The relationship between sustainability and cost savings

By Gina Elliott, Chief Services Officer at Buildings IOT
In the world of construction, it is essential that cost-saving measures and sustainability see a lot of overlap. Here we take a look at how that is going

Commercial buildings in the United States account for 18 percent of primary energy use, leading to yearly expenditures worth $190 billion.  This energy use also has a negative environmental impact. Burning fossil fuels to provide energy for buildings emitted 718 million metric tons of carbon dioxide in 2020, approximately 16 percent of all U.S. CO2 emissions that year. 

Commercial building owners have always looked for ways to reduce operating expenses, but now sustainability has entered the mix. While once strange bedfellows—green technologies are often seen as more costly to acquire and implement—sustainability and cost-saving measures can now go hand in hand. 

Prioritizing Sustainability in Buildings

Organizations face increased pressure to implement environmental, social, and governance (ESG) programs to reach Net-Zero by targeted dates—especially publicly traded companies that want to appeal to investors. In addition, they need to look even further at their physical structures to accelerate achieving these goals to meet federal, state, and local mandates. Government bodies at all levels prioritize sustainability and hold organizations accountable to fulfill these goals ­­and limit emissions. Consistent data and reporting will become crucial to measuring goals.

For example, in March of this year, the United States Securities and Exchange Commission proposed rules that aim to enhance and standardize climate-related disclosures for investors by requiring publicly-traded companies to disclose their greenhouse gas emissions and other climate-related risks to their shareholders starting as early as 2023.

Publicly-traded real estate investment trusts (REITs) have already begun providing sustainability disclosures and reports to keep up with today’s growing environmental concerns. Prologis, the largest owner of warehouses in the world, has focused on sustainability—and reporting on it—for quite some time. Even non-publicly traded real estate companies will need to embrace these methods. When doing business with a publicly-traded real estate investor, non-public entities will need to report their greenhouse gas (GHG) emissions to the public REIT as part of that public REIT’s required Scope 3 emissions reporting. If the non-public business partner cannot provide that data, then the public REIT may reconsider doing business with the company that cannot comply.

Investors have taken notice as well. According to BNP Paribas Wealth Management, Socially Responsible Investing (SRI), ESG, Low Carbon and Clean Energy indices have outperformed non-sustainable benchmarks over the last five years. Since 2016, general SRI/ESG indices and, more specifically, low carbon/clean energy indices have all outperformed European and global benchmark indices.

Other government organizations specifically focused on energy, such as the U.S. Environmental Protection Agency and Energy Star, provide building owners with resources that help boost awareness and incorporate strategies. State-level government resources also exist, such as the New York State Energy Research & Development Authority (NYSERDA) in New York, which encourages energy efficiency and the use of renewable energy sources for public, private, and residential properties.

Adding to the government mandates, utility companies have also stepped in to assist building owners with energy conservation to prevent grid overload. For example, Pacific Gas and Electric (PG&E) offers energy efficiency solutions that tackle LED lighting, HVAC controls, appliance optimization and efficiency that reduce operating costs for owners while attracting and retaining tenants. Another example is the Database of State Incentives for Renewables and Efficiency (DSIRE), run by North Carolina State University and Energy Sage, which helps businesses across the U.S. identify tax credits and exemptions, loan programs, and rebates when deciding to acquire renewable energy assets.

While government agencies and utilities prioritize sustainability, tenants and occupants also primarily drive the need for more sustainable spaces. Employees, consumers, and investors are reconsidering working with companies that do not align with their values and are increasingly expecting the commercial buildings in which they work, shop, eat, or go to school to meet their expectations for sustainability. To meet these needs, corporations, especially those in the technology, finance, and insurance sectors, are interested in meeting net-zero goals and often use this in their messaging and mission statements.

Whether driven by government enforcement or the needs of tenants and occupants, there are several forces shaping the future of sustainability for building management and operation. Commercial building owners will need to adapt and evolve their strategies to succeed, and fortunately, the building industry has solutions in place to help stakeholders along the way. 

Predictive Maintenance for Next-Level Efficiency and Sustainability 

Running equipment only when needed can be an easy and efficient way to realize cost savings and reduce waste quickly. Mainly accomplished by analytics software, such as fault detection and diagnostics, predictive maintenance delivers two benefits: real-time, prioritized alerts of equipment that is underperforming and the root cause of issues related to energy, operations, comfort and health.

As such, predictive maintenance strategies represent a seismic shift in the day-to-day operation of those running a building. The longer-term benefits mean a more efficient and sustainable property utilizing predictive technology to optimize everyday operations. Predictive maintenance requires operators to embrace technology and incorporate it into their day to day activities, often providing the information they need for a fraction of their efforts.

When introducing equipment analytics, building owners and operators must incorporate its utilization into their existing maintenance routine. Indeed, a phased approach to implementing predictive maintenance for energy efficiency and optimization will yield lasting results. Reducing energy consumption is a relatively straightforward time-to-value calculation, as it represents a goal most building owners wish to pursue immediately and analytics provide quick results.

The ROI for predictive maintenance can be easily calculated. Building managers can make the determination based on the existing maintenance strategies, particularly the cost of break/fix, contractor cost, the productivity of staff and the impact of downtime. Assuming an average of $1.63 per square foot of annual maintenance cost and a conservative 8% savings, a predictive maintenance strategy would save a 150,000-square-foot building almost $26,000 per year. In addition, the productivity improvement would be substantial.

Renewable Energy and Storage on Site

On-site renewable power generation and storage is another way for building stakeholders to implement more sustainable practices. Renewable energy resources like solar plus energy storage build resiliency when the utility grid goes down.

Thanks to the push for renewable integration, this microgrid trend has been gaining momentum for several years and will continue to grow. These “smart energy upgrades represent a way to add value to premium properties serving customers that demand top-of-the-line service in a world tilting toward a digital economy,” notes RealComm. However, owning and operating a microgrid requires a talented and dedicated team of people that not every organization can have available to them.

Energy-as-a-Service (EaaS) providers, enabled by a smart building integration platform like IOT Jetstream, will continue to bring cleaner energy into the grid when utilities are otherwise not incentivized to bring it online, as evidenced by the successful implementation by large-scale property owners like Macerich.

The Macerich 9% Emission Reduction Success Story

Macerich is one of the country’s largest property owners, operators, and developers in retail and mixed-use real estate. When the company, the third largest shopping center investor in the U.S., wanted to unify energy management systems across 17 sites, the REIT sought the help of Buildings IOT to integrate them without disrupting operations. 

Macerich’s previous energy management systems didn’t provide any insight into whether the systems were performing at peak efficiency. Macerich viewed fault detection and diagnostics (FDD) as an opportunity to enhance and modify operating parameters to reach the company’s energy goals.

Buildings IOT married Macerich’s two competing goals of an engaging mobile-forward user front-end and robust FDD back-end, leading them to the platform currently in use today. Since its initial implementation in 2019, the platform has been a key driver of Macerich’s 9 percent reduction in emissions—significant to the REIT’s goal of carbon neutrality by 2030.

Sustainability is the Future

Building owners must continue to find ways to be more efficient, save money and become more sustainable. While saving money and reducing energy consumption are welcomed goals for any building owner or property manager, it is much more complex in reality. Improving sustainability is a growing concern, driven by external forces such as government mandates and internal factors such as tenant and occupant needs, but it can be challenging to implement.

Predictive maintenance can help cut costs by reducing energy consumption and improving operations, but to meet ESG objectives, there are other measures to consider. As the corporate real estate industry is still finding normalcy throughout 2022, sustainability is becoming a leading factor in the marketability of owned assets.


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