI generation in REC industry. Second, SBI process development and implementation was

Table 2. Summary of round-two interviews

developed as solution to SBI challenge of project based business. The main characteristic of SBI process include holistic approach to project design, building multidisciplinary project teams, implementing expertise and dedication to innovation inside the core team and focus on professional SBI project coordination. Finally, co-operation and research result implementation with global companies, creating from science to business SBI culture in universities, development and implementation of new SBI valuation investor tools and development of intelligent SBI tools for cities were mentioned as potential solutions. 4.4 SBI challenges in REC industry Next we reviewed the findings from our three-round interview and exploratory empirical study. The challenges of the venture financing organization active in SBI, the companies active in SBI, and SBI policy decision-makers are presented and summarized in Table 3. The challenges identified for SBI in REC industry were categorized under the nine themes of complex REC industry value network, team building, R&D and commercialization management, project business orientation in REC industry, internationalization, fundraising for SBI, incentives, customer pull, and regulation and standards.

SBI REC challenge

SBI VC investor challenge

SBI industry and company challenge

SBI policy decision-maker challenges

Complex value network management

Complicated and costly decision-making processes

How to find the right partners and projects for SBI and convince multiple stakeholders of the SBI benefits at the same time?

How to manage systemic change in a fragmented environment?

Team building

Lack of multidisciplinary and entrepreneurial teams

Lack of innovation management competencies

R&D and commercialization

- Long-term R&D required for SBI - Time gap from product to market with high sunk costs

Lack of processes and tools of R&D management and commercialization

- Marginal competition in the industry - How to create science-to-business culture?

Project business orientation in REC industry

-How to create an innovation culture in a project organization? -How to convince risk-averse project participants on SBI?

How justify local investments to voters?

Inter-nationalization of SBI

SBI company local market orientation

- How to create a company innovation culture for transferring SBIs in different locations? - How to make regional business to strive for international growth

How to facilitate co-operations with national organizations and global partners?

Fundraising for SBI

How to find the right sustainability-oriented financing sources for high risk SBI-projects?

How to focus sustainability investments?

Customer pull Lack of sustainability consumer organizations

Incentives How to create and visualize win-win-win situations?

How to develop concrete benefit schemes to end-users?

Regulation and standards

Slow-paced political decision-making for energy efficiency standards

Lack of a common understanding on sustainability, innovation and environmental standards

Lack of sustainability lobbing inside the industry

Table 3. Summary of empirical observations from interviews

Roughly speaking, all groups of interviewees found mostly similar challenges, especially in terms of value networks and team building. However, project business orientation in REC industry and challenges related to fundraising for SBI were present mainly in SBI companies. In addition, in contrary to VC investors, the SBI companies did not perceive pending regulatory decision as such a severe challenge to SBI as investors. Instead the companies highlighted lack of common understanding of sustainability and use of standards as a regulatory challenge. Moreover, while VC investors consider long-time to market and sunk costs related SBI as primary issues in the area of R&D management, the SBI companies felt that it is first and foremost a question of better tools and processes for innovation management. From policy-maker point of view, the dilemmas of lack of customer pull in REC industry was highlighted in interviews. Interestingly, the academic group of interviewees were more aware of potential solutions for SBI challenges than the companies and investors. However, any of the interview groups could present potential solutions to lobbing, incentives, local invests versus national benefit and marginal competition inside the market. Therefore, these identified challenges might present the most significant SBI barriers in REC industry. 5. Discussion and conclusion The study was set to investigate what the challenges of sustainability business innovations are in REC industry in Europe and what potential SBI solutions can tackle these problems. First, a thematic framework for SBIs in REC industry was utilized to identify relevant themes, then several professionals from public and private venture financing organizations, REC industry companies, and research organizations were interviewed to increase the understanding of challenges specific for SBI in REC industry. Finally, we analysed the challenges from VC investor, innovation company, policymaker perspectives by interviewing several SBI experts. The results of the paper suggest that SBIs in REC have several industry specific challenges. The key challenges identified by all of the interviewees were the complex REC industry value network, team building challenges, high R&D-intensity and commercialization management. In addition, the findings suggest that SBIs in REC industry are constrained by project business nature of REC industry, fundraising and internationalization issues, lack of regulation, multitude of standards, lack of customer pull, and intelligent incentives. It would seem that the challenges in sustainability innovation in REC industry differ from general innovation theories – especially in terms of the importance of complex value networks, project business nature of REC industry and regulation intensity. Moreover, unique challenges of SBI policiec such as, lack of informative sustainability lobbing, local investments and marginal competition were identified. Several potential solutions for SBIs in REC were identified in interviews. Fundamentally, new tools for SBI screening, evaluation and management are needed to enable companies, VC investors and policy makers to succeed in SBIs. Moreover, REC industry should develop customer-oriented and fast innovation processes that holistically integrate the value networks. Furthermore, creation of national round table decision-making concepts and development of intelligent SBI platforms and tools for cities are critical to develop policy decision-making activities. When generalizing based on the results, this study has some important limitations. Since the data collected through interviews for the study is limited in number, the implications made should be considered as suggestive only. However, this paper sets forth several leads for future research. It would be highly interesting to study further the role of VC and policy decision maker in creating SBIs in built environment. Moreover, potential solutions identified in the study should be evaluated and diffused.

6. References [1] Liebreich M, Bloomberg New Energy Finance,

<http://www.newenergyfinance.com/Download/pressreleases/105/pdffile/>, (Accessed: 3.3.2011).

[2] McKinsey&Company, Pathways to a low carbon economy, Version 2 of the Global Green House Gas Abatement Cost Curve. 2009.

[3] Rennings K., Ziegler A., Ankele K., and Hoffmann E., The Influence of Different Characteristics of the EU Environmental Management and Auditing Scheme on Technical Environmental Innovations and Economic Performance, Ecological Economics Vol. 57, No. 1, 2006, pp. 45-59.

[4] Kajander, J-K., Sivunen, M., Junnila, S., Challenges of sustainability business innovation in built environment. SB10 Finland - Sustainable Community BuildingSMART, Espoo, 2010. RIL, Finnish Association of Civil Engineers, pp. 288-289.

[5] EUROPE 2020 strategy – Finland’s national programme, Ministry of Finance, 2011, http://ec.europa.eu/economy_finance/sgp/pdf/20_scps/2011/01_programme/fi_2011-04-06_nrp_en.pdf (accessed 10.4.2011)

[6] Rennings, K., Markewitz P., Vögele S., How clean is clean? Incremental versus radical technological change in coal-fired power plants, Journal of Evolutionary Economics, Vol. 20, 2010, pp. 1-25.

[7] West, J., Callagher, S., Challenges of open innovation: the paradox of firm investment in open source software, R&D Management, Vol. 36, No. 3, 2006, pp. 319-331.

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Implementing Green Building Policies and Assuring Environmental Benefits in Singapore

Edward Anggadjaja Assistant Director Building and Construction Authority of Singapore Edward_ANGGADJAJA

@bca.gov.sg

Wai Kiong (Oswald) Chong Associate Professor University of Kansas, Dept. of Civil, Environmental and Architectural Engineering USA oswald@ku.edu

Nicholas Moossa, Building Systems and Diagnostics, Singapore, nmoossa@bsd.com.sg Kian Seng Ang, Director, Building and Construction Authority, Singapore, ANG_Kian_Seng@bca.gov.sg

Summary The purpose of this paper is to present an overview of the green building master plan of the Building and Construction Authority (BCA) of Singapore, and showcase one of the research projects aimed to achieve the goals of the green building master plan. One of the key targets set by the Singapore’s Inter-Ministerial Committee on Sustainable Development (IMCSD) is to ensure that at least 80% of the buildings in Singapore comply with the Singapore green building standards (known as Green Mark) by 2030. The master plan includes various policies and initiatives that aim to culminate green building design and practices in Singapore. One of these research projects done in collaboration with industry, academic and authority is presented in this paper. The project develops the framework to measure and account for carbon emissions for various Green Mark standards, and establishes the relationships between Green Mark standards and carbon emissions. The paper establishes the framework to correlate green building standards and equivalent carbon emissions by, first, reviews the criteria of direct and indirect carbon emission measurement, and second, identifies the focal point of carbon emission modeling.

Keywords: Green Building Policies, Green Mark, Sustainable Development, Carbon Emissions

1. Introduction and Objectives Given the highly urbanised environment in Singapore with a 5 million population and land area of about 700 square kilometres, there is a need to develop and promote an environmentally sustainable built environment. Our buildings have been shown to consume about a third of the national end-use electricity and are the second largest electricity consumer, after the industrial sector. Hence, the adoption and promotion of green buildings is vital towards a sustainable built environment. The main objective of this paper is to layout the Building and Construction Authority (BCA) of Singapore’s vision to achieve the goals of making Singapore building more sustainable. This paper also showcases one of the projects that BCA has conducted to achieve the goals. One of the goals is to measure carbon emissions generated from buildings in Singapore. The paper

documents the details of the research project.

2. BCA’s Approaches to Sustainable Buildings BCA introduced Singapore’s green building rating system, the BCA Green Mark in 2005. It is a unique green building rating system developed specifically for the tropical climate to improve energy efficiency, water conservation, indoor environmental quality and waste minimisation in buildings. The BCA Green Mark scheme is an initiative to drive Singapore’s construction industry towards more environment-friendly buildings. It is intended to promote sustainability in the built environment and raise environmental awareness amongst developers, designers and builders when they start project conceptualisation and design, as well as during construction. The BCA Green Mark has give key assessment criteria looking at Energy Efficiency, Water Efficiency, Environmental Protection, Indoor Environmental Quality and Other Green Features. The rating system has four rating levels, namely, Certified, Gold, GoldPLUS and Platinum, each level corresponding to higher energy efficiency levels to be attained above the current building codes in Singapore. BCA Green Mark has criteria for new residential buildings, new non-residential buildings, existing buildings, office interiors, landed houses, new and existing parks, infrastructure and district. The BCA Green Mark for new buildings has also undergone several reviews to keep it relevant and with more stringent performance levels. The latest is currently the Green Mark version 4 that came into effect on 1 December 2010. 2.1 Inter-ministerial Committee on Sustainable Development (IMCSD) In 2008, a high level Inter-Ministerial Committee on Sustainable Development (IMCSD) was formed in Singapore. The Committee was co-chaired by the Minister for National Development, Mr Mah Bow Tan, and the Minister for the Environment and Water Resources, Dr Yaacob Ibrahim, and tasked to formulate a national framework and strategy for Singapore’s long-term sustainable development. Amongst the key recommendations made relating to the built environment were targets to have by 2030, 80% of all the buildings in Singapore attain at least the BCA Green Mark Certified level and the overall energy efficiency improve by 35% from the 2005 level. The policy instruments under the Green Building Masterplan were also formulated and aimed at achieving these targets set by the IMCSD by 2030. 2.2 Green Building Master Plan in Singapore To champion sustainability in the built environment, BCA formulated the Green Building Masterplan which focuses on new buildings, those undergoing major retrofitting, and existing building stock. The Master plan has six strategic thrusts shown in Figure 1. 2.3 Success of the Green Building Master Plan in Singapore Since the launch of the Green Building Masterplan, there has been a significant transformation in Singapore’s new building projects. From having only 17 Green Mark building projects each year in 2005 and 2006, the number increased to 96 in 2007, 120 in 2008 and now, a total of more than 500 Green Mark building projects in 2010. In terms of floor area, over 20 million square metres, or close to 10% of buildings, are now certified under the Green Mark scheme. One of the projects aim to achieve the above goals is to correlate carbon emissions and BCA’s Green Mark Criteria.

Figure 1. Six strategic thrusts under BCA’s Green Building Masterplan

3. Green Mark Criteria Carbon Scoping To ensure that BCA Green Building Master Plan achieves its objectives, BCA develops several research projects to enhance Green Mark’s capability to account and measure environmental benefits. One of the projects is the “Carbon Calculator for Green Mark”. The quantify the carbon emissions reduction of various BCA Green Mark criteria. This project allows BCA to understand if the intended carbon emission reduction from various criteria can be achieved. 3.1 Carbon Scoping GHG emissions include a variety of gases, such as carbon dioxide, methane, nitrogen oxide, sulphur hexafluoride and a range of HFCs, PFCs. The GHGs are released as a result of a number of activities. In the building context, these activities include primarily the combustion of fossil fuels for electricity or heat/cool energy generation and refrigerant gases. They also include those arising from indirect impacts such as those from material and water production. The Green Mark criteria recognises that sustainability addresses more emission and thus cover a range of environmental sustainability issues, some of which have little or no relevance to carbon emissions.environmental issues, the GM credit criteria will be carbon emissions. The scoping process will be carried out as follows: 1. Identify those credits which have a potential carbon impact.2. Determine the correlation between the credit criteria and carbon relevance (di3. Determine the significance of the impact carbon impact of the credit criteria (high or low

impact). Qualitative evaluation only. 4. Measurability. The scoping process will also qualitative assess the measurability at this

stage of the carbon emissions.

Collectively, undergoing this scoping exercise determine which are the credit criteria which are included and evaluated in this study. The next step after the scoping process is to identify the relevant equations to each of the relevant cre

. Six strategic thrusts under BCA’s Green Building Masterplan

Green Mark Criteria Carbon Scoping and Modeling

ensure that BCA Green Building Master Plan achieves its objectives, BCA develops several research projects to enhance Green Mark’s capability to account and measure environmental benefits. One of the projects is the “Carbon Calculator for Green Mark”. The quantify the carbon emissions reduction of various BCA Green Mark criteria. This project allows BCA to understand if the intended carbon emission reduction from various criteria can be

variety of gases, such as carbon dioxide, methane, nitrogen oxide, sulphur hexafluoride and a range of HFCs, PFCs. The GHGs are released as a result of a number of activities. In the building context, these activities include primarily the combustion of

ssil fuels for electricity or heat/cool energy generation and refrigerant gases. They also include those arising from indirect impacts such as those from material and water production.

The Green Mark criteria recognises that sustainability addresses more than just carbon emission and thus cover a range of environmental sustainability issues, some of which have little or no relevance to carbon emissions. As this study only relates to the carbon aspect of environmental issues, the GM credit criteria will be reviewed and scoped to those only related to carbon emissions. The scoping process will be carried out as follows:

Identify those credits which have a potential carbon impact. Determine the correlation between the credit criteria and carbon relevance (diDetermine the significance of the impact carbon impact of the credit criteria (high or low impact). Qualitative evaluation only. Measurability. The scoping process will also qualitative assess the measurability at this

n emissions.

Collectively, undergoing this scoping exercise determine which are the credit criteria which are included and evaluated in this study. The next step after the scoping process is to identify the relevant equations to each of the relevant credit criteria, and these include:

. Six strategic thrusts under BCA’s Green Building Masterplan

ensure that BCA Green Building Master Plan achieves its objectives, BCA develops several research projects to enhance Green Mark’s capability to account and measure environmental benefits. One of the projects is the “Carbon Calculator for Green Mark”. The project aims to quantify the carbon emissions reduction of various BCA Green Mark criteria. This project allows BCA to understand if the intended carbon emission reduction from various criteria can be

variety of gases, such as carbon dioxide, methane, nitrogen oxide, sulphur hexafluoride and a range of HFCs, PFCs. The GHGs are released as a result of a number of activities. In the building context, these activities include primarily the combustion of

ssil fuels for electricity or heat/cool energy generation and refrigerant gases. They also include those arising from indirect impacts such as those from material and water production.

than just carbon emission and thus cover a range of environmental sustainability issues, some of which have

As this study only relates to the carbon aspect of reviewed and scoped to those only related to

Determine the correlation between the credit criteria and carbon relevance (direct or indirect) Determine the significance of the impact carbon impact of the credit criteria (high or low

Measurability. The scoping process will also qualitative assess the measurability at this

Collectively, undergoing this scoping exercise determine which are the credit criteria which are included and evaluated in this study. The next step after the scoping process is to identify the

1. Identification of carbon relevant GM criteria: This first part of the scoping process will

essentially evaluate whether each of the credit criteria processes has any impact on carbon emissions. For example, External Thermal Transfer Value (ETTV) has an impact on the heat transfer to the building. This has an indirect impact on the air conditioning cooling energy and hence an impact on carbon emissions of the building. The process will go through all the GM credit criteria systematically and assess those which are deemed to have a carbon impact. Justifications for each of the criteria will be provided. (ETTV is an overall value that includes three basic components of heat gain through external wall and windows of a building, and these three components include heat conduction through opaque glass and glass windows, and solar radiation through glass windows).

2. Correlation of GM criteria to carbon emissions: Once the relevant credit criterion has been identified, the next step is to assess the correlation of the processes under each criteria and how they generate carbon emissions. Carbon emissions can arise directly as a result of the criteria activity itself or indirectly as a consequence of the activity. Consequential carbon emissions can also be from secondary impacts. The impact will thus be divided into three categories: Direct, indirect (level 1) and indirect (level 2).

3.2 Carbon Emissions Modeling Carbon emission model set boundary to factors that will be counted in carbon emission calculation. Existing carbon emission models in different countries use dissimilar models and methods for the carbon emissions calculations. According to the literature review for this project, carbon emission models can generally be classified into 3 categories: (1) Input-Output Economic Model (Top-Down); (2) Process Model (Bottom -Up); and (3) Hybrid (combination of two models).

3.2.1 Input-Output Models (Top-Down) The Input-Output Economic Model basically counts the whole annual economic activity of a country as a lump-sum revenue. The amount of revenue used on energy will be applied to determine the energy consumption per cost. A conversion factor will then be applied to the calculation to determine the carbon emission. This method was used in the article The Estimation of Life Cycle Energy Consumption and CO2 Emission of Office Building in Japan by Oka and Michiya. They estimated the total amount of domestic, imported, and exported products caused by construction of buildings such as steel, and concrete using the I/O Table of Japan published by the Research Committee of International Trade and Industry each year (Oka, Suzuki, & Kounya, 1993). The profit margin, transportation cost and storage cost are deducted. The cost spent on materials will be converted to cost per building area. The data will again be converted to CO2 per building area using fuel carbon emission. In Canada, carbon emission for business is limited by policy and high tax. Similar to the model from Japan, the revenue of construction is initially used in the calculation. However, the cost is swapped by a market-based policy instrument carbon permit system (Dissou, 2005). The revenue generated by carbon permit is calculated and converted to carbon emissions. In the United States, Economic Input-Output Life Cycle Assessment (EIO-LCA) method developed by the Green Design Institute at the Carnegie Mellon University also uses the input-output method to measure carbon emissions. They adopted the Japanese economic model and localize it for the commonwealth of Pennsylvania and the state of West Virginia. They composed different models for year 1992, 1997, 2002 using the United States Department of

Commerce Data. Analysis result will be displayed either in an excel file or on a webpage with specific industry sector and activity input.

3.2.2 Process Models (Bottom-Up) The Process Model calculates carbon emissions based on the flow of energy use and consumption pattern. The energy consumption includes energy use during construction, operation and maintenance, material production, extraction, and transportation. Energy consumption on water supply and wastewater treatment is also counted in this model. This model is more precise and detail-oriented compared to the I/O Model. Many of the countries use this model including the European Union, Israel, UAE, USA and UK. Process Model calculates carbon emission with diverse variables. The variables are categorized into General Building Information (building characteristics, occupancy, location, energy efficiency and construction methods), Building Energy Use (types of energy), Domestic Water (embodied energy of water, heating, and treatment methods), Landscape (vegetation, irrigation and water consumption), Transportation , Materials (embodied energy, transportation and lifecycle) and Solid Waste (treatment methods like recycling, reuse or landfill). These categories will be divided into sub-categories to determine the contribution of carbon in each activity. This model has precise assessment on carbon emission in different categories, and the scopes are closely related to Green Mark certification criteria’s, KU proposes to use Process Model for this project as it is comparatively more accurate than the I/O model. ürge-Vorsatz, Harvey, Mirasgedis, & Levine (2007) can be used to determine the breakdown of residential and commercial building energy use in the U.S., E.U. and Canada and incorproated into the process models. 3.2.3 Hybrid Models Hybrid Model is a combination of Economic Input-Output Model and Process Model. In this model, fuel consumption and its carbon emission calculation are commonly estimated by the Economic Input-Output Model, while carbon emission from other criteria’s such as materials and water are estimated by Process Model. 3.3 Life Cycle and Expectancy Life cycle impact has a huge component in addressing carbon emissions of a product used in a built environment. Different product has different life expectancy and thus they are replaced at the end of their lives. Each product has to be maintained throughout its life cycle. The replacement and maintenance will add additional carbon footprints to a built environment. Michiya & Oka (1998) developed a list of life expectancies of different construction-related products. The life expectancies can range from 15 to 25 years for roof, to 1.5 to 5 years to lighting systems.

4. Data Sources There are a few researches that provide existing data on carbon emission applicable to Singapore. LEED, green building certification in the US, provides some data on carbon emissions on their credit weighing tools while EPA in the US also provides data on carbon emission on hydrogen carbon fuels. However, these data are not complete and carbon emission on construction materials and transportation energy are not mentioned. In addition, the data

from the US may not be applicable to Singapore due to the geographic differences. In the UK, 2009 Guidelines to Defra / DECC's GHG Conversion Factors for Company Reporting by the Department for Environment Food, and Rural Affairs, and AEA for the Department of Energy and Climate Change provides data on transportation energy consumption in details. It also provides the carbon emission for electricity generation all over the world, including Singapore. The Inventory of Carbon & Energy (ICE) Version 1.6a by Hammond and Jones from the University of Bath provides all the carbon emission for most of the common construction materials. These two resources offer data on CH4, N2O, CO2, and VOCs emission which can be used to determine the carbon equivalent emissions. The Environment Protection Agency also provides data on carbon emissions relevant to the United States. To overcome the magnitude of work, carbon data will be adjusted to fit into the situations in Singapore.

5. Calculations and Models The methods and models that most calculators use to calculate the carbon footprint are usually not available even though there are many calculators developed and posted on the web. It is not a simple task to examine the relevance of these calculators to Singapore. As such, the research focuses on re-establishing the models from scratch using the following methods: 1. US: CTG Carbon Calculator (Mäkivierikko, 2009), National Institute of Standards and Technology’s BEES (Lippiat, 1999), Economic Input-Output and Life Cycle Analysis (Hendrickson et al, 2006) 2. UK: Regulations and Robust Low-Carbon Buildings (Tuohy, 2009) 3. Canada (Wastewater): Comparison of On-Site and Upstream Greenhouse Gas Emissions From Canadian Municipal (Sahely et al, 2006) 4. Methods from other existing calculators will also be taken from other calculators that can be applied in Singapore Carbon emission is classified into two kinds of emission-Direct, Indirect. Direct emission is calculations that are related to carbon emissions during combustion of hydrocarbon fuel, while indirect emission is calculation that are related to carbon emission during the production of electricity (United States Environmental Protection Agency, 2009). There are two levels for indirect carbon emission. Indirect (level 1) carbon emissions relate to the emissions generated as a result of a GM criteria, but where the emission occurs as a result of another process or outside the boundary of the building. One example will be provision of energy efficient lighting. This will save electrical energy of the building which will indirectly save carbon emissions at the power plant. Indirect (level 2) relates to those activities which has a secondary impact on another activity that has carbon relevance. The primary impact relates to other environmental variables, such as waste or water. One example of this is the ETTV criteria. The ETTV value has a primary impact on the heat transferred into the building. The secondary impact will be the impact on the level of air conditioning required to cool the internal environment. The level of air conditioning will have an impact on the electrical energy and ultimately the carbon emission level generated at a power plant. Another example may be installation of water leakage devices within the building. The primary impact of this is that it might potentially reduce the water consumption of the building. This may lead to a reduction of water consumption will reduce carbon emissions from the water production process.

6. Assessment of carbon impact of GM criteria

The next step in the scoping process is to assess the carbon emissions impact from each of the credit criteria. The impact will be assessed qualitatively at this stage, in terms of those that are deemed to have a high impact, medium and low impact. The impact represents the contribution of the carbon emissions towards the total carbon footprint of the building. Electricity usage for example, will be deemed a high impact while carbon footprint associated with water will be deemed a low impact criterion.

7. Measurability of the carbon impact As part of the scoping process, the criteria will also be evaluated in terms of its measurability at this stage. Because the carbon impacts are a result of direct and indirect processes, some will be difficult to quantify and measure. For example, providing bicycles to encourage occupants to cycle do not necessarily translate to an increase in cycling and therefore reduction in carbon emissions. The carbon savings will also depends on the residence location of the occupants. This is considered a difficult criterion to measure.

8. Proposed Framework for Models Development The carbon calculation methods contains the followings: (1) Data are adopted from the 2009 Guidelines to Defra/DECC’s GHG Conversion Factors for Company Reporting and The Inventory of Carbon & Energy (ICE) Version 1.6a as study found that these data are more relevant to Singapore (due to the inheritance of British practices in Singapore). In addition, carbon data from the United States will also be used as Singapore has imported most of its technologies from the United States; (2) The models are mainly adopted from the CTG Carbon Calculator and the carbon models are created using the Process Model. The economic level data is Singapore does not allow the project team to accurately estimate the breakdown of carbon emissions of different sectors (i.e. how much energy is used for different activities), however, the data and models need to be adjusted to fit the need in Singapore; (3) the carbon emission on water treatment data and the transportation fuel consumption will be worked out from the data that will be provided by the utility companies and transportation companies in Singapore. Water supply company and transportation agency in Singapore were contacted to provide the data.

9. Conclusion and Future Development The Ministerial guideline is translated into BCA’s Master Plan which in turn becomes the carbon calculator at the implementation level. The carbon calculator becomes a critical tool to relate the criteria with the benefits of carbon emissions reduction. The research project is the first step to prove that green building standards will eventually benefit the environment (in this case, the reduction of GHG helps reduce the impact on climate change). The project team is in progress of developing the calculator and it will be available in September 2011.

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measurement toolkit for the EU Ecolabel. The International Journal of Life Cycle Assess,

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CO2 Emissions in Canada: A General Equilibrium Analysis . Resource and Energy Economics, 27 , 187–207.

[4] Hendrickson, C. T., Lave, L. B., Matthews, H. S. (2006). Environmental Life Cycle Assessment of Goods and Services: An Input-Output Approach.

[5] Intergovernmental Panel on Climate Change. (1996). The Science of Climate Change. Cambridge, United Kingdom: Cambridge University Press.

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[7] Lippiatt, B.C. (1999). “Selecting cost-effective green building products: BEES approach”, ASCE Journal of Construction Engineering and Management, 125 (6), 448 -455.

[8] Mäkivierikko, A. (2009). CTG Carbon Calculator. Uppsala: Institutionen för informationsteknologi, Uppsala Universitet.

[9] Michiya, S., & Oka, T. (1998). Estimation of Life Cycle Energy Consumption and CO2 Emission of Office Buildings in Japan. Energy and Buildings, 28 , 33-41.

[10] Oka, T., Suzuki, M., & Kounya, T. (1993). The Estimation of Energy Consumption and Amount of Pollutants Due to the Construction of Buildings. Energy and Buildings, 19 , 303-311.

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Sustainable Innovations and its Routinization Sandeep Langar

Ph.D. Candidate Virginia Tech. United States slangar9@vt.edu

Annie R Pearce Assistant Professor Virginia Tech. United States apearce@vt.edu

Summary Sustainable Innovations has been defined as the process of developing new ideas, behavior, products, and processes that contribute toward reduction in environmental burdens. Over time the adoption of LEED has increased to the extent that it is gauged as one of the important measures of assessing and achieving sustainability of built facilities across the United States. Many state and public agencies require buildings to be LEED certified. A LEED Checklist is a bundle of sustainable innovations used by public sector owners working on such facilities for the first time. This research investigates whether sustainable innovations were routinized in future projects after their initial adoption. Routinization has been defined as the stage in which an innovation has become incorporated into the regular activities of the organization and has lost its separate identity. The LEED Version 2.2 was used as the measure for sustainability. The study sample was comprised of a group of public sector organizations from different parts of the country. Upon selection of sample, the LEED Checklists of all of the projects by the particular public sector organization were analyzed and the routinized credits were categorized. The results helped to establish that public sector organizations mostly tend to routinize credits used in the initial projects. The study further provides a possible explanation for the routinization of some credits over others and considers whether the process of routinization helped in achieving overarching organizational goals, i.e., increasing sustainability of the built environment.

Keywords: Innovation, Adoption, Routinization, Sustainability, LEED, Public sector

1. Introduction and Background Innovations have been defined in literature as “any practice or material artefact perceived to be new to the relevant adopting unit” [1-6]. Some researchers have also defined innovation as “the use of a non-trivial change and improvement in a process, product or system that is novel to the institution developing the change” [7-12]. For purposes of this paper, we shall assume the former definition as the baseline to evaluate an innovation. Furthermore, sustainable innovations have been defined in literature as “the process of developing new ideas, behavior, products, and processes that contribute to a reduction in environmental burdens or to ecologically specified sustainable targets” [13-14]. Hence, any process or product that can be categorized by even a few of the many attributes of innovation [3, 15-17] that bring about a change in how they are currently perceived can be considered a sustainable innovation. These innovations in products or processes initiate change in the Business As Usual (BAU) scenario of organizations ranging from nominal (often mentioned in literature as incremental) to radical [9, 18-19] change. The importance of incorporating sustainable innovations that change the BAU scenario of the Architecture, Engineering, and Construction (AEC) Industry has become critical, considering the negative impacts of the facilities not only on the economic wealth of the ecosystem as well as humans but also on the health of people associated with the facilities or any of its components throughout the lifecycle of the facilities [20-24]. The concept of incorporating sustainable innovations in the design

and construction of facilities has gained momentum over the past decade with the increase in the number of buildings that are LEED certified and with the increase in the members affiliated with the United States Green Building Council (USGBC) [25-26]. USGBC was created in 1993 as a non-profit organization whose primary mission has been to create awareness about the concept of sustainability and the use of sustainable materials within the AEC industry [23]. Since that time, it has evolved to serve as a major benchmark to gauge the sustainability of facilities in the United States. Many federal facilities and state governments have mandated Leadership in Energy and Environmental Design (LEED) certification for all their newly constructed facilities [27-28]. In this study, the credits under the LEED Version 2.2 rating system are considered to be sustainable innovations on the basis that decision makers must have perceived a change in the BAU scenario upon accomplishing these credits for the first time, thereby confirming the definition stated above. After some experience in working with the innovations, the owner decides to either adopt or reject the innovation [4]. The concept of incorporating an innovation is often termed as adoption and Rogers (2003) defines it as the decision to make use of an innovation as the best course of action. Consistent use of an innovation after adoption leads to routinization. Rogers (2003) often defines routinization as the process when the innovation loses its separate identity and becomes incorporated into the regular activities of the organization. For this study, we are observing if public sector owners routinize certain credits for the various facilities after the initial encounter with the sustainable innovation. There are suggestions in the existing literature that show the possibility of routinization of sustainable innovations is mainly driven by its potential benefits, federal requirements, social awareness and pressure, and availability of complimentary technological capabilities [27-29]. In order to identify routinization in this study, we will observe if public sector facility owners routinize LEED credits after the initial adoption. The rational for selecting public sector facility owners was that the US federal government has over 500,000 public facilities in its portfolio, and in the year 2008 it spent approximately 24 billion dollars on construction [30-32]. It would be easier to observe fluctuations in the process of routinization of certain LEED credits, if any. The next section talks about the methodological approach taken for the study. 2. Methodology The main aim of this research is to observe if routinization of sustainable innovations occurs after its adoption in initial projects, thereby allowing the researchers to identify the commonalities among multiple projects by the same owners. The sustainable innovations for this study are the LEED credits under Version 2.2, which are mostly responsible for changing the construction methods and operation techniques of facilities from the past. These innovations also offer means and methods for creating and operating built facilities that are environmentally and economically efficient. They also enhance the occupant’s quality of life. Figure 1 shows the overall methodology used for this research. For the purpose of this study the initial sample consisted of public sector organizations that had LEED certified projects within their portfolio as of the end of 2008. The major rational for selecting public sector owners was that most public sector owners have large portfolios with many facilities, and it is relatively easy to observe how they make the decision to adopt certain credits over others and eventually routinize them over time. Also, public sector owners have to incorporate sustainable innovations since they currently have to comply with procedures and policies mandated by federal and state law makers. The public sector owners shortlisted for this study are located all over the United States; however, there were certain constraints that helped refine the sample. The following constraints were used in the selection of the sample:

• All projects handled by any sample must be within the same geographic location • All projects handled by any single sample must lie in the same climatic zone • Availability of the LEED checklist for all the projects undertaken by the sample • The sample should have at least six certified projects in its portfolio by the end of 2008

Once the sample was able to get through the filter mentioned above, 28 projects from four different public sector owners were selected for the study. The four public sector organizations that fulfilled the established criteria and were selected for the study are the following:

• University of Florida, FL

• The City of Seattle, WA • Arizona State University, AZ • The City of Austin, TX

After finalizing the sample, the next step was to determine all sustainable innovations that had been routinized by each organization after their initial adoption. However, before the selection was conducted, the research team realized that not all projects handled by a single owner served the same purpose, and that each project fulfilled unique requirements. One such instance to demonstrate this phenomenon was when one such organization had initiated routinization of IEQ credit 8.2 (Views for 90% of the spaces). After successful routinization for a wide array of projects, the next project handled by the organization was a theater. As per the design guidelines for the theater, it is optimal to restrict use of lighting scenes as much as possible. Given that this particular innovation would be irrelevant it is implied that the owner would not need to apply or achieve this credit. The particular innovation for the project cannot be routinized. Thus, while calculating the routinized projects for an organization, the type of the structure was a major decision factor. Also, for this study we maintained the limit of 75% credits routinized for the entire array of executed projects This implies that any innovation consistently being used for over 75% of the projects within an organization shall be considered routinized. An observed break in the process of routinization was considered independent along the timeline axis. Another such factor was the prominent difference between calculating for the prerequisites and credits within the LEED Checklist. Prerequisite credits are mandatory for a project to be successfully LEED certified compared to normal credits. For this very reason they were separated at the very beginning of the routinized credit selection process. This also meant that all the pre-requisites were automatically routinized by the sample used in this study. After the level of routinization for each LEED credit had been determined across all the organizations, it was possible to sort the credits on the basis of owner-by-owner. The results of this analysis are presented next. 2.1 Results After careful analysis of the checklists, the results indicate that the process of routinization does occur eventually. In total we found 90 credits routinized by the four organizations, which did not include the prerequisites. The study also found that six credits were routinized by all of the

Figure: 1 Overall Methodological Approach for the study

Identification of research question Literature review

Selection of sample (Public sector organizations)

Short-listing of sample

Filter: 1 (Geographic, climatic, & project information)

Identification & analysis of checklist

Categorization of prerequisites and credits

Analysis and final result

organizations and thirteen credits were routinized by none of the organizations within the sample. The LEED Version 2.2 credits routinized by all of the organizations are shown in Table 1, while the Table 2 provides the list of credits that were routinized by none of the selected organizations.

Sustainable Sites (SS) SS Credit 1 Site Selection SS Credit 4.1 Alternative Transportation - Public Transportation Access SS Credit 4.2 Alternative Transportation - Bicycle Storage/Changing Rooms Material and Resources (MR) MR Credit 4.1 Recycled Content - 10% MR Credit 5.1 Regional Materials - 10% Indoor Environmental Quality (EQ) EQ Credit 4.3 Low–Emitting Materials - Paints & Coatings EQ Credit 7.1 Thermal Comfort – Design

Table 2: Credits that were routinized by none of the selected organizations

Sustainable Sites (SS) SS Credit 3 Brownfield Redevelopment Water Efficiency (WE) WE Credit 1.2 Water Efficient Landscaping, No Potable Use WE Credit 2 Innovative Wastewater Technologies Energy and Atmosphere (EA) EA Credit 1.3 - 1.5 Optimize Energy Performance (>24.5%/17.5%) EA Credit 2.1 - 2.3 Renewable Energy, 5-15% Material and Resources (MR) MR Credit 1.1 - 1.3 Building Reuse MR Credit 3.1 - 3.2 Materials Reuse - 5-10% MR Credit 6 Rapidly Renewable Materials MR Credit 7 Certified Wood Indoor Environmental Quality (EQ) EQ Credit 1 Outdoor Air Delivery Monitoring EQ Credit 2 Increased Ventilation EQ Credit 6.1 Controllability of Systems – Lighting EQ Credit 6.2 Controllability of Systems - Thermal Comfort EQ Credit 8.1 Day lighting & Views - Daylight 75% of Spaces In addition to the above, all of the prerequisites were treated separately, and it was observed that the rate of routinization was 100% since it is mandatory for all the buildings to adopt prerequisites in order to be certified. It can also be accounted for in that the process of routinization occurred due to the mandatory requirements of LEED certification, thus implying a reactive acceptance. The routinization of credits occurred due to the proactive acceptance of the credits when the owners were free to adopt and routinize credits based on their own needs. The next section presents an overall discussion and conclusion about the study. 2.2 Discussion and Conclusions One of the most obvious conclusions was that most of the sustainable innovations that were routinized were from products, which were prescriptive and incremental innovations in nature. A surprising observation was that most routinized innovations never offered any direct economic benefit to the owner. Owners might be motivated by the core mission of their organization to serve the greater good of the community. Also, facilities are expected to run for many years and so products with a long life-cycle could have been a preselected input. However, no such explanation can be related to the credits that had been rejected as we observe the credits to be either product-

Table 1: Credits routinized for all organizations

process, prescriptive-performance, or incremental-radical in nature. Another aspect that could not be explained was why water based innovative technologies were not routinized in certain projects from regions that face dearth of water. One of the areas for future research was to ascertain if product-process, direct-indirect economic and incremental-radical attributes of innovations have any influence on the routinization of sustainable innovations. Another interesting aspect would be to observe the categories to find which has the most reliable means of being achieved. It could be suggested that a particular category requires some sustainable innovations in the market in order to meet the requirements of being a sustainable facility. In addition to above, the study also observed a large number of credits not routinized within the category of Indoor Environmental Quality (IEQ). As a future study it would be interesting to observe the reasons underlying the rejection of these credits. The importance of this question is clear since most of the facilities studied had a certain amount of public interaction within the facility. However, one aspect that was clear was that LEED has been increasingly accepted and most of the credits are being routinized after their initial adoption. 2.3 References [1] CZEPIEL J.A., "Word-of-Mouth Processes in the Diffusion of a Major Technological Innova-

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teenth International Conference on Information Systems, 1992, Dallas, TX, pp. 195-206. [3] KOEBEL C.T., PAPADAKIS M., HUDSON E., and CAVELL M., “The Diffusion of Innovation

in the Residential Building Industry”, United States Department of Housing and Urban Devel-opment, 2003, Washington, DC.

[4] ROGERS E.M., Diffusion of Innovations, 5th Edition, Free Press, 2003, New York, NY. [5] HABETS M.J.M., VOORDIJK J.T., and VAN DER SIJDE P.C., “Adoption of Alternative

Transport Technologies in the Construction Industry”, 14th HTSF Conference, 2006, En-scheda, NL, 11-13 May.

[6] ATUN R.A. and SHERIDAN D., Innovation in Biopharmaceutical Industry, World Scientific Publishing Company, 2007, New Jersey, NJ.

[7] SCHMOOKLER J., "The Changing Efficiency of The American Economy, 1869-1938", The Review of Economics and Statistics, Vol. 34, No. 3, 1952, pp. 214-231.

[8] FREEMAN C. and SOETE L., The Economics of Industrial Revolution, 3rd Edition, Routledge, 1997, OX, UK.

[9] SLAUGHTER E.S., “Models of Construction Innovation”, Journal of Construction Engineering and Management, Vol. 124, No. 3, 1998, pp. 226-231.

[10] SLAUGHTER E.S., "Implementation of construction innovations", Building Research and Information, Vol. 28, No. 1, 2000, pp. 2-17.

[11] SEXTON M. and BARRETT P., "A literature synthesis of innovation in small construction firms: insights, ambiguities and questions", Journal of Construction Management and Eco-nomics, Vol. 21, No. 6, 2003, pp. 613-622.

[12] BLAYSE A.M. and MANLEY K., “Key Influences on Construction Innovation”, Journal of Construction Innovation: Information, Process, Management, Vol. 4, No. 3, 2004, 143-154.

[13] HELLSTROM T., "Dimensions of Environmentally Sustainable Innovation: the Structure of Eco-Innovation Concepts", Journal of Sustainable Development, Vol. 15, No. 3, 2007, pp.148-159.

[14] RENNINGS R., “Redefining innovation — eco-innovation research and the contribution from ecological economics”, Journal of Ecological Economics, Vol. 32, No. 2, 2000, pp. 319-332.

[15] ARDITI D., KALE S., and TANGKAR M., “Innovation in Construction Equipment and its flow into the Construction Industry”, Journal for Construction Engineering and Management, Vol. 123, No. 4, 1997, pp. 371-378.

[16] CAGAN T.A., ONER A., and BASOGLU N., "Factors Affecting Innovation Diffusion: The Case of Turkish Armed Forces", Proceedings of the PICMET Portland International Confer-ence on Management of Engineering and Technology, 2003, Portland, OR, 20-24 July.

[17] ABBOTT C., JEONG K., and ALLEN S., "The economic motivation for innovation in small construction companies", Journal for Construction Innovation: Information, Process, Man-agement, Vol. 6, No. 3, 2006, pp.187-196.

[18] ORLIKOWSKI W.J., “Radical and Incremental Innovations in Systems Development: An Em-pirical Investigation of Case Tools”, Center of Information Systems Research, Massachusetts Institute of Technology, 1991, Massachusetts, MA.

[19] MALE S. and STOCKS R., Competitive advantage in construction, Butterworth Heinemann Ltd., 1991, London, UK.

[20] PEARCE A.R. and VANEGAS J.A., "Defining Sustainability For Built Environment Systems: An Operational Framework”, International Journal of Environmental Technology and Man-agement, Vol. 2, No.1, 2002, pp. 94-113.

[21] SCHEUER C.W. and KEOLEIAN G.A., "Evaluation of LEED Using Life Cycle Assessment Methods", University of Michigan, 2002, Arbor, MI.

[22] WERNICK I.K. and AUSUBEL J.H., Industrial ecology: Some directions for research, Pre-publication draft, Program for the Human Environment, The Rockefeller University, 1995.

[23] KIBERT C.J., SENDZIMIR J., and GUY B.G., Construction Ecology: Nature as basis of green buildings, 1st Edition, Spoon Press, 2002, New York, NY.

[24] KRYGIEL E. and NIES B., Green BIM: Successful Sustainable Design with Building Infor-mation Modeling, 1st Edition, Wiley Publishing Inc., 2008, Indianapolis, IN.

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[27] BOSSINK B.A.G., "Managing Drivers of Innovation in Construction Networks", Journal of Construction Engineering and Management, Vol. 130, No. 3, 2004, pp. 337-345.

[28] DUBOSE J.R., BOSCH S.J., and PEARCE A.R., "Analysis of State-Wide Green Building Policies", Journal of Green Building, Vol. 2, No. 2, 2007, pp. 161-177.

[29] BLACKLEY D.M. and SHEPHARD E.M., "The Diffusion of Innovation in Home Building”, Journal of Housing Economics, Vol. 5, No. 4, 1996, pp. 303-322.

[30] GENERAL SERVICES ADMINISTRATION (GSA)., Sustainability Matters, General Services Administration, 2008, Washington, DC.

[31] CENSUS BUREAU., “Annual Value of Construction Put in Place 1993-2008”, 2008, <http://www.census.gov/const/C30/federal.pdf> (April 3rd, 2011).

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The role of environmental efficiency in Finnish real estate market – a market study

.

Anna Kyyhkynen M. Sc ( Arch.) Marketing Director and Green Building services Real Estate & ICT Consulting and Project Development Pöyry Finland Oy anna.kyyhkynen@poyry.com

Summary

The ecological footprint of buildings has been discussed in numerous arenas and sustainable development is seen as one of the crucial challenges in the field. Companies increasingly want to identify, understand, measure and reduce the environmental impact of their actions. A market study was carried out to gain valid and up-to-date information about the current and fu-ture trends, understand the diverse needs of various kinds of companies and learn about economi-cal valuation of environmentally efficient solutions in Finnish real estate market. The results of the study give insight into obstacles and drivers towards a greener and more sus-tainable future.

Keywords:Green building, environmental and energy efficiency, balanced sustainability, carbon footprint, green investments, environmental certifications,

Introduction Sustainability is the strongest driving force in real estate cluster today and market transformation towards more environmentally efficient products, services and operations is clearly taking place. Globally, a number of market studies have been carried out, but Finnish real estate market is not studied from sustainability point on view. A market study was carried out to gain valid and up-to-date information about the current and fu-ture trends, understand the diverse needs of various kinds of companies and learn about economi-cal valuation of environmentally efficient solutions in Finnish real estate market. Results are compared to similar Finnish study carried out in 2008 as well as international market studies. The results can be exploited when valid present state information from Finnish perspective is needed, future actions are planned and new business opportunities are developed.

1. Methods and material A market study was carried out to gain valid and up-to-date information about the current and fu-ture trends, understand the diverse needs of various kinds of companies and learn about economi-cal valuation of environmentally efficient solutions in Finnish real estate market. A web-based questionnaire was send to over 300 respondents in 2010. Respondents represented broadly both private companies and public organisations. 20% of the respondents were from the pubic sector and 80% from the private sector. The names and companies of the respondents were not published. The response rate was 20%. The respondents were divided into five different groups:

Users Owners Investors Environmental research and development (universities, research centers, consultants, etc) Construction material industry

This was the second Market study by Pöyry of this same topic. The first Market study was con-ducted in 2008. The themes for questions were collected based on questions raised in client feedbacks and current interest. The themes mentioned in the cover letter were:

Value of green buildings in real estate market Considering enviromental issues in real estate business Lifecycle efficiency in buildings Environmental ratings

The market study also included interviews of prominent delegates of the Finnish real estate inves-tors and owner sector to receive more accurate and detailed information and experience of dealing with green building issues. The study was a joint venture incorporating Pöyry’s specialists from environmental and real estate consultancy, architectural and project management departments The questionnaire was conducted with Digium data acquisition tool.

Respondents by role

32 %

31 %14 %

9 %

3 %

11 %

Real estate users (company's core business is not property investments or maintenance)

Real estate owners and property investors (properties are company's core business)

Contractors and developers

Real estate surveying, consulting, environmental studies & development (researchers, consultants etc.)

Technical engineering (HVACE, structural, architectural etc.)

Building products manufacturing

2. Results . The results of the study give insight into obstacles and drivers towards a greener and more sus-tainable future. The most often mentioned obstacles were stated to be uncertainties related to competences and doubt of sufficient return of investment. However, 45 % of the respondents don’t recognise any obstacles why environmental efficiency could not be significantly improved. The most important drivers for environmental efficiency were seen to be tightening legislation, raising energy costs and organisation’s brand and image improvements. From the respondents answers it was concluded that the general interest towards environmental issues has risen in recent years and will keep rising in the future. Also the demand for greener buildings has increased along with the demand to verify the actual benefits instead of giving vague estimations. In practice verifying means using a systematic tool to measure sustainability and efficiency.

1.1 The current and future trends

Biggest obstacles mentioned for implementing sustainability to buildings were insufficient return on investment (75% of respondents), lack on knowhow (75%) and client demand (62%). Weight of these obstacles were expected to decrease. Current drivers stated for implementing sustainability in to buildings were possibility to boost com-pany brand and image (20%), rising energy costs (18%), tightening regulations (16%), need to keep up with development (9%), to gain competitive edge (9%). Markable was that the investors saw the image benefits gained from sustainability to lessen in the future. Energy costs and tightening regulations were seen as important in the future. Investors will also expect better ROI to strengthen as a driver. Construction companies and developers saw the possibility to develop their own business and practices through sustainabilitity as the most important driver.

What are the tree most important drivers for Green in real estate and construction companies?

46 %

24 %

29 %

60 %

78 %

16 %

14 %

43 %

15 %

5 %

10 %

11 %

33 %

52 %

29 %

25 %

11 %

0 % 10 % 20 % 30 % 40 % 50 % 60 % 70 % 80 % 90 % 100 %

All respondents

Real estate users

Building productsmanufacturing

Real estate investors

Contractors and developers

Opportunity to develop/increase business Need to stay in the market

Personal will/ethics of key persons in the organisation Legislational obligation

1.2 Diverse needs of various kinds of companies

The study reveals different needs for different players. Also common interests were found. Energy efficiency, efficiency of use and maintenance, flexibility of spaces and closeness public transportation were seen as most important common drivers. Investors are looking for better ROI and asset value. They also want to engage tenants and increase rentability. Tenants on the other hand have demands for better indoor climate, seek for better image or have guidelines from head office to follow.

1.3 Ecolocical valuation

The bases for extra investments made for green building is a central topic among developers and users. What is the yield for these green investments? The first LEED certified building in Finland was finished in 2008, so there is not very wide data available yet on the subject. At the time of making the study the number for certified buildings was 11. Despite of this one fifth of the respondents had facts of gained added value. Half of the respondents had a feeling they had gained added value. One fourth felt that no extra value had resulted. In international surveys the subject has been studied and findings have been such that for instance the cost for LEED certification has been calculated to be around 2 % of building costs. This is in line with the result of Pöyry’s market study. Half of the investor respondents estimated the amount of green investments in a building project to be 3-5% and one third estimated it to be 1-3%. Considering the savings in energy, water and waste management made during 20 years time span the pay back time can be calculated to be only 4 years. In the first year the saving would be nearly 8,5€/sqm or 25% or the extra green investment. Half of the investors and consultants estimated the pay back time to be 5-10 years for the extra investments. According to the international study also saving can be detected from well-being of the occupants. Environmentally better buildings generate less sick days and boost productivity. In the market study the willingness to pay higher rent for green premises was embraced by half of the respondents. Lowering the rent would be justified if the maintenance cost were significantly lower. The green building indicators would seem to have effect also to the transaction process in which the environmental certificate and energy certificate were picked as most important

Compared to a traditional premises, how much higher rent you would be willing to pay for Green premises?

0-1 % more; 24 %

1-3 % more; 24 %3-5 % more; 29 %

5-10 % more; 5 %

> 10 % more; 5 %

On the contrary, less; 14 %

3. Discussion, conclusions and acknowledgements The green issues are fairly new to the real estate sector in Finland and thus the questions may have been difficult to answer if the subject is not familiar or the respondent does not have subjective experience on sustainable building projects or investments. The study can also be seen as a wishing well for the real estate sectors wake up to fight climate change. The results are showing rather what the parties are expecting of each other and their actions. Compared to the previous market study conducted by Pöyry in 2008 the attitudes have changed more favourable towards green building. Investors, builders and users have all much more knowledge and experience compared to two years back. The trend if getting stronger and stronger and the green building sector is expected to grow bigger every year. The tipping point of green building may still be ahead of us. We have not yet reached the point where the benefits or added value are presented with such guarantees that they would convince everybody. Much more time will be needed to gather data and experience of green buildings . The standards are rising all the time, what may be considered green now will be ‘normal’ in years to come. What the speed of this development is, is not known. What is acknowledged is the fact that energy prices will continue rising and we need to start monitoring consumption more accurately to change our consumer habits. Mechanisms to motivate the occupants to more energy efficient practices are on their way in form of Green office programs and Green lease models. Also the regulations will continue to tighten and emission caps to lower. Real estate sector sees green building issues strongly as an image issue although the weight of it was seen to decrease in the future as it will become more difficult to stand out as many other green projects evolve. Results can be compared to similar Finnish study carried out in 2008 as well as international mar-ket studies. The results can be exploited when valid present state information from Finnish per-spective is needed, future actions are planned and new business opportunities are developed.

A market study of this kind will be again conducted in 2012.

SB11 Helsinki Abstract and Paper Ref.Nr: 1658679 page 1

Thomas Schmitz -Günther Manager natureplus International Association for Sustainable Building and Living Germany Info@natureplus.org

Abstract

The labelling landscape. natureplus® – an ambitious pan-European initiative

Every construction activity encroaches upon the natural environment and is connected with the consumption of limited resources. Our responsibility towards future generations requires us to undertake every effort to reduce these encroachments to the lowest level possible and to limit our use of resources to a necessary minimum. For the building sector this means promoting the use and application of building products which help to minimize the consumption of fossil fuels and limited resources. If quality seals, test symbols and environmental labels represent proven instruments in ensuring quality standards on the one hand and in providing an orientation for consumers (and also building professionals) towards particular recognised goals on the other, then it would be reasonable to expect that internationally, a plethora of labels connected with the building sector would exist that are focussed upon and tailored to exactly these requirements and which attest that the certified products fulfil above average levels of performance in the three areas of sustainability: the Environment, health and functional quality. To be more precise, the environmental requirements should, above all, be focussed upon the conservation of limited resources and energy efficiency. The health-related requirements of building products should aim to provide a good level of indoor air quality, the avoidance of mould-growth problems and the use of harmful substances. The technical or functional quality requirements should ensure not only a good level of functional suitability and usability but also the durability and longevity of a product In reality, despite the large number of labels available in Europe, this is not the case. At the building products level, the statements of most of the currently available quality seals and environmental labels are limited to one or a maximum of two levels: in the main, quality seals concern themselves almost exclusively with the subject of technical quality and ignore the environmental and health aspects. Labels for substances harmful to the Environment as per ISO 14024 deal with the subject of (environmentally-) harmful substances and residential health and ignore the types of environmental requirements that arise from the subject matter. Environmental labels as per ISO 14024 concern themselves in the main with individual environmental requirements (e.g. the use of recycled raw materials) and assuming a comprehensive position on sustainability is not their aim. Even the Environmental Product Declaration (EPD) as per ISO 14025 lacks a steering effect – and that in terms of both consumer behaviour and product development. The most important reason is the lack of an evaluation: Every product can – and even should – possess such an environmental declaration. The presentation of such a declaration is not, for example, proof of particularly environmentally-friendly production but instead, as it is not dependent upon any sort of conditions, it can be awarded to even the “dirtiest“ manufacturer.

SB11 Helsinki Abstract and Paper Ref.Nr: 1658679 page 2

Environmental product declarations are not in a position to set best practice standards for the production processes and consequently dictate insufficient target objectives. There is however an environmental label which has been available for ten years that really does satisfy all the requirements that have been mentioned for a real and effective sustainability label for building products: natureplus®. It has gained recognition and support across Europe and has certified around 300 products with a total turnover of over 500 Mio. Euros. The natureplus®-Quality Label is awarded by an organisation in which trade associations and companies from the construction and building materials industries, architects and builder’s merchants are represented but which also includes advisory organisations, environmental organisations, trades unions and scientific institutes. In this way, all stakeholders take part in defining the sustainability criteria The natureplus®-Quality Label is classified as a Type 1 environmental label as per ISO 14024 and is valid across the whole of Europe according to uniform criteria. The pre-requirements for a product to be awarded the natureplus®-Quality Label are its especially high performance characteristics in terms of the environment, health and sustainability. The main focuses are on the protection of limited resources by the minimisation of the use of petrochemical substances, sustainable raw material extraction/harvesting, resource-efficient production methods and the longevity of the products. Therefore, building products made from renewable raw materials, raw materials which are unlimited in their availability or from secondary raw materials will be favoured for certification. An above average ecological performance, in the areas of the conservation of natural resources and energy efficiency in both the harvesting/extraction of resources and the production process, is the fundamental principle governing the awardance of the natureplus®-Quality Label. The natureplus®-Quality Label should serve a special role in protecting the Environment and the health of users and consumers. Therefore products certified with the natureplus®-Quality Label should offer an above average level of safety performance in respect to the dangers posed to the environment and health by chemicals. To this end, two exclusion lists have been compiled which stipulate substances which may not be used in certified products. For natureplus, the prevention or avoidance of negative influences on the interior room climate caused by building products is not the only issue. The strong accent on building products made from natural materials also makes it possible to benefit from the numerous positive characteristics of these natural products in improving indoor air quality. A minimum requirement for the awardance of the natureplus®-Quality Label is compliance with the requirements of the EU Building Products Regulations with respect to hygiene, health and environmental protection. In order that the products fulfill the much more stringent natureplus requirements, the emission levels of

- Volatile Organic Compounds (VOC, SVOC and formaldehyde) - Odours - Radioactivity - Dust particles and fibres

into the indoor air during the usage phase must be extremely low. The criteria for the natureplus® Eco-label, based upon scientific and reproducible standards and tests, are determined in a participative process by an independent commission and are freely accessible to the Public via the internet. The tests and examinations are performed by independent and scientifically competent external institutes. Based upon the information contained within the test report, an independent awardance body inspects and assesses whether the requirements have been complied with and awards the label. Thereby, all the corporate compliance requirements of ISO 14024 are fulfilled.

SB11 Helsinki Abstract and Paper Ref.Nr: 1658679 page 3

Full Text Version

The labelling landscape. natureplus® – an ambitious pan-European initiative

by Thomas Schmitz-Günther, Neckargemünd, Germany, natureplus manager

Every construction activity encroaches upon the natural environment and is connected with the consumption of limited resources. Our responsibility towards future generations requires us to undertake every effort to reduce these encroachments to the lowest level possible and to limit our use of resources to a necessary minimum. In view of the foreseeable exhaustion of the reserves of fossil fuels, for example, and the dangers to the earth’s climate, such an approach is the only possible means to ensure sustainable and socially equitable development. For the building sector this means promoting the use and application of building products which help to minimize the consumption of fossil fuels and limited resources. Energy-saving building methods and the avoidance of uncontrolled ventilation facilitates the accumulation of volatile chemical compounds in the interior air that are emitted by building products and the inventory contained within the building. This presents an avoidable danger to the health of the occupants. Also, the accretion of chemical contaminants (especially phthalates/plasticisers) from building products on house dust, the increasing use of biocides in everyday products and the dangers posed by mould growth due to negative product characteristics give rise for concern. An increasing proportion of the population are exhibiting reactions, such as allergies, to the negative health-related effects of these building products. If one considers building products from the viewpoint of sustainability, it is obvious that the qualitative features of these products – based upon the three classic pillars of sustainability (the environment, social aspects and the economy) – should fulfill three fundamental requirements: the Environment, health and functional quality. To be more precise, the environmental requirements should, above all, be focussed upon the conservation of limited resources and energy efficiency. The health-related requirements of building products should aim to provide a good level of indoor air quality, the avoidance of mould-growth problems and the use of harmful substances. The technical or functional quality requirements should ensure not only a good level of functional suitability and usability but also the durability and longevity of a product. Incidentally, these correspond in general terms with the requirements drafted in the new EU building product regulations. If we are all in agreement that quality seals, test symbols and environmental labels represent proven instruments in ensuring quality standards on the one hand and in providing an orientation for consumers (and also building professionals) towards particular recognised goals on the other, then it would be reasonable to expect that internationally, a plethora of labels connected with the building sector would exist that are focussed upon and tailored to exactly these requirements and which attest that the certified products fulfil above average levels of performance in these three areas of sustainability. In reality, at the building products level this is not the case. At the building (property) level there are a number of certification systems – for example LEED, BREAM, DGNB – which claim to reflect and satisfy all of these three dimensions of sustainability. Whether they will really be able to achieve this will not be commented upon here but there is room for doubt. At the building products level, the statements of most of the currently available quality seals and environmental labels are limited to one or a maximum of two levels: in the main, quality seals concern themselves almost exclusively with the subject of technical quality and ignore the environmental and health aspects. Labels for substances harmful to the Environment as per ISO 14024 deal with the subject of (environmentally-) harmful substances and residential

SB11 Helsinki Abstract and Paper Ref.Nr: 1658679 page 4

health and ignore the types of environmental requirements that arise from the subject matter. Environmental labels as per ISO 14024 concern themselves in the main with individual environmental requirements (e.g. the use of recycled raw materials) and assuming a comprehensive position on sustainability is not their aim. It should be noted: All these quality seals and environmental labels are reputable labels which, through external test and validation procedures, are in a position to attest a level of quality which exceeds the standard legal requirements. Despite this they are not in a position to provide real orientation on sustainability. The type of environmental declaration that claims to provide the best depiction of the environmental impact of a product, based upon a comprehensive and scientifically substantiated environmental assessment of the whole product life-cycle, is the EPD (Environmental Product Declaration) as per ISO 14025. The result has been that in a number of European countries, including Germany, very large sums of Public money have been invested in recording data for all product areas as well as promoting the integration of these data into environmental-construction simulation programs. The guiding influence or steering effect of such EPDs towards a culture of sustainable building is however disputed in the following text. This however is the central purpose of such environmental labels and declarations. Environmental labels (ISO 14024) and environmental declarations (ISO 14025) are intended to promote the selection and purchase of sustainable building materials by consumers and building professionals as well as private and public investors. At the same time, they are also designed to steer the manufacturer’s development activities towards sustainable production methods and products. However, the steering effect of most of the existing environmental labels (ISO 14024) is usually inadequate: The use of renewable resources and the conservation of resources are not made priorities. Instead, they concentrate on a limited range of product characteristics and thereby fail to demand or ensure a comprehensive level of product quality. They are also usually limited to individual countries. They are not able to harmonise sustainability and the Environment with the consumer’s health needs, as the single most important personal purchase criterion. They are often not credible because they are unduly influenced or financed by individual interest groups rather than a collective of all stakeholders. In terms of the directional guidance of the development of products, the example of the “Blauen Engels” (Blue Angel) (RAL UZ45) for (gloss-) paints has shown that in the past this environmental label has provoked product developments which have had a negative impact on the Environment and health. This was due to the fact that the primary objective was the reduction in use of certain chemical solvents. Industrial producers, under the guise of “solvent-free“ and „water-based“ products, then introduced another type of solvent which was less volatile and therefore did not fall within the standard definition. However, these high-boiling point solvents have the unpleasant characteristic of polluting the interior of buildings with emissions over a period of many years. Even the Environmental Product Declaration (EPD) as per ISO 14025 lacks a steering effect – and that in terms of both consumer behaviour and product development. The most important reason is the lack of an evaluation: Every product can – and even should – possess such an environmental declaration. The presentation of such a declaration is not, for example, proof of particularly environmentally-friendly production but instead, as it is not dependent upon any sort of conditions, it can be awarded to even the “dirtiest“ manufacturer. Environmental product declarations are not in a position to set best practice standards for the production processes and consequently dictate insufficient target objectives. It is possible for the manufacturer, based upon the underlying results of the environmental assessment, to identify potential areas for improvement, but there is no incentive to make changes as the declaration will be issued anyway, whether they are made or not. It is envisaged that the steering effect will come into force when used in a building and in the comparison of various products. This is however very seldom the case. Outside of small circles of experts, the

SB11 Helsinki Abstract and Paper Ref.Nr: 1658679 page 5

environmental declaration provides no orientation to influence consumer behaviour: To the lay-person the EPDs are unintelligible and for professionals they lack transparency. And so, the consumer is left confused and disorientated by the numerous building-related eco-labels which exist in certain countries in Europe and becomes disappointed with the informative value of the labels and fears a “Greenwashing-Effect“ – which is sadly often justified There is however an environmental label which has been available for ten years that really does satisfy all the requirements that have been mentioned for a real and effective sustainability label for building products: natureplus®. It has gained recognition and support across Europe and has certified around 300 products with a total turnover of over 500 Mio. Euros. The natureplus®-Quality Label is awarded by an organisation in which trade associations and companies from the construction and building materials industries, architects and builder’s merchants are represented but which also includes advisory organisations, environmental organisations, trades unions and scientific institutes. In this way, all stakeholders take part in defining the sustainability criteria. Its structure is linked to weighted voting rights which assures that none of the groups can dominate the awardance of the label no matter how numerous and well funded they are. The Association has its HQ in Heidelberg (Germany) and is represented in seven Western European countries and is expanding even further into South and Eastern Europe. The natureplus®-Quality Label is an award for building products which meet the highest standards of sustainability by exhibiting the best possible levels of quality in terms of the Environment, health and functionality. Only the best products in a particular product group are eligible for certification in order to act as an orientation for all building professionals and consumers towards the promotion of a culture of sustainable building. The natureplus®-Quality Label has anticipated the goals of the European Building Products Regulations: If in the future these regulations require evidence of the sustainable use of resources and of compliance with requirements in terms of the Environment and hygiene (= health-compatibility), the natureplus®-Quality Label already provides these proofs. This is gauged by natureplus according to criteria and requirements which, as a rule, far exceed the legal requirements and as a minimum comply in each case with the strictest recognised standards applicable. The award guidelines are subdivided into three hierarchies: The basic criteria (for all products), the award guidelines for product-groups and the award guidelines for specific products. All award guidelines consider the three requirements of health, environmental and functional compatibility. The award guidelines are developed on the basis of scientific perception and data and in a process of discussion and auditing with the manufacturers and external experts. The natureplus®-Quality Label is classified as a Type 1 environmental label as per ISO 14024 and is valid across the whole of Europe according to uniform criteria. The pre-requirements for a product to be awarded the natureplus®-Quality Label are its especially high performance characteristics in terms of the environment, health and sustainability. The main focuses are on the protection of limited resources by the minimisation of the use of petrochemical substances, sustainable raw material extraction/harvesting, resource-efficient production methods and the longevity of the products. Therefore, building products made from renewable raw materials, raw materials which are unlimited in their availability or from secondary raw materials will be favoured for certification. The manufacturer must make an exact declaration to natureplus of all input substances. The manufacturer must provide a proof of origin for all input materials. The sustainable use of natural resources must also be proven. Input materials must be selected so as to take due account of their impact on the functional suitability, environmental compatibility and health risks posed by the end-product in accordance with ecological best practises and current technical developments (state-of-the-art technologies). The proportion of renewable and/or environmentally-friendly resourced mineral raw materials (including water) in the products should be maximised. The use of petrochemical input

SB11 Helsinki Abstract and Paper Ref.Nr: 1658679 page 6

substances should be kept to the minimum level that is technically possible. As a rule, the proportion of renewable and mineral raw materials should not be less than 85 Mass% of the product. Products whose function is based upon petrochemical substances are not eligible for certification. Raw materials which are limited in their availability or which are very difficult or cost-intensive to harvest/extract should be replaced by environmentally-friendly, secondary raw materials whenever possible. An above average ecological performance, in the areas of the conservation of natural resources and energy efficiency in both the harvesting/extraction of resources and the production process, is the fundamental principle governing the awardance of the natureplus®-Quality Label. A product eligible for certification must exhibit a distinct, above-average performance in at least one of these areas and must not fall below the level of accepted comparative standards in the other areas. The manufacturer must provide suitable proof of compliance with these criteria. In order to obtain an objective measurement of the ecological performance of the certified products, natureplus uses the accepted scientific method of an environmental life-cycle analysis, which concentrates, above all, on the phase from the extraction/harvest of the raw materials up to the finished product (cradle-to-gate). This is the area in which the manufacturer can exert the greatest influence. natureplus has extended the standard measurement methods by the use of Benchmarks. These are above-average values for the individual effectivity factors/indicators which must be met by the product applying for certification. An example taken from the requirements for OSB-boards is shown below.

-----------Extract from natureplus guideline RL0203 OSB-Boards-----------

The product manufacturing process must comply with the following ecological indicators.

Test Parameters Limits Testing Method

Ecological indicators See T.Zelger , M.Gann, IBO: Final

Report “Ökologische Kennwerte von

Holz und Holzwerkstoffen in

Österreich“ (April 2002) und Frank

Werner, Hans-Jörg Althaus, Tina

Künniger, Klaus Richter EMPA,

Dübendorf und Niels Jungbluth

ESU-services, Uster: Life Cycle

Inventories of Wood as Fuel and

Construction Material, Data v 2.0,

ecoinvent report No.9 (September

2007)

Non-renewable energy sources [MJ/kg] 13

Global warming potential [kg CO2 equiv./ kg] 0.5*

Over-fertilization [kg Phosphate-equiv./ kg] 0.00035

Photo-smog [kg Ethylene- equiv./ kg] 0.00035

Acidification [kg SOx -equiv./ kg] 0.0025

* Without taking into account the level of carbon fixing (carbon sequestration) through wood growth. If just a single guideline limit is exceeded, it will be decided on a case by case basis if this is permissible in order to optimise the complete product manufacturing process. Additional indicators which are calculated within the framework of the test procedure are:

- Renewable energy sources [MJ/kg] - Ozone destruction potential [kg CFC-11 equiv./ kg] - Consumption or use of abiotic component resources [kg Sb eq./kg] - Global warming potential [kg CO2 equiv./ kg] taking into account the level of carbon

fixing (carbon sequestration) through wood growth -

-----------End----------

SB11 Helsinki Abstract and Paper Ref.Nr: 1658679 page 7

The natureplus®-Quality Label should serve a special role in protecting the environment and the health of users and consumers. Therefore products certified with the natureplus®-Quality Label should offer an above average level of safety performance in respect to the dangers posed to the environment and health by chemicals. To this end, two exclusion lists have been compiled which stipulate substances which may not be used in certified products. That covers substances which are prohibited or classified as carcinogenic, causing mutations or toxic to reproduction or classified as suspected of being carcinogenic, causing mutations or toxic to reproduction, toxic or sensitizing or classified as harmful to the environment. Furthermore, additional individual substances may be specified by natureplus as non-desirable due to their environmental and health dangers and which one would not expect to find in a certified product. In these lists of prohibited substances, the substances are named or reference is made to other lists in which they are specified. In addition to the substance proscriptions as a safeguard to health, the presence of which are of course investigated within the framework of the test procedure during the laboratory examinations should there be any indication or grounds for suspicion, the individual product level awardance guidelines also contain binding laboratory threshold limits for a diverse range of substances, especially for volatile organic compounds (VOC). A minimum requirement for the awardance of the natureplus®-Quality Label is compliance with the requirements of the EU Building Products Regulations with respect to hygiene, health and environmental protection. In order that the products fulfill the much more stringent natureplus requirements, the emission levels of

- Volatile Organic Compounds (VOC, SVOC and formaldehyde) - Odours - Radioactivity - Dust particles and fibres

into the indoor air during the usage phase must be extremely low. An example of the emissions testing requirements for OSB-Boards is shown below.

-----------Extract from natureplus guideline RL0203 OSB-Boards----------

Test Parameters Limits Testing Method Emissions: Chamber Process: natureplus-

Implementation regulation

Volatile Organic Compounds (VOC) µg/m³ DIN ISO 16000-6, DIN EN ISO 16000-9, DIN EN ISO 16000-11

VOC (VOC, VVOC, SVOC) classified in:

Regulation (EC) No. 1272/2008: Categories

Carc. 1A and 1B, Muta 1A and 1B, Repr. 1A and 1B; TRGS 905: K1, K2, M1, M2, R1, R2; IARC Groups 1 & 2A; DFG MAK-List III1, III2

n.m. 3 days after loading the testing chamber

Total Volatile Organic Compounds (TVOC) ≤ 3,000 3 d after loading the testing chamber

Total Volatile Organic Compounds (TVOC) ≤ 300 28 d after loading the testing chamber

Of which:

Total bicyclic Terpenes ≤ 200 28 d after loading the testing chamber

Total sensitising substances per MAK IV, BgVV-List Cat. A, TRGS 907

≤ 100 28 d after loading the testing chamber

SB11 Helsinki Abstract and Paper Ref.Nr: 1658679 page 8

Total VOC (VOC, VVOC, SVOC) classified in:

Regulation (EG) N0. 1272/2008: Categories Carc. 2, Muta 2, Repr. 2; TRGS 905: K3, M3, R3; IARC Group 2B; DFG MAK-List III3

≤ 50 28 d after loading the testing chamber

Total Aldehyde, C4-C11, acyclic, aliphatic ≤ 100 28 d after loading the testing chamber

Styrene ≤ 10 28 d after loading the testing chamber

Methylisothiazolinone (MIT) n.m. 28 d after loading the testing chamber

Benzaldehyde ≤ 20 28 d after loading the testing chamber

Total Volatile Organic Compounds (VOC) without non-identified compounds

≤ 100 28 d after loading the testing chamber

Total Semi-Volatile Organic Compounds (TSVOC) ≤ 100 28 d after loading the testing chamber

R-Value Value

≤ 1.0 28 d after loading the testing chamber

Formaldehyde

µg/m³

≤ 36 (2)

DIN EN 717-1, DIN ISO 16000-3

28 d after loading the testing chamber

Acetaldehyde µg/m³ DIN ISO 16000-3

≤ 36 (2)

28 d after loading the testing chamber

Monomer Isocyanate (3) µg/m³

n.m. 24 h after loading the testing chamber

Termination criteria:

The emissions test can be terminated 7 days after the test chamber has been loaded if the values measured at this time are lower than 50% of the 28-day threshold limits.

Odour/Smell Odour Intensity

VDA 270; 23°C

≤ 3 natureplus- Implementation

regulation "Odour/Smell Test", 6-stage scale, 24 hrs after loading the testing chamber

n.m. ... not measurable; Threshold limit: VOC 1 µg/m³, Isocyanate 1 µg/m³ (TDI, HDI) / 2 µg/m³ (MDI) (1) POP’s (Persistent Organic Pollutants) if suspected

(2) 36 µg/m³ = 0.03 ppm (3) If binding agents based upon polymer MDI (PMDI) have been employed

-----------End----------

SB11 Helsinki Abstract and Paper Ref.Nr: 1658679 page 9

In order to protect allergy-sufferers, a special declaration duty will be introduced. The product packaging should display a full declaration of the input materials listed, analogue to the EU-Cosmetic Regulations, according to the declining mass percentage and stating the place and country where the product was manufactured. If sensitizing input materials are used, there must be a note on the packaging indicating where more detailed information can be obtained. For natureplus, the prevention or avoidance of negative influences on the interior room climate caused by building products is not the only issue. The strong accent on building products made from natural materials also makes it possible to benefit from the numerous positive characteristics of these natural products in improving indoor air quality. This applies above all to their ability to temporarily absorb and later release air-borne moisture or moisture contained within building components through their capillary conductivity capacities without suffering any functional impairment. The building materials thereby contribute to a stabilisation of the interior room climate and a moisture balance. They act as moisture buffers and prevent the build-up and accumulation of moisture. Many of these products employ natural mechanisms to combat mould and prevent the development of mould-growth. natureplus also requires that the production processes for exemplary and certification-worthy products fulfil additional aspects of sustainability and ecological-responsibility: The production and assembly of the preliminary/intermediate products should be socially compatible. Compliance with the minimum standards of the International Labour Organisation (ILO) may be taken as an indication of the social compatibility of the production process. The product packaging should have the lowest possible impact upon the Environment. In the processing/installation of the certified product, compliance with the fundamentals of health and safety, in accordance with the EU-Health and Safety Directive 89/391/EEC and national health and safety regulations must be ensured. The criteria for the natureplus® Eco-label, based upon scientific and reproducible standards and tests, are determined in a participative process by an independent commission and are freely accessible to the Public via the internet. The tests and examinations are performed by independent and scientifically competent external institutes. Based upon the information contained within the test report, an independent awardance body inspects and assesses whether the requirements have been complied with and awards the label. Thereby, all the corporate compliance requirements of ISO 14024 are fulfilled. The natureplus®- Eco-label represents the most highly developed approach in Europe in objectively measuring the sustainability of building products in their entire complexity and so serves as an orientation for building professionals, consumers, manufacturers and the building industry – extending beyond national borders – towards the development of a culture of sustainability in the building sector.

World Sustainable Building Conference, 18 - 21 October, 2011 Helsinki, Finland

Full service energy efficient renovation business for Swedish single-family houses

Krushna Mahapatra Dept. of Engineering and Sus-tainable Development Mid Sweden University Sweden Krushna.mahapatra@miun.se

Leif Gustavsson, Linnaeus and Mid Sweden University, Sweden, leif.gustavsson@miun.se

Summary More than 80% of the Swedish single-family houses were built prior to 1977 when energy efficiency was introduced in the national building code. These houses are more than 30-40 years old and need renovation. This provides a unique opportunity for large-scale implementation of energy efficiency measures. However, there is a lack of business model to introduce full service energy efficiency renovation packages that include consulting, contract work, follow-up and financing. Under the Nordic project “Successful Sustainable Renovation Business for Single-Family Houses – SuccessFamilies”, we have conceptualized a new business model to offer such a full service package to the Swedish homeowners. The new business could be offered by existing construction/renovation companies in collaboration with energy auditors/building consultants and heating system retailers/installers. The business could be targeted to houses built during 1971-80 as the primary energy efficiency potential is significant in this segment. Especially houses that are on sale could be targeted because people usually do indoor renovation when they buy a house and therefore, they may be interested in energy efficient renovations. Banks may consider post renovation value of the newly-bought house based on planned renovation package from an entrepreneur to provide increased mortgage finance for renovation. Other options to improve energy efficient renovation of single family houses include tax subsidies, preferential loans and guarantee on energy or energy cost savings.

Keywords: Energy efficient renovation, Target group, single-family house, Sweden

1. Introduction In Sweden, 60% of the 145 TWh energy used in the residential and service sector in 2008 was for space heating and hot water purposes [1]. Of this 60%, about 42% was used by the 1.7 million single-family houses (actually “one- and two-family houses” according to Statistics Sweden). There is considerable potential to improve the energy efficiency of these existing houses, a large share of which was constructed in the 1960s and 1970s before energy efficiency was emphasized in the building codes in 1977. A public investigation reported that the final energy demand for heating and electricity in single-family house segment could be reduced by about 14 TWh under the period 2005-2020 [2]. However, the actual realization of this techno-economic potential depends on adoption of the energy efficiency measures by the end-users. More than 80% of Swedish single-family houses are more than 30 years old and majority of them need some renovation. Technical solutions exist for residential energy efficiency improvement and they can be cost effective if implemented during major renovation works [3, 4, 5, 6]. However, there is a substantial lack of business concepts for energy efficient renovation of single-family houses in Sweden and other Nordic countries. The renovation market is dominated by a craftsman based

World Sustainable Building Conference, 18 - 21 October, 2011 Helsinki, Finland

approach with individual solutions, traditional warehouses ”do-it-yourself-shops” and actors marketing single products. A package of measures are given less priority may be due to a lack of information, knowledge or awareness about the energy and non-energy benefits of such measures, or due to a lack of access to the capital cost involved. When several measures are sourced from different actors or companies, a homeowner faces the difficulty of coordinating the activities of number of actors and he/she has to take the risk and responsibility of construction and workplace regulations. Moreover, if there is some problem during or after renovation, if might be difficult to ascertain whose fault it is. To address these disadvantages of traditional individual solution renovation approach and to speed up the implementation of energy efficient renovation of single-family houses there is a great need for one-stop-shop business models where an overall contractor offers full-service renovation packages including consulting, independent energy audit, renovation work, follow-up (independent quality control and commissioning) and, financing. Recently, few such concepts have emerged in the Nordic countries. See Tommerup et al. [7] to know more about those concepts e.g. ENRA in Finland, JADARHUS Rehab in Norway, Energieffektiva Hus AB in Sweden, and Dong Energy Cleantech in Denmark. There seems to be a significant business potential for full service or one-stop-shop renovation concept. For example, in Sweden there are about 2 million single-family houses. If annually 1% of these houses i.e. about 20,000 houses would be renovated with an average investment cost of about 100 KSEK the total market potential would be 2000 million SEK. This is an extremely conservative estimate as the yearly market for renovation and extension of single family houses in Norway is approximately 38 Billion NOK [8]. In this paper we use a business model canvass [9] to analyze and develop a one-stop-shop business model to offer full-service renovation packages in Sweden. This will be an important source of information for companies planning to develop a one-stop-shop concept.

2. The one-stop-shop business model Every business explicitly or implicitly uses a business model which describes the rationale of how to create, deliver and capture value. In other words business model is a blueprint for a strategy to be implemented through organizational structures, processes and systems to deliver value to customers, entices customers to pay for value, and convert those payments to profit [9]. However, there are risks that a business model may not be successful due to inadequate planning and implementation, changing market conditions and policy framework, and lack of customer interest in the value proposition. A business model essentially has nine building blocks; Value proposition, customer segment, key activities, key partners, key resources, customer relationship, channels (communication, distribution and sales), Cost structure, and revenue stream. These building blocks can be analyzed using a “business model canvas” [9]. Such a canvas applied to the full service or one-stop-shop concept for energy efficient renovation of single-family houses in Sweden is depicted in Table 1. 2.1 Value proposition This building block explains the value offer of the business by answering which customer problems or needs the business seeks to solve or satisfy. An important aspect of the one-stop-shop business model is that a single actor is responsible to offer all relevant steps necessary for the energy efficient renovation of a building - from planning, over actual renovation to cleaning and maintenance of the installations as per contractual agreements. The value of such a model over traditional individual craftsman based renovations is that the homeowners get a professionally renovated house that reduces operating energy and maintenance costs, while they will avoid the trouble of coordinating a number of actors and the risks and responsibilities of construction and workplace regulations. A single entrepreneur means homeowners are more secure about where to turn when there is any problem during or after renovations. Furthermore, homeowners’ lack of knowledge, awareness, or access to energy efficiency measures will be lesser problem for them to

World Sustainable Building Conference, 18 - 21 October, 2011 Helsinki, Finland

implement such measures.

Value proposition 1. Offer all types of home renovation services, espe-

cially energy efficiency measures, to homeowners. 2. Single-point contact responsible for planning, design,

implementation and post-renovation service 3. Free-of-cost preliminary building examination/energy

audit report 4. Detailed energy analysis by independent agency for a

fee; Refunded or discounted if homeowners use the company service to renovate their house

5. Free of cost price estimation for the renovation work 6. Help to apply for subsidies and obtain construction

permissions 7. Coordinate with banks to facilitate mortgage financing 8. Fixed price for the total work as agreed in the con-

tract 9. Guarantee on the renovation work for two years 10. Free of cost information on energy efficient use of

the building

Customer segments 1. Target group: houses built before during 1970-

80 and heated with resistance heaters, but all houses in the need of renovation are of interest (mass market)

Key partners 1. Renovation company (service provider) 2. Energy auditor (partner) 3. Retailer of heating systems (partner)

Key resources 1. Physical: vehicles and machines usually available

with renovation firms, energy audit equipments with energy auditors

2. Human: skill and experience to attract customers, conduct proper energy audit, and to do quality reno-vation

3. Intellectual; softwares to conduct energy analysis, company reputation and database of condition of houses sold to attract customers)

4. Financial: to start and run a business

Key activities 1. Marketing to attract customers 2. Building examination and energy audit 3. Prepare renovation packages and show their

cost-benefits 4. Renovation of the building including purchase

of building products 5. Apply for subsidies and building regulations 6. Customer service 7. Post renovation commissioning 8. Information provision to the customers

Customer relationship 1. Dedicated personal assistance (house visit, email,

phone calls 2. Communities: Provide an online platform for custom-

ers to discuss with each other

Channels 1. Advertisement in newspapers and magazines,

home delivered fliers 2. Local area meetings 3. Interaction with energy auditors when house is

sold 4. Interaction with heating system retail-

ers/installers

Cost structure 1. Costs involved in traditional renovation (labour, mate-

rial, free of cost building examination etc.) 2. Marketing costs (advertisement, local meetings, hir-

ing new employees etc) 3. Cost for post-renovation commissioning and informa-

tion material 4. Companies can increase the use of their existing

resources (benefits of economies of scale)

Revenue stream 1. Payment from customers for renovation work 2. Commission from suppliers of building products

and heating systems

2.2 Customer segment The “customer segment” building block identifies the groups of people or organizations an enterprise aims to reach and serve; Mass market, niche market, and segmented, etc. The full service energy efficiency renovation concept could be available for all homeowners who need to renovate their houses. But, from the service provider point of view, it is important to target potential

Table 1. A business model canvas applied to full service or one-stop-shop concept for energy efficient renovation of single-family houses in Sweden (Based on [9])

World Sustainable Building Conference, 18 - 21 October, 2011 Helsinki, Finland

customers who might be more interested in the value proposition. Once a critical mass of such potential adopters is reached the diffusion process would be self-sustainable [10]. One such target group is the owners of houses that have large potential for energy efficiency improvements, which would make it easier for the service providers to show the cost effectiveness of the investments and thereby attract the potential customers. Hence, we analyze the energy efficiency potential of existing single-family houses of different construction year. The average final energy use for space heating and hot water purposes decreases with decreasing age of the Swedish single-family houses (Table 2). This suggests there is a significant potential to reduce final energy use of older buildings by renovating them to the energy standards of newer

houses. The largest potential might be in the houses built before 1960 as these houses have the highest per floor area final energy use and they constitute about 50% of the single-family houses. However, the final energy use reported in Table 2 is based on energy content of the fuel input for biomass or oil-based heating systems, while for electric or district heating system the estimation is based on actual use of electricity or district heat excluding conversion and distribution losses Joelsson [12] and Tommerup et al. [7] have concluded that the primary

energy use in an electric heated house from the 1970s could be reduced by about 70-80% with the implementation of energy efficiency measures in the building envelop and changes in the heating system. Maximum gain was from replacing the resistance heaters with a bedrock heat pump or connection to a district heating system. Hence, the primary energy efficiency potential of houses built after 1970, predominantly with electric heating systems, might be higher than that of the pre-1970 houses heated mostly with biomass or oil-based heating systems. The largest potential for primary energy efficiency could be with the houses from 1971-80 because the absolute number of houses with electric heating systems is highest from this period; 145000 houses have electric systems only and another 114000 houses have electricity and biomass system [11]. 2.2.1 Two types of customers among the owners of houses from 1971-80 From primary energy efficiency point of view, houses with electricity heating systems and built during 1971-80 could be targeted for introducing the full service energy efficiency renovation concept. However, there are two categories of homeowners among these types of houses: houses

that are on sale or recently sold/bought and houses where the owner has lived for many years. Two major differences are related to locating the potential houses to be renovated and financing for renovation. Statistics on houses sold in previous years show that majority of the houses being sold are built prior to 1941 or during 1971-80 (Fig. 1). For entrepreneurs of full service renovation, it might be easier to find such a house that needs to be renovated, if they collaborate with energy auditors/building consultants or

Table 2: Number of one- and two-dwelling houses (including agricultural property) from different construction periods and average final energy use for heating and hot water (kWh/m2) in those houses, 2008 [11].

Construction year Number houses (1000s)

Final energy use (kWh/m

2)

-1940 525 172

1941-1960 265 165

1961-1970 258 141

1971-1980 398 130

1981-1990 166 132

1991-2000 73 128

2000- 58 111

Fig. 1. Number of houses from different construction periods sold in Sweden in 1981, 2000, 2005 and 2008 [13]

0

4 000

8 000

12 000

16 000

-1940 1941-1950

1951-1960

1961-1970

1971-1980

1981-1990

1991-2000

2001 -

No

. o

f h

ou

ses s

old

Construction year

2008

2005

2000

1981

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real estate agents. These actors have first-hand information about the condition of the house on sale. Certified energy auditors issue energy declaration which is mandatory for houses sold in Sweden and real estate agents entrust building consultants to prepare building condition reports to attract potential house buyers. These energy auditors/building consultants have a unique opportunity to motivate the prospective buyers to go for energy efficient renovation as they are usually consulted by the prospective buyers to learn about the condition of the house. In contrast, it might be difficult to identify owners interested in renovation of house that are not on sale. One possibility is to use various forms of advertisement to inform the potential customers about the availability of the full service renovation packages and interested customers will contact the service provider.

People sell their house for various reasons, but a common reason is when homeowners reach the age of retirement and children have moved out. They may sale the house and move to apartments. This trend is reflected from Fig. 2, where homeowners more than 65 years old are most likely to sell a house. People of this age are less likely to have made energy efficiency investment if they had income constraints post-retirement and/or they did not expect to recoup the investment during their occupancy of the house [14, 15].

Buyers of single-family houses usually are young people who move from an apartment to start a family. This is reflected in Fig. 2, which shows that majority of the home buyers are below 36 years old. Studies have shown that homeowners of this age group were least likely to invest in new energy efficiency heating system or retrofit building envelope components [14, 15]. One reason could be that these young owners have less information and finance to make energy-related investment decisions, but the situation improves over time with increased awareness and income [16]. However, house buyers usually do indoor renovations, and therefore may be interested in energy efficient renovations. The most cost-effective way of financing energy efficient renovation is financing from banks by using the house as mortgage. The interest rate is one of the lowest among various borrowing options and homeowners can borrow up to 85% of the purchased/appraised value of the house. People who have recently bought a house are most likely to have borrowed up to this ceiling and therefore, may find it very difficult to avail mortgage finance to renovate their house. On the other hand, homeowners who have lived in a house for several years, it is likely that value of the house has increased and they may have paid back a portion of their mortgage. Hence, it may not be difficult for them to avail mortgage financing to renovate their houses. 2.3 Key partners In Sweden, the traditional small to medium size construction/renovation companies can and in some cases do carry out all types of renovations themselves or with help from other companies, but they usually do not do energy auditing or offer financing. These companies can offer the full service renovation packages in collaboration with energy auditors/building consultant and heating systems supplier. Energy auditors/building consultants are responsible to inspect the condition of the building, conduct energy analysis, and suggest packages of energy efficiency measures. They usually also have first hand information about the condition of the houses on sold. Certified energy auditors/building consultants cannot offer energy efficient renovation service as they are mandated to be independent of marketing building products and services. Heating system retailers or installers (vvs-företag/installatör in Swedish) can also be key partners as renovation of a typical house from the 1970s involves replacing electric heating system with other heating systems such

Fig. 2. Number of houses sold/bought by different age groups in 1981, 2000, 2005 and 2008 [13]

0

5,000

10,000

15,000

20,000

25,000

2008 2005 1993 1981 2008 2005 1993 1981

No

. o

f h

ou

ses

so

ld/b

ou

gh

t

Year of sale

Up to 35 yr 36-45 yr46-55 yr 56-65 yr>65 yr

Sold Bought

World Sustainable Building Conference, 18 - 21 October, 2011 Helsinki, Finland

heat pumps, pellet boilers or district heating system and may include a hydronic system for distribution of heat with the house. Homeowners interested to install a new heating system usually contact the heating system retailers/installers and this provides an opportunity for the heating system retailers/installers to discuss with the homeowners about the full service renovation possibilities. 2.4 Key activities

The key activities in the one-stop-shop business model include marketing to attract customers, coordinating activities of number of actors involved in the renovation process, energy audit/building examination, energy analysis, apply for subsidies and building permits, renovation of the building, post-renovation commissioning, consult banks to convince them about the benefits of financing the energy efficient renovation, and customer service. 2.5 Key resources A business requires several key resource or assets to do the activities needed to deliver the value proposition. Those resources can be physical, intellectual, human capital, or financial. For the full service renovation of single-family houses, the key physical resources include all that is required for conventional renovation, e.g. machines and equipment to carryout the renovation, and vehicles to transport goods and workers, telephone to reach customers etc. Additional physical resources required from the partner companies include supply of heating systems and equipment to conduct energy audit. The human resources include skilled and experienced workers to do proper energy audit and analysis, quality renovation, and offer good customer service. Intellectual resources include company reputation to attract customers (brand), softwares to conduct energy analysis and cost-benefit calculations (from energy auditors) and database of condition of houses sold (from energy auditors). Overall, the service provider needs financial resources to conduct the business, especially when homeowners make payments for the renovation work after the renovation is done. 2.6 Customer relationship Customer relationship is important to entice new customers and retain existing customers. Especially for renovation business it is important to attract new customers as people who have already renovated their house are very less likely to renovate the house again. Potential customers are likely to be influenced not only by the approach of the service provider, but also by the feedback of the people who have already renovated their house. If owners of houses that are renovated are not happy with customer service, they may pass on their negative experience to potential customer. Several categories of customer relationship (e.g. personal assistance, dedicated personal assistance, self-service, automated service etc.) may co-exist in a company’s relationship with its customers. Dedicated personal assistance represents the deepest and most intimate type of relationship. Such a relationship is common in conventional renovation business and is important for full service renovation concept also as homeowners may feel it easy and comfortable to contact one person among several people and companies involved in the renovation process, starting from home visit to understand homeowner needs to post-renovation commissioning for few years. Moreover, the service provider may provide an online platform for their customers to share experience and take help from each other. Such user communities are useful to expand customer base. 2.7 Channels There are several channels to communicate with the customer and deliver the value proposition. Homeowners in general could be informed about the full service renovation offer through advertisement in newspapers, magazines, and home delivered fliers. Especially, it could be effective to arrange local area meetings to interact directly with the homeowners as was done by the ENRA group in Finland and the energy company Jämtkraft in Sweden [17]. Presumptive owners’ of houses on sale or owners of recently bought houses could be reached through energy

World Sustainable Building Conference, 18 - 21 October, 2011 Helsinki, Finland

auditor as they are usually consulted by such homeowners before purchasing the house. Similarly, owners of houses interested to install a new heating system could be reached through the heating system retailers/installers. 2.8 Cost structure The full service renovation packages are intended to be offered by a consortium of existing companies. Since, such companies already possess the required resources to renovate a house there may not be any significant additional cost to offer full service renovation. In fact, there are benefits of economy of scale with increased use of the existing resources. However, for the service provider there will be a marketing cost to inform and attract customers, for example, costs for advertisements, local area meetings, and hiring new employees. There is a cost involved in the free-of-cost preliminary building examination and cost estimations for a package offer. These costs could be a significant burden if enough people do not use the company service to renovate their houses. Also, there are costs for dedicated customer service, post-renovation commissioning, and information material to educate the homeowners about operation and maintenance of the building.

2.9 Revenue stream The revenue stream building block represents the sources of cash a company generates from the business. The main source of income in the full service renovation model is the payment from the homeowners for the renovation work. The service provider may also earn commissions from the energy auditor/building consultants, heating system retailer/installers, and building product suppliers who can earn money from increased sale of their product of service.

3. Renovation process in the one-stop-shop model The renovation process of house according to the one-stop-shop model could differ between houses on sale and houses when people have lived for a long time. 3.1 Houses on sale

1. Homeowner contact real estate agent.

2. Real estate agent contact energy auditor (energy declaration mandatory in Sweden) and building consultant.

3. Energy audit report and building examination report is prepared and handed over to real es-tate agent.

4. Energy audit report and building examination report is made available to interested buyers.

5. Prior to actual sale of the house, building consultant discusses with the potential buyer about the energy audit report and building examination report. The consultant must have access to energy declaration, if the same is issued by a different company or expert.

6. The building consultant indicates the opportunities for a package offer to implement energy renovation and suggest several companies. If the potential buyer is positive to the offer, the consultant asks if it is OK that a company offering full service energy renovation of houses contact the buyer.

7. House is sold.

8. Service provider (construction/renovation company) contact the buyer and discusses the possibility of full service energy renovation of the house based on the energy declaration and building examination report.

9. Service provider, on its own cost, prepare a preliminary package offer according to the cus-tomer requirement. The offer should include the following.

a. Based on energy analysis of the current situation of the building and household, en-ergy saving and cost effectiveness of individual measures is estimated.

World Sustainable Building Conference, 18 - 21 October, 2011 Helsinki, Finland

b. Financier/real estate agent estimates the post-renovation value of the house, if the estimated measures will be implemented.

c. Service provider will indicate the investment cost of the planned measures.

d. Financing (based on the owner's existing banking relationships).

e. Cost-benefit analysis of the measures.

10. With positive response from the homeowner, the offer is refined and a detail workplan is prepared.

11. Contract signed with the homeowners; time-line, costs, guarantee, independent agency agreed by both parties to look into the renovation work, etc.

12. Service provider is responsible to implement the package offer according to the contract.

13. Final inspection of the renovation work by the independent agency.

14. Service provider provide information to homeowner about operation and maintenance of the building.

15. Homeowner pays to the Service provider.

16. Service provider makes regular visit to the house as part of post-renovation commissioning

3.2 Homeowners lived for long time in the house

1. Service provider advertises in mass/local media about their service, dispatch home-

delivered brochures highlighting benefits of energy efficient renovation, may arrange infor-mation meetings in specific areas

2. Homeowners interested in energy renovation contact service provider and discuss about the possibility of a package offer

Or service provider get contact details of potential customers from the energy audi-tor/building consultant or heating system retailer/installer and contact the homeowners to discuss about the possibility of a package offer

3. Service provider make a free of cost home visit for a preliminary building examination

4. If homeowners are willing to pay, a detailed energy audit/building examination by an inde-pendent agency is conducted. This fee may be returned to the homeowner if renovation service is taken from the service provider.

The rest of the steps are same as the steps 9 onwards for houses on sale

4. Conclusions Significant final energy efficiency potential exists in houses built before 1977, when a new building code with higher energy performance requirement of buildings was implemented. Primary energy efficiency potential mostly lies in the houses built during 1970-80, about 33% of which have electric heating systems only. These houses are more than 30 years old and needs to be renovated. This provides an opportunity for implementation of energy efficiency measures. To tap this opportunity there is a need for one-stop-shop business models where an overall contractor offers full-service renovation packages including consulting, independent energy audit, renovation work, follow-up (independent quality control and commissioning) and financing. We have proposed a business model where existing small to medium sized construction/renovation companies can collaborate with energy auditors/building consultants and heating system retailer/installers to offer full service energy efficiency renovation of single-family houses. There is significant business potential as the renovation market for single-family houses could be in the order of billions of Swedish Crowns per year. Homeowners will get an improved

World Sustainable Building Conference, 18 - 21 October, 2011 Helsinki, Finland

quality renovated house with little risk or responsibility which usually is the case with traditional renovations with individual solution, the energy cost will be reduced, market value of the house is likely to increase, mortgage banks will have a safer asset and there is societal benefits in terms of reduced energy use and greenhouse gas emission. However, the one-stop-shop business model for energy renovation of single-family houses is yet to establish. One major uncertainty with such a model is to find enough interested customers. Following suggestions may improve the situation. 1. Financing: The best option to finance energy efficiency renovation of single-family houses in

Sweden mortgage refinancing. However, the need to self-finance the amount not covered in the mortgage loan and a higher cost for the top loan (amount above 75-85% of the appraised value of a house) may not homeowners to go for energy efficiency renovation. This could be addressed if government provides soft loans or subsidies to cover the investment cost beyond the mortgage (base) loan. In some countries, e.g. Germany and Norway, there are preferential loans for energy efficient renovation of single-family houses.

Attention should be given to the limitation of mortgage financing for energy efficient renovation of recently bought houses. Banks should consider an energy efficient renovation plan prepared by an entrepreneur and pre-evaluate the post-renovation value of the house in collaboration with real estate agents. This valuation could form the basis for the bank to confirm the homeowner and the entrepreneur that certain amount of investment cost would be covered by mortgage refinancing. The rest may be covered by the government sponsored soft loan or investment subsidies.

2. Tax deduction linked to energy efficiency measures: From July 01, 2009 private persons in Sweden can get tax deduction (ROT program) amounting to 50% of the labour cost for specific repair, maintenance, renovation, or extension works in a single-family house or tenant-owned apartment. The maximum claim allowed is SEK 50000/person/year. This deduction can be combined with subsidies to replace resistance heaters or to decontaminate radon in single family houses. However, often this tax deduction is used for non-energy related measures such as improving kitchen, painting, a new or improved balcony, or house cleaning. An amendment to the tax deduction programs to incorporate specific requirements regarding energy efficiency of implemented measures may increase homeowners’ interest in energy efficient renovation.

3. Guarantee on energy savings: Annual energy cost is the most important factor in the homeowners’ decision to implement energy efficiency measures [14, 15]. Hence, a guarantee on energy or energy cost saving may encourage energy efficient renovation of houses. But, at present it is less likely that such guarantee will be given as the full service energy renovation concept is yet to be tested and not enough experience exists regarding energy savings potential in the context of varying household energy behaviour. However, such concepts exist for industrial and public buildings (the ESCO concept) and are emerging for residential buildings. It is possible that service providers may consider offering a guarantee on energy savings based on theoretical calculations.

5. References [1] STEM, ”Energy in Sweden 2009 [Energiläget 2009]”, ET 2009:28, Swedish Energy Agency,

Eskilstuna, Sweden, 2009. [2] SOU, “An energy-efficient Sweden. Interim report of the Energy Efficiency Inquiry [Ett

energieffektivare Sverige. Delbetänkande av Energieffektiviseringsutredningen]”, SOU 2008:25, Government of Sweden, 2008.

[3] LAUSTEN, J. “Energy efficiency requirements in buildings codes, energy efficiency policies for new buildings”, IEA Information paper in Support of the G8 Plan of Action, International Energy Agency, 2008, Web accessed at www.iea.org on March 09, 2010.

[4] NORRMAN, S. and JOHANSSON, P., “Energy conservation: economic evaluation of energy saving measures in homes Energihushållning: ekonomisk utvärdering av energisparåtgärder i småhus”, The National Board of Housing, Building and Planning, Karlskrona, Sweden, 1995.

World Sustainable Building Conference, 18 - 21 October, 2011 Helsinki, Finland

[5] GUSTAFSSON, S.-I. and KARLSSON, B., Profitable energy-saving measures in the 1960s apartment buildings [Lönsamma energisparåtgärder i 60-talets flerbostadshus]”, Report LiTH-IKP-R-727, Linköping Institute of Technology, Linköping, Sweden, 1997.

[6] ERLANDSSON, M. LEVIN, P. and MYHRE, L., “Energy and environmental consequences of an additional wall insulation of a dwelling”, Building and Environment, Vol. 32, No. 2, 1997, pp. 129-136.

[7] TOMMERUP, H., VANHOUTTEGHEM, L., SVENDSEN, S., MAHAPATRA, K., GUSTAVSSON, L., HAAVIK, T., AABREKK, S., PAIHO, S., and ALA-JUUSELA, M. “Analysis of promising sustainable renovation concepts”, Deliverable D1.2, Successful Sustainable Renovation Business for Single-Family Houses – SuccessFamilies, 2011.

[8] HAAVIK, T., AABREKK, S., TOMMERUP, H., SVENDSEN, S., MAHAPATRA, K., GUSTAVSSON, L., PAIHO, S., and ALA-JUUSELA, M., 2011. Report on stakeholders interests, Deliverable D2.1, Successful Sustainable Renovation Business for Single-Family Houses – SuccessFamilies, 2011.

[9] OSTERWALDER, A. and PIGNEUR, Y. Business Model Generation, John Wiley & Sons, New Jersey, 2010.

[10] ROGERS, E.M., “Diffusion of innovations”, The Free Press, New York, 2003. [11] STEM, “Energy statistics for one- and two-dwelling buildings in 2008 [Energistatistik för

småhus 2008]”, ES 2009:07, Swedish Energy Agency, 2009; email communication with Erik Marklund, Statistics Sweden, on October 23, 2009 for data for the years 1971-76 and 1977-80.

[12] JOELSSON, A., “Primary Energy Efficiency and CO2 Mitigation in Residential Buildings”, PhD Thesis 58, Mid Sweden University, Östersund, Sweden, 2008.

[13] SCB, “Number of houses sold in 1981, 1993, 2000, 2005 and 2008 [Antal sålda småhus 1981, 1993, 2000, 2005 och 2008]”, Statistics obtained through email communication with Martin Verhage, Statistics Sweden, November 18, 2009.

[14] MAHAPATRA, K. and GUSTAVSSON, L., “An adopter-centric approach to analyze the diffusion patterns of innovative residential heating systems in Sweden”, Energy Policy, Vol. 36, 2008, pp. 577–590.

[15] NAIR, G., GUSTAVSSON, L., MAHAPATRA, K., “Owners’ perception on the adoption of building envelope energy efficiency measures in Swedish detached houses”, Applied Energy, in Press.

[16] ISAKSSON, C. “Optimum heating and comfort: A knowledge overview on households’ relation to energy with focus on households’ choice and use of heating system in detached houses [Lagom varmt och bekvämt: En kunskapsöversikt over hushållens relation till energi med fokus på hushållens val och användning av uppvärmningssystem i småhus]”, Department of Technology and Social change, Linköping University, 2005.

[17] TOMMERUP, H., VANHOUTTEGHEM, L., SVENDSEN, S., MAHAPATRA, K., GUSTAVSSON, L., HAAVIK, T., AABREKK, S., PAIHO, S., and ALA-JUUSELA, M. “Existing sustainable renovation concepts”, Deliverable D1.1, Successful Sustainable Renovation Business for Single-Family Houses – SuccessFamilies, 2010.

Factors that have Influenced Education Sector Projects in NZ Since 2008

Jason Bretherton Manager, Mechanical & Electrical Engineering Christchurch Opus International Consultants, New Zealand jason.bretherton@opus.co.nz

Thomas Spencer, Opus International Consultants, New Zealand, Thomas.Spencer@Opus.co.nz Bruce Curtain, Opus International Consultants, New Zealand, Bruce.Curtain@Opus.co.nz

Summary Education building projects in New Zealand have included environmentally sustainable design features for a number of years, even without the ability to benchmark against local Greenstar® rating tools. The release of the rating tool has allowed a much more consistent and collaborative approach to the consideration of ESD features. This paper discusses a number of initiatives that are contributing to the increased adoption of sustainable design on education sector projects in NZ and introduces the principles employed by Opus in delivering these projects in a collaborative manner with our clients.

Keywords: NZGBC, Education, GreenStar® Rating Tool, Opus, New Zealand

1. Introduction Following the formation of the New Zealand Green Building Council (NZGBC) in 2006, the NZGBC [1] released the GreenStar® Education Pilot Rating Tool in December 2008 to encourage the construction of sustainable buildings in the education sector. Opus International Consultants Ltd (Opus) was a key contributor to the development of the Education Rating Tool, and has also been actively involved in the development of tools for other industry sectors. The Tool was, and is, intended to provide assistance to building and site designers in making sustainable choices. It covers a number of aspects that aid a holistic approach to sustainability, so that while things like energy efficiency of services are included, and weighted to reflect an appropriate level of importance, other aspects of design, such as usability and occupant comfort, are not overlooked. Through the application of the rating tools on projects, NZGBC allows buildings to be assessed and, if specific criteria are achieved, the project becomes GreenStar® certified. Through this process the project can receive wider recognition and accolades through the promotion of best practice in design. This process further encourages the adoption and implementation of the GreenStar® initiatives on other projects. Opus has delivered many projects in the education sector, including several new schools and a number of rebuilds and refurbishments. Sustainability has played an important role in all of these projects, as the funding model used by the Ministry of Education in NZ allows an additional contribution to be made for the adoption and implementation of GreenStar® principles. Some of

the projects have progressed towards attaining a formal GreenStar® certification. Even where the full process of certification has not been universally adopted, the principles are well integrated into the decision making process on all projects. This has resulted in more efficient buildings that reduce the impact on the environment, have improved functionality, and positively affect the health and comfort of building occupants. This paper discusses the push for sustainability in schools in New Zealand, demonstrated though recent projects, and looks at the influence of the GreenStar® rating tool on sustainable school building solutions. The primary outcomes and benefits from sustainable design and high performance schools include higher academic achievement, increased average daily attendance, lower operation costs, improved teacher satisfaction and retention, decreased liability, and reduced environmental impacts.

2. Government Sustainability Initiatives 2.1 Central Government The NZ Government has implemented a series of sustainability goals that extended to all state organisations, including the Ministry of Education. Key actions over the 2007/08 year included: implementing waste recycling and composting in the Ministry’s Wellington-based operations and completing a first waste audit. Recycling at the national office extends to cover computers, phones, surplus furniture and fluorescent light bulbs. Options for the Ministry’s regions continue to be examined for similar schemes where the availability of external services to support recycling is in many cases limited. developing a carbon emissions inventory and plan as part of the Ministry’s involvement in the Carbon Neutral Public Service programme introducing a series of electricity saving measures for all ministry offices and staff information gathering and analysis on volumes and patterns of travel to inform policy and decision-making, and greater use of the ministry’s 36 video-conferencing facilities amending contracting and procurement policies to include sustainability clauses using monitoring and benchmarking software to capture, record and compare energy use information for the majority of ministry sites. [2] 2.2 Ministry of Education All building works at schools required the integration of Environmentally Sustainable Design. Prior to the release of the NZ GreenStar® Pilot Rating Tool, international best practice was used as the benchmark including (Australia) GreenStar®, (US) LEED, and (UK) BREAM. The base building design was provisioned using an applicable market rate for building construction in the area ($/m2). An additional 10% funding was also available for including ESD features in the concept design. A checklist was used to assess the benefits provided by the ESD features and there was encouragement to include a range of features rather than simply focussing on one particular area, such as energy usage. With the formal release of the GreenStar® rating tool, the objectives became more defined – requiring all significant building projects to ideally achieve a 5 star rating. The release of the tool allowed a more consistent approach to evaluating ESD featured proposed by building designers, and ensuring that best value was provided for the project within the required funding constraints. Smaller projects are led by the individual school Board of Trustees (BoT) and generally involve building replacement projects and site redevelopments. The final decision on the amount of ESD features to be included are governed by the BoT but there is generally a requirement to ensure that the building design includes some ESD features to attract the additional funding.

3. Project Procurement Models Funding for new school buildings and/or building replacement is allocated based on a simple cost per square metre of building footprint. The rate varies according to the use of the building (i.e. a science laboratory attracts a higher rate compared to a standard classroom). In line with government initiatives, there is the additional 10% funding limit available to enable sustainable design building principles to be integrated into the project. Two procurement models currently dominate for the delivery of new build projects released by the Ministry of Education in NZ. Model Description/Comments Traditional • Design by Architect & Consultant Team, including quantity surveying

(project costing) • Construction by Contractor team • Independent Project Manager Appointed by the Ministry

Design Build - GMP • Design and Construction team led by contractor (architect, consultants, QS, PM)

• Project delivered to Guaranteed Maximum Price Budget that is confirmed following Preliminary design phase.

• Independent Project Manager and Quantity Surveyor also appointed by Ministry

4. Opus’ Contribution 4.1 About Opus Opus International Consultants is New Zealand’s largest and longest established professional services consultancy for the provision and design of roads, buildings, airports water and wastewater, and other infrastructure. Our resource base consists of engineers, architects, environmental planners, project managers and asset management consultants. Opus is at the forefront of building and infrastructure development in NZ, and has grown to build up significant presence in Australia, UK and Canada. Opus is a key contributor to the NZ Green Building Council (NZGBC) and has assisted with the development of a number of rating tools now deployed. 4.2 Sustainability in Opus Opus is committed to delivering on all of the four sustainability wellbeing’s - Economic, Environmental, Social and Cultural - that are enshrined in the Opus Sustainability Policy. We aim to balance these wellbeing’s against each other to ensure our projects meet our client’s needs in all of those four areas now and in the future. We have a team of people dedicated to ensuring sustainability is at the core of all of our design and engineering disciplines in NZ and overseas. As a demonstration of our company ethic to being sustainable in the way we work, rather than to just design sustainably, we are a member of the Sustainable Business Network and also the Green Building Council. We are committed to training Green Star Accredited Professionals within our organisation and also have people involved with the creation of a number of the Green Star Tools. Our expertise now extends to being able to provide accredited carbon emissions testing. One of Opus’ core philosophies is to keep at the forefront of sustainability. Integrating environmental and social considerations into our delivery of professional services in achieving

best-practice sustainable solutions that meet or exceed environmental standards. This approach has allowed us to deliver a number of award winning projects and projects that either achieve or are aligned with the Greenstar® system. Opus International, as a multi-disciplinary organisation, are able to bring to bear a large variety of expertise to projects, with sustainable approaches not just from Architecture but also in specialised fields such as Mechanical and Electrical engineering, Structural Engineering, Environmental Sciences and even extending to our Research & Design labs around New Zealand. That variety of expertise and our core sustainable approach to projects is what allows Opus to deliver successful projects such as those mentioned in this paper. 4.3 ESD Principles in our Project Work Recent projects always incorporate sustainable design features and principles wherever practicable within the constraints of the project budget. These projects have added value in terms of improved environmental quality, and reduced ongoing operating and maintenance costs. Some of the sustainable design features incorporated in our projects have included the following: • Use of locally manufactured materials. • Use of materials with low embodied energy. • Use of materials with low life cycle energy demands. • Use of low toxicity materials and production methods. • Optimising natural ventilation and lighting. • Double-glazing and energy efficient glazing. • High levels of insulation. • Low energy light fittings and intelligent controls. • Building Management Systems (BMS) to maximise efficiency of HVAC and power

consumption. • Use of re-cycled and approved Green Build materials wherever practicable. • Heat recovery units and associated systems. • Storm water collection and re-use. • Waste management during construction and post occupation. • Alternative energy sources (solar water heating, wind generation & photovoltaics).

5. Projects Delivered Significant education projects recently delivered or currently underway by the Opus design team include: Project Name

Completion Date

Project Budget

Description/Comments ESD benchmark

Wilson Special Needs School

2008 $5M New school on Greenfield site Traditional Procurement

Prior to GreenStar® tool

Clearview Primary School

February 2010

$10M New school on Greenfield site Design Build - GMP

GreenStar® Education Checklist

Wanaka Primary School

September 2010

$19M Relocation of existing school to new Greenfield site Design Build - GMP

Greenstar® Education Checklist

Porirua College

Mid 2011 $18.5M Refurbishment and redevelopment of existing school Reuse of existing buildings – Stage 1 New building construction – Stage 2 Traditional Procurement

GreenStar® 5

Kapi-Mana Special Needs School

Late 2011 $6M New school on Greenfield site Traditional Procurement

GreenStar® 5

Lyttelton Main

Mid 2012 $2.8M Rebuilding / redevelopment of existing school Traditional Procurement

No specific rating but modelled on

Heretaunga College

Refurbishment of existing school Traditional Procurement

6. Benefits Provided Significant benefits are provided through the delivery of sustainable building projects. These can be categorised into tangible (where the benefits are real and measurable) and intangible (where the benefits are more subjective) 6.1 Tangible benefits • Greenstar® Rating – enables benchmarking of design achievements. The project may also

receive wider recognition and accolades through the promotion of best practice in design. This provides significant marketing collateral for the design and construction team and encourages the adoption of Greenstar® initiatives on other projects.

• Improved building performance – improved environment for users in all ambient conditions. • Increased productivity and performance for building users [3]:

o Higher academic achievement levels o Increased attendance levels o Reduced operational costs o Reduced liability o Reduced environmental impacts

6.2 Intangible Benefits • A greater level of sustainability awareness by all stakeholders, particularly building users

results from the inclusion, and visibility of sustainable design features provides an improved interior environment and “feel good” factor

• Sustainable features can be used as a training medium by staff/teachers to educate students/pupils and rein-force sustainable principles

• Increased opportunity for designers and facilities managers to capture the benefits of environmentally sustainable design

7. Further Opportunities 7.1 Decision Making Around Capital Investment Justification of design decisions using whole of life, not just lowest capital cost is a concept that Opus has been lobbying for some years, particularly on refurbishment and upgrade projects that are administered by school BoTs. Funding is allocated to schools based on a 5-year cycle and there is a strong desire to maximise the contribution towards educational activities rather than building maintenance. The justification of project decisions based on lifecycle costs, and payback periods has in many cases influenced the decision by the school BoT resulting in a more long term focus being applied to capital investment, with a better outcome being delivered. 7.2 Integrated Design The process of integrated design is encouraged and embraced through sustainable design. In

addition to sound material choice and construction methods, there is greater emphasis on the building services and internal environment. In order to ensure the best outcome, the design team and stakeholders integrate early in the process to ensure that all issues and constraints are properly addressed 7.3 Operations and Maintenance Designing for operations and maintenance of building equipment is an important consideration and one that is often overlooked. Much of the equipment installed within the building will require maintenance of replacement several times over the life of the building. The designer must ensure that appropriate consideration has been given to allow this to occur, without causing significant disruption to the building operations or compromising structural integrity 7.4 Softlandings Soft Landings [4] means designers and constructors staying involved with buildings beyond practical completion. This will assist the client during the first months of operation and beyond, to help fine-tune and de-bug the systems, and ensure the occupiers understand how to control and best use their buildings – as promoted in NZ by the NZGBC. There is also significant opportunity available in the education sector for this to occur and harness the learning opportunities for students/pupils. Opus is a strong advocate for this process and is pushing for continued engagement with clients and stakeholders following project completion and occupancy.

8. Conclusions 1. The development and release of the GreenStar® rating tool for the education sector in NZ has

had a significant impact on the delivery of projects. Through the increased awareness of ESD and the additional funding available most, if not all projects have successfully received additional budget to include performance enhancing features as part of the design.

2. Opus has been a key contributor to the development of the Greenstar® rating tools and drives

the inclusion of ESD on all projects, working collaboratively with our clients to ensure that the best outcome can be achieved within the available funding limits.

3. The delivery of sustainable building projects in NZ has resulted in a significant improvement in

the buildings delivered. This has enabled improved long term performance for the buildings and the users.

4. There remains a number of further opportunities to enable NZ (particularly the education sector)

to fully embrace sustainable building and maximise the potential benefits and delivery of truly successful outcomes that will contribute to increased building performance long term.

9. References [1] New Zealand Green Building Council, NZGBC.

http://www.nzgbc.org.nz/ [2] Ministry of Education Annual Report, Part 2 = The way we work, 2008

www.minedu.govt.nz/~/media/MinEdu/Files/TheMinistry/AnnualReport/2008/AnnualReport082.pdf

[3] Benefits of high performance schools http://www.chps.net/dev/Drupal/node/48 [4] Soft landings Framework www.softlandings.org.uk

Assessing the state of existing residential real estate – developing, piloting and results. – Tila-arviointi.

Jani Saarinen M. Sc. MD Suomen Talokeskus Oy Finland jani.saarinen@ talokeskus.fi

Tapio Karhu M. Sc. Student Technical University of Tampere Finland tapio.karhu@ talokeskus.fi

Summary This presentation details the new concept of the complete assessment of existing residential real estate. The concept is founded on 1) the evaluation of existing operations and management, 2) progressive assessment and 3) benchmarking. Assessment can be verified as an environmental certificate through a third party, valid without renewal for 3 years, although the assessment criteria are supposed to be available for self-assessment. The goal of this concept is to combine existing real estate information into a single A4 using graph. This concept is TALOKESKUS’s opening line for discussion: How to simplify and guide the complex field of sustainability among existing buildings and reduce the gap between those few environmentally certified buildings and the grey mass.

Keywords: Assessing existing residential real estate, sustainable building, benchmarking, EFQM, BAT

1. Introduction This concept is a product of the master’s thesis work of Tapio Karhu, with the support of a 7-member guidance team. The goal of the master’s thesis work has been developing wide-ranging evaluation, which gathers together the BAT of existing operational practices and benchmarks the metrics of existing residential building. The assessed topics include: User Safety and healthiness Energy efficiency Environmental effects Economy Technical state of the building and systems Surroundings Innovations and development of the evaluation system The objective of this project has not only been to assess the performance of buildings through metered performance, but also through the applied operating tools. Progressive assessment tightens towards high evaluation scores. Therefore in order to obtain only moderate results and guidelines for future development assessment can be reduced. Similar progressive assessment is used in the EFQM-model, which is used to evaluate the excellence of business organisations. The EFQM-model is also available for self-assessment. The other cornerstone is benchmarking. Suomen Talokeskus Oy has a long history of benchmarking energy efficiency and metering though the Tampuuri database. Benchmarking and

the entire assessment are designed for performance on a web-interface in the database. Two of the company’s areas of expertise are consumption monitoring and the technical assessment of real estate. The Tampuuri-database already contains up to date energy consumption measurements on over 7,000 real estate units. 300 criteria from seven widely used certificates and evaluations are brought together to form the basis for the work. Also, legislation, European standards and EU directives have been taken into account.

2. Background It can be roughly estimated from available statistics that 0.2-0.6 % of Finland’s annual greenhouse gas emissions are from new (1 year old) buildings. In contrast, 23-31 % GHG emissions are from existing old buildings. [1] There are over 2 million real estate units in Finland and only a small portion of these are professionally assessed*. Fewer than 100 are environmentally certified through LEED, BREEAM, etc. *Assessed: technical assessment, energy assessment, long-term management plan made, etc. Therefore, it is important to give guidance and support in sustainable maintenance and management. The concept has been developed from widely used criteria. In the preliminary work, slightly less than 300 criteria are gathered from the following:

LEED – Existing Buildings O&M 2009 BREEAM, Multi-residential 2008 DGNB, New Construction Office and Administration, ver. 2008 SBTool 2007, narrowed to existing residential building BOMA 360 Performance Program Code for Sustainable Homes

Also PromisE and Miljöbyggnad are studied, but not in the gathered criteria list. The guidance team of seven members has chosen the most important criteria of about 100, and more have been taken in account. The gathered criteria are compared to Finnish work methodology. A surprising result was that when professional assessments are completed, most of the gathered criteria are taken in consideration.

3. Concept – Tila-arviointi Tila-arviointi – concept consists of criteria, weighting and results presenting graph. The assessment consists of 30 criteria, which are divided into 8 main topics. Most of the criteria contain sub criteria. The main topics include:

User, 4 criteria: user survey, communication, guide for user, communality Safety and robustness, 5 criteria: temperatures, air quality, lighting, noise, safety Energy efficiency, 4 criteria: consumption, energy certificate, energy efficiency improvement,

energy efficiency contracts Environmental effects, 4 criteria: used energy form, waste, harmful substances, pollutants Economy, 3 criteria: economical stability, costs, value retention Technical state of the building and systems, 4 criteria: guidance of use and maintenance,

guidance of management and investment, technical state of construction, technical state of systems

Surroundings, 2 criteria: connections and transportation, site Innovations and development of the evaluation system, 4 criteria: innovations, green

purchase, reporting, system developing It is planned that the weighting will be calibrated by a third party – a consensus based committee

of interests groups. The results of the case study examples are weighted by weighting constructed by SB-method [2].

The results are presented in graph form. In the graph, the height of the segment presents assessed buildings excellence in that criterion. The width of the segment presents the weight of the criterion. The score of the assessment is presented in points in the centre. 1,000 points is the maximum score. In the case study used graph is prototype as like criteria and weighting. The final certification criteria and weightings are set by a third party – if the concept is applied.

4. Case Study Examples Tila-arviointi assessment is tested in 3 case study examples. Assessment has been performed as far as is possible. A portion of the criteria base on benchmarking and some of that benchmarking data are not yet available. On those portions, assessment begins to collect that data. These criteria are highlighted with tanned background in results graph. 4.1 First case study example, 1991 terraced house complex The results graph of the first case study is presented above. The case scored high on noise (8) and pollution (17) prevention. Low scores in temperatures (5) and guidance of use and maintenance (21) are explained with not existing technical maintenance. All maintenance work had been done through the voluntary work of residents. Therefore, for example the radiator system was without maintenance. 4.2 Second case study example, 2001 multi-storey residential building

The building is in very good technical condition (23). The only available improvement in waste criterion (15) is to optimise waste collection. Moderate scores on the guidance of use and maintenance (21) are explained by the lack of an existing building service manual. A building service manual (huoltokirja) is mandatory for new buildings. 4.3 Third case study example,

1964 multi-storey residen-tial two building complex

The low scores of case are explained by age and non-existing development. Mandatory works have been done, with almost nothing else being done since 1964. The remediation debt of the case is vast. High scores had been gained in used energy form (14), stable economy (18) and connections and public transportations (25).

4.4 Presenting development One key-feature of the Tila-arviointi is renewal. The assessment is valid for 3 years, and upgrades possible during that period. The chance is presented in a result graph; improvements are

presented by blue sectors and reduced scores by red dash-lined sectors. Also, old scores are presented in brackets. Case 1 had decided to perform developments. It was decided to order a building maintenance manual (21), remediation and adjustment of the radiator system (5 and 24). They were chancing the building manager to more competent (19), updating user guides (3) and garden plan (16). Old scores are presented in brackets and added scored in the blue sectors.

5. Conclusion In this work, a concept to evaluate existing residential buildings has preserved and renewed. Excellent real estate management has not yet been detailed in Finland. In the short term, excellent real estate management is doing work well and is efficient, considering the ecological sustainability, and it is serving the customer. Tila-arviointi is developed to measure and enabling excellent real estate management. TALOKESKUS’s request is to consider the following: Is Tila-arviointi suitable to be developed for a national environmental real estate certificate for existing residential buildings?

6. References

[1] KARHU T, ”Kiinteistöjen tila-arvioinnin tuotteistaminen”. Diplomityö TTY, Tampere, to be

published, ca. 70 p. + ca. 40 appendix p. [2] iiSBE. 2010. iiSBE short overview 2010. Presentation 22 p. http:// www.iisbe.org/sbmethod

[26.8.2010], p.15

A Nordic Guideline on Sustainable Refurbishment of Buildings

Anders-Johan Almås PhD-student NTNU, SINTEF Buildings and Infrastructure & Multiconsult Norway aja@multiconsult.no

Chief Research Scientist Pekka Huovila, VTT, Finland, pekka.huovila@vtt.fi Senior Researcher PhD Peter Vogelius, Danish Building Research Institute, Denmark, pev@sbi.dk Ass Prof Björn Marteinsson, University of Iceland & Innovation Centre of Iceland, bjorn.m@nmi.is Prof Svein Bjørberg, Norwegian University of Science and Technology, sb@multiconsult.no Senior Researcher PhD Kim Haugbølle, Danish Building Research Institute, Denmark, khh@sbi.dk Customer Manager Jyri Nieminen, VTT, Finland, jyri.nieminen@vtt.fi

Summary The overall objectives of the Nordic SURE research project (Sustainable Refurbishment ─ life cycle procurement and management by public clients, 2009-2011) are to build a Nordic network among industry, authorities and researchers to improve knowledge exchange on sustainable refurbishment procurement. Further, to summarize state-of-the-art on the interplay between life-cycle costing, environmental assessment of buildings and sustainable procurement, assess and classify various sustainable procurement strategies already being deployed by public clients on refurbishment of existing public buildings and analyse the experiences of public clients acting as sustainable change agents on the implementation of sustainable refurbishment in construction and real estate. And finally, to develop a Nordic guideline on sustainable refurbishment of buildings based on case studies and different client-specific and internal workshops/discussions. To develop a Nordic guideline on sustainable refurbishment, the SURE research project has investigated 10 different cases in the four countries, aiming to find out how the refurbishment projects are conducted and which possibilities and barriers there are to achieve a sustainable refurbishment. The guideline is divided into 6 phases; “Finance and procurement strategy”, “Requirement setting”, “Selecting the team”, “Managing the supply”, “Operation and maintenance” and “Monitoring, Enforcement and Evaluation”. The first phase (strategy) is of most importance, being a tool for client change. The phase is divided into seven steps. First, the client (building owner) is encouraged to create a strategy for the refurbishment project. Second, the finances for the project must be set. Third, when the finance strategy is set, the client has to define sustainability based on approximately 60 different sustainable indicators. Fourth, the client has to choose level of ambition based on different parameters like energy consumption, technical standard, adaptability etc. Fifth, a condition survey of the building is highly recommended. When the condition survey is finalized, the client should create a performance profile of the building. Based on the profile, the level of ambition set in step four should be reviewed before finalizing a revised ambition level based on the performance of the building and the strategic analysis (sixth step). Finally, a list of priorities should be conducted for the specific refurbishment project (seventh step). Further, the second (of six) phase gives guidelines for setting requirements. The methodology is based on the 60 indicators of sustainability and a PDCA-model (Plan, Do, Check, Act) which also are of high relevance for phases 3-6 in the guideline. Further work on customizing country specific or even client based guidelines and analyzing experiences from implementation in multiple case studies is still to be done. Keywords: Sustainable refurbishment, guideline, sustainable indicators, strategy, client

1. Introduction

Sustainable development of buildings and other construction works brings about the required performance and functionality with minimum adverse environmental impact, while encouraging improvements in economic and social (and cultural) aspects at local, regional and global levels [1]. In other words; to achieve a sustainable refurbishment, a lot of parameters, e.g. energy reduction (environmental), LCC-analysis (economic) and indoor climate (social) have to be simultaneously taken into account. The latest years, global warming has become one of the main challenges for our future development of the society. The IPPC report (2007) [2] concludes that improving energy efficiency in buildings is one of the greatest potentials and most cost-efficient actions to reduce the climate changes. The building stock counts for a high amount of the total energy use, both in the Nordic countries and globally. Energy-efficient refurbishment of buildings is therefore extremely important both for reducing the amount of greenhouse gases and reducing the load on the energy distribution system. In the building sector, reducing energy demand and changing the energy sources from fossil fuel to renewable energy have been the main actions to reduce the environmental impact. This huge focus on energy reduction is important, but there are also a lot of other sustainable measures that have to be taken into account when aiming for sustainable refurbishment of buildings. Issues like e.g. waste management, material properties, area efficiency, lifetime, indoor climate, adaptability, building conservation, maintainability and building physics should not be forgotten. Furthermore, the measures must be done in the right way to avoid building defects and to ensure proper use of the building. The buildings also have to be refurbished according to the climate to come, not only the present climate. There are number of tools available for sustainable planning for both new and existing buildings. Existing commercial rating schemes, such as BREEAM, HQE, DGNB or LEED give guidance on how to plan and build sustainable buildings using their indicator set. These systems are one step in the work towards a more sustainable building stock, but they also have disadvantages. Obtaining a certificate for marketing purposes using indicator sets not fitting well with local context don`t always improve sustainability. Furthermore, the certification comes with a fee. These tools usually focus on the planning process, given that the client has chosen to do a sustainable refurbishment. But this is not always the case. The need of construction or renovation often starts when the space in use doesn`t meet user needs.. And at this stage the client might not even be aware of the meaning of sustainability. He also might not have a strategy for the project, and the condition and performance of the building(s) might not be known. Therefore, focusing on the client as a change agent is of high importance if the refurbishment should get a high character of sustainability. This paper describes a Nordic Guideline on sustainable refurbishment of buildings developed in the Nordic SURE research project (2009-2011) by building researchers from Denmark, Finland, Norway and Iceland. The project title is “SURE - SUstainable REfurbishment – life-cycle procurement and management by public clients”. The overall objectives of the SURE project have been to build a Nordic network among industry, authorities and researchers to improve knowledge exchange on sustainable procurement, summarize state-of-the-art on the interplay between life-cycle costing, environmental assessment of buildings and sustainable procurement, assess and classify various sustainable procurement strategies already being deployed by public clients on refurbishment of existing public buildings, analyse the experiences of public clients acting as sustainable change agents on the implementation of sustainable refurbishment in construction and real estate, develop guidelines for sustainable refurbishment of existing buildings by public clients and finally develop a Nordic guideline on sustainable refurbishment based on the case studies and different client-specific and internal workshops/discussions [3]. The 10 different case studies in Norway, Denmark, Finland and Iceland are described in [4], and some of the main conclusions from the case studies, as a basis for developing a Nordic guideline, are summarized in the following. First, the client has to go through a process of defining sustainability. The content of sustainability could differ for each project and client. What is sustainable for the specific refurbishment project in

the specific location with the given assumptions, limitations and possibilities? Is the client aware of the meaning of sustainability? When the sustainability is defined, a strategy and ambition level for the project is needed. But the strategy and ambition level cannot be set before the client has a performance profile of the building. Therefore, a condition survey is of high importance in a very early stage of the project. A condition survey must be carried out by highly qualified personnel, and should give alternative concepts for the refurbishment as outputs, highlighting the economical, social and environmental consequences of the different concepts. One of the questions which often arise is weather to refurbish or tear down the building. In a guideline on sustainable refurbishment of buildings, a helpful tool to make the client reflect and hopefully conclude on this question should be implemented. Also, a list of sustainable indicators should be presented. The indicators should be sorted in three main groups; social, environmental and economical, and should be mostly quantitative so that they can be measured and benchmarked in the operation phase. The lack of measuring, monitoring and benchmarking of important sustainable indicators is one of the main challenges to achieve the goal of a sustainable building. Therefore, the guideline should both help the client to plan how to implement these indicators into the project, and give guidance on how to check the indicators both during planning, building and operation phase.

2. Methodology Figure 1 shows an outline of the methodology used in this study. 10 different case studies in Den-mark, Finland, Norway and Iceland are investigated in order to find sustainable solutions for refurbishment. Further, thorough discussions with the clients regarding ambitions, strategy, energy reduction, future use and a lot of other parameters have been conducted. For several of the case

studies, a condition survey has been carried out to get an overview of the performance of the building(s). Thereafter, discussions on recommended measures, overall client strate-gies, procurement strategies, client as a change agent and the use of guidelines in the specific refurbishment project are summarized in a case study report. The guideline on early phase planning here described has been created based on findings and conclusions in the case studies, internal and cli-ent-specific discussions/workshops combined with the re-searcher`s theoretical and practical former experiences and knowledge in refurbishment of buildings. The guideline con-tents and structure is created through internal discussions and brainstorming in workshops in the SURE research project.

Figure 1: Outline of the methodology

3. The guideline The two main focus areas for developing the guideline have been contents (themes) and structure. The contents (themes) are carefully considered and put into context to give the user of the guideline the best insight in what to focus on to achieve a sustainable refurbishment of building(s). The structure of the guideline has also shown to be of high importance. One of the objectives of the guideline is to change the client into thinking sustainability. We had to ask ourselves: How can the guideline be easy to use and still point out the most important topics for a sustainable refurbishment? And how can the structure itself help the project to succeed? The Nordic Guideline on Sustainable Refurbishment (SURE) of buildings is built upon the principals shown in figure 2. The figure shows the different phases during the lifetime of a building, starting from left. The vertical axis shows the quality standard of the building during time (horizontal

axis). First, the planning of the building starts with an early design phase, thereafter a more detailed design phase followed by the construction phase. When approaching the handover phase, the building has reached its highest quality standard. Then, the operational phase starts, and the quality of the building will decrease, depending on maintenance intervals and replacement of building parts. When the quality or usability of the building has decreased to a certain point, there is a need for a major renovation (figure 2, far right, visualized with the sign “You are here”). Now the building owner has three choices; tear down the building, refurbish the building according to present quality standards and requirements, or raise the quality standard of the building into a sustainable standard, a SURE standard. The SURE guideline will help the client to take the right choice, and should be used from this point.

Figure 2: The SURE Guideline structure. A number of procurement guidelines already exist, e.g. those by ISO [5] and UN [6] but none of them seemed to provide a framework for SURE applicable as such. Therefore, the SURE guideline is divided into six phases: “Finance and procurement strategy”, “Requirement settings”, “Selecting the team”, “Managing the supply” “Operation and maintenance” and “Monitoring, Enforcement and “Evaluation”. Some of the phases may need to be revisited several times during the process, but they have been picked out because of their importance. In this way the actual refurbishment process “Managing the supply” represents only one phase out of six. The first phase is definitely the most important phase - the strategic phase. This phase is divided into seven main steps. First, the client (building owner) has to create a strategy for the refurbishment project. If the client already has an overall strategy, it should be reviewed and specified to suit the specific project. Secondly, the finances for the project must be set. Which finance models should be used, and which are the finance boundaries? These are most important questions, as ambitious refurbishment projects often are put on hold because funding is not clarified in advance. Third, when the finance strategy is set, the client has to define sustainability and answer the question; what is sustainable for this specific refurbishment project? The analysis on sustainability will be based on a lot of different parameters as shown in appendix 1 and figure 3. At this point the overriding criteria for sustainability is defined, and the client is now (fourth step) encouraged to choose the level of ambition for the project based on different parameters like

YOU ARE HERE

energy quality, technical standard, adaptability etc. Fifth, a condition survey of the building is highly recommended. Findings and analysis in the condition survey could reveal specific obstacles

making the defined ambition level hard, or even impossible, to reach. The condition survey should focus on the building component`s technical standard and provide answers on which components / damages will make the upgrade especially costly. Further it should focus on building physics, cultural values, technical equipment and the other sustainable indicators shown in appendix 1. The survey should be summarized in a report showing the performance profile of the building. It should also give different recommended refurbishment concepts based on the performance profile and the client`s ambitions and finance strategy. A well documented condition survey has shown to provide a high efficient planning process. The condition survey or the following strategic analysis should also focus on weather to tear down or refurbish the building. The SURE Guideline methodology for this purpose is based on a four quadrant figure where the client has to place the building in one of the quadrants. The figure is built upon a three-grade scale for both adaptability and quality standard. If the building has both very low adaptability and quality standard, the client should consider either to tear down, sell or change the use of the building. More about the methodology can be seen in the guideline. When the condition survey and performance profile is finalized, the client should review the level of ambition set in step four, and make a revised version of the ambition level based on the condition survey and the strategic analysis (6th step). Finally, a list of priorities should be conducted (7th step).

Figure 3: The sub-categories of the sustainable indicators used in the SURE Guideline. When the strategic phase is finalized, the client is ready to set the requirements for the refurbishment project. “Requirement setting” is the second phase (of six) in the SURE guideline structure. Here, the client has to set quantitative values or choose between different alternatives for sustainable refurbishment indicators, e.g. delivered energy (kWh/m2y), indoor climate (CO2-ppm), percentage reuse of building materials etc. The SURE indicators (approximately 60) are sorted in the three categories Social (performance), Environmental and Economic as shown in figure 3. Also, a fourth category is added, named Process. Here, indicators related to project management are found. As they often are difficult to place in one of the three traditional sustainable categories, they are here united in a Process-category. Efforts on setting the requirements will also give important inputs to the procurement documents and for setting the criteria when selecting teams (cf. “Selecting the team”). In the SURE guideline, the indicators and requirements are chosen to be mostly quantitative. This will help the client to set measurable values for the project. As often happens, the requirements for the refurbishment are qualitative and cannot be measured in the operational phase. Then, the users and the building owner have too few figures in the operation phase to benchmark from the planning process. This is of high relevance, especially for indicators like energy use, CO2-

concentration and day light factor. To try to give a helpful tool for planning, setting requirements, measuring and to form procurement documents, the SURE guideline is using the principle of PDCA; Plan, Do, Check, Act (figure 4). PDCA is an iterative four-step management process typically used in business. It is also known as the Deming circle/cycle/wheel, Shewhart cycle, control circle/cycle, or plan–do–study–act (PDSA). The concept of PDCA is based on the scientific method, as developed from the work of Francis Bacon [7]. The scientific method can be written as "hypothesis"–"experiment"–"evaluation" or plan, do and check. The four steps could be described as in the following:

Figure 4: The PDCA-principle

Plan: Here, the client should establish the objectives and processes necessary to deliver results in accordance with the expected output. By making the expected output the focus, it differs from other techniques in that the completeness and accuracy of the specification is also part of the improvement. Do: Here, the client is encouraged to implement the new processes, often on a small scale if possible. Setting the requirements for the refurbishment project and actions in the construction phase are examples of processes in the “Do”-category. Check: Here, the client should measure the new processes and compare the results against the expected results to ascertain any differences. Act: Here, the building owner or the user of the building should analyze the differences in planned and checked values to determine their cause. The client should determine where to apply changes that will include improvement. When a pass through these four steps does not result in the need to improve, one should refine the scope to which PDCA is applied until there is a plan that involves improvement [7]. The PDCA-model should be used on each of the sustainable indicators. Approximately 60 sustainable indicators are included in the Nordic SURE guideline. Appendix 1 shows the different indicators sorted by sub category (cf. figure 3). When the requirements are set, the client is ready to start the third phase of the SURE Guideline; “Selecting the team”. In fact, this phase is more dynamic than the other phases, in terms of actually being relevant for all phases. To achieve a successful sustainable refurbishment, a high qualified and competent team is needed for both for the strategic analysis, the condition survey, the design, the construction and the operation. The PDCA-methodology is also used in the “Selecting the team” phase. The first team to select is the early phase strategic team. Here, the client should first plan how to reach and engage the right personnel. Thereafter, the procurement documents should be created for the tendering process, and relevant companies should be contacted (do). When the bids are received, the references, competence, description of deliverance etc. should be carefully checked. Further, the deliverance should be checked according to the procurement documents. Finally, if there are differences in planned and checked deliverance, the client should determine the cause and apply changes that will include improvement, e.g. more focus on specific building components in the condition survey report (act). The principles are the same also for the other team-selection-processes. The fourth phase of the SURE guideline is “Managing the Supply”. Here, the client is encouraged to follow up the requirements set in phase nr. 2. Design, construction and hand over are all included in this phase, and the “check” and “act” categories are used in particular. The client or project manager should keep eye on procurement requirements and carefully check the execution of the construction work or the documentation delivered at hand over. If there are differences in requirements set and execution/documentation, the client should act in forms of e.g. holding back money or set specific deadlines for rectification. The fifth and sixth phases of the SURE guideline are “Operation and Maintenance” and “Monitoring, Enforcement and Evaluation”. Also here, the “check” and “act” categories are most relevant. If the operation of the building is not as intended, or the measured values in the monitoring process do not correlate with the values from the requirement setting, the client or building operator should determine the cause and apply changes. E.g. if the measured energy consumption is higher than expected, a review of a detailed energy account should be conducted. When the source of error is found, changes in use or operation of the building should be carried out as soon as possible.

4. Discussions and Conclusions The main reason for creating such a guideline is to give building owners (clients) a helpful tool to take the right choices when aiming for a sustainable refurbishment. Very often, the clients have

high ambitions, but not as high finances. In addition to finances, both the quality standard of the building and the possibilities and restrictions have to be highlighted before finalizing the ambition level. By going through the guideline, a performance profile of the building(s) will be set. This profile should improve the awareness of sustainability with the help of indicators. The guideline can also be used as a checklist. One of the biggest challenges in developing a common Nordic guideline has been the differences in defining sustainability and the national requirements, building codes, climates, building practice etc. in different countries. Reducing the energy consumption in buildings is of high priority in most of the countries, but because of the use of geothermal energy, this is not as important in Iceland. It has shown, though, through investigations of the different case studies in Denmark, Finland, Iceland and Norway that the most challenging part is the need for client changes. Therefore, the SURE guideline is focusing on the client as a change agent in a six phase process, starting with the two most important phases “Procurement and finance strategies” and “Requirement settings”. Further, the guideline focuses on sustainable indicators to help the client to be aware of important parameters to achieve sustainable refurbishment of buildings. The methodology is based on a well established PDCA-model (Plan, Do, Check, Act).

5. Further work This is the first version of the SURE Guideline. Further work on customizing country specific, or even client based guidelines, and analyzing experiences from implementation in multiple case studies is still to be done.

6. Acknowledgements This paper has been written within the framework of the ongoing Nordic research project SURE – Sustainable Refurbishment (2009-2011) and as a part of the ongoing SINTEF research & development programme “ROBUST – Robust Envelope Construction Details for Buildings of the 21st Century” (2008-2011). The authors gratefully acknowledge the assistance given by NICe (Nordic Innovation Centre), all construction industry ROBUST partners, the Research Council of Norway and RANNIS – Icelandic Centre for Research. The authors would also like to thank all clients for valuable discussions and inputs, and for making specific case buildings available for investigation.

7. References [1] ISO15392:2008(E) Sustainability in building construction - General principles. First edition

2008-05-01,30p. ISO copyright office, Geneva, Switzerland. [2] Intergovernmental Panel on Climate Change (IPCC), Fourth Assessment Report (2007) [3] HAUGBØLLE K., “SURE - Sustainable Refurbishment – life-cycle procurement and

management by public clients – Description”, Research Project Description, Danish Building Research Institute, 2009.

[4] ALMÅS A.J., HUOVILA P, VOGELIUS P, MARTEINSSON B, BJØRBERG S, HAUGBØLLE K, NIEMINEN J, “Sustainable Refurbishment – Nordic Case Studies”, World Sustainable Building Conference, Helsinki, 2011.

[5] ISO (2011) ISO 10845-2:2011 Construction procurement -- Part 2: Formatting and compilation of procurement documentation. 2011-01-13

[6] UN (2008) United Nations Procurement Manual. Department of Management Office of Central Support Services. Procurement Division, June 2008.

[7] SHEWART, W.A, “Economic Control of Quality of Manufactured Product/50th Anniversary Commemorative Issue”. American Society for Quality. ISBN 0-87389-076-0, 1980.

Appendix 1 – The sustainable indicators used in the SURE guideline

Economical Environmental Social

LCC Paybacktime

Energy

Delivered energy

Indoor Climate

Room temperature

Annual costs Primary energy Design air flow

Value Plot opportunities Electrical Air velocity

Meeting owner`s/user`s strategy Heating Noise level

Branding/certification

Material Life time Formaldehyde concentration

Technical

standard

Ground, foundations and grid systems Product documentation Air quality

Windows, exterior doors Waste management Acoustics

Exterior cladding and surface

Lightening intensity

Roof, gutters, drains

Thermal comfort

Interior surfaces (floor, wall, ceiling)

Radon

Fixtures

CO2-concentration

Water and sanitation

Emission from materials

Heating

Cleanness of air-handling components

Cooling

Adaptability

Flexibility

Fire

Generality

Air treatment / ventilation

Elasticity

Electricity: general construction / distribution

Climate change

Electrical: lighting, electric heating, opera-tional technology

Safety and

accessibility

Number of accidents/deaths

Telecom and auto: general construction, electrical and electronics systems

Structural safety

Elevators

Fire safety

Waste

Accessibility

Outdoor technical facilities

Safety in use

Drainage, terrain management

Feeling of safety

Comfort

View to outside

Architectural design

Support spaces

Visual stimulation

Usability

Functions (core activity)

Support functions

Capacity

Logistics

Cultural values Protection level

Cultural heritage

Community acceptance

Achieving Sustainable Retrofit: Human Barriers and Solutions

Erik Bichard Professor of Regeneration and Sustainable Development Director, Urban Quality Research Centre School of the Built Environment University of Salford, UK e.bichard@salford.ac.uk

Research Assistant, Nirooja Thurairajah, University of Salford, UK, n.thurairajah2@salford.ac.uk

Summary The standing stock of buildings today will make up the large majority of the built environment in the middle of the century and will be subject to increasingly severe weather events and flooding as a result of climate change. Despite this, many home owners have not invested in recommended amounts of insulation, and most do not have property-level flood protection measures. The Resilient Homes: Incentives project was able to show how a combination of trusted information sources, community engagement, and innovative incentives was able to change the context in which homeowners make decision about the way to protect their property against the effects of climate change.

Keywords: behaviour change, climate change, retrofit, energy conservation, flooding.

1. Introduction The standing stock of buildings today will make up the large majority of the built environment in the middle of the century. However, changing environmental conditions will introduce external stresses including severe weather events and flooding, and produce unacceptable internal environmental conditions. In addition, UK housing accounts for 27% of national green house gas emissions and the government estimates that improved insulation alone will be needed for 26 million homes. An estimated 5.2 million homes are in areas that are threatened by flooding from the sea or rivers, but many more could be affected by flash flooding as surface drainage is overwhelmed by local deluges. Over 9 million homes still do not have basic energy conservation measures such as loft, wall and window insulation, or efficient low carbon heating units. The problem is rooted in private ownership. Most of the commercial stock and over 70% of the residential stock in the UK is privately owned, and while many people are aware that they live in a flood risk area, a majority think that their house will not be flooded. While many have invested in energy conservation, the majorit of houses do not have recommended levels of insulation.

2. Effective Influences to Motivate Homeowner Investment in Retrofit Measures

In the first phase of the project, attitudinal work carried out with over 1,000 home owners in Greater Manchester, England and Wales shows that the majority of people are concerned about climate change, do think that using energy in their home contributes to global warming, and understand that minimising greenhouse gases is their responsibility. Many were interested in acquiring flood protection measures including raised electric fixtures and installing air brick covers and door guards. Energy-saving appliances and energy-efficient boilers were also at the top of the list of things that the householders would consider buying in the future. However, many thought that the government was also responsible for protecting their houses against climate change, and just under half said they would not be willing to invest anything towards flood-protection and energy-saving improvements. Nearly a quarter of the respondents would not invest more than £500 which is, on average not sufficient to pay for either energy or flood protection. When respondents were offered non-cash rewards, over 60% changed their minds and said that they would be willing to consider investing in the measures. The most popular non-cash rewards for investing in flood protection or energy-saving were vouchers for fruit and vegetables followed by free meals at restaurants, tickets for entertainment and vouchers for leisure and health centres. Around a quarter of the respondents would not be persuaded to accept any value of rewards, and over half wanted rewards to the value of their expenditure or more before they would agree to participate in an incentives scheme. Nearly half of the respondents canvassed said they would participate in a reward scheme should it be offered in their area. The next phase of the project sought to test whether these attitudes would be carried through into active decision-making be home owners. A sample of 50 households of mixed housing type and income were engaged in a suburb in western Manchester, England. Initially they were canvassed by a local environmental community group with the same attitudinal survey that was carried out in England and Wales and which produced very similar results. Through the survey they were invited to participate in the rewards scheme that was called „Timperley Green Homes‟ and half opted for a free energy and flood survey which compared well with the one-third take-up that utility companies expect from their own customers. To date, 20% (5 households) have followed the advice of the audit and bought energy-saving measures. None have thus far chosen flood protect measures. The residents chose a variety of rewards including beauty treatment sessions, fruit and vegetables, a season ticket on the local tram system, and the re-development of their garden.

3. Discussion The Salford team determined through the attitudinal work that commitment by home owners to act on climate change was not affected by geography or income bracket. The limiting factor was, for flooding, a combination of a lack of understanding about which measures that would be effective, the nature, frequency and severity of the risk of inaction, and an absence of evidence that either the authorities or their neighbours considered protection against flooding priority. For energy saving a comparison of national statistics and responses to the attitudinal survey suggests that the limiting factor was a lack of understanding about the amount of measures that were needed to make a significant difference to their energy consumption. The relative cost of the initial investment against the payback period could also have explained the reluctance to spend sufficient money on insulation and other retrofit measures. The Salford team sought to determine which of the strategies that have been deployed by policy-makers would effect the greatest behaviour change. The evidence from the attitudinal work and the rewards trial suggests that information alone will not change the context that has resulted in slow responses or inaction to the treat of climate change. The results of the trial to date suggest that a combination of better information, incentives, and encouragement to pro-environmental behaviour through community-based influencers will produce accelerated commitment to retrofitting privately owned domestic properties against the threats to property due to global warming.

Achieving Sustainable Retrofit: Human Barriers and Solutions

Erik Bichard and Nirooja Thurairajah, University of Salford, UK

Abstract

The standing stock of buildings today will make up the large majority of the built environment in the middle of

the century. In the UK, housing accounts for 27% of national green house gas emissions and the government

estimates that improved insulation alone will be needed for 26 million homes. An estimated 5.2 million

homes are in areas that are threatened by flooding from the sea or rivers, but many more could be affected

by flash flooding as surface drainage is overwhelmed by local deluges. Over 9 million homes still do have

basic energy conservation measures such as loft, wall and window insulation, or efficient low carbon heating

units. The problem is rooted in private ownership. Most of the commercial stock and over 70% of the

residential stock in the UK is privately owned, and while many people are aware that they live in flood risk

area, high numbers think that the probability that their house will be flood in the future is low, and few are

making energy conservation a spending priority. This paper will consider the implications of the attitudinal

barriers to sustainable retrofit of housing stocks, and describe field studies undertaken by the authors in this

area. The research tests whether the simultaneous employment of better information, non-cash incentives,

and community-led influencing can change home owner behaviour and accelerate commitment to invest in

property-level protection against the threat to property from the effects of global warming

Introduction Until recently, the UK Government has relied on a combination of strategic legislation, public information, and targeted subsidies to help home owners to address the effect of climate change on their homes. This has almost exclusively emphasised mitigation measures and the conservation of energy consumption in particular. The Climate Change Act 2008 placed legally binding limits on greenhouse gas emissions and it has been identified that individual members of the public need to reduce their carbon emissions in order to achieve these targets [1]. There have been a number of public and private sector campaigns seeking to motivate the public to use less energy at home [2] [3]. Yet, despite government messages, many millions of homes in the UK are not energy-efficient due to under insulation and old heating units and appliances [4]. In comparison to mitigation measures, adaptation measures, and flood prevention in particular, has been broadly left to the regulator (the Environment Agency) which has concentrated on homes in areas where it considers that there is the highest risk of damage. Compared to energy conservation, there has been far less effort directed at motivating the public to adapt their properties in this area. However, individuals are increasingly being seen by policymakers as needing to take personal responsibility to protect their dwellings against the effects of flooding [5]. In “Making Space for Water”, the Government [6] shifted it‟s stance away from taking sole responsibility to protect property, and towards one in which other organisations and individuals take a more prominent role [7]. The Resilient Homes programme was instigated by the Environment Agency of England and Wales in 2009 to understand how to engage with neighbourhood groups on the ways in which climate change will impact their properties and their lives. Part of this initiative was an incentivisation programme which was undertaken by Salford University and the local authorities of Salford City Council and (later) Trafford Borough Council to investigate the preparedness of householders to install and pay for energy conservation and flood-protection measures in their homes. Having established clear attitudinal tendencies towards personal responsibility and the ability to be motivated by incentives, the project undertook a trial in a flood-threatened neighbourhood in western Greater Manchester. The results of this trial are proving to be highly informative in establishing the mix of influences that public bodies will need to introduce into future climate change campaigns in order to influence the owners of property to retrofit in response to climate change.

4. Theoretical Basis for the Study 4.1 Theories of Behaviour Change Much of the work about barriers that inhibit action in response to climate change stems from the theory of reasoned action or TRA [8], which the Salford team summarised for the purpose of experiment design as the following set of questions individuals ask themselves before acting:

Do I understand that there is a problem? Do I care about the problem? Do I know what to do about the problem? Will my solution work or make a difference? What will others think of me if I act?

While many of these questions may not be consciously considered when individuals are asked to act in response to the threats of climate change, they do offer a useful guide to policy-makers during the design stage of a campaign. TRA has been criticised by some as being over-reliant on rational decision-making processes, and the psychoanalytical experience suggests that this may be justified. However, those looking for consensus in this area might expect that a synthesis of these different approaches could help to build better policy. There are other behavioural theories such as Bandura‟s Social Cognitive Learning Theory and Becker‟s Health Belief Model and these have also been applied across a wide variety of disciplines in order to understand behaviour change. However, while these pay considerable attention to individual behaviour change, less work has been carried out on behaviour change within communities, and this is why TRA, with its reference to „others‟ or norm-based behaviour‟ was attractive to the Salford team. 4.2 The significance of education, awareness and community interaction There is a need to understand how communities interact on issues of climate change. Schulz [9] found that individuals say that they would take pro-environmental action to protect the environment, but often their actions were influenced by a similar action by a friend or neighbour (buying a low-energy light bulb for example). Understanding the barriers and enablers to change, and what influences behaviour in general is a key element in the process of designing successful intervention programmes for retrofit projects. Many models assume that decisions are made based on cognitive processes leading to interventions that focus on offering various forms of information to change attitudes or address problems. However, in reality, the success of these interventions can not solely depend on changing the comprehension and understanding of people, particularly when habits are entrenched. While it may be possible to change people minds about significant issues around acting on climate change, this is likely to take a considerable amount of time. Some argue that the urgency to address the consequences of climate may mean that it would take too long to address behaviour change in this way and that different strategies need to be employed. This is not to say that information is inconsequential in behaviour change programmes, but Lorenzoni et al. [10] identified a longer list of reason for inaction including a lack of knowledge about the causes and consequences of and solutions to climate change, scepticism about the sources of information, downplaying the magnitude and significance of climate change impacts, externalising responsibility and blame for the impacts, reluctance to change lifestyles, and fatalism. Stern [11] concluded that individuals will make decisions according to their state of awareness and concern about climate change, their willingness to act, and a belief that their actions will be effective and beneficial which is in line with many elements of TRA. The perception of risk associated with flooding is a good example of the difficulty that authorities face when attempting to influence householder behaviour to protect against a flood event. Whilst some studies show that the majority of flood plain residents are aware of living in flood risk areas [12]; [13], the actual risk is predominantly seen as low [13] or located in a distant future [14]. Other factors such as advanced age tends to have a negative influence on awareness of flood risk

[15], or concern about climate change impacts and the willingness to adapt [13]; [14]. Those with higher education and income have been found to be more aware of the risk of flooding [15] and are more likely to buy energy-efficient appliances [16]. There is a similar though less marked tendency to inaction in relation to energy conservation. Despite the Government‟s commitment to target better understanding about ways to mitigate climate change, 29% of respondents to the DEFRA [17] survey had never considered an energy-efficient boiler, 27% had never considered solid wall insulation, and 14% cavity wall insulation. This may suggest that there is still scope for education about these improvements. The literature suggests that, whilst a majority of householders are aware that climate change is a serious issue, the potential consequences of the threats posed by climate change seem to be underestimated and misunderstood. This, alongside the relation between socio-demographic characteristics of people and their opinions, may have significant implications for shaping policy and needs to be explored further. 4.3 Affordability, adaptation and mitigation measures

The Energy Saving Trust (www.energysavingtrust.org.uk) provides some indication of typical costs of energy-saving measures: £150 for cavity wall or loft top-up insulation; £1,800 for a new energy-efficient boiler (without installation and connection charges); and £2,000-4,000 for double glazing an entire house. Whilst government estimates [18] show that householders can save around £45 per year in heating bills by having thick loft insulation, and £115 per year with cavity wall insulation, (resulting in a payback time of under two years), even these cheaper energy-saving options can be too expensive for some. DEFRA‟s [17] survey suggests that around a quarter of the respondents could not afford cavity wall or loft insulation. Flood-protection measures are more expensive. In the DEFRA pilot of individual flood-protection grants, the average cost of works per property was about £2,900, in a range from circa £300 to £13,000 [19]. For a shallow flooding event (less than 90cm), smaller properties can be protected with resistance measures for as little as £2,300, whilst recovering from a flood may cost from £4,500 to £23,000. For deeper floods, a package of resistance measures may cost from £20,000 to £40,000, but this may still be recovered in a single flood event [20]. Bowker [21] observes that some measures may not cost more than standard repairs (raising electrical fixtures above the likely flood level should not exceed £1,000), yet a whole package of resilience measures can reach £10,000 to £30,000. The research on preparedness to pay for flood-protection measures is limited, but the existing literature indicates that the many people say that they would not pay anything [22]; [13]. Only 8.5% of respondents to a household survey in Scotland were willing to contribute an additional £100 per year in council tax to fund flood protection [22]. A survey of over 1,500 people in England and Wales [23] revealed that previously flooded or at risk respondents were willing to pay respectively £200 or £150 a year to avoid the health impacts associated with flooding. The median one-off sum respondents to a survey in Salford were prepared to pay for flood-protection measures was less than £100 [13]. Thus, the costs of flood-protection measures seem to exceed the sums people are willing to pay for them. 4.4 The importance of Rewards Positive incentives can be used to stimulate a variety of behaviours, and, in association with other influencers, establish longer term habits [24]. The evidence that would support the use of financial incentives in encouraging sustainable behaviours is mixed. Offering financial incentives for one type of sustainable behaviour may either result in a “spillover” to other types of behaviour or, with equal probability, reduce the likelihood of engaging in other environmental behaviours unless more money is offered. However, the main reasons why direct financial reward many be counter-productive is that money-based schemes are expensive, and there is no control over the goods and services that the participants will buy with the reward money. Spending could easily go

towards more frequent flights to holiday destinations rather than more solar panels. Pay as you save energy schemes may be attractive to some, but those already concerned about high energy bills will be worried that they will not be able to pay for energy saving measures in the future. These schemes also rely on efficient energy management of the home, something that is not a foregone conclusion. This scheme is also ineffective in motivating householders to invest in flood protection. Non-financial incentives can be more effective in influencing sustainable behaviour than financial incentives. They can have an intrinsic value (increased consumption of fruit and vegetables for example) and can have a number of additional benefits. They can boost local economy (e.g. locally sourced fruit and vegetables and free meals at local restaurants can help local businesses), help in community development (e.g. free college courses can improve education levels, skills and employability) and contribute to meeting a variety of the Government‟s objectives (e.g. passes for health centres can lower obesity, and social enterprise employed labour can help a number of hard-to-reach parts of society including long-term unemployed, disabled people, and ex-offenders). In the longer-term a reliance on incentives is not desirable if it results in a lack of proactive behaviour in the absence of a financial stimulus. However, non-cash incentives have the potential, in association with other tactics, to achieve two objectives. First, they are well suited to motivate once in a while transactions such as buying a new boiler or insulation or flood protection that does not require repeated behaviour. Secondly, they allow the resident to experience the benefits of the purchase without the need to be entirely convinced by the other arguments associated with climate change.

5. Results

5.1 Phase 1: Attitudes to Investing in Property-Level Measures

Two surveys were carried out to test owner –occupiers on their attitudes to climate change and their home over a two-year period. Each survey asked householders the same set of questions to determine how well informed residents were about the threat of climate change, and whether they considered that it was their responsibility to protect their homes against damage caused by global warming. The residents were asked about the energy and flood prevention measures that they could take, and how much they would pay to fit these measures in their homes. Finally they were asked about their interest in receiving non-cash rewards in return for investing in the energy and flood measures. One of the surveys was conducted door to door and canvassed 100 people, some of whom lived in deprived areas of the city of Salford. There largest of the surveys contacted 1,043 people living in flood risk areas in England and Wales by telephone. The results on flood protection showed that very few residents had installed any form of flood protection. The raising of electric fixtures and installing air brick covers and door guards were seen as the most appealing measure, while tiled flooring was the least popular option. The results for energy conservation showed that less than 50% of the residents had a combination of loft insulation, wall insulation (where cavities were present), double glazing, an efficient boiler or energy-saving appliances. Energy-saving appliances and energy-efficient boilers were top of the list of things that the householders would consider buying in the future. Just under half of the respondents said they would not be willing to invest anything towards flood-protection and energy-saving improvements. However, nearly a quarter of the respondents would invest over £500. The most popular non-cash rewards for investing in flood protection or energy-saving were vouchers for fruit and vegetables (51.7% of positive answers), followed by free meals at restaurants (44.2%), tickets for entertainment (33%) and vouchers for leisure and health centres (27%). The least popular reward was free bus travel although the high proportion of the sample were aged over 60 (a consequence of home ownership) and in the UK these residents already

have access to free public transports. Around a quarter of the respondents would not be persuaded to accept any value of rewards, and over half wanted 100% to 200% of rewards for the investment they would make. Nearly half of the respondents said they would participate in a reward scheme should it be offered in their area The most important recommendations from this first Phase of the research were:

There is a need for a climate change strategy which is aimed at householders and promotes prompt action to make physical changes to the fabric of their premises;

Reward-based incentive schemes will motivate many householders to purchase energy-saving and flood protection measures for their homes. A variety of pilots should be commissioned to test this contention.

Carefully selected non-cash incentives can boost local economies, will help to develop communities and aid delivery of current Governmental campaigns.

People with little disposable income should be eligible to receive flood protection grants. Innovative awareness-raising and education programmes should not be carried out to

the exclusion of community-level discussions and debates using local leaders and motivators.

More work is needed by Government to help these existing and emerging community leaders to effectively engage with those around them to help them accept the threats to domestic houses that will be caused by climate change, and take prompt action to reduce potential harm to their areas.

5.2 Phase 2: The Trial The trial was carried out in Timperley, west Greater Manchester. The areas was selected because of its mix of housing types and because parts of the area had been assessed as having either a moderate or significant risk of flooding by the Environment Agency. A group of streets containing 211 houses was chosen as the sample set. The house-to-house survey was conducted by a community group that was set up to engage neighbourhood on environmental issues. The same questions that were used in earlier studies were put to the new group of residents and 50 questionnaires were completed representing a response rate of 24%. Housing types were dominated by semi-detached structures (64%) with the remainder being either terraced rows, modern two-story detached or single story bungalows. Most of the people (around 60%) had resided in the area for more than 10 years. Half of the respondents were in full time employment. The questionnaires were analysed through PASW Statistics Software. Further, Spearman‟s rank correlation was computed for the variables relating to awareness of climate change, flooding and energy saving and, owners‟ preference for different rewards in the survey instrument. Component Analysis (PCA) was used to reduce the inter-correlated dataset and principal components were formed. Later, Varimax rotation was applied to maximise the variance of factor loadings and to assist the classification of variables. Kaiser criterion (eigenvalue one test) was then applied and only the components with an eigenvalue larger than 1.0 were retained. Median values of ordinal variables and principal component scores were compared between unrelated samples with Mann-Whitney test (U) and Kruskall-Wallis test (H). The survey results showed that 52% of the respondents were concerned about how climate change could affect their property which was lower than other surveys. However, the 80% who expressed their personal responsibility towards climate change was similar to previous results. Approximately 82% of respondents said they were aware that their houses are in flood risk area but almost the same number (80%) said they felt that the chances of their houses being flooded were low or very low very similar. This is very similar to the response to the same question in the England and Wales survey. The study identified two Principal Components (PCs). They were PC1 – Awareness on Climate Change and PC2 – Attributed responsibility and flooding event. Awareness on Climate Change comprised of factors related to perceptions on „Concern on Climate change‟; „Less usage of energy in home make a difference in climate change‟; and „Usage of coal, oil and gas in house change

earth's climate‟. Meanwhile, PC2 consists of „Government has the responsibility to protect their home‟; „Home owners have a responsibility to protect their home‟ „Has their house flooded before‟. The commonly stated (over 75%) motivating factors for taking action and investing in property-level measures were non-cash rewards or grants, cheaper prices when the whole street or a group of their neighbours decided to have the work done together and saving on the cost of repairs/replacements. This validated the hypothesis of the project that home owners are prepared to make improvements for non- cash rewards. More than 70% of respondents agreed or strongly agreed that installing energy saving measures would make a difference to the effects of climate change. Responding to the effect the investment would have on house prices, 72% of respondents felt that installing energy measures to their houses would increase the value of their house while 54% of respondent felt it for flood protection measures. This is at odds with the Royal Institute of Chartered Surveyors which states that homeowners are less likely to invest in energy efficiency because „the barriers holding back demand are much stronger than the drivers for it, and are primarily behavioural and financial; specifically there is a lack of a reasonable return on capital and an unwillingness to pay high upfront costs for longer term benefits [25]. When asked about flood protection measures, installing air brick covers (76%); door guards with raised threshold (70%); and raising electric, TV and phone sockets and, the fuse box and meter (66%) were all accepted as interventions by the majority of residents as flood protection measures. As in previous studies, replacing carpets and floorboards with tiles over concrete floors and concrete staircases was only accepted by a third of respondents. When asked about energy saving measures, loft (70%) energy efficient appliances (68%‟) and fitting double or triple glazing (66%) were the most preferred measures. Again these answers were similar to earlier studies. In addition, the average expenditure range that the residents are willing to make on installing flood protection measures was £100 - £500 while for energy saving measures is £500 - £1000 mirroring other survey answers. The results for the rewards that Timperley residents would accept showed that free vouchers for fruit and vegetables (72%) and free meals at restaurants (64%) were again the most preferred incentive. A new reward (free furniture makeover) at 58% was also popular. Once again free tram (54%) and train travel (52%) were less popular, but more so than in the earlier study. This could have been due to the location of good public transport 9including a tram stop) in the vicinity of the sample area. Following the initial survey, 50% of the residents (25 households) choose to take part in the next stage of the project and were visited by a combined flood and energy audit team. The recommended flood protection measures included external remedial works, demountable door barriers; waterproof air brick covers, and foul sewage non return valves. The auditors recommended a range of energy saving measures including 270mm of mineral wool or equivalent loft insulation, new boilers, boiler and radiator controls, cavity wall insulation, and insulation for solid walls. The audit reports also included a full list of all the rewards that were available to residents along with the value of the rewards on the open market. Residents were invited to choose the measures that they would purchase, and then match their expenditure to the same value of rewards. The reports were delivered to most of the residents by hand by the community workers who acted as the main interface between the research team and the householders. Where it was requested the community worker took the resident through the recommendations and helped to pick out the rewards. Later, the residents who decided to undertake improvements communicated their interest and the community workers who returned to facilitate quotes and made arrangement for fitting and delivery where this was requested. To date 8 residents have expressed their interest to carry out improvements that were recommended for them. They have chosen a range of rewards such as a garden re-developments and fruit and vegetable vouchers for a new boiler, and beauty treatments at the local college for cavity wall insulation. None of the residents have chosen to purchase flood protection measures to date. This project is still continuing and further results will reported in the future.

6. Discussion Whilst a large proportion of the public in England and Wales may now be familiar with climate change and accept that this phenomenon will affect their lives, many householders lack sufficient motivation to act on this understanding and invest in their homes. When gauged against the barriers to reasoned behaviour, acceptance of the problems is tempered by an incomplete understanding of how to respond, and an unwillingness to accept that the householder bear the responsibility for protecting their property. More seriously, for those living in flood-threatened areas, the almost universal belief that a flood is unlikely to affect their houses make it highly challenging for regulators and policymakers to persuade property owners to spend money on an issue that they believe is a low priority. This is the context within which the attitudinal survey was designed, investigating the relationship between the conditions necessary for uptake of adaptation and mitigation measures and the willingness of homeowners to implement and pay for them. The Salford team sought to determine which of the strategies that have been deployed by policy-makers would effect the greatest behaviour change. The failure of residents to buy flood protection measure (thus far) suggests that the authorities need to work harder at tailoring information to residents in flood threatened areas. This applies both to clarity on the range of measures available in relation to the nature and frequency of the threat, and to the likelihood of flood events affecting individual dwellings. The evidence being produced from the trial suggests that a combination of better information on the door step, and incentives that are attractive to householders would be more effective than the current reliance on ineffective fact-based public information messages in motivating investment in property-level solutions.

7. Conclusions The findings made to date from this study suggest that a continuation of awareness-raising campaigns without the augmentation of additional strategies is not likely to increase the uptake of property-level flood-protection measures. There is a clear need to improve the quality of information, and to employ incentives and motivate house owners by delivering these messages through community-based actors. Energy saving strategies are proving to be more effective, but would benefit from the same multiple strand approach to ensure more effort is devoted to completing energy conservation measures in partially treated buildings. References [1] HM GOVERNMENT, “Climate Change”, The UK Programme 2006, Norwich: HMSO, 2006. [2] BOARDMAN B., “New Directions for Household Energy Efficiency: Evidence from the UK”,

Energy Policy, 2004, Vol. 32, No. 17, pp. 1921-1933. [3] OFGEM, “A review of the Energy Efficiency Commitment 2005-2008”, Report to the

Secretary of State for Environment, Food and Rural Affairs, London: Office for Gas and Electricity markets, 2008.

[4] DECC, “Statistical Release: Experimental Statistics”, Estimates of Home Insulation levels in Great Britain: July 2010, London: Department of Energy and Climate Change, 2010a.

[5] PITT M., “Learning lessons from the 2007 Floods, An Independent Review by Sir Michael Pitt”, London: Cabinet Office, 2008.

[6] DEFRA, Making Space for Water: Developing a New Government Strategy for Flood and Coastal Erosion Risk Management in England: A Consultation Exercise, London: Department for Environment, Food and Rural Affairs, 2004.

[7] JOHNSON C. and PRIEST S., “Flood Risk Management in England: A Changing Landscape of Risk Responsibility?”, International Journal of Water Resources Development, 2008, Vol. 24, No. 4, pp. 513-525.

[8] AJZEN I., and FISHBEIN M. Understanding Attitudes and Predicting Social Behavior, New Jersey: Prentice Hall, 1980.

[9] SCHULTZ P. W., “Knowledge, Education, and Household Recycling: Examining the Knowledge-Deficit Model of Behavior Change”, In: T. Dietz and P. Stern (Eds.), Education,

Information, and Voluntary Measures in Environmental Protection National Academy of Sciences, Washington, 2002, pp. 67-82.

[10] LORENZONI I., NICHOLSON-COLE S., WHITMARSH L., “Barriers Perceived to Engaging with Climate Change Among the UK Public and their Policy Implications”, Global Environment Change, 2007, 17, pp. 445-459.

[11] STERN P., “Towards A Coherent Theory of Environmentally Significant Behaviour”, Journal of Social Issues. 2000, Vol. 56, No. 3, pp. 407-424.

[12] HARRIES T., Householder Responses to Flood Risk: The Consequences of the Search for Ontological Security, Unpublished PhD Thesis, London: Flood Hazard Research Centre, Middlesex University, 2008.

[13] KAZMIERCZAK A. and BICHARD B., “Investigating Homeowners‟ Interest in Property-Level Flood Protection”, International Journal of Disaster Resilience in the Built Environment, 2010, Vol. 1, No. 2, pp. 157-172.

[14] WHITMARSH L., “Are Flood Victims More Concerned about Climate Change than other People? The Role of Direct Experience in Risk Perception and Behavioural Response”, Journal of Risk Research, 2008, Vol. 11, No. 3, pp 351-374.

[15] BURNINGHAM K., FIELDING J. and THRISH D., „It‟ll never happen to me‟: understanding public awareness of local risk, Disasters, 2007, Vol. 32, No. 2, pp. 216-238.

[16] BOARDMAN B., LANE K., HINNELLS M., BANKS N., MILNE G., GOODWIN, A. and FAWCETT T., “Transforming the UK Cold Market”, Environmental Change Institute Research Report 16, Oxford: University of Oxford, 1997.

[17] DEFRA, Public Attitudes and Behaviours towards the Environment – Tracker Survey, London: Department for Environment, Food and Rural Affairs, 2009a.

[18] DECC, “The Green Deal Energy savings for Homes and Business”, Public Information Leaflet- ref: 10D/973, London: Department of Energy and Climate Change, 2010b.

[19] DEFRA, Local authority CO2 Emissions Estimates 2006, London: Department for Environment, Food and Rural Affairs, 2008b.

[20] THREE REGIONS CLIMATE CHANGE GROUP, Your home in a Changing Climate: Retrofitting Existing Homes for Climate Change Impacts, London: Greater London Authority, 2008.

[21] BOWKER P., Flood Resistance and Resilience Solutions: an R&D scoping study, 2007. [22] WERRITTY A., HOUSTON D., BALL T., TAVENDALE A. and BLACK A., Exploring the Social

Impacts of Flood Risk and Flooding in Scotland, Edinburgh: The Scottish Government, 2007. [23] DEFRA, “The Appraisal of Human-Related Intangible Impacts of Flooding”. Final project

report, London: Department for Environment, Food and Rural Affairs, 2005. [24] BICHARD E., COOPER C.L., “Positively Responsible”. Oxford, Butterworth-Heinemann, pp

176-184, 2008 [25] RICS (2010) Energy Efficiency and Value Project: Final Report. Royal Institution of Chartered

Surveyors, London

Sustainable building renovation and refurbishment with applications of Vacuum Insulation Panels

Navid Gohardani Research Engineer Royal Institute of Technology, Sweden Navid.Gohardani @byv.kth.se

Kjartan Gudmundsson Associate Professor Royal Institute of Technology, Sweden Kjartan.Gudmundsson@byv.kth.se

Summary A large part of the available energy in the European Union is used for space heating of houses. This utilized energy presents an economical challenge as well as an environmental problem that ultimately must be dealt with by reducing the thermal losses through the climatic envelope. This reduction, however, is intricate due to the spatial constraints in designated living areas and com-plexities arising from retrofitting of historical and cultural façades of the existing building stock. In light of the aforementioned problems, Vacuum Insulation Panels (VIP) may provide attractive solu-tions as they employ a thickness about one tenth of the required thickness when using conven-tional insulation materials. The aim of this study is to do a comparative analysis of VIP and tradi-tional insulation materials and several other means of retrofitting in terms of life cycle energy and costs. Particular attention is given to the comparison of exterior and interior applications of VIP and the effects on the thermal bridges at the joints between the external wall and the adjacent floor slabs and balconies.

Keywords: Vacuum Insulation Panels, thermal bridge, retrofitting, building refurbishment, balcony slabs

1. Introduction

The energy use in buildings has been a subject for numerous studies based on questionnaires, qualifying trade-offs, lack of maintenance and damage, and priority of actions to increase an adequate heat envelope. In Sweden, the National Board of Housing, Building and Planning [1] has set targets for energy use and environmental quality objectives which in part includes that the total energy consumption per heated unit area of residential buildings is to be reduced by 20% in 2020 and by 50% in 2050, upon comparison to corresponding consumption levels of 1995. There are currently about four million residential houses in Sweden. Due to the relatively slow turnover of the housing stock, renovation and refurbishment of the existing residential houses are crucial, in order to achieve substantial improvements and achieve the set energy efficiency goals by 2020. A target area of substantial importance in this context is the approximately 750 000 apartments built in Sweden [2] during the “Million program”, which are in need of refurbishment in the near future. While new buildings are to be built with considerate care related to energy efficiency, the mentioned group of apartments has to be subjected to housing renovation levels in line with current building standards. Hence, an adequate use of insulation materials has a central role in this framework. For this purpose, this study focuses on production of energy efficient and cost-effective technical solutions for insulation of residential buildings.

2. Vacuum Insulation Panels 2.1 Usage and implementation In 2002 the U.S. Department of Housing, conducted a study in which different parts of building components were investigated. The selection of the examined parts was based on production costs, risk of injuries and other installation costs [3]. Furthermore, usage of VIP as insulation was considered but was abandoned due to the high cost that entailed. The market at that instance was not prepared for the introduction of this new insulation material. Treatment and implementation of VIP has further to that study been carried out in a conceptual study within Europe, as a part of IEA/Annex 39 [4]. This investigation was carried out in two phases with the first one solely investigating the insulation panels and the latter part, applications of VIP in buildings. Successful implementation of VIP in buildings has been carried out in numerous building projects in Europe, in particular in Germany, Switzerland, the Netherlands and Sweden. There are however numerous reasons for the limited implementation of VIP as insulation in buildings. Under the European Construction Products Directive [5], such an implementation has to obey certain requirements related to: structural stability, mechanical resistance, fire safety, health, environment, and hygiene as well as energy and economy. The relationships between thermal and structural performance and heat and service life period are considered to be extremely important as examined by the work of Tenpierik et al. [6]. Based on reviewed literature, ([7], [3], [8]) a number of conclusions can be drawn for successful implementation of VIP. Although vacuum insulation panels have good heat resistance, this resistance is limited due to the good thermal conductivity at the edges of the panels. To minimize these effects, quadratic dimensions are recommended on the panels. During the implementation of the panels, considerable caution has to be exercised in order to avoid any mechanical damage that may degrade the thermal performance of the panels. Further, it is noteworthy that the vacuum seal on most vacuum insulation panels is designed for a time period of 15-50 years, why ruptured panels should be restored immediately. Lastly, any form of condensation should be avoided on the panels, in order to ensure adequate levels of insulation. 2.2 Economical investment To illustrate the effect of an investment in VIP, a study has been carried out on a base panel with dimensions 1000 × 600 mm2 and a thickness of 30 mm. The thermal conductivity λ, at the center section of the panel is 0.004 W/(mK), and the panel is examined for a time period extending over 50 years. Results are shown for three different interest rates (r1, r2, r3) ranging between 3 to 7 %, for a household income per square meter of surface and year, versus the net cost of the VIP with the given cost of 1090 SEK (Swedish Kronor) per panel, as shown in Figure 1. From Figure 1, a linear trend for the three different cases is observed. A comparison between VIP and traditional building insulation materials shows that the latter are approximately 100 SEK cheaper per square meter. Nonetheless, the heat conductivity of the VIP is about 10 times lower than the corresponding value for the traditional building insulation. Figure 1 further implies that an investment in VIP waives the deposited amount after a time period of approximately 50 years.

Fig. 1 Rental income in SEK (Swedish Kronor) per square meter of surface area versus the net cost of VIP in SEK per square meter wall and years for different interest rates, r.

2.3 Environmental effects from manufacturing of VIP In order to demonstrate and understand the effects caused by manufacturing of VIP from an ecological and energetic point of view, a study was carried out as part of the IEA/Annex 39 [4] project involving three different life cycle analyses (LCA). The analyses included a comparative study between VIP, glass wool and polystyrene EPS. The results obtained from the LCAs show in large that the benefits of insulating materials used in building envelopes, by far outweigh their ecological disadvantages. The LCA of VIP is primarily dominated by the high energy consumption required during production. Consequently the results from the comparative LCA study of the three aforementioned materials were generally favorable, with minor differences in the overall environmental aspects found between them.

3. Case study 3.1 Coupled heat and moisture transport for predefined configurations In order to obtain a coupled heat and moisture transport due to heat transfer and diffusion, the COMSOL Multiphysics® simulation software was employed for four distinct cases with different arrangements of the insulating materials. The utilized materials for these combinations are shown in Table 1.

Table 1 Material properties used for combined heat and moisture transport simulations

Material Z (s/m) δ (m2/s) t (m) λ (W/mK)

Light-weight concrete 200 0.001 0.2 0.14 Envelope film 2 106 1 10-9 0.002 0.036 VIP 1000 15 10-6 0.015 0.008 Mineral wool 6667 15 10-6 0.1 0.036

In Table 1, Z denotes the vapor resistance or the ratio between the thickness and vapor permeability defined as Z = t / δ. The thermal conductivity for each material is denoted by λ. The four cases differ based on the location of the materials as seen from the exterior cross section of the wall outdoors, to the interior wall cross-section indoors. The considered configurations are:

I. Mineral wool, light-weight concrete and vapor barrier II. Light-weight concrete, mineral wool and vapor barrier III. Envelope film, VIP, envelope film and Light-weight concrete IV. Light-weight concrete, envelope film, VIP and envelope film

Evaluation of the vapor resistance is carried out for the given configurations based on measured values [4] of the Water Vapor Transmission Rate (WVTR), as shown in Table 2.

Table 2 The vapor resistances and corresponding water vapor transmission rates for the considered cases.

Case Z1 (s/m) Z2 (s/m) Z3 (s/m) Z4 (s/m) ZTotal (s/m) F (g/m2s)

I 200 6667 2 106 0 2.01 106 1.02 10-6

II 6667 200 2 106 0 2.01 106 1.02 10-6

III 200 2 106 100 2 106 4.00 106 5.14 10-6

IV 1000 2 106 200 2 106 4.00 106 5.14 10-6

From Table 2, it is observed that configurations III and IV (cases including VIP) are responsible for the lowest value of the flux density F. It is further evident that cases I and II, and cases III and IV respectively, result in exact the same flux value due to a fixed concentration difference at the boundaries and constant total vapor resistance for the aforementioned cases.

3.2 Thermal bridges

3.2.1 Computations with COMSOL Multiphysics©

In order to illustrate the influence of a thermal bridge on the heat transfer of a wall section, a two-dimensional calculation with different boundary conditions was actualized in COMSOL Multiphysics©. Two distinct temperatures for the interior and exterior of the wall, Tinterior = 20 °C and Texterior = -10 °C were used in the simulations. These temperatures imposed on the two sections implied that hinterior = 1/Rsi and hexterior = 1/Rse, where Rsi = 0.13 and Rse = 0.04. The temperature distribution and the total heat transfer for the four cases are shown in Figures 2-5. The interior heat transfer coefficient is given by hinterior while hexterior denotes the exterior heat transfer coefficient. Rsi further denotes the interior heat transfer surface resistance and Rse consequently denotes the exterior heat transfer surface resistance.

INTERIOR EXTERIOR EXTERIOR INTERIOR

EXTERIOR INTERIOR

Fig. 2 Temperature distribution (left) and total heat flux (right) for a thermal bridge under Configuration I, where floor and wall section consists of mineral wool and light-weight concrete [9].

Fig. 3 Temperature distribution (left) and total heat flux (right) for a thermal bridge under Configuration II, with mineral wool placed on the inside of the light-weight concrete layer [9].

Fig. 4 Temperature distribution (left) and total heat flux (right) for a thermal bridge under Configuration III, with VIP positioned as an external insulation and light-weight concrete as an internal layer [9].

INTERIOR

INTERIOR

EXTERIOR EXTERIOR INTERIOR INTERIOR

EXTERIOR INTERIOR

Fig. 5 Temperature distribution (left) and total heat flux (right) for a thermal bridge under Configuration IV, with VIP placed as an internal insulation [9].

3.2.2 Calculation of the linear thermal transmittance Ψ, with COMSOL Multiphysics©

COMSOL Multiphysics©, provides the total normal heat flux by means of integration at a boundary as the quantity ΦTotal. The linear thermal transmittance Ψ (W/mK) for the mentioned configurations is hence given by Table 3.

Table 3 Calculated values for Ψ from COMSOL Multiphysics©

Case U (W/m2K) h (m) ΔT (K) ΦTotal (W/m) Ψ (W/mK)

I II III IV

0.2285 0.2285 0.2117 0.2117

0.9 0.9 0.9 0.9

30 30 30 30

13.54 13.80 12.55 12.94

0.0400 0.0487 0.0373 0.0503

The thermal transmittance coefficient is denoted by U (W/m2K) and the height of the calculated building envelope is given by h (m).

3.3 Balconies and loggias

3.3.1 Supplementary insulation of balcony slabs Balcony slabs are good examples of thermal bridges. Past energy efficiency projects have considered it necessary to remove and replace these with new cantilevered balconies, or simply to extend the whole exterior wall outside the balcony, in order to break the thermal bridge effect. Vacuum insulation panels save considerable rentable floor space in wall thickness compared to conventional insulating materials, especially during redevelopment as they are much finer tools that can be used with greater precision and effectiveness when insulating large linear and point-shaped thermal bridges. In turn, this allows an effective insulation without lowering the architectural significance of the construction. In a recent study performed in Sweden with the main goal to evaluate the possibilities of energy refurbishment and the formation of additional architectural values, the possibility of insulating by attaching vacuum insulation panels mainly on the edge of a 200 mm thick concrete balcony was considered. The top and bottom of the balcony slab would tentatively be insulated with conventional insulation such as mineral wool.

EXTERIOR INTERIOR EXTERIOR INTERIOR

Fig. 6 Architectural drawing of a residential apartment complex with insulated balcony slabs [10].

3.3.2 Finite Element Analysis of supplementary insulated balcony slabs In this study Finite Element simulations were performed in order to demonstrate the interaction of VIP and conventional insulation materials. Based on this investigation, it is verified that by employing the preceding insulation method to the balconies, the linear leakage flow coefficient (linear thermal transmittance) Ψ (W/mK) at the connection to the exterior wall, is reduced by 50%. With moderate amounts of supplementary insulation this corresponds to about 0.6 (W/mK) compared to 1.2 (W/mK) in the present condition. The approximate energy saving ensuing from such an implementation is about 50 kWh per meter balcony connection. In addition, the risk of condensation on the inside and frost damage in the surrounding concrete will be reduced due to the balcony remaining dry and warm. Figure 7 illustrates the temperature distribution in the connection between the balcony and the exterior wall construction, with and without supplementary insulation. The refurbished solution in-cludes a balcony with 50 mm mineral wool insulation on top and bottom, while the outer edge is insulated with VIP with a thickness of 15 mm.

Fig. 7 Finite Element Analysis of supplementary insulated balcony slabs in the current state (left) and after supplementary insulation with mineral wool and VIP (right) [10].

4. Discussion The results obtained with COMSOL Multiphysics© in Table 3 exhibit that configurations II and IV have the highest values of the linear thermal transmittance Ψ (W/mK). It can also be deduced that if VIP is placed as an external insulation it can prevent high values of heat flow as shown by configuration III. Table 3 also outlines that the position of VIP as an internal or external insulation affects the value of the linear thermal transmittance. The validity of employed empirical formulas for the linear thermal transmittance Ψ, calculations in large solely encapsulate conventional build-ing insulation materials such as mineral wool. The employment of these empirical formulas to more advanced insulation materials such as VIP may therefore yield results outside accepted empirical ranges for empirical values on the linear thermal transmittance.

5. Conclusions A study related to more efficient insulation materials and in particular implementation of VIP has been presented. The usage of simulation software such as COMSOL Multiphysics©, has enabled the identification of advantages of employing VIP as a contender in building insulation. Subsequently, the results presented for various insulation placements have highlighted the importance of the physical order of these materials for optimum energy efficiency. It is also demonstrated that the effects of thermal bridges can be simulated with the above mentioned simulation software and an empirical formula. This study illustrates that residential buildings and multi-storey apartments can be optimized with regards to thermal insulation by means of one or more proposed solutions where high performance building insulations such as vacuum insulation panels are applied. This allows for an economic viable and sustainable solution obtained over a longer time period for the renovation and refur-bishment of a residential area.

6. References

[1] National Board of Housing, Building and Planning (Boverket), ”Så mår våra hus - redovisning av regeringsuppdrag beträffande byggnaders tekniska utformning”, 2009.

[2] BODEMO M., and MYHR P., “Termovillan – Självuppvärmande enfamiljshus med stora fönsterytor”, Technical report, 2006.

[3] THORSELL TI., “Vacuum insulation in buildings, Means to prolong service life”, Licentiate dissertation. Royal Institute of Technology, Stockholm, 2006.

[4] Annex39A/B, “Vacuum Insulation in the Building Sector, Systems and Applications”, HiPTI-High Performance Thermal Insulation, IEA/ECBCS Annex39 Report Subtask A/B, 2005.

[5] The European Union, Official Journal of European Union, “European Construction Products Directivity 89/106/EEC”, 2003.

[6] TENPIERIK MJ., CAUBERG JMJ., and THORSELL TI., ”Integrating vacuum insulation panels in building constructions: an integral perspective”, Construction Innovation, 2007, Vol. 7 No. 1, pp. 38-53.

[7] MAINKA GW., and WINKLER H., ”VIP – Vacuum Insulation Panels in Buildings”, RRTH Aachen, Technischer Ausbau, 2009.

[8] THORSELL TI., and KÄLLEBRINK I., “Edge loss minimization in vacuum insulation panels I.”, Proceedings of the 7th symposium on Building Physics in the Nordic Countries. 13-15 June, Reykjavik, Iceland, 2006.

[9] GOHARDANI N., ”Vakuumisolering vid byggnadsrenovering och tilläggsisolering”, MSc. Thesis, Royal Institute of Technology, 2010.

[10] ORRLING A., and LARSSON J., “Form & teknik vid upprustning av 60-/70-talshus”, Technical report (White and ÅF, Stockholm, Sweden), 2009.

Sustainable building process

Tarja Häkkinen Dr, Chief Research Scientist VTT Technical Research Centre of Finland Finland tarja.hakkinen@vtt.fi

Veijo Nykänen Customer Manager VTT Technical Research Centre of Finland Finland veijo.nykanen@vtt.fi

Summary

This paper defines and presents characteristic features of sustainable building process. The work was done within a Finnish national research project Sustainable Building Processes (SUSPROC). The objectives of the SUSPROC research project were to understand barriers and impacts, develop new working processes, develop new business models for sustainable building and develop effective steering mechanisms. The target of the paper is to describe the characteristics of sustainable building process with help of flow charts and with the focus on roles of different actors, decision making points, needed information and documentation, and relevant tools and models. The work was based on iterative processes and expert discussions and the usage of the results of SUSROC cases studies. The discussions of the expert panels resulted in the description of sustainable building process. The entire process was outlined to the following stages: sustainable customer briefing, sustainable programming, sustainable preliminary design, sustainable implementation, and sustainable use and maintenance.

The paper addresses important characteristics of sustainable building process. These include first of all the systematic requirement management, owner's commitment to sustainable building targets, the quality of requirements (performance based and measurable), ensuring the awareness of targets by all relevant actors, continuous monitoring of results, cooperation and designers' team work and good delivery and share of information.

Keywords: sustainable building, building process

1. Premise and target

The research project Sustainable Building Processes (SUSPROC) aimed at adopting new processes for eco-efficient building and sustainable built environment. The objectives were to 1) understand barriers and impacts, 2) develop new working processes, 3) develop new business models and 4) develop effective steering mechanisms for sustainable building. The premise of the work was that sustainable building is not hindered because of the lack of information, technologies and assessment methods, but because it is difficult to adopt new processes and working methods in order to apply new technologies. New technologies are resisted because those require process changes and unknown risks and not-foreseen costs are suspected. These hindrances can be reduced and overcome with help of seeking for efficient processes and understanding what kind of decision making phases, tasks and information, and new actors, roles and ways of networking are needed.

This paper introduces results of the SUSPROC project. The target of the paper is to describe the

characteristics of sustainable building process with help of flow charts and with the focus on roles of different actors, decision making points, information and documentation, and relevant tools and models.

"The sustainable development of buildings (and other construction works) brings about the required performance and functionality with minimum adverse environmental impact, while encouraging improvements in economic and social (and cultural) aspects at local, regional and global levels" (ISO 15392). This ISO definition is used here for sustainable buildings. The sustainable building process is defined as the overall quality of the process that enables the delivery of sustainable buildings. It is also defined here that the three main prerequisites for sustainable building are: the availability sustainable building technologies the availability of methods and knowledge for sustainable target setting, design, procurement,

monitoring and management of buildings the development of sustainable building processes and the adoption the new sustainable

building technologies, methods and working models.

2. Method

The research methods of the entire project were:

Critical review of literature, which analysed barriers and drivers mainly on the basis of academic literature

Web-based enquiry, which studied the viewpoints of Finnish building professionals about the most significant barriers

Interviews, which aimed at defining the needs for changes Expert panels and workshops, which described the characteristics, tasks and roles in

sustainable building processes Case studies. The cases studied the possibilities to improve the sustainable building processes

and the impacts and benefits of sustainable building.

The Table 1 lists the case studies of the project.

Table 1 Case studies of the SUSPROC project Case Issue View point 1 Planning of an ecological resi-

dential area Benefits from SB* End user, occu-

pant 2 Briefing of an office building

project SB process description Owner + user

3 Design-build process of resi-dential areas

Role of founder contractor in SB

Founder contrac-tor

4 Design process of a kindergar-ten

Use of indicators in target setting

Owner and de-signer

5 Management of building stock (private owner)

Modelling as a tool for sus-tainable management of building stock

Owner and de-veloper

6 Procurement process (HVAC system for an office building)

Setting life-cycle targets in procurement

Owner + supplier

7 The role of chief designer SB process description Designer 8 Energy performance regula-

tions for existing building stock Advantages and obstacles of steering

Authority and occupants

9 Financing Financing as a tool to main-stream sustainability

Investors and financiers

* SB = sustainable building

The work process for the description of sustainable building process was as follows:

The creation of the first generic draft for the description of sustainable building process The draft was created with help of an iterative process and with help of researcher panels which commented the first versions and finally created the first generic draft.

the creation of the specific process description (specific office building project) within the case study number 2 (summarised in Bakic et al. 2010 ) with help of the generic draft;

collection of all case study results and formulation of a summary of lessons learnt (Häkkinen 2011 and Häkkinen and Belloni 2011);

starting a new cycle on the basis of the first generic draft. The purpose of this new cycle was to improve the first generic version with help of the experiences received in case studies. The working method was an expert panel, which developed the final version of the sustainable building process description with help of the material received in the project and with help of expert discussions.

On the basis of the results of the whole project the following issues are important in Finland for sustainable building (Häkkinen and Belloni 2011):

the need to increase the expectations and demands of, and awareness by end users (both occupants and owners) about the potential of sustainable building,

the adoption of methods for sustainable building requirement management, the mobilisation of (integrated) sustainable building tools, the development of designers team working, competence and the role of chief designer, and the development of new concepts and services.

3. Background - main process related findings of the project

From the view point of the description of sustainable building process the most important issue that was emphasized through the whole research project and in all cases studies, was the importance of requirement management (Häkkinen 2011). The owners should understand the user needs and interpret these as requirements for the building project. The owner should also be aware about the targeted life cycle impacts and address also these as requirements for the project. The requirements should be clear and as measurable as possible. All parties - like for example the whole design team - should be made aware about the performance requirements. The monitoring and possible updating of the requirements should be a systematic process which continues though the whole life cycle of the project.

The expert panel ended up in the formulation of the following conclusions:

It is highly necessary for the development of sustainable building processes that professional building clients and especially public actors develop and take in use effective methods for sustainable requirement management. Clients should be able to state requirements that are

performance based measurable and monitored and maintained during the whole process.

The findings of the case studies also emphasized the role of the design manager and the importance of team working. In spite of few for-runners, designers still lack wide competence in sustainable building. This is connected to the fact that designers lack effective and integrated sustainable building design tools. However, to overcome this barrier it is also important to improve professional education in the field of sustainable building. This requires the awareness of professors and the availability of research funding with help of which relevant master and doctoral thesis can be worked out.

It is also necessary that the clients that are committed to sustainable building pay attention to the competence and collaboration of the whole design team, and the competence of the chief architect and his/her ability to lead sustainable building design. In addition, it is necessary that the clients that are committed to sustainable building are also ready to compensate for new tasks and competences required from the actors of the sustainable building project.

The case studies showed that one of the roles that should be strengthened and developed in sustainable building is the role of the design manager. The current task descriptions and the juridical liability emphasize the technical aspects of the role. However, the increased needs for team working and simultaneous consideration of all design aspects, much stresses the importance of communication and interaction skills, leadership and wide substance related skills. The role of chief designer is important in creating team spirit, influencing and motivation. On the other hand, the demanding responsibilities are not in complete balance with the current power. One essential finding was that the design manager's tasks are not a list of performances but the most of the design manager's tasks are more like processes in their nature. The findings of the project with regard to the design manager's tasks are more discussed in (Rekola et al. 2010).

4. Description of sustainable building process

The discussions of the expert panel resulted in the description of sustainable building process. The entire process was outlined to the following stages:

sustainable customer briefing sustainable programming sustainable preliminary design sustainable implementation sustainable use and maintenance.

Sustainable building process is described with help of flow charts and with the focus on roles of different actors, decision making points, needed information and documentation, and relevant tools and models.

Figures 1 - 5 show the described stages of sustainable building process. The building process flowchart is a general description of building process of a medium sized project. The process flowchart works as a platform to be able to present key tasks, stages and decision points in sustainable building process. Background sources in the work included the following reports and books Häkkinen (2011), Kiviniemi (2005), Eastman (1999), Tanhuanpää et al (1996) and Dorsey (1997).

The following text explains and characterises the phases of sustainable building process.

Sustainable customer briefing

11.. Action plan The action plan is based on the business vision and strategy. Principles of sustainable development are written and interpreted in the organisation's vision and strategy. These principles may be originally introduced as principal goals of social responsibility and then expressed as targets in the action plan.

22.. Selection of consultants The selection criteria include the consideration of sustainable building references and the management sustainable building methods.

33.. Briefing The customer briefing aims at the description of the owner's and users' need for the spaces. This stage describes the coming needs based on activities and explains the basic solutions for fulfilling the needs. The background material for the customer briefing includes the organisation's vision about future activities, the strategy and the action plan. The stage results in the creation of the customer briefing document.

Figure 1 Sustainable customer briefing

44.. Definition of the location, volume and budget The first estimates about the sustainability of the different alternatives are done in this stage. The area and volume of spaces, the performance of the building and the access to services (for example the access to public transportation and the access to the pedestrian and bicycle ways) have an essential impact for example on the carbon footprint of the organisation. In addition to the preliminary budget assessments, also preliminary carbon footprint assessments are considered in the comparison of the basic alternatives. Either the selected consultant is able to carry out preliminary sustainability assessments or the process uses external assessment services. The following expertises are represented in this stage: the development of the organisation's activities, searching of spaces, and sustainable building assessment. The principal options considered are a) the acquisition of a new lot and a new building, b) the acquisition of an existing building (and its refurbishment when needed), and c) the development of the organisation's activities with help of which it may be possible to adapt oneself to the existing spaces. The stage results in the formulation of a document, which describes the assessment results for the alternative options.

55.. Definition of targets The targets are outlined into the following parts: 1) building performance, 2) environmental impact and 3) economical impact. The building performance is divided in to the following elements: indoor conditions, safety, adaptability, usability, accessibility, experiencing and aesthetic quality, maintainability and service life. Sustainable building process sets such targets for spaces that correspond to the user purpose and user

needs. The life cycle targets are adequately high level targets to which the organisation is able to commit. When the project receives a positive decision, this stage ends up in the formulation of the target definition document.

Figure 2 Sustainable programming

Sustainable programming

The documents of customer briefing create a starting point for sustainable programming and acquisition planning.

11.. Definition of targets Customer requirements form a guideline for the whole programming process. Programming consultant control the process by documented customer requirements. If later, solutions don’t meet the requirements, it’s necessary either to correct plans or to document adjusted goals as new goals for the next process phases.

22.. Alternatives and estimating Space program, alternatives for acquisition, cost estimates and simulations and specified goals (facility management, opportunities and limitations of design solutions and other clarifications) and comparison between goals and results are essential part of sustainable programming. Finally a reasoned choice can be made by the most potential alternatives in order to start design.

The result of programming is a program statement and a conclusion of the remaining options.

33.. Real estate management objectives In Real estate management objectives included viewpoints are impacts on performance, environment and economy (return value).

44.. Program specification Customer requirements are checked and transferred to program specification document.

Sustainable preliminary design

The main issues presented in the building program and specifications include goals for sustainable construction and summary objectives.

11.. Design team selection criteria Design team selection criteria are defined on the basis of program goals. Criteria are requirements of sustainable building process. The starting point is performance thinking, where the owner presents performance goals including environmental and economic viewpoints without limiting design solutions.

22.. System-level design The first design level is building system design, where collaborative design and planning are essential and all design expertise is needed.

33.. System-level design and validity estimates The design is evaluated and controlled by results. Users participate in providing feedback on plans.

44.. The result The result is system-level design solutions, performance goals and validity estimates.

Figure 3 Sustainable preliminary design

Sustainable implementation

Sustainable implementation is carried out in accordance to the building programme and specifications and system design, which states the target levels and assessment results.

Figure 4 Sustainable implementation

11.. Dimensioning and selection of products After the system level design, the design goes on by dimensioning, calculations and the

selection of products. The selections are based on the assessment results of the alternatives. Design-Build and Design-Build-Operate implementation models have best support the process of sustainable building. In those cases the significance of supervising in detailed design and in implementing of targets is diminished during the process. It is essential that the fulfilment of targets can be verified from the final outcome. It has to be possible to distinguish the influence of users when the final result is assessed.

22.. Drawings and specifications of systems and the building Detailed design results in the creation of the design (building model, BIM), its assessment result and the construction specification. The approval of the design and the building decision and the time point of these decisions depend on the implementation model.

33.. Construction specification The construction specification defines the targets and thus completes the design. It guides the sustainable design of implementation. At the same time this is an up-dated document of building programme and it includes the possible (reasoned) changes of targets that have been made during the preliminary design. The construction specification states the site specific environmental and social targets in addition to the performance targets and environmental and economical targets of the building.

44.. Purchasing rules Specific criteria are defined for actors and for purchasing. The criteria cover also the maintenance stage. The criteria cover the functionality of systems, service life, care and maintenance, and environmental impacts based on assessments.

The building level targets on interpreted and concretised with regard to actors and purchasing on different levels. Service life requirements, care and maintenance requirements and environmental and economical requirements are derived from the system level performance requirements.

55.. 5A. Monitoring and verification of performance The realization of targets is monitored continuously When needed the changes of targets are written to the construction specification (which includes the description of targets). The targets are kept up-dated all the time and the continuous understanding of the targets is ensured.

5B. In this stage the building is adjusted to correspond to the user needs. The training of personal is also started.

66.. Building model The stage results in the completion of the building and its model. In addition, the guidelines and instruction of care and maintenance are created as an outcome. The instruction includes the target levels of performance.

5 Sustainable use and maintenance

Buildingauthorities

Specialist and tradecontractors

Primecontractor

MechanicaldesignerStructural designer

PrincipalDesigner

Architecturaldesigner

Project managerOthers

consultants

Owner

Users

Commisioning planUser instructions

Users’ operations

Feed back

Monitoring real estate indicatorsPerformance levels

Service andmaintenance

SBPerformance

evaluation

To correct defects and faults

Adjust checks

To correct defects and faults

To plancorrective

actions Analyse

Analyse

Analyse

Analyse

Analyse

Corrective actions

Corrective actions

Corrective actions

Corrective actions

Compliancein SB goals

Verification

Verification

Verification

Verification

Corrective actions

Economic liquidation

1

2

4

3A new

estimate for space needsand change

requirements

Space need?UpgradingThe operation plan

User trainingUser servicesPerformance standards

1

3

4

4

4

43

34

5

5

5

Safety inspection

Figure 5 Sustainable use and maintenance Sustainable use and maintenance

Sustainable use and maintenance is managed by plans and instructions from the previous phase, which include performance targets.

11.. Training User training is the first task. User training ensures that Facility Management personnel and users know performance targets and user impacts on property performance.

If the use deviates from the planned, it’s necessary to write new instructions and performance targets based on update estimates and simulations.

22.. Warranty inspection

33.. Continuous monitoring Performance targets and measured values are monitored and building performance is controlled to meet owner’s and users’ needs and the target level of sustainable construction. User feedback is collected at the same time.

44.. Corrective actions If necessary, analysis and corrective actions will be done.

55.. Upgrading the operation plan and a new space need When owner’s operation plan has been changed a lot, a new space acquisition process will be started again by a new sustainable briefing.

Experiences from the previous space acquisition will be used in the next acquisition process aimed at continuous improvement.

5. Conclusions

On the basis of the sustainable building process description, the central issues in a sustainable building process are

1) that the tasks of target setting assessment of results versus target up-dating of targets inclusion / interpretation of targets in all subsequent documentation continue through the

whole process. Target setting is not a single task but it forms a continuous chain of tasks through the whole process.

2) that it is always about comparing the options which starts from assessing the options of new site and new building refurbishment development of activities.

3) that is continuous Sustainable building process does not end to the completion of a new building or refurbishment project but it continuous through the whole life cycle of the building in terms of taking care that the needed performance is maintained and the required life cycle impacts are not exceeded. Finally, the owner and the users may end up in a situation were they start to rethink the options of new building, refurbishment and change / development of activities.

6. Acknowledgements

This paper presents part of the overall results of the Finnish national research project Sustainable Building Processes (SUSPROC 2010). The corresponding author was the coordinator of the research project. The objectives of the SUSPROC research project were to understand barriers and impacts, develop new working processes, develop new business models for sustainable building and develop effective steering mechanisms. A number of VTT's researchers participated in the SUSPROC seminars and expert workshops. Valuable comments were received especially from Mr Jari Shemeikka, Mr Pekka Huovila and Mrs Tarja Mäkeläinen.

7. References

[1] BAKIC K., KASTE K., LEHTINEN T. and STORMBOM S., SUSPROC Kestävän rakentamisen prosessit Case SYKE [SUSPROC sustainable building processes - Case SYKE]. 19.3.2010. Aalto University. Helsinki Technical University, SimLab-Resarch Institute. 2010.

[2] DORSEY R., Project delivery systems for building construction. AGCA 1997. [3] EASTMAN C., Building product models. Computer environments. Support design and

construction. CRC Press, New York 1999. [4] HÄKKINEN T. and BELLONI K., Barriers and drivers for sustainable building. Building

Research and Information. Volume 39, Issue 3, 2011, pp. 239 - 255 [5] HÄKKINEN T., ed. Kestävän rakentamisen prosessit [Sustainable building processes]. VTT

Research Notes 2572, Espoo 2011,100 p. + App. 3 p. [6] ISO 15392. 2008-05-01. Sustainability in building construction - General principles. [7] KIVINIEMI A., Requirements management interface to building product models. CIFE

Technical Report 161. 2005 Stanford University. [8] REKOLA M., MÄKELÄINEN T. and HÄKKINEN T., The role of design manager in sustainable

building process. Manuscript sent to ... [9] SUSPROC http://virtual.vtt.fi/virtual/environ/susproc_e.html. [10] TANHUANPÄÄ V.-P. and LAHDENPERÄ P., Rakentamisprosessin malli. VTT tiedotteita 1768.

Espoo 1996.

Five years later: revisiting the construction client as change agent

Kim Haugbølle Senior Researcher, PhD SBi/AAU – Danish Building Research Institute, Aalborg University Denmark khh@sbi.dk

Researcher Ib Steen Olsen, SBi/AAU – Danish Building Research Institute/Aalborg University, Denmark, iso@sbi.dk Senior Researcher Peter Vogelius, SBi/AAU – Danish Building Research Institute/Aalborg University, Denmark, pev@sbi.dk

Summary This study will analyse how the lessons learned from participation in a sustainable development project some five years ago is implemented and sustained over time in a social housing company. Sustainable refurbishment of the existing building stock requires the implementation of new procurement strategies and methods in order to succeed. The issue of developing sustainable procurement strategies and methods were addressed by a group of social housing companies within the European project SUREURO (Sustainable Refurbishment Europe). But what became of the results? This study draws on business strategy analysis and is based on the combination of three sets of methods: A re-analysis of existing documentary material from the SUREURO project along with qualitative research interviews with previous project participants in one of the national pilot projects. This article will report on the preliminary conclusions of the study that will be finalised in spring 2011. Thus a revised version will be provided for the final paper submission. In conclusion, this paper has illustrated the problems of embedding new sustainable procurement policies and practices in a construction client organisation. First, although the social housing company has aligned itself with its environment on sustainability, other political agendas on e.g. privatisation may be more important to align with. Second, the absence of a concerted and comprehensive strategy hampers the process. Third, the autonomous internal decision-making processes may crumble the ability of a construction client to act as a change agent in construction.

Keywords: Innovation, Procurement, Strategy, Client, Organisation, Housing

1. Introduction The construction and real estate cluster has significant environmental impacts for example with respect to energy consumption, use of raw materials, waste generation and health issues. A number of public policies have been implemented in the European countries to reduce the environmental impact for example with respect to energy consumption (see e.g. [1] and [2]. Despite the importance of these public policies, it has also become clear that further actions from the construction and real estate cluster itself are necessary to achieve the desired goal of sustainability. However, the construction industry is often accused of showing a low level of innovation (see e.g. [3]). In response, policy makers, the AEC (Architectural, Engineering and Construction) industry, clients and researchers have called for the construction client to become a change agent that can stimulate a sustainable transformation of the construction industry for example by using procurement as the driver of innovation (see e.g. [4]).

Fig. 1 Putting strategy in its place according to [3] (p. 53).

These calls have manifested themselves in various forms like governmental building policies for public clients in e.g. Denmark and the Netherlands, the revaluing construction initiative of CIB and the establishment of the International Construction Clients Forum (ICCF) as well as a similar network for public real estate owners (PURE-net). Along with these calls for action the research interest on the role of construction clients as change agents have increased (see e.g. [5] and [6]). But little is still known about how clients in practice can make a difference as change agents. If clients are to act as change agents towards a sustainable built environment, they will need to rest their policies and actions on firm ground rather than loose sand. Thus, sustainable refurbishment of the existing building stock requires new procurement strategies and methods in order to succeed. More specifically, two challenges needs to be addressed (see e.g. [7] and [8]): – From traditional refurbishment to sustainable procurement strategies – making a sustainable

difference. – From business-as-usual to change management – implementing new ideas and sustaining

change etc. In the major European research and development project SUREURO (Sustainable Refurbishment Europe), the issue of developing sustainable procurement methods and strategies were addressed by a group of social housing companies. The SUREURO project was concluded more than 5 years ago, but what became of the results? The purpose and scope of the actual case study is to analyse how a social housing company has implemented their experiences and knowledge gained from participating in a research and development project and sustained these over time.

2. Methodological framework According to [9] an abundance of frameworks for analysing strategy processes have been provided the last 30 years; however, what has been missing in the debate is guidance as to what the product of these frameworks should be – and more fundamental, what actually constitutes a strategy. The main point of critique is that the use of specific strategic tools tends to draw the strategist toward:

"…narrow, piecemeal conceptions of strategy that match the narrow scope of the tools themselves. For example, strategists who are drawn to Porter’s five-forces analysis tend to think of strategy as a matter of selecting industries and segments within them. Executives who dwell on “co-opetition” or other game-theoretic frameworks see their world as a set of choices about dealing with adversaries and allies." (p. 51).

Rather, strategy should be seen as an integrated set of choices that stand apart from a catch-all conception of strategy as every important choice an executive officer faces in his work. Strategy is concerned with how a business intends to engage its environment, so choices about internal organisational arrangements are not part of strategy and neither are well-known concepts such as mission and objectives. These should rather be viewed as standing apart from and guiding the strategy. Thus, [9] provide us with the following illustration to put strategy in place (see Figure 1), which we will use as basis for our analysis of the housing company.

Fig. 2 The five major elements of strategy [3] (p. 54).

Arguing that a strategy has five basic elements, [9] provide a framework for strategic processes that provides answers to the following five core questions (see Figure 2):

– Arenas: Where will we be active? – Vehicles: How will we get there? – Differentiators: How will we win in the marketplace? – Staging: What will be our speed and sequence of moves? – Economic logic: How will we obtain our returns?

Thus, the model will enable us to discuss and assess the strategy of the social housing company from outside a specific delimited theoretical or economical perspective and instead focus on the strategy of the social housing company as an integrated, mutually reinforcing set of choices that forms a coherent whole.

In the Discussion chapter we will return to this framework in order to address six criteria for assessing the coherence and adequateness of the strategy. This case study is based on the combination of three sets of methods: First, the extensive documentary material from the SUREURO project will be re-analysed. Second, a number of qualitative research interviews have been conducted with previous project participants in the Danish national pilot project. Third, we will draw on the experiences gained by one of authors of this article, who was also involved in the SUREURO project. This article will report on the preliminary conclusions of the study that will be finalised in spring 2011. Thus a revised version will be provided for the final paper submission.

3. Setting the scene 3.1 About SUREURO – Sustainable Refurbishment Europe In Europe, more than 170 million people are living in some 80 000 post-WWII residential areas with about 56 million flats, which have been built from 1950 onwards. The need for refurbishment was and is enormous. Following a successful sustainable refurbishment project in the mid-1990s, the Swedish social housing company Kalmarhem took the lead on initiating SUREURO. The interest among other European social housing companies was compelling. With a total budget of close to 10 Million Euro, the four-year research and development project SUREURO was launched in 2000 partly funded by the European 5th Framework Programme within the action of City of Tomorrow [10]. The objectives of the SUREURO project were: – To provide housing organisations with practical management tools for integrating sustainable

development and tenant participation in their refurbishment management process without exceeding the normal costs for the tenants.

– To develop systems and methods for construction companies, designers, architects and engineers; models for better planning, design and technical specifications of refurbishment projects.

– To test and implement new, flexible technical concepts for sustainable transformation of existing housing areas. The result is a unique and innovative system for the total process, tested and implemented in twelve projects in nine different countries.

The SUREURO project included twelve housing organisations from nine countries: Sweden, Denmark, Finland, the Netherlands, United Kingdom, France, Germany, the Czech Republic and Italy. The consortium also included fourteen research organisations, one sub-national authority, two consultancy companies and two construction firms, who collaboratively worked on the twelve national pilot projects. 3.2 About the social housing company AKB Boligselskabet AKB s.m.b.a. (Limited Liability Company) was a Danish non-profit social housing association with some 17,000 rented homes in the metropolitan area of Copenhagen. AKB was established in 1913. Around 2000 AKB had some 280 employees, of which 90 worked in the central administration and 190 worked locally as managers and caretakers in the individual residential areas. AKB provided management services to 10 local social housing associations consisting of about 80 autonomous estates. By 1 January 2007 AKB merged with another social housing company KAB – Bygge- og Boligadministration s.m.b.a. to form the new social housing company KAB [11]. The newly formed housing company rents out some 50,000 homes in the metropolitan area of Copenhagen. The information below is generally applicable to all social housing company, since they all have to comply with the same national regulation of their activities. Each estate in a social housing company has its own tenants' board. Each board of tenants has at least 3 members, elected at annual meetings. The local associations elect members to the board of the housing company (the administration company). This board draws up the policy framework for overall company management. The tenant representatives and staff from the housing company collaborate to decide on objectives, overall strategy and policies for information to the tenants, employees' etc. Social housing companies also develop training programmes for tenants and employees. At the local offices, the employees work with the management of the local estate and prepare the budgets and accounts for the estates. A social housing company include several functions like management, financing, administration, information systems and so on. 3.3 About the pilot project Taastrupgaard The Danish pilot project of SUREURO was the residential area Taastrupgaard [12]. Taastrupgaard is situated 20 km west of the city of Copenhagen, and it was built in 1970-1972. The area consists of 8 blocks 4 storeys high, which are built together to form a 700 m long main building. Further, the

area houses 31 detached blocks each 3 storeys high. All in all, the residential area comprises some 1,000 tenancies plus 53 garages and 3 tenancies for commercial use. The total floor area is 83,547 m2 with an outdoor area of about 150,000 m2. 40 employees are taking care of the residential area. Some 2,500 people live in Taastrupgaard of which about 45 % is under 25 years. Half of the tenants hold Danish citizenship, and more than two-thirds of the tenants are immigrants or descendants of immigrants from non-Western countries. The area is marked by a number of social problems linked to the mixed composition of the tenants: people on low incomes or social benefits, unemployment, mental illness, drug and alcohol abuse etc.

Fig. 3 View of Taastrupgaard. Photo: Kim Haugbølle

The main construction system consists of prefabricated concrete elements. The architectural expression is very monotonous. The buildings are worn down. Due to the heavy wear and building defects dating back to the original design of the buildings, the residential area underwent comprehensive refurbishments in 1981-1983 and again in 1985-1991. The pilot project became part of the third comprehensive refurbishment to start in 2002. At the outset, nine development projects were defined in the Danish pilot study Taastrupgaard as part of SUREURO. Due to practical circumstances and financial constraints, the number of projects was later reduced to seven sustainable development projects. The seven development projects included: – Declaration of building materials – sustainable owner demands to building process, construction

and materials. – Development of new bathrooms. – Development of low energy out door light systems. – Natural ventilation system. – Sorting and treatment of waste. – Information strategies and direct influence by the tenants. – Establishment of green jobs on the estate.

4. Revisiting a social housing company as change agent 4.1 At which fields will the client be active? Judged by the social, cultural, economic and environmental dimensions of sustainability, the social housing company AKB had years of experience with sustainable development before entering SUREURO. For a number of years, affordable housing, tenants’ democracy, energy and water savings in buildings etc. had been an integral part of the daily and political practice of housing companies in Denmark. Even before entering SUREURO, the housing company AKB had an environmental policy as part of its vision, mission and action plans. However, the environmental policy was not considered to be comprehensive. Thus, the housing company decided to develop a new environmental policy for the period 2003-2005. During 2001 the housing company developed a proposal for a new environmental policy. In early 2002, the proposal was presented at the annual assembly of the housing company and adopted as new policy. The environmental policy covered 7 areas that were not only addressing the physical environment but also development of new attitudes, tenants’ involvement, environmental accounting, partnerships etc. The 7 goals of the environmental policy were broken further down to another 16 concrete measures to be taken by the social housing company. The seven goals of AKB were [13]: – To work for an increased focus on sustainable planning and development of urban and

residential areas. – To inspire tenants and employees to be environmentally conscious in the everyday life. – To include sustainability in building and refurbishment activities. – To continue to work for a resource efficient organisation. – To further develop environmental accountancy. – To develop local partnerships to ensure sustainable development and profiling of residential

areas. – To emphasize the use of new technology in the housing sections in order to create new services. Along with the development of the new environmental policy, the top management decided to initiate a development project in relation to the national pilot project Taastrupgaard with the purpose of developing a new environmental guideline to be used in future refurbishment projects. Thus the housing company hired a consultant company to develop the environmental guideline. During an intensive period of less than 3 months in the late summer and beginning of autumn 2001, the development of the guideline took place. The work was undertaken in close cooperation with a group of employees from the housing company and participants from the other Danish partners in the SUREURO project along with researchers and consultants working on associated development

projects in Taastrupgaard. Based on the principles of environmentally sound design [14], the environmental guideline set out to describe how AKB as a construction client could integrate environmental concerns in its procurement of refurbishment projects. First, the environmental guideline contained a survey of information sources and a general survey of existing initiatives, tools, procedures and barriers to the inclusion of environmental concerns in refurbishment projects. Second, the environmental guideline described the environmental targets, procedures for choosing measures to be taken, and requirements to the process of planning, designing and executing the refurbishment project. Four prioritized targets were set and for each of the four targets, a detailed list of specific measures was suggested. The four targets were: – Indoor climate. – (Hazardous) waste. – Energy consumption. – Resource consumption including consumption of materials during refurbishment, water

consumption during operation, and noise and vibration during refurbishment. 4.2 How will the client get there? With the new environmental policy and guideline, the housing company had strengthened its strategic and tactical orientation. Legitimacy for an improved sustainable effort had been granted from the general assembly, targets had been set for a new course of the housing company, and some of the elements of the environmental policy and guideline had been turned into practice. They were used as an environmental brief in relation to procurement of products and services from consultants and contractors. Moreover, the environmental policy and guideline was expected to provide the housing company with a competitive advantage, when the housing company entered into tenders for the role as client on new social housing projects. 4.3 How will the client win? The feasibility tool developed within the frame of SUREURO was praised as a critical tool that would make it possible for the housing company to identify problematic trends in a residential housing area well in advance in order to take the necessary steps to counteract an unwanted development. With the analysis conducted by using the feasibility tool, the housing company would be able to address problematic trends before they actualised as problems. This in turn was believed to improve the image of the individual residential housing areas and more overall the image of the housing company as such. 4.4 At what speed will the client proceed? At the closure of the SUREURO project, the social housing company formulated its ambition on the implementation of the results from the project. In sum, these included [7]: – To convert the SUREURO specific tools in to a Danish, operational and practical version. – To train staff due to implementation of knowledge and tools obtained during the last 4-5 project

years. – To further develop some of the tools. AKB will create a prioritised list of relevant tools. – To continue contact and project relations with some of the contacts and partners. – To write down our experiences during these years, in order to investigate the experiences into

depth, and for the purpose of implementing new working methods in the organisation. – To study some of the concrete inspirational examples (e.g. 3-liter house from Germany) in more

details in order to learn from these and implement lessons learned in new cases in AKB. – To share some of the experiences and lessons learned with other housing companies in

Denmark through existing networks in Denmark. At what speed the client wanted to proceed with the implementation and further development of SUREURO tools and methods is very difficult to assess, since there was not a very explicit action plan in place at the end of the development project besides the above formulated ambitions. What actually did happen after the closure of SUREURO is under investigation.

4.5 How will the client obtain returns? Since AKB/KAB is a non-profit housing company, the issue of obtaining returns on investment is somewhat different from a pure market-oriented firm for which the analytical framework by [9] was originally developed. Still, the housing company is facing two main challenges when it comes to economic return on investments. First, the social housing company is competing not only with other social housing companies but also private property owners on attracting tenants as well as private property market of home-owners. Second, the social housing company has to finance all of its activities in the individual residential areas on a balance-of-cost basis, which means that the social housing company is not generating a profit for investors but still needs to generate an income to finance its activities. The same principle of balance-of-cost also applies to the individual residential areas, where the tenants’ representative in the tenants’ board and at the annual meeting will have to sanction rent increases or not. Thus, the social housing company can on its own not initiate costly refurbishments without the explicit consent of the tenants.

5. Discussion The overall criteria for the evaluation of the strategy of the housing company are consistency and adequateness. Consequently, [9] proposes that it is insufficient to simply make five sets of choices regarding arenas, vehicles, differentiators, staging and economic logic. Thus, some strategies are clearly better than others, and to test the quality of the strategy the following key evaluation questions can be applied: 1. Does your strategy fit with what’s going on in the environment? 2. Does your strategy exploit your key resources? 3. Will your envisioned differentiators be sustainable? 4. Are the elements of your strategy internally consistent? 5. Do you have enough resources to pursue this strategy? 6. Is your strategy implementable? According to [9], the six key evaluation criteria are an extraction of the most powerful messages of a wealth of strategy-analysis tools that have been developed in the past 30 years, being such tools as industry analysis, technology cycles, value chains and core competencies (p. 61). We will consider each of these in turn below. As for the moment, the points made below are still to be considered as preliminary conclusions that require further substantiation as the study is finalised in the coming months. 5.1 Does AKB's strategy fit with what is going on in the environment? The sustainable strategic orientation of the social housing company is well in line with both national and international policies on sustainability as well as with policies on the construction client as a change agent. 5.2 Does AKB's strategy exploit their key resources? Whether the strategy of the social housing company exploited its key resources over time may be judged along two dimensions. First, knowledge is in general personified and carried by individuals. At the end of the SUREURO project, the project manager lost her heart to another participant in the SUREURO project and decided to move to United Kingdom. Thus, the social housing company lost one of its key personnel resources and with her also the intimate knowledge and insights gained in the development project. Further, the close working relation with the research and consultancy group evaporated after the project closure. To the benefit of the housing company, this loss of key resources was partly counteracted by the institutionalisation processes of lessons learned in SUREURO most notably through the environmental policy. The other dimension is related to the acquisition of new key resources. Partly by chance, partly by design the social housing company got access to a range of new key resources through the merger with another social housing company KAB Bygge- og Boligadministration s.m.b.a., which

was effectively put in place by 1 January 2007. KAB had for years been highly active and visible in the sustainable arena through participation in a number of predominantly Danish research and development projects. Through this participation, KAB Bygge- og Boligadministration had developed extensive knowledge and experience on sustainability. 5.3 Will AKB's envisioned differentiators be sustainable? One of the core differentiators of social housing companies in Denmark is their professionalism obtained and maintained through their very persistence in the market. Social housing companies have been around for decades and they have been executing refurbishment activities on a recurrent basis. Despite changes over time like outsourcing of consultancy tasks etc. they still hold considerably higher professionalism and competence-building on a general scale than most private clients on sustainable building and refurbishment (see e.g. [15]). The main question is whether social housing companies will stay in place as we know them. There has been a strong political pressure by the government to privatise social housing through selling off the flats. This political and ideological ambition of privatisation may turn out to be a serious threat towards the professionalism and the very existence of the social housing companies. 5.4 Are the elements of AKB's strategy internally consistent? The question implies that a strategy is in place. This assumption may be questionable in the case of AKB. A very overall plan or rather catalogue of ideas was presented at the closing of the SUREURO project (see Chapter 4.4 above). But there did not exist a fully formed strategy and action plan to be implemented in the housing company after the closure of the development project. Some of these ideas have been carried out, others not. However, the subsequent merger between the two social housing companies has potentially strengthened the policies and practices of sustainability (this is to be investigated in further detail). 5.5 Do AKB have enough resources to pursue this strategy? The issue of having enough resources to pursue the strategy touches on three dimensions: 1) access to resources, 2) linking business and project processes, and 3) agency or structural constraints. First, having or gaining access to resources, in particular finances, is crucial. The funding model of social housing is basically based on a balance-of-cost principle, which implies that refurbishment costs will usually be directly reflected in the rent level of the tenants. Each residential area is in principle a self-governed and self-contained financial entity. In certain cases like Taastrupgaard additional funding can though be achieved from the common savings fund (Landsbyggefonden) for extraordinary refurbishment, but the pressure on these funds is high. The housing company is not allowed to generate a profit, and the social housing company do not have any funds to distribute between different residential areas. Consequently, the social housing company will usually not have the opportunity to make increased or even aggressive investments in sustainable refurbishment due to their very sparse financial resources as a limited company. The second dimension relates to the mobilisation and use of knowledge on a continuous and recurrent basis. On one hand the professionalism and recurrent refurbishment activities of the housing company ideally provide the opportunity for continuous improvement of policies and practices. On the other hand, the project-based nature of construction often makes it difficult to link the business processes of the housing company with the project processes of the individual refurbishment project as pointed out by among others [16]. This is a problem that is further accentuated when it comes to linking development projects to specific refurbishment projects as pointed out by [17]. Thus, the development activities have a tendency to become drowned in the day-to-day project-oriented practices, which challenges the embedding of new procedures and practices internally. The third dimension relates to agency or structural constraints, or in other words, what is the open negotiation space for the social housing company to navigate within. Current regulation of the

Fig. 4 Summary of the strategy of AKB.

social housing sector in general is very tight and with limited degrees of freedom to navigate within. This regulation provides the tenants with certainty, transparency and influence through the legal rights on decision-making power, notably the extensive tenants’ democracy. The drawback is that the social housing company is left with rather limited degrees of freedom to act. 5.6 Is AKB's strategy implementable? Judging whether the social housing company is or can become a change agent for sustainable construction, will to a large extent rest on the ability for a social housing company to implement its sustainable strategies in the shape of environmental policies, supporting tools and procedures etc. For the clients to make a difference in construction they will need to turn their potential purchasing volume into buying power. Due to the dispersed and autonomous decision-making process of the tenants’ democracy of social housing in the individual residential areas, it may be difficult to align the various purchasing wishes into buying power. The social housing company itself is fully aware of the constraints (and benefits) imposed by the tenants’ democracy as well as the financing model of social housing. Thus, consultations, negotiations, information etc. or in short attempts to persuade the individual boards and annual meetings of the individual residential areas are constantly being practiced by the housing companies to ensure a sustainable direction of refurbishment projects. The outcome of this shaping process is not given in advance, since the sustainable ambitions of the individual autonomous residential area may be set high or low. Consequently, the double-edged sword of the tenants’ democracy is both supporting and hindering the turn of sustainable policies into sustainable practices.

6. Conclusion This study has analysed how a social housing company as construction client can act as a change agent in the construction and real estate industry cluster with respect to improving sustainability of housing provision. In Figure 4, we have illustrated AKB’s strategy according to the strategy model. Here the main findings from the preceding analysis are summarised in bullet points according to the five elements of the strategy model.

The study has shown that a social housing company as construction client may act as a change agent in order to improve sustainability in housing, but not all strategies and tools are equally successful and appropriate. A number of observations lead to five observations regarding how the construction client may act as change agent when it comes to making strategic choices on arenas, vehicles, differentiators, staging and economic logic. The appropriateness of the strategy of the social housing company in relation

to the overall mission and objectives can be judged along the following six criteria: – The strategy of AKB is well aligned with what is going on in the environment, but the broad

conception of sustainability is likely to be more narrowly focused on energy. – Despite the resignation of key personnel, some institutionalisation of environmental policy has

taken place and new resources have become available through the merger with another housing company.

– The political and ideological ambition of privatisation of social housing may turn out to be a

serious threat towards the professionalism of the social housing companies. – A catalogue of development ideas has been provided, but we do not see a coherent strategy

and action plan unfold to ensure sustainability in the housing company. – Pursuing the strategy depends on the ability of the housing company to 1) gain access to

resources, 2) linking business and project processes, and 3) expand agency to circumvent structural constraints.

– The dispersed and autonomous decision-making process of the tenants’ democracy in the individual residential areas makes it less likely that a social housing company can turn their purchasing volume into buying power, which may transform the construction industry.

In conclusion, this paper has illustrated the problems of embedding new sustainable procurement policies and practices in a construction client organisation. First, although the social housing company has aligned itself with its environment on sustainability, other political agendas on e.g. privatisation may be more important to align with. Second, the absence of a concerted and comprehensive strategy hampers the process. Third, the autonomous internal decision-making processes may crumble the ability of a construction client to act as a change agent in construction.

7. Acknowledgements The paper has been written within the framework of the Nordic research project “SURE: Sustainable Refurbishment – lifecycle procurement and management by public clients” (2009-2011). The project is carried out in collaboration between the Danish Building Research Institute/Aalborg University (Denmark), Multiconsult AS and NTNU (Norway), VTT (Finland) and the Innovation Center Iceland (Iceland). The authors gratefully acknowledge the financial support given by NICe (Nordic Innovation Centre), TEKES and the Danish Enterprise and Construction Authority. The authors would also like to thank all clients for valuable discussions and inputs as well as making case material available for investigation.

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B. (2008). Miljøstyret bygningsdrift i danske boligejendomme – under forskellige ejerformer. Hørsholm: SBi 2008:15.

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Procurement and sustainability in construction works – two cases of construction works projects with sustainability demands regarding the

phase of procurement

Urban Persson PhD Pedersen&Persson Project and Env Management Sweden pedersen.persson@ telia.com

Summary The construction sector is complex and fragmented and has, therefore, a tendency to resist change to becoming more sustainable. Clients and project managers are facing barriers to implement sustainability, e.g. lack of pro-active sustainable measures, conflicts in real and perceived costs and inadequate implementation expertise. One major measure to handle and to be more pro-active by the client is in the phase of procurement of a project, both regarding the design team and concerning the contractor. This paper examines two case studies within the process of construction works, but at the opposite ends of the process; a procurement of contractors for an exploitation project and a procurement of a contractor for dismantling of a former power station. The case of the exploitation project shows a need of a very carefully performed specification of land use and design specifications with clearly formulated contracting conditions. The case in question failed to reach a reasonable level of sustainability because of lacking triple-bottom conditions and holistic approach. The dismantling project proved to be a good example of procurement of a construction project with an acceptable level of sustainability. This was done by stringent demands of specified verifications and with prioritizing of administrative regulations including sustainability demands compared with other procurement documents.

Keywords: sustainability, construction works, procurement, case studies

1. Introduction The construction sector is of a complex and fragmented nature and has, therefore, a tendency to resist changes leading to more sustainability [1], where sustainability involve issues of balancing economy and social development with ecological considerations. This is called the ‘triple bottom-line’ and is an expression of these complementary parts of sustainability [2] [3] [4]. Construction is also a complex task with a number of different actors each having different interests in dealing with multiple activities during a specific timeframe requiring the right level of quality to a specific cost on a given site [5]. The possibility to change the outcome of the product (i.e. the building) during the construction process decreases considerably with time. The work is undertaken by a project based organization, i.e. the work start from zero on a new site with new combinations of performers and, although having a common goal, the building. The uniqueness of construction works can be of two kinds: the product and the site where the building is situated. The site or the location of use of a building is a key variable of design and management decisions [6]. When the building addresses aspects such as energy use, indoor climate and material productivity, the site of a building addresses aspects on both local and regional levels. Examples of local aspects are urban microclimate, accessibility to neighbourhood

buildings, security and local biodiversity. On the regional level there are examples of aspects as community demands, transportation systems, air quality, public health and emergency preparedness. Sustainability in construction works could be interpreted in many different ways. The term covers a broad and complex interaction between involved stakeholders, aesthetic, and functionality and material interactions. Construction itself could imply everything between site-specific activities to the creation of human settlement. Sustainability, on the other hand, should imply a holistic view, “the whole is more than the sum of its parts” with relationships and interactions between humans, society, the biosphere, economy and the state of technology [7]. In this complex framework, it is the client/owner/developer, as the responsible performer of activities who has the main responsibility concerning construction works and the obligation to commit sustainability [8]. The client and the management team of a sustainable construction work project should therefore consider the entire process from an early design stage towards the final product, and the benefits and negative impacts regarding the triple bottom-lines of sustainability that are to be expected during the lifetime of the final product. With regards to the social aspects, it appears that information between the stakeholders in a construction project is one essential missing part, especially regarding complex relationships and interactions related to sustainability issues [9]. This means that it is important for the project management team to clearly and openly evaluate all possible options to obtain the project purpose with respect to the relevant sustainable issues from the perspective of the project stakeholders There are relatively few examples of good practice regarding sustainability in mainstream construction. It seems that clients and project managers are facing barriers to implementation. Williams and Dair [10] found at least 12 barriers to implementation, the most common were being lack of pro-active of sustainable measures, conflicts in real and perceived costs and inadequate implementation expertise. One major measure to handle and to be more pro-active by the client regarding sustainability is in the phase of procurement of a project, both regarding the design team and concerning the contractor. 2. Method approach and definitions This paper examines two case studies within the process of construction works, but at the opposite ends of the process: a procurement of contractors for an exploitation project and a procurement of a contractor for dismantling of a former power station. The outcome of the procurement documentation was then evaluated regarding the proportion to sustainability in construction works set by the nine principles of ISO 15392 [11]. To make the evaluation, a model approach was used with respect to client desired level and perspective of sustainability, STURE (stakeholder-urban evaluation model) according to the modified version by Persson [12]. Because of the special legislation regarding competition and public procurement in EU, the paper do not include public procurement. It also only regards the client perspective in the procurement phase. Further on, when referring to the triple bottom-line of sustainability, the parts are considered on an equal level [11] [13] [14] .

2.1 Definitions Stakeholders are defined in this paper according to Olander´s [15] “..as individuals and organizations who are actively involved in a project, or whose interests may be affected by the execution of a project ..”. It could be any individual or group with the power to be a threat or a benefit to a project. The stakeholders can be divided into internal and external [16]. Internal stakeholders are those who are members of the project coalition or who provide finance; the external stakeholders are those others affected by the project in a significant way [17]. Environmental management system, EMS, is defined as in the international standard of ISO14001 [18]. Hazardous waste is defined by waste of environmentally hazardous components and substances regulated by national legislation. Dangerous waste is other environmentally hazardous waste not regulated by national legislation

The nine principles of sustainability in the international standard of ISO 15392:2008 [11] are: 1. Continual improvement – improvement of all sustainability aspects over time adapted to

construction works including performances and processes. It addresses methods or means of assessment, verifications, monitoring and communication,

2. Equity – includes the consideration of intergenerational, interregional and intra-societal ethics including the triple bottom-lines,

3. Global thinking and local action – when acting locally consider global consequences and when applying global strategies consider local implications,

4. Holistic approach – includes all aspects of sustainability when considering or assessing sustainability in construction works and regarding the whole life- cycle,

5. Involvement of interested parties – involvement of stakeholders in relation to their importance, responsibility and timing,

6. Long-term consideration – taking in account of short-, medium-, and long- term implications in decision making, including performance over time, life- cycle thinking and legacy impacts (the impacts as a result of a development),

7. Precaution and risk management – the precautionary principle adapted to construction works such as avoidance of risks through risk management, i.e. risk assessment, risk treatment, risk acceptance and risk communication,

8. Responsibility – comprises the moral responsibility for actions carried out, and 9. Transparency – information in an open, comprehensive and understandable way with

traceable underlying data and verifiable credibility, e.g. information about products and decision-making processes.

Finally, the expression construction works is used according to the definition in ISO15392 [11]. 3. Case study A – Exploitation project Between a land developer and four main contractors, an agreement of cooperation was made concerning exploiting a part of developer owned ground for future resident buildings. The four main contractors were allotted by the developer to the main part, but there were two minor parts left to other contractors to build student flats, flats for rent, social housing and a kindergarten. A procurement to allot these two parts was announced by the developer. The chosen contractor was allowed to develop the part as a client in accordance with its proposal and an exploitation agreement between the contractor and the land developer. Contractors that previously had announced their interest to the land developer were requested to participate in the procurement. About a dozen contractors were positive to participate and were informed about the guidelines including demands and limitations. The two areas in question were Area A, which was assigned to 70 to 90 student flats, and area B, which was assigned to resident buildings with 50 flats for rent and one part of social housing. For limitations there were restrictions of design, sizes and the mix of sizes of the buildings. There were also restrictions in noise levels and regarding parking norms. Further on, there were special programs of accessibility and environmental demands that was mandatory to fulfil by the contractors for an acceptable submission. In the environmental programme the demands were divided in design and construction stages with subheadings as durability, environmental impact, health, comfort, protection of damage from damp, protection from noise, energy savings and conservation of resources. There were also demands how to prepare to manage operation and maintenance and how to manage a follow up during the second year of tenant use. The submitted proposals had to include a drawing of the area with proposed buildings, external (facades and cross-sections) and internal (ground plans) drawings and a program of how to deal with the environmental demands. The participated contractors were free to submit proposals to one or to both areas. The contractor of the winning proposal had to be prepared of developing the area together with the land developer with regards to the proposal and to follow the preliminary time schedule that was set.

3.1 Sustainability aspects in the procurement documents The land developer and the contractors that were committed to the procurement could be considered as internal stakeholders, see Table 1. The external stakeholders were the four contractors that already got their agreement with the land developer of exploit a certain piece of

Table 1 Stakeholder analysis, project conditions and sustainability programme (adapted from 12)

ground. The public concerned of the area of exploitation and future presumed tenants was also considered as external stakeholders. General conditions of the procurement were the Swedish construction and environmental legislation plus demands of accessibility issued by the local authority, which was mandatory for construction project regarding resident buildings in the actual municipality. Another condition was to follow the preliminary detailed plan set by the local authority for the actual area. No reference was made in the procurement documents to the land developer’s EMS, i.e. the

environmental policy and the environmental objectives.

The specific conditions for the areas in question and the demands of the contractors were formulated in the procurement documents as:

• The cooperation part in the agreement between the land developer and the four main contractors was to be included in the final allotting agreement with the procurement winner,

• The detail planning work of the area made by the local authority was in progress and the contractor of the winning suggestion had to cooperate in the continuing work,

• Specification of the areas in concern were made by: o Amount of flats, o Design demands, o Noise reducing demands, and o Parking norms actual for the area,

• To follow the time schedule set by the land developer, • To suggest a specified price of the allotted ground by square meter, and • How to ensure and verify the demands of the environmental programme

Concerning area A, a special demand was set how to ensure the proposed buildings to be used as student flats. Special demands concerning area B was set by:

• Construct and operate the social housing part with a rent similar to other social housing situated in the municipality, and

• Let two flats to he local authority for social purposes, • Follow the local authority’s demands of accessibility except for one-person student flat,

where demands of the Swedish legislation only were taken to account, • A description how to organize the operation of the flats, ·

No sustainability programme was made in the procurement documents because of a lack of reference to the land developer’s EMS and later during the process because lack of references to the contractors own EMS.

Table 2 Sustainability aspects according to ISO 15392 (adapted from 12)

When evaluating the procurement documents of the case by the ISO 15932 general principles, it seems to be a lack in several corresponding relationships, see Table 2. The principle of continual improvement is not fulfilled by a compulsory demand of the contractor’s EMS commitment of its organisation. There was only one contractor that addressed this principle by a voluntarily commitment by a promise of formulating a project specific environmental policy. Unfortunately, it was not the winner of the procurement. The equity principle was covered partly by the demands of social housing adaption: intra-societal (partly) and intergenerational, and by the condition of accessibility. There were no explicit demands of holistic approach, responsibility, precaution management and risk management. Finally, the principle of long-term consideration only covered the short-term (two years of operation and maintenance demands) condition. Nothing explicit was

found in the programme of medium- and long-term considerations.

4. Case study B – Dismantling project This case concerns a dismantling project of a former power station in southern Sweden. The aim of the project was to dismantle the power station’s interior of old coal- and oil-based power equipment and retain the cover of the building for a future new gas technology power and district heating plant. The aim of the case was to steer the procurement of the dismantling contractor to a performance, which met the principles of sustainable construction works and the client’s ISO 14001 certified environmental management system with its environmental policy. The aim was also to make a clearance to the client’s environmentally dept regarding this facility. The operation of the power plant stopped in the 1970’s and the equipment remained more or less untouched for more than 30 years. There were three elder and two newer combustion boilers making steam for the turbines, which generated electrical power. The three eldest was solely on coal-based fuel, one of the newer was converted from coal-based fuel to the use of oil and the newest and biggest boiler from the mid-60’s was made for oil fuel only. The majority of the power plant equipment was originally from the 1950’s, except the newest boiler, and this indicated a large presence of environmentally hazardous materials. An extensive investigation of environmentally hazardous and dangerous components and substances was carried out, where the hazardous components and substances were defined by Swedish legislation by Ordinance of Waste [19]. The hazardous waste included asbestos, oil-contaminated materials, organic contaminants from coal and oil combustion, mercury, polychlorinated biphenyls (PCBs) and acids. The dangerous waste included led, copper, phthalates (plasticizers), brominated flame-retardants, arsenic, and the metals of vanadium, nickel and zinc. From the envelopment of the boilers there were 30.000 meters of sealing, 2.000 meters of sealing in sheet metal channels, 2.100 valves and 4.700 meters of pipes containing asbestos. Further on, there were more than 500 electrical pumps containing copper and oil, 6.400 meters of copper rails and 4.300 meters of copper pipes. Electrical wires in different sizes containing copper, led and PCBs was estimated to roughly 365.000 meters at the whole site. In this investigation a rough fractionation and division of ecocycle content was also defined. The

Table 3 Stakeholder analysis, project conditions and sustainability programme (adapted from 12)

This is a Table caption

totally recyclable content of iron was app. 11.000 tons, 340 tons of copper and about 20 tons each of aluminium and led. Further on, there was app. 2.000 tons of brickwork in the combustion boilers to be recycled. A detailed program of how to handle and verify the handling of the different fractions was made. During the pre-procurement phase of the project numerous project meetings were held where the demands of the client and the stakeholders were set. There was also a design stage where the technical preconditions of the demolition performance were investigated, evaluated and designed. In the procurement documents there were, besides the sustainability demands, also demands of relevant education of environmental skills for the contractor’s personal and demands on preventive measures as emergency plans and availability of relevant equipment in case of accidents during performance. During performance, demands were also on preventing pollution to the surroundings by water, air, noise and vibrations when handling the dismantled equipments on site. Restrictions were also made regarding chemical products and materials that could be used when handling the dismantled equipments on site. All chemical products in use have to be documented and approved by the client. The client was to be allowed to make assessments on site to follow up the demands stated in the contract. The contractor was procured internationally and was handled by the client’s procurement department.

4.1 Sustainability aspects in the procurement documents In this case the internal stakeholders, see Table 3, were identified as the power company’s sub- divisions and other users of the power plant site that were directly involved in the project. External stakeholders were the local and national authorities. The local authority was acting as environmental controller due to the Swedish Environmental Code and as supplier of the water and

sewage system. The national authority as a stakeholder has concern about environmental and work environmental legislation.

The general conditions of the dismantling project were identified as internal and external conditions. The internal conditions were mainly the client’s environmental policy with the content of promotion of sustainable development, be in the front-line concerning environmental issues in the sector of electric power, have a holistic approach to daily work, promote actual research and promote continual improvements. The external general conditions were the Swedish Environmental Code, the Swedish Work Environment Act and the authority of environmental control performed by the local authority. The special conditions were mainly based on the investigation of hazardous and dangerous material including fractionation and division of ecocycle content. But also project meetings during the pre-procurement phase and input from the design team regarding technical preconditions of the dismantling performance were included in the special conditions. Adaptation to an international

Table 4 Sustainability aspects according to ISO 15392 (adapted from 12)

This is a Table caption

context was also in consideration, because of the intention to procure the contractor internationally. The base to formulate the sustainability programme was the general consideration rules in the Swedish Environmental Code [20] including the precautionary principle, the principle of ecocycle components and materials, the BAT (best available technology) principle and substitution principle. The optimization and analysis process of sustainability aspects from the general and specific conditions gave the following result in order of priority:

1. Work environment considerations – A human health social aspect that needed attention during the dismantling work, especially if the contractor was internationally procured,

2. Optimize high levels of ecocycle components and materials – An ecological and economic aspect according to the principle of recycling. Maximizing of re-use and minimization of material to dump sites,

3. Disposal of dangerous material – An aspect of social (human health) and ecology (protection of ecological diversity) concerning present and future risks. Managing hazardous material is regulated in the Environmental Code, and

4. Global distribution of available resources – A social aspect considering promoting more equal distribution of available resources globally, especially concerning developing countries. This concerned the recycled components and materials.

These four objectives were then in the sustainability programme divided in measurable targets with defined demands of verifications. As an example, the targets for the second objective were divided in material fractions, levels of recycling, end-functions and demands of specific verifications of the end-function. The levels of recycling were described as material and component re-uses, material re-use, energy re-use and disposal of material by destruction or to special dump sites. In terms of the sustainability programme this case shows the process of target- setting and the demands of verification of the targets. It also seems to be able to insert the demands in the contractor’s quality verifications of the contract work. The sustainability programme was attached to the administrative regulations in the procurement documents for the dismantling contract work. This was especially important because the administrative regulations were given a higher priority than the other procurement documents, i.e. the demands of the sustainability programme were of high importance, in accordance of the client’s intention, when to interpret different regulations in case of contradiction of details in the contract documents The dismantling project shows a procurement situation where a client’s demands of sustainability are prioritised on a high level in the procurement documents. By comparing the outcome of the procurement documents with the ISO 15932 general principles, see Table 4, it seems to be conformity between the principles and the outcome. The only discrepancy is the principle of responsibility, where an indirectly linkage through the objective of work environment consideration. But this link is strong because the connection with the Swedish legislation in Work Environment Act [21]. This case should be considered as to fulfil the principles of ISO 15932 and therefore to be

considered as sustainable construction works.

5. Conclusions The case of the exploitation project had a long way to reach and fulfil the principles of ISO 15932. The emphasis of the procurement documents was on design and environmental aspects only. The case shows a need of a very carefully performed specification of land use and design specifications with clearly formulated contracting conditions. The case in question failed to reach a reasonable level of sustainability because of lacking triple-bottom conditions and holistic approach. This could not to be considered as a future sustainable construction works if the agreement of allotment followed solely the procurement documents. But the land developer could have included more sustainable aspects in the negotiations of the agreement with the chosen contractor. Unfortunately, this was not done. The dismantling project proved to be a good example of procurement of a construction project with an acceptable level of sustainability. This was done by stringent demands of specified verifications and with prioritizing of administrative regulations including sustainability demands compared with other procurement documents. Stringent and thoroughly made sustainability conditions in the procurement phase are the client’s opportunity to fulfil the obligation of sustainability in construction works as the responsible actor. The possibility to change the outcome without significative additional costs during the rest of construction process decreases considerably with time.

6. References [1] MYERS D, ”A review of construction companies’ attitude to sustainability”, Construction

Management and Economics, Vol. 23, No. 8, 2005, pp. 781-785. [2] POPE, J. et al, ”Conceptualising sustainability assessment”, Environmental Impact

Assessment Review, Vol.24, 2004, pp. 595-616. [3] O ́CONNOR, M, The “Four Spheres” framework of sustainability”, Ecological Complexity,

Vol.3, 2006, pp. 285-292. [4] HACKING, T. and GUTHRIE. P. “A framework for clarifying the meaning of Triple Bottom-

Line, Integrated and Sustainability Assessment” Environmental Impact Assessment Review, Vol.28, 2008, pp. 73-89.

[5] LANDIN, A. Impact of quality management in the Swedish construction process. Doctoral thesis, Division of Construction Management, Lund University, Sweden, 2000.

[6] MOFFATT, S. and KOHLER, N. “Conceptualizing the built environment as a social-ecological system”, Building Research and Information, Vol. 36, No. 3, 2008, pp. 248- 268

[7] DU PLESSIS, C. “A strategic framework for sustainable construction in developing countries”, Construction Management and Economics, Vol. 25, No.1, 2007, pp. 67-76.

[8] PERSSON, U. ”Management of sustainability issues in construction works processes” Conference Proceedings, SB10 Finland, 2010

[9] PERSSON, U. LANDIN, A. OLANDER, S. and PERSSON, M. “A sustainable construction management at project level: a modified environmental management system structure”, Proceedings, World Sustainable Building Conference, SB08, Melbourne, Australia, 2008

[10] WILLIAMS, K. and DAIR, C. “What Is Stopping Sustainable Building in England? Barriers Experienced by Stakeholders in Delivering Sustainable Developments “, Sustainable Development, Vol.15, 2007,pp.135-147

[11] ISO 15392, Sustainability in building construction – General principles, Geneva: ISO, Switzerland, 2008

[12] PERSSON, U. Management of sustainability in construction works. Doctoral thesis, Division of Construction Management, Lund University, Sweden, 2009

[13] LÜTZKENDORF, T. and LORENZ, D. “Sustainable property investment: valuing sustainable buildings through property performance assessment”, Building Research and Information, Vol. 33, No. 3, 2005, pp. 212-234.

[14] CEM . Sustainability and the built environment, The College of Estate Management, Reading, UK, www.cem.ac.uk (2008-12-03)

[15] OLANDER, S. External Stakeholder Analysis in Construction Project Management. Doctoral thesis, Division of Construction Management, Lund: Lund University, Sweden, 2006

[16] GIBSON, K. “The moral basis of stakeholder theory” Journal of business ethics, Vol. 26, 2000, pp.245-257

[17] WINCH, G. and BONKE, S. (2002). “Project stakeholder mapping: Analysing the interests of project stakeholders” The frontiers of project management research, Slevin, Cleland and Pinto (eds.), Project Management Institute Inc. 2002, Chapter 23

[18] ISO 14001. Environmental management systems – Specifications with guidance for use. Stockholm: SIS, Sweden, 2004

[19] THE SWEDISH ENVIRONMENTAL CODE, Ordinance of waste, 2001:1063. http://www.sweden.gov.se/ (2009-08-27)

[20] THE SWEDISH ENVIRONMENTAL CODE, Ds 2000:61, http://www.sweden.gov.se/ (2009-08-27)

[21] WORK ENVIRONMENT ACT, SFS 1977:1160, http://www.sweden.gov.se/ (2009-08-27)

Strategizing sustainable procurement in a political environment Peter Vogelius Senior Researcher Danish Building Research Institute, Aalborg University Denmark e-mail pev@sbi.dk

Kim HaugbølleSenior Researcher Danish Building Research Institute, Aalborg University Denmark e-mail khh@sbi.dk

Ib Steen OlsenConsultant Danish Building Research Institute, Aalborg University Denmark e-mail iso@sbi.dk

Summary The paper presents a case study with focus on how the municipality of Copenhagen, as a public client, implements an ambitious strategy for sustainability with special regard to energy consump-tion. The paper deals with the general question how public clients can in practice make a differ-ence as sustainable change agents. The study is bases on qualitative interviews, two field cases (sustainable renovation) and with desk-top studies on the policy regarding sustainability and reno-vation in the municipality. It is concluded that the municipality is pursuing sustainable renovation in a strategic way and it act actively with network initiatives to enforce the effect of its politic. Further it is noted that when deciding to invest in sustainable renovation, calculations with payback time is used, this give rise to difficulties and do not always fit into the municipality’s budget system. Finally, as more tentative conclusion, it seems as the original, more ideological agenda about climate ini-tiatives etc. was supplemented by translation to the economical dimension which was enabling a broader political support for sustainability in renovation.

Keywords: client, users, innovation, sustainability, renovation, change agent, public policy, construction

1. Introduction This paper describes the results of a case study undertaken as part of the Nordic project “SURE: Sustainable Refurbishment – lifecycle procurement and management by public clients”. The SURE project team covers four Nordic countries, with participation from both research institutes and practitioners, namely SBi/AAU (Denmark), VTT (Finland), Multiconsult (Norway) and Innovation Centre Iceland (Iceland). The purpose of the case study is to analyse how municipal policy, understood as strategies for change, shape the financing and practices of sustainable renovation strategies in a municipality. The actual municipality studied is the city of Copenhagen and its recent policy with respect to sustainability and construction. In continuation of this question, we will draw on some tentative analyses and overall conclusions on how Copenhagen as a public client is acting and shaping strategies [1] for sustainability, in the field of construction.

1.1 Analytical approach and disposition for the paper The study operates on two levels; the systemic policy level and the level of the specific building project. The analyses at the systemic level are juxtaposed with two specific studies of recent renovation projects in the municipality.

At the systemic policy level, we look at the conditions for operating with a sustainable approach to renovation/refurbishment. Our focus is directed towards that part of the policy which deals with the built environment as a subdivision of the target areas for sustainability in the policy for the municipality. We endeavour to understand the web of regulations that a big public client have to operate inside. For example, conditions for long-term loans and the problem of defining and operating with a (new) long-term horizon of investment are explored. At the level of the specific building project, we look into two more recent building / renovation projects. It is the ambition, to see how these concrete projects have taken colour from the (ambitious) general policy for sustainability. At the same time it is observed how they, as more or less, ordinary renovation projects, have been streamlined like most other projects. The paper falls in five main sections. The next section gives an overview of the central concepts for understanding the client as a change agent. We break down the different part of the concepts to reveal what kind of mechanisms are at stage; as a consequence we also take a further look into the concepts of innovation and the concept of Strategy. In section 3 we describe the case – the work with sustainable renovation in the municipality of Copenhagen. In section 4 we give an insight into the analyses of case. We have focus on which kind of problems the municipality is facing and which can act as barriers. Finally we conclude in section 5. 2. Clients, change (-agents) and strategy A look at the central concepts represented in the problem, we deal with, show four concepts that seem to be important. The keyword 'client' may translate into the field of 'construction procurement' dealing with issues related to e.g. theoretical foundations; development and privatisation; the role of culture: trust and institutions; procurement systems: classification and choice; contractual arrangements and forms of contract; procurement: culture and conflict; environmental sustainability and procurement (see e.g. [2], [3], [4], [5] and [6]). The keyword 'change' may be associated with the field of 'innovation' dealing with issues related to the nature of innovations, drivers of innovation, innovation process and innovation systems (see [7], [8], [9], [10], 11]). The keyword 'agent' may translate into the field of 'agency' dealing with the dualism of actors and structures in relation to the role as users, clients and stakeholders (see [12], [13], [14], [15], [16]). These three fields point at a combination of innovation theories. The theories have to deal with the role of users, most notably the concept of lead users, various constructivist approaches on the co-construction of users and technologies, and the role of clients in changing the construction industry (as dealt with by the CIB Task Group 58 and the literature on construction procurement). The concept of strategy becomes relevant when we try to understand the overall policy and the different initiatives connected with sustainable renovation in the municipality, our understanding is based on [1]. 2.1 Construction procurement: the role of the client There are different inputs which can inspire an understanding of this area. Both "The International Council for Research and Innovation in Building and Construction (CIB)" and [17] have engaged intensely in developing projects and programmes to gain experience with the client as a change agent; below a model from the latter.

The construction client (and construction in general) operates in a context of project-based services. As noted by [18], a major impediment for innovation in project-based service firms is the gap between the project-based processes and the business processes of the firm. The project-

based nature of construction implies that the

interdependencies are primarily linked to the fluid, changing and ad-hoc patterns of cooperation with a rather large number of external firms. Gann & Salter [18] provide an analytical framework that can place change agents of construction in the context of a regulatory and

institutional framework on one hand and the technical support infrastructure on the other hand. Further they offer a

framework that explicitly addresses the linking of business processes of the firm with project-based processes (see Figure 2). Although the work of [18] provides a stronger analytical perspective on the context of managing innovation in construction, it does not in any substantial way provide practical guidelines for creating change in the construction industry. 2.2 Change and agents - or the client’s role as a user in the innovation process Since the 1980s, it has been argued within science and technology studies (STS) that technology is socially shaped and designed. The point of departure in STS is that technical objects and social relations are bound together and that actors and technology are co-constructed. A distinction

Figure 1.The client's relations to the stakeholders

(Source: The Swedish Associa-tion of Construction Clients)

Figure 2. Knowledge, information flows and actors in project-based processes Source: Gann & Salter 2000

Client function Customer

Users

Building sector

Building process

Society

Laws

Owner

Business idea

between the social and the technical is not given beforehand, but is the result of a mutual shaping process [13], [14]). According to [7] the literature on innovation management deals with four questions. First, researchers have analysed the nature of innovation activities by asking questions on whether innovations are radical/incremental, continuous/interrupted, changes over life cycles, are modular/architectural (systemic), result in dominant designs, or are sustaining/disruptive. Second, other approaches consider the sources of innovation, which can broadly be grouped in the push model, the demand-pull model, and the coupling model. Third, approaches related to analysis of the innovation process include the chain-linked model, the innovation journey, and various innovation management approaches focusing on organisational integration, technology strategies and knowledge management. Fourth, approaches concerned with innovation systems focus on systems of innovation on a national, regional, sector and technological level, analyses of networks to which firms belong, and the integration of complex product systems. Behind the strategy of the client as a change agent, it is believed that the client, through the choice of procurement methods, targeted goal setting, acting as a lead user etc. can have a decisive impact on the products and services of the building industry on behalf of the owner/end-user. However, the client as a change agent requires a closer definition of the role of the client. It is clear that construction projects – whether procured through traditional systems or through long-term 'service contracts' – have to meet the needs of stakeholders and in particular the needs of users and clients as expressed by the representatives of users and owners. 2.3 The concept of “strategy” What do we mean by the concept of strategy?. We can identify [1] four important dimensions that are necessary for the investigation of whether or not an organisation has a strategy (in fact the authors operated with a fith one, namelig “How will we win?”, however this dimension is primarely directed against studies of more commercial organisations and it will not be included here): – Where will we be active? – How will we get there? – What will be our speed and sequence of moves? – How will we obtain our return? In the analyses of the municipality of Copenhagen, we had these dimensions in mind, and tried to relate them to the different levels of policy conducted by the municipality. 3. The case

Since the 1990s, Copenhagen has been engaged in local policies focusing on energy saving and renewable energy. Several generations of plans for the use of energy and the introduction of sustainability have been prepared, some of them as a part of national and international cooperation with other cities working on the same agenda. Former initiatives can be mentioned, for example "Agenda 21" for intensified local environmental efforts regarding energy saving, separation and reuse of waste - an initiative that was a continuation of the UN Brundtland report from 1987 [19]. Also the UN stipulation in 2005 of the 2015 goals can be seen in same light. All in all, over the years the initiatives can be perceived as drifting in a direction which is getting both increasingly ambitious and specific. Today the municipality is also active in various network activities in the field of sustainability. Among others, they participate in a broader development initiative - Gate21 [20] involving Copenhagen and the surrounding municipalities. The primary goal is to be a pivot for new climate and energy solutions, and the initiative therefore hosts major projects for low-energy solutions and renovation with a very broad participation from different public as well as private actors.

It is obvious that an large dominating client like Copenhagen has the option to set out its own requirements, while minor municipalities has to wait for national regulation covering the whole of Denmark. Minor actors have, to a higher degree, to rely on cross-cutting initiatives like "Green Building Council Denmark" (GBC, a broad representation of all actors with reference to construction, building and urban-planning practice; GBC is currently (2010) very active in Denmark - the primary goal being to establish norms and sustainability standards for the Danish construction industry including consultants. Several web-based sources from the City of Copenhagen present plans and programmes related to energy savings, and more broadly, to sustainability. Below is presented an (by September 2010) extract stating the municipalities’ policy on energy consumption: Copenhagen is focused on the climate. The city is energy efficient with our district heating system, while nearly 40 % of our citizens cycle to work or their educational institution every day and the electricity-generating windmills, located in the sea outside the city, save 76,000 tons of CO2 emissions annually. Our vision is for Copenhagen to be the climate capital of the world, with a 20% reduction in CO2 emissions by 2015 compared to 2005. We even want to become completely CO2-neutral by 2025 as the first capital in the world. We are looking for joint initiatives from municipalities, the business world and the citizens as well as close cooperation across international borders. More than 30% of CO2 emissions in Copenhagen come from residential and other buildings. It is our goal that in the future all urban development projects will contribute to reducing Copenhagen’s total CO2 emissions, and that selected urban areas will become completely CO2-neutral. Source: [21]

3.1 Copenhagen City Properties – the case organisation Our overall research in the case study of the City of Copenhagen originates in “Copenhagen City Properties” (Danish abbreviation KejD). This is the organisation which takes care of all the traditional tasks of the client. For Copenhagen, several actors used to have relation to renovation and service of buildings. Some years ago it was decided to make a major organisational reform for the handling of buildings used by the City, and City Properties was established as the central organisation in this respect. According to [22] (The Danish Association of Construction Clients), a municipality, as a public client, can basically choose to arrange its organisation in accordance with different principles. It is possible to illustrate the principles, by thinking of the local facility management organisation as layout in four different ways along an axis with the administration for each unit/building (schools etc.) at one end of the spectrum, and at the other end the entire portfolio for service, new building and renting, centralised in a separate organisation for the whole municipality. City Properties is an example of the latter form which is typically highly professionalised and is applying economic models for calculating rent, investment and depreciation. The organisation, which administrates one of Denmark's biggest portfolios of properties, describes itself in this way: "a cross-sector unit in Copenhagen under the Culture and Leisure Administration. Copenhagen City Properties handles ownership, operation, development and administration of the City of Copenhagen’s properties and tenancies. The property portfolio comprises some 750 properties and 570 tenancies and consists of administrative buildings, schools, leisure institutions, child day-care centres, cultural buildings, fire stations, etc." source: [23] ) 3.2 The City of Copenhagen – a policy for implementing sustainably In the fields of new construction and renovation, the national regulation does not offer much to lean on. In the current Danish Building Regulations (2010) [24] there are no defined standards for sus-tainability, although you can find detailed provisions for energy consumption and indoor climate. However the principle of sustainability is incorporated in several town plans, but in urban planning sustainability is primarily a declaration of intent, rather than a specific standard for buildings, de-sign or construction. A declaration of intent does not give much leverage to sustainability demands

in renovation projects. Finally some of the regulations regarding sustainability are in-cooperated in the environmental legislation, among others this count for construction waste from demolished buildings. For the municipality, the work with sustainability can, roughly speaking, be divided into three differ-ent levels: The programme level – Political announcements ↓ The level of practical politics (prioritising the economy) ↓ The level of implementation At the programme level the principal political decisions are taken regarding transforming the mu-nicipality in a sustainable direction. Political compromises and negotiations are placed at this level. Often the input for policy creation is introductions from the civil servants. The political handling of sustainability and renovation has been greatly influenced by economic calculations regarding pos-sible gains due to reduction of energy cost. Political back-up from a broad spectrum of political parties to sustainability programmes has also been highly dependent on the ability to express gains in energy savings in absolute terms or as good investment compared with the general level of interest rates. At the level of practical politics, we place the comprehensive reports describing how the City of Copenhagen will reach the goal for sustainability, and more precisely the achievement of Copenhagen as a CO2 neutral city by 2025 (with a sub-goal for construction). For some time, the municipality of Copenhagen has, been working with its own set of standards. In 2010 it announced a new set of regulations with the title of "Environment in building and construction" [25]. It has a binding status for companies that want to work for the City of Copenhagen, whether it is renovation, conversion or new building. Furthermore financial support for urban renewal or social housing can be conditional with regard to the regulation. The regulation covers 9 different fields:

1. environmental design 2. energy and CO2 3. material and chemistry 4. water and sewers 5. design of valued environments (urban spaces – urban design) 6. waste 7. noise 8. indoor climate 9. building site

For each field the regulation demands that the project is described in three sections, namely an introduction, a demand section and a documentation section. At the level of implementing we have all the practical efforts in the administration for ensuring that the rules and procedures for handling of sustainable renovation projects is followed. It covers all kind of initiatives from informative contact meetings with contractors and advisers to internal education in the new formalities and new templates for bidding in the procurement. At the level of implementing it is also possible to interpret the former mentioned, development initiative - Gate21 [20] 4. Analysis By nature, initiatives in the field of renovations and changes at buildings are bound to be evaluated in a long-term perspective – the life time and rate of turnover for different improvements are long.

It is therefore a general schism how to implement specific goals in energy savings and sustainability, when running budgets are cut down and major policy areas take over in the public debate. Especially themes like (un-) employment, lack of economic growth, a deficit of kindergartens, schools that are run down and stagnation in local business are important themes with strong public attention. 4.1 Backlog and Prioritising At present the backlog is DKK 2.5 billion for the City of Copenhagen as a unified whole (according to interview June 2010). With the existing grant of DKK 200 million per year (excluding certain minor special contributions) for renovations (covering all renovations – not only energy renovation), it can quickly be calculated that there has to be some cross-cutting strategies for sustainability, if not all funding is going to be monopolised by urgent, but traditional, renovation tasks. Some general principles meant for supporting ordinary service has been defined for prioritising the DKK 200 million. In a short form they follow here: 1. Worst first 2. Housing or buildings where people work on a daily basis. For example, it could be indoor problems related to moisture and/or mould growth 3. Of the DKK 200 million/year, 10 million are reserved for individual well-defined sustainable energy renovation projects and additional 10 million are reserved for what could be called extra (marginal) cost of traditional renovation projects where specific extra cost can be traced to new high energy standards. This raises some related problems. In technical terms, it can be discussed what has to be included in the term "renovation", and further what is the "standard solution"? The latitude of marginal cost is central both for access to those special funds but more generally to guidance on when to implement different energy-saving solutions. Obviously it can be a problem when limited budgets have to be distributed in the day to day practice. Currently there is work going on in the municipality with respect to this. To exemplify the problem, one can mention that plans for better coverage of institutions for children (especially kindergartens and day nursery) is a sensitive subject in the public debate, it has been discussed to stretch a point on energy demand for exactly those institutions – otherwise there was a concern whether the earmarked sum would be sufficient to fulfil the plan for new institutions. The city council is the only one to make this difficult decision! Up till now the current practice regarding financing of renovation initiatives has often been similar to other investments of the municipalities. This means that funds have to be allocated from year to year. Besides, a rolling budget model covering three more years (constantly four years in all) is applied. A time horizon of 1 – 4 years is often insufficient to plan improvements or renovations at a list of schools, or similar. The problem becomes even more pressing when we talk about calculation pay-back times for different initiatives, in relation to sustainable construction. Especially when initiatives are not any longer among the tree's low-hanging fruits, in those situations payback time can be as long as 10 or even 20 years. The question is how to calculate such initiatives? As opposed to the calculated, prioritising model, a rather new trend seems to gain footing. That is, simply to take a political decision, in principle regarding a construction principle or similar. As an example can be mentioned a recent decision, by the City Council prescribing how to use "green roofs" (on certain public and semi-public buildings) in Copenhagen. In those cases the ambition both to calculate the price on the initiative and compare the cost effectiveness with other initiatives has been abandoned. In other words: there seems to be embedded conflicts between specific goals regarding sustainability and major policy themes when implementing strategy at the municipality level.

4.2 Financing and horizons of investment The Danish government has, especially in the last couple of years operated with a very limited "frame of cost" for the municipalities, in relation to the theme in this text, it is important to note this kind of policy for public finances means that the municipalities constantly have to face serious dilemmas in their priorities. This applies to running costs as well as for investments in new buildings and renovation. Regarding investment in solutions with an energy-saving potential, an exception exists for this principle ("Lånebekendtgørelsen", "the loan declaration"); in such cases municipalities are allowed to obtain loans for new projects without straining the overall frame for cost. This opportunity is frequently used by the City of Copenhagen to realize its policy in the field of sustainability and energy saving. The municipality has asked itself whether cooperation with major private (or semi-private) investors could be an answer to the difficulties with financing renovation, and recently it has engaged in a tentative cooperation with the worldwide financial institution "Carbon War Room" [26]. In the municipality, this cooperation is regarded as important, and believed to represent a great potential, although there can be problems, due to different core competences in the two organisations as well as a different culture between the organisations when it comes to negations and agreements (architects and engineers are not trained in conducting economic negotiations concerning conditions and long-term regulation of loans at a multi-million Kroner scale). In spite of these difficulties, it is the plan to go further into investigations on the potential for long-term loan agreement. This kind of solution is quite new for the City of Copenhagen, and it may have the potential to prevent that the pragmatic “day to day” policy will over the years erode goals and strategies for sustainability. Looking at the current political scene, solutions with long-term loans from investors with a special interest in CO2 reduction and (and to some extent sustainability in general) seems to be a way of financing energy renovation. In September 2010 Bo A. Kjeldgaard, mayor for the Technical and Environmental Administration [27], has commented on the 2012 political budget agreement, where he draws special attention to the new possibilities for such loans, as a part of the agreement. But, as we have touched on in the former sections (and as our interview person from KejD have pointed out during an interview), there is obviously a challenge of balancing, at the one hand the public clients governing principle for economic planning and budgeting and on the other hand the need for long investment horizons. 4.3 Is the city of Copenhagen following a strategy for the initiatives on sustainable

renovation? It is possible to interpret the municipalities’ handling of the development of sustainable renovation in the scheme described by [1]. With the overall plan for Copenhagen as a CO2-neutral city by the year 2025 and a planning history in the field of sustainability going back to Agenda 21 initiatives at municipality level, the city has pinpointed the arena for where and how to do policy when it comes to sustainability. Or with the expression from [1] they “know where to be active” The defining of nine focus areas for activities (where construction/renovation is one), where each area is the subject of an analyses, equals the strategic ambition of stating where and how to proceed. Further the criterion on “speed and sequence of move” is covered by the time table for goals in the years of 2015 and 2025. We saw that the city had a line of initiatives aiming at the procedures for cooperation with advisors and contractors. New mechanisms for procurement have to ensure change in calculations in the biddings. Finally standards have been introduced for how to

document that as a contractor you do in fact follow the initiatives prescribed in the procurement documents. 5. Conclusion The city of Copenhagen has made a marked effort to ensure sustainability as a principle in renovation and construction, and the city is organising its efforts in a strategic way. The outset for the policy can be traced back to the Brundtland agenda, but today the work with sustainability is arranged in a “strategic way” [1] A major problem for conducting sustainable renovation in practice in the municipality seems to be the calculation of payback periods (internal interest rate). At the same time the payback period is a central instrument in the political decision process when talking about sustainable renovation (which in this connection is mainly identical with “energy savings”). Further the standard economic planning horizon is far too short to host ambitious, expensive energy-saving projects. A cooperation with a private or semiprivate investor is a possible way to handle this problem and the city of Copenhagen is currently looking at this possibility. As a change agent, the municipality acts on several levels. It acts directly with demands to constructors who want to bids on construction work; it acts as a very active network actor both with efforts for rising new regional projects and for promoting the ideas to the business, industry, public and the state. Looking at the drift towards sustainability, you can say that inside the municipality, the original, more ideological agenda about climate initiatives etc. was supplemented by translation to the economical dimension which apparently was enabling a broader political support for sustainability. 6. References [1] Hambrick, Donald C. & Frederikson J.W. 2005: Are You sure you have a strategy? In

Academy of Management Excutive, Vol. 19, No. 4 [2] Rowlinson, S. & McDermott, P. (eds. 1999). Procurement systems. A guide to best practice in

construction. London/New York, USA: E & FN Spon/Routledge. [3] Edler, J. & Georghiou, L. (2007). Public procurement and innovation – Resurrecting the

demand side. Research Policy, Vol. 36, 949-963. [4] Brown, K., Hampson, K. & Brandon, P., 2005, Clients Driving Construction Innovation:

Mapping the Terrain, (Australia: Icon.Net Pty Ltd) [5] Brown, K., Hampson, K. & Brandon, P., 2006, Clients Driving Construction Innovation:

Moving Ideas Into Practice, (Australia: Icon.Net Pty Ltd). [6] IVA – Kung. Ingenjörsvetenskapsakademien/Swedish Academy of Engineering Science

(1997). Kompetensutveckling inom samhällsbyggnad. Byggherren i fokus. Stockholm: IVA [7] Dodgson, M., Gann, D. M. & Salter, A. J. (2002). The Intensification of Innovation.

International Journal of Innovation Management, Vol. 6 (1), 53-83. [8] Gann, D. M., 2002, Building Innovation: Complex Construct in a Changing World, (London:

Thomas Telford Services Ltd). [9] Manseau, A. & Seaden, G. (eds. 2001). Innovation in Construction. An International Review

of Public Policies. London & New York: Spon Press [10] von Hippel, E. (1986). Lead Users: A Source of Novel Product Concepts. Management

Science, 32 (7), 791-805 [11] von Hippel, E. & Katz, R. (2002). Shifting innovating to users via toolkits. MIT Sloan School of

Management. Working Paper No. 4232-02. [12] Pinch, T. J. & Bijker, W. E. (1984). The social construction of facts and artifacts. Social

Studies of Science Vol. 14: 399-431. [13] Bijker, W. E., Hughes, T. & Pinch, T. (1987). The Social Construction of Technological

Systems. Cambridge, MA: MIT Press. [14] Bijker, W. E. & Law, J. (1992). Shaping Technology/Building society – Studies in

Sociotechnical Change. Cambridge, MA & London, England: MIT Press. [15] Haugbølle, Kim & Forman, Marianne (2006). The Co-Construction of Clients, Concepts and

Companies. I: Pietroforte, Roberto; De Angelis, Enrico & Polverino, Francesco (eds.). Construction in the XXI Century: Local and global challenges. Rome: CIB & ArTec. pp. 1-12. Full papers.

[16] Olander, Stefan (2006). External Stakeholder Analysis in Construction Project Management. Lund, Sweden: Lund University, Construction Management 06/1023.

[17] Swedish Construction Clients Forum 2006: The Role and Mission of the Construction Client. Byggherreforum. Stockholm

[18] Gann, D. M. & Salter, A. J. (2000). Innovation in project-based service-enhanced firms: the con-struction of complex products and systems. Research Policy, Vol. 29, 955-972.

[19] Brundtland (1987). Report of the World Commission on Environment and Development: Our Common Future. UN

[20] Agenda 21. (2010) (http://www.gate21.dk/ (in Danish only) [21] Municipality of Copenhagen (2010). http://www.energymap.dk/Profiles/City-of-Copenhagen [22] The Danish Association of Construction Clients (“Bygherreforeningen”) 2009: Udvikling af

bygherrerollen 1999 – 2009. Bygherreforeningen & Boligfonden Kuben. København [23] Municipality of Copenhagen (2010a).

http://www.kk.dk/sitecore/content/Subsites/CityOfCopenhagen/SubsiteFrontpage/ContactsAndFacts/DepartmentalStructure/CityAdministrations/CultureAndLeisureAdministration.aspx

[24] Danish Enterprise and Construction Authority (2010). http://www.ebst.dk/bygningsreglementet.dk/br10/0/42

[25] Københavns kommune (Municipality of Copenhagen) (2010): Miljø i byggeri og anlæg [26] Carbon War Room (2010). http://www.carbonwarroom.com/ [27] Kjeldgaard, A. B (2010). Interview to Licitationen (newspaper for Construction Industy)

Green Public Procurement in Poland – criteria for T hermal Insulation products

Dominik Bekierski Sustainable Construction Specialist ITB Building Research Institute Poland d.bekierski@itb.pl

Summary The article is focused on the important issue of most suitable selection of procurement regarding Green Public Procurement (GPP) on the example of the thermal insulation products. Increasing demand on ecological goods, service or work causes that ‘green’ market is growing stronger especially in construction sector. Environmental friendly technology is becoming important element of everyday life and now it starts to exceed from single households to public authorities, which are major consumers. Their need of purchasing sustainable goods or services caused formation of GPP, a voluntary instrument which has a key role to become more resource-efficient. Due to this growing demand Building Research Institute (ITB) in cooperation with Thermal Insulation Producers Association and Ministry of Economy developed the ecological criteria for thermal insulation products. Document partly took into account GPP Thermal Insulation Technical Background Report prepared by AEA Group for European Commission [1], but is mainly based on national law and requirements. Elaborated criteria for thermal insulation products, depending on their application and material that are made from, are focused on the key environmental impacts, including: energy consumption in manufacturing and transportation, pollution of air, water and soil due to the use of hazardous substances (e.g. blowing agents, fire retardants) and promotion of easily recycled materials. What is important for GPP approach the national ecological criteria take into consideration Life Cycle Assessment (LCA). The document consists of main criteria, which need to be fulfilled and secondary criteria – additional issues, which are regarded as an advantage. Intention for this document was to help local and public authorities to purchase the most environmentally friendly thermal insulation products, but was criticised by European Mineral Wool Manufacturers Association EURIMA. Keywords: GPP, thermal insulation, sustainable goods, Life Cycle Assessment, public authority.

1. Introduction Green Public Procurement (GPP) draws policy that sets standards for public authorities in selection of procured goods or service, which minimize their negative impact on environment and which take into account Life Cycle Cost and Life Cycle Assessment. On that basis GPP is influencing development of innovative, ecological and pro-environmental technologies. In 2004 two directives aiming to clarify, simplify and modernize existing public procurement European legislation were adopted. First - 2004/18/EC Directive that covers public works contracts, public supply contracts and public service contracts and second - 2004/17/EC, which covers the procurement procedures of entities operating in the water, energy, transport and postal services sectors. The Directives set the possibility of including environmental considerations in the contract award process, what allows the authorities to contribute to the protection of the environment and the promotion of sustainable development, whilst ensuring the possibility of obtaining the best value for money for their contracts. The European Commission activity aiming to estimate common GPP criteria resulted in 2008

issuing first set of environmental criteria. The 10 products and service groups covered, including construction materials, have been identified as priority groups that are most suitable for “greening” using GPP. Key, selected features, which are significant for GPP approach in construction materials, are:

• organic and natural origin, • energetic performance, • indoor air quality, • low embodied energy, • ability of reuse, • recycled content, • dangerous substances reduction, • waste reduction, • rainfall water use, • renewable energy source, • effective water use, • water recycling and reuse.

Second set of GPP criteria was released in July 2010. The package included environmental criteria for: windows, glazed doors and skylights, wall panels, hard-floor coverings, combine heat and power, road construction and traffic signs, street lightning and traffic signals, mobile phones and thermal insulation. Thermal Insulation is a product group, that was one of the first taken into consideration to prepare environmental criteria for Green Public Procurement in Poland. Ministry of Economy of Poland in cooperation with Public Procurement Office, industry represented by Thermal Insulation Producers Association and research institutes - Building Research Institute (ITB), on the basis of criteria developed by the European Commission, developed national criteria for “green procurement” for thermal insulation materials. ITB plays fundamental role in these works. Partly on the basis of background information [1] developed by European Commission and European GPP, Building Research Institute had to estimate national criteria in reference with polish regulation acts and in compliance with Essential Requirements of Directive 89/106/EC. Draft of these polish criteria was consulted with Thermal Insulation Producers Association and know it will be sent for public verification. Estimated criteria for thermal insulation procurement process include the most important environmental factors such as: energy consumption in the building as a result of less efficient insulation, energy consumption, especially in manufacturing and transportation, pollution of air, land and water due to the use of hazardous materials e.g. blowing agents or, carbon dioxide emission, use / extraction of raw materials, production of hazardous waste, generation of waste material, including hazardous wastes and packaging and its disposal. In accordance to these environmental limitations GPP criteria promote insulation products, which meet those requirements and are:

• most energy efficient, • appropriate for a situation to ensure maximum benefit, • restricted with the use of hazardous materials, • easily dismantled and recycled, • effectively maintained to extend its useful life, • produced with its end of life management, • made of recycled materials and its packaging consists or is fully made from recycled

materials. • friendly to environment and have documented environmental features such as: Eco

labels, environmental declarations or environmental management systems.

2. Definitions and Background For the purpose of Green Public Procurement thermal insulation materials criteria are defined as material used to keep buildings cooler in summer and warmer in winter by reducing the flow of heat through the exterior surfaces of the building [2]. Choose of proper insulation has to apply to its application and its amount depends on a climate zone and

geographical position, where the building is raised. There are different insulation products, polish criteria were set for six types depending on an application site, which included cavity wall insulation, solid wall insulation, loft insulation, floor insulation, roof insulation and insulation for pipe work and ducts. Apart from application type thermal insulation can differ by the material it’s made of. There is insulation with inorganic mineral fiber origin (e.g. mineral wool, stone wool, and glass wool), organic oil/coal origin (e.g. polyurethane foam, phenolic foam, expanded or extruded polystyrene), organic plant/animal origin (e.g. cellulose, cork, wood fiber or cotton insulation) and other (e.g. aerated glass, foamed glass or foil products). 2.1 Key environmental impacts After many meetings and brainstorms with Thermal Insulation Producers Association it occurred that the most important criterion should be energy savings and carbon footprint benefits from the use stage of thermal insulation products in building. 2.1.1 Dangerous substances Main threats for environment in insulation product life cycle come from components, which the product consists of. Few of them can be classified as dangerous for human or environment. Dangerous substances have a negative impact on air quality, water, even human health, with many of the substances identified as carcinogenic, teratogenic or mutagenic. One of examples are the blowing agents used for preparation and application of foam insulation. In recent years blowing agents were based on chlorofluorocarbons (CFCs), permanent substances, which do not affect negatively on human health, but as it turned out they contribute to ozone layer depletion. Substitute for CFCs was hydro chlorofluorocarbon (HCFC), which had smaller ozone layer depletion potential, but still it had negative impact on ozone layer. In accordance to Montreal Protocol the use of both substances is forbidden. As an alternative are common and said to be less hazardous to environment – carbon dioxide and pentane. 2.1.2 Embodied energy and thermal performance Subsequent impact, embodied energy, has an indirect effect on environment during the life cycle of a product. Product life cycle is defined in norm PN-EN ISO 14040:2009 Environmental management – Life cycle assessment – Principles and framework and in case of construction product – in prEN 15804 Sustainability of construction works ― Environmental product declarations ― Product category rules [3]. Significant energy consumption is observed in production phase and transport and it also depends on thickness and weight of thermal insulation product, necessary for proper thermal performance. Embodied energy is shown in an example of different kinds of insulation depending on product on a roof with the same thermal resistance (table10.

Table 1. Possible variety of prime embodied energy in thermal insulation on example of 100 m2 roof with thermal conductivity 3,33 m2k/W

Material Thermal conductivity

Thickness [mm]

Weight [kg]

Embodied energy [GJ]

Cork EPS PUR/PIR Rock wool Glass wool XPS Wood fiber

0.040 0.035 0.024 0.038 0.037 0.036 0.050

133 117 80

127 123 120 167

1733.33 291.60 264.00

1520.00 1295.00 420.00

4000.00

12.2 28.9 33.3 33.6 44.8 46.2 68.0

The use of thermal insulation with high level of thermal resistance, in terms of environmental protection, is very important and should be considered as a main criterion in choosing products. Such insulation allows reducing energy consumption, what affects on environment in reduction of energy production. It is highly recommended to reduce the embodied energy in production phase. Values of embodied energy should be taken from IIIrd type Environmental Declaration (prEN 15804) and can be used in GPP for choosing “greener” insulation product with same technical features e.g. thermal resistance . 2.1.3 Recycling Most of insulation products can be processed in recycling process. It is important for cost-effective measures in terms of economy and environmental protection in reference to storage in a landfill. If the product has to be recycled, there need to be a recycling facility to enable its recycling. What is crucial, after that process the product operational, quality and durability performance need to be sustained.

3. Criteria and Regulations Developed environmental criteria are divided into core and comprehensive criteria. Core criteria, which are significant element in GPP process, relate to main environmental impacts of a given product. They are made with minimum additional verification or cost increases. Comprehensive criteria give an advantage in overall score for products, which have documented environmental certificates. 3.1 Core criteria 3.1.1 Energy saving by insulated wall. The amount of energy that is saved by using thermal insulation material in comparison to non insulated wall should be assessed. On this basis carbon footprint should be also assessed. To gain maximum energy savings thermal transmittance of insulation should not exceed 0.04 W/mK. Producer declares transmittance factor, 90% of given product needs to have better transmittance than declared value. Producer needs to present product declaration, CE marking. The basis of this criterion is EPBD Directive 2010/31/EU. 3.1.2 Greenhouse gasses Carbon footprint in emissions of greenhouse gasses have to be assessed in accordance to prEN 15978. Most of fluorinated greenhouse gasses have significant Global Warming Potential (GWP). In this category hydrofluorocarbons (HFCs), perfluorocompounds (PFCs) and sulfur hexafluoride (SF6) can found. Also gasses, like chlorofluorocarbon CFC-11, which have negative impact on ozone layer (ODP – Ozone Depletion Potential) are listed as dangerous. Criterion does not allow any of these substances to be released from product. The bidder is obliged to provide appropriate proof that criterion is met. It is regulated by Regulation (EC) No 842/2006 of 17 May 2006 on certain fluorinated greenhouse gases. 3.1.3 Substances classified as dangerous In this category there are substances which are said to be carcinogenic (R40, R45, R49), harmful to reproductive system (R60, R61, R62, R63), mutagenic (R46, R68), toxic (R23, R24, R25, R26, R27, R28, R51), allergic (R42), cause heritable genetic damage (R46), danger of serious damage to health by prolonged exposure (R48), possible risks of irreversible effects (R68). Substances mentioned cannot be released in amounts exceeding acceptable concentration limits, which are shown in table 2 The bidder is obliged to provide appropriate proof that criterion is met. It is regulated by

Ministry of Health Regulation (Dz. U. 2003 nr. 171 poz. 1666 with following changes) and by REACH Regulation – EC/1907/2006.

Table 2. Indoor acceptable concentration limits and its categories A and B[4]

Substance Indoor acceptable concentration limits [µg/m3]

Category A Category B Ammonia 300 300 Phenol 20 50 Formaldehyde 50 100 Dibutyl phtalate 100 150 Styrene 20 30

3.1.4 Technical Environmental Information The bidder must provide following information:

• Manufacturer and date of manufacture/ batch no, • Energy amount and materials used for production, • Weight and thickness • Percentage value of recycled content • Recycling information • Maximum storage or install-by date • Transport and installation instruction • Storage instruction

These features are verified when bidder provides suitable documents. 3.2 Comprehensive criteria Comprehensive criteria for GPP purposes in Poland are still under development, but there a scheme of what it should contain, how it should be verified and under what regulations. As it was previously mentioned comprehensive criteria promote products with specific, above standard documented features. 3.2.1 Recycled content in thermal insulation Additional points would be given for recycled content in offered product. Limits proposed differ depending on a kind of insulation material e.g. Glass wool>55%, cellulose fiber>80%. This criterion will be regulated by novelized Construction Products Directive (89/106/EEC). 3.2.2 Environmental Management Systems EMAS and PN- EN ISO 14001 Other additional points would be given if producer can prove implementation of Environmental Management System (EMAS) or have introduced regulations given by PN-EN ISO 14001, which determines environmental aims, obliges the producer to implement pro-environmental policy, which needs to be controlled and certified by accredited body. 3.2.3 Environmental Declarations Terms and conditions of environmental declarations are regulated by PN-EN ISO 14024, PN-EN ISO 14021 and prEN 15084. These norms set standards for type 1, 2 and 3 ecolabel or EPD type, which are regarded as an advantage in procurement process. Bidder should demonstrate compliance with this criterion and provide declaration made by qualified institutions.

3.2.4 Origin of Wooden material Other considered comprehensive criteria relate to origin of wooden material. Wood for the purpose of production of thermal insulation need to be certified by Forest Stewardship Council (CFC), Programme for the Endorsement of Forest Certification (PEFC) or other equivalent documents prepared by certified bodies. 3.2.5 Values of GWP and ODP for blowing agents Additional points would be given for products which have blowing agents with lower ODP and GWP levels in reference with other blowing agents with the same thermal effectivity in product life cycle. Examples of materials and their potential is shown in table 4. It is assumed that in case of PIR, PUR and EPS production ODP emission equivalent of blowing agents is zero. It is regulated by Regulation (EC) No 842/2006 of 17 May 2006 on certain fluorinated greenhouse gases, what bidder is obliged to prove.

Table 4. Blowing agents in termo plastic insulation materials and their ODP and GWP

Product used Substance ODP GWP

Urethane foam CFC-11 1 4000

HCFC-141b 0.11 630

Urethane foam modified with isocyanate derivatives

HFC-134a 0 1300

HFC-245fa 0 560

cyclopentane C5H10 0 3

styrene-olefine foam CFC-12 1 8500

HCFC-142b 0.065 2000

HFC-134a 0 1300

Phenolic foam CFC-113 0.8 5000

Dichloromethane CH2Cl2

0

3.2.6 Warranty Last comprehensive criterion, still under discussion, is warranty, which for the products installed should be minimum 20 years. If GPP chooses also to install the product, then the installation service needs to declare also 20 years of warranty for their service. The bidder needs to declare compliance with this criterion.

4. Conclusions Developed by Building Research Institute polish environmental criteria for Thermal Insulation should simplify public procurement process and allow “greener” producers to compete on the market. Green Public Procurement sets standards for pro-environmental service in public sector, what should affect or give less negative impact for the environment especially in energy consumption, air quality or waste disposal. Public procurement with environmental aspects is one of the instruments of sustainable development and realization of 3x20 policy. Although criteria are almost developed, they need to be verified and accepted by public

authorities and then implemented. Reference [1] Harwell “Green Public Procurement – Thermal Insulation Technical Background Report”, AEA, June 2010 [2] Allen, E. (1999) Fundamentals of Building Construction Materials and Methods. 3rd ed. John Wiley & Sons [3] Norm is in preparation by Technical Committee CEN TC 350, in Poland by Technical Committee PKN KT 307 – Sustainable Development. [4] Ministry of Health Regulation (Monitor Polski nr 19 z 1996 r., poz. 231)

Estimating Energy Consumption during Construction of Buildings: A Contractor’s Perspective

SANDEEP SHRIVASTAVA, LEED-AP

ABDOL CHINI, PHD Rinker School of Building Construction, University of Florida, Gainesville, FL, USA

1. Introduction The construction industry uses more materials by weight than any other industry in the United States [1]. Whenever a building is constructed, it imposes loads on the environment in various forms, namely: resources depletion and contamination of air, soil and water, etc. These loads are generated while various demands, such as materials and energy, are met to furnish the designed building. The environmental impacts of building construction, partly caused by large consumption of energy, are imposed during the whole life cycle of a building [2, 3]. Typically, the life cycle of a building can be divided into the following phases: extraction of required raw materials; processing and manufacturing of construction materials and building components; transportation and installation of building materials and components; operation, maintenance, and repair of building; and, finally, disposal of materials at the end of the building lifecycle. Each phase demands energy, material and other resources to produce the required input for a successive phase to complete the cycle. In fact, each of these phases includes several sub-cycles to complete that particular phase. The accumulated consumption and impacts of these sub-cycles provide a comprehensive result for that phase. These results may vary from study to study depending on the various sub-cycles included and the boundaries of an analysis. Setting the boundaries and inclusion of the sub-cycles depend on the parameters being analyzed and/or on the importance of a sub-cycle for a particular study. Each phase of the life cycle of a building affects the environment. Therefore, each phase must be studied in search of providing a high performance energy efficient building. Although conclusions about energy and environmental performance of a building should be based on the results of a whole life cycle analysis, there are always opportunities to explore each phase individually to collect detailed information and strengthen information databases. The collected data would be of interest to the stakeholers who strive to build environmentally friendly buildings. Changes in construction, along with changes in design and selection of building materials, are essential to the success of national efforts to minimize environmental impacts and reduce overall energy use and greenhouse gas emissions [4]. In a construction project, contractors provide resources and select the means and methods of construction. To maximize energy efficiency on a project by using the least energy intensive means and methods of construction, the energy profile for a project is needed. This is possible if the contractor, during pre-construction planning, has access to information regarding energy consumption during construction of the project to identify activities that consume more energy. The obtained information would help contactors focus on energy intensive activities and develop energy efficient means and methods to minimize energy consumption during construction. 2. Construction industry and energy consumption The U.S. construction industry accounted for $611 billion or 4.4 percent of the nation’s GDP in 2008 [5], which would increase to 10% if the equipment, furnishings, and energy required to complete buildings were included [4]. According to the U.S. Department of Energy [6], U.S. buildings - residential and commercial - consume around 40% of the total energy consumption.

Presently, there are plenty of research works assessing the energy consumption and environmental impacts of buildings, but few encompass construction process in complete life cycle. Some studies have included the construction phase; however, this was limited to various stages of material extraction, production, and transportation and did not include on-site construction processes [7-9]. The industry’s energy consumption during construction is not well understood because of its fragmentized nature and involvement of many parties during construction phase [2]. That is why, at the time of design and even before construction starts, it is hard to predict the energy required and its impact at the construction phase. Often researchers exclude the construction phase, stating that its contribution towards total life cycle energy consumption is insignificant. Researchers have also stated that energy consumption and environmental impact of construction activities have never been adequately quantified [2, 10, 11]. European and U.S. figures estimate the construction portion to be about 7-10% of total embodied energy [12, 13]. In the near future when low/net-zero energy buildings are more common, the embodied energy and, hence, construction energy, will gain more importance to achieve sustainable construction [14]. Figure 1 shows the change in ration of operational energy to embodied energy when building development moves from traditional buildings to low energy buildings. Embodied energy in the built environment, especially when buildings have short lives or when buildings are extremely energy efficient, will share an important portion in total energy consumption [15].

Fig. 1 Energy use in buildings: the changing relationship between embodied and operational energy [15]

2.1 Construction contractors and energy consumption during construction The stakeholders for a building project include Investors, developers/owners, architects/engineers, and contractors. In general, selection of the site for a project is done by the owner, and designs and selection of materials are the responsibility of architects/engineers. Contractors are hired mainly to construct the building according to the construction documents within budget and on time. Selection of means and methods of construction and reducing the environmental impacts of the construction process is the sole responsibility of contactors. Rising energy costs is also a concern to contractors. Arnold [16] studied several building projects and found that energy costs during construction vary and can be a significant part of the construction operation costs (as high as 5.7%). He also mentioned that it is difficult to measure energy costs because these costs are embedded in the materials, equipment, or overhead costs. The cost of energy affects the cost of construction, and dependence on fossil fuels makes

construction costs dependent on a volatile market. As the price of gas and diesel go up, so will construction costs. Rising fuel costs may also play an important role in a contractor’s resources procurement strategies. If a contractor is aware of energy consumption and environmental impacts of a project in advance, he/she may play a role in controling energy consumption and environmental impacts associated with the construction phase of the building. In addition, possible measures to conserve energy and use renewable sources on site may be sought. Therefore, it is desirable to develop a system that helps contractors estimate energy consumption during construction phase of a project. This study presents an energy estimation system that can be used by contractors to identify high energy intensive construction activities during construction and seek energy efficient alternatives. The following sections present energy estimation system and a case study to demonstrate its application. 3. Energy estimation system 3.1 Embodied energy in buildings Energy consumed during life cycle of a building may be divided into operational energy, embodied energy, and decommissioning energy [10, 14, 17]. Operational energy is required for heating, cooling, ventilation, lighting, equipment and appliances. Embodied energy is non-renewable energy required to initially produce a building and maintain it during its useful life. It includes energy used to acquire, process and manufacture the building materials, including any transportation related to these activities (indirect energy); energy used to transport building products to the site and construct the building (direct energy); and energy consumed to maintain, repair, restore, refurbish or replace materials, components or systems during the life of the building (recurring energy). Decommissioning Energy is the energy used for demolition/deconstruction of the building and transporting demolished/salvaged materials to landfill/recycling centers. Embodied energy is measured as a quantity of non-renewable energy per unit of building material, component or system. It may be expressed as mega Joules (MJ) or Giga Joules (GJ) per unit of weight (Kg) or area (square meter). Associated environmental impact is implicit in the measure of embodied energy. As a rule of thumb, embodied energy is a reasonable indicator of the overall environmental impact of building material, assemblies or system [14]. 3.2 Scope of the system: a contractor’s perspective The construction phase of a building life cycle involves numerous activities, such as construction of temporary structures, transportation and installation of building materials and components, site work, etc. These activities consume energy and affect the environment. The aim of this research work was to develop an energy estimation system from a contractor’s point of view and, therefore, it concentrates on only energy consumptions for transportation of labor, material and equipment to the jobsite; handling and installation of materials and building component; equipment operation; and energy consumption due to on-site trailers, security lights, and building use. 3.3 Proposed system When a building construction project is started, the general contractor or construction manager prepares a detailed estimate for the materials, workers and equipment required. A bill of quantities (BOQ), which is not only a list of materials but also a list of tasks/items required for the execution of the project, is prepared. The proposed system utilizes a BOQ spreadsheet as the base data for the system. Almost all construction companies prepare BOQ in more or less a similar format as shown in Table 1. BOQ consists of rows that contain a unique reference number that may be Construction Specification Institute master format number or the company’s specific code number,

corresponding task description, quantity of material, unit, and cost associated with the task. The proposed system uses the RS Means cost data [18] for reference numbers and task details. Table 1 A typical BOQ format

Reference No Task /Item description Quantity Unit Unit Cost Total Cost

042710.300140 Brick Walls 100mm thick, facing, 100mm x 65 mm x 120mm

05 M $1900.00 $9500.00

The framework of the proposed system is shown in Figure 2. The BOQ for the project and data related to the project job overhead are entered into the proposed system. In the next step, a crew is assigned to each task. Although RS Means crew were used as default crew in the system, the crew data could be updated based on the crew characteristics associated with the project. Each crew includes number of laborers and equipment as well as energy consumption of the crew per hour. The energy consumption of the crew per hour is used to estimate energy consumption of each task based on the amount of hours it takes to complete the task. A report containing information about energy consumption of each task and high energy demanding task is generated. This report can be utilized by the project manager to consider alternative energy efficient means and methods for the energy intensive task/areas. The next section further illustrates the function of the proposed system by using a case study. Fig. 2 Energy estimation system

4. Repair garage case study The present case study illustrates the use of the proposed energy estimation system. An example of a repair garage was taken from Means Scheduling Manual [19]. The garage was of 30 m x 12 m size, with a reinforced concrete footing, concrete slab on grade, concrete block bearing walls, offices and restrooms, mezzanine over the offices, bar joist and steel deck, builtup roof, sky lights, mechanical and electrical systems, and doors and windows. Figure 3 shows a snapshot of the bill of quantities for construction of the garage. The Means Scheduling Manual could be referred for additional details of the repair garage. A spreadsheet was developed to operate the energy estimation system. The spreadsheet, as shown in figure 3, was divided into two main parts. One part for bill of quantities and the other part for etimating energy consumption due to managerial set-up.

Energy Estimation

Contractor’s BOQ data Project specific information

Ref

eren

ce

Tas

k da

ta

No

Pro

ject

da

ta

Report

Ene

rgy

info

rmat

ion

Crew energy data Mgmt set-up energy data

Fig. 3 A Spreadsheet based energy estimation system for the repair-Garage

A crew number, based on R S Means crew [18] list, was assigned to each task. Productivity of each crew to perform the specific task was available to estimate the amount of time it takes to perform the task. The management set-up inputs were carried over to management data sheet where energy estimation calculation was completed.The calculations of energy consumptions were forwarded to the energy data report sheet, which presents the total energy consumed against each items in the bill of quantities sheet, and energy consumption by the managerial set-up ( figure 4).

Fig. 4 Spreadsheet based energy report

4.1 Validation of the system

Athena Impact Estimator 3.0 [20], a widely known tool to estimate environmental impacts of buildings, provides the estimate of energy consumption during the whole life cycle of a building. This information can further be subdivided into various phases of the building life cycle. As Athena can model only structural components of a building, the bill of quantities sheet of the repair garage was curtailed to the items that can be modeled in the Athena. This new bill of quantity sheet included only concrete, masonry, and metal categories. The outputs from both models were compared to validate the output of the spreadsheet. Table 2 shows the descriptions of inputs used and outputs of the models. 5. Results and Discussion

Table 2 demonstrates that the spreadsheet system can produce acceptable results (about 10% difference in this case), but with more detailed information, as Athena does not further breakdown these results at the level of items and managerial set-up as presented by the spreadsheet. In addition, Athena estimates energy consumption only due to the transport of equipment and materials (not laborers) to the job site and energy consumed in equipment operations [20]. Therefore, the results in Table 2 are prepared and compared for the same scope. The spreadsheet system has the advantage of including additional tasks beyond just structural components, such as energy consumed to transport laborers to the job site and management set-up into its calculation. In addition, it can provide additional outputs, which is helpful to contractors to improve energy performance of a project during construction. Table 2 Inputs and outputs details CSI division Description Input Bill of

Quantities sheet to the System

BOQ generated from the Model developed in ATHENA Impact Estimator 3.0

3-Concrete Concrete 20 MPa 16.0 m3 16.6 m3 Concrete 25 MPa 40 m3 39.0 m3 WWF mesh 0.40 tonnes 0.35 tonnes Reinforcement 4.55 tonnes 4.83 tonnes 4-Masonry 300 mm block bearing wall 5613 blocks 5910 Blocks 200 mm block bearing wall 360 blocks Mortar 14.5 m3 15.0 m3 5-Metal Open web Joist 5.60 tonnes 5.70 tonnes Metal deck 3.40 tonnes

3.67 tonnes 3.70 tonnes

C-frame lintels 3.71 tonnes Output Description Energy consumption under the same scope (materials and equipment transport and equipment operation only)

Energy consumption in construction phase (GJ) Spreadsheet system Athena Impact estimator Model 49.51 44.22

Table 3 shows the results of complete energy estimation during construction for structural tasks using the spreadsheet system. Total energy consumption for the structural tasks was estimated to be 100.51 GJ. This estimation is almost two times that of the value presented in Table 2, which did not include managerial set up and labororers transport, as these were not under the scope of Athena Impact Estimator 3.0. The results show that inclusion of these two items will have significant impact on estimating energy consumption during construction of buildings. Having access to this data before starting the construction operation will help contractors to pay attention to these areas and use energy efficient means and methods, like using low energy consuming security lights and buying renewable energy for managerial set up to reduce the carbon footprints of the building.

Table 3 Energy consumption, based on spreadsheet

Managerial Set-up Labor Transport Material Transport Equipment (Tran+ Opr) Total

GJ GJ GJ GJ GJ 28.41 22.59 38.02 11.49 100.51

Table 4 shows the output of energy estimation system for the construction of the repair garage. The output demonstrates the energy consumption details of the top five energy intensive activities and energy consumed by the managerial set-up. All the items (except electrical and mechanical systems) presented in the Means schedule [19] were included in the bill of quantities. The total energy consumption (both electricity and fuel energy) during the construction phase of the repair garage was estimated to be 309 GJ. Construction activities were responsible for 63 percent of the total consumption. Managerial set-up contributes the remaining 37 percent of the total consumption. It was found that the bearing wall construction was consuming maximum energy among the construction activities and use of diesel generators, and security lights on site were among the major contributors to the energy consumed by managerial set-up. With this additional information, a contractor can reduce the transportation distances for materials, and advise the masonry contractor to bus the required masons and mason helpers to the project site. Table 4 Energy report sheet

Managerial Set-up

Labor Transport

Material Transport Equipment(Tran+Opr) Total

GJ GJ GJ GJ GJ 114 41 35 120 309

Energy Intensive Activities Order (Energy, MJ) Reference No Description Labor Material Equipment Sum % of Total

BOQenergy (196 GJ)

42210344300 Bearing Wall 300 mm 12,615 11,199 0 23,813 12 311110100020 Clear and grub 1,011 0 12,731 13,743 7 52119100440 Open web joists 624 693 8,090 9,407 5 310516100100 Bank run gravel 74 0 7,612 7,686 4 312323131400 Backfill mechanical 569 0 6,902

7,471 4

Managerial Set-up Item Energy, MJ

Trailer 6,171 Diesel Generators 45,257 Security lights 62,208

A sensitivity analysis was also performed to see the effects of variation in “transportation distances” on total amount of energy consumption. Figure 5 shows that when transportation distance is increased by three times, energy consumption for transportation of laborers, materials, and equipment increase by 26%, 22%, and 9%, respectively. This means that, in this project, change in transportation distance affects energy consumption in laborers and materials more than equipment. Therefore, a contractor who is looking for reducing energy should focus on reducing transportation distances for laborers and materials, but should rent equipment from a more distant place if they are more energy efficient.

Fig. 5 a. Total Energy consumption vs labor transportation (energy in,1,000 GJ)

Fig. 5 b. Total Energy consumption vs material transportation (energy in 1,000 GJ)

Fig. 5 c. Total Energy consumption vs Equipment transportation and use (energy in 1,000 GJ) Another analysis was done to demonstrate the significance of energy consumption during construction in high energy efficient buildings. Table 5 shows that the percentage of energy consumption during construction to total energy of building increases as the building becomes more energy efficient. The operational energy of a repair garage was assumed to be 2400 MJ/m2-yr[21] . Sartori and Hestnes [22] observed some increment in the amount of embodied energy in energy efficient buildings in comparison to that of traditional buildings. Based on the data presented in their research, a 15% flat increment in embodied energy and construction energy, for each 25 percent reduction in operational energy, was used in the calculation. Their research also showed that in a traditional building, total embodied energy was around 7% of the total energy. Using their numbers for increment in embodied energy (15% for each 25% reduction in operational energy) and the percentage of embodied energy to total energy (7%), the changes in percent of energy consumed during construction phase to the total energy consumption during 25 years life cycle of the repair garage were calculated (see Figure 6). As predicted earlier in the literature review section, the results show that construction phase will play a significant role in reducing the carbon footprint of high energy efficient buildings.

0.040.08

0.12

0.310.35

0.39

0%

13%

26%

25 km(Base Case) 50 km 75 km

Labor Transport Energy Total Energy % Change in total energy*100

0.03 0.07 0.10

0.31 0.34 0.38

0%

11%

22%

25 km(Base Case) 50 km 75 km

Material Transport Energy Total energy % Change in Total enrgy *100

0.12 0.13 0.15

0.31 0.32 0.34

0%5%

9%

25 km(Base Case) 50 km 75 km

"Equipment Transport+Use Energy" Total Energy % Change in Total energy*100

Table 6. Change in percentage of energy consumption in construction phase to total energy consumption (energy in 1,000 GJ)

Conventional Repair Garage (Base Model) 25% 50% 75% 100%

Construction Energy 0.31 0.36 0.41 0.47 0.54 Embodied energy 1.8 2.0 2.3 2.7 3.1 Operational energy for 25 years life 25.0 18.8 12.5 6.3 0.0 Total energy 26.8 20.8 14.8 8.9 3.1 Construction Energy as % Total energy 1.0 2.0 3.0 5.0 18.0

Fig. 6. Change in percentage of energy consumption in construction phase (Energy in 1,000 GJ)

The importance of the construction phase of a building to reduce energy consumption, therefore reducing the building carbon footprint is clearly supported by the results and discussions presented above. As mentioned in the earlier sections lack of data on energy consumption during construction prevents the search for finding alternative energy efficient means and methods of construction. The presented system can fill this gap by providing contractors and construction managers a tool that identifies high energy intensive tasks in construction operation. The system can be developed on a spreadsheet that is widely used in construction industry and will not impose any additional learning efforts on the contractor’s side. Once developed, the system could be used to forecast energy estimation for repetitive type of projects. It can also be used to record actual data, which will not only strengthen the database at the construction phase but also provide better estimates in the future because the initial use of default values reduces the accuracy of the system. It should be pointed out that the presented system cannot be used to compare two alternative designs for energy efficiency because the amount of prefabrication may vary from design to design. A comprehensive life cycle analysis is required to know energy and environmental impacts of such alternative design. 6. Conclusions Construction of buildings imposes loads on the environment in various forms. Resources such as energy and materials are needed to furnish buildings. The energy used in extraction, manufacturing, transportation, and installation of building components will play a more significant role in construction of energy efficient buildings. The construction phase of a building life cycle needs energy in procuring the resources and installing the materials on site to construct the building. Contractors play a major role in the development of energy efficient means and methods to reduce energy consumption, and overall carbon footprint during the construction phase of the building. The proposed energy information system of this study allows contractors to identify energy intensive activities during construction and deploy energy efficient means and methods to reduce energy consumption of a particular project. In addition, collecting energy consumption data during construction and updating the database will increase the accuracy of estimating energy consumption of future projects. The proposed system can further be expanded into a comprehensive information system, which not only gives companies a cutting edge in a highly competitive market, but also supports the sustainable movement in the construction industry.

0.0 1.8

25.0 26.8

1.05.00

2.3

12.514.8

3.0

10.00

3.10.0

3.1

18.0

Building efficiency Embodied energy Operational energy for 25 years life

Total energy Construction Energy as % Total energy

100

%

0 % 50

7. References 1. HORVATH, A., "Construction Materials and the Environment", Annual Review of

Environment and Resources, Vol. 29, No. 1, 2004, pp. 181-204. 2. SHARRARD, A.L., H.S. MATTHEWS, and M. ROTH, "Environmental Implications of

Construction Site Energy Use and Electricity Generation", Journal of Construction Engineering and Management, Vol. 133, No. 11, 2007, pp. 846-854.

3. HENDRICKSON, C. and A. HORVATH, "Resource Use and Environmental Emissions of U.S. Construction Sectors", Journal of Construction Engineering and Management, Vol. 126, No. 1, 2000, pp. 38-44.

4. NSTC, "Federal Research and Development Agenda for Net-Zero Energy, High-Performance Green Buildings. Washington, D.C.: NSTC.", Vol., No., 2008, pp.

5. Bureau of Economic Analysis. 2009. Available from: (03/12/2011) Gross Domestic Product by Industry Accounts. Available at

http://www.bea.gov/industry/gpotables/gpo_action.cfm?anon=95848&table_id=24547&format_type=0. .

6. Department of Energy. 2008 Available from: (03/12/2011) http://buildingsdatabook.eren.doe.gov/TableView.aspx?table=1.1.3, . 7. HORVATH, A. and C. HENDRICKSON, "Steel versus Steel-Reinforced Concrete Bridges:

Environmental Assessment", Journal of Infrastructure Systems, Vol. 4, No. 3, 1998, pp. 111-117.

8. TRELOAR, G.J., et al., "A hybrid life cycle assessment method for construction", Construction Management and Economics, Vol. 18, No. 1, 2000, pp. 5 - 9.

9. TRELOAR, G.J., P.E.D. LOVE, and R.H. CRAWFORD, "Hybrid Life-Cycle Inventory for Road Construction and Use", Journal of Construction Engineering and Management, Vol. 130, No. 1, 2004, pp. 43-49.

10. COLE, "Energy and greenhouse gas emissions associated with the construction of alternative structural systems", Building and Environment, Vol. 34, No., 1998, pp. 335-348.

11. BILEC, M., RIES, R., MATTHEWS, H. S., & SHARRARD, A. L., "Example of a Hybrid Life-Cycle Assessment of Construction Processes.", Journal of Infrastructure Systems, Vol. 12, No. 4, 2006, pp. 207-215.

12. KOHLER. Life Cycle Cost of Building. in Buildings and the Environment. 1991. University of British Columbia.

13. COLE, R.J. and D. ROUSSEAU, "Environmental auditing for building construction: Energy and air pollution indices for building materials", Building and Environment, Vol. 27, No. 1, 1992, pp. 23-30.

14. Canadian Architect. 2010; Available from: (10/25/2010) http://www.canadianarchitect.com/asf/perspectives_sustainibility/measures_of_sustainablity

/measures_of_sustainablity_embodied.htm. 15. MITEI | Innovative buildings. 2010 27 February 2010; Available from: :Prudent use of

energy and materials http://web.mit.edu/mitei/research/spotlights/innovative-buildings.html. 16. ARNOLD, A.G., Development of a method for recording energy costs and uses during the

construction process. 2008, A&M University, USA: Texas,. 17. COLE and KERNAN, "Life-cycle energy use in office buildings", Building and Environment,

Vol. 31, No. 4, 1996, pp. 307-317. 18. R.S.MEANSCOMPANY, "Means building construction cost data. 2010: Kingston, MA : R.S.

Means Co., c1991-c1995. 19. HORSLEY, F.W., "Means scheduling manual: On-time, on-budget construction, up-to date

computerized scheduling. 1991, Kingston, MA: R.S. Means Co. 20. The Athena Institute - Impact Estimator for buildings 26 March 2010; Available from: (12/07/2010) http://www.athenasmi.org/tools/impactEstimator/. 21. Buildings energy Databook. Available from: (04/1/201)

http://buildingsdatabook.eren.doe.gov/TableView.aspx?table=3.1.3. 22. SARTORI, I. and A.G. HESTNES, "Energy use in the life cycle of conventional and low-

energy buildings: A review article",Energy and Buildings, Vol. 39, No. 3, 2007,pp. 249-257.

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Calculating life cycle cost in the early design phase to encourage energy efficient and sustainable buildings

Gerhard Hofer e7 Energie Markt Analyse GmbH Theresianumgasse 7/1/8 A-1040 VIENNA Email: gerhard.hofer@e-sieben.at Bernhard Herzog M.O.O.CON GmbH Wipplingerstraße 12 -2 A-1010 VIENNA Email: b.herzog@moo-con.com Margot Grim e7 Energie Markt Analyse GmbH Theresianumgasse 7/1/8 A-1040 VIENNA Email: margot.grim@e-sieben.at

Abstract Consideration of Life Cycle Costs (LCC) during the design phases of construction is insufficient at the moment. The reasons for this are on the one hand based on the fact that the focus of construction clients most often remains on the initial investment costs. On the other hand, available software tools are complex and the data needed to use them properly is vague during the early design phase – the phase where cost minimising can be most efficient. Thus, on the basis of various existing Life Cycle Cost tools, a model which enables detailed forecasts of expected Life Cycle Costs during early design phases was developed. The new LCC model can illustrate the characteristic values of space efficiency, energy efficiency, and cost efficiency of the investment and operation while presenting an overview of Life Cycle Costs. This is facilitated through:

• separation of the building in about 100 aggregated building elements in varying levels of detail

• database of investment and operating costs for different solutions and different qualities for these aggregated building elements;

• a building model for entry of space allocation and function programs as well as architectural concepts;

• a tailored energy calculation model for realistic energy costs. All these components are part of the LCC model and were integrated in a software tool. In this way the long-term economic impact of energy efficient buildings can be illustrated quickly during an integrated planning process at the beginning of a building project.

1. Introduction Life-cycle-costs (LCC) are defined as the total cost of a building or of a specific building component throughout its lifetime, including the costs for planning, design, acquisition, operation, maintenance, demolition and disposal less any residual life. The life-cycle-costs

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include both investment costs and operational costs throughout the whole functional lifetime, including demolition [1]. Current methods in construction show that in most cases investment cost is still a decisive factor in the construction of a building. However, increasingly it can be seen that the sustainability of a building plays an ever more important role. One of the reasons is the growing demand for buildings with low operating costs coupled with the increasing desire for sustainability evaluation made through sustainable building certification. LCC is included as a specific criterion in both the German Sustainable Building Council’s certification [2] as well as in the Austrian certification for a Total Quality Building [3]. In the German certification system a specific methodology to calculate LCC is defined. The calculation of LCC for the building has to be compared to defined benchmarks in order to receive credits in the sustainability certification scheme. On the contrary, within the Total Quality Building (TQB) system the auditor has to comply with defined calculation standards and has to include certain types of running costs in order to receive credits in the certification system. Standardization proposals are being developed on the European level by CEN’s Technical Committee 350. Workgroup 4 of the committee is working on Standard EN 15643-4 [4] for the assessment of economic performance in the framework of a sustainability assessment. LCC is the main indicator for the economic sustainability. Considering LCC is important in the early design phase in order to optimize the costs for investment and follow up costs. Usually, various options are taken into account in this phase. A Life Cycle Costs Analysis (LCCA) could evaluate these options: What are the consequences in costs of different insulation standards, different energy carriers or different façade systems? Commonly, a more energy efficient building with higher insulation standards has higher costs for the façade, lower costs for the heating system and, consequently, lower energy costs. External shading systems lead to lower costs for the cooling system and lower energy costs, but to higher costs for cleaning and maintenance of these products. This means, that different design options may have consequences on the investment, energy, maintenance, cleaning and operation costs of a building that should be analysed during the design phase. In many cases there is just a shift of running costs, for instance from energy to maintenance and cleaning costs. A LCCA takes all these costs into account. In this concept the “lowest life cycle cost” option, which is pertaining to the building‘s entire life cycle, is the most economic one [4]. After all, the impact of LCC plays an important role in the value of the real estate. As part of the European project IMMOVALUE [5], research and analysis were conducted on energy efficiency (based on the energy performance certificate), LCC and property value. Findings gathered through interviews [6] showed that sustainable buildings have a higher marketability. At the same time, a clear correlation can be seen between lower operating costs and higher net rent revenues. This illustrates that consideration is given to the inclusion of operation costs in rental costs. International research [7] has shown that sustainable buildings generate higher rent revenues and incur shorter vacancy periods. These various factors and activities show the growing interest for the methodology of LCC. This method allows for the operating costs of a building to be taken into account at the time of initial investment. Additional information about future operating costs can already be ascertained during early design phases, thereby creating a better basis of available data for planning sustainable buildings.

2. Problem Outline Figure 1 describes the essential problems of existing LCC approaches. Today it is common that the projected investment and operating costs of buildings are based on benchmarks of existing buildings (e.g. BKI [8], OSCAR [9]). Top-down approaches do not exist in sufficient detail to be used in the early design phases of a building, when different types of building systems with

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altering costs have to be compared. These approaches are based on categories such as air-conditioned or non-air-conditioned office buildings without paying regard to the particulars of the building design or technical equipment in use in the building. Furthermore, concepts for energy efficient office buildings or those that implement alternative energy systems are not respectively insufficiently taken into consideration. Since specifications are relevant to the past, obviously they cannot be representative of current sustainable building designs. Existing software tools for calculation of LCC (e.g. LEGEP [10], BUBI [11], Baulocc [12] available on the German-language market) are based on the bottom-up approach, which makes it necessary to enter itemized data (i.e. lime cement plaster, or type of paint coating/finish of paint). On the one hand this requires a great deal of data entry while on the other hand the data is simply not available at the required level of detail in the initiation and early design phases. A quick simulation of different variations, as it is necessary in an iteration process with an integrated planning approach, is only possible through a great expenditure of time and effort.

BOTTOM UP APPROACH

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LEGEP, BUBI, Baulocc,...

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PHASE OPERATION PHASEINITIATION PHASE CONCEPT PHASE

Figure 1: Missing link in models for calculating life cycle costs during the design phase (Source: original illustration) Likewise, there are countless software programs which calculate economic efficiency or programs for calculating LCC (e.g. LCProfit), that do not come with any cost data pre-sets. Therefore, in order to calculate LCC, the first task is to determine construction and operating costs of the building which again, requires extensive time and effort in the early design phases. It is exactly in the initial design phase, that taking the long-term economical implications into account is most decisive, as the influence on LCC is most significant in the initial phase of a project. Approximately 80% of all investment and operating costs are determined in the initial and early design phases [13]. Further on in the design phase, the influence on costs declines. Quite the contrary, the accumulation of building costs increases during the design phase. Therefore, it is of the utmost importance to optimize systems in these first phases of a building project. However, just in this period of the project there is a missing link in LCC models in order to assess different design options quickly during the design process.

3. Research Objectives and Purpose The objective of the newly developed approach was to model the building in such a way that LCC can already be calculated in the early design phases; even at a point of time when no design for the building is yet available at the definition of requirements. The main concept is to have an 80/20 Pareto principle that is applied in the design process: by using approximately 20 percent of input efforts 80 percent of the indicators should be

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calculated. Furthermore, the first LCC calculation should be carried out before the first architectural concept is drawn. The purpose of this LCC model is to calculate costs to provide construction clients of office buildings well-founded basis for decision making in order to:

• inform construction clients about the life cycle costs of buildings in the early demand planning phase: these clients very often don’t know about the long term costs of decisions in the demand planning phase. When they can decide on having for instance a passive house at the end of a construction process, they don’t know the options and consequences for investment and follow up costs. This is a crucial aspect concerning the decision for sustainable buildings. If consultants and construction clients don’t know the financial consequences of their decision in early demand planning phase in detail, this might impede the implementation of energy efficient buildings. By using the new LCC method, the client should be well informed about the financial consequences at the very beginning of a building project process

• analyse options for different projects solution in preliminary designs and drafts during the design phases. In this phase, various designs and technical solutions will be analysed regarding the economical effect for the building. By making use of the mentioned LCC model as well as the supportof a tool, various options concerning design and technology can be analysed very quickly in order to find the optimal economical solutions and not to delay the design process.

By integrating the necessary input data for this model into a software tool, it should be possible – with an acceptable expenditure of time and effort – to make reliable statements on prospective investment and operating costs of the building and thereby accelerate the realization of sustainable and energy efficient construction concepts.

4. Methodical approach Figure 2 shows the different phases of a design process. In the initiation phase the requirements are defined. For instance which total area is needed, which quality of building should be carried out? When the requirements are defined, the architect designs the first concepts. In this phase the life cycle costs of the general building concept should be optimised. Later on in the design phase LCC of building components will be analysed. In order to make use of this approach, models for generating the space allocation program and volume program for the building as well as data for construction costs and operating costs are necessary on an aggregated level. This eventually enables entries to be made before the beginning of design. In addition, an energy calculation model should illustrate the interdependency between the building design, the façade, and the building equipment system. If this is executed in this way, no additional calculation tool is needed. The model design should enable LCC analysis during the design phase for optimisation of the building concept and, to a lesser extent, during the preparation for construction for the optimization of the building components.

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DESIGN REQUIREMENTS

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Figure 2: Areas of application of the LCC tool from initiation through to the detailed design phase (Source: original illustration) 5. Realisation of a new LCC model 5.1 Reducing input data On the one hand there should be little data input comparing to a top-down approach; on the other hand the results should be building specific comparing to a bottom-up method. In order to combine the advantage of the fast cost estimation of the top-down method with the advantage of the accuracy of the bottom-up method it was necessary to take on a new approach. At the same time, the decision-making process in the design phase was incorporated into the model with great detail. Figure 3 describes the decision making process in a building project. At the bottom there are the stages of life, beginning from acquisition to operation and disposal of the building. On the vertical axis there are the different levels of detail in the decision process. Furthermore, different parts of the building such as structure, envelope, services and finishes are mentioned separately. In general, decisions are made mainly at the strategic phase and system levels during the stage before the construction of a building as shown in figure 3.

Level of decisionin Initiation &

Design Phase

Figure 3: Levels in the decision-making process (Source: European Commission [14])

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For this reason, the building was divided into aggregated building elements with the aim of reducing input data. These elements were evaluated regarding the influence on costs and in total amount of a building. Moreover, the relevance for system decisions in the early design phase was taken into account. Concerning the building, the impact of the various usage areas on cost was investigated, focussing on outlining the effect of special spaces on cost compared with main usage “office” spaces. The primary utilization of an office building, as the names suggest, is for office and administrative use. The main usage spaces are complimented by decentralized spaces such as staircases, elevators, restrooms, as well as centralized special usage areas such as conference rooms, the lobby, cafeteria(s), storage areas or carports. The essential system decisions are made based on the main usage which also generates the main source of costs. Consequently, the building elements for the main usage areas (“office” spaces) need to be provided at a different level of detail than for the special usage areas. Based on cost analysis, building elements were defined at different levels of detail. Depending on the influence of the usage, aggregation of the building elements was carried out at a different level. For the main usage area, “office”, cost relevant issues are compiled at the level of elements (as defined by Austrian Standard ÖNÖRM B 1801-1 [15]), for less cost relevant issues or planning elements in less cost relevant usage areas at the level of cost ranges (as defined by ÖNORM B 1801-1 [15]).

Office area Office area

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Figure 4: Structure of costs for the main usage “office” space and special usage space (Source: original illustration) The building elements were consequently compiled from bottom-up aggregated items for the relevant cost drivers. Referring to figure 4 the level of detail for building elements are the system level. For less relevant costs ranges and usages they were bottom-up aggregated in a less detailed level and tested against top-down benchmarks, hence a certain imprecision can be tolerated due to the relevance of the data. For this cost data the level of detail is the strategic level. Thus the number of elements and consequently the amount of data entry is reduced significantly. 5.2 Virtual building model For the modelling of the building, a virtual building model was developed. This building model is based on the experience the company M.O.O.CON acquired as a result of their client consulting on office buildings. Based on the requirements of the client’s brief, the virtual building model can calculate the approximate volume and surface area of the building at a time where no design drafts for the building have been put forward. Aside from the calculation of volume and surface area this tool can also optimize usable floor space. Optimising the use of floor space is a powerful lever for the reduction of construction and operating costs. Through the reduction of conditioned volume, energy costs can also be reduced. In this process office spaces and other special spaces in the building are combined in different design variations to floors and building cores. Subsequently, the gross floor space is calculated. Thus, it is possible to optimize the floor space even at this point of time, which in turn leads to

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lower follow-up costs. Figure 5 shows the model for optimising the floor space: the columns of the table contain the number of office areas adjacent to one staircase, the rows describe the total number of staircases in the building. The letters “HH” define high rise buildings; “FB” means low rise buildings. The numbers in the coloured cells are the total area of the building. By using this model, the type of building with lowest area can be chosen.

Figure 5: Output of floor space values per building sector and number of cores. (Source: M.O.O.CON) With the introduction of an architectural concept, the data in the building volume model is changed in accordance with the significant geometrical dimensions (essential building area data, façade, building orientation). With minimal additional effort for data entry the existing data can be optimally used. 5.3 Cost database For the calculation of LCC in early design phase it is essential to have a cost database for investment and running costs in order to be able to calculate LCC very quickly. Therefore, based on the defined building elements and different quality levels of decentralized spaces, the costs for more than 1,000 database elements were calculated. Different sources were incorporated for an estimation of the investment and operation cost. These figures were integrated into a database which was specifically developed for this model. In order to determine the total cost of the elements comprehensive building data was necessary. This was ascertained by drawing on the virtual building model or the architectural concept. As with the aggregation of the building elements, it was also necessary to keep the amount of required data to a minimum for the calculation of comprehensive building data. Again, the results of the analysis of the cost drivers were drawn to and an attempt to incorporate only a few significant parameters from the building design was made. All other data should be calculated by algorithms based on these entries. The algorithms were derived from design regulations for office buildings, fire safety regulations, work space regulations and years of experience of various projects of M.O.O.CON. The significant parameters for the efficient use of space such as width and structure of building could easily be entered and changed. The data entry was done through a space allocation and function program in the initiation phase. Common measurements of architectural plans provided at this time were used as a basis during the early design phases. Building elements could be defined and associated with investment and operating costs based on the structure of the usage area as well as significant system decisions, which contributed to the comfort of the interior (acoustics, visual comfort). For a usage area such as a cafeteria, this meant the definition of different building elements for different standards at a level of cost ranges (such as “high quality cafeteria”). For the office areas building elements for flooring, floor construction, office partitions, hallway dividing walls, noise insulation, etc. were defined (e.g. office area, flooring, carpet, high quality carpet). For the building itself, building elements such as façade, HVAC and many more had to be defined.

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5.4 Calculation of energy use and energy costs Founded on the building model of selected building elements and user specified comfort guidelines, it was now possible to calculate energy consumption based on the calculation for the energy certificate complemented by several significant factors such as the influence of thermal mass, different usage areas, the consideration of daylight, the actual energy consumption of different utilities like lighting, cooling, heating and ventilation. The energy calculation was divided into different degrees of detail. For the main use of the building the energy consumption was calculated according to an energy balance model by using ISO 13790 [16]. Precisely, the Austrian standards for calculating the energy performance certificate were used (ÖNORM B 8110-6 [17], ÖNORM H 5056 [18], ÖNORM H 5057 [19], ÖNORM H 5058 [20]). For detailed calculation of energy demand for lighting the European standard ÖNORM EN 15193 [21] was incorporated taking the use of daylight into account. To be more precise, additional aspects in comparison to the energy performance certificate were included in order to calculate the energy consumption. The thermal mass was calculated based on a detailed assessment of the respective building elements. The operation time of the building could be inserted individually. The decentralised areas were calculated very roughly. In these areas the usage of space is normally most important for the energy use (e.g. in the kitchen the internal appliances are more important for the energy use than the system of the façade). In these areas the heating and cooling level is depending on the energy balance of the main usage area. Furthermore, energy demand details based on data of DIN 18599-10 [22] and SIA 2024 [23] were integrated without calculation of an energy balance. Based on the integration of a detailed energy assessment method and by using an individual operation period as well as comfort date, realistic energy usage scenarios could be compiled. Results of the calculation were compared to the general benchmarks of the OSCAR report [9]. Owing to the programming of a software interface the entry of the building model and of the building elements could be directly linked to the energy cost calculation, making any additional step unnecessary. The linking of the building elements to the use of energy calculation allows for an additional correlation between building design and heating and cooling load of the building’s central equipment system. Heating and cooling loads are calculated through the entry of the building’s volume and façade design. These loads are indicators for the selection of the dimension of the building equipment systems for heating and cooling. An improved insulation of the façade contributes directly to lower investment and operating costs of the building equipment systems. The chosen method of calculating the energy costs also allows for the selection of alternative energy systems such as heat pumps, photo-voltaic and thermal solar systems. Based on investment and operating costs provided by a per-element basis (originating from the building elements) as well as building specific calculated energy costs it is now possible to calculate LCC using the net present value method or the method of complete financial plans. By changing significant parameters (inflation, construction cost index, energy cost index, depreciation period and financing options, etc.) their effect can be simulated. Sensitivity analyses can be done by changing the entered value for calculations. Cost parameter of the building can be varied in Excel allowing for a risk analysis of individual parameters to be carried out.

6. Discussion of methodology In the test phase of this LCC model investment cost and operating cost data, derived from completed and operating buildings, were compared with corresponding results generated by

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this model. Through this data it was possible to test the programmed algorithms and the cost estimates and make any necessary change. Having completed the testing phase, it was possible to confirm that the chosen approach leads to extremely short data entry times. There are around 50 data inputs needed for the building geometry and around another 50 for the quality of the building elements. At the same time the cost reliability achievable in this early design phase remained within the margins of +/- 10 to +/- 20% for all simulated projects. Thus, it could be shown that with sufficient knowledge of significant cost drivers the simulation effort can be minimised without compromising on data reliability. However, this cost data and results of LCC are just limited to a national level. In the test phase buildings from Austria and Germany were calculated. For this region, by taking certain regional factors for costs into account, this model can be applied by using the developed cost data base. Furthermore, there are restrictions in the building types. At the beginning, this model was developed just for office buildings. Now, the building types were extended to nursing homes, hospitals, hotels and schools. In general, these building types that have regular and standardized rooms in the main usage spaces can be used. The cost data was mainly developed together with big Austrian building and HVAC companies. These companies have their focus on big non-residential buildings. Therefore, data cannot be used for small buildings less than 1,000 square meters are and for residential buildings.

7. Examples for LCC calculations The focus of the application is on the early design phase of a building project. Here, the LCC tool is used for the following purposes:

• Optimization of life cycle costs in the project initiation and determination of a reference value for life-cycle costs for the planned space and functional program, considering sustainability goals.

• Comparison of life cycle costs of different building designs in the context of an architectural competition

• Optimization of life cycle costs by comparing different solution in the preliminary design and design of a building project

7.1 Assessment in the architectural competition A public project developer plans a nursing home with high sustainability standards. According to comprehensive sustainability criteria, a reference value for the life cycle cost of the building can be established in the definition of requirements. As a part of the architectural competition, the cost of the competition project was calculated, compared with the reference value and prepared for the jury. Therefore, the jury was able to consider the long-term economic effects of the architectural concept and building services in the competitive decision. Figure 6 shows the investment costs of the five submitted projects and the reference value for the investment costs divided into costs for structural, HVAC and finishing works. Figure 7 contains life cycle costs in 25 years reference period while figure 8 shows the accumulation of life cycle costs in a time period of 60 years.

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Comparing all projects, there are two projects (No. 2 and 4) that have higher LCC than other projects and the reference value. By using this graphs and cost values, the projects will be analysed regarding the economical effects. The jury will receive the results of graphs, values and of the analysis to incorporate LCC in their decision for the best project. 7.2 Assessment in the preliminary design phase of an office building A private project developer plans a new office building in passive house standard. For this project approximately 3% additional investment costs for a passive house were compared to the anticipated operating costs. The additional investment costs could be refinanced within 17 years with an assumed energy cost index of 5%. For an institutional development project it is even more important to show the full cost of the building to the future tenants. Only when full costs of energy efficient buildings are on the same level of building with low energy efficiency, such projects can be carried out. The cost of good decision making information about costs in early stages is therefore crucial. For this project, the cost drivers over the life cycle have been shown in the design phase. Thus, the design team concentrated on the most relevant building elements. A comparison between different energy sources such as gas, district heating or geothermal energy was carried out; additionally the use of photovoltaic and thermal solar plant was considered. For the upcoming design phase the use of geothermal energy in combination with an activation of thermal mass (peak load with district heating) will be assessed in detail. 8. Conclusion The development of a new model for calculating LCC in the early design phase was successfully transferred to the market. There are first projects in the demand planning phase, for architectural competition as well as in the design phase of a building. The results of this model are mainly used to give the construction client valuable information about the future cost of the building. At the moment this model is extended to the refurbishment of buildings. The main aim is to compare different solutions (refurbishment of an existing buildings, construction of a new building) in the initiation phase of a building in order to give the construction client valuable decision making information for the optimal economical solution. In general, the economical dimension of a building is just one aspect. By advising the construction client in the early design phase all aspects of sustainable building are taken into account. Potential negative and positive aspects of different design solutions are mentioned in order to find the best integrated design solution for the building.

9. Acknowledgement The development of the mentioned model for early calculation of LCC in the design process was funded by the “ZIT - Die Technologieagentur der Stadt Wien” (Agency for Technologie of the City of Vienna). The further development of an LCC model for the refurbishment of buildings is supported by the Austrian programme “Haus der Zukunft plus” (Building of the Future plus) within the project BIGMODERN. The development of a database for investment and running costs of building elements was supported by the large Austrian construction company Allgemeine Baugesellschaft - A. Porr Aktiengesellschaft as well as the large Austrian and international building equipment supplier Cofely Gebäudetechnik GmbH and the engineering office Allplan GmbH.

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10. References [1] Hofer, Gerhard: Integrated Planning for Building Refurbishment - Taking Life-Cycle Costs

into Account (LCC-Reburb), final report, project in the framework of the European Commission´s Energy Efficiency Programme SAVE, Vienna, 2006.

[2] Deutsche Gesellschaft für Nachhaltiges Bauen e.V., Deutsches Gütesiegel für Nachhaltiges Bauen, Aufbau – Anwendung – Kriterien. Issue 3/2009. Stuttgart, 2009.

[3] Lechner, Robert: TOTAL QUALITY BAUEN: Ergänzung und Erweiterung des bestehenden Gebäudebewertungssystems, Wien, 2009.

[4] prEN 15643-4:2009-12-31 (working draft): Sustainability of construction works — Sustainability assessment of buildings — Part 4: Framework for the assessment of economic performance, Brussels, 2009.

[5] IMMOVALUE: Improving the market impact of energy certification by introducing energy efficiency and life-cycle costs into property valuation practice, IEE/07/553, 2010, www.immovalue.org.

[6] Bienert, Sven et al.: Integration of energy efficiency and LCC into property valuation practice, paper for the 15th PRRES Conference, January 2009, Sydney. Download at www.immovalue.org.

[7] Fuerst, Franz; McAllister, Patrick: Green Noise or Green Value, Measuring the Price Effects of Environmental Certification in Commercial Buildings, Reading, 2008.

[8] Baukosteninformationszentrum Deutscher Architekten (BKI): Statistische Kostenkennwerte für Gebäude, 2010, www.baukosten.de.

[9] John Lang Lassalle: Büronebenkostenanalyse OSCAR 2008, Berlin, 2009. Can be ordered from www.joneslanglasalle.de

[10] LEGEP Software GmbH: LEGEP Bausoftware, bauen berechnen betreiben; Ein Werkzeug für die integrierte Lebenszyklusanalyse, 2010, www.legep.de.

[11] Riegel, Gert Wolfgang: Ein softwaregestütztes Berechnungsverfahren zur Prognose und Beurteilung der Nutzungskosten von Bürogebäuden, Darmstadt, 2004.

[12] Herzog, Kati: Life Cycle Costvon Baukonstruktionen – Entwickl. eines Modells u. einer Softwarekomponenten zur ökonomische Analyse und Nachhaltigkeitsbeurteilung von Gebäuden, Darmstadt, 2005.

[13] Statsbyggs: LCProfit, 2010, www.lcprofit.com. [14] European Comission, DG Enterprise and Industry: Task Group 4: Life Cycle Costs in

Construction, Brussels, 2003. [15] ÖNORM B 1801-1:2009 06 01: Bauprojekt- und Objektmanagement - Teil 1:

Objekterrichtung, Wien, 2009 [16] ISO 13790:2008 03: Energy performance of buildings - Calculation of energy use for space

heating and cooling, Genf, 2008. Can be ordered from www.iso.org [17] ÖNORM B 8110-6:2010 01 01: Wärmeschutz im Hochbau - Teil 6: Grundlagen und

Nachweisverfahren - Heizwärmebedarf und Kühlbedarf, Wien, 2010 [18] ÖNORM H 5056:2010 01 01: Gesamtenergieeffizienz von Gebäuden - Heiztechnik-

Energiebedarf, Wien, 2010 [19] ÖNORM H 5057:2010 01 01: Gesamtenergieeffizienz von Gebäuden - Raumlufttechnik-

Energiebedarf für Wohn- und Nichtwohngebäuden, Wien, 2010 [20] ÖNORM H 5058:2010 01 01: Gesamtenergieeffizienz von Gebäuden - Kühltechnik-

Energiebedarf, Wien, 2010 [21] ÖNORM EN 15193:2008 01 01: Energetische Bewertung von Gebäuden - Energetische

Anforderungen an die Beleuchtung, Wien, 2008 [22] DIN 18599 10:2007 02: Energetische Bewertung von Gebäuden – Berechnung des Nutz-,

End- und Primärenergiebedarfs für Heizung, Kühlung, Lüftung, Trinkwarmwasser und Beleuchtung – Teil 10: Nutzungsrandbedingungen, Klimadaten. Berlin, 2007.

[23] SIA Merkblatt 2024: Standard Nutzungsbedingungen für die Energie- und Gebäudetechnik, Schweizer Ingenieur- und Architektenverein. Zürich, 2006

Value Driven Management Decisions and Eco-Efficient Technologies

for Building Sustainability

Dr. Panayiotis PhilimisTechnical Director CNE Technology Center Cyprus p.philimis@cnetechnology.com

Research Engineer, Dr. Souzanna Sofou, CNE, Cyprus, s.sofou@cnetechnology.com Associate Professor. Diofantos Hadjimitsis, CUT, Cyprus, d.hadjimitsis@cut.ac.cy Senior Research Scientist, Mr Kyriakos Themistocleous, CUT, Cyprus, kt33@cytanet.com.cy Director, Mr Photos Paraskeva, Skycore Group, Cyprus, fotos@skycore-group.com Summary Sustainable Building is commonly referred to as the practice of adopting processes that are eco- responsible and resource-efficient throughout a building’s life-cycle. This work relates to decisions in contemporary management, supported by eco-efficient technologies. Successful implementation of value-driven decisions in the building sector can sometimes be achieved by following non-traditional pathways. Indications for such managerial decisions in the procurement and building sectors are given by: i) business instinct ii) desire for innovation and non-conventional architecture iii) economic, social, and cultural factors affecting the value of property iv) opportunities for radical business changes v) traditional investment analysis results vi) knowledge of current and prediction of forthcoming law or state/municipality development plans vii) key people viii) negotiations with third parties, ix) traditional ideas that can be applied to facilitate cutting-edge technology x) Renewable Energy Technologies and eco-efficient facilities, etc. The purpose of this study is to model the value-driven, decision making mechanism leading to sustainable buildings with enhanced value. This work will be supported by case studies performed in the framework of the ValPro European Project (Eracobuild VDP call).

Keywords: value-driven management decision model, value-driven business model,

sustainable buildings, eco-efficient technologies

1. Introduction The Value Driven approach has by now been materialized in decision making [1] and integrated as a process in Technology Road Mapping (VTRM) [2]. However, creating additional value is still a rather new concept in the building industry and as such it is not yet driving business models or being enabled by contract forms. As a result, value driven processes and supporting models, methods and tools are not implemented in practice, even if they exist. ValPro stands for Value Driven Procurement in Building and Real Estate Sector. It is a pan-European Research programme that brings together 8 leading research institutions and 15 key industry partners and governmental institutes from 6 different countries, creating a framework for interdisciplinary research to tackle the problem described above; a novel solution that can boost economic and social growth in the value-added direction.

One of the ValPro above-mentioned case studies concerns Skycore Megastructures Ltd, which is based in Limassol, Cyprus. Skycore’s activities fall into ‘Strategic investments for the development of fascinating true worldwide icon infrastructures at primary locations in Eastern Europe’. Skycore’s initial business plan involved the development of a land owned by the company in a key spot of the city centre of Limassol in Cyprus, and more particularly in the vicinity of the most historical street and the shopping city center. An old building (block) was build there, but due to its bad condition, the financial income from this property (rental fees) was not proportional to its strategic position and, consequently, the investment opportunity was clear. However, a set of facts and parameters have altered the initial business plan. In fact, the business scenarios of the project were changed several times in a 2 year period, which, in turn, has lead to the dramatic change of the company itself. More specifically, the total plot area to be constructed is now more than 3 times the initial plan (600m2 to 2000m2), the total covered building area is now more than 5 times the initial one, the budget was raised from 5m€ to 25 m€, and Skycore has now partnered with 2 other foreign companies in order to make this plan a reality. The purpose of this case study is to model the value-driven decision-making mechanism that lead to important changes in the ‘steps to value’, and resulted in value-driven procurement and use of eco-efficient technologies for building sustainability. 2. Research Background, Analysis and Targets 2.1 Background The research background, (RB) and the key stages that need to be analyzed are listed below:

RB a) A key problem faced at the first period of the project was the establishment of free ownership of the old building, which involved negotiations with the previous long term tenants before reaching the demolition stage that took place in late 2008.

RB b) Architectural work took a lot of time since Skycore wanted to construct a unique building that would make its mark in the city, as an architecturally unique, energy efficient, and beautiful multi-use high-tech building. Skycore people had to extensively work on human resources so as to establish a flexible and strong team of professionals.

RB c) Due to the strategic location of the owned property, the case owner considered and proceeded with the purchase of a neighbouring land (see Figure 1) that gave an entirely new dimension to the project. This decision was based on the fact that this particular land is situated very close to the main shopping street in Limassol, a key government building, etc, which practically means that the land’s value is only expected to rise. Indeed, new modern buildings are already constructed, and the Cyprus University of Technology is now established in this area. The first property was purchased in 2009 and the second in 2010.

RB d) One of the factors that influenced the decision to purchase the neighboring land was a specific benefits’ scheme by the municipality of Limassol. In particular, in a residential area, a land’s building coefficient is substantially raised if the area is bigger than 1000m2 and the building can provide more than 70 parking places. In this case, the

Fig. 1 Initial available land for development and neighbouring area purchased in Limassol, Cyprus.

building coefficient is raised from 240% to 350%, which corresponds to a high potential economic benefit for the case owner, as the land is at a strategic point.

RB e) The dynamic architect of the project is Ms. M. G., a Silver Metal Winner who gave a novel character to the design of the new buildings. The architect was recently employed by the Skycore Group. The concept for the new building now combines creative architectural design and flexible functionality, while being high-tech oriented.

RB f) All decisions taken were also based

on Evaluation Reports, Cost - Benefit Analysis, Budgeting Control, Cash Flow Management, Risk Assessment Tools, Comparative Methodologies Tools, etc.

RB g) The discussion on the final use of the building went through several stages. At first, it was conceived as an entertainment center with clubs and restaurants. Due to the objections of the Town council for such use in the area, the management team was forced to change the initial use.

RB h) Another idea regarding the use of the building involved the following: i) A Ground floor /mezzanine (to be used as show-room, bank, shop or office), ii) 4 floors offices, iii) 1 floor restaurant with roof garden, iv) 70 parking spaces in three floors. The last will be accomplished with the use of smart parking systems that reduce the need of 6 underground floors to 3 floors. This gave the case owner another business idea; a new company was formed to promote the sales of such systems in Cyprus. These systems are not used in Cyprus at the moment and a huge business opportunity has been drawn. The name of the company is Skycore Smart Parking Systems.

RB i) With regard to the energy efficiency of the

building, a holistic perspective is to be followed. Eco-efficiency means doing more with less, creating and providing quality products and services while reducing resource use, waste and pollution along the entire value chain [3]. In that sense, Skycore’s integrated approach includes available technologies like PCM (Phase Changing Materials) and Solar Energy. In fact, a new company was created to promote the sale of integrated solutions for saving energy technologies in buildings. The new company is Skycore Smart Technologies Ltd.

RB j) The new building itself will act as a show-case for the newly formatted companies, targeting Middle East Clients interested in eco-efficient buildings and facilities.

RB k) The building will include several features like different lifts for different purposes: for public, for private use, and one for services like food. A Central Monitoring Room has

Fig. 2 One of the designs for the new buildings. The architect based the design on the picture of

two ballet dancers dancing on the street.

Fig. 3 The Concept of smart parking systems lead to the formation of a new company in order to promote

the sales of such systems in Cyprus.

been planned for the new building. Using cutting-edge technologies, the person in charge will monitor the energy use/needs of the building, manage the facilities for smooth operation and attend to any problems. The goal is to minimize human interaction.

RB l) Also, the building will be decorated with horizontal and vertical gardens, and have a view in two directions (including the sea view). Fig. 4 below shows the final designs of the first Skycore tower.

Fig.4 Final designs of the first Skycore Tower

2.2 Analysis This study refers to the top two levels of the value pyramid, that is, value models and business models. As mentioned above, the purpose of this case study is to model the value-driven, decision making mechanism that drove these changes, and gave indications for value-driven procurement. More specifically (see, research background, RB) the research questions are:

RB a) is an indication of the way negotiations with third parties affect value-driven decision processes. Can the outcome and the duration of negotiations alter these processes, or visa versa?

RB b) implies that business instinct and desire for innovation played a role in decision making. Were these two the key parameters?

RB c) suggests that value driven decisions are affected by economic, social, and cultural factors, but the importance of location is also critical. Is business instinct somewhat based on the above, or are these the key factors in decision making? Can this be affirmed by third party business activity?

RB d) describes how a state or a municipality development plan can give rise to potential economic value and therefore affect value-driven decisions. Can politics be a driving force?

RB e) proves that key persons in a project can literally change its course. RB f) reports that traditional investment analysis results are used in the decision process. But

can a firm ignore such tools if other parameters suggest that the investment will produce more value than that predicted by financial tools?

RB g) describes how the law or an edict can influence value-driven decisions. RB h) is an example of how a business opportunity can give now value to a company, leading

to the change of the company itself. RB i) is an example of how Renewable Energy Technologies can provide new value and

affect the decisions taken, even to the point of the creation of new business activities. RB j) describes how eco-efficient facilities can provide added value in the decisions taken by

modern, energy efficiency oriented companies. RB k) is a characteristic example of how traditional ideas can be applied to facilitate cutting-

edge technology and add new value. In fact, a monitoring room is constantly used in factories and production plants, and a job description for the person in charge of the monitoring room can be the Building Operations Janitor (BOJ).

RB l) suggests that nature can provide value in multiple ways. It is noteworthy that the corporate decisions described above were taken at the times of world economic crisis, and the availability of funding was a time dependent factor. 2.3 Research Targets Looking back on all that has happened in the last 2 years, neither of Skycore managers could easily pinpoint the ‘why’ of each decision, let alone the several impressive changes in the business scenarios in a 2-years time. Although traditional managerial tools were used, neither could tell which circumstances or risks weighted in favor of which course of action. And that, because the exact criterion by which the decision makers could choose a course of action under uncertainty, was not the one that would generate the greatest expected profit. It was the one that would generate the greatest expected value; the latter could not however be easily quantified. It is clear from the above that there are several challenges in this research work. In order to model the value-driven, decision making mechanism that drove these changes, and gave indications for value-driven procurement, one has to consider the multi-criteria dimension of this problem. The use of weight coefficients would necessarily mean employing personal criteria in value assessment, but ironically, this is what drove these changes. A step-wise approach could therefore be adapted. More specifically, the first project phases could be modeled using the weight summation method, and the theoretical results will then be compared with the actual practices. In future decision making problems, the study parameters / weight coefficients could then be re-calculated and adjusted. (See for example [5] regarding the verification of the weight coefficients in multi -attribute decision making.) In such case, the LifeCycle Value should be considered as the summation of current and potential value, taking under consideration ‘how long the future is’. Also, it should be presupposed that value lies also in the development of new companies, which will use the building as show-case in order to demonstrate the unique concepts materialized, the new technologies, and their use in energy efficiency, accessibility and services. Skycore is interested in an interactive, custom made tool for supporting decision problems. If successful, this resulting tool is to be applied and used in similar future actions. 3. Value-Driven Decisions 3.1 Multi Criteria Decision Making (MCDM)

a) Questions given to decision makers. During this study, the Skycore manager - decision makers were asked to answer a series of questions, without consulting one another. Firstly, they were asked to identify the three most important business scenarios, S. Next, they were requested to write down the most important criteria for evaluating those scenarios. For this, they had the choice of taking into account the analysis of chapter 2.2 (RBa to RBl), that they have already agreed to. Alternatively, they could ignore the above, and write down other criteria. They also had the choice of categorizing and re-numbering the criteria. Also, they were asked to provide weight coefficients, wi, for the criteria chosen. Finally, the decision makers had to give a grade, aij, for each of the most important scenarios with regard to all the criteria they choose as the most important ones. Since

the study included both quantitative and qualitative criteria, they were given instructions on the climax they could use for each case. The following examples were given for clarification: (Climax i) (quantitative) if one of the criteria was for example RB f) (traditional investment analysis results, economic factors) then they could use the NetPresent Value as a grade for each scenario. (A m€ for Scenario A, B m€ for Scenario B, C m€ for Scenario C) (Climax ii) (qualitative) if one of the criteria was for example RB c) (social, cultural factors), then they could use a scale from 0 to 10 (0 meaning indifferent and 10 meaning very important). (Climax iii) (qualitative) if one of the criteria was for example RB i) (use of RET and eco-efficient facilities), then they could use a scale from -5 to 5 to measure environmental impact (-5 meaning very negative environmental consequences.) b) Answers received: The most important business scenarios identified by Skycore were the following: i) Development of a 600m2 land and no other purchase of land, S1 ii) Purchase of neighbouring land and immediate start of construction work for 2000m2, S2 and iii) Purchase of neighbouring land and proceed with construction for 2000m2 gradually, S3. With regard to criteria, three new were added by Skycore, who used the grades in the interval {0, 1}, (-1 meaning very important) to evaluate all criteria. The weighting coefficients were then calculated according to:

n

iiw

1

1 (1)

With regards to the grades given, Climax iii) was used to evaluate Scenarios with regard to the first criterion, while Climax ii) was used for all the rest. Then, standardisation for all grades was performed according to:

jj

jjj

minmax

min

, (2)

where max j and min j are the maximum and minimum values observed for criterion j for all alternative scenarios. The weighted summation method was used to rank the Scenarios according to their weighted average (total grade): Sh=max(S1, S2, S3), where Sj the weighted average of each Scenario, that was found as follows:

n

iijij wS

1

(3)

It is noted that one set of answers was received, so the use of standard deviation (eij) based double weight coefficients was not needed in this case:

n

i ij

ijij e

wS

1

(4)

where eij the standard deviation corresponding to average aij. Results are summarised in Table 1:

Table 1 Ranking of Skycore Scenarios based on the weighted summation method

S1 S2 S3 S1 S2 S3 S 1 S 2 S 3

weight coefficient, wi ai1 ai2 ai3 ai1 ' ai2 ' ai3 ' wi * ai1 wi * ai2 wi * ai3

Criterion 1 (ƒ 1) 0.057 -2 0 0 0 1 1 0 0.057 0.057

Criterion 2 (ƒ2) 0.086 5 10 10 0 1 1 0 0.086 0.086

Criterion 3 (ƒ3) 0.057 2 10 10 0 1 1 0 0.057 0.057

Criterion 4 (ƒ4) 0.057 5 10 5 0 1 0 0 0.057 0

Criterion 5 (ƒ5) 0.086 3 3 3 0 0 0

Criterion 6 (ƒ6) 0.029 8 2 2 1 0 0 0.029 0 0

Criterion 7 (ƒ7) 0.029 2 8 8 0 1 1 0 0.029 0.029

Criterion 8 (ƒ8) 0.057 3 10 10 0 1 1 0 0.057 0.057

Criterion 9 (ƒ9) 0.086 8 10 8 0 1 0 0 0.086 0

Criterion 10 (ƒ10) 0.029 8 10 8 0 1 0 0 0.029 0

Criterion 11 (ƒ11) 0.114 10 2 8 1 0 0.75 0.114 0 0.086

Criterion 12 (ƒ12) 0.114 5 10 9 0 1 0.8 0 0.114 0.091

Criterion 13 (ƒ13) 0.114 5 5 10 0 0 1 0 0 0.114

Criterion 14 (ƒ14) 0.086 2 8 8 0 1 1 0 0.086 0.086

sum(wi) 1 0.143 0.657 0.663sum(wi*aij)

standardizationgrades weighted average

business instinct/ desire for innovation

outcome/duration of negotiations with third parties

importance of location

state/municipality development plan

key people's opinion and actions

traditional investment analysis results

law/edict

business oportunity

use of RET and eco-efficient facilities

traditional ideas for cutting edge technology

availability of financing

world economic crisis

timing

future prospective opportunities

3.2 Results and Discussion

The analysis above verified that the Scenario with the highest grade is S3, which is in fact the one followed by Skycore. It is worth mentioning that world economic crisis, availability of funding and timing proved to be key criteria, while traditional investment analysis results were evaluated as less important compared to the opportunity for using RET and eco-efficient technologies. The latter proved that although traditional investment analysis results were taken under consideration, the Skycore managers’ decisions where value driven, as they evaluated the scenarios on the basis on generating the greatest expected value on the long term basis. These decisions were reflected on the final outcome, as a thorough study was performed for integrating eco-efficient technologies in the new building. Key points of this study are explained in chapter 4. 4. Eco-Efficient Technologies 4.1 Current Situation in Cyprus

Next generations’ future urban sustainability is gradually becoming one of the most important concerns and priorities of all major governmental and semi-governmental bodies in Cyprus. Being an EU new member country, Cyprus did not have a comprehensive energy efficiency policy. The recent application of the Union’s legislation, and in particular the Energy Performance Buildings Directive (EPBD), has indeed improved the contribution to energy savings in the last 2 years. However, the Building and Construction Industry practices have remained unchanged with regards to the use of energy efficient solutions and renewable energy systems integration in new and existing buildings. 4.2 Optimising Design and Eco Efficient Technologies in the Skycore Case

It is worth noting that the building selected in this case study is unique in terms of its fascinating architectural design but it is also the first building in Cyprus to use a vast amount of energy efficient technologies to meet Europe’s 2020 target. More specifically, the optimised operation is based on the following:

i) Optimization of Building Design: Orientation, compact structure, thermal inertia, and internal space organisation shall be optimized in order to meet the low energy requirements while maintaining the concept of a fascinating and unique architectural design.

ii) Air tightness: Sealing the building from the influence of the external conditions in order to reduce heat loss from the building, improve comfort and avoid draughts.

iii) Efficient glass: Glass with energy-efficient coatings can both insulate the room and block out the sun.

iv) Automated windows shades: The use of automated shading systems will be utilized to save additional energy beyond routine use of shades. “Winter warm” opens the shades, taking advantage of sunlight warming a southern façade. “Summer cool” does the opposite by lowering shades and blocking solar heat gain, thereby reducing cooling costs.

v) Natural lighting: Energy reduction can be achieved using a special device (e.g. "sunpipe" system) that eliminates the need to use electric lighting during daylight hours. It offers considerable environmental and health benefits by creating better indoor working conditions, and prevents unnecessary solar gain during summer months and heat loss in winter times therefore improving the insulations of the overall design of the building.

vi) Enhanced automation (EA) control strategies for HVAC systems: This can be implemented to some degree with existing electric, pneumatic or digital control systems. Linking the various sensors and controllers through a digital system is necessary to achieve the higher level of operating control needed to effectively manage and optimize energy use and minimize energy costs.

vii) Water savings measures and management: Water saving and management measures will be used in the kitchen bathrooms, gardens etc. In addition, an automatic monitoring system for water consumption & leakages in the building will be installed on the water meters and on specific parts of the water distribution network in the buildings, in order to determine the water consumption as well as to determine the presence of any water leakages.

viii) Strategy for waste management (collection, recycling, valorisation): Recycling provisions will include waste sorting and storage facilities on site and the development of a recognisable measure of sustainability that all users can understand and take part in. Site waste management during construction will be implemented, as well as waste minimisation plans and monitoring of waste volumes on site. Waste sorting on site minimises changes to the specification during construction and serves to avoid over ordering of materials.

ix) Office Energy savings in lighting: Lighting control will be used to save energy while increasing productivity and enhancing occupant comfort. The basic components for lighting control are: (a) Dimming which saves considerable amount of energy (b) Use of Sensors to cut lighting electricity though the use of occupancy/vacancy sensors to detect fine motions and turn lights on when a space is occupied and off or dimmed when it is vacant, and daylight sensors that continually measure ambient daylight and adjust lighting levels to reduce unnecessary electric lighting and provide even illumination throughout a space.

x) Heat recovery: Phase Change Materials (PCMs) will be used as products for the thermal storage cooling solution whereby coolness can be stored from one process or period in time, and used at a later date or different location. This is because they store and release thermal energy during the process of melting & freezing (changing from one phase to another).

xi) Energy management system: The management system takes into account the particular daily load curve of offices. The basic components that are going to be used for advanced monitoring, optimized control, and real-time consolidated reporting are: (a) Voltage optimization: Energy consumption can be reduced by using a voltage optimizer (b) Building Management System (BMS): to control all energy components of the system in order to minimize primary energy consumption while ensuring optimal indoor comfort and safe operation of all controlled mechanical and electrical equipment within a building.

xii) The Cooling System: In the warm Cyprus climate conditions, the selection of an appropriate cooling strategy is a key issue in the reduction of energy consumption in a building. In this case, the choice is thermal storage cooling technology integrated with chillers that reduce a facility’s peak electrical-demand charge for air-conditioning by transferring load to off-peak hours.

xiii) Thermal Solar Panels: They are an ideal renewable energy source for Cyprus’ warm climate, regarding heat production for space heating & hot water. High efficiency and novel solar panels capable of absorbing heat from the sun, air and rain temperature will be used. This

guarantees hot water availability all year round if it is combined with an energy storage system.

4.3 Targeted Savings and calculated emissions The percentages given relate to the minimum requirements for the specific building according to Cyprus regulations, which came into force in 2010 and are based on EU standards. The estimates have been calculated using the ISBEM software, which is the official software provided by the governmental Energy Department of Cyprus. Increase of Energy Efficiency: 48%

CO2 Reduction: 58%

RET Contribution: 23%

Less Energy Consumption By: 58%

Euro/KWh Savings: 0,047 Euro/KWh

Euro per ton. CO2 saved: 200 Euro/ton CO2

This building conforms to the Energy Performance Buildings Directive, which is the EU legislation applied in Cyprus, and is classified as category A. Furthermore, this building is the first building in Cyprus to use advanced energy efficient technologies, complicated building automation systems and holistic monitoring energy management systems, to meet Europe’s 2020 target and LEB2020 model i.e. buildings consuming less than 60 kWh/m2•y. 5. Conclusions

This work is performed in the framework of the ValPro European Project (Eracobuild VDP call). A Multi Criteria Decision Making MCDM approach was used in this study to model a company’s decision making mechanism in the procurement sector. It was found that theoretical results are in agreement with actual practices and that successful implementation of value-driven decisions in the building sector can sometimes be achieved by following non-traditional pathways. Furthermore, this case study proved that integration of eco-efficient technologies is considered a key criterion and a top priority in the value-driven decision making mechanism. Future work will include verification of weight coefficients in order for this custom build MCDM tool to be used by the company in future decision making cases. 6. References [1] LAZARUS, E. “The Application of Value-Driven Decision Making in air Combat Simulation”,

Computational Cybernetics and Simulation, Vol. 5, 1997, pp. 2302-2307. [2] FENWICK, D., DAIM, T., U., and GERDSRI, N. “Value Driven Technology Road Mapping

(VTRM) process integrating Decision Making and Marketing Tools: Case of Internet Security Technologies”, Technological Forecasting & Social Change”, Vol.76, 2009, pp.1055-1077.

[3] HÄKKINEN T., VARES S., HUOVILA P, “ICT for whole life optimisation of residential buildings”, VTT, Espoo, 2007, pp. 207.

[4] Eco-efficiency Centre, Dalhousie University, Canada, Fact Sheet: Eco-Efficiency and Alternative Energy Sources: Wind, Solar, and Geothermal, 2008.

[5] DEKHTYARENKO, V., “Verification of Weight Coefficients in Multicriteria Optimization Problems”, Computer-Aided Design, Vol. 13, No 6, 1981, pp. 339-344.

[6] POHEKAR S. D., RAMACHANDRAN, M. “Application of Multi-Criteria Decision Making to Sustainable Energy Planning—A Review”, Renewable and Sustainable Energy Reviews, Vol. 8, 2004, pp. 365-381.

Design competition for a near zero energy building – implementation, results and lessons to learn

Timo Rintala Leading consultant Green Building consulting Pöyry Finland Oy Finland Timo.rintala@poyry.com

Ari Nissinen Senior Researcher, environmental science and policy Finnish Environment Institute Ari.nissinen@ymparisto.fi

Summary This paper shortly summarizes methodology and results for ecological architecture competition for the new Finnish Environmental institutes head office. The main ecological feasibility targets for the competition were selected to be energy efficiency and energy production strategy and material efficiency in main structures. The results showed innovative high quality of technical solutions and energy generation as well as progressive timber or steel structures. While the competition itself was successful relative to objectives, the tools and models used would need some further development. The main findings will be presented.

Keywords: energy efficiency, carbon footprint, design competition, architectural competition, energy production

1. Introduction Senate Properties and The Finnish Environment Institute (SYKE) organized a competition for the design of the Finnish Environment Institute’s office building in the Viikki Science Park area. The building to be designed as the head office for the Finnish Environmental Institute shall contain office premises for approximately 625 persons as well as laboratory facilities. The purpose of the competition is to find an innovative and integrated COMPREHENSIVE SOLUTION that optimally meets the stated goals of the competition. The decided major competition decision credits were stated as follows: Ecological sustainability (in order of importance) Energy efficiency of the design proposal Materials efficiency and materials’ ecological sustainability Energy production using local renewable energy Townscape and architectonic quality Integration with the Viikki Science Park’s regional entity Overall architectonic solution Originality (interesting expression of environmental favourability) Usability Functional characteristics

Quality of working environment Feasibility Investment and life cycle costs Quality of technical solutions The purpose of this paper is to shortly describe the methodology and the results of a near zero energy design competition based on ecological sustainability evaluation.

2. Methodology development The project had a very comprehensive preliminary assessment concerning ecological aspects to be implemented in design competition. In a very early stage a pre-study & target setting using most known environmental assessment method including BREEAM Europe 2009, LEED New Construction and the Finnish Promise methodologies. However these were not used in competition program, but served as a systematic listing of possible environmental targets. After careful evaluation a decision was made to highlight only a few major issues in the competition. The decision was based on general high level target of both the Senate properties and the Finnish environmental institute. The final targets were set to be: Minimize energy demand in the building. This is measured based on the energy demand of the building and don’t account energy production on site. This was selected as the major goal to promote very low energy consumption level. The building is located by existing district heating network with efficient heat & electricity cogeneration. The competition was not aiming to compete with district heat system. Promote alternative construction materials with lower carbon footprint One major target is to promote use of alternative structural solutions to lower the carbon footprint of construction stage. The assessment was made by a separately developed carbon footprint calculator based on typical Finnish environmental profiles and a excel calculator for major building elements. Support efficient use of alternative energy production methods While energy efficiency was the major goal, the competition was also to promote alternative energy production competitive with district heating. Also electricity production on site was promoted. Solar/wind electricity production was however limited to 15 % of total electricity use. This was not to support design solutions with very large amount of solar panels, which would not be feasible with existing construction cost targets. While these three major issues were selected to measure energy efficiency and eco efficiency in the competition, the following minimum requirements were set: Indoor air quality in the working spaces should reach demands set by the Finnish indoor air quality class S2 (good quality). In the competition this was verified by fresh air rates and indoor temperature simulation during summer time dimensioning conditions. Indoor air quality class S2 sets the minimum requirements to 1.5 dm3/s,m2 or 8 dm3/s,person for fresh air rates and maximum of 27 C indoor temperature during summer. The proposed design net purchased energy without user electricity should be no more the 80 energy carrier weighted kWh/net-area/year. Energy carrier factors were used to balance district heat (with 0.7 factor) to electricity (2.0 factor). This minimum demand was verified with calculation and meant a demanding energy efficiency target for the design team. 3. General design competition results In general the design competition succeeded regarding the fundamental goals set. The design competition proposals showed innovative architectural solutions as well as integrated design

concepts. Several designs showed innovative alternative structural solutions using wood based materials. Also energy efficiency solutions were in general developed based on integral design methodology involving both architectural and technical solutions. Design proposals in general meet the goal of the design competition delivering high quality of design. On technical side the case was not as positive. Energy simulation results delivered by the design teams showed variations above design solutions. Some delivered results were miscalculated (or wrongly entered into the files) leaving the expert group with hard task to fill up and correct given results. While energy simulation results varied more than expected beforehand, the technical expert group was forced to continue with a more complex assessment path with verification simulation. The result showed also that in some cases the technical team and architect were not able to provide a truly integrated design solution. 4. Energy efficiency 4.1 Assessment method The primary energy target was to minimize energy need in the building by energy efficient architectural design, structures with good insulation, efficient heating, ventilation and air conditioning systems and advanced lighting solution. The overall model was simplified by excluding laboratory spaces and technical systems involved with laboratory operation. While laboratory spaces was seen as one major issue with energy efficiency, it was considered to be too complicated to be solved during competition and also to be one major source to generate diversity in calculation results, thus leading to general uncertainty to results. This simplified building used in energy calculation was called energy design case. Because of the nature of the competition and global design teams the comparability of energy simulation results was questioned during competition program development. This uncertainty of compatibility of different energy simulations was dealed by using reference building comparison method. In the competition this was realized by defining a technical solution for a predefining business-as-usual (BAU) case. This BAU case is based on typical Finnish technical solution for a high level office building. All design teams were obligated to provide IFC model of the building, to make two energy calculations (design & BAU) and to provide indoor air quality simulation to verify S2 quality level compatibility. A separate guidance for energy simulation, to develop reference building case, operation hours and initial data for calculation was generated. 4.2 Energy simulation results Energy simulation results were analyzed through savings & design comparison. Reference building energy use calculation results were not seen comparable. The results, which should be based on a predefined design & use, varied a lot on reference calculations. Especially issues like hot water heating with predefined hot water consumption and lighting calculated with given lighting operation hours and specific power were surprisingly different in some calculations. This variance lead to finding, that some of the consumption data was wrongly entered.

0

200

400

600

800

1 000

1 200

1 400

Space heating Hot water heating Lighting Ventilation Cooling, space Cooling, process User electricity

Case 1

Case 2

Case 3

Case 4

Case 5

Case 6

Figure 1 Comparison of reference building calculation results The basic comparison value in the competition was generated savings towards business as usual solution. The savings delivered by the design team showed high variance in the results. The design solutions had good characteristics related to a high level of energy efficiency, but these characteristics did not always show in the calculation result forms. Some teams also generated savings to predefined constants like user & process electricity. While these figures were easy to correct, this weakened the trust to the results given by the competitors.

-90 %

-80 %

-70 %

-60 %

-50 %

-40 %

-30 %

-20 %

-10 %

0 %

Space heating Hot waterheating

Lighting Ventilation Cooling, space Cooling,process

User electricity

Case 1

Case 2

Case 3

Case 4

Case 5

Case 6

Figure 2 Comparison of savings between reference and energy design buildings

While some variance were expected and general objectivity demanded control calculations, the design team were prepared to do 2-3 energy simulations based on delivered IFC models. Based on technical solutions and architectural competitiveness three of the strongest competitors were selected for technical team’s energy simulation.

4.3 Energy production results The design teams were also expected to deliver energy production solutions for the site, which would take in the account by primary energy factors (0.7 for district heating and 2.0 for electricity). Achievement of the final goal, to deliver near zero energy, building was evaluated through the primary energy calculation. The energy solutions were affected by already energy efficient district heating, which is deemed to limit functional possibilities for alternative solutions. Also electricity production by solar panels or wind is limited to 15 % of total electricity used. This limitation was made to control total construction cost of the project and secure real feasibility of the winning plan.

Figure 3 Final total energy consumption weighted by primary energy factors (heat 0.5-0.7, electricity 2.0) without user electricity The design teams selected fairly similar routes in energy production. The solutions involved the use of geothermal heat and cooling in five cases and the use of solar heat panels in three cases. In most of the cases the primary system is backed up with district heat system. Almost all of design team used efficiently the possibility to use geothermal heat systems to generate cooling during summer time. This can clearly be seen from the results keeping in mind, that the total cooling capacity needed include also a computer center with high constant cooling demand. Also the possibility to use waste heat from the computer centre was efficiently implemented in some of the cases. Only one case showed the solar heat as the primary energy source through extensive solar heat & electricity casing. Only one of the cases was designed without district heat backup. Five out of six cases used district heat as backup power source during peak load hours. In general, geothermal energy was the major energy source selected by the design teams, including the selected competition winner.

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Case 1 Case 2 Case 3 Case 4 Case 5 Case 6

Cooling

Electricity

Heat

5. CARBON FOOTPRINT 5.1 Assessment method The other major objective when seeking ecological sustainability is materials efficiency. This was measured with respect to the greenhouse emission resulting from the materials’ manufacturing and maintenance over a 100-year review period.. When designing the competition entries, the intent was to minimize the carbon footprint generated by the building’s main materials. Carbon footprint analysis was limited to the main structures and material quantities significant in term of their scope. Structures assessed were: Bottom floor External wall structures Windows and glass walls Load-bearing partitions Structural frame (columns and beams) Intermediate floors Top floor and roof structure, insulation and surface materials The competitors were asked to provide the material quantities and carry out a carbon footprint review using the given material based emissions factors. The carbon footprint review should take into account the possible need to renew or replace façade or roofing materials over a 100-year review period. The final assessments took into account the imprecision of calculations made during the preliminary design stage: The results of materials quantities and carbon footprint calculations were to be considered only as indicative, and they were to be used as a support for expert evaluations. 5.2 Results Looking at the greenhouse gas emissions of the main structures, the differences were large between the cases (see figure below). And for carbon footprints they were even larger, as the carbon storages (i.e. use of wood-based materials) differed a lot between the cases. This holds especially for the different main structures, but also for their combinations, i.e. the whole buildings. Four out of five designs was based on timber frame structure, as two was designed with light steel structure. Most of the timber structures were supported by more traditional concrete structure in laboratory spaces. From the results it can be seen, that bottom & intermediate floor structures are significant, especially with designs with smaller amount of floors. All design produced light frame & outer door structure.

0

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Case 1 Case 2 Case 3 Case 4 Case 5 Case 6

Top floor/ roof structure

Intermediate floors

Frame (columns andbeams)Load-bearing partitions

Windows and glasswallsExternal wall structures

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Figure 4 Building footprint results by building element The greenhouse gas emissions of main structures were relatively large compared with the greenhouse gas emissions caused by the energy use, corresponding to the use time 10-40 years. Also the largest carbon footprint of main structures corresponded as much as 20 years use period. The greenhouse gas emissions and carbon storage showed much larger differences between the competition entries than the greenhouse gas emissions from energy use. 6. Conclusions Although the energy simulation results showed variation above expectation and control calculations were needed, the method succeeded to deliver high quality energy efficient design solutions. Based on result, the method used can be recommended to similar kind of design competitions. The following issues should be dealed in similar kind of competitions.

- the energy simulation will be one of the last delivered objects and will be made in a hurry. It could be possible to allow 1 extra week for energy simulations after other competition material delivery.

- While energy simulations are complex by nature, inspection methodology and obligatory update could be implemented in the process. By this methodology, an expert will go through all simulation results and the design team will update the simulation based on comments and clarification demands.

- The guidance for energy simulation and especially result delivery should be even more clarified. Possibility for develop an energy calculation scorecard with automated verification could be investigated.

Energy production solutions were limited by demand of cost effective solution and district heat system possibility. Energy production systems showed good understanding and use of potential. However, a less defined environment could have provided a better base for even more innovative solutions. In general, geothermal energy was the major energy source selected by the design teams, including the selected competition winner. In the design case geothermal was designed to produce both heating and cooling, which was found to be effective solution in the building. Also solar heat was functional solution, but could be used only as secondary source. When preparing design competitions and the award criteria, it is good to keep in mind that the competition entrie will probably have much larger differences related to the carbon footprints of the main building materials than related to the greenhouse gas emissions from the energy use. In general, with similar ecological architectural competitions it would be recommended to implement a separate expert verification phase to correct major faults in the calculation. Competition should have feedback and complement system to provide useful calculation data for the competition decisions or this data should be generated by the expert team. Funding from the Finnish Funding Agency for Technology and Innovation (TEKES) for the projects 'Practises for eco-efficient public building; case Synergy building' and 'Synergia-pilot' are greatly acknowledged. Regarding the design process, public procurement process and the carbon footprint tool, see also www.environment.fi/eco-officebuilding.

Paralell commissioning. A new way of planning for a sustainable settlement –The case of Brøset, Trondheim (Norway).

Rolf André Bohne Associate Professor Norwegian University of Science and Technology Norway rolf.bohne@ntnu.no

Annemie Wyckmans Associate Professor Norwegian University of Science and Technology Norway annemie.wyckmans@ ntnu.no

Summary The municipality of Trondheim has decided to develop a 35 hectare site, Brøset, into a “Carbon Neutral” settlement with 1200 dwellings. Carbon Neutral was defined with regard to the development, as a cap on total carbon emissions of 3 tons per capita. This means a factor 4 from the current Norwegian per capita average. The whole project has been developed with active participation of an NTNU-SINTEF research project. To reach these ambitious goals, the municipality announced an international planning competition with a twist – parallel commissioning. Four cross disciplinary teams were chosen to work in parallel, as well as meet at workshops for information exchange and discussions, in order to develop proposals for the masterplan and long-term development process towards a carbon neutral settlement at Brøset. Throughout this process they had access to the research group and the municipality for State-of-the-Art information, feedback and discussions, both individually (each team) and during the common workshops. Each team received a fixed sum of NOK 400 000.- (approx. € 50 000.-), that was to cover all expenses for each team. In return the municipalities would have ownership of all ideas and plans produced during the process. There wouldn‟t be selected a “winner” through this process, but the municipality would select freely among the ideas brought forward, and combine them in order to create a masterplan and long-term development process towards a carbon neutral settlement. This paper describes the whole process of parallel commissioning, as well as the final outcome of the planning competition (January 2011).

Keywords: sustainable building, city planning, parallel commissioning.

5. Introduction In Autumn 2007, the local authorities of Trondheim selected the area of Brøset to be developed as “a sustainable neighbourhood”. “Sustainable” was defined in a holistic way, including low energy demand and healthy materials as well as social and economic issues such as low cost housing for vulnerable groups. In April 2008, the local authorities of Trondheim decided that the municipality should be in charge of the planning process of Brøset to secure its highly ambitious environmental goals, even though the municipality did not and to this day still does not own the site. In fact, Brøset is owned by three governmental organisations, Statsbygg, South-Trøndelag County and St Olavs Hospital, including a high-security psychiatric institution on the premises. In order to prevent any chance of the land being sold to private contractors and developed in a traditional, market-dominated manner, the municipality “locked down” the area for any development for the next two years, through a municipal regulation. The project was further aided by the initiation of the Norwegian Cities of the Future programme by the Ministry of Environment, involving the 13 largest

cities in Norway to develop holistic and ambitious plans for Land Use and Infrastructure; Stationary Energy; Waste and Consumption; and Climate Adapation [1]. The idea of creating a low-carbon neighbourhood in Trondheim was initiated by NTNU researchers in 2006, and successfully adopted by Trondheim‟s politicians and planning office in 2007, who designated the Brøset site to this purpose. In order to support Trondheim municipality in this process in the best possible manner, NTNU in co-operation with SINTEF Building and Infrastructure initiated small-scale projects to gather State-of-the-Art research and practice on carbon-neutral settlements from all over the world to inform the municipality‟s choices, funded by NTNU and the Norwegian State Housing Bank. Early 2009, NTNU gained a 1.5 million € interdisciplinary research project „Towards carbon neutral settlements – processes, concept development and implementation‟ in co-operation with SINTEF Building and Infrastructure, Trondheim municipality, the Norwegian Research Council, the Norwegian State Housing Bank and Trondheim Energy. The purpose of the research project was twofold, 1) to assist the municipality in its planning process to create a sustainable neighbourhood, and 2) to create models for physical programming and process planning for sustainable neighbourhoods, and help create a vision of what such a sustainable neighbourhood would look like and what kind of lifestyle its residents would have. In order to achieve optimal transfer of information and a mutual understanding of goals and priorities, the head of the Brøset project at the Municipality participated in the researchers‟ meetings on a regular basis, while the research team was represented at the Municipality‟s Brøset meetings with at least one representative. In Autumn 2009 an agreement between the Municipality of Trondheim and the land owners was reached, and an ambitious programme for the development of the Brøset [2] area was developed in co-operation with NTNU and SINTEF Building and Infrastructure, After the programme had passed the city council, the work on preparing the neighbourhood/urban planning competition started. In dialogue with the research group, the municipality decided that instead of running a traditional planning competition, they should make use of a parallel commissioning process in order to ensure broad user participation and to better facilitate the active integration of the municipality‟s high sustainability goals for Brøset in the outcome of the „competition‟. Thus an open call for cross disciplinary teams to participate in the parallel commissioning process was made public medio 2010. The announcement and programme were in Norwegian, forcing each participating team to have at least 1-2 Scandinavian representatives for better understanding of the local policy documents and premises regarding the site. Out of 30 highly-qualified applicant teams, four teams with broad cross-disciplinary experts were chosen to participate in the parallel commissioning process; their expertise comprised, amongst others, architectural, planning, social, artistic and economic professionals. During half a year, these four teams worked in parallel to develop a neighbourhood plan for the Brøset site, and met during three interactive workshops with each other, the municipality and the research team for information exchange and discussions. In addition, the four teams also had continuous access to the research group and the municipality for feedback and discussions on their ongoing project development. For this effort each selected team received a fixed sum of NOK 400 000.- (approx.. € 50 000.-), that was to cover all expenses for each team (in reality, the teams invested more time into the process than covered in this budget). In return the municipality received ownership of all ideas and plans produced during the parallel commissioning process. It was stipulated on beforehand that no winner were to be selected; indeed, the municipality would be free to select among the ideas brought forward, and combine them in order to create a carbon neutral settlement. The parallel commissioning process took place in the period September 2010-January 2011, and included the following organised activities:

Start-up seminar, research presentations and on-site inspection in Trondheim, including the four teams, researchers and municipality. Presentations of preliminary results of research

project (2 days); Individual work period, with possibility to contact the research team; Midterm workshop, including the four teams, researchers and the municipality.

Presentations, mixed group work and discussions (2 days); Individual work period, with possibility to contact the research team; A final workshop, with all teams, researchers and the municipallity. Presentations and

discussions (1 day).

6. The research project The research project “Towards carbon-neutral settlements” is a cross disciplinary and iterative process, involving topics from technology to lifestyle, and a direct interaction between researchers, municipality, site owners, industry and user representatives. The direct interaction with a wide range of stakeholders engaged in the Brøset development, and the mutual influence of science and policy actors on each other‟s progress, have come to denominate the majority of the research project as action research. Most of the research project was carried out in the period 2009-2010, with some activities (mainly PhD work and capacity building) continuing through 2011. 6.1 Research goals Four subgoals are defined for the research project:

Develop models for the early phase planning process that may contribute to secure the fulfilment of ambitious goals throughout the process;

Develop concepts for buildings, energy supply, infrastructure and urban fabric that support a carbon neutral settlement;

Develop knowledge and understanding of the cultural changes that are necessary in order to achieve carbon neutral settlements;

Implement concepts, models and knowledge in real-life. The project was carried out through four main research activities:

A. Models for programming and planning carbon neutral neighbourhoods B. Concepts for carbon neutral neighbourhoods (including architecture, transport, energy

supply, and infrastructure) C. Socio-cultural changes towards carbon neutral settlements D. Knowledge dissemination and capacity building

6.2 The preliminary results from research activities So far the research group has provided the Municipality with State of the Art knowledge and best practice projects, as well as analyses and descriptions of the Brøset area and its potential interaction with the surrounding urban fabric, with regards to:

Defining “carbon neutrality”: what does it mean for the Brøset neighbourhood to adopt a target of 3 ton CO2eq per capita (compared to the average 12 tons per capita in Norway) [3]?

Describing and understanding the transport patterns in Trondheim, thus identifying potential scenarios and actions for making non-motorised and public transport more attractive choices for Brøset users, and correspondingly reducing environmental impact from transport to and from the Brøset area [4, 5].

Describing and understanding the actor network for the development of Brøset,using focus groups to identify and interact with a wide range of stakeholders, and thus facilitate the process towards a consensus regarding the sustainable development of the Brøset area and in fact the entire urban area of Trondheim.

Building capacity and transfering knowledge and best practice to the planning authorities, to architects, consultants and entrepreneurs, as well as other stakeholders and the general public [6,7]

7. Program and organisation of the parallel commissioning process While the parallel commissioning announcement and program were designed to fulfil the same formal requirements as a conventional urban planning competition, far-reaching modifications were made to design an open process, where the teams worked in parallel, shared ideas and interacted

with each other and the municipalities, as well as a panel of experts appointed by the municipality. Thus the organisation of the parallel commissioning process consisted of:

Process Management, making the necessary decisions and accounting for the practical implementation of the overall process.(ECOBOX in collaboration with Trondheim Municipality)

The four participating teams An opponent/expert panel, whose background and expertise matches and complements

the participating teams. The panel will consist of both researchers and other experts in within relevant disciplines (planning / architecture, environment, climate, transportation, landscape architecture / green, property development, project contractors, landowners, etc). The role of opponent panel will be to advise the project teams and to challenge the teams during the process, including the workshops.

An Evaluation Panel, consisting of representatives for the municipality, site owners, and other stakeholders in the Brøset development.

Table 1 Timeline of parallel commissioning process

Activity Time Public announcement in DOFFIN/TED 09.08.2010 Deadline for submission of applications 09.09.2010 Evaluation of applications 10-20.09.2010 Selection of teams 20.09.2010 Deadline for formal complaints 05.10.2010 Start of parallel commissioning process 15.10.2010 Final workshop and project feedback 15.01.2011 Deadline for submission of project results 23.01.2011 Public announcement of project results 23.01.2011

8. Program phases 8.1 Introductory seminar (2 days) Purpose of the introductory seminar:

Creating a common understanding of the Brøset project and the collective nature of the process and overall objectives among the participants;

Reviewing the applications for parallel commissioning with focus on particularly important issues;

Presentations and exhibitions from practitioners and researchers, as an update to the State of the Art, an inspiration to the upcoming work process, and networking for potential co-operation;

Presenting the process of parallel commissioning to the teams, including the procedures, rules and the roles of the various participants;

Field excursion to the Brøset site; Open breakfast seminar to present the key issues of these two days to the local

construction industry and other interested parties, as the rest of the 2-day seminar was open to invited stakeholders only;

Networking lunch and dinner to discuss the information received and potential co-operation. 8.2 Midterm Seminar (2 days) Purpose of the midterm seminar:

The teams present their proposals and answers to the challenges of the parallel commissioning programme. After a general round of clarifying questions, the Expert and Evaluation Panel and municipality representatives are divided into small groups of about 10 people each, to provide each of the four teams with the best possible feedback on their work;

The work is led by an independent facilitator of ECOBOX, to answer questions regarding the procedure, help the groups get started, and ensure the constructive nature of the discussions;

At the end of the 2-day workshop, the Evaluation Panel provides a short summary of the midterm results of each team, based on the presentations and discussions during the seminar. During the following days after the workshop the Evaluation Panel, assisted by the Expert Panel, evaluates the teams‟ midterm submissions more thoroughly and in a written feedback summarises main focus points and specific guidelines as input for further work to each participating team.

8.3 Presentation of final draft (1 day) Purpose of the seminar:

Each team presents its final proposal draft to an audience of invited stakeholders, researchers and municipality representatives;

The audience provides constructive criticism on the current draft and its development throughout the entire process, enabling each team to make small adjustments to their project work before submitting the final version one week later.

8.4 Evaluation of the results

The Expert and Evaluation Panels evaluate the quality of the teams‟ submitted material, related to issues such as greenhouse gas accounting, transport, cultural heritage, user participation, architectural quality, etc

9. The outcome of the parallel commissioning process During the parallel commissioning process, the projects of the four teams showed a tremendous development and a serious commitment to not only incorporate the traditional technological issues such as building standards, energy supply and motorised transport, but also engage in attempting to envision how the physical framework they provide, can support more environment-friendly lifestyles at the Brøset site and its surroundings. The final results also showed that the four teams had converged towards similar priorities for the project, amongst others on manners in which to reduce individual car parking, providing multi-functional blue-green infrastructures for resident well-being and stormwater protection, and envisioning how public facilities at the Brøset site can be used to upgrade the surrounding suburban housing areas. The density of the Brøset neighbourhood was designed within a range of 1200 to 1700 dwellings on 35 hectares, as, as the same time, blue-green infrastructures were given large priority: amongst others, the rehabilitation of closed waterways into open brooks, experimentation with green roof and facades, and the continuation of green pathways for attractive non-motorised transport, leisure, biodiversity and climate adaptation. In addition to kindergartens and a school, business areas are provided for SME‟s, particularly related to social and green entrepreneurship related to the Brøset development. Space saved due to minimised individual car parking, was transformed into shared and public facilities to the benefit of the entire community, such as tool sheds, guest accommodation, and vegetable gardens and markets. During the process, the researchers had provided a GHG accounting tool including all aspects of everyday life, which the teams were encouraged to use to estimate the impact of their own design decisions. The calculator comprised issues that fall far beyond the conventional reach of a planning project, such as the purchase of clothing. Originally, several of the teams protested to using this tool as it might „instrumentalise‟ the design decisions, given the difficulty of quantifying issues such as attractiveness, liveability and usability of the built environment in terms of greenhouse gas emissions. In addition, the teams soon found out of the rebound effect [9] of reducing GHG emissions: the financial savings people receive from reducing their energy bill, for example, are easily spent on other purchases and activities which in turn again create GHG emissions, such as air travel. However, at the end of the process, several of the teams commented that this exercise had been very insightful, as it made them realise (1) how small the direct effect of for example insulation levels in buildings have on the overall GHG emissions per capita, while (2) designing the built environment for more indirect impact on people‟s lifestyles holds a promising, though as to yet little analysed, development. An additional issue that arose during the process, is the development of an on-site resource centre providing daily assistance to the residents, as a sort of green caretaker, enabling the start-up of

SME‟s related to the building and maintenance of the low-carbon housing and infrastructure, showing visitors around the premises, and providing consultancy to other projects with similar ambitions. Services related to type of organisation are proposed by several of the participating teams, as an important driver for strong user participation in the development of the area, preferably starting as soon as possible after the parallel commissioning process has come to an end. Such a centre could be run by the municipality in co-operation with NTNU, SINTEF Building and Research, industry and user representatives, modelled after similar examples at BedZED [8] in the UK, and Freiburg in Germany. Plans for these types of stakeholder-driven activities are currently being developed in the research group, in co-operation with the municipality.

10. Conclusion Parallel commissioning proved to be a very effective way of bringing forward good ideas. The iterative process of midterm workshops and continuous correspondence with the expert panels built a shared understanding of the challenges and priorities, and the teams received feedback that enhanced the outcome in terms of their project results. The project results showed that through planning and design of the built environment, it is possible to directly reduce the carbon footprint with 3 to 5 ton of CO2eq per capita (from 12 to 7-9 tons CO2eq). Further reduction requires lifestyle changes, i.e. choice of food, transportation, leisure activities, etc., which may be indirectly impacted by built environment design, yet more difficult to control. During the following months, the municipality will proceed in programming the Brøset area based on these results, and choose the most promising results from each team. Since all teams‟ suggestions were interlinked, and developed in dialogue with each other, there are shared issues that can be adopted from each proposal without compromising their integrity. A more disappointing result from the process, is the acknowledgement of the fact that we cannot become a low-carbon society only with carefully designed neighbourhoods, although such neighbourhoods are an absolute necessity in making a sustainable future possible. If we are going to reach sustainability and thus stay below 550 ppm CO2 in the atmosphere (IPCCs 2 degree limit), we must also undertake far-reaching changes in lifestyle, consumption and production patterns. Brøset will hopefully show that such changes can be economically viable, desirable, and will even create a better quality of life for society as a whole.

11. References [1] MINISTRY OF ENVIRONMENT. Cities of the Future programme (English version

available) < http://www.regjeringen.no/en/sub/framtidensbyer/cities-of-the-future-2.html?id=551422>

[2] MUNICIPALITY OF TRONDHEIM. Planprogram 2009. June 2010. < http://www.trondheim.kommune.no/broset/ >

[3] SOLLI, C., BERGSDAL, H., BOHNE, R.A. Klimanøytrale boformer på Brøset. Arbeidsnotat om klimautslipp og klimanøytralitet. May 2010 < http://brozed.files.wordpress.com/2010/05/misa_rapport_05_20101.pdf >

[4] THOMSEN, J., MANUM, B., Non-motorised transport and urban form – A review of recent research. November 2009. <http://brozed.files.wordpress.com/2009/07/transport-urbanform-endeligversjonomslag.pdf>

[5] SPACESCAPE. Strategisk Tillgänglighetsanalys. 2009. < http://brozed.files.wordpress.com/2009/07/brosetspacescape091221.pdf >

[6] WYCKMANS, A., SOLBRAA, A., (eds), Towards zero emission settlements. Inspirational projects for the development of the Brøset area in Trondheim. 2010. Available at <http://www.broset.com>.

[7] WYCKMANS, A. Environmental learning from the ivory tower to the town square: The case of Trondheim. I: Cities and Adaptation to Climate Change - Proceedings of the Global Forum 2010 (Chapter 15). Springer 2011 ISBN 978-94-007-0784-9.

[8] BIOREGIONAL ENTREPRENEURIAL CHARITY <http://www.bioregional.com> [9] Hertwich, E.G., Consumption and the rebound effect: an industrial ecology perspective.

Journal of Industrial Ecology, 2005. 9(1-2): p. 85-98.

Sustainable Construction in the Recession

Dr Shamil Naoum Senior Lecturer London South Bank University London UK naoums@lsbu.ac.uk

Zoë Elizabeth Mulholland, Imperial College London, UK, z.mulholland@imperial.ac.uk Daniel Fong, Senior Lecturer, London South Bank University, UK, fongd@lsbu.ac.uk

Summary Sustainability emerged as a public concern at a time when the construction industry was in boom. During the middle of the last decade there was growing momentum in this field with Government legislation and peer pressure to implement sustainable development. However, as the world enters a deep recession, is there still room for sustainable construction? The aim of this paper is to investigate whether the drivers and barriers to sustainable construction have changed during the current recession. The research consists of a literature review into the drivers and barriers to sustainable construction and recent evidence of the industry‟s reaction to the recession. In-depth interviews were conducted with construction professionals who represent a cross section of industry and project roles. The key findings are that 60 percent of respondents thought that sustainable construction would continue to increase despite the recession, with the main drivers found to be increased legislation, customer demand and energy costs. Clients are found to be more likely +to focus on passive design features over renewable energy technologies as a means of delivering sustainable construction in an economical way.

Keywords: sustainability, construction, recession, drivers, barriers, renewable

1. Introduction Sustainability first appeared in the public consciousness with the publication of the World Commission on Environment and Development (WCED) report „Our Common Future‟ [1] when the term „sustainable development‟ was first coined. Over the following 15 years the awareness of sustainability grew across all sectors. In Britain, the urgency and importance of sustainable development was crystallised in the Government‟s „Energy white paper 2003: our energy future - creating a low carbon economy‟ [2]. Since this time it has been building momentum and sustainability has become the buzz word of every forward thinking organisation. It was realised that sustainability impacted not only the design of buildings but also the manner in which they were constructed. Increasingly, all aspects of the construction process and life of the building came under scrutiny. Green design incorporated energy efficiency, recycled materials, passive cooling, water conservation or green roofs [3]. Procurement is even addressing „green issues‟ with e-procurement reducing paper waste, packaging under inspection and lean ordering from suppliers [4]. Running a construction site sustainably is now dominated by the Site Waste Management Plan (SWMP) and schemes like „Considerate Constructors‟ which ask the contractor to consider its impact on the local community as well as the environment [5].

As it became apparent that sustainability was not a passing fad, more and more organisations adopted the mantra and sought out ways to be green. However, even though sustainable practices could and should be applied throughout the supply chain and life cycle of the project, it is the onsite renewable energy sources that have become iconic of green buildings and sustainable construction. Most notable in this category are photovoltaic panels (PV panels) and wind turbines [6]. It is likely that this has been due to their visibility and the appeal of using the latest technology. However this paraphernalia is expensive and is unlikely to ever have a viable payback period [7]. Until recently the rise of sustainability awareness was set against a backdrop of economic prosperity and more specifically an unprecedented boom in construction. It was possible for companies to adopt „sustainable practices‟ on the basis of environmental concern and the marketability of corporate social responsibility [8]. Now that the UK, and most of the rest of the world, are entering into a significant economic recession is there still room for sustainability in construction? The motivation to implement sustainable technologies may still be there but the business case and approach for these practices is likely to be substantially reviewed. Whereas previously clients were specifying more outlandish visible demonstrations of green practices, these may be replaced with more subtle, less sexy, money saving applications of sustainable construction during a recession. A recession could also focus organisations‟ minds on technologies and practices which could give them a competitive advantage [9]. Although people are less likely to pay a premium for green products, whether for construction materials or a green office building, environmental awareness has reached the critical point where it is increasingly expected as standard. Legislation will also pay a major role in forcing contractors and clients alike to maintain the momentum in sustainable construction during the recession.

2. Research aim and outline methodology This paper is based on an MSc research that was conducted by Zoë Mulholland [10] at London South Bank University. The main aim is to reveal whether the drivers and barriers to sustainable construction have changed during the current recession. The literature review of the research covered two main sections. Firstly, it reviewed the drivers and barriers to sustainable construction from its emergence in the mid-1990s up to the modern day. The second section evaluated the key effects of a recession on the construction industry: which areas it affects and how. Also in this section, recent literature on the effect of the current recession on construction was reviewed. These two areas of research provided background information against which the findings from the questionnaire responses were compared. Interviews were conducted with professionals from different size organisations which represented a cross-section of the construction industry and project roles to understand the experiences from each area. The following four types of professionals were selected: 1) Three Client organisations; 2) Three Architects; 3) Two Cost Managers; 4) Two Contractors. The research questions aimed to investigate the experience of clients, architects, cost consultants and contractors of sustainable construction practices, the drivers, barriers and ways in which these have changed in the recession. The same questions are asked of each respondent. The following topics were covered: 1) Definition of sustainable construction; 2) The key drivers for sustainable construction; 3) the key barriers to sustainable construction; 4) Changes in the drivers and barriers in light of the recession; 5) The affect of the recession on the respondent organisation; 6) Changes in the amount or type of sustainable construction during the recession.

3. Analysis of the results 3.1 Definition of sustainable construction A broad range of responses were given for the definition of sustainable construction. Some respondents gave very specific responses such as „being carbon neutral‟ while other detailed more in depth definitions touching some of the complexities of the field. In particular, Client B gave a

detailed outline of what it means from design, construction to occupation of a building. Nevertheless, there were common themes with many overlapping definitions. The most common statements were: to reduce the impact of construction on people and the environment; a holistic approach to building and; the use of renewable energy and materials. It is interesting to note that both the Contractors responses focused on renewable energy and materials as this is the end of the supply chain with which they are involved. The more general concepts of holistic buildings and impact on society or surrounding environment are mentioned by architects and clients. Client B also mentioned under the broader definition of sustainability that the „Considerate Contractors‟ Scheme‟ was key with its bid to reduce impact of noise and prevent pollution to the surrounding area during the construction of a building. The next most common definitions were low or zero carbon status buildings and consideration of life cycle costing and running costs. Finally, minimising waste in design and construction and longevity of buildings were stated by two of the interviewees. It was noted by Architect C that these last two concepts were in fact very old fashion ideas and stated that 100 years ago all construction professionals were interested in building to last and reducing costly waste. Two respondents also stated what they considered not to be sustainable construction. Cost Manager A and Architect B made the point that it is not just about being carbon neutral but must be a more far sighted view of the impact on the society and environment. Similarly, Architect A asserts that sustainable construction is not just about technology but how buildings are used and operated. The wide ranging answers showed that there was a good body of knowledge amongst the respondents, with many demonstrating a deep level of understanding. An interesting trend can be seen in the timeline of when respondents became aware of sustainable construction. Two of the architects had heard of the concept of sustainable construction under different terminology in the early 1990s. These concepts have been dubbed „proto sustainability‟ and include energy saving, ethically resourced materials and non polluting construction. In the late 1990s a second group (a client, the other architect and a cost manager working at a dynamic practice) were introduced to the concept. These probably represent „early adopters‟ of sustainable construction in its current format, working on landmark projects, first examples of BREEAM and with forward thinking clients. Then there is the critical mass, where half of the other interviewees stated that they had first heard about it in 2005 or 2006. Both contractors state this as the time they became aware of sustainable construction. 3.2 Drivers for sustainable construction The first part, investigating the drivers for sustainable construction, asked respondents to give their opinion on the top drivers without prompting from a list to exclude any bias from academic literature. This gives an overview of their perception from personal or company experience of the subject matter. There was a danger that interviewees could state what they felt they ought to but they were encouraged to be candid in their responses. The open ended responses were coded into eight categories, which were then grouped in three themes: social, financial and external drivers. Analysis of the results showed that, by a clear margin the most frequent answer was personal commitment of the client or developer with 80 percent of respondents stating this was a key driver. The next highest at 50 percent were reputation/image and funding/planning authority demands. These were closely followed by legislation and increased energy costs at 40 percent. It is worthy of note that only two of the ten respondents stated business case or customer demand as a motivation for adopting sustainable construction, areas which traditionally would be considered a strong driving force behind company strategies. When the results are weighted according to the order in which the respondents listed the drivers a different trend appears (the first response was assumed to be the most important for the respondent, the second assumed to be the second most important, and so on). The result reveals that a company‟s concern for their reputation or image overtakes personal commitment to be the top priority, showing that the clients in the construction industry are primarily concerned with being „seen to be green‟. Closely behind reputational drivers is the external demand of the funding/planning authority. The two respondents that did state customer demand and business

case as drivers for sustainable development ranked them very highly raising their profile in the results. With such a small sample size, single or infrequently listed drivers can distort the results. However it is worth noting that there is a group of respondents that not only consider customer demand and business case as a driver for sustainability but rate it as a top priority. 3.3 Changes in drivers during the recession Respondents were asked to state how each driver would change in the face of the recession. Each factor was scored +1 for increase, -1 for decrease or 0 for no change. These factors were kept in the same thematic groups of external, financial and social factors. In interpreting these results, it should be noted that if an equal number of respondents thought a driver would increase as those that thought it would decrease the net result would be zero, no change, even though no one had stated „no change‟. “Competitive advantage” was thought most likely to increase as a driver which is an interesting result as it had the lowest mean score in the previous section for level of importance as a driver. 70 percent of respondents said it would increase as a driver in the recession with the rest declaring no change. No one thought it would decrease as a driver. When rated for its relative level of importance, competitive advantage had the lowest score but also the greatest deviation. This variation shows that no matter how highly it was rated previously there was agreement that it would become an increased driver in light of the recession. The comments from this section show that clients, consultants and contractors are all seeking ways to distinguish themselves. Anything that will give them a competitive advantage they will latch on to. This driver is increasing as a response to the recession. One respondent who had rated competitive advantage highly stated that they are already experiencing the benefit of sustainable construction in differentiating their product in the market. Customer demand was also consistently thought to increase as a driver during the recession. All respondents stated an increase or no change in demand. Although at a lower level of 50 percent predicting an increase, it is significant that no one predicted a decrease in customer demand. This factor was rated of higher importance than competitive advantage in the previous section, but it still shows a high degree of variation in opinion from not at all important to critical. The comments reveal that awareness of sustainable construction is still rising and there is a lag before this is translated into tangible customer demand. Therefore this driver is likely to increase in spite of the recession. Whole life cycle benefit is the next most likely driver to increase during the recession but the responses were divided. Two respondents felt clients would retreat to a closed-minded perspective focusing on the pressures of the immediate capital outlay but the majority felt clients were looking more holistically at the cost of a building motivated by the increasing price of energy as a key driver. Corporate social pesponsibility policy and peer pressure were the two drivers which were unanimously stated to decrease in importance. These were grouped as social factor and in the face of the recession would recede in importance. Respondents felt that businesses would be less concerned about comparison with their peers and more interested in the bottom line of their business during a recession. Staying afloat and keep projects going was considered a marker of success. Analogously, the notion of wanting to build a better building as a driver for sustainable construction only marginally increased. Several respondents felt this was a nice to have which clients could not afford to invest in during a difficult financial climate. 3.4 Barriers to sustainable construction In common with the section investigating drivers for sustainable construction, respondents were asked to name barriers from their experience without any prompts. Many more barriers were listed in this question than in the drivers section. Their answers were coded into 11 separate categories and these were grouped into four themes: change; financial; information; and technological barriers. Despite the wide range of responses, the trend of the results was striking. By a clear margin, the capital outlay was most frequently stated, at 80 percent, as a barrier. After which

resistance to change and lack of evidence were the next most frequent responses at 60 percent. The rest of the barriers listed were mentioned by only one or two respondents each. Although many technology-related barriers were mentioned these were diverse in their type with no single area emerging as a notable impediment. This implies that it is the financial aspects and softer aspects of convincing clients to adopt sustainable construction which are the key hurdles. The results were also analysed by taking into account the ranking of each barrier by the respondents. As numerous barriers were listed unprompted only responses which were mentioned twice or more are listed. When the relative importance of each barrier is taken into account, lack of evidence just fractionally overtakes perception of cost as the top barrier to sustainable construction. What can be interpreted from these results is that although cost was mentioned by nearly all respondents, those that did state lack of evidence as a barrier felt it was a substantial one. Resistance to change remains high but issues with legislation and limitations of technology are also significant. However it is important to note with such a sample size results can easily be distorted so these last two factor although rated fairly high were only stated by two respondents out of the ten. 3.5 Changes in barriers during the recession Respondents were asked to state how each barrier would change in the face of the recession. Each factor was scored +1 for increase, -1 decrease or no change 0. These factors were kept in the same thematic groups of financial; information; technology related factors. It is worth noting that if an equal number of respondents thought a driver would increase as those that thought it would decrease the net result would be zero, no change even though no one had stated „no change‟. Increased capital outlay and being a small or medium enterprise were thought the most likely barriers to increase during a recession. The reasons stated in the comments is that during a recession capital budgets are markedly reduced with many businesses limiting their development to essential work with no frills. However one client did point out that as the technology improves the capital cost is likely to fall and therefore this barrier decreased. In terms of the challenges faced by SMEs one client noted that they cannot access debt in this economic climate, therefore they would be very unlikely to afford any development let alone pay a premium for sustainability. Split incentives and client knowledge are the most likely barriers to be overcome through the course of the recession. One client stated that tenants are looking at ways to be more efficient and cut down their running costs and so are putting pressure on landlords to provide sustainable buildings through green leases thereby decreasing the „split incentives‟ as a barrier. The barrier thought most likely to decrease was the client‟s lack of knowledge with all respondents stating it would either decrease or remain the same. However, respondents were clear that this was not particularly a consequence of the recession, rather a continuation of an existing trend of more knowledgeable clients. 3.6 The effect of the recession on respondent organisations All organisations reported that they had been affected at least moderately by the recession. The respondents who were not connected to public sector work were particularly badly affected. Across the board there were comments that there were fewer projects in the market and the ones continuing despite the recession were lower value, often having been reduced in scope or quality to make them financially viable. Client C noted that all projects they commissioned equated to a strict payback equation based on annual rental income. Since rents had fallen 7-8 percent, this had a direct impact on the capital that could be invested in construction. All consultants and contractors reported that there were still plenty of tendering opportunities or bids for new work but the competition was much stiffer with more companies bidding for the same jobs. Contractors in particular have experienced bidding wars with competitors, drastically reducing their margins and in some cases putting in negative bids so that they effectively „buy‟ the job. This has put a lot of strain on the industry, with firms at great risk of going into liquidation, and creating a

combative culture with increased claims being made to try and claw back money to regain a profit. Another side effect of reduced spending within the industry is that with fewer large projects, big contracting firms are dropping down to tender for medium size jobs. This is squeezing SME sized businesses who are struggling to diversify their workload in any way. Many noted that even when they were successful in winning work, whether as an architect or contractor, the project was often mothballed with no foreseeable start date. One client stated that they did not expect put any new commercial property on the market until 2011. Nearly all respondents reported redundancies within their organisations. This was a direct reflection on the lack of work. However one cost consultant noted that one of the first members of staff to go was their newly appointed sustainability consultant. Rather than being seen as way of distinguishing themselves from the competition the firm felt that they had to retreat to their core business of cost consultancy. The respondents who were engaged in public sector construction projects felt they had been shielded from the worst effects of the recession. In particular schools, higher and further education, and healthcare have been buoyant with Government initiatives to bring forward public spending in these areas. It is worth noting that many of these clients have additional incentives for sustainable construction as many have conditions attached to their funding streams. However, several respondents noted that the downturn in the public sector had started and predicted it would continue over the coming year. 3.7 Change in the amount of sustainable construction in the recession Despite the numerous barriers listed in earlier sections of the questionnaire, 60 percent of respondents said that sustainable construction would increase through the recession, whilst 20 percent felt it would not change and 20 percent said it would decrease. Several respondents noted that the trend for sustainable construction had only really taken off in the past two years and that this movement would continue to gain momentum despite the economic downturn. It was commented that sustainable construction was an increasing priority in the commercial and residential sector. Likewise, BREEAM assessments are on the increase as they are often stipulated as part of planning or funding conditions which affects most of the public sector. Legislation in sustainable development was also considered to be on the increase, one respondent remarked that the new Part L would be even more onerous to comply with. Another respondent complained that Government was increasing the legislative burden in this area during the recession as the same rate is it did pre-recession. The respondent argued that due regard should be given to economic circumstances of the industry when extending sustainability requirements. Respondents were asked why they felt that sustainable construction would increase or decrease during the recession. Those that felt there would be no change in the amount of sustainable construction, said that it was likely to continue but the level to which projects aspired may be muted. Instead of looking to attain BREEAM „Excellent‟ clients may settle for „Good‟. Similarly there may be a tendency to stick to more passive measures rather than investing in expensive new technologies. The two respondents who stated a decrease in sustainable construction in the recession attributed this to reduced capital budgets across all sectors. It was felt that with fewer projects proceeding and less money available sustainable construction would be a nice to have with clients seeking to attain minimum compliance. Contractor B remarked that most small and medium sized jobs (under £10m) do not attract any notable sustainable construction practices. Any sustainability measures included in the project are likely to be „token‟ items such as PIRs, low flow taps or recycled materials, which can be introduced with minimal disruption to the job. 3.8 How sustainable construction has changed in the recession After asking the respondents whether they felt sustainable construction would increase or decrease in the face of the recession, they were questioned on how it would change in terms of the

practices adopted or technologies used. The top three ways in which sustainable construction was thought to alter were very much passive measures: more passive design, increase in natural ventilation and increase in energy efficient measures. These solutions focus on lowering carbon emissions through reduction in energy usage rather than installing a source of renewable energy. This is a positive finding as it suggests a change of attitude towards design of buildings, use of energy and allowing a broader range of acceptable ambient temperature. Respondents commented that clients are becoming more aware of the cost of air conditioning, something which grew with the fashion for glass sealed buildings, and it is now considered to be an expensive luxury. As organisations are looking to reduce spend during the recession air conditioning is seen as a huge cost in terms of electricity but also maintenance. The cost of air conditioning has been compounded by an increase in oil prices. Client B pointed out that passive design, natural ventilation and energy efficiency measures have an obvious business case. They cost little to introduce, if brought in at inception, have a short pay back period and are conveniently also deemed to be „green‟. These solutions were said to be win-win measures in a recession. With rapidly growing awareness about sustainability and the carbon content of meachanically cooled buildings there is an increase in tolerance to alternative options. Clients are beginning to realise this means tolerance to a broader range of temperatures, particularly with overheating in the summer months. Client A predicted that there would be wholesale shift in attitude even in commercial offices, with radically different buildings being put to the markets which take into account orientation, air flow, shading and challenge the traditional glass box approach. A third of the respondents said there had already been a reduction in the use of PV panels. The initial enthusiasm for adopting photovoltaic technology has died down and clients and designers are taking a step back to assess the practicality of this technology looking at their efficiency, payback period and embodied carbon. Their popularity was attributed to the relative ease of installation to new as well as existing building and their visibility to the public, providing a means of broadcasting an organisation‟s green credentials. However clients can no longer afford to make eco-statements; there must be a viable payback period with a technology that is proven to work. Several respondents noted that it was not just PV panels that would be reduced but there would be careful consideration before implementing any renewable energy technology. Architect B said that more attention needed to be paid to the appropriateness of a particular technology to the location of a building. It would be senseless to install biomass boilers in a central London location if it meant transporting in fuels from the countryside. Each solution should be tailored to each project. The renewable energy solutions are by no means one size fits all. As more is understood about the available technologies, the better the selection of technology will be for a project. It was commonly stated that most projects that installed PV panels or similar were done so with the aid of a government grant, without which the installation would not have had a viable payback period. This is itself is not a sustainable situation, although a green budget was mentioned in the March 2010 budget, the industry cannot rely on government handouts to make construction sustainable. With a reasonable level of scepticism noted in the adoption of renewable energy technology, it was remarked that in order for sustainable construction to develop in future more innovation was needed. Contractor A noted that it seemed to be the same technologies which are seen again and again and it was felt that there was a limited selection of viable options. With some of the better established technologies such as PV panels there is increasing competition between suppliers bringing the costs down and signs of new developments to improve efficiency of materials. Client A described how his firm would use the self-enforced two year gap between their projects to seek out the latest innovations to explore what could be brought to market in 2011. The recession was being treated as an opportunity to take stock and investigate the next phase in sustainable construction. Despite the reticence regarding sustainable technologies, there was agreement that BREEAM would continue to be used a „stamp‟ of sustainability, and was likely to increase. BREEAM is a recognisable measure of sustainable credentials across all types of construction project. With the introduction of BREEAM for refurbishment it is can be used for the majority of projects. It noted that many planning authorities stipulated a BREEAM rating in order to obtain permission and funding sources in the public sector often attached BREEAM as a criterion.

4. Conclusions Prior to the recession, “legislation” was rated as one of the top drivers with little disagreement about its importance amongst respondents. Specifically, the interviews highlighted the funding and planning demands for sustainable construction, another branch of the imposed drivers driven by the UK Government‟s commitment to reduce CO2 emissions. Personal commitment and company image were frequently stated as important drivers but when respondent weightings of these factors were included „being seen to be green‟ emerged in front. On the other hand other respondents were sceptical that a market existed for sustainable development and felt it was not yet a significant feature to distinguish a company from its competitors. The divide in viewpoints reflects the rapidly changing nature of sustainable construction in the industry and hints at the changes still to come [11]. On the other hand, the principal barrier which emerged from the research was increased capital outlay as stated in much of the literature. Secondly, lack of evidence for the case for sustainable construction was a significant barrier. In addition client‟s resistance to change was highlighted. Removing air conditioning from buildings would mean increased tolerance varying environmental conditions. During the recession, “competitive advantage and customer demand” were found to be the drivers most likely to increase during the recession. Legislation and consideration of whole life costs were also drivers predicted to increase, although respondents already rated these as important existing factors. These findings tie in with most recent evidence from industry surveys [12,13] which predict that market forces will overtake government action as the key motivator for adoption of sustainable construction. The barriers identified most likely to decrease during the recession were “split incentives and client lack of knowledge”. Respondents explained that with increased cost of energy and more prolific sources of information and training on sustainable construction these factors would decrease significantly as a hindrance in this area. However, one of the greatest barriers identified, increased capital outlay, was thought to continue to increase in the recession as clients were likely to be put off sustainability measures due to extreme budgetary constraints.

References [1] BRUNDTLAND, G.H. (ed.), “Our common future: The World Commission on Environment

and Development”, Oxford, Oxford University Press, 1987. [2] DEPARTMENT OF TRADE AND INDUSTRY, “Energy White Paper: Our energy future –

creating a low carbon economy”, Norwich, The Stationary Office, 2003. [3] WADDELL, H., “Sustainable construction and UK legislation and policy”, Proceedings of the

Institution of Civil Engineers: Management, Procurement and Law, 161, Issue MP3, 2008, pp. 127-132.

[4] STUBBS, B., MORGAN, B., SMITH, C., BONIFACE, T., “Reduced Resource Consumption in the Built Environment Construction Industry”, Constructing Excellence, 2008

[5] CONSIDERATE CONSTRUCTORS SCHEME, PO Box 75, Ware, Hertfordshire SG12 0YX. [6] DAHLE, M., NEUMAYER, E., “Overcoming barriers to campus greening: a survey among

Higher Educational Institutions in London, UK”, International Journal of Sustainability in Higher Education, Vol. 2 (2), 2001, pp.139-60.

[7] WILLIAMS, K., DAIR, C. (2007), “What is stopping sustainable building in England? Barriers experienced by stakeholders in delivering sustainable developments”, Sustainable Development, Vol. 15, No. 3, 2007, pp. 135-147.

[8] BUILDING, ”Short term fears voiced over sustainability in the recession”, Building.co.uk, http://www.building.co.uk/news/short-term-fears-voiced-over-sustainability-in-the-recession/3135025.article. [Posted 27 February 2009, accessed 15 April 2011]

[9] BALCH, O., “Sustainable construction: Building momentum, brick by brick”, ClimateChangeCorp.com, http://www.climatechangecorp.com/content.asp?ContentID=4334. [Posted 20 June 2006, accessed 15 April 2011]

[10] Mulholland, Z.E., “Sustainable construction in the recession”, MSc dissertation, Department of the Built Environment, London South Bank University, 2009.

[11] DIXON, T., “Sustainability and corporate real estate”, Property in the Economy, 2009, RICS, London.

[12] RICS, 2009 Q2 Global Property Sustainability Survey, RICS. www.rics.org/economics [Accessed 15 April 2011].

[13] JONES LANG LASALLE and CORENET GLOBAL, “Global Trends in Sustainable Real Estates: An occupier’s perspective”, Jones Lang LaSalle IP, Inc., 2008, www.joneslanglasalle.com/csr/SiteCollectionDocuments/Global_Sustainability_Feb08.pdf [Accessed 15 April 2011].

Swedish architects’ perceptions of hindrances to the adoption of wood frames and other innovations in multi-storey building construction

Kerstin Hemström PhD Student Mid Sweden University Sweden kerstin.hemstrom@miun.se

Dr. Krushna Mahapatra, Linnaeus University, Sweden, krushna.mahapatra@miun.se Prof. Leif Gustavsson, Linnaeus University, Sweden, leif.gustavsson@miun.se

Summary A better understanding of general hindrances to the diffusion of innovations (new products, services, processes, systems, or concepts) in the construction sector may help improve the sustainability of buildings. Adoption of innovations such as multi-storey wood frames may e.g. reduce the primary energy use and carbon dioxide emissions of building construction. This study uses a web-based questionnaire to collect information on Swedish architects‟ perceptions of hindrances to the adoption of innovations in building construction in general, and to the adoption of multi-storey wood frames in particular. Results show that the most influential hindrances to the general adoption of innovations were perceived as the focus on project costs instead of life-cycle costs, the economic risk adopting an innovation imply, the focus on traditional engineering models, the construction industry´s tendency to use proven materials and methods, and contractors‟ inability to adjust processes. Concrete and steel were perceived as more advantageous than wood with regards to several aspects influencing the innovativeness of the Swedish construction industry, but wood was perceived as better with regards to opportunities to support local industry. The architects also had more positive perceptions of the performance of concrete and steel in multi-storey buildings, than of wood. While gender and size of company seem to have little influence, perceptions of innovativeness and frame materials vary with age and regions. Keywords: Innovation, construction industry, multi-storey buildings, architects, wood frames,

Sweden

1. Introduction

An increased use of wood frames from sustainable forestry in multi-storey buildings will help reduce primary energy use and greenhouse gas emissions in building construction [1-6]. This is because the manufacturing of wood products often requires less primary energy compared with alternative materials; industrial process carbon emissions such as in cement manufacturing are avoided; carbon is stored in wood products; and wood by-products and wood products at end of life can be used to replace fossil fuels [1-6]. However, fire protection measures prohibited or discouraged the use of multi-storey wood frames in several European countries from the late 19th century until functional based requirements for building products were introduced in the late 1980‟s. In Sweden, the market share of wood frames has increased since they were re-allowed in 1994. It was about 15% in 2008 [7]. In the context of the Swedish construction industry, multi-storey wood frames can be understood as an innovation [8]. Mahapatra and Gustavsson [8], Gustavsson et al [9], and BRE [10] have

summarized possible barriers to the diffusion of wood frames in multi-storey construction. The majority of such hindrances relate not only to the diffusion of multi-storey wood frames in particular, but to the diffusion of innovations in building construction in general. The construction industry in Europe is generally recognised as being slow to change [11-13], and the diffusion of innovations (new products, services, processes, systems, or concepts) often faces barriers inherent to the sector [8, 14-17]. This tendency has been addressed in several studies in different countries. In general, the characteristics of the industry, also referred to as liabilities, do not promote innovation [11]. The liabilities are related to the nature of the activities involved in construction and their organisation into projects (e.g. the lack of coordination and management of building projects and the division of work in different phases), the fragmented structure of the industry (e.g. the lack of competition between the few number of large contractors who rely on a large number of small local sub-contractors), the uncertain demand (due to e.g. the uniqueness of each building project), the difficulty to evaluate innovations (due to e.g. the size and long life-time of buildings), and the type of contractual agreements (e.g. the management of risks and costs and the level of influence and cooperation allowed from and between different actors). In addition to these factors, the path dependency of an existing concrete-based construction system may also resist the diffusion of wood frames [8]. Path dependence means that present decision-making is affected by previous events or decisions that contributed to self-reinforcement of various interrelated aspects [18]. Such path dependence may manifest itself through a consistent use of traditional materials or methods, and be reinforced by institutions (knowledge, perceptions, and regulations, e.g. building codes and standards), actor networks (e.g. inter-firm collaborations regarding specific materials and methods), and sunk investments (e.g. investments in knowledge, tools and machinery involving specific materials or methods) [8, 19]. Here, perceptions held by the actors of the construction industry of how wood frames perform in relation to alternative materials in multi-storey buildings may influence the decision to adopt wood frames. Such perceptions may be accurate or inaccurate with respect to objective reality, but the perceptions rather than reality itself will often determine behaviours [20, 21]. Norwegian architects‟ intention to use structural timber in urban construction are found to vary with their perceptions towards and experience of structural wood [22]. And although wood frames are common in multi-storey residential buildings in the US ([23] cited in [24]), North-American architects and structural engineers perceive drawbacks with the structural use of wood in non-residential buildings [25, 26]. With increased building height and area wood is perceived as less appropriate than more „proven‟ frame materials such as concrete and steel, due to perceived drawbacks regarding fire safety, strength, stability, and durability [25, 26]. This may influence what material the architects propose or assume in their design of the building. The mentioned hindrances to the diffusion of innovations in building construction (discussed more in detail elsewhere, see e.g. [11, 27-30]) are mostly theoretically studied. In this paper, we conduct an empirical study to complement such theoretical analysis through a questionnaire circulated to Swedish architects involved in building construction. Architects are important actors in building construction as they produce the designs that describe how the building will be built [31]. We investigate architects‟ perceptions of the relevance of various hindrances to the general innovativeness of the Swedish construction industry, especially with regards to the use of wood frames instead of alternative frame materials in multi-storey buildings. Innovativeness here refers to the degree to which the construction industry tends to adopt innovations.

2. Method We used a web-based questionnaire to gather information from the Swedish architects. The first part of the questionnaire (A) covered some background information on the respondents and the company. Part (B) contained questions on innovation in the construction industry (e.g., how innovative the Swedish construction industry is and the relevance of indicated hindrances to the Swedish construction industry). Part (C) contained questions on the choice of frame material and the performance of steel, concrete, and wood frames in multi-storey buildings (e. g how wood frames perform with regards to fire safety), while (D) covered questions regarding e.g. gender and years of work experience in the construction industry. Most questions comprised five-point Likert-

type scales (e.g. 1=Completely disagree, 5=Completely agree).The extremes of the scales were named depending on the question. The survey questionnaire was in the Swedish language and targeted architects working on multi-storey construction at architectural firms in Sweden. As Swedish architects are not obliged to be members of a professional association and no comprehensive e-mail list was found to reach the target group, the e-mail addresses of potential respondents were retrieved from the Swedish internet-based yellow pages (http://www.eniro.se) through a search on the keyword “architect”. Where company web sites were returned, e-mail addresses were retrieved from the web sites. From the limited information available on these web sites it was difficult to assess which addresses belonged to individuals working specifically with multi-storey buildings. Although architects with a published profile directed solely towards detached houses were excluded, e-mail addresses may have been collected from individuals outside the target population. E-mail invitations to complete the survey were sent to roughly 3,600 potential respondents in late March 2010. Four e-mail reminders followed the invitation. The first reminder was sent five workdays after the original send-out, the second six workdays later, and third and fourth reminders five workdays after the previous reminder. The survey invitation contained information on the purpose of the study, how the e-mail address was retrieved, and an individual hyperlink with which to login to the survey website. 2.1 Respondents One week after the fourth reminder, 412 individual surveys were completed. Many e-mail addresses (208) were removed from the sample due to delivery failures and automatic replies stating that the individual had left his position or was on a long leave of absence. Other individuals (149) communicated by email that they did not belong to the target population, and 214 individuals renounced participation. There may be a variety of reasons for non-participation, such as a high level of survey fatigue in the target group, a lack of interest in the survey topic, and the length and complexity of the questions [32]. It is unknown how many invitations were hampered by spam filters or how many individuals were invited to complete the survey that did not belong to the target population. A few respondents indicated that they were invited through more than one e-mail address. This may have happened to individuals both within and outside of the target population. Based on emails received from survey recipients, time pressure was the most common reason for active non-participation, including several people who referred directly to pressure from their companies to invoice all work-hours. One person could not complete the survey due to technical problems. The 412 survey respondents makes this a smaller group of respondents than surveys among North-American architects and structural engineers [25, 26] but larger than that of a web-survey among Norwegian architects [33]. Contact details of the respondents of those surveys (which were conducted for different purposes than the current survey) were acquired through professional associations, which could not be done for our survey, increasing the uncertainty regarding the size of the population. Studies have found no significant differences between traditional mail-in questionnaires and web-based surveys regarding the response rates and socio-demographic make-up of respondents [34]. The majority of respondents (93%) worked with architecture, while the rest worked with structural engineering, building construction, project management or interior design. The mean age was 48 years, ranging from 25 to 74, and 68% were men. The mean age was lower among women (44 years) than among men (51 years). About half of the respondents had at least 20 years of work experience within the construction industry. A majority (68% of n=199) of those with 20 or more years of work experience within the construction industry were above 54 years of age, while 91% of those with less than 10 years of work experience (n=103) within the construction industry were 44 years of age or younger. Concerning company characteristics, 26% of the respondents worked at a micro-enterprise (1-9 employees), 42% at a small enterprise (10-49 employees), and 17% and 16% at a medium-sized or large enterprise, respectively (according to definition of size of companies provided by the European Union [35]). A large proportion of respondents (62%) were

located in the metropolitan areas of Sweden (Stockholm, Gothenburg or Malmo region). Those respondents were on average younger and had fewer years of work experience than the rest. They were also more likely to work at a medium or large-sized enterprise than were the respondents of non-metropolitan areas. Regarding in which statistical regions (Southern, Eastern or Northern Sweden according to Nomenclature des Unités Territoriales Statistiques, NUTS1) the respondents worked (n=395), 24% reported to work in Southern Sweden, 37% in Eastern Sweden, and only 7% in Northern Sweden. A third (33%) of the respondents was involved in projects in more than one statistical region of Sweden. 2.2 Analysis Respondents used a five-point Likert-type scale to rate how innovative (1=Not innovative at all, 5=Very innovative) the Swedish construction industry is in general. They then rated their agreement (1=Completely disagree, 5=Completely agree) to the influence of various hindrances to innovativeness (see aspects in Table 1) within the Swedish construction industry. The mean agreement was used to rank the hindrances in order of relevance. Wilcoxon ranks test (p≤0.05) detected whether the rating of the hindrances were significantly different. The test compared the ranking of successive pairs of decreasing mean values. A significant result for the first pair of mean values automatically renders the following mean value significantly different from the first one. Such a test is suitable for comparing rankings among the same group of respondents [36]. The questionnaire also included an open-ended question allowing 250 characters on what could facilitate the adoption of innovations in the Swedish construction industry. About 50% (n=203) of the respondents replied to this question. Responses were analysed on a qualitative basis through content analysis and search for recurrent themes. Respondents then rated how innovative (1=Not innovative at all, 5=Very innovative) they found different frame systems (on-site and prefabricated steel, concrete, massive timber, glue-laminated wood, and light-weight wood) in multi-storey buildings. The mean ratings were used to evaluate the perceived relative innovativeness of the materials. The respondents also rated how they perceive different frame materials (steel, concrete, and wood) to perform (1=Very poor performance, 5=Very good performance) with regards to some hindrances to the general innovativeness of the Swedish construction industry (opportunity to support local industry, how proven the method of construction is, experience of contractors, easiness to find suppliers, level of marketing from suppliers, and easiness to find affiliations/construction partners). To understand the perceptions towards the use of steel, concrete and wood frames in multi-storey buildings, the respondents then rated the importance (1=Not taken into account at all, 5=Very much taken into account) of different aspects in the choice of frame material in a building of 3-8 floors, and the performance (1=Very poor performance, 5=Very good performance) of steel, concrete and wood frames with regards to those aspects (also analysed in [37]). Cross-tabulations with Chi-square test for independence (p≤0.05) tested for the influence of age, gender, years of work experience within the construction industry, geographical location, and size of company, on the perceived innovativeness of the Swedish construction industry; perceived relevance of hindrances to the innovativeness of the Swedish construction industry; how innovative different frame materials were perceived to be; perceived performance of steel, concrete and wood frames with regards to hindrances to the innovativeness of the Swedish construction industry; and perceptions of steel, concrete and wood frames in multi-storey buildings.

3. Results 3.1 General innovativeness of the Swedish construction industry

The respondents perceived the Swedish construction industry as not very innovative, with 56% (of n=322) rating 1 or 2, and only 5% rating 4 or 5 on the Likert-type scale. Most influential hindrances to the diffusion of innovations in Swedish building construction were perceived as cost aspects (focus on project costs rather than life-cycle costs, the economic risk associated with innovations), followed by a focus on traditional drawing/calculation models and a tendency to use proven

materials and methods (Table 1). The next highest agreements were to that contractors lack ability to adjust processes and established collaborations regarding specific materials and methods. Aspects related to the nature of buildings (e. g. the long life-time, the site-specific nature of construction and the uniqueness of each building project) were least agreed to as influencing the innovativeness of the Swedish construction industry.

Table 1 Mean agreement (1=Completely disagree, 5=Completely agree) with the relevance of indicated hindrances to the innovativeness of the Swedish construction industry, arranged in decreasing order.

Hindrances to innovativeness of the construction industry n Mean Std. Error of Mean

Wilcoxon test

a

The focus on project costs rather than life-cycle costs. 396 4.34 0.04

The economic risk associated with innovations. 399 3.95 0.04 *

Building projects focus on traditional drawing-/calculation-models. 400 3.84 0.05 *

The construction industry uses proven materials and methods. 402 3.79 0.05 n. s.

Contractors lack the ability to adjust construction processes to innovations.

400 3.76 0.04 n. s.

Established actor collaborations based on specific materials and methods.

400 3.75 0.05 n. s.

Conventional contract forms. 400 3.69 0.05 n. s.

Construction clients lack of interest in innovations. 401 3.64 0.05 n. s.

The division of project phases prevents a comprehensive overview. 402 3.60 0.06 n. s.

Innovations are inefficiently marketed. 399 3.42 0.04 *

The lack of coordination and management of building projects. 401 3.40 0.05 n. s.

The temporary character of building projects leads to insufficient knowledge transfer.

399 3.25 0.05 *

Current standards and building codes 399 3.18 0.06 n. s.

Competition is deficient. 397 3.14 0.06 n. s.

Subcontractors are too small 400 3.06 0.06 n. s.

The long life-time of buildings makes it difficult to evaluate innovations.

399 2.82 0.06 *

The site-specific nature of building projects leads to insecurities and lack of routines.

396 2.57 0.05 *

The tendency to support local industries. 396 2.49 0.05 n. s.

The uniqueness of each building project. 402 2.23 0.05 * a An asterisk indicates that the ranking of this factor is significantly different from the preceding one at p ≤

0.05, and n. s. indicates not significant.

There were regional as well as age and gender differences regarding perceived relevance of hindrances to the innovativeness of the Swedish construction industry. Younger respondents and those of fewer years of work experience within the construction industry perceived a greater relevance of the influence of a tendency to use proven materials and methods, established actor collaborations involving certain materials and methods, conventional contract forms, construction clients lacking interest in innovations, and current standards and building codes. Respondents of longer work experience within the construction industry as well as respondents not working in the metropolitan areas of Sweden perceived a greater relevance of sub-contractors being too small to be able to adopt innovations. Respondents not working in the metropolitan areas also gave a higher relevance to the uniqueness of each building project as a hindrance. Women and respondents working at larger enterprises gave less relevance to the uniqueness of each building projects than did men and respondents of smaller enterprises. Female respondents also gave less importance to the long life-time of buildings than did male, but greater importance to building projects‟ focus on traditional drawing/calculation models and that the lack of coordination and management of building projects hinders the adoption of innovations. The responses to the open-ended question of how to improve the innovativeness of the Swedish construction industry covered several broad themes. The most frequently mentioned themes were

cost aspects (mentioned in 59 replies). Common comments included the importance of life-cycle perspectives on costs and of creating incentives for construction clients and contractors to take the risk to try something new. Respondents argued that as long as building projects focus on short-term costs, few projects will take risks. Financial incentives such as subsidies for energy efficient or sustainable building were frequently mentioned as a means to move forward by sharing risks with actors outside the building project. The next most frequently mentioned category was cooperation (36 replies). According to these respondents, dialogue, open discussions, coordination and enhanced cooperation would lead to a better understanding of the viewpoints of different actors and contribute to a shift from the present „narrow mindedness‟ to trans-disciplinary competence and better solutions. Most of these respondents mentioned cooperation between all actors of the building project, while some suggested the need for increased cooperation between the construction client and the architect and structural engineer. Other frequently mentioned factors were knowledge and time (20 and 16 replies, respectively). These respondents felt that better knowledge of sustainability is needed among the actors participating in the building project, as well as a better diffusion of knowledge and research results within the industry. In this vein, 14 respondents mentioned that research results should be better communicated. More time to analyse and consider different technologies and materials in the initial stages of the building project was also requested. Contract or procurement forms and regulations were mentioned to a lesser extent (12 and 13 replies, respectively). Contracts were mostly mentioned with regards to their present negative impact on cooperation, time, and costs; whereas regulation comments mostly argued that building codes are too stringent. 3.2 Perceptions of the use of wood frames in multi-storey buildings Massive timber and glue-laminated wood were perceived as the most innovative frame materials, whereas concrete were perceived least innovative (Table 2). Although prefabricated options generally were perceived as more innovative than on-site constructed systems, the main material content seemed more important to how innovative the frame system was perceived to be. Respondents working in the metropolitan areas of Sweden perceived on-site concrete frames, on-site light-weight wood frames, on-site steel frames, and prefabricated steel frames as significantly less innovative, than did the rest of the respondents, while on-site massive timber was perceived as significantly more innovative in the metropolitan areas of Sweden. Older respondents perceived prefabricated concrete and prefabricated steel frames as more innovative than did younger ones. Women and respondents working at larger enterprises perceived on-site massive timber as more innovative than did men and respondents working at smaller enterprises.

Table 2 Mean rating of how innovative (1=Not innovative at all, 5=Very innovative) different frame systems are in 3-8 storied buildings, arranged in decreasing values.

Frame system n Mean Std. Error of Mean

Prefabricated massive timber 369 3.58 0.05

On-site massive timber 374 3.55 0.05

Prefabricated glue-laminated wood 368 3.42 0.05

On-site glue-laminated wood 371 3.42 0.05

On-site steel 370 2.91 0.05

Prefabricated steel 366 2.88 0.05

Prefabricated lightweight wood 369 2.69 0.05

On-site lightweight wood 370 2.65 0.05

Prefabricated concrete 371 2.65 0.06

On-site concrete 373 2.63 0.06

The respondents rated concrete frames better than steel and wood with regards to several aspects influencing the innovativeness of the Swedish construction industry (Table 3). Wood was rated best regarding the opportunity to support local industry, but was given the poorest rating with regards to the rest. Men and older respondents gave a better rating of wood with regards to the

opportunity to support local industries, while those with longer years of work experience perceived wood to as better regarding easiness to find suppliers, than did the rest of the respondents. Respondents working in Northern Sweden perceived it easier to find affiliations regarding wood frames than did the respondents working in other regions or across Sweden.

Table 3 Mean perceived performance (1=Very poor performance, 5=Very good performance) of concrete, steel, and wood frames with regards to aspects influencing the innovativeness of the Swedish construction industry.

Aspects Mean (n) Concrete

Mean (n) Steel

Mean (n) Wood

How proven the construction method is 4.43 (339) 4.05 (336) 3.11 (332)

Contractors‟ experience 4.22 (311) 3.75 (306) 2.90 (311)

Easiness to find affiliations/construction partners 4.05 (278) 3.70 (268) 3.18 (267)

Level of marketing from suppliers 3.49 (284) 3.23 (280) 3.14 (278)

Easiness to find suppliers 4.04 (307) 3.75 (296) 3.29 (297)

Opportunity to support local industry 3.37 (275) 2.86 (267) 3.58 (274)

Most important aspects when choosing frame material for buildings of 3-8 floors were perceived as project costs, fire safety, construction time, vertical and horizontal stability, sound insulation and acoustics, and energy efficiency of the building. In general, engineering aspects (such as fire safety, sound insulation, and stability) were perceived to be of great importance whereas environmental aspects (such as climate impact, energy use during construction and recycling of leftover materials from the building site) were perceived to be of less importance.

Table 4 Likert-type scale (1=Very poor, 5=Very good) mean values of the perceived performance of concrete, steel, and wood frames in relation to different aspects in the choice of frame material, arranged in decreasing order of importance.

Aspects Mean (n) Concrete

Mean (n) Steel

Mean (n) Wood

Project costs 3.75 (260) 3.46 (251) 3.74 (238)

Fire safety 4.68 (368) 3.06 (355) 3.44 (351)

Construction time 3.72 (327) 4.13 (317) 3.81 (295)

Sound insulation and acoustics 4.40 (367) 3.01 (341) 3.39 (347)

Vertical stability 4.60 (304) 4.40 (297) 3.89 (281)

Horizontal stability 4.51 (297) 4.15 (287) 3.75 (272)

Energy efficiency of the building 4.03 (302) 3.33 (287) 4.03 (289)

Work environment 3.18 (275) 3.54 (266) 4.11 (273)

Durability 4.43 (328) 4.00 (319) 3.69 (302)

Transports 2.98 (252) 3.55 (247) 3.75 (248)

The building‟s design and aesthetics 4.02 (366) 4.27 (363) 4.16 (360)

Climate impact 3.52 (291) 3.21 (286) 4.07 (292)

Requests by users/The buildings flexibility 4.16 (361) 4.36 (358) 4.29 (349)

Sustainable development 3.19 (317) 3.18 (313) 4.26 (316)

Energy use during construction 3.08 (240) 3.13 (238) 3.97 (239)

Easiness to recycle materials 2.34 (326) 3.84 (326) 4.09 (324)

Easiness to renovate/demolish building 2.75 (331) 3.73 (327) 4.24 (325)

On average, the performance of concrete was most positively rated with regards to the engineering aspects, but poorly rated with regards to environmental aspects (Table 4). Wood was rated best performance with regards to environmental aspects. Wood and concrete were equally rated with regards to costs of the building project, construction time and energy efficiency of the building. The perceived performance of steel, concrete, and wood frames varied with age, respondents‟ geographical location, and gender. Men, older respondents and those with longer work experience

within the construction industry perceived steel to perform better with regards to costs, energy efficiency, climate impact, and sustainable development, and concrete to perform better with regards to climate impact, than did women and the younger ones. Older respondents of longer work experience also perceived steel and concrete to perform better regarding the work environment and energy use during construction. They also rated steel better with regards to easiness to renovate/demolish the building. Moreover, those of longer years of work experience perceived steel to perform better with regards to fire safety and sound insulation and acoustics than did those of fewer years of work experience within the construction industry, and older respondents perceived steel and concrete to perform better with regards to transports than did younger ones. Respondents working in non-metropolitan areas perceived steel to perform better with regards to sound insulation and acoustics and energy efficiency than did the metropolitan ones. Women perceived wood to perform better with regards to sound insulation and acoustics, durability, and recycling, than did men. Older respondents and respondents from smaller enterprises perceived wood to perform better with regards to fire safety, than did respondents of lower age and larger enterprises.

4. Discussion The mean age of the responding architects correspond to that among working architects in Sweden [38]. But due to the uncertainties regarding the studied population the results of this survey may not be representative for architects working with multi-storey buildings in Sweden at large. Still, the results give empirical evidence to and strengthen the conclusions of previous qualitative studies further. The Swedish construction industry was perceived to be of low innovativeness. A similar assessment has been expressed in several studies (see e.g. [13, 27, 39]). Cost aspects were perceived as most important to the innovativeness of the Swedish construction industry and were also most frequently mentioned in the open-ended answers as to how innovativeness can be improved. The importance of costs have been emphasised in several studies (see [12, 14, 17, 40]) and was also found important in the choice of frame material. Several other aspects perceived as relevant to the innovativeness of the Swedish construction industry are related to costs [14, 28, 41]. For instance, the industry‟s tendency to use proven materials and technologies, acknowledged by the responding architects, is likely related to resulting ease of cost prediction [41] and the perceived financial risk of adopting something new [17, 29]. The architects‟ suggestions on how to overcome the costs issue included governmental subsidies and economic instruments making a life-cycle perspective more attractive. Similar measures have been suggested by UNEP [17]. Conventional contract forms and construction clients‟ lack of interest in adopting innovations were also perceived as a relevant hindrance to the innovativeness of the Swedish construction industry. Relating to this, better communication between the actors of the building project and more knowledge and time to evaluate different options were mentioned by the respondents as means to facilitate innovativeness. This has also been suggested by Blayse and Manley [27]. Such things are generally governed in the contract form, which is decided on by the construction client. That respondents not working in the metropolitan areas perceived the smallness of subcontractors and uniqueness of building projects as more important to the innovativeness of the Swedish construction industry may indicate such problems are stronger perceived in areas where the range of companies involved in building construction may be smaller. Regarding frame materials, the respondents perceived wood frames as innovative, indicating that general hindrances to the innovativeness of the Swedish construction industry may apply to the diffusion of multi-storey wood frames. However, in line with studies not finding any significant cost differences depending on choice of frame material [42], concrete and wood were perceived as equally good with regards to costs. Thus, although costs may be important to the diffusion of innovations within the construction industry in general, it seems not perceived as an important hindrance to the diffusion of multi-storey wood frames. However, as concrete and steel was perceived as more proven materials than wood in multi-storey buildings and also as superior to wood with regards to contractors‟ experience, easiness to find affiliations/construction partners, the level of marketing from suppliers, and easiness to find suppliers, such aspects may indeed constitute hindrances to the diffusion of multi-storey wood frames.

Even though any tendency to support local industries was not perceived as a hindrance to the innovativeness of the Swedish construction industry, the regional differences with regards to the opportunity to support local industries may be significant to the adoption of multi-storey wood frames. The opportunity to support local industry through the use of wood was rated better in the non-metropolitan areas of Sweden than in the Stockholm, Gothenburg and Malmo region. Also, respondents in the North perceived it as easier to find affiliations/construction partners to build with wood frames, than did the rest. This may relate to that several suppliers of multi-storey wood frames, e .g Lindbäcks bygg and Martinssons trä, are located in northern Sweden. Also, the initial Swedish multi-storey wood building projects were located in non-metropolitan areas [43] with a closer relationship to forestry. It may also indicate a stronger tradition of using concrete in urban areas. From the results of this survey it cannot be discerned whether that respondents in the metropolitan areas perceived wood as more innovative relate to e.g. a lesser use, or an increased discussion, of use of wood frames in urban areas. However, as older respondents perceived prefabricated concrete and steel as more innovative than younger, it seems perceived innovativeness of frame material may relate to years of work experience within the construction industry. Also, as younger respondents perceived a greater relevance of several hindrances to the innovativeness of the Swedish construction industry, they may perceive more of a need for change. Regarding perceived performance of frame materials in multi-storey buildings, and relating to how proven the methods of construction were perceived to be, the perceptions were most favourable towards concrete frames with regards to the most important aspects of the choice of frame material. Should perceptions of wood be more positive with regards to engineering aspects, or were environmental aspects of greater importance in the choice of frame material, the decision to adopt wood frames might be easier. Such a shift may be accomplished through promotion of good examples of multi-storey wood frames and through consumer demand or policies encouraging greater importance of environmental aspects in construction projects. However, older respondents, who were more likely to have longer work experience and be male than the rest of the respondents, had more positive perceptions of steel and concrete frames, than did women and younger respondents, who tended to be more positive towards wood. Hence, such changes may already be happening.

5. Conclusion The architects perceived the Swedish construction industry as not very innovative and seem to attribute it mostly to a short-term focus on costs and a tradition of using proven materials and methods. Wood frames were perceived as more innovative than steel and concrete frames, in particular in the metropolitan areas of Sweden. With the exception of costs, several general hindrances to the adoption of innovations in the Swedish construction industry seem to apply to the diffusion of multi-storey wood frames. Apart from the possibility to support local industry, current circumstances and perceptions seem to favour the use of concrete and steel, rather than wood. However, perceptions seem more favourable among younger architects than among those of longer work experience, indicating a shift towards more favourable conditions for the adoption of innovations, and the use of wood, in multi-storey construction.

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Built Environment Professionalism in a Changing Economy

Stephen Hill C2O futureplanners, UK stephenhill@futureplanners.net

David Lorenz Lorenz Property Advisors, Germany d.lorenz@property-advisors.de

Peter Dent Oxford Brooks University, UK prdent@brookes.ac.uk

Thomas Lützkendorf Karlsruhe Institute of Technology, Germany thomas.luetzkendorf@kit.edu

Summary This paper explores the tensions between an emerging change of mindset in favour of more sustainable patterns of behaviour among many built environment professionals and their struggle to understand what they should be doing to create a more sustainable world, and how to do it. Many professional bodies claim that sustainability is at the core of their activities. For example, the Royal Institution of Chartered Surveyors (RICS), one of the largest organisations for property professionals worldwide, adopted a dedicated sustainability policy in 2005, which is strong on the ‘what’, but says little about ‘how’ or ‘why’. Professionals remain unclear about how to respond to complex and inter-related environmental, social and economic challenges, when they probably mostly imagine having a simple set of one-dimensional responsibilities to their clients or shareholder value. At best, professionals are confused about how to balance their technical competences and public interest responsibilities. The paper examines the objectives of selected built environment professional bodies and their approach to sustainability as a field of professional expertise and a professional duty. It will identify disabling factors that prevent a change of mindset being translated into new models of practice. These factors include the absence of a coherent new paradigm and narrative for sustainability in which to acquire and apply new knowledge, and to redefine the public interest values in everyday practice; or the erosion of ethical values and social context, as the fundamental guiding principles for personal and professional behaviour. The paper provides propositions for actions (such as fostering and providing conditions under which built environment professionals can take personal responsibility for ethical behaviour) that can be effective levers for change. In summary, this paper will deal with the relationship between knowledge, skills, and ethics to models of professional practice, and will answer the following question: What does it mean to be a built environment professional for a sustainable world? Keywords: Professionalism, public interest, ethics, responsibility, accountability, values

1. Introduction Today’s globalised economy can be characterized by a mostly uncritical admiration of uncon-strained markets, a prevailing belief in Adam Smith’s ‘invisible hand’ and the self-regulating forces of the free market play, a general disregard for the public and the environment as well as the delu-sion of endless growth. This has led to a situation where there is greatly increased resentment re-garding the disparities that have grown up over a generation, both between and within countries, and which have been exposed by the combination of three simultaneous and mutually reinforcing crises: the financial, environmental and social. Within many western countries, the economy is changing – or already has changed – from an economy that was regulated and controlled (at least to a certain extent) by governments in order to prevent markets from failing and to protect weaker individuals from the worst market excesses into an economy that now implicitly excludes politics and governmental regulation “as an arena of choice: [instead it is now assumed that] systems of economic relationships are […] laid down by nature. Once they have been identified and correctly understood, it remains to us only to live ac-cording to their laws” [1, p.193]. In addition, the lesson from the recent international climate change negotiations at Copenhagen and Cancun is that politicians are significantly less powerful than previously imagined. They have been unable to deliver political deals, to create change, or to define common values within which societies need to operate. Even though it needs to be acknowledged that for some ‘enlightened’ participants of the free mar-ket, sustainable development issues (such as an assumed responsibility towards society and the environment) do impact on business decisions, it is open for debate if and to what extent ‘sustain-ability’ has become a marketing concept only. In addition and in a strict sense, the conception of unchangeable ‘rules and laws of the free market’ arguably disqualifies the ethically grounded and normative concept of sustainable development as a misbelief and as orphaned from mainstream thinking and behavior (see also: [2]). However, when the “market and the free play of private interests so obviously do not come to-gether to collective advantage […]” [1, p. 206]; i.e. when the environmental, social and financial problems societies are facing can neither be tackled by market mechanisms nor by (deliberately) powerless governments who have been ill-advised by corrupted ‘economic experts’ (see the film “Inside Job”, 2010, by Charles Ferguson), who then can take responsibility and accountability for market outcomes? Responsibility and accountability are now more diffuse and lie (more than before) with a wider group including professionals and, in particular, professional bodies and organisations. So rather than governments it should be the overall institutional framework (of which professional bodies are an integral part) that will need to lead on realigning market forces with the wider public interest. Interestingly, in a recent survey, when asked who should be responsible for mitigating the impacts of climate change, less than 5% of respondents employed in international real estate consultan-cies, identified professional bodies as having any responsibility [3]. This suggests that despite ef-forts to push a sustainability agenda, there are barriers to its implementation both in universities and, consequently, in the workplace. These barriers, the ethical and moral bases for responsibility and accountability of professional bodies as well as the resulting consequences for individual pro-fessionals are discussed in the following within the context of the built environment professions.

2. Built Environment Professionalism and Professional Bodies

2.1 General guiding principles and role within the institutional framework Institutions have been defined as “systems of established and embedded social rules that structure social interactions” [4, p. 13]. Institutional structures are sustained through a network of public and private organizations and professional bodies. Keogh and D’Arcy [5] comment that “the institutional structure of individual property markets is very important across the world because each property market behaves differently in terms of the institutional form and structure”. As such, an institutional framework covers political, regulatory, and economic aspects of a market. These can facilitate or limit the property market process of bringing market players together to produce activities which generate the rules of the game. This market process is, therefore, subject to change in response to institutional changes in a property market, which can be political, social, economic or legal. In general, built environment professional bodies – being part of as well as apart from the market process – fit into this institutional framework as they, on the one hand, circumscribe and reinforce workplace skills and practices, develop and control a knowledge base, control entry into the occu-pation, demand public recognition of professional status and fix the market for professional ser-vices. On the other hand, built environment professional bodies also offer the promise of a cove-nant with society to protect it from unscrupulous, unfair or short-term practices through the provi-sion of impartial advice and services [6]. Davies and Knell [7] identify four guiding principles for the built environment professions. These are: The development of a body of knowledge – This is not only ‘codified knowledge’, which is increas-ingly available to all via electronic access but, more particularly, ‘tacit knowledge’, “the knowledge that is not consciously on our minds, but acts as an indispensable resource for getting things done.” This is the enabling knowledge built into a professional framework to meet moral and ethic conduct within social boundaries. Trustworthiness – The role that the professions play is as an intermediary establishing levels of behaviour in markets “with extreme informational asymmetries”. They provide another layer to the market mechanism offering integrity and independence. Formal association – It is only through formally constituted organisational structures that profes-sional bodies can wield any power or influence. In order to be authentic in their role over and above the market and immediate financial reward, they have to be perceived as “maintaining high barriers to entry […] [to] ensure that both their body of knowledge and their reputation are secure.” The protection of the public interest – There is a tension here between ‘the public-oriented ethos’ of a profession and the market mechanism within which its members, as employees of third party organizations, work. To overcome this, most professional bodies have a code of conduct and a regulatory framework within which their members are expected to work in order to avoid conflicts of interest. 2.2 Professional bodies at risk Despite the built environment professional bodies’ important role within the overall institutional framework and their respectable general guiding principles, there is a very real danger that profes-sional bodies lose both, their power and reputation as well as direction because of the weight of the influence of the market, a market which is more and more aligned to the pursuit of financial profit above all else.

This can be illustrated in the context of sustainable development – a complex concept in itself but one which is of significant concern to all built environment professions. Not only that, though, be-cause it is one which these professions could take a lead in addressing both the technical fix and the behavioural shift needed to mitigate the impact of degradation of our climate as well as the loss of important and valued public goods through privatised and hostile public spaces, social conflicts, occupational diseases, contaminated land, resource exploitation, energy and water insecurity, wastelands within cities and destruction of the countryside (see, e.g. [8]). So far, among professional bodies and their members there has been some movement on the first (i.e. the technical fix) but very limited activity on the second (i.e. the behavioural change). The rea-sons for this are threefold: Firstly, technical solutions are based on science and generally, practitioners are presented with a potentially long term problem and they are able to produce a short term solution without undermin-ing the fundamental causes of the problem. This raises the question “under what conditions do cer-tain sections of human populations develop new fundamental behaviour patterns, rather than merely move between the already constituted patterns they predictably adopt due to their social position” [9]? In this case, social position relates to patterns learnt and applied as professional sur-veyors, planners, architects, engineers, etc. Secondly, most professions in the built environment have their roots in technical knowledge and the physical sciences. This, in itself is not a problem but it does encourage a propensity to see the concrete rather than the value-laden aspects of the facility, to the extent that “if one imagines that education, if it is to be of any value at all, is concerned mainly with ‘things’, whether in scarcity or abundance, the whole point is missed [...] both make the mistake of trying to produce wisdom by circumstances instead of circumstances by wisdom” [10]. Behavioural change and reaction to natural or manmade factors tends to be a more difficult area to pursue. It tends to fall outside most members‘ area of expertise or interest. Thirdly, the whole issue of sustainability does not lend itself to reductionist theory, in the same way that it is possible to assess stress on building materials or cost per square metre of usage. Nor can it be seen in terms of present (or, indeed, short term future) usage. Sustainability as a concept has to be seen holistically over space and time. In addition, to most ‘sustainability’ still only means en-vironmental concerns. And in environmental terms, sustainability is unseen (‘day to day the weather stays the same!”), distant (‘why should I be concerned about world poverty?’) and some-thing to worry about in the long term (‘it can be discounted away to virtually no problem at all!’). If sustainability is to have meaning then its broader social and financial consequences (e.g. social costs like transport, health, security, general well-being) – as opposed to marketing value-added – would have to be exposed by the professional bodies. But these are not the issues professional bodies get too directly involved in normally. In addition, social justice and equity are rarely taught, examined or debated as part of everyday practice, let alone inform key strategic concerns of the professional institutions. Unfortunately, under the current circumstances, the technical fix is relatively unimportant if it is not accompanied by a parallel shift in behaviour. Otherwise, wasteful resource usage and disposal ac-tivities remain the same or consumption habits and practices continue to accelerate. What is needed is a level of sustainability literacy which enables both the technical and the behavioural as-pects of professional advice to be implemented side-by-side. 2.3 Sustainability literacy in built environment professionalism The report “Sustainable Development in Higher Education – Current practice and future develop-ment”, [11, p. 6] identifies the following skills and knowledge as representing sustainability literacy:

• An appreciation of the importance of environmental, social, political and economic contexts for each discipline

• A broad and balanced foundation knowledge of sustainable development, its key principles and the main debate within them, including its contested and expanding boundaries

• Problem-solving skills in a non-reductionist manner for highly complex real-life problems

• Ability to think creatively and holistically and to make critical judgements

• Ability to develop a high level of self-reflection (both personal and professional)

• Ability to identify, understand, evaluate and adopt values conducive to sustainability

• Ability to bridge the gap between theory and practice; in sustainable development, only transformational action counts

• Ability to participate creatively in inter-disciplinary teams

• Ability to initiate and manage change. These are very different skills from those of the more technically minded and may be contra-intuitive to a pragmatic professional who invariably is sought out by clients craving short term solu-tions. These solutions are often responses based on partial knowledge (both of the client and the situation) and often do not responsibly take account of wider issues. In this sense, they do not re-spond ‘adequately‘ nor is the response necessarily effective or at its ‘highest capacity‘ [12]. In short, built environment professionals (like any other professional and citizen) cannot continue to evaluate the world and the choices they make in a “moral vacuum” (see: [1, p. 37]). However, ac-cording to Blake [13] three key barriers hinder a shift in behaviour from taking place: individuality, responsibility, and practicality.

• Individual barriers, i.e. barriers lying within the person, having to do with attitude and tem-perament.

• Responsibility barriers, i.e. people who do not act sustainably feel that they cannot influ-ence the situation or should not have to take the responsibility for it.

• Practicality barriers, i.e. the social and institutional constraints that prevent people from act-ing sustainably regardless of their attitudes or intentions (e.g. lack of time, lack of money, lack of information).

If the professional bodies can start to address the issue at this level, it may be possible to develop the buildings and places that align with the sustainability agenda created with sustainable finance and used in a way that helps to realise a sustainable future. But why, how and to what extent should built environment professional bodies engage in changing behavior and thus, in shaping the forces of the market and the free play of private interests?

3. The ethics of built environment professionalism 3.1 Professional disciplines in a social, environmental and economic context “It is no longer possible for us to masquerade as disinterested, or objective professionals, applying our techniques with equal ease to those clients we agree with, as well as to those we disagree with. We are, in effect, the client for all our projects, for it is our own society we are affecting through our actions.” This sounds a very contemporary assessment of the challenges facing built environment profes-sionals engaged in championing the principles and promises of sustainability. In fact, it comes from the 1970s, and is contained in Robert Goodman’s ‘After the Planners’ [14, p. 249-250]. ‘After the Planners’ is an exhausting but exhilarating 300-page polemic book of sustained anger at the archi-tects, planners, and property professionals who had been lured into the urban renewal process, and how their skills and their knowledge were then entirely debased by corporate political and

commercial interests. Goodman accused them of abandoning their public interest obligations; in this case towards the mostly poor urban populations that were displaced by these projects and programmes. Goodman’s unforgiving ethical challenge to all built environment professionals reso-nates today, both in the context of sustainability, but also in the light of the ‘morning after the night before’ feeling of life after the global financial crisis. Did we really let that happen? How? Sandel [15, p. 4] tackled this feeling of malaise in his 2009 Reith Lectures on the New Citizenship: “It’s […] a time to rethink the role of markets in achieving the public good. There’s now a wide-spread sense that markets have become detached from fundamental values, that we need to re-connect markets and values.” The book ‘Ecological Urbanism’, published by Harvard University Graduate School of Design [16], may sound rather detached from ethics, values and markets, but it goes to the heart of the skills that may be required of an ethical professional with values about what to be, and how to act: “The prevailing conventions of design practice have demonstrated a limited capacity both to respond to the scale of the ecological crisis, and to adapt their established ways of thinking. Ecological urban-ism utilises a multiplicity of old and new methods, tool and techniques, in a cross-disciplinary and collaborative approach” [16, p. 26]. The book recognises the tensions between disciplinary knowledge, and the moral imperative of sustainability; an imperative that can override and undermine the value of disciplinary examination, as if sustainability was an unquestioned and static absolute good, or a question to which there is a right answer. Mostafavi and Doherty [16] and the other 150 contributors to the book, argue that the traditional distinctions between the design professions are breaking down, and that generalism is also important and necessary as a productive disciplinary strength. Ecological urbanism will emerge into a way of professional working that is based on the complexity of human experience, both observed and personal, and informed by social justice and ethics, as well as technology and design competence. Such a vision implies also that clients are bound into that web of complexity and human experi-ence from which the professional is expected to make some sense of the challenges of climate change, resource depletion, population growth and urbanisation. Goodman [14] described the pro-fessional as a client and as someone likely to be affected by the consequences of the pro-ject/assignment or his or her actions as a professional. Behind both formulations is the idea that someone is taking responsibility and is accountable; but for what and for and to whom? This is the subject that we turn to next. 3.2 How ethical are professional Codes of Conduct? In the UK, the professional bodies are founded with charters, stating their purpose, backed up by Codes of Conduct, regulations and byelaws, which variously regulate the business of the institu-tion, the education, accreditation and the practices of its members, as well as the promotion of the institution’s purposes to the world at large. (In other countries (e.g. in Germany) similar regulations apply which are contained within the articles and statutes of the respective professional organisa-tions). Professional bodies – such as the Royal Institute of British Architects (RIBA), the Institution of Civil Engineers (ICE), and the Royal Institution of Chartered Surveyors (RICS) – are not membership organisations designed to promote the interests of individual members, beyond the overarching purpose of promoting the profession as a whole. Many members do not fully understand the dis-tinction, and the business of the institutions can be compromised by the occasional discontent of members who feel their self interests are not being served. There are strong similarities between the governance arrangements and their scope across the main professional institutions; for the purposes of this paper, architects, engineers, planners and surveyors.

Till [17] deconstructed the various elements of being an architect, and the workings of the Archi-tects Registration Board (ARB) and the Royal Institute of British Architects (RIBA), in his recent book, ‘Architecture Depends’. Till’s analysis [17, Chapter 10, pp. 171-188] serves also for examin-ing the characteristics of other built environment professions. He observes that that “one of the most commonly made mistakes is to confuse professional pro-priety with an ethical position, as if acting in accordance with the codes of professional conduct will ensure ethical behaviour.” Till illustrates how the requirements of the ARB’s and RIBA’s codes of conduct (and similar profes-sional bodies in North America) are about reasonable standards of competence and diligence, of keeping knowledge up to date, and prudent and honest business administration mainly in relation to the client’s interests or those of other professionals; standards that “even my hairdresser could meet”, and so not intrinsically ethical or even professional. He argues that ARB’s powers ‘to protect the consumer’ are for the benefit of the client, and not the user of the building or others who may be affected by it. Till [17, Chapter 10, pp. 171-188] asserts that simply meeting the requirements of a code of con-duct that serves only the client’s interest “may be unethical in my terms”, as it may ignore the long term, the interests of the user, or environmental responsibility; responsibilities which may be ful-filled by an enlightened client, but which may equally be subject to pressures from the “short term, opportunist, and potentially exploitative” demands of the market. He has an answer to the criticism that the client pays, so is entitled to get what he or she wants, or that “the whole idea of wider responsibilities smacks of idealism”. He maintains that social ethics are inherent in the design of any building or place: “just to ignore them does not mean that they will go away. Better to face up to them, and in this deal with the tension between the values and priori-ties attached to the professional codes and implicit in social ethics […] not to engage with the dirty reality of short term demands is as much a form of escape as the positing of utopian proposals of a harmonious ethic.” Architects, planners and surveyors are therefore left rather exposed in an ethical void in which the terms of their charters, whilst appearing to promise actions in the public interest, and codes which regulate professional behaviour, cannot provide any moral guidance or framing for debate about the ethics of the project/assignment or the application of their knowledge and skill to it, or to a wider societal understanding of what they should do. Engineers, at the Institution of Civil Engineers (ICE), are more fortunate, as their code of profes-sional conduct is unequivocal: “The duty upon members of the ICE to behave ethically is, in effect, the duty to behave honourably; in modern words, ‘to do the right thing…Members of the ICE should always be aware of their overriding responsibility to the public good. A member’s obliga-tions to the client can never override this, and members of the ICE should not enter undertakings which compromise this responsibility…The ‘public good’ includes care and respect for humanity’s cultural, historical and archaeological heritage, (and) to protect the health and well being of present and future generations and to show due regard for the environment and for the sustainable man-agement of natural resources” [18]. Moreover, Rule 3 of the Rules of Professional Conduct states that: “All members shall have full re-gard for the public interest, particularly in relation to matters of health and safety, and in relation to the well-being of future generations…Members should take account of the broader public interest - the interests of all stakeholders in any project must be taken properly into account, including the impact on future generations. This must include regard for the impact upon the society and quality of life of affected individuals, groups or communities, and upon their cultural, archaeological and ethnic heritage, and the broader interests of humanity as a whole” [18].

All this is in addition to the basic requirements of competency observed by Till [17], and a separate Charter for Sustainable Development based on the principle that: “Sustainable Development is central to civil engineering and that ICE and the profession it serves must organise themselves ac-cordingly. […] In fulfilling this role, civil engineers contribute to economic growth, to environmental protection and to improved quality of life […] equally recognising the need to protect and enhance the environment and to use resources in a way that does not disadvantage future generations” [19]. This paper cannot reflect on whether civil engineers are notably and self-evidently more ethical than others, in their professional work and as members of cross-disciplinary professional teams, or whether they are more challenging in their relationships with clients. However, anyone employing a civil engineer would be in no doubt about what they were getting, and what the professional body expected of its members. Other built environment professionals, less constrained than civil engineers, may continue to main-tain that their first responsibility is to their client’s shareholder value, and indeed their own, as over-riding fiduciary obligations. The charters or codes of conduct do not explicitly go as far as that, and may, on the contrary, as in the 1881 Royal Charter of the Royal Institution of Chartered Surveyors (RICS) describe one of the principal tasks of the surveyor as “securing the optimal use of land and its associated resources to meet social and economic needs” [20, Clause 3]. (Note the inclusive and mandatory ‘and’.) However, despite the moral ambivalence identified by Till [17], taking refuge in the exigencies of company law is no escape from his ‘dirty reality’, as the UK Companies Act expanded the duties of directors to mirror objectives not unlike the ICE’s. Section 172 of the Act [21, Chapter 2] describes the duty to promote the success of the company: (1) A director of a company must act in the way he considers, in good faith, would be most likely to promote the success of the company for the benefit of its members as a whole, and in doing so have regard (amongst other matters) to (a) The likely consequences of any decision in the long term, (b) The interests of the company’s employees, (c) The need to foster the company’s business relationships with suppliers, customers and others, (d) The impact of the company’s operations on the community and the environment, […]. Historically, fiduciary obligation appears to have been interpreted by many investors as forcing them to disregard such matters in fulfilling their beneficiaries’ interests. The ‘long term’ and com-munity and environmental impact were therefore new, and intended to be ‘defensive’ and protec-tive to ensure that directors were not regarded as being in breach of their fiduciary duty because they had had regard to those things. However, good parliamentary drafting enables many interpre-tations to be made of the same words, so it is clear that Section 172 of the UK Companies Act is also permissive, and so “provides a model for fiduciary investors to have the freedom to take a more enlightened approach to their responsibilities. The fact that fiduciary investors are them-selves shareholders makes this case all the more compelling. At present, the Companies Act ethos of enlightened shareholder value is in direct conflict with the perception of these shareholders that their legal obligations actively prevent them from taking an enlightened approach” [22, p. 115]. In France and Germany, mutual funds owe a statutory duty to act “in the sole interest of investors and of the integrity of the market [23, p. 58]. Similar regard could and should have been required, perhaps, in recent market conditions, to prevent some UK and other long-term fiduciary investors partaking in risky or short-termist strategies which undoubtedly have compromised financial stabil-ity, without serving beneficiaries’ long-term interests. So custodians of shareholder value and fiduciary obligations are no more exempt from considering the tensions between markets and moral and ethical issues, or taking responsibility for their choices and decisions, than professionals or, indeed, any other citizen.

3.3 Responsibility and Accountability for Outcomes: Future Professionals The preceding discussion, particularly the example of the ICE, shows that the allocation of respon-sibility for acting in the public interest rests with both the individual professional and the institution, and in some cases, in supporting collaborative behaviour across the built environment institutions. What is less clear is how changes occur where the public interest imperative needs to be strength-ened. Are the institutions or individual professionals the most likely and effective agents for change? In 2006, the main UK professional bodies concerned with planning, RICS and the Royal Town Planning Institute (RTPI) commissioned, with others, the ‘Future Planners’ report in order to imag-ine the new roles and skills required of ‘planners’ to put into practice the disciplines of spatial plan-ning, adopted as part of the UK procedural planning reforms of 2004. Spatial planning was to be the new principal means of ordering and enabling sustainable development. There was a recogni-tion that the professions would need to do different things, as well doing existing things differently. According to one of the report’s interviewees, head of planning for a London council, “planners are implementing the same system they have always implemented, but it wasn’t designed for a global-ising world” [24, p. 4]. Spatial planning was therefore understood to be a more dynamic and fluid process, needing to be constantly adaptive to the interactions between people, place and capital flows, which might now emanate from anywhere in the world. In this context, the challenge to the planner would be to me-diate the tensions between local and extra-local priorities and imperatives. The report suggested new roles for planners, ranging from Enabler to Scenario Planner, to Provocateur, and Judge. It gave the planner greater autonomy, but working within a framework of collective and collaborative effort from other professionals, people and politicians, and managing knowledge flows and the content of planning debate: a world away from the traditional functions of policy writing and devel-opment control [24]. To maintain credibility in this autonomous and highly responsible position, the planner would need a story about his or her role that would enable others to trust them as disinterested advocate of a better future. The authors of the ‘Future Planners’ report proposed the concept of ‘Public Value’, a term with some political currency at the time, to move the debate about public interest beyond the normal presumption of ‘public investment good for all, private investment good for some’. The pub-lic interest should not be taken for granted, but had to be proposed, debated and endorsed. “We take ‘public value’ to be the achievement of democratically legitimate sustainable development […] integrating environmental sustainability and social justice with economic growth […]. This requires all to take a long term view. It demands a reassertion of the idea […] that the planning system aims to pursue the public interest” [24, p. 5]. The responsibility of the Future Planner was to manage this process of co-producing a sustainable future, and to be held accountable by all the stakeholders in the co-production for the realisation of ‘public value’. Public value was, however, essentially a forward looking construction of value, hard to reconcile with the pragmatics of development economics today. Whilst most forms of investment in new de-velopment have a relatively short term investment horizon, often reliant more on short term trading in speculative and inflationary land and asset values, both the costs of the providing for the future and future accruals of value are routinely ignored. Planners would, therefore, have needed a revo-lution in practice, skills and status to put themselves and their profession into a position where this debate could reshape the operation of markets to deliver genuinely sustainable development, in any market, let alone one in which asset values were distorted by massive inflows of global capital from GDP surplus countries to the GDP deficit UK and some other European countries and their land and housing markets. The ‘Future Planners’ report was enthusiastically received by both professionals and their institu-tions in the UK; some individual professionals, not traditional planners, were inspired by the ambi-

tion of the report to develop new modes of practice, and are operating effectively at the interesting margins of professional practice. It is not surprising, though, that none of the RICS, RTPI or main-stream professional firms or public offices have yet found a way to act on any of the ideas. Assess-ing the future is too difficult and uncertain. Taking responsibility for it seems an unnecessary dis-traction, when dealing with and mostly accommodating the ‘dirty reality’ of today is the best that can be managed. Whereas planning does at least imply an interest in the future, the task is even harder for property professionals, especially for valuers whose principal responsibility is to assess the price at which a willing purchaser and vendor will agree to a transaction. The valuer's dilemma is that the task of valuation is about the price today, based on a backward look at the evidence of previous transac-tions. Valuing sustainable development is a challenge not least because it has to be based on a view of an uncertain future, and its potential risks and rewards. There are also strong, almost moral prohibitions in their force, that prevent valuers trying to ‘shape’ markets; they may only reflect it. As with the earlier observation about planners, however, that leaves valuers “implementing the same system they have always implemented, but it wasn’t de-signed for a globalising world”. However, sustainable development is now embedded fully in the global discourse about the future of the planet. Almost every aspect of national UK and EU public policy and an increasing body of regulatory requirements requires new development to carry the burden of environmental and social costs of sustainability, quite explicitly internalising to the cost of development, (and the holding of land for development), what was previously externalised or ig-nored as a ‘harmless’ or inconsequential by-product. Valuation practice has not yet found a way to accommodate this view of the future. Moreover, ‘willing’ does not necessarily also mean wise, prudent, forward looking, enlightened or any other virtuous quality that might be the necessary precondition for promoting sustainable de-velopment. In an imperfect system, therefore, it is hard to bring transparency to any understanding of value that does take account of the future expectations of sustainable development, and ac-commodate future change and uncertainty. The authors of this paper will be exploring this idea in greater depth in their forthcoming book, ‘Be-yond Price – Valuation in a changing built environment’. At this stage, the constraints on shaping the market seem anachronistic, and only capable of hindering innovation, the development of new knowledge and the growth of an investment market for sustainable development. Whilst valuation, as a professional skill, may need to be as highly regulated as it currently is, the concept of value cannot ever be value free, static or solely backward looking. Even in 1871, Carl Menger could as-sert that “the value of goods arises from their relationship to our needs, and is not inherent in the goods themselves. With changes in this relationship, value arises or disappears” [25, p. 120]. Other non-valuer property professionals, from land economics, construction cost estimating and management, building design, and land use management disciplines, as well as other built envi-ronment professionals, all possess special knowledge and insight about many possible futures, and thus many possible future values. They might be called ‘Future Professionals’, and be respon-sible for speaking out and sharing that knowledge, and also the limits of their knowledge, so that all parts of the market are better informed, both about future prospects and impacts, as well as past performance, where that continues to be relevant. Valuers and their clients may therefore be ex-posed to a wider base of evidence and public and professional discourse about the social, eco-nomic and environmental characteristics of a project or assignment, and against which they may then be held more accountable than hitherto.

4. Conclusion: Taking Personal Responsibility for the Other In summary, one key concern within the context of challenges imposed by sustainable develop-ment to built environment professionals is that of ‘non-responsibility’. It could be argued that in ad-dition to the so-called ‘vicious circle of blame’ (see: [26]), there is another vicious circle operating at a more fundamental level within property and construction markets: the vicious circle of non-responsibility. The problem is that many built environment professionals give away responsibility and do not feel (in any way) responsible for market outcomes. For example, valuation profession-als do not feel responsible since responsibility is usually ascribed to the free market’s invisible hand. Yet, surely valuation professionals are inescapably bound into the both the causes and ef-fects of the global financial crisis in which widely held professional and lay assumptions about the value of property assets have been a material factor. Also designers and builders usually do not feel responsible for the actual performance of their buildings; responsibility is often ascribed to facility managers and users. Although almost all de-signers and builders would agree that creating sustainable buildings is a key priority, very few go back (after the project has been completed) to check the building’s logbook (i.e. the actual perfor-mance) or have a role or stake in the actual performance. So what this means is that most profes-sionals are interested in compliance (usually with a hypothetical model) but not in performance (of the actual building). From a conceptual and methodological point of view, this is flawed [27]. In the same context, Leaman et al. [28, p. 575] argue that “the divisions of responsibility make it difficult to close the feedback loop from building performance in use to briefing, design and con-struction.” As a consequence, professional bodies and individual professionals are confronted with the un-equivocal challenge of becoming more responsible and accountable for property market outcomes. Expressed in other words, the need for a ‘new professionalism’ spans across the built environment professions – they must find a new role in pro-active “market shaping” (see: [6]). Otherwise, built environment professionals operate in conflict with the stated goals / constitutions of their profes-sional bodies. The key for solving this problem lies in fostering and providing conditions under which built envi-ronment professionals can take personal responsibility for ethical behaviour. Favourable conditions for a change in behaviour are essential because “the same combination of people, organizations, and physical structures can behave completely different, if the system’s actors can see a good reason for doing so, and if they have the freedom, perhaps even the incentive, to change” [29, p. 237]. The assumption of personal responsibility is also Till’s [17] proposition. Rejecting a range of tradi-tional definitions of ethics, he turns to Bauman [30] and his inspiration, the philosopher Emmanuel Levinas: “Ethics is defined simply and directly as ‘being-for the Other’. To assume an ethical stance means to ‘assume responsibility for the Other’” [30, p. 13 cited in: [17, p. 173]]. This sounds disarmingly simple. However, Bauman’s explanation ensures that readers understand the complexity of what is being proposed: “The ethical paradox of the post-modern condition is that it restores to agents the fullness of moral choice and responsibility, whilst simultaneously depriving them of the comfort of the universal guidance that modern self-confidence once promised” [30, p. 13 cited in: [17, p. 173]]. Till welcomes the fact that this means that professional bodies cannot police a brand of imperfect ethics. There cannot be a set of static ethical principles, based on “absolute correctness. Instead, it works from within

each situation, rather than imposing an abstract set of moral codes from without. These ethics have to work with the contingencies of each context, and not attempt to stifle them” [17, p. 173].

This proposition does not need to remain an abstract notion. An approach for taking personal re-sponsibility has been reinforced by an earlier study in 2007 for the Royal Society of Arts (RSA) Professionals for a Sustainable World, and has been developed further for the RIBA Building Fu-tures in 2009 (see: [31]). This study was based on over sixty interviews with practicing profession-als, clients and policy makers in the UK, exploring the relationship between ‘high quality design’ and the demands and disciplines of sustainable development. From the interviews (though not necessarily by the interviewees) it was possible to identify three serious gaps in developing a workable concept of ethical professional practice, based on the responsible application of acquired specialist knowledge and skill. These are [32]: First gap: We (as built environment professionals) are at the limit of what we know, but we do not have much honesty about what we know and what we do not yet know. We go into projects all the time pretending we know everything, even when we do not. We think it is professional to know everything. To admit that you do not know is seen as unprofessional in the eyes of peers and cli-ents. That is dishonest. Second gap: There is no culture of explicitly learning on the job, recording what we do not know and using the project systematically to build up our knowledge in ways that embrace all the differ-ent professionals, as well as the client and any other stakeholders in the project. Third gap: We need a more explicit set of ethical values that must be learned, tested and sustained in the social context of the project, within the team and in the way that team engages with the out-side world. That is not to say that there can be a rigid set of ethical rules for sustainable develop-ment, as it would not be very useful if we did, as it would suggest that a ‘sustainable development’ was a finite and determinate phenomenon, whereas it is needs to be adaptive. However, it should always be legitimate to argue, debate and test the values that we need to embody in the profes-sion and on specific projects. Finally, the professional institutions, even if they cannot police ethics as comfortably as their cur-rent codes, will have to find some new way of making explicit the primary duty of the professional: responsibility for the Other. The general duty of care to the world at large is expressly or implicitly stated in most professional charters – public first, client second: stated but not always remembered or observed. But the Other is sometimes also them, the professionals, so there also needs to be the idea that profes-sionals should have to reconcile their ideas about the way they want to live personally and the way they should behave as a professional person. They should not expect more for themselves than they expect for the Other. That requires a social context as the place where professional and per-sonal values, ethical dilemmas and potential conflicts of interest can be openly discussed and tested, and where professional behaviour may then be held up to account by both peers and the public. To do that, the roles of the traditional players may also need to be redefined and strength-ened: Citizen clients: (as suggested by Mostafavi and Doherty [16]), clients have a responsibility to be more informed, more robust, and more permissive, in the cause of enabling sustainable develop-ment to happen. They need to become co-producers with the professionals, accept they may not understand the question they are asking or that it is even the right question. Clients should expect to be challenged by the professionals. Citizen professionals: (a name suggested by Till [17]; and a role advocated forty years earlier by Goodman [14, p. 250]: “By raising the possibilities of the humane way of producing places to live, by phasing out the elitist nature of environmental professionalism, we can move towards a time when we will no longer define ourselves by our profession but by our freedom as people.”

Binding the two roles together is the late Tony Judt’s injunction: “Today, when the market and the free play of private interests so obviously do not come together to collective advantage, we need to know when to intervene […]. As citizens of a free society, we have a duty to look critically at our world. But if we think we know what is wrong, we must act upon that knowledge” [1, p. 206 and p. 237]. The ambition of these writers is both inspiring and difficult to live up to. However, there is no avoid-ing the ethical and practical imperatives on built environment professionals to act at global, na-tional and local levels to meet the challenges of climate change, population growth and the deple-tion of natural resources; and, in the words of the RICS Royal Charter, “to promote the usefulness

[authors’ emphasis] of the profession for the public advantage in the United Kingdom and in any other part of the world” [20, Clause 3].

So, professionals and their professional bodies must re-learn how to be useful.

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Sustainability Reporting and Rating in the Construction and Real Estate Sector

Thomas Lützkendorf Prof. Dr.-Ing. habil. Head of Chair Karlsruhe Institute of Technology – KIT Germany thomas.luetzkendorf@kit.edu

David Lorenz FRICS Dr. rer. pol. Director Lorenz Property Advisors – Chartered Surveyors Germany d.lorenz@property-advisors.de

Summary The implementation of sustainable development principles within the construction and property (real estate) industry can be supported by number of different instruments such as sustainability assessment and certification systems for new and existing buildings as well as environmental product declarations for construction materials. Current efforts undertaken to introduce sustainability reporting for construction and property related corporations close a key gap within the transformation towards more sustainable construction and property markets. This is because sustainability reporting allows (in the best case) both, to see how organisations actually perform and describing and analysing how sustainability considerations are (1) aligned with corporate goals, (2) implemented into production- and business-processes, (3) taken into account within the supply chain, and (4) considered in relation to corporate product responsibilities. All this impacts on the degree to which an organisation or company is perceived as a good corporate citizen or sustainable business. The paper contains an analysis and discussion of available sustainability reports from real estate companies. The analysis reveals that until now sustainability reports from this sector largely differ in terms of scope, quality and degree of coverage and presentation of respective sustainability indicators. It is argued that for sustainability reports from the construction and real estate sector to be comparable and meaningful, actor-specific / sub-sector-specific sustainability reporting formats and standards are needed. This is because the construction and real estate sector is so diverse and multifaceted that a “one-size-fits-all” reporting format aiming to cover all sub-sectors of the real estate and construction industry (i.e. planning, design and engineering offices; construction product and materials manufacturers; construction and building craft companies; housing companies; real estate companies; property funds, Real Estate Investment Trusts (REITS) and other investment vehicles) would arguably impair the preparation of comparable and meaningful sustainability reports within this sector. And without comparable and meaningful sustainability reports, stakeholders, third-parties and the public cannot assess both companies’ actual performance in contributing to the implementation of sustainable development principles as well as the material consequences of company activities and behaviour in socially, environmentally or politically sensitive areas. The paper contributes to an ongoing discussion as well as to efforts undertaken to develop and apply sustainability reporting formats and standards for construction and real estate companies such as the recently published draft version of a Construction and Real Estate Sector Supplement of the Global Reporting Initiative. The paper contains recommendations on the development of actor-specific sustainability reporting requirements for the construction and real estate sector and discusses how to improve reporting practices in this sector. It is argued, that one key issue for this lies in explicitly taking into account the particularities, role and possible contributions of the respective groups of actors (reporting entities) along the construction and real estate value chain.

Keywords: Real Estate, Sustainability Reporting, Reporting Quality, Sustainability Rating

1. Introduction and context Sustainability reporting can be described as an instrument for portraying organisations’ and corporations’ activities and achieved results in contributing to sustainable development as well as in taking their responsibility towards society and the environment. Sustainability reporting stands in a tradition of both accountability towards third parties as well as internal reporting and financial accounting. Through sustainability reporting these former strictly financially oriented reporting and accounting exercises are now being extended to include further aspects relating to the environment, society and corporate governance (commonly referred to as ESG-issues). However, the scope, aims and benefits of sustainability reporting go beyond the mere fulfilment of accounting requirements towards third parties and the improvement of communication with stakeholders respectively; i.e. within corporations and organisations the development and implementation of a system for sustainability reporting supports, amongst other issues, the formulation of as well as the agreement upon corporate goals and visions; development and application of appropriate indicators and benchmarks; installation of a wider controlling, information-, risk and quality-management frame-work; i.e. an

improvement of internal flows of information understanding of and insights into the relationships between financial factors and socio-cultural

and environmental aspects. To address this, sustainability reporting guidance has emerged that is also sector specific in nature. A global voluntary framework for sustainability reporting has been developed by the Global Reporting Initiative (GRI) that can be used by all organizations regardless of size, sector or location to disclose sustainability performance information. GRI is an international, multi-stakeholder NGO that develops guidelines for reporting on economic, environmental and social performance GRI’s sustainability reporting framework is developed through a unique multi-stakeholder consensus based process involving geographical diverse representatives from reporting organizations and report information users drawn from NGOs, the labour movement and investors. First published in 2000 and then revised in 2002, GRI’s sustainability reporting framework is now in its third iteration the GRI G3 Guidelines, which were released in October 2006 [1]. While there are some core sustainability impacts relevant to all industries, there are also some sector specific impacts. Sector specific reporting guidance is also available for some industries in the form of Sector Supplements. GRI’s Sector Supplements are developed using the international, multi-stakeholder, consensus based approach, also used to create the core framework for reporting. The sector specific reporting guidance is integrated into the GRI G3 Guidelines, complementing the existing reporting guidance. Through sustainability reporting organizations aim to communicate information on the organizations’ economic, environmental and social performance, and its contributions towards sustainable development. In a sustainability report, reporting organizations commonly refer to the wide variety of other instruments, methods and tools that help them manage and measure their performance on specific sustainability issues, such as carbon emissions, or water usage. Within the construction and real estate sector examples for these other instruments, methods and tools are: Product and object related instruments such as the description and assessment of building

products (e.g. environmental product declarations (EPD); Blue Angel) or the development and application of systems for describing, assessing and communicating the sustainability performance of buildings based on life cycle analyses (e.g. green labels, sustainability building assessment schemes).

Planning- and construction process related instruments such as design for the environment,

construction site audits, or eco management and audit schemes (EMAS). Process related instrument such as green procurement, the assessment of the economically

most advantageous tender (EMAT), or the preparation and justification of investment decisions based on responsible property investment premises.

Contract related instrument for the arrangement of lease contracts (e.g. green leases) or for the

organisation of operator models (e.g. BOT – built, operate and transfer). The type and manner, extent and results of an application of these instruments, methods and tools can be described within an organisations’ or corporations’ sustainability report. 2. Key objectives & requirements for useful sustainability reports Sustainability reports do not only have to express a commitment of the reporting entity and contain performance information of which the reporting entity assumes importance, materiality and comparability also have to be ensured. This is not a new concern. For example, without focussing on a specific industry sector, Zadek and Merme [2] argued in 2003 that “companies too often disclose information that is not used, incurring unnecessary costs without satisfying intended audiences” and that useful sustainability reporting is “not about dumping ever-increasing volumes of data into the laps, and laptops, of unprepared investors and other stakeholders. […] [Instead] effective public reporting must, in short, communicate what is important to targeted information users in ways that enable them to make coherent decisions and take planned and timely actions relevant to their interests whether as customer, employee, neighbour or citizen.” Similarly, in 2004 a general ethical, social and environmental reporting-performance portrayal gap has been identified by Adams [3] and by Hummels and Timmer [4]. They argued that current ethical and social reporting practice does not provide investors and other stakeholders with appropriate information to assess the material consequences of company activities and behaviour in socially or politically sensitive areas. And Rogers [5] commented in 2005 that “until reports that compare sustainability performance are freely available, as ubiquitous as financial reports, we will remain lost in the quagmire of intriguing anecdotes, unable to determine who performs better […]. In a world with comparable reports, sustainability reporting can fulfil its true potential: providing concise, transparent information that clearly reflects the reality of environmental and social issues, allows for benchmarking, highlights long-term risk and opportunities, and contributes to improved levels of public and investor confidence. […] Otherwise sustainability reporting will remain an exercise in creative writing […].” Investigating if and to what extent the situation has now improved in industry sectors other than construction and real estate is beyond the scope of the present paper. It is, however, clear that the concerns about the usefulness of sustainability reports raised above still apply to the construction and real estate industry. Why this is the case for sustainability reports from the real estate sector is discussed in Chapter 3 below. For reports from the construction sector, Isaksson and Steimle [6] investigated in 2009 to what extent the GRI-compliant sustainability reports of five major cement manufacturers really address the sustainability performance of the reporting companies. The findings of this study reveal that “the current GRI guidelines are not sufficient to make sustainability reporting for the cement industry relevant and clear. In other words, the guidelines are not sufficient for assuring that a report answers the questions of how sustainable a company is and how quickly it is approaching sustainability.” The reasons for a current lack of materiality and comparability of sustainability reports from the construction and real estate sector are manifold; key issues arguably are the diversity and complexity of the construction and real estate sector in general as well as the particularities of the building “production”, operating and management processes in particular. It could even be argued that construction, building use and real estate are three very different worlds – they just happen to come together in the physical artifact of a building, which in turn responds to and influences the surrounding built environment [7]. In any case, the involvement of a wide variety of different actors such as planning, design and

engineering offices; construction product and materials manufacturers; construction and handicraft companies; asset and facility managers, etc. creates difficulties regarding the systematic compilation, storage, updating and sharing of property specific information relevant for assessing construction and real estate companies’ sustainability performance. In addition, the building “production” process usually takes place on site and involves a variety of different (often smaller) firms and sub-contractors (which usually do not have dedicated sustainability departments). And this makes it difficult to control and assess material flows. A further important issue lays in the circumstance that sector-specific sustainability reporting formats and guidelines are only partially available for the construction and real estate sector or are just in the process of development. Even though these difficulties make slow progresses in improving reporting quality in this sector understandable, the construction and real estate industry has a major role to play in efforts undertaken to reach society’s sustainability goals (see also [8]). For this reasons, sustainability reports from this sector are critical. Accepting marketing-driven exercises in creative writing as good corporate practice bears the real danger that stakeholders and the public are obscured and that sustainability reporting becomes an – admittedly sophisticated – form of greenwashing the industry. Instead, sustainability reports should (1) enable and trigger internal processes for improving a company’s sustainability performance, (2) provide a basis for internal as well as external benchmarking within the construction and real estate sector, and (3) provide a meaningful informational basis for both, sustainability ratings undertaken by third parties (see Chapter 4 below) as well as for informed decision-making among investors, stakeholders and the wider public. This requires, that construction and real estate companies in general as well as sustainability reporting standard setters in particular, identify “information [for reporting purposes] that, if omitted or misstated, would significantly misrepresent the organisation to its stakeholders, and thereby influence their conclusions, decisions and actions.” [2] Further key requirements for useful sustainability reports from the construction and real estate sector are: Adjustment of reporting standards and guidelines to the construction and real estate actors’

various areas of responsibility and impact (as it was said above, this sector is so diverse that its different groups of actors can have various forms of environmental and social impact, which in return requires tailor-made reporting standards for measuring sustainability performance; see also Table 1 below);

Reporting / expression of quantitative property-related performance issues (such as energy

usage, etc.) in (1) absolute values, (2) as a trend, (3) in comparison to selected benchmarks (whenever possible – a good information source in this regard is the International Sustainability Alliance which has published preliminary performance benchmarks for this sector; see [9]); and, most importantly, (4) by using appropriate reference values (such as m², m³, number of occupants/employees, number of visitors, etc.). Regarding the latter issues of appropriate reference values it is important that performance is not only expressed in relation to one reference value only, but that – whenever possible and meaningful – performance is expressed in relation to several reference values. This would significantly improve comparability of sustainability reports.

3. Status-quo and Trends in Sustainability Reporting 3.1 Analysis of Sustainability Reports – Basics and Methodology In comparison to other branches, the compilation and publication of sustainability reports within the construction and particularly within the real estate industry has started relatively late. Reasons for this circumstance have arguably been a lack of respective guidance, methodological basics and standards for sector-specific sustainability reporting as well as a general lack of demand for such information. As a consequence, only few companies from the construction and real estate sector have published sustainability reports in the past. However, this situation is now beginning to change: On the one hand, the (draft) Construction and Real Estate Sector Supplement of the Global Reporting Initiative [10] provides an initial basis for sector-specific sustainability reporting. On the other hand, the demand among investors, other stakeholders as well as service providers (such as rating agencies) for sustainability reports from construction and real estate companies is constantly increasing. In order to obtain a more detailed insight into the status-quo of sustainability reporting in the real estate sector, several sustainability reports for 2009/2010 that comply with the GRI Guidelines have been analysed within the scope of research & development project on sustainability reporting and management software undertaken by SAP Software AG (Germany) and SUPEC GmbH (Germany) in close cooperation with the authors of this paper. Companies for this analysis have been selected on the basis the GRI Reports List [11] which lists companies (for each industry sector) that publish sustainability reports according to the GRI Guidelines. Additional selection criteria have been that the sustainability reports are published in English language, that sustainability reports are freely accessible through the companies’ websites and that there is a reporting history of at least two consecutive years. By August 2010 this has led to a selection of a total of eleven large real estate companies from the following countries: Australia, Finland, Portugal, Sweden, United Arab Emirates, United Kingdom and the United States of America. (By April 2011 the number of companies that would have met these criteria has almost doubled. It has also to be noted that by August 2010 there were further companies from the real estate sector that also publish comprehensive sustainability reports. However, as these reports have not (as of August 2010) been prepared to comply with the GRI Guidelines, they could not be compared and analysed on the basis of the GRI structure of reports.) The sustainability reports of the aforementioned eleven companies have been analysed in terms of the scope and quality of coverage of single GRI sustainability reporting indicators. The overall topics and indicators of the GRI sustainability reporting structure are displayed in Fig. 1. The full list of indicators including their description and definition is contained within the GRI G3 Guidelines [1]. On that basis, sustainability reports can be evaluated in terms of their degree of coverage of relevant indicators. In order to evaluate the sustainability reports’ “degree of coverage” of GRI’s reporting requirements, a simple rating methodology has been applied by which the degree of coverage of each single GRI indicator is evaluated through a scale ranging from 0 to 5 (0 = no information on this indicator is contained within the sustainability report; 5 = report covers all sub-components and parameters of this indicator as defined in the Technical Protocols of the GRI G3 Guidelines). The methodology can also be used for evaluating sustainability reports from other branches and also allows weighting each GRI indicator according to its relative importance; this could be necessary for the comparison / evaluation of sustainability reports for special occasions/questions (e.g. in order to address questions of materiality for a particular sector or branch). However, for the purpose of the present paper and in order to achieve an unbiased picture of reporting practices in the real estate sector, the relative importance of each indicator has been assigned an identical value. The overall, weighted rating result is then displayed through a scale ranging from 0 to 10 and can be described as a measure of the degree of coverage and materiality of a given sustainability report. This methodology is depicted in Fig. 2 as an example for GRI’s group of economic indicators.

Economic Performance

Market Presence

Indirect Economic Impacts

Economic

Material

Energy

Water

Biodiversity

Emissions, effluents and waste

Suppliers

Product and Services

Compliance

Transport

Overall

Environmental

Community

Corruption

Public Policy

Anti-Competitive Behavior

Compliance

Social

Performance:

Society

Employment

Labor/ Management Relations

Occupational Health and Safety

Training and Education

Diversity and Equal Opportunity

Social

Performance:

Labor Practices &

Decent Work

Customer Health and Safety

Products and Service Labelling

Marketing Communi-cations

Customer Privacy

Compliance

Social

Performance:

Product

Responsibility

Investment and Procurement Practices

Non-Discrimination

Freedom of Association and Collective Bargaining

Child Labor

Forced and Compulsory Labor

Security Practices

Social

Performance:

Human Rights

Fig. 1 GRI Sustainability Reporting Structure [12]

Scale

Performance Indicator 0 1 2 3 4 5Importance

(I)Coverage

(C )Total = I * C

EC1Direct economic value

Does not report

Report upto 2 of 6 parameters

Report 3 of 6 parameters

Report 4 of 6 parameters

Report 5 of 6 parameters

Report all 6 parameters 5 5 25

EC2 Climate changeDoes not report

Partially reports 1 component

Reports 1 component

Partially reports 2 components

Reports 2 components

Reports 3 components 5 4 20

EC3 Benefits planDoes not report

Reports 1-2 of the 8 components

Reports 3-4 of the 8 components

Reports 5-6 of the 8 components

Reports 6-7 of the 8 components

Reports 8 of the 8 components 5 5 25

…

EC9Implications water usage

Does not report

Reports 1-2 parameters from 9 listed in 2.2

Reports 3-4 parameters from 9 listed in 2.2

Reports 5-6 parameters from 9 listed in 2.2

Reports 7-8 parameters from 9 listed in 2.2

Reports all 9 parameters listed in 2.2 5 4 20

Total 45 175

Degree of coverage of the Economic Indicators [∑ (I * C) / ∑ (I) ] * 10/5 = 8

Performance Indicator Reporting Criteria

EC 1 - Direct economic value generated and distributed

2.2. Report EVG&Da) Revenuesb) Operating costsc) Employee wages and benefitsd) Payments to providers of fundse) Payments to governmentf) Community investments

Component

Parameter0

2

4

6

8

10Economic

Environment

Product Responsibility

Labor Practices & Decent Work

Human Rights

Society

Fig. 2 Evaluation of the degree of coverage and materiality – example [12]

3.2 Results Sample results of this analysis of sustainability reports from the real estate sector are displayed in following figures: Fig. 3 shows the overall evaluation results regarding the degree of coverage of six anonymised sustainability reports. These results provide a more global view on the structure of the analysed sustainability reports and show that the degree of coverage is rather heterogeneous and varies significantly between different reports. While some sustainability reports cover almost the entire spectrum of the reporting requirements formulated in the GRI Guidelines, some reports cover partial aspects only. Fig. 4 shows a detailed analysis of the (un-weighted) degree of coverage regarding the group of GRI’s environmental indicators for all eleven sustainability reports. The diagram reads as follows: the coloured areas indicate the degree of coverage for each environmental indicator while the numbers within the diagram indicate how many companies have reported on a particular indicator at a given degree of coverage (e.g. the first column concerns the indicator “EN1 materials used” and shows that nine out of eleven companies do not report on this indicator while two companies report on this indicator at a degree of coverage of 4). It becomes clear from this analysis that while certain environmental issues are treated in great detail others are considered cursorily only. The reasons for the latter issue might be manifold: (1) GRI’s reporting requirements concerning these indicators might be too inexact / ambiguous for an application within the real estate industry (e.g. “EN 9 implications on water usage”); (2) these indicators could be considered unimportant by the reporting companies (e.g. “EN 27 Packaging”), or (3) reporting on these indicators might appear too complicated and is therefore avoided (e.g. “EN 19 Ozone depleting substances”). Fig. 5 provides a detailed analysis regarding the degree of coverage as well as types of indicators used within one single, anonymised sustainability report. It shows that there is both, diverse coverage and also diverse usage of qualitative, quantitative and mixed indicators. Fig. 6 shows two examples for differences in the performance metrics used to report on selected indicators (“EN 16 total greenhouse gas (GHG) emissions”, “EN 18 GHG reduction”) across nine sustainability reports (note that not all eleven companies reported on these two indicators) .

4

0

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6

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4

6

8

10Economic

Environment

Product Responsibility

Labor Practices & Decent Work

Human Rights

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10Economic

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Product Responsibility

Labor Practices & Decent Work

Human Rights

Society

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10Economic

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Product Responsibility

Labor Practices & Decent Work

Human Rights

Society

Report 2

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10Economic

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Product Responsibility

Labor Practices & Decent Work

Human Rights

Society

Report 4

2

1

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1

00

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10Economic

Environment

Product Responsibility

Labor Practices & Decent Work

Human Rights

Society

Report 5 Report 6

0

2

4

6

8

10Economic

Environment

Product Responsibility

Labor Practices & Decent Work

Human Rights

Society

Report 3

Report 1

Fig. 3 Overall evaluation results of six anonymised sustainability reports [12]

Fig. 4 Degree of coverage regarding the group of GRI’s environmental indicators for all eleven

sustainability reports [12]

012345

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PR2

PR3

PR4

PR5PR6

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Quantitative IndicatorsQualitative IndicatorsMixed Indicators

Environment Labor Practices and Decent WorkEconomic

Human Rights Society Product Responsibility

Fig. 5 Degree of coverage and types of indicators used within one single, anonymised

sustainability report [12]

Fig. 6 Differences in the performance metrics for selected indicators [12] In summary, the analysis of eleven, GRI compliant sustainability reports from the real estate sector leads to the following conclusions: The analysed sustainability reports differ significantly in terms of coverage and quality.

The usage of quantitative, qualitative and mixed-indicators is not homogenous. This hampers

comparability of sustainability reports and company performance respectively. If quantitative information is provided in order to report on performance indicators, then large

differences exist in terms of measurement units and reference/relative units. In several cases, meaningful reference/relative units are not displayed. If performance is expressed in relation to reference/relative units, then usually only one single reference/relative unit is used. This also negatively impacts on comparability since specific reporting requirements / standards in this regard have not yet been formulated.

If information on performance developments over time is provided, then the reported time series are not comparable (even within single sustainability reports).

Regarding the materiality of the analysed reports, from the authors’ point of view, reported

indicators do not always embrace / do justice to the specific roles and potential impact on society and the environment of the reporting companies. For this reasons, it should be discussed if and to what extent reporting requirements should / could be tailored to the particularities of different sub-sectors of the real estate and construction industry; e.g. planning and design offices, construction companies, housing companies, real estate funds and other investment vehicles, etc.

Within the present analysis, the focus has been placed on the degree of coverage of GRI’s reporting requirements. However, an evaluation / comparative analysis of sustainability reports concerning the achieved performance in contributing to the implementation of sustainable development principles is hindered by the differences in the overall structure of sustainability reports, by missing or heterogeneous performance metrics and reference/relative units as well as by the general lack of appropriate benchmarks against which company performance could be measured.

3.3 Recommendations for actor-specific indicators The sustainability reports analysed in the previous section have been produced at a time when the (draft) Construction and Real Estate Sector Supplement of the Global Reporting Initiative was not available. So these reports have been produced on the basis of the general GRI G3 Guidelines

without specific guidance on sector specific reporting requirements. For this reason, it does not come as a surprise that there are large differences across the sustainability reports from this sector as indicated above. However, even within the (draft) Construction and Real Estate Sector Supplement of the Global Reporting Initiative the particularities of different sub-sectors of the real estate and construction industry are, from the authors’ point of view, not (yet) adequately addressed. The authors concern is that the real estate and construction sector is just too diverse and multifaceted and that a “one-size-fits-all” sector supplement covering all sub-sectors of the real estate and construction industry would impair the preparation of comparable and meaningful sustainability reports within this sector. At the moment it can also be observed that – independently from the Global Reporting Initiative – certain groups of actors from within the construction and real estate industry are working on own formats and standards for sustainability reporting and related CSR issues The results of the European Housing Network (EURHONET) on the issue of CSR reporting serve as a first example for the housing industry [13]. From the authors’ point of view, this indicates a need / demand for reporting formats tailored specifically to the situation and particularities of single groups of actors from within the real estate and construction industry. For these reasons it is suggested that any effort regarding the standardisation / formulation of sustainability or CSR reporting requirements for the construction and real estate sector sub-divides this sector into the following groups of actors and adjusts some of the required reporting indicators to the situation and particularities of these groups of actors: a) Planning, design and engineering offices b) Companies from the construction product and materials industry c) Construction companies and handicraft enterprises d1) Housing companies d2) Real estate companies e) Property Funds, Real Estate Investment Trusts (REITS) and other investment vehicles In addition and due to the significance of buildings and construction works within the sustainable development discourse, it is necessary to include and make reference to the buildings owned or used by corporations and organisations from all other sectors or industry branches (CREM – corporate real estate management). In this case it is, however, assumed that buildings are then treated as a part of the sustainability reporting requirements of the respective sector or industry branch. In order to be able to reflect and portray the various possibilities and actions of single groups of actors to contribute to sustainable development along the supply and value chain within the construction and real estate sector, it is necessary to specify more specific themes and performance measures for the sustainability reporting of the groups of actors listed above. The following Table 1 illustrates the basic idea and procedure of developing actor specific indicators within a particular sector or branch. It has to be noted that the Table serves as an example and contribution to an ongoing discussion only.

Tab. 1 Selected themes for sustainability reporting (Examples and Proposals) Planning,

design, engin.

Construction product and materials

Construction and building craft companies

Housing Real estate Property Funds, REITS, etc.

Econ.

Contractual penalties for planning / design errors / mistakes

Employment creation and preservation

Employment creation and preservation

Buildings at risky locations (e.g. risks due to flooding, extr. weather, large-scale catastro-phes in adjunct industries, etc.)

Buildings at risky locations (e.g. risks due to flooding, extr. weather, large-scale catastro-phes in adjunct industries, etc.)

Buildings at risky locations (e.g. risks due to flooding, extr. weather, large-scale catastro-phes in adjunct industries, etc.)

Error / Scrap rate

Scope of warranty payments

Running costs / rent ratio

Extent of abatements/ reductions of rents

Market Value shifts

Occupancy / vacancy rate

Occupancy / vacancy rate

Occupancy / vacancy rate

Env. Environ-mental impact through office operations

Environmental protection at location

Environmental protection on sites

Environmental impact through building use

Environmental impact through building use

Environmental impact through building use

Recycling and redemption

Waste avoidance and separation

Part of the stock supplied by renewal sources of energy

Resource use through building operation

Resource use through building operation

Preparation of EPDs

Environ. friendliness of materials

Availability of EPCs, green labels, etc.

Availability of EPCs, green labels, etc.

Availability of EPCs, green labels, etc.

Social

Education & training of employees regarding sustainable design

Workplace safety and health

Workplace safety and health

Part of dwellings accessible to the disabled and elderly in the existing housing stock

User / tenant satisfaction & participation

User satisfaction; based on post-occupancy evaluations

Suggestions for improve-ments / patents

Suggestions for improvements / patents

Tenant education and influence

Tenant education and influence

Information policy regarding investment risks

Tenant participation

Extent and manner of regular inspection and maintenance works

4. Sustainability Rating Over a longer period of time the issues surrounding the sustainability debate within the construction and real estate industry have been focused on the description and sustainability assessment of building products and materials (e.g. in the form of environmental product declarations, EPDs) as well as of single buildings (e.g. in the form of labels and certificates). A sustainability rating of real estate and construction companies complements this in a meaningful way. Private and institutional investors which are interested in responsible investing opportunities can take such sustainability rating results of companies as an additional basis for informed investment decision making. Such rating results are usually provided by external service providers (rating agencies) and are often also transferred into a sustainable investment index. One example in this regard is the Dow Jones Sustainability Index, DJSI (see: http://www.sustainability-index.com). In order to determine which companies are included in the index, companies are divided into 57 branches. The best 10% of each branch – measured in terms of the companies’ sustainability performance – are included in the DJSI. This methodology is commonly referred to as the “best-in-class” approach. Examples for companies that are included in the DJSI are: Lafarge (France) – construction product industry; HOCHTIEF AG (Germany), Land Lease Group (Australia), GS Engineering & Construction Corp. (South Korea) – construction industry; Dexus Property Group (Australia), British Land (UK) – real estate industry. Precondition and informational basis for the evaluation of the companies’ sustainability performance is an environmental, CSR, or sustainability report. This explains why at the moment and particularly in the future a comprehensive and high quality sustainability report is important – others (e.g. index providers) rely on it, it can influence investor behavior and, as a consequence, can impact on the economic success of companies. 5. Conclusion and Outlook Sustainability reporting of construction and real estate companies closes a key gap within the transformation towards more sustainable construction and real estate markets. Besides construction products and materials as well as single buildings, the sustainability performance of companies can (at least to a certain extent) now also be described, assessed and taken as an informational basis for decision making of investors, stakeholders and the wider public. However, the quality (i.e. materiality) and comparability of sustainability reports from the construction and real estate sector is in need of improvement. At the moment, current reporting practices and respective reporting guidelines in this sector only partially allow assessing and understanding both companies’ actual performance in contributing to the implementation of sustainable development principles as well as the material consequences of company activities and behaviour in socially, environmentally or politically sensitive areas. Two important starting points for such an improvement of reporting practices in this sector are: (1) A shift from general and sector-specific reporting guidelines and formats to actor- / sub-sector-specific guidelines and formats containing tailored indicators and sub-indicators; a “one-size-fits-all” reporting format for the diverse and multifaceted construction and real estate sector is not good enough as it does not do justice to the various groups of actors’ particularities and areas of impact and responsibility. And (2), the implementation, specification and usage of standardised performance measurement units and reference/relative values for key sustainability performance indicators. Both aforementioned issues would greatly improve the usefulness and comparability of sustainability reports from this sector and would allow a consistent usage of such reports for internal and external benchmarking purposes.

Acknowledgement The analysis of sustainability reports presented in this paper has been carried out within the scope of research & development project on real estate specific sustainability reporting and management software undertaken by SAP AG (Germany) and SUPEC GmbH (Germany) in close cooperation with the authors of this paper. The authors thank the consortium members for their support and contribution in the preparation of this paper. References [1] GRI, 2006, “GRI G3 Guidelines”, [online], Published by: Global Reporting Initiative [online],

Available at: http://www.globalreporting.org/ReportingFramework/G3Guidelines. [2] ZADEK, S. and MERME, M., 2003, “Redefining Materiality - Practice and public policy for

effective corporate reporting” [online], Published by: AccountAbility, Available at: http://www.accountability.org/images/content/0/8/085/Redefining%20Materiality%20-%20Full%20Report.pdf.

[3] ADAMS, C.A., 2004, “The ethical, social and environmental reporting-performance portrayal

gap”, Accounting, Auditing & Accountability Journal, Vol. 17, No. 5, 2004, pp. 731-757. [4] HUMMELS, H. and TIMMER, D., 2004, “Investors in Need of Social, Ethical, and Environ-

mental Information”, Journal of Business Ethics, Vol. 52, 2004, pp. 73–84. [5] ROGERS, J., 2005, “We have financial fundamentals, so why not sustainability fundamen-

tals?”, Ethical Corporation Magazine, No. 2, February 2005, pp. 38-39. [6] ISAKSSON, R. and STEIMLE, U., 2009, “What does GRI-reporting tell us about corporate

sustainability?”, The TQM Journal, Vol. 21, No. 2, pp. 168-181. [7] Anonymous Building Research & Information referee, 2011. [8] LORENZ, D., D’AMATO, M., DES ROSIERS, F., VAN GENNE, F., HARTENBERGER, U.,

HILL, S., JONES, K., KAUKO, T., KIMMET, P., LORCH, R., LÜTZKENDORF, T. and PERCY, J., 2008, “Sustainable Property Investment & Management – Key Issues and Major Challenges”, Published by: The Royal Institution of Chartered Surveyors, London.

[9] ISA, 2010, “Preliminary Benchmarking Results” [online], Published by: International

Sustainability Alliance, Available at: http://www.internationalsustainabilityalliance.org/filelibrary/ISA_Benchmarking_Results_October_2010.pdf.

[10] GRI, 2010, “GRI Construction and Real Estate Sector Supplement – Draft” [online],

Published by: Global Reporting Initiative, Available at: http://www.globalreporting.org/ReportingFramework/SectorSupplements/ConstructionandRealEstate.

[11] GRI, 2011, “GRI Reports List” [online], Published by: Global Reporting Initiative, Available at: http://www.globalreporting.org/ReportServices/GRIReportsList.

[12] SAP AG / SUPEC GMBH, 2010, “Status-quo of sustainability reporting in real estate

companies”, Unpublished. [13] EURHONET, 2010, “The EURHO-GR - The reference system for the CSR reporting of the

housing companies in Europe” [online], Published by: the European Housing Network, Available at: http://www.eurhonet.eu/#/projects.

Climate Change: What’s in it for A Bank?

Roles of Financial Institutions in Mitigation Effort

SB11 Helsinki Conference

Hanna Yolanda Tobing PhD Candidate on Sustainable Development, Faculty of the Built Environment University of New South Wales, Australia h.tobing@unsw.edu.au

Dr. John Merson, the Institute of Environmental Studies, University of New South Wales, Australia, j.merson@unsw.edu.au Dr. Deo K. Prasad, Faculty of the Built Environment- University of New South Wales, Australia, d.prasad@unsw.edu.au

Abstract The aim of this paper is to examine the roles of commercial banks in climate change risk mitigation. Global warming is the most hazardous problem facing people and living creatures. Tackling this crisis requires a multi-stakeholder involvement, including the business sector. The roles of private financing are pivotal for mainstreaming sustainable business practice into core business operation and accelerating solutions to climate change. This movement is growing rapidly and starts becoming „best practice' among banks worldwide. Banks also act as the entry points to their clients, customers and supply chains. In this study, a bank in Europe and Australia is compared to illustrate how their focus on sustainability values influenced their core business and daily operation. The result is an exploration of the roles of banks in supporting climate change solutions and achieving a sustainable future. Keywords: corporate sustainability, climate change, risks, opportunities, a low-carbon economy.

1. Introduction This paper focuses on the risks and opportunities that climate change brings for the financial sector. The role of government funding to counter climate change has been commonly accepted, but it is becoming acknowledged that the funding from the private-sector would be able to add more value to public finance [1]. According to the estimation by the United Nations Environment Programme Finance Initiative (UNEP FI), the cost of inaction on mitigate climate change problem would be 14% of annual global GDP for the next 200 years. On the contrary, if we take action, the cost would be 1%. Meaningful mitigation effort in developing countries will need $100 billion annually [2], but the pledge by developed countries is only $30 billion per annum for the period up to 2012. This enormous gap makes private-sector investment in a low-carbon economy essential. First, the paper explores how sustainability should inspire corporate values and transform their strategy in finding solutions to climate problems. Second, the paper identifies related risks and opportunities in climate change mitigation, explore roles of banks and determines barriers of implementation. At least twelve global banks have shown their concern in supporting a low-carbon economy. However, this paper chose a European and an Australian bank to illustrate this. Both of them were among the pioneers in adopting sustainability in the banking business.

2. Sustainability in Business and Corporate Responsibility

Corporations (including banks) are categorized as the fundamental cells of a modern economy. They transform the environment and society. The critical issue is whether existing business entities have to be modified to preserve the planet, and to promote a just society by implementing

corporate sustainability [3]. The modification of business approach, which generates long-term shareholder value, through creating opportunities and managing risks derived from economic, environmental and social developments is a suggested definition of corporate sustainability [4]. Firstly, according to a recent large CEO survey on sustainability, the motivating factor of corporations to incorporate sustainability across their core business is brand, trust and market reputation. They realized that trust in the banking sector was badly damaged by the financial crisis. They need to regain this trust by demonstrating a culture which promotes a responsible business conduct [5]. Secondly, corporate sustainability is required for global survival. The UN Secretary General has repeatedly warned international business leaders not to keep locked in short-term thinking of political election cycles and business profit-taking; captive to the old idea of choosing economic growth or conservation [6]. Revolutionary thinking and action to secure a balanced development to alleviate poverty and protect ecosystem is required. Existing business concepts were proven failed to fight for this global purpose [7]. Therefore, a business paradigm derives from a strong sustainability principle is crucial [8].

Thirdly, investors increasingly recognize that long-term shareholder value creation is a result of implementation of the environment, social and governance (ESG) principles. Companies which adopt strategy and management to harness the market's potential for sustainability products and services are reducing their own sustainability costs and risks [4]. Fourthly, corporate sustainability is also an ethical choice. Economic activity driven by the exponential growth of human population has reached a scale that is large enough to threaten the welfare prospects of future generations. The Global Ethic organization argued that if corporations choose to integrate sustainability principles into their business decision and operation, it will show their responsibility [9].

Corporate Responsibility

Corporate responsibility means a willingness to include social and environmental considerations in its business strategy. It is often used as an umbrella term for all voluntary engagements by firms. However, neo-liberal economics argued [3] that the role of a corporation was only to maximize short-term returns to its shareholders. Opposing views argued that those shifts brought destructive consequences for other key stakeholders including employee, local community and the environment. These harmful impacts resulted from a relentless drive to achieving short-term profit at the expense of longer-term sustainability [10]. Kennedy suggested that reforms are needed to create sustainable wealth for all stakeholder groups [11]. Sethi [12] observed three modes of corporate responsibility. First, the Social Obligation mode, focuses on complying with regulations. Second, the Social Responsibility mode, represents an incremental step toward better practices in cooperation with external parties. This seemed similar to using „band-aids‟ to support an unsustainable business model and often involves „green-wash‟ marketing. Third, the Social Responsiveness mode, reflects a re-examination of corporation‟s role in society. Hart stated that whether “we like it or not, the responsibility for ensuring a sustainable world falls largely on the shoulders of the world‟s enterprises, the economic engines of the future” [13]. To act responsibly nowadays means being prepared to become part of the solutions to global warming and its consequences.

3. Climate Change, What’s In It For A Bank?

The on-going scientific debates on whether or not human activities are causing climate change have created problems in public perception and create barriers for adaptation, mitigation and political action from stakeholder. Referring to the Climate Change Task Force of the UNEP Finance Initiatives, this paper takes the position that there is sufficient knowledge of climate science and increased frequencies of extreme climate events [2]. Adaptation effort aims to reduce the recent effects of climate change and increase resilience to future impacts [14]. Those efforts reasonably should be financed by government in state or local level in order to increase resilience

of their citizens. However, this paper will focus on mitigation efforts, which avoid greenhouse gas emissions in the areas of renewable energy, energy efficiency and broad-spectrum of lending and investment. Progressive private financing gradually have more appetite to invest and become part of bringing solution to mitigate risk of the changing climate.

3.1. How Banks Will Suffer Because of Climate Change Risks

Financial institutions will experience multi faceted impacts from increasing global temperature. It will not only affect banks‟ own operation but also their business partners/customers. First column of Table 1 on risks brought by climate change were revealed and summarized from the UNEP FI online course [2], and then an analysis long term impact and related business opportunities are further developed. Essentially, banks need to understand climate-related risks then re-examine their operations and begin to change such as to integrate the Environment Social Governance component including climate change into their existing risk assessment. Accordingly, they will be able to support their clients, not only to overcome the risks, but more importantly to transform those to develop new challenges. Table 1: “Summary Climate Change Risks and Related Opportunities”

Risks brought by Climate Change Related parties/ Object of impacts

Long term impact

Embrace opportunities

The increasing temperatures changes in season & weather decline in crops production arrears in loan repayment agriculture will be perceived as a medium/ high risk investment additional risk premium in the pricing structure higher price of food

agriculture sector / agribusiness clients

Food insecurity

Contribute in Sustainable Agribusiness

More frequent instant, intense vast floods land sliding & heavy materials excessive property & infrastructure damage in developing nations this damage has not covered by any extreme weather event‟s insurance property & infrastructure developers suffer great loss. Besides, new (unidentified) flood zone affects insurance industry in developed nations.

Property contractor, infrastructure developer. Bank‟ operations& availability to serve during disaster period

3 major industries 1. Water & primary industries; 2.Tourism & infrastructure3.Insurance industry

Sustainable forestry; Hydropower; Water& waste management, Sustainable tourism, Infrastructure for adaptation

Sea level rise vulnerable coastal megacities rapid increase of the displaced population in developing countries from 1 million nowadays to + 100 million in 2060 [2]. For banks, a decrease in volume & value of collateral assets located in the coastal region.

- climate refugee

- decrease quality & quantity of the loan‟s collateral

Unemploy-ment & social problems. Unmatched value of the collateral.

Microfinance; CSR activity of mangrove planting in coastal zones

Warming global temperature more severe droughts water scarcity unstable water supply affects various business sectors. More intense rainfall, flooding and landslides. Drought species migration species extinctions ecosystem changes biological diversity decrease decline in bio-prospecting of flora & fauna for research & development of consumer products & innovation of medicines.

- entertainment & tourism industry;

- energy electricity of hydropower;

- aquaculture business;

- manufacturers& pharmaceutical companies

Biodiversity, life cycle, food chain. Uncured diseases/ illness

Efficiency & Cleaner Technology industry; Food industry; Biodiversity preservation; Consumer products manufacturing

Regulatory risks of implementation of the United Nations Framework for Climate Change Convention results affect business deals & contracts in countries.

- National bank who is not updated on the international negotiation results

Not involve in new opportunities of the Low-carbon Economy

Play a role in carbon emission trading, renewable energy

Controversy & reputational risks from not incorporating the Environment Social Governance & climate change risks into loan assessment & investment appraisal process systematically.

- Nonperforming loans rate of bank asset portfolio / exposure

Trust, corporate image, brand.

Set a best practice as a sustaining corporation

3.2. Opportunities and Incentives for Banks to Invest in Sustainability

The environment used to be considered as a risk factor in a bank‟s portfolio assessment. Internationally, there is a shift from addressing climate change as a risk factor to innovating new products/services demanded by clients toward a low-carbon economy. For example, financing cleaner technology, energy efficiency, renewable energy such as geothermal, solar thermal, wind farm, hydropower, new generation of bio fuels, bio mass installation, water and waste management, biogas, marine energy of wave, ocean thermal; sustainable agribusiness and biodiversity conservation [2]. Global banks should perceive sustainability and tackling climate change as a source of competitive advantage and opportunities by opening up new markets [15].

Among those opportunities are the involvement in delivering several financial incentives resulting from the UNFCCC meeting [14] such as the Global Climate Change Fund, the Adaptation Fund, the Emission Trading Scheme such as the Clean Development Mechanism (CDM), the Joint Implementation (JI), and Reducing Emission from Deforestation and Forest Degradation Plus

(REDD+) scheme [16]. In the World Climate Summit (the UNFCCC parallel conference of business executives), the corporate sector argued that building a low-carbon economy can be the engine of the global economy recovery by launching whole new industries [17]. Consequently, banks and their clients need to build up their capacity in ready-to-implement technology and to grasp the new business prospect [2].

Business prospects in innovative technologies can be understood through integrated “continuum” financing as shown in chart-1, which involves Venture Capital Company (VCC), Equity Finance and Asset or Project Finance. The following chart on „Global Trend in Sustainable Energy Finance‟ suggested the corresponding investment required [2] in each development stage of a technology innovation.

PROCESS

Government Venture Capital Company Private Equity Public Equity Markets Mergers and Acquisitions FUNDING Bank Debt Market Carbon Finance

Chart 1 “Global Trend in Sustainable Energy Finance”. – Source: http://www.sefi.unep.org

It starts with experiments in the lab which is naturally more risky. Government research funding usually finances this. Then, in the early stage, VCC and private equity financing will take part in their capital. This capital often comes from the third-party investors, because in this phase, it is too risky to raise money in capital markets or to obtain bank loans. To compensate this high-risk investment, VCC usually gets significant control over company decisions, brings managerial/technical expertise and owns a substantial portion of the

Technology Research

Technology Development

Manufacturing

Scale-Up

Roll Out (Asset

Finance)

company. In the same stage, private equity refers to investment which is not freely tradable on a public stock market. In the following phase, a more mature technology which ready to be scaled up in manufactures would be financed by public equity markets. During a learning period of a “light carbon” technology, banks should closely observe those processes before their leverage the technology in roll-out phase.

3.3. Roles of Commercial Banks in Climate Change Mitigation

Roles of commercial banks are critical, not only because they are holding and managing the flow of capital to various investments, including low-carbon financing, but also banks are the entry points to persuade their clients, borrowers and supply chains. In general, the role of a bank is: a) Ensuring a proper use of the depositors‟ funds by investors and borrowers, as a financial

intermediary; b) Sharing and managing risks of lending and investment; c) Playing a role in corporate governance and acting as outside monitors for their corporate

clients; d) Fostering and contributing to the general economy growth such as providing finance for

projects, industry manufacture, creating jobs, energy generation, housing construction et cetera [18].

In the context of finding solutions to mitigate climate change, some of the roles financial institutions can undertake are as follows:

a) Embedding sustainability into core business and operation strategies: The Board of Directors and CEO‟s commitments to mainstreaming sustainability into the business‟ policy, plans and strategies, are critical as demonstrated by the 100-most sustainable companies [19]. While they are reorganizing to become a sustaining corporation, they also gain the capacity to educate the circle of companies under their influences [3].

b) Developing environment/climate change policy including financing a low-carbon economy: As financial intermediaries, banks are expected to bring in the capital flow for sustainable energy and related industries to support a carbon-light economy. However, wider stakeholder group that is environment activists, local communities and investors demand a shift in a bank‟s portfolio from financing the carbon producer/other fossil fuel based energy sector [20] to the renewable energy. This requires a continuous improvement in their environment and climate policy.

c) Guiding and assisting corporation clients (lending and investment side): In their role of managing risks of lending and investment, banks need to recognize and mainstream climate change as a decision factor in their planning, strategy, business processes and procedures. This includes revising risk assessment, credit-ratings, financing structure, and portfolio management [2], particularly in carbon dependent sectors and alternative energy. „Carbon Principles‟ (in USA) is designed to become a road map for banks and power producers to reduce financial risks associated with GHG emission [21]. Whereas „Climate Principles‟ (in the Europe) guides signatory banks to manage climate risk across the whole range of services [22] including playing a role as a carbon credit brokerage for their clients in emission trading schemes.

d) Dealing with customers‟ emerging needs of products/services: Customers‟ demands are changing. On one hand, retail banks may identify some climate-friendly goods/services to respond to consumers‟ financing needs, for example, energy-efficient appliances, micro-power generation (home solar panels, domestic windmills). This equipment could have a quick pay-back period in higher electricity costs, particularly in developing countries [2]. On the other hand, a bank also supports the product manufactures whilst fostering and contributing to the general economy growth.

e) Becoming a carbon neutral entity and engaging supply chains: In pertaining to achieve good corporate governance for their wider stakeholder groups, business sector nowadays should „walk the walk‟. Several global banks implement sustainable office practices and explicitly aim to become a carbon neutral entity. They apply a sustainable purchasing guideline in their procurement policy and engage their supply chain. They see a return on investment from embedding sustainable practices in their operations. More than 50% of large businesses and 25% of their suppliers saw cost savings as a result of carbon management activities [23].

f) Contributing to the stakeholder‟s network through national and international cooperation: The private financing sector has been identified as one of stakeholder in the climate solution framework. The business environment needs a radical change to re-focus on climate change awareness, to review the business process, to build the relevant skills, to create an information network and contingency/alternative market plans [3]. In a national institutional framework, a bank should be a member of the National Climate Change Council and contribute to the National Agreement on Plan of Actions (NAPAS). They can have a significant role in supporting the public-private partnership. Moreover, in regional and international cooperation, banks are recommended to collaborate and act proactively as well as become signatory/adopter of several enablers of sustainable business institutions, namely the UNEP Finance Initiatives, the Equator Principles, the UN Global Compact [24] and reporters of the Carbon Disclosure Project (the largest database of all relevant climate data of corporations world-wide) [25]. Nevertheless, in implementing these roles, banks might encounter several challenges as shown in the chosen case study and the following sub chapter.

3.4. Barriers and Dilemma Are Encountered by Banks:

In acting out those above mentioned roles, banks may face barriers and dilemma, as follows:

a) An unequal awareness of and commitment to sustainability:

Sustainability value disconnects with its practice, either on the leadership level (board of directors), in top-bottom relationships or between inter-divisions and employees. Sustainable practices have not been included in the Key Performance Indicator of personal and divisional scorecards. Without a firm-commitment and equal-awareness, sustainability would only result to a „green or blue-washing‟ marketing and a tool for public relations [13].

b) „Business as usual‟ paradigm of peer companies: Competitors/peers maintain „business as usual‟ activities. Yet, the low-carbon economy has not set up a clear, firm and long term framework. That policy will shift the risk reward balance in favour of carbon-light financing. The certainty of a low-carbon economy framework is crucial for encouraging the appetite to invest in large-scale initiatives [26]. The UNEP FI argued that private financing must do a commercial basis calculation and monetized eco-benefits of their involvements. If the reason for entry is only to demonstrate their corporate responsibility and corporate image, it is not enough [2].

c) Carbon producer and fossil-fuel-based industry remain as powerful business forces: One the one hand, banks are required to create a short-term profit for their annual financial performance and the shareholder‟s revenue creation. Under such circumstances, banks have no choice other than to finance coal power electricity and fossil-fuel-based industries [20] which create instant revenue and profit. On the other hand, a wider stakeholder engagement requires banks to reallocate their investment in cleaner technology financing although the market is still in the developing stage and lending officers of the bank have to build-up expertise [2].

d) Questioning the customer real value on sustainability: The issue of short-term horizon versus long-term sustainable growth exists. Customers have not yet change their unsustainable lifestyle (such as consumerism/ luxury living). They often

perceive that climate causal-effect relationships happen not in their generation or exist in someone else‟s backyards. When it comes to an additional price (for example, the debate on who should pay carbon tax); finally customers seem hesitate to pay.

e) Difficulties in implementing the sustainability principles: A bank should start with an internal awareness raising education, acquires new talents/skills, and an organisational change in order to integrate sustainability principles into the core business and to bring solutions to climate change. However, some banks consider that the top barrier is how to apply it across supply chains and subsidiaries [4].

f) Intrigues among stakeholder in national and international politics:

A global emissions reduction goal is a highly political debate on how quickly it should be reached and by whom. This relates to strategic implications for fossil fuel production and use. Carbon intensive and heavy industry presented in the UNFCCC negotiation, both as observers and lobbyists with the aim of delaying agreement on emissions targets. A range of economic argument has been advanced in suggesting [2] that if we are taking action too soon, that will bring negative economic impacts. This contributes to the difficulty of progress making in climate change solutions.

Al Gore and others have stated that sustainable investing, in fact, examined the ability of a company to survive through the longer term revenue protection and sustainable competitive advantage [27]. In this information-based economy, financial institutions need for their long-standing survival. Business entities last longer if they clearly identified their values and goals [3]. The below case studies will illustrate how banks tried to incorporate sustainability values into their core business and perform their roles to contribute to climate solutions. 4. Case Study and Discussion

The following banks have shown a long history back to 1992 in their efforts to apply their sustainability values. Both of their business approaches tried to create long-term shareholder values by embracing opportunities and managing risks deriving from climate change. These attempts have not been perfect and got some critical opinions and cynical media, but some lessons learnt on similarities as shown in Table - 2 and differences as highlighted in point 3.1 are worth exploring. The banks are chosen based on these criteria: They are both signatories of the UNEP FI statement on the environment and sustainable

development, adopters of the Equatorial Principles in their project financing assessment, followers of the Principle for Responsible Investing of the UN Global Compact in their investment policy, and voluntarily reporters of the Carbon Disclosure Projects; Their sustainability performances were carefully assessed by international sustainability ratings

agencies e.g. the Dow Jones Sustainable World Indices, FTSE4GOOD [28], ECPI Ethical Indices, NASDAQ OMX CRD Global Sustainability 50 Index; They were winners of „Sustainability Banking Awards‟ by The IFC [29] and The Financial Times

[30] and granted international awards for their CSR program.

Table 2: “Outlining Similarities”. Source: Bank Official Websites [31] [32]

Bank Y (European Bank) Bank Z (Australian Bank)

Company profile

Employs > 80,000 people in 72 countries in Europe, USA, Asia Pacific & the emerging markets. Offices in New York, London, Singapore, Hong Kong, Sydney, Paris, Moscow, Amsterdam, Toronto, São Paulo, Tokyo & Mumbai. Investing in expanding markets such as the Middle East, Latin America, Central & Eastern Europe, Asia & the Pacific. The top-10 banks in Europe 2010 ranked by market capitalisation. Revenue: 2010 € 28.6 bn; 2009 € 28 bn Net Operating Income:

Employs 38,900 people in 15 countries, mainly in Australia & New Zealand. Offices in major financial centres including New York, London, Singapore, Hong Kong, Sydney. A presence in Asia (Singapore, Hong Kong, Shanghai, Beijing, Jakarta & Mumbai), the near Pacific (Fiji, Vanuatu, Cook Islands, Samoa, Tonga, Papua New Guinea, Solomon Islands). The world‟s 17th largest bank ranked by market capitalisation. Revenue: 2010 $ 37.9bn; 2009 $31.16bn Net Operating Income:

2010 € 2.33 billion; 2009 € 4.9 billion Total asset: 2010 € 1,906 billion; 2009 € 1,500 billion

2010 $16.9 billion; 2009 $16.5 billion Total asset: 2010 $ 618.27 billion 2009 $ 589.59 billion

a)

Embedding sustainability values into core business & operation strategy

Statement on sustainability as the guiding principles. It reviews & improves its working procedures according to the sustainability-related criteria. It established a comprehensive Sustainability Management System as an integral part of business strategy. The Group Sustainability Officer is responsible for implementation within the Bank.

It applies „Our Principles of Doing Business‟ which promote the sustainable business practice. It formulated an Internal Sustainability Council (comprised of general managers of business divisions) as a decision making forum for direction & progress monitoring. It formed a Board Sustainability Committee to assist the management board in its commitment.

b)

Developing environment& CC policy including financing the low-carbon economy Note: CC = Climate Change

In 2005 it defined 3 main roles: as a financial intermediary, an eco efficiency manager & a climate ambassador. In 2007 it established an “Environmental Steering Committee”/ESC to coordinate environmental protection activities (incl. Eco Project Management Office) & to benefit from synergies. In 2008 it formed “CC Advisory Board” consists of 10 experts from business, politics & scientists of industrial & emerging markets (Brazil & China) to advise the management.

In 1996 it was the first bank to join the Australian Government Greenhouse Challenge & reported its GHG ever since. Its „Environmental Advisory Group‟ manages the development & implementation of sector-leading energy & emission reduction programs of operational issues. Its „Environmental Co-ordinator‟ ensures a consistency in implementation of their policy development. Its CC position statement: Financing the transition to a low-carbon economy.

c)

Guiding & assisting corporation clients (lending & investment side)

As a Financial Intermediary creating sustainable business opportunities & contributing to climate related banking products/services. Financing projects in “green technologies”& the renewable resources energy projects in Europe &USA, including 50 CDM projects.

It formed the internal Environmental Advisory Group which incorporating environmental consideration into the lending process for customers. Providing finance for environmentally -friendly investments such as renewable energy.

d)

Dealing with customers‟ emerging needs

Provides innovative bank products & service solutions to fight climate change & to create added value for society. It realized the business opportunities of the climate change sector & involves in innovations.

Stated in their „Principles of Doing Business‟ for customers: actively promoting & developing products, services & relationships to a low-carbon transition society, such as investment funds; other products promoting positive social & environmental outcomes.

e)

Becoming a carbon neutral entity & engaging their supply chains

Aims to have all operative procedures climate neutral in 2013 onwards. It reduced its carbon emissions by 40% from the 2007 baseline figures. As an Eco Efficiency Manager, it invests in an eco-efficient infrastructure & increases renewable energy usage. In 2010 it established a Sustainable Sourcing mechanism to include the indirect carbon emissions coming from the supply chain into its calculations of the carbon footprint (such as energy providers & paper suppliers).

Aims to reduce emission from 14,059 tons CO2 in 2009, to 11,842 tons by 2012. It formulated a paper purchasing policy, recycling & paper avoidance strategy. Sustainability performance is reflected in personal & divisional scorecards. Long-term partnership with Australian Conservation Foundation to implement sustainable workplace by its employees, then in a wider community. Its „Sustainable Supply Chain

Management‟ policy & process sets out the minimum standards requirement.

f) Contributing to the Stakeholder‟s Network in National & International Cooperation

As a Climate Ambassador, it keeps a knowledge-based business with top-level research departments. Establish an active dialog with clients, employees, share-holders & public, such as the Carbon Counter, a real-time counter of GHG emissions in New York CBD. The Vice Chairman/Head of ESC was appointed as a member of the UNFCCC “High Level Advisory Group” which implementing the financing of CC as agreed in Copenhagen.

In 1992, it was one of the founding signatories to „Environment and Sustainable Development Statement‟ of the UNEP FI. In 2002 released a Social Impact Report that outlined the bank's plan to meet the highest international standards in the area of corporate social responsibility and sustainability. It led this bank to be the global sustainability leader for the banking sector in the Dow Jones Sustainability Index from 2004-2007.

4.1. Highlighting Differences of Bank Y and Bank Z

a) Embedding sustainability values into their core business and operation strategy:

The vision of Bank Z is to be clearly recognized as a global leader in sustainability. Its five-year strategy is regularly reviewed based on feedback from the Community Consultative Council. The current strategies include mainstreaming sustainability to become real for customers, working together to support community; treading lightly and managing their environmental footprint; developing products; services and relationships to a low-carbon transition society; practising sustainable business practices through governance and risk management; and speaking out to advocate on sustainable business practices. Recent research sought its customers‟ views on sustainability. The survey showed one third of their customers thought being sustainable was more urgent than ever in the context of global economic uncertainty [33]. Their Chief Executive added that although taking steps to become a sustainable corporation can be tough, it is worth it. They see it as part of their duty to act responsibly and assist in building a more sustainable economy. In contrast, Bank Y has not yet engaged wider stakeholder in reviewing its sustainability strategy regularly. Even so, they have formulated a statement on sustainability as their guiding principles in daily business decisions, asset-management activities, workplace and operational procedures according to sustainability-related criteria.

b) Developing environment and climate change policy including financing the low-carbon economy:

Both banks regularly review their environment policy to be adaptive to climate change. Bank Y tracks the performance of 100 largest-global company-shares and excludes stocks with the largest carbon footprints. It also tracks the performance of the renewable energy firms. In early 2011, this bank and the European Bank for Reconstruction and Development (EBRD) launched an „Environmental Sustainability Bonds‟ to finance energy efficiency, water and waste management, and public transport in central Asia and central Europe. Through its involvement in the New Zealand Emissions Trading Scheme and a number of renewable energy projects, Bank Z shows continuing support in the transition to a carbon-constrained economy. Its climate strategy focuses on five key areas, namely: minimizing direct environmental footprint; capacity building and managing climate risks; developing products/ services that drive environmental outcomes; engaging employees in the issues; and communicating/advocating climate change in the wider community.

c) Guiding and assisting corporation clients (lending and investment side):

Both banks implemented the „Equatorial Principles‟ for their project financing and adopted the „Socially Responsible Investing‟ (SRI) for their investment guidance. On one hand, in their reputational risk management Bank Y added risks connected to transactions in high-carbon industries. On the other hand, they recognized the green technology as a future growth market. Various specialists in the bank are dealing with: structured green investment funds, the global banking to finance manufacturers/suppliers and consumers such as a Desertec industrial initiative which is a climate-friendly energy development in deserts of the Middle East and North Africa (MENA) to supply energy for the MENA countries and Europe by 2050. Since 2000, Bank Y was a leader in the international carbon credit market. It was elected as the first rank in CER trader in professional polls. It was the first to facilitate investment in the Prototype Carbon Fund issued by the World Bank, CDM and Joint Implementation project. The carbon trading in Australian is under developed. The country originated „the GHG Protocol: A Corporate and Reporting standard‟ as a preparation for future regulation [34]. Despite that, since 2006, Bank Z started in carbon trading, offering solutions across the Australian, European and New Zealand carbon markets, including international offset units. It

involved in New Zealand Emission Trading Scheme and became the winner of the „Best Trading House – Australasia‟ and the runner up of the „Best Finance House – Renewable Energy Asia-Pacific‟ in 2010. They made progress on Environmental, Social and Governance (ESG) Risk Framework policies to incorporate these risks across the business portfolio, but a similar framework for their investment activity has not been finalised.

d) Dealing with customers‟ emerging needs:

In managing customer needs, both banks have gone beyond the „green-wash‟ marketing differently. They follow a consistency between branding positioning with the factual business. Together with companies and investors, bank Y realized that climate change is not merely a social, political or moral issue, but it is also a business issue [35]. This translated numerous sustainable investment innovations as follow: participation in emissions trading schemes; investments in renewable energy in and out of the country; discretionary of the investments portfolio management by incorporating a comprehensive sustainability aspects and criteria, as well as integration ethical aspects in investment guidelines; the third-party fund offers the issuance of a sustainability fund and a sustainable closed investment (investments in photovoltaic facilities, in forestry, in listed companies with a focus on climate protection and environmental technologies, shares in green buildings); collaborate with the country‟s development bank in loan approval process of the environment and climate protection investments of the residential and industrial programs; and an asset finance and leasing which offers their customers a wide spectrum of international class assets including aviation, shipping, real estate, infrastructure and natural resources, renewable energy and alternative assets such as micro finance and energy project financing in emerging regions.

In a different way, within the period of November 2009 up to March 2010, Bank Z supported the Australian Government Green Loans Program and offering an interest-free loan for homeowners. The program provided homeowners an opportunity to save energy cost and to reduce water usage. Over 35,000 Australians took advantage of the free home sustainability assessment provided by the government (valued at $250 per home), and then the Green Loan can be utilized to make the recommended changes. This bank believed that many of their customers choose to bank and invest with the bank because they share their views on sustainability.

e) Becoming a carbon neutral entity and engaging their supply chains:

Bank Z believed that staff engagement is an essential tool in applying sustainable business practice and becoming carbon neutral. It collaborated with the Australian Conservation Foundation, which hold employee workshops on sustainable workplace and find ways to reducing the businesses footprint. Their headquarter office conformed to the Australian Building Greenhouse Rating. They adopted the sustainable purchasing policy. The Sustainable Supply Chain Management code of conduct requires their suppliers to provide a written certificate of compliance. Annually suppliers are randomly selected to participate in an audit on their SSCM performance by an independent auditor paid by the bank. Comparatively Bank Y has a number of initiatives showing that climate neutrality is a key pillar of their strategy. Noteworthy was when they started refurbishment of the headquarter towers aiming to be one of the most eco-friendly high-rise buildings in the world. They implemented many progressive ideas to reduce 50% energy supply, 70% water consumption and 90% CO2 emissions. They are convinced that resource-efficient solutions will pay off from an economic perspective. This attracted worldwide attention and gained some awards: a Green Mark GoldPlus Singapore for office interior, the LEED Platinum certification and DGNB Gold for resource and energy efficiency, a Sustainable City Awards of The City of London. In 2009, they obtained 69% of their electricity from renewable sources. As a result, the bank was named as a “Green Power Partner of the Year” by the U.S. Environmental Protection Agency [31]. Three of their overseas offices also got ISO 14001 certification.

Bank Y regards the importance of the relationship to suppliers to maintain a consistent focus on sustainability. They expanded systematic sustainability criteria for checking/reviewing their suppliers to extend their sustainability goals within the supply chain effectively. The bank refined its global inventory of greenhouse gases in accordance with the internationally acknowledged protocol. They systematically began to incorporate carbon cost into the financial decisions within the company and the selection of service providers. They purchased top-grade CER certificates to neutralize the remaining emissions.

f) Contributing to the Stakeholder‟s Network in National and International Cooperation on Climate Solutions:

In May 1992 on the road to the Rio Summit that year, Bank Y and Z were among those financial institutions which joined forces with the UNEP to catalyse banking industry awareness to develop and promote linkages between the environment, sustainability and financial performance so called “UNEP Finance Initiative statement on the Environment and Sustainable Development” [36]. It is a strategic public-private partnership between UNEP and nearly 200 financial institutions globally. Likewise, both banks signed the Principles for Responsible Investment by the UN Global Compact, Bank Y also a founding member. Bank Y participated in the World Business Sustainable Development Forum and became a member of the Board of Directors of the Global Reporting Initiatives. Since its participation in the Carbon Disclosure Project, this bank was among the top listed 15 percent in the Carbon Disclosure Leadership Index (CDLI) and was reckoned as one of the three companies in the financial sector that has dealt most effectively with the challenges of climate change. In 2009, a Vice Chairman of the bank was appointed as a member of the High Level Advisory Group on Climate Change assembled by the UN Secretary General. The advisory group is formed to mobilise financing which was promised during the UNFCCC in Copenhagen. On one hand, from 2004-2007 Bank Z was assessed by the Dow Jones Sustainability Index as the global sustainability leader for banking sector. On the other hand, from 2005 to 2009 Bank Y was recognized as one of the top-rated (the top 1%) of 4,000 companies in 19 consecutive ratings by the Governance Metrics International (GMI) who assessed corporate governance practices and looked at value-drivers which were not revealed through financial analysis.

4.2. Barriers and Dilemma Are Encountered by Both Banks:

Despite its signature under various sustainability declarations, Bank Y was charged by many critics in the public domain. It was remarkably clear that the carbon producer and fossil-fuel-based industry remain like solid business forces for them. This bank was criticized for their participation in co-financing both the China oil conglomerate which has been extracting oil from the crisis region of Darfur; and the USA mining company that extracts gold and copper from Papua forest and emit chemical contamination in Indonesia [37].

Bank Y also faced a manoeuvre from climate sceptics and deniers as one of national stakeholder. Recently the bank collaborated with the Climate Centre at the Earth Institute-Columbia University to publish a paper to re-address the major claims of climate change deniers. Interestingly, within a week it got an immediate response from a university researcher which the bank then replied and corrected two mischaracterizations notes. The bank convinced that the primary findings quoted in the document was not significantly impacted by the technical/ methodological errors of the original work by a climate scientist [38].

Alike, Bank Z also faced some barriers in achieving their „ideal‟ aims. This bank is among the big four banks in Australia. They are under pressures, to limit their funding to key industries, which are adversely impacting on the climate. A report by Profundo (Dutch consultants) commissioned by

Greenpeace has noted that, in the last five years, Australia's leading banks include this bank invested more than $5 billion for coal projects while promoting their green image [39]. They spend time and money creating a corporate social environmental responsibility, at the same time they are quietly financing new coal-fired power stations, coal mines and coal port infrastructure. The comparison of financing for renewable energy projects to conventional mining sector, banking sector in Australia are still not equal, balance, or proportional. Another barrier for Bank Z is the issue of short-term horizon versus long-term sustainable growth. The short period of the Board of Director‟s term might results in an unsustainable impact for the long term. Although this bank often claims to be a corporation concerned with environment sustainability, unfortunately, the drive to short term profit is still there. The BOD‟s short tenure makes them focus on how to make the highest possible profit, which gave high yield for the shareholders. In doing so, directors also gain benefit from receiving incentive bonuses in the corresponding year performance. However, the unfavourable business decision making such as increased mortgage interest higher than the Reserve Bank recommendation [32], could cause a reputational risk and disloyalty from customers. A fundamental issue remains whether a sustainable profit relates to an environmentally sustainable business practice and a positive contribute in finding a solution to climate change.

5. Conclusion

Climate change is the challenge of our generation. Through collaborative actions, we should be able to mitigate risks. Financiers and business sector need to add value to public sector funding, because government capacity is limited. Integration of sustainability values into core business strategy and operation will drive change needed to accelerate solutions to climate change. This paper has examined six roles of commercial bank in the context of climate change. Banks are able to support their clients, customers, and supply chains, not only to overcome the risks, but more importantly to convert those to develop new opportunities. Nevertheless, global companies are under pressure to act responsibly to counter climate change problem. On one hand, they need to switch to renewable-energy power, reduce costs in the supply chain, and handle reactions from wider stakeholder. On the other hand, they are obliged to make short-term profitability through strong dividends and financial performance annually. How to improve the corporate social, environmental and governance in order to achieve excellence in both sustainability and economic/financial performance continuously is a substantial challenge. Apparently, banks are still in the developing stages as shown by the case study. Although sustainability principles are mainstreamed in their business approaches, and are guiding both banks to managing risks and opportunities deriving from climate change, it seems that Bank Y has developed more climatic innovative products/services to serve its marketplace than Bank Z. However, employee involvement in the environmental/corporate culture in Bank Z is more embedded than Bank Y. Even so, a lot more will need to be done and their progress is promising, but banking sector is still far from the right path of sustainable business practices. Nonetheless, a corporate sustainability model as suggested by Epstein [40] is needed if we are to see environmental sustainability more successfully implemented in the Banking sector.

Acknowledgements Hanna Yolanda wishes to thank Riza Sunindijo (PhD candidate in Faculty of the Built Environment UNSW) who gave constructive feedback and review of this paper. She is also grateful to her husband and son for the inspiration and motivation along the process.

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[4] Dow Jones Sustainability Indexes website. On Line. Available at http://www.sustainability-index.com/07_htmle/sustainability/corpsustainability.html Accessed February 7th, 2011.

[5] LACY P., COOPER T., HAYWARD R., NEUBERGER L., „A New Era of Sustainability‟ the UN Global Compact-Accenture CEO Study 2010 Report, Accenture Institute of High Performance.

[6] ANNAN K., The Secretary General‟s Remarks on receiving the Global Leadership Award of the Zayed International Prize for the Environment‟, 6 February 2006, Dubai: United Nations Environment Programme. Online. Available http://www.unep.org/Documents.Multilingual/ Default. Print.asp?DocumentID=470andArticleID=5136andl=en accessed 3 February 2011

[7] KI-MOON B., The Secretary General‟s Remarks on the Davos World Economic Forum: United Nations Environment Programme. Online. Available http://www.unep.org/Documents. Multilingual/Default.asp?DocumentID=470andArticleID=5136andl=en accessed 3 February 2011

[8] NEUMAYER E., ”Weak Sustainability Vs Strong Sustainability_Exploring the limits of two opposing paradigms”, Edward Elgar Publishing Ltd, Cheltenham UK, 2010

[9] The Global Ethic Organization website. Online, available at http://www.global-ethic-now.de/gen-eng/0d_weltethos-und-wirtschaft/0d-04-verantwortung/0d-04-103-cs-responsibility.php. Accessed 7 Feb 2011

[10] HAWKINS P., LOVINS A., LOVINS H., “Natural Capitalism: Creating the Next Industrial Revolution”, London UK, 1999.

[11] KENNEDY A., “The End of Shareholder Value” as quoted in BENN S., DUNPHY D., and GRIFFITHS A., “Organizational Change For Corporate Sustainability” (2nd Edition), Routledge UK, 2007, pp. 8

[12] HART S., ”Beyond Greening: Strategies for A Sustainable World” Harvard Business Review, January- February 1997 pp. 76 as quoted in BENN S., DUNPHY D., GRIFFITHS A., “Organizational Change For Corporate Sustainability”, Routledge UK, 2007, pp. 10

[13] SETHI S.P., ‟Defining Sustainability‟ President of Sethi International Centre for Corporate Accountability at Baruch College City University of New York, in BUONO AF., 2010 „What is sustainability? Differing perspectives on sustainable business practice in the global context‟, proceeding of the 6th Bentley Global Business Ethics Symposium, Massachusetts.

[14] Official website of the United Nations Framework Convention for Climate Change http://cdm.unfccc.int/about/index.html and http://unfccc.int/cooperation_and_support/financial_mechanism/items/3659.php accessed January 31st, 2011

[15] Official website of Sustainable Banking Awards. Available at http://www.csrwire.com/ press_releases/FinancialTimes-Sustainable-Banking-Awards. Accessed January 31st, 2011.

[16] Official website of the United Nations – REDD programme http://www.un-redd.org/ accessed March 1st, 2011

[17] Water Materials Energy magazine „Investors call for carbon certainty‟ and „Cancun‟s private-sector call‟ in International News section, Ross May Publishing, Gladesville NSW Australia, vol 21 no 11 December 2010 pp. 14-15

[18] ALLEN F., and CARLETTI E., “The Roles of Bank in Financial Systems‟‟ University of Pennsylvania and University of Frankfurt. Online. Available at http://fic.wharton.upenn.edu/ fic/ papers/ 08/0819.pdf accessed 9 Feb 2011

[19] The Global 100 Most Sustainable Corporation, accessed 22 February 2011, available at <http://www.huffstrategy.com/MediaManager/release/Corporate-Knights/29-1-11/Corporate-Knights-Global-100-Most-Sustainable-Corporations-announ/2172.html>

[20] Sydney Morning Herald official website, „Bank under scrutiny over coal funding‟ Online. available at <http://www.smh.com.au/business/ 20101001-16133.html> October 2, 2010.

Accessed 25 February 2011 [21] The Carbon Principles official website. On line. Available at <http://carbonprinciples.org>

Accessed 3 March 2011 [22] The Climate Principles official website. On line. Available at

<http://www.theclimategroup.org> programs/the-climate-principles/>Accessed 3 March 2011 [23] KEATING B., QUAZI A., KRIZ A., COLTMAN T., „In pursuit of a sustainable supply chain‟

School of Business and Management, University of Newcastle and the Centre of Business Services Science, University of Wollongong, Australia September 2007

[24] The UN Global Compact official website. Online. Available at <http://www.unglobalcompact.org> Accessed January 31st, 2011.

[25] The Carbon Disclosure Project official website. Online. Available at <https://www.cdproject.net> accessed 21 February 2011

[26] LABATT S., and WHITE RR., “The Financial Implications of Climate Change”, 2007 [27] SAMPSON A., “Gore Sounds Alarm Over Short-Term Vision” in Sydney Morning Herald,

online. Availabe www.smh.com.au/news/money/fore-sounds-alarm-over-shortterm-vision/ 2005/11/11/1131578230974.html/page=2 quoted in BENN S., DUNPHY D., and GRIFFITHS A., “Organizational Change For Corporate Sustainability” (2nd Edition), Routledge UK, 2007, pp. 50

[28] The FTSE4Good Index official website of. Online. Available at <http://www.ftse.com /Indices/ FTSE4Good_Index_Series/index.jsp> accessed 21 February 2011.

[29] The International Finance Corporation official website. Online. Available at <http://www.ifc.org /ifcext/media.nsf/Content/IFC_FT_Awards_June08> accessed February 3rd, 2011

[30] The Financial Times official website. On line. Available at <http://www.ft.com/cms/s/2 /224557c8-5cef-11da-a749-0000779e2340.html#ixzz1Cqdveg79 accessed 3 February 2011

[31] Bank Y Official Website, http://www.Y. accessed February 23, 2011). [32] Bank Z Official Website, http://www.Z.com.au/(accessed February 23, 2011). [33] Bank Z Media Release, http://www.Z.co.nz/olcontent/olcontent.nsf/Content/2+June+2009

(accessed February 25, 2011). [34] BALATBAT M., “The Greenhouse Gas Protocol: A Corporate Accounting and Reporting

Standard” presentation material of the Accounting for Climate Change and Sustainability course ACCT5961 Australian School of Business, UNSW Sydney, September 2010.

[35] Banking on Green Energy. Renewable Energy News Article, http://www.renewableenergyworld.com /rea/news/article/2007/11/banking-on-green-energy-50453 (accessed February 25, 2011).

[36] The United Nations Environment Programme – Finance Initiatives Official Website, http://www.unepfi.org (accessed February 25, 2011)

[37] Online. Available at http://www.global-ethic-now.de/.../0d-04-206-Bank Y-kritik.php accessed 22 February 2011

[38] Bank Y Climate Change Advisors “Climate Change: Addressing the Major Sceptic Arguments” September 2010 online, available at the official website, accessed 7 Feb 2011

[39] Energy Farm Official Website. Online. Available at http://www.energyfarm.com.au/news /general_solar/clean-energy-to-trump-coal-for-bank-lending. Accessed 25 Feb 2011

[40] EPSTEIN M.J., „Making sustainability work_best practices in managing and measuring corporate social, environmental and economic impacts‟, Greenleaf Publishing and Berrett-Koehler Publisher Inc, San Francisco 2008

Glossary and Abbreviations CDM : Clean Development Mechanism, a mechanism under the Kyoto Protocol through which developed countries may finance greenhouse gas emission reduction or removal projects in developing countries and receive credits for doing so which they may apply towards meeting mandatory limits on their own emissions. CDP : the Carbon Disclosure Project is an independent not-for-profit organization. The

Carbon Disclosure is an independent, international not-for-profit organization established in London in 2000. It holds the largest database of primary corporate climate change information in the world. Thousands of organizations (4,700 large companies in 50 countries and on behalf of more than 500 institutional investors) from across the world‟s major economies measure and disclose their greenhouse gas emissions, water use and climate change strategies through CDP.

CER : Certificate for Emission Reduction COP 16 : Corp of Parties 16th of UNFCCC at Cancun - Mexico CR : Corporate Responsibility CSR : Corporate Social Responsibility ESG : Environment Social Governance DJSI : the Dow Jones Sustainability Index FT : the Financial Times FTSE4Good : the index was included in the international ethical index. It measures the

performance of companies that meet globally recognised corporate responsibility standards, and facilitates investment in those companies. It has been designed to measure the performance of companies that meet globally recognised corporate responsibility standards, and to facilitate investment in those companies. Transparent management and criteria alongside its brand make FTSE4Good the index of choice for the creation of Responsible Investment products [30]

GRI : The Global Reporting Initiatives, based in Amsterdam- Netherland IFC : the International Finance Corporation JI : Joint Implementation, a mechanism under the Kyoto Protocol through which a

developed country can receive emissions reductions units when it helps to finance projects that reduce net greenhouse gas emissions in another developed country

NAPAS : the National Agreement on Plan of Actions in climate change REDD : Reducing Emission from Deforestation and Forest Degradation is a mechanism to

create an incentive for developing countries to protect, better manage and wisely use their forest resources, contributing to the global fight against climate change. REDD strategies aim to make forests more valuable standing than they would be cut down, by creating a financial value for the carbon stored in trees. Once this carbon is assessed and quantified, the final phase of REDD involves developed countries paying developing countries carbon offsets for their standing forests. REDD is a cutting-edge forestry initiative that aims at tipping the economic balance in favour of sustainable management of forests so that their formidable economic, environmental and social goods and services benefit countries, communities, biodiversity and forest users while also contributing to important reductions in greenhouse gas emissions.

REDD+ : REDD Plus strategies go beyond deforestation and forest degradation, and include the role of conservation, sustainable management of forests and enhancement of forest carbon stocks in reducing emissions. SEFI : the Sustainable Energy Finance Initiative <www.sefi.unep.org> UNEP – FI : the United Nations Environmental Program – Finance Initiatives. It is a global partnership between UNEP and the financial sector. Over 190 institutions, including

banks, insurers and fund managers, work with UNEP to understand the impacts of environmental and social considerations on financial performance.

UNFCCC : the United Nations Framework Convention for Climate Change UN PRI : the United Nations Principles for Responsible Investment UNGC : the United Nations Global Compact VCC : Venture Capital Company

Low-energy versus conventional residential buildings: market

stimulants, investment cost and profit

Agnieszka Zalejska-Jonsson

PhD student Building and Real Estate Economics, KTH Royal Institute of Technology Sweden agnes.jonsson@abe.kth.se

Professor Staffan Hintze, Civil and Architectural Engineering, KTH Royal Institute of Technology, Sweden, staffan.hintze@byv.kth.se

Professor Hans Lind, Building and Real Estate Economics, KTH Royal Institute of Technology, Sweden, hans.lind@abe.kth.se

Key words: low-energy buildings, residential buildings, investment cost, building operation, investment analysis

Summary A good investment is measured by benefits it gives in return, and so financially viable investment is an elementary requirement for the stockholders. Cost and affordability have been often pointed as the greatest barrier in sustainable construction development [1] and further often brought up in the discussion about the “sustainable” or “green” investment profitability. It is therefore important to collect market evidence to facilitate understanding and evaluation of environmentally conscious investments in real estate.

1. Purpose

The focus of this paper is to investigate the cost side of “green” building construction and if increased investment cost are profitable taking the reduction in operating cost into account. The investment viability is approached by comparing investment in conventional and “green” residential building, particularly low-energy building, using real construction and post-occupancy condition. Moreover, the paper investigates incentives needed to accelerate low-energy residential development in Sweden.

2. Method and data collection

The key information was obtained from private and public housing companies by surveys and personal interviews. The first survey was directed to the companies involved in constructing conventional and low-energy housing and the second survey to the housing

companies that actively manage operation of low-energy houses. Personal interviews allowed for better understating of low-energy construction and access to more detail data. An investment analysis was conducted to assess investment viability of low-energy and conventional residential buildings. Limitations of the study comes from data availability and the number of observations, as relatively few low-energy multi-family residential buildings have been built to date in Sweden. The study use results from surveys, and therefore may carry certain level of subjectivity.

3. Key findings

The information received from investors and housing management companies indicate that low-energy buildings are considered as interesting and good business opportunity and the energy-efficient building investment are seen as strengthening company’s market position.

At present the average extra cost in low-energy buildings construction is estimated to be approximately 5% higher than cost of conventional buildings. The cost of labour, material and more advanced mechanical ventilation systems with heat recovery add up to higher cost. The estimated operating cost is expected to be significantly lower thanks to reduced energy requirement, which according to housing managers reflects the actually metered energy consumption fairly well.

The calculated risk and uncertainty is not regarded to be higher in “green” buildings construction. The experience, however, is significant as it increased efficiency and profitability of low-energy residential projects. The study demonstrates that, at present energy prices and 5% extra investment cost, low-energy buildings (passive house standard) are an attractive investment and that the potential energy saving defray for required extra cost.

Development of new technologies and building concepts can truly stimulate “green” construction. The change of Buildings Regulations appears to be a significant stimulant in accelerating energy-efficient buildings construction, which suggests that the present regulations are too low and not motivating industry. The financial incentives, such as tax reductions or subsidies are generally considered as an important incitement. Those forms of stimulants can encourage investments in low-energy buildings and allow developers to gain significant experience, which in consequence contributes in accomplishing successful projects.

Upcoming changes in political and legal environment should be seen as important arguments for active supporting low-energy construction. In order to meet The European Councils goals (Directive 2010/31/EU; [26]) it is crucial to gain experience and expertise of producing energy efficient buildings. This knowledge is also critical for organizations that wish to stay ahead and strengthen their position on the property market.

1. Introduction

1.1. Background

Accurately evaluating property is challenging, and seems even more so when sustainability values are involved. Sustainability features are expected to contribute to the property value [2], so the sustainable attributes of a building should be included in property valuation models [3][4]. On the other hand, uncertainties concerning the financial and environmental potential of “green” buildings contribute to doubt on the part of participants and property investors. Financial and insurance institutions seek strong evidence of profitability in green projects [5] before they are willing to support them. Investors and developers defend this reluctance by expressing concerns regarding the extra cost of “green” buildings and the highly speculative return on investment and payback period [6].

In seeking empirical evidence, a few research studies have focused on the linkage between cost and income premium in energy-efficient and sustainable properties. Matthissen and Morris [7] compared LEED and non-LEED certified projects and concluded that, though costs vary between building projects, there is no significant statistical difference between LEED and non-LEED certificated buildings; both categories include low- and high-cost buildings. They have also pointed out that a number of factors can influence the economic results, so comparison with an average construction budget yields little information. Schnieders and Hermelink [8] examined residential energy-efficient buildings in Europe and concluded that constructing a passive house costs 0–17% more than constructing a conventional house; on average, the specific extra investment was found to be 8% of the total building cost. Other research [9] has demonstrated that, the more environmentally friendly a building is and therefore the higher the LEED certified level, the higher the extra cost of building green. On the other hand, emerging results indicate that green labeled commercial buildings can generate higher rental income [10] and that the relationship between green rating level (i.e., LEED) and effective rental premium is significant [11] Moreover, energy-efficiency apartments in Switzerland have sold at a 3.5% premium over the last ten years, while energy-efficient single-family homes commanded a premium of 7% [12]. 1.2. Purpose and significance of the study

The financial rationale of “green” buildings is often questioned by practitioners, who point to the importance of risk, construction complexity, and other real-life conditions that often have considerable effect on investment feasibility. This paper therefore compares investments in conventional and “green” residential property (particularly low-energy housing) using real construction and post-occupancy conditions. The key information was obtained from private and public housing companies in Sweden involved in constructing both types of housing. Furthermore, we also discuss challenges related to constructing energy-efficient housing and incentives that might be needed to accelerate development of the low-energy housing market in Scandinavia.

The study is part of a research project investigating the comprehensive value of low-energy housing and its investment potential. The findings should further the development of the low-energy building market and improve present understanding of the construction and operation of energy-efficient residential buildings.

1.3. Scope and limitations

We particularly address the cost side of investment and explore if increased investment cost are profitable taking the reduction in operating cost into account. The investment costs have been defined here as total investment cost, which includes construction and land cost. The land prices may vary significantly depending on location, size, urban infrastructure etc., though in the paper the average land price is assumed.

Low-energy buildings requires better insulated envelope, which may increase width of walls, and reduce ratio between living space and total built area, which in its turn influence the amount of square maters available for sale and affect investment viability. This construction aspect of low-energy buildings was not discussed in this paper, but shall be explored in our further studies.

In this paper we use term investor to refer to public or private companies that build residential buildings with apartments for rent. We refer to housing management company and we mean organization that is responsible for maintenance and operation of the building. In cases present here the housing management company is often part of investor’s organization. The role of banks and financial institution is not discussed in this paper.

The study use results from survey, and therefore may carry certain level of subjectivity. The study is also limited by data availability and the number of observations, as relatively few low-energy multi-family residential buildings have been built to date in Sweden (Fig. 1).

Fig. 1. Housing construction in Sweden, 2001–2009 (SCB, Statistics Sweden, http://www.scb.se; Passivhuscentrum, http//www.passivehuscentrum.se)

0

2000

4000

6000

8000

10000

12000

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Number of completed multi-residential dwellings 2000-2009 Sverige

rental apartments corporative/condominium apartments

low-energy apartments (passive house)

2. Theoretical overview

2.1. Low-energy buildings

A strict definition of what constitutes a “low-energy” house or residential building is difficult to find. It is generally assumed that low-energy buildings should consume significantly less energy than the levels specified in the Building Regulations. The key objective of such buildings is energy-efficient design that allows the minimization of energy consumption throughout the building life cycle [13]. Specifications that facilitate energy-efficiency gains include compact construction, minimum thermal bridge value, air tight and thermally insulated building envelope and windows, and adequate choice of heating and ventilation systems [14]. The objective of good indoor climate and energy-efficient building can be achieved by design and construction in consideration to regional climate conditions [15].

Forum för Energieffektiva Byggnader (FEBY; the Forum for Energy-efficient Buildings), the organization that promotes building and renovation to energy-efficient standards in Sweden, recognizes two types of low-energy houses: passive houses and mini-energy houses. Definitions included in the Swedish standards for passive and mini-energy houses state that low-energy houses should aim to achieve better [16] or significantly better performance [17] than stated in the Swedish Building Regulations.

2.2. Profit and investment viability

Objective for most companies is profit (p) which is the difference between income (i) (discounted) and cost (c). In cases, there income is unlikely to increase (ex. property market with controlled rent) the focus must be placed on costs. Whether or not return on invested capital is deemed satisfactory depends on the investor’s objectives, but a potentially good investment can be identified using equity investment models, net present value, internal rate of return, and payback period [18]. Generally, the outcome of an investment evaluation of a real estate development project is determined by the total investment cost, net operating income generated on real estate, and the required rate of the return over the expected holding period [19][20]. Net present value (NPV) can be described by the following function:

��� � ∑��

�� ���

����,��� �

���

�� ���� ���, RVn=

��

��� (equation 1)

NPV: net present value of equity NOIi: net operating income through i periods R: required rate of return n: expected holding period RVn: residual value in the nth period TIC: total investment cost Consequently, internal rate of return (IRR) can be described as:

0 � ∑��

�� ����

����,��� �

���

�� ���� – ��� (equation 2)

IRR: internal rate of return on equity

3. Method and data collection

3.1. Investors

Information about low-energy buildings in Sweden was collected through a survey and personal interviews.

The survey questionnaire was sent to municipal housing companies that build rental housing and to private construction companies that build housing for sale or rent. The companies were chosen because they had experience of building low-energy housing. All respondents were asked to answer questions from the position of an investor (i.e., client) and not that of contractor (some companies might have participated in construction projects as contractor, investor, or both). The number of survey recipients per company varied depending on company size and the number of low-energy projects carried out. The survey was addressed to chief executives (i.e., those responsible for new projects and housing development) and project leaders. The notification of survey questionnaires were sent to 34 companies (93 people) that had participated in at least one low-energy housing project in Sweden. Answers were collected using an on-line questionnaire from February to March 2010; thirty-four completed questionnaires were collected for a response rate of 37%. In total respondents represented 24 companies (i.e., 71% of the contacted companies), 16 public and 18 private. Some of the biggest construction companies in Sweden took part in the survey, including listed companies (e.g. Skanska, NCC, and PEAB) and large municipal housing companies, such as Svenska Bostäder, whose 2009 turnover was approximately EUR 300 million (http://svenskabostader.se).

Twelve face-to-face, open-ended interviews were conducted between September 2009 and September 2010 to acquire a better understanding of the technical and economic challenges of building low-energy housing in Sweden.

3.2.Operation and management companies

Data on the operation and management of low-energy dwellings were obtained by survey and personal interviews. Survey questionnaire was sent to housing companies that were identified by market research as actively managing low-energy buildings. Only multi-family residential buildings with rental apartments were subjects of study.

Answers to an on-line questionnaire were collected from November to December 2010. Nine people, (of 30 recipients), each representing a different housing company, completed the survey. Additionally 8 interviews were conducted with representatives of housing management companies in period of approximately one year, i.e. December 2009–February 2010.

4. Results

4.1. Investment cost

Most respondents stated that the total investment cost of low-energy housing (LEH) was less than 10% greater than that of conventional buildings (CH). Just over half of the public companies estimated that the extra total investment cost was in the 5–10% range, while only one quarter of the private companies gave this answer. Most of the private companies, i.e.,

approximately 60%, estimated that the extra investment cost of LEH was 5% or lower (figure 2).

Administration costs in LEH are no higher than in conventional housing (CH), except in the case of “reference projects”, where the increased costs often relate to organizing lectures and on-site visits. Nearly two-thirds of respondents said that LEH construction material was more expensive than CH material, which may relate to higher unit prices of more energy-efficient material (e.g., insulation and windows). Labour and design costs are also higher on LEH budgets (Fig. 3). The architect team, installation designer team (e.g., for HVAC), and energy coordinators must work together to deliver a low-energy building design. Collaboration and active engagement throughout the design and construction processes as well as work precision may translate into more hours of work, for both the design and building teams.

Fig. 3. Percentage of respondents (public and private companies) who consider LEH costs to be higher than that in CH, answers by cost type Public and private companies’ opinions differ to some extent concerning the cost estimates. This difference may be because private companies tend to have more production knowledge

24%35%

24%0% 0%13% 20%

53%

7% 7%19%28%

38%

3% 3%0%

10%

20%

30%

40%

50%

60%

difference is insignificant

higher cost but not more than 5%

higher costs between 5%-10%

higher costs between 10%-15%

costs higher than 15%

Total investments cost for low-energy buildings in comparison with conventional residential buildings

private companies public companies all companies

0%

20%

40%

60%

80%

100%

administration

and fees

design

construction

materialinstallations

labor

Cost which are considered to be higer in LEH than CH, by cost type

Public companies

Private companies

and more accurate information about individual cost components (e.g., operation, materials, and design). Since private companies are often contracted as development company, they may have procurement advantages, and their workers can find savings on site during construction by discovering innovative and practical solutions. On the other hand public companies are more experienced in housing management activities. Public companies often own and manage their building stock, whereas private companies less often assume this responsibility. 4.2. Operation and maintenance costs

Regarding the estimated operating cost, most public and private companies expected significant savings in operating low-energy buildings. This belief seems to be confirmed by housing management companies, which also cited cost reductions of at least 20–40% for LEH operation. The reduction in operating cost is based mainly on reduced energy requirements. Investors anticipate that achieving the estimated energy efficiency may require more system adjustments than usual. In practice, the technical installations are not considered to be a particular problem. Housing managers believe that LEH installations require just as much adjustment as do CH installations, though the need for adjustment comes earlier in LEH than in conventional dwellings. Housing managers admit that balancing LEH systems can be challenging, and that the biggest problems are insufficient auxiliary heating efficiency in cases in which air heating systems were installed and adjusting the air flow and temperature in those systems.

One third of public companies believed that low-energy buildings would require less maintenance in the future, whereas only one fifth of private companies thought the same. This difference in opinion may depend on differences in experience, since municipal companies own, manage, and are in charge of operating and maintaining their building stock, whereas private companies often do not assume that responsibility.

4.3. Assessing business uncertainty and opportunity

Neither private nor public companies regarded calculated financial risk and uncertainty as higher in LEH than CH projects. Moreover, more private (60%) than public (30%) companies noted that prior experience of LEH projects significantly increased efficiency and profitability in ensuing LEH projects. This difference of opinion may be based on the extent of prior construction experience. However, by managing and operating low-energy buildings, municipal companies may gain knowledge and experience that allows them to reduce operation and maintenance costs in LEH and increase efficiency in existing housing stock.

Private companies were convinced that constructing LEH is good business and that doing so will strengthen their market position. Public companies are not as clear in their plans regarding LEH construction, though 75% said that LEH has business potential.

4.4.Stimulants and outlook in the future

Generally private companies recognise factors as industrialization or construction components standardization, as the elements that have the greatest effect on LEH market development. Public companies on the other hand identified external factors as subsidies and obligatory certification to influencing low energy building construction to a larger extent. All respondents assigned high importance to the Building Regulations and suggested that strengthening the Building Regulations have a strong influence (50%) on acceleration of low energy buildings construction, which suggests that the present regulations are too low and not motivating industry.

Interestingly, according to majority of survey respondents obligatory environmental assessment and certification system has an insignificant effect on low energy housing development. Only 30% of private and 45% of public companies acknowledge obligatory environmental assessment to be an important factor. On the other hand majority of housing management companies believe in importance of environmental rating and stating their interest in participation in environmental assessment of their building stock.

Additionally, decrease of prices for environmentally friendly material was found to be an important factor, but it is rather development of construction new technologies and building concepts that can truly stimulate development of “green” construction.

5. Investment analysis

Using feedback from investors and housing managers, we can attempt to assess LEH and CH investments and build a life cycle costing (LCC) model that allows for differentiation analysis. The general assumptions are presented in table 1.

The annual specific energy demand is estimated as 110 kWh/m2 reference area for CH, according to the Swedish BBR 16 Building Regulations [21], and 50 kWh/m2 for LEH, according to the Swedish passive house standard [17]. The analysis is done with real prices, but we assume that energy price trend is going to hold and assume 2,5% price increase in real terms. In LCC, we omit maintenance cost, though we deduct EUR 10 per m2 annually from the operating income for management cost. Building management cost here refers to activities the housing management company must undertake to ensure good building operation; activities include administration and planning, building performance optimizing, communication with tenants, and technical help in case of problems.

Net cash flow or net operating income (NOI) consist of income from rents, less operating and management costs. Potential income was estimated based on the average rent for new build public buildings in Sweden in 2009, which was approximately EUR 144 per m2 (SCB, Statistics Sweden, http://www.scb.se); Since rent level is rather related to location and production year than energy savings (LIND) [22], the rent is assumed to be the same in both types of housing.

In assessing LEH and CH investment projects, the NPV (equation 1) equity investment models is used. The holding period is 20 years and exit yield 5%. The rate of return is 3%, somewhat higher than present government bonds ( June/July 2011 approx 2,7%, Sveriges Riksbank, Central Bank in Sweden, http://www.riksbank.se).

.

Table 1.Investment analysis assumptions

Average total production cost for multi-family building 2009, Sweden SCB, Statistics Sweden, http://www.scb.se) [EUR/m2]

3 000

Average rent for m2 in newly built multi-family building 2009, Sweden SCB, Statistics Sweden, http://www.scb.se) [EUR/m2]

144

Extra cost required in production of LEH 5% Energy price - electricity [EUR/kWh] 0,1 Energy price – district heating (mean price for Sweden) [EUR/kWh] , (Svensk Fjärrvärme, http://www.svenskfjarrvarme.se/Statistik--Pris/Fjarrvarmepriser)

0,075

Annual energy price increase 2,5% Return rate 3% Exit yield 5% Holding period [years] 20

The analysis confirms that low-energy building is an attractive investment (table 3). The computed NPV, in holding period 20 years, was positive and higher for LEH (EUR 178 per m2) than that for CH (EUR 165 per m2) . The potential energy savings are sufficient to defray the extra investment cost required in low-energy buildings.

Table 2. Base case scenario, analysis results. NPV [EUR/m2] Conventional building (CH) 165 Low-energy building (LEH) (passive house standard) 178 Delta (energy savings) 13 Additional m2 value in LEH, in the end of holding period (20 years) 144

Sensitivity analysis indicates that LEH are less sensitive to annual energy price changes and that at annual energy price increase higher than 1,5% computes higher NPV for LEH than for CH. If extra cost for LEH is 6% or higher the computed NPV is higher in case of CH investment.

6. Conclusion

The study demonstrates that, at present energy prices and 5% extra investment cost for low-energy building (passive house standard), building low-energy residential building is an attractive investment. Investors are recognizing this potential and are interested in developing those projects in the future.

Most investors recognized the business value of low-energy buildings and expressed willingness and readiness to invest in low-energy projects; yet the total volume of low-energy buildings (particularly passive house standard) has been relatively low. This suggests that building regulations and financial incentives, such as tax reductions or subsidies, may further energy-efficient construction. Subventions or tax reductions may act primarily as “catalysts”

covering, to a certain extent, the extra cost of low-energy construction and eliminating the initial barrier to energy-efficient projects.

Knowledge and experience lead to higher efficiency in construction projects [23]. Survey results confirm that experience gained during prior low-energy housing projects improves the efficiency and profitability of ensuing “green” projects. Moreover, improvements in construction processes due to experience, competence, and ongoing monitoring [24] as well as improvements in cost position, for example, due to better procurement, strategic partnerships, and cost driver control [25], allow the investor and developer to control investment costs and improve the market position. One can observe this phenomenon in low-energy construction only if such projects are not considered as experimental attempts but rather standard production.

Upcoming changes in political and legal environment should be seen as important arguments for active supporting low-energy construction. In order to meet The European Councils goals (Directive 2010/31/EU; [26]) it is crucial to gain experience and expertise of producing energy efficient buildings. This knowledge is also critical for organizations that wish to stay ahead and strengthen their position on the property market.

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