We investigate what green building really costs, put a value on the learning curve involved with becoming a green developer or building professional, as well as look at the different types of green building product specifications available on the market.
As many design and construction professionals know, building material cost estimations and reality can be two very different things. While there are many clients who are prepared to pay a premium price for long-term sustainability benefits that are achieved from green building practices, the perceived price premium for building green isn’t always within everyone’s reach. In this issue, we explore the issues and costs involved with green development.
In a book entitled The green building bottom line: The real cost of sustainable building by Martin Melaver and Phyllis Mueller, various green building experts – including editors, builders and engineers – draw on their experience in the costs involved with green building. In chapter four, the chief financial officer of Melavier Inc., Denis Blackburne, considers the costs of gaining green expertise and looks at the cost of the learning curve.
Green is the colour of money
The money aspect of sustainability is on top of everybody’s mind, writes Blackburne. The questions that are asked include: Can I afford it? How much does green cost? Does it make economic sense? What is the payback? Is it a fad or is this green stuff here to stay?
At workshops and conferences focusing on sustainable developments, many speakers leave with the message that while green has arrived on “Main Street” (i.e. among the blue chip companies who can afford it), it isn’t yet part of the mainstream. This, argues Blackburne, is changing rapidly with the main driver being financial considerations.
“If the initial drive for the sustainability movement was initiated by the heart – a commitment and passion for doing the right thing at all costs – what will keep this movement sustained over the long haul is the wallet: Market demand for green products and services, ﬁnancial capital to address these needs, and business models that prove conclusively that a company not only can do well by doing good, but can do better,” writes Blackburne.
When asked whether it costs more to be a green building company, Blackburne usually responds with what may seem like a contrarian or off-putting question, namely: “More versus what?”, because there is no such thing as an absolute standard for building. This isn’t a yes/no question because one developer might opt to collect rainwater on the roof for irrigation instead of choosing high-end finishes for a foyer, for example.
The cost will also depend on the type of green certification that is sought, how experienced the developer is in green building practices and how green the developer wants the project to be. A cheaper green initiative would be dedicating parking bays to people driving more sustainable cars or car-pooling to the office, for example, while a more expensive investment would obviously be a green roof.
The cost of learning green building practices
There’s also a learning curve associated with developing green building practices. A company developing their first certified green building won’t be able to say that the project didn’t cost more due to green initiatives and features, because there’s a premium cost associated with adapting a new set of processes. Besides the additional time involved in doing things differently, there is also a learning curve associated with changing from a linear approach to development to an integrated approach.
Blackburne explains: “In a conventional development project, the developer creates an overall vision for the project and hands off the vision to the design team, who gives shape to the vision, which then gets handed off to ﬁnance for cost evaluation, back to design for refinements and then to the contractor who builds the project. A leasing team is brought in to ﬁnd paying tenants. And the whole thing gets handed off to the property management group to make things run smoothly. In a green development, all of these disparate parties are present from the get-go. Done well, siloed areas of expertise are jettisoned as all work collaboratively to achieve a high-performance building. Done poorly, turf battles emerge, various professionals lay claim to their own area of expertise and collaboration seems well-nigh impossible. It takes time to manage this collaborative process both creatively and efﬁciently.”
The cost of certification
There is also a cost associated with achieving LEED certification, for example. Table 1 shows what Melaver Inc. has spent on LEED certification:
Blackburne says it took their company approximately three years to manage this learning curve to the point where they can now develop a green building with the same efficiency of time and money as a conventional project. Other costs that can be attributed to the learning curve include paying premium prices for green materials and technologies (either out of ignorance or because the prices still needed to become competitive). The three-year learning curve, writes Blackburne, amounted to approximately USD$1,56million (USD$1,513 million + USD$49 000 in LEED-related education), but the investment was definitely worthwhile.
Blackburne summarises that green building does cost more, but that the costs involved with the learning curve should be seen as an investment in the long-term future and it should be amortised over the lifetime of the business.
In 2013, the World Green Building Council (WGBC) released a report entitled The business case for green building: A review of the costs and benefits for developers, investors and occupants, which examines whether or not it’s possible to attach a financial value to the cost and benefits of green buildings.
“From risk mitigation across a building portfolio and city-wide economic benefits, to the improved health and well-being of individual building occupants, the business case for green building will continue to evolve as markets mature. Indeed we have already seen this momentum grow globally, where in more and more places green is now becoming the status quo,” said Jane Henley, chief executive officer of the WGBC.
The report reinforces the Green Building Council of South Africa’s (GBCSA’s) own publication, entitled The rands and sense of green buildings.
“The rands and sense of green buildings sets out the economic case for green building in a clear, incontestable manner based on local evidence and tangible case studies. It dispels the myth that green building is more expensive, lists the benefits of green building and provides the local proof of these,” says the chief executive officer of the GBCSA, Brian Wilkinson.
SA misconceptions about the costs associated with green buildings
In a report by Grahame Cruickshanks from Ernst & Young, entitled Motivation for green buildings, Cruickshanks writes that there have been many misconceptions about the costs associated with green buildings when compared with conventional construction costs.
“It is noteworthy that until the start of this century South Africa enjoyed some of the lowest energy, water and construction costs in the world,” writes Cruickshanks. While these lower costs supported positive growth in the building industry, it also facilitated inefficient construction methods and excessive resource consumption by the built environment.
In the GBCSA’s report, the Council reveals that the South African property industry can expect cost premiums of a new commercial green building to be between 3% and 10%. Cruickshanks’ report states that the developers of the four-star rated Green Star SA 40 on Oak development in Johannesburg said the construction value was affected by less than 1% to achieve Green Star certification. Greening the Absa Towers West office (a five-star rated Green Star SA office building) is reported to be less than 2% (including the costs related to the Green Star SA certification).
“More work is required in researching the costs and benefits of green building in South Africa – especially in terms of productivity benefits associated with the improved indoor environment quality. But even at this early stage, the business case for green building is very strong. This is particularly relevant when one considers the realignment of South Africa’s utility costs with worldwide trends. The era of cheap and abundant resources has come to an abrupt end,” writes Cruickshanks.
Green product standards and certification
Green product standards started to appear in the market in the 1980s. While the standards were initially developed in response to growing concerns about product toxicity, the number of product certification types has continued to grow due to concerns over global warming and resource depletion. Today there is a proliferation of green standards, certifications and rating systems. According to Building Green, there are about 600 green product certifications in the world and the numbers continue to grow.
“It can be challenging and time-consuming determining which standards, certifications and rating programmes are most credible and applicable to a particular project,” says the WBDG.
Product certification confirms that a product meets defined criteria of a standard. ISO defines certification as “any activity concerned with determining directly or indirectly that relevant requirements are fulfilled”. Product certification and labels certify products based on lifecycle parameters such as energy use, recycled content, and air and water emissions from manufacturing, disposal and use. Third-party certification is of key importance, seeing as specifiers and builders would want to choose a product that has been certified by a party that is independent of the manufacturers.
“To fully understand what a green certification represents and the quality of information it provides, the details of its requirements need to be reviewed carefully. The ISO defines different types of labels that can be used for products,” says the WBDG.
SA rating systems
In The rands and sense of green buildings, the GBCSA notes that many committed specifiers in South Africa spend many additional and often unrecoverable hours investigating the green claims of manufacturers and trying to establish which materials options are environmentally preferable.
“Designing green requires a green products and material supply chain, and this is one of the challenges facing green designers and specifiers in South Africa,” says the GBCSA, before listing the following local systems:
Ecospecifier is chiefly a product and materials assessment service and online eco-product database. Its aim is to help architects, designers, builders and specifiers with shortcuts in the materials sourcing process. Ecospecifier is also planning to launch its GreenTag system in South Africa. GreenTag is a lifecycle assessment (LCA) based rating system for products and is a Type 1 ISO 14024 compliant eco-label.
Eco Standard South Africa is a resource and standards council for the sustainable building product and material sector. Their material and product assessment tool is designed specifically for South Africa, and serves as a measurement to be used as a reference to identify materials and products for responsible environmental practices.
South African National Eco-Labelling Scheme (SANES)
In conjunction with Indalo Yethu (an agency of the Department of Environmental Affairs aimed at mobilising the country around environmental and sustainability issues), the Department of Public Works will develop this eco-labelling scheme as part of the department’s Green Building Programme.
For more information, visit www.gbcsa.org.za, www.wbdg.org, www.ey.com and www.academia.edu, to whom full thanks and acknowledgement are given.