Global Sustainability Perspective October 2011

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Global Sustainability Perspective October 2011

  1. 1. Global Sustainability PerspectiveOctober 2011COPYRIGHT © JONES LANG LASALLE IP, INC. 2011. All Rights Reserved 1
  2. 2. Global Sustainability Perspective, October 2011Trends in Sustainability Communications and ReportingThroughout 2011, Jones Lang LaSalle sustainability professionals have been reflecting on global sustainability reportingand communication trends, as well as the latest developments of specific interest to the real estate sector. A summaryof these trends is provided below.Trend 1: Use of Web 2.0 applications to engage with stakeholdersCompanies are, in an innovative way, beginning to exploit the possibilitiesoffered by Web 2.0 applications to reach out to different stakeholder groups Web 2.0 refers to web applications– in particular their customers - and to engage in dialogue with them. that facilitate information sharing, user-centred design and collaborationEncouraging dialogue can attract attention. It can also allow companies to on the World Wide Web. Web 2.0gain useful feedback and, potentially, to promote behavioural change. For applications allow users to interact and collaborate with each other in aexample, Timberland’s Responsibility Website includes a feature called social media dialogue, in contrast to‘Voices of Challenge’ where stakeholders can add comments about different static web content created for passiveaspects of Timberland’s Responsibility strategy and Sustainability viewing only. Examples of Web 2.0performance. In the property sector, use of Web 2.0 applications has include social networking, blogs andfocused on videos and blogs. Examples include Jones Lang LaSalle’s video sharing sites.global Green Blog and European property company SEGRO’s Sustainabilitylive.Of course, we may find that Web 2.0 applications are not as useful for real estate players as for those more ‘consumer-facing’ sectors. In real estate, ‘customers’ are of course tenants rather than individual consumers. But the concept ofdeveloping different sustainability communications for different stakeholder groups – rather than trying to reach all ofthem in one Sustainability Report – is definitely as relevant for this industry as any other. And in the real estate sector,we are already seeing a split between: 1 Environmental and social accountability to investors, major tenants and employees through corporate-level communications 2 Sustainability engagement with tenants, local communities, local authorities and other stakeholders at an individual property or development level.We expect this trend to accelerate throughout the remainder of 2011 and beyond.Trend 2: Transparency and trust are criticalWhile the expansion of digital media brings new opportunities, it also poses challenges. Brand value is becomingincreasingly difficult for companies to control as the fast-growing use of social networks means that concerns about acompany can quickly be publicised to a large audience. Coupled with this, there is a pervading loss of trust ingovernments and business in the wake of the global economic crisis and concerns over climate change.There is no trust without transparency, and if companies are perceived to be withholding material information orreporting only selectively on their performance, then their trustworthiness will suffer in the eyes of the public. However,demonstrating a high level of transparency about impacts on society and the environment can help to reduce these riskssignificantly.Inviting stakeholders to post direct feedback on a company’s website (such as in the Timberland example mentionedabove) is one way in which companies are increasing openness and transparency. Another way is to use stakeholderpanels composed of external experts, inviting members of the panel to provide critical feedback in a SustainabilityReport. Examples here include Lafarge and Balfour Beatty. And when it comes to reporting, readers do not expectperfect performance but they are impressed when companies tackle sensitive issues ‘head on’ rather than avoidingthem. A leading example here is Marshalls, a British landscaping company, who have taken a very honest and upfrontapproach to child labour.COPYRIGHT © JONES LANG LASALLE IP, INC. 2011. All Rights Reserved 2
  3. 3. Global Sustainability Perspective, October 2011For the real estate sector, we consider that transparency is already important in developed markets and is likely toincrease rapidly in the developing markets of the Middle East and Asia. At the moment, the lens of transparencyfocuses on environmental impacts during the development, operation and occupation of real estate. We can see this inthe recent release of the Global Real Estate Sustainability Benchmark (GRESB), where the larger part of the score isbased on environmental performance. Jones Lang LaSalle’s forward-looking perspective, however, is that therequirement for transparency is likely to spill over increasingly into social impacts, especially in Europe, where theprivate sector may be expected to fulfill some of the social obligations formerly provided by the state before austeritymeasures took hold. We envision that, globally, local communities and local governments are going to be far morequestioning about the socio-economic benefits of new developments, and the real estate sector will need to be ready toprovide robust and honest answers.Trend 3: Integrated reportingInvestors are increasingly demanding that sustainability is truly integrated into corporate strategies and is reflected incompanies’ reporting. Consequently, the number of integrated reports – reports that demonstrate the interconnectionsbetween an organisation’s strategy and financial performance and the sustainability context it operates in - is steadilygrowing at a global level. In particular, it is gaining significantly more traction in some markets, such as South Africa(where integrated reports are required by the Johannesburg Stock Exchange) and Brazil 1 .Currently, companies take different approaches to integrated reporting. Some (such as the Portuguese propertycompany Sonae Sierra) report on their financial, environmental and social performance separately, but within the samereport to demonstrate the importance of all three aspects. Others (including Hammerson of the UK) have focused morestrongly on communicating the value they derive from their sustainability strategy by applying Accounting forSustainability’s Connected Reporting framework. We expect to see greater consistency in the future with thedevelopment of an integrated reporting framework, led by the International Integrated Reporting Committee (IIRC). Thisis an important landmark in the evolution of integrated reporting and the IIRC recently released a discussion paper whichsets out an initial proposal for the framework.The IIRC proposes five guiding principles which should underpin the preparation of an Integrated Report:• Strategic focus• Connectivity of information• Future orientation• Responsiveness and stakeholder inclusiveness• Conciseness, reliability and materiality1 CorporateRegister.com; ‘CR Reporting Awards 2011 – Global Winners & Reporting Trends’ (March 2011)COPYRIGHT © JONES LANG LASALLE IP, INC. 2011. All Rights Reserved 3
  4. 4. Global Sustainability Perspective, October 2011Trend 4: Real estate sector specific reporting standards - EPRA and GRI guidanceIn the March 2011 edition of Jones Lang LaSalle’s Global Sustainability Perspective we reviewed key developments incorporate ESG reporting requirements at a global level and in different regions worldwide.Since then, two key developments have taken place with important implications for the property sector: the launch ofEPRA’s Best Practices Recommendations on Sustainability Reporting and the launch of the Global Reporting Initiative’sConstruction and Real Estate Sector Supplement (GRI CRESS).EPRA Best Practices Recommendations (BPR) on Sustainability Reporting was launched during the EPRA AnnualConference in London in September 2011. EPRA’s aspiration is for its sustainability BPR to provide a consistent way ofmeasuring sustainability performance in the same way that EPRA BPR on financial reporting make the financialstatements of listed real estate companies in Europe clearer and more comparable. The sustainability BPR are basedon GRI CRESS guidelines, and comprise two key components:• The EPRA Sustainability Performance Measures (the current version of the BPR covers environmental indicators but the scope of the BPR is likely to broaden in years to come)• Core recommendations for sustainability reporting which should be adhered to by all EPRA members, alongside additional recommendations which are based on EPRA’s observations of good practice. These observations cover issues such as: reporting by meaningful segmentation (e.g. by country or asset type); normalisation (e.g. kWh/m2); like-for-like analysis; and landlord and tenant consumption arrangementsEPRA also introduced the EPRA Sustainability Awards to annually assess compliance by the listed real estate sectoragainst the Sustainability BPR from 2012 onwards.The Global Reporting Initiative (GRI) offers the world’s most widely used sustainability reporting framework. InSeptember 2011, the GRI launched its Construction and Real Estate Sector Supplement (CRESS), a version of theGRI’s G3.1 Sustainability Reporting Guidelines tailored for the construction and real estate sector. The CRESS includesnew requirements and general guidance on the Guidelines’ content, so as to ensure that sustainability reports byconstruction and real estate companies effectively cover the sector’s key issues. It also introduces eight new sector-specific performance indicators.In particular, the CRESS covers the following key issues for the sector, expanded from the G3.1 Guidelines:• Design, operation and retrofitting of buildings• Building energy intensity, water intensity, and GHG emissions relating to buildings in use• Green building certifications• Management and remediation of contaminated land• Economic legacy impacts from activities and provision of facilities for local communities• Policies and practices regarding resettlement and displacementCOPYRIGHT © JONES LANG LASALLE IP, INC. 2011. All Rights Reserved 4
  5. 5. Global Sustainability Perspective, October 2011• Assessment of negative and positive impacts on local communities and community engagement at each stage of the property lifecycle• Reporting of labour and ‘health and safety’ impacts in relation to the total workforce, including contractors and subcontractorsThe content of the CRESS was developed over a two-year period through a multi-stakeholder process which wassupported by Jones Lang LaSalle’s in-house experts on sustainability reporting. Organisations involved includedProLogis, Lend Lease, Oxford Properties, Hermes, Hindustan Construction Company (HCC), Citycon, the UnitedNations Environment Programme (UNEP) and the UN’s specialised agency, the International Labour Organization (ILO).With the introduction of these two guidance documents, we hope to see greater consistency and transparency in themeasurement, monitoring and reporting of sustainability impacts in the real estate sector.Legislative UpdateSustainability Legislation for the Real Estate SectorMaking sure that we keep you up to date on major energy, carbon and related sustainability legislation in the majormarkets, below are the latest changes that may impact the office space you are managing or the real estate investmentsyou are holding.Global / United Nations At the beginning of October, Panama hosted the last of three meetings held since the Cancun Climate Change Conference last year in preparation of the Durban Conference starting at the end of November. The meetings are intended to help governments prepare their negotiation positions going into the Durban meeting at the end of November. The Executive Secretary of the United Nations Framework Convention on Climate Change (UNFCCC), Christiana Figueres, stated during the Panama meeting that Governments “have recognized very clearly that the current level of effort is not enough and that it is important to increase both the level of emission controls on greenhouse gases as well as the capacity of countries to adapt to climate change”.However, there were some positive outcomes in Cancun, notably the creation of a $100 billion a year Green ClimateFund to help developing nations adapt to climate change and to facilitate technology transfer mechanisms betweenindustrialised and emerging economies.But the key issue remains prolonging the Kyoto Protocol for a second commitment period beyond 2012. Opinions onhow this goal may be achieved diverge in the preparation for the Durban meeting and some countries propose to delayany decision until 2015. Currently, only the European Union stands firmly behind the Kyoto Protocol prolongation beyond2012. The U.S. government continues its refusal to commit to any binding carbon reduction targets, as long as majoremitters - such as China, India or Brazil - are not joining the collective global effort in combating climate change.Canada, Russia and Japan have announced they are not in favour of prolonging the Kyoto Protocol at the meeting inDurban.In our next edition of the Global Sustainability Perspective we will provide you with feedback from the Durban ClimateChange Conference (COP17) being held in South Africa from 28 November to 9 December.COPYRIGHT © JONES LANG LASALLE IP, INC. 2011. All Rights Reserved 5
  6. 6. Global Sustainability Perspective, October 2011UKIntroduced in March 2011, the UK Energy Bill aims to encourage investment in energy efficiency measures for homesand commercial real estate. This September, the Bill went through the Report stage and Third Reading in the House ofCommons, and in October it will go through the Consideration of Amendments in the House of Lords prior to receivingRoyal Assent. The June amendment - supported by a number of organisations such as the UK Green Building Counciland the British Property Federation - to require Display Energy Certificates (DECs) for commercial buildings was notretained by the UK government during the September session.The question therefore remains if the UK government will put into practice the Carbon Plan, a UK government-wide planof action on climate change that sets out initiatives and deadlines for the next five years, its commitment to extend DECsto commercial buildings by October 2012, and what the next step will be to boost the uptake of commercial greenbuildings.The UK government also intends to launch a number of consultations this autumn on energy performance certificates aswell as building regulation changes.FranceA continuing stream of decrees is being published as part of the French ‘Grenelle’ Environment Laws. Here are the mainupdates since our last Global Sustainability Perspective edition.A decree on what to report in greenhouse gas inventories requires companies with over 500 employees to reportgreenhouse gases from direct and indirect emissions (electricity and district heating etc.). The law also applies to publicinstitutions with headcounts over 250, to municipalities with over 50,000 residents and to central government. The reportneeds to include reduction measures and goals for a three-year planning period.The urban planning law will contain a new requirement to further the use of eco-friendly materials and products inbuilding construction. The new decree will no longer allow urban planning laws to prohibit the use of eco-friendlyconstruction materials or installations, such as photovoltaic installations on building roofs.The building code receives a new obligation for building owners to install electric vehicle charging stations in new andexisting buildings. Electric charging stations must be installed and cover at least 10% of a buildings car parking capacity,for new buildings from 2012 and existing buildings from 2015. A similar obligation applies for bicycle storageinstallations.ChinaChina is studying how to enforce a total cap on energy consumption by setting targets for local governments, agovernment report stated in August. The proposed total energy gap is intended to slow emissions growth and fuelconsumption by setting quotas, and some details of how China could enforce the cap have been disclosed by theNational Development and Reform Commission (NDRC). Any proposed projects that have not passed an energy savingassessment will not be approved for construction, it added. However, the cap would still allow for a 26% increase in totalenergy consumption by 2015.As an advisor to developers of large construction projects, we expect the central government to ramp up efforts tocontrol energy intensity. Though new construction has slowed somewhat in the more developed Eastern regions of thecountry, the volume of new projects in these areas is still extremely high by any Western country’s measure. In the lessdeveloped Western cities and central tier 2 cities, new construction growth is accelerating, following the path of leadingcities like Shanghai and Beijing. With so much new property and the consequential energy demands pulling from analready pressured electricity grid, energy efficiency has become the urgent need of a nation which requires fast growth(8% to match population growth) with strained domestic energy supplies.COPYRIGHT © JONES LANG LASALLE IP, INC. 2011. All Rights Reserved 6
  7. 7. Global Sustainability Perspective, October 2011However, it is also important to bear in mind China’s typical process for introducing new regulations as demonstrated bythe recent tax overhauls. Before introducing sweeping reforms which add cost to companies, government traditionallypilots a variety of different execution strategies in select cities such as Shenzhen, starting with initial standards whichalign with existing best practice before tweaking the regulations and increasing the standards. Should China moveforward with firm caps, it can be expected that implementation will be conveyed well in advance and the impact todevelopers of the highest quality properties will be marginal.On the renewable energy front, there has been an important change with the introduction of feed-in tariffs for solarpower. Since August, project developers can now sell solar-generated electricity to utilities at a price of about $0.15 perkilowatt hour. And in some cases, depending on the timing and location of solar projects, the price is slightly higher.Analysts attribute the birth of this long-awaited scheme to two urgent needs: keeping the nations promise to use non-fossil fuels amid nuclear development setbacks, and feeding its hungry solar manufacturers for whom overseas marketsare no longer sufficient. Up to now, China has lacked efficient financial incentives to nurture its own solar energy use. Inmany cases, analysts say, project developers here could barely break even, let alone get a decent investment return.AustraliaOn 1 November 2011 the Australian property industry will be subject to the full disclosure requirements of theCommercial Building Disclosure (CBD) program that started in the summer of last year and is designed to improve theenergy efficiency of Australia’s large office buildings. The program was operating in a transitional capacity from 1November 2010 with only a NABERS Energy rating required at transaction. From 1 November 2011 a full BuildingEnergy Efficiency Certificate (BEEC) will be required during eligible property transactions. The BEEC needs to beprovided during the sale, lease or sub-lease of commercial office space greater than 2,000 sq m with only limitedexceptions (for example new buildings with an occupancy certificate less than two years old). Each BEEC will be apublicly available document that can be downloaded from http://www.cbd.gov.au.The Building Energy Efficiency Certificate (BEEC) comprises the following: Full Disclosure Disclosure Transition Period Requirements Completed by Whom? Requirements 1 Nov 2010 – 1 Nov 2011 From 1 Nov 2011 NABERS Energy rating Yes Yes Accredited Assessor Tenancy lighting energy efficiency No Yes Accredited Assessor assessment Department of Climate Change & Energy efficiency guidance No Yes Energy Efficiency (DCCEE)A limited number of exemptions apply for genuine cases wherein disclosure requirements cannot be satisfied: Exceptions (granted automatically – no action required) New buildings (occupancy certificate < 2 years old) Strata title properties Sale through shares, units or partial interest Short-term lease (< 12 months including options to extend) Mixed-use buildings < 75% office (of the NLA) Exemptions (Application required. Exemptions are granted at the discretion of DCCEE) Police or security operations Where NABERS rules cannot be appliedCOPYRIGHT © JONES LANG LASALLE IP, INC. 2011. All Rights Reserved 7
  8. 8. Global Sustainability Perspective, October 2011Holistic Evaluation of Sustainability InvestmentsThe environmental and social impacts of property are rapidly becoming central to its overall performance, as investorsand occupiers alike recognise the importance of sustainability to the long-term viability of their business.Several efforts have been made during the past few years to help build a consensus within the sector about the mostappropriate sustainability metrics to use. A number of industry initiatives have emerged to enable property stakeholdersto track this important aspect of environmental asset efficiency in meaningful ways.One of the most significant emerging trends in property is the shift towards an increased acceptance of open planenvironments and a general move away from ‘private’ cellular space to more agile and flexible workplaces. The goal isto reduce occupancy costs, accommodate activity growth at minimal expenses and create a collaborative space that, atthe same time, increases staff productivity.Sustainability investments and ROIA well-managed property requires regular scrutiny of its plant and equipment, and of energy-consuming practices, toidentify further savings that might be achieved through sensible and timely improvements. Going beyond the low cost‘quick wins’ and behavioural changes, one should involve a robust investment appraisal with a view to identifying thosesustainability improvement measures that offer the best value per invested dollar. Financial modelling techniques shouldcertainly account for important variables that are likely to currently impact on the commercial viability of sustainabilitysolutions; for example, rising utility prices, carbon emission related taxes or rising insurance premiums.More challenging criteria to be factored into the financial model are the upside value potential that certain investmentsmight secure for the property owner, such as attractive rental values or reduced vacancy rates, by virtue of better future-proofing the asset to changing investor/occupier requirements.Whatever the financial modelling technique utilised, the aim should invariably be to evaluate the net present value (NPV)of sustainability improvement measures. Such measures can then be grouped according to their value potential toproperty stakeholders with differing investment horizons.Innovative ways of overcoming what has become known as the ‘split incentive’ (where the owner pays for the capitalimprovement and the tenant recuperates the associated operating cost saving) are emerging. One example are the so-called ‘green leases’ where both landlords and tenants agree on how to share some of the costs and benefits ofsustainability upgrades and ensure transparency around performance data.Planning sustainable investments into asset lifecyclesThe timing at which a particular sustainability initiative is considered within an asset’s lifecycle is a fundamentallyimportant criterion in determining its commercial viability. Planning for sustainability investments as an intrinsic part ofany property’s asset refurbishment cycle allows the sustainability measures to be integrated within existing capitalbudgets by aligning the planned preventive maintenance (PPM) schedules and Asset Replacement interventions.Holistic property performance must include consideration of sustainability. It also emphasises the important role thatchanging property usage, including the move towards flexible working policies, can play in reducing property’s exposureto rising energy prices and carbon liabilities. There is a need for robust financial models to systematically factor incomplex environmental and economic parameters in the appraisal of value that can be generated from investments insustainability improvements.COPYRIGHT © JONES LANG LASALLE IP, INC. 2011. All Rights Reserved 8
  9. 9. Global Sustainability Perspective, October 2011Stop Press: Jones Lang LaSalle CSR Report 2010Our 2010 CSR Report is now published - learn how our sustainability performance can benefit you Jones Lang LaSalle released its annual Corporate Social Responsibility (CSR) Report at the beginning of September. The Report shows how Jones Lang LaSalle and LaSalle Investment Management have taken significant strides towards integrating CSR and sustainability into our business. It also profiles a range of industry-leading initiatives that add value to our role as experts in real estate. The new Report, entitled ‘Where we stand: Building beyond tomorrow’ focuses on five material areas: energy and climate; client service excellence; green buildings; community commitment; and workplace, wellbeing and diversity. It provides a robust insight into the success of Jones Lang LaSalle’s own CSR commitments through our internal sustainability program, ACT: A Cleaner Tomorrow, as well as the numerous sustainability achievements related to work with our clients around the world. Colin Dyer states in his opening message: “Our CSR Report tells the story of our achievements and challenges throughout 2010. Our CSR activities will always be ‘a work in progress’, but we believe reports such as this can inspire effortstoward being first for our people, first with our clients and shareholders, and first in the communities where we dobusiness.”Jones Lang LaSalle’s 2010 CSR Report is based on guidelines from the Global Reporting Initiative (GRI) to an initial,self-evaluated disclosure level C. Additional information is available from Jones Lang LaSalle’s dedicated CSR websiteand from a podcast where our Global Chief Operating and Financial Officer, Lauralee Martin, discusses our CSRcommitment.We welcome your feedback on this edition of our CSR Report and on our overall sustainability and CSR strategy. Toretrieve your comments, we have created a five-minute survey. We look forward to hearing from you as we aim to improveour approach to CSR.Research - Sustainability and Offices in 2020There has been considerable change in the office real estate sector over the last 10 years. The future isdifficult to predict but the worst position one can take is not to even try. Jones Lang LaSalle’s Offices 2020research aims to go beyond the existing forecasts and to establish new insights into the office market betweennow and 2020. As part of this endeavour, we have polled a selection of industry experts in Europe on the keyfuture issues perceived as most pertinent to them today. The programme will consider the top issues facingoffice real estate investors, developers and occupiers across Europe, the Middle East and Africa. Offices 2020explores the shape of offices to come and covers issues and challenges including sustainability, location,asset management, technology, fit-out and finance.In this summary, we are providing you with the key findings that concern the sustainability issue in the officescontext. Based on a preliminary survey by Jones Lang LaSalle, 83% of real estate professionals thinksustainability is currently the most pressing issue facing office real estate and will be for the next 10 years.From almost nowhere a decade ago, this subject has raced to the top of our worry list. In seeking tounderstand sustainability and its impact on the offices sector, we have identified five significant drivers. ForCOPYRIGHT © JONES LANG LASALLE IP, INC. 2011. All Rights Reserved 9
  10. 10. Global Sustainability Perspective, October 2011the most part these are interconnected, self-reinforcing and require continual vigilance as they evolve andspearhead the developments in office real estate.The key drivers of sustainability• Environmental Change - This needs little commentary these days. Acid rain, holes in the ozone layer, global warming, damage to ecosystem services, climate change, resource depletion, air water and ground pollution, deforestation, wasteful practices – the list is long and compelling.• Legislation - Governments have responded, slowly at first, and subsequently with a torrent of environmental legislation. From Kyoto, Copenhagen to Cancun, the issues have been discussed at the very highest political level and policy decisions taken at supra-governmental, regional, national and local levels. Two key obligations are: – by 2020 all new buildings need to be ‘nearly zero energy’ – by 2050 emissions from all buildings need to be as ‘near to zero’ as possible• Ethical Business - many corporations have radically revised their view of what they do and how they do it. Ethical concerns have spread well beyond ecological issues, of course, to include things like child labour, workers salaries in the developing world, and health and safety issues in the Middle East. In short, the business of business is no longer business, but profits, social and environmental – the triple bottom line.• Cost Control - Finance Directors have been quick to understand that the sustainability agenda is yet another way to squeeze costs inside the business. Whether cynical or enlightened, the fact is that being ‘green’ is now business common sense.• Management Levers - Sustainability is such a powerful force in our society that its influence on employees comfort and motivations has not been lost on HR and business managers. Overall, employees seem more satisfied to work in sustainable buildings and, in an age where finding and keeping talent and commitment is a regular HR nightmare, offices have an increasing role to play.These sustainability drivers will ensure that the ‘green agenda’ will continue to grow and grow over the decade. Manynew trends linked to sustainability will emerge and continue to change the landscape. Each trend poses newmanagement challenges and new risks but also new opportunities. Here is just a selection of some of the trends we canforesee:• Stricter legislation - every new piece of legislation at a European or national level will have the power to surprise on the downside, leading to investor frustration• While the vast majority of buildings remain non-green, a trend towards light refurbishment programmes will give many more buildings a boost towards eventual conformity with legislation• Green leases – or at a minimum Memorandums of Understanding• Continual technological innovation• Green city governance• Occupiers will become far more educated about their sustainability requirements and be more imposing• Occupiers will be likely to push the boundaries further with a demand for second-hand furniture and non-toxic cleaning productsThe list of trends is long and exhaustive. One of the things we can ascertain is that a ‘sustainable building’ will quitequickly come to mean a ‘quality building’. Given the forceful, accelerating drivers and the emerging trends, it is clear thatorganisations would be wise to keep up with the pace of change. On the other side, there are very few inhibitors to thisdynamic, if any. Those who succeed will recognise sustainability as a force for rapid change that stirs up much in theindustry and which offers opportunity rather than constraint. Click here for more Offices 2020 research.COPYRIGHT © JONES LANG LASALLE IP, INC. 2011. All Rights Reserved 10
  11. 11. Global Sustainability Perspective, October 2011Certification Updates: LEED 2012 (USA); HQE 2011 (France)LEED Certification Recast Ready for 2012The U.S. Green Building Council (USGBC) periodically reorganizes its LEED rating system in response to feedback fromgreen building practitioners as more is learned about best practices to reduce the impact of building design, constructionand operations on the environment. The last major reorganization was in 2009. The 2012 reorganization will introducethe most sweeping changes since the system began.The USGBC’s original goal was to minimize the environmental impact of buildings within the boundaries of strategiesthat could be carried out in a cost-effective manner. As green building knowledge and practices improve and the cost ofLEED has become negligible compared to the benefits, the USGBC now seeks to evolve the system so that LEEDcertification eventually recognizes buildings that have a neutral or even positive impact on the environment. The 2012version aims to move the system toward that goal.In addition, each successive reordering of the LEED system has addressed the feedback that the USGBC has receivedfrom green building practitioners.One of the biggest proposed changes is the increase in credit categories from 7 to 10, with new categories to ensurepractitioners follow an integrative process to measure building performance, as well as the separation of location andtransportation credits into their own category. The number of prerequisites may also increase from 9 to 15, inrecognition of the additional baseline criteria that every building should have to be worthy of certification.Another major change is the realignment of the types of LEED. The existing New Construction (NC) and Core & Shell(CS) certifications will be rolled up into a new Building Design & Construction (BD+C) system that will include a range ofproperty types: commercial, schools, retail, data centers, warehouse and distribution centers, hospitality and healthcare.The Existing Buildings: Operations and Maintenance (O+M) system also includes all those property types excepthealthcare, and the Interior Design & Construction (ID+C) standard covers not only commercial interiors but also retailand hospitality properties. Systems for homes and neighborhoods continue to have their own criteria.A welcome change for many practitioners is a closer alignment of credits among the different rating systems. Whereas inthe past versions similar credits had different names requirements in different systems, there is much more uniformity inthe proposed 2012 system. Also, in some situations two or more existing credits have been combined into one morecomprehensive credit.While there are a number of new credits being introduced and several being reused from other rating systems, duringthis first public comment period, no point values have been assigned yet. The main focus of the comment period is toevaluate and revise the credit requirements. This brings up the obvious question if the proposed rating system will raisethe total points achievable in LEED from 110 to higher total, or if credits will start being counted at ½ point values.The proposed draft also moves closer to USGBC’s goal of developing a performance-based rating system instead ofprescriptive requirements. While a performance-based system will obviously require more evaluation, calculation anddocumentation by the project team, it will also allow more opportunities for alternatives to compliance.Our perspectiveAlthough the comment periods were the most appropriate times to offer opinions on specific changes, our extensivework with building owners, investors and tenants worldwide - as well as the hundreds of LEED buildings we have helpedcertify, lease and/or manage - gives us a unique perspective on where the system is headed.In general, the changes under discussion do an admirable job of addressing most of the concerns that we hear aboutLEED. In particular, the emphasis on measurement and verification and the introduction of credits for following anCOPYRIGHT © JONES LANG LASALLE IP, INC. 2011. All Rights Reserved 11
  12. 12. Global Sustainability Perspective, October 2011integrative process will help ensure that LEED certification signifies a high-performing building, which was not universallythe case in the early days of the system.We are pleased to see the inclusion of retail and hospitality properties in the new version. Many retail and hotel ownerswe work with have expressed an interest in certification, but the existing systems do not work well for those propertytypes. It is an interesting decision for USGBC to develop one system for retail, hotel, office and other property types,rather than creating individual systems for property types with very different issues and goals. Creating one system forall property types has clear advantages, but it may create challenges that prevent retail and hospitality owners fromadopting LEED as quickly as we would like.Another trade-off lies in USGBC’s decision to raise the bar on certification overall, by eliminating most of the ‘easy to get’credits and increasing the number of prerequisites. Many owners already tell us that LEED is too difficult for them to get,and these changes may prevent more owners from maximizing energy and sustainability in their buildings. However, werecognize that LEED is designed to be an elite standard indicating superior performance, and making certification moredifficult to achieve serves that purpose well.A question in our minds is how changing LEED standards will affect legislative efforts to make buildings greener. In theU.S., many states and cities have passed laws that large commercial new-construction projects - and even existingbuildings in some cases - must conform to LEED standards. This has already created some confusion as somelegislation contains language that conformed to the LEED standard at the time of passage, but no longer conformstoday. These points of confusion will surely increase as certification requirements become more stringent. To put itanother way, the evolution of LEED as a benchmark for high performance is inconsistent with the idea that everybuilding must achieve that benchmark.These points are not meant to suggest that LEED standards should remain frozen in time. One of the best things aboutLEED is its evolution as an effective worldwide standard, and that it requires the will to change. USGBC’s process forgetting feedback from the market and acting on that feedback, is vital to its continued success.French Green Building Certification System HQE recastSince its beginning in 2005, the French green building certifications system HQE (Haute Qualité Environnementale orHigh Environmental Quality) for commercial property has built separate reference frameworks depending on the buildinglifecycle and the building type that was to be certified. As such, in France there exists a separate reference frameworkfor office and educational buildings for new construction or for their in-use phase. Another framework would certifywarehouses or hotels etc. When there was a development programme that contained at the same time offices, retailand, for example, hotel buildings, each asset had to be certified independently across all the 14 assessment categories.On top of building-specific criteria, there was a complementary assessment of the project management that included ananalysis of the project management quality, the communication among project stakeholders and the documentationprocess.In order to streamline the certification system for new mixed-use developments and to reduce time and effort, the Frenchcertifying body, Certivea, is introducing an assessment recast. For mixed developments it proposes to use a genericassessment framework that applies to all different asset types that form part of the development programme. And foreach different asset type, it uses a building specific analysis that comes in addition to the generic framework. In addition,if there are several separate activities in the same building, then a developer can choose to apply the assessmentframework to the activity-specific portion of a building to which it corresponds most.In contrast to the existing assessment methodology, where a building was only certifiable if a reference frameworkexisted for that specific type, from now on a building with any kind of activity it houses can be assessed, using a systemof equivalent points that Certivea may provide based on custom-made audits.COPYRIGHT © JONES LANG LASALLE IP, INC. 2011. All Rights Reserved 12
  13. 13. Global Sustainability Perspective, October 2011This new method allows, for example, for only having to assess the construction method and the site once, if it concernsone and the same mixed development programme. As a consequence, only the individual asset specific categories needto be analysed.After a public consultation period that lasted from May to June of this year, the new methodology is currently being finetuned, taking into account the comments and feedback from various working groups. It is expected to come into forcesome time in October 2011.COPYRIGHT © JONES LANG LASALLE IP, INC. 2011. All Rights Reserved 13
  14. 14. Global Sustainability Perspective, October 2011Global Energy and Sustainability Services Contacts:Dan Probst Julie Hirigoyen Peter Hilderson Peter BelisleChairman, Energy & EMEA Head of Asia Pacific Head of Energy Americas President of EnergySustainability Services Sustainability Services & Sustainability Services & Sustainability Services+1 312 228 2859 +44 (0)20 7399 5330 +61 2 9220 8735 +1 213 239 6033dan.probst@am.jll.com julie.hirigoyen@eu.jll.com peter.hilderson@ap.jll.com peter.belisle@am.jll.comCOPYRIGHT © JONES LANG LASALLE IP, INC. 2011.This report has been prepared solely for information purposes and does not necessarily purport to be a complete analysis of the topics discussed, which are inherentlyunpredictable. It has been based on sources we believe to be reliable, but we have not independently verified those sources and we do not guarantee that the information inthe report is accurate or complete. Any views expressed in the report reflect our judgment at this date and are subject to change without notice. Statements that are forward-looking involve known and unknown risks and uncertainties that may cause future realities to be materially different from those implied by such forward-lookingstatements. Advice we give to clients in particular situations may differ from the views expressed in this report. No investment or other business decisions should be madebased solely on the views expressed in this report.COPYRIGHT © JONES LANG LASALLE IP, INC. 2011. All Rights Reserved 14

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