2013 is likely to be a year in which the fluidity of the sustainability agenda poses mixed challenges for office owners, occupiers, developers and lenders.

Miles Keeping, Deloitte Real Estate, is a member of the BCO's Environmental Sustainability Group.

In a selection of blogs from the BCO's ESG Miles shares his views on challenges of the sustainability agenda in 2013...do you agree?

Will energy performance become a bigger value bargaining chip?
Last year I predicted that 2012 would see an increase in investor attention towards the energy ratings of their assets and portfolios as the Energy Act 2011 promised to mark offices with poor energy ratings as unlettable without certain steps being taken to improve them. It seemed like a safe bet that Minimum Energy Performance Standards (MEPS) would be a motivating force.

Certainly, some investors took a more rigorous approach to investment due diligence with regard to the energy performance of prospective acquisitions. A number of property owners have also taken steps to assess the exposure of their standing investments to the risks that the prospective regulations hold, and to begin to put in place strategies for dealing with them. Moreover, we’ve seen lenders begin to factor these issues into their lending decisions and this trend will almost certainly continue through 2013, as Government consults upon its detailed regulatory proposals during the year.

What is somewhat surprising is that office occupiers haven’t to any great extent begun to consider the risks from MEPS that face them. There are downside and upside issues here: Potential restrictions on sub-letting surplus space on the one hand but also, perhaps, having a whip hand in releasing, rent review and dilapidations negotiations in the run in to 2018.

Regulatory uncertainty
However, this particular area of regulatory risk (and opportunity, for the savvy) sits within a much broader context of policy and legislative ambiguity. Whilst the broad direction of travel in the UK is reasonably clear, there is a significant number of policy and regulatory reviews on-going which are creating uncertainty within the market on how the relevant policy objectives will be implemented in practice. This affects many aspects of the property lifecycle, and is a key concern for many office owners, developers and occupiers. Key examples include the future requirements of Building Regulations for new construction and refurbishment, the next iteration of which is due in 2013, and the future of the CRC Energy Efficiency Scheme, which will remain in simplified form until 2016 but is to be reviewed thereafter.

From 2013, new regulations extend the requirements for Energy Performance Certificates (EPCs) in commercial property. Perhaps most notably, from January 2013 it is a requirement for all non-dwellings over 500m2 frequently visited by the public to display a valid EPC in a prominent place clearly visible to members of the public. The definition of what property this includes will be open to some considerable interpretation, and we expect this to cause confusion amongst office owners and occupiers. This move also goes against the recommendations of a strong industry lobby to mandate the use of Display Energy Certificates in certain commercial buildings. It’s likely that this new requirement to display EPCs, a mechanism in which the market has little confidence, will fuel more intense debate in this area.

Mapping carbon penalties & incentives
More broadly, there is likely to be considerable focus afforded to the array of financial penalties and incentives which currently relate to the energy and carbon performance of commercial property. The Green Property Alliance, including the BCO, with co-funding from the Green Construction Board, has instructed Deloitte Real Estate to engage with representatives from across the sector, and Government, to assess the effectiveness, proportionality and consistency of the existing fiscal framework with a view to positively influencing future Budgetary policy.

So, 2013 is likely to be a year in which the fluidity of the sustainability agenda continues to pose challenges for office owners, occupiers and developers. With the political cycle moving towards the next iteration of party manifestos, we can expect intense debate in this area to continue.

Climate Change: heresy and science

Nick Cullen is a Partner, Research & Development, at Hoare Lea and sits on the BCO's Environmental Sustainability Group (ESG).

Over the past few years he has been very active in BCO Research and played a key member in the team behind Good Practice in the Selection of Construction Materials (March 2011). 

In a selection of blogs from the BCO's ESG Nick shares his views on Climate Change...do you agree?

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I have spent the past 16 years of my professional life arguing the case for carbon reduction within the business and property sectors. I have used data and analysis from globally renowned scientists and policy makers - the case for action seemed irrefutable.

What’s more, it seemed important that the UK, the birth place of the fossil-fuelled industrial revolution, should lead the way and commit to a near carbon free future. Arguing for this was easy, what’s not to like? Well, the short term financial cost might be one thing, but this was easily countered by arguments about externalities and the long-term benefits of a green economy.

And yet over these 16 years something odd has happened: global temperatures haven’t risen as predicted. The upward trend forecast by the climate models has failed to materialise, despite CO2 levels punching through the 400ppm level in May. The actual global temperature is on the verge of being lower than the low range of climate prediction.

This isn’t due to any action taken by mankind, we have still managed to pump 100 billion tonnes of CO2 into the atmosphere over the first decade of this new millennium. In truth, climate scientists have yet to understand why the climate is not responding in line with model predictions, and they continue to update their models as data builds. This is the nature of science. Global Climate is complex and perhaps we have been unrealistic about our expectations of the science. Understanding how our global climate responds, climate sensitivity, to the undoubted increase in greenhouse gases is now the focus of many climate scientists.

Rather like a flat lining economy, there are mixed signals. While global temperatures may have not increased, averages can disguise a multitude of other signals. There have been temperature increases more locally, most notably in the polar regions leading to a decrease in the amount of Artic sea ice.

What does this mean for the UK? Should we continue with the current raft of policies that will directly increase costs, particularly to businesses and individuals, at a time when we are struggling to grow our economy and when fuel poverty is increasing? A significant proportion, 28%, of the domestic electricity bill is attributable to environmental measures and £300 billion of investment is required by 2020 to adapt our infrastructure to enable our low carbon future.

While I confess to heretical thoughts on the subject of climate change, I am going to hedge my bets. The precautionary approach remains a sensible response to the uncertainties of climate science and we can’t wait until the science of climate is better understood. The basic principles of mitigation, such as improving resource use efficiency, are sound. However, the successful transition to a low carbon economy requires considerable investment and a successful economy above all, perhaps we should at least consider whether the fact that the planet's climate does not appear to be as sensitive to CO2 as first thought, may justify a pause.

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For further information covering the topics raised in this blog you can take a look at the following BCO Research papers, which have been produced in association with the BCO Environmental Sustainability Group:

• On-site Renewables (September 2012)
• Whole-life Carbon Footprint Measurement and Offices (March 2012)
• Designing for Biodiversity, Productivity and Profit (March 2011)

At a time when Germany is in the midst of a rapid transition to renewable energy, which is said to be the country's biggest and most expensive project since the fall of the Berlin wall (see article from www.bbc.co.uk/news), should we be following suit? Or do you agree that we should be taking a brief pause? Post your comments on our LinkedIn Group BCO Online.

60 seconds with...Simon Sturgis and Gareth Roberts, Sturgis Carbon Profiling

Simon Sturgis

We spent 60 seconds with Simon Sturgis, Managing Director, and Gareth Roberts, Partner at Sturgis Carbon Profiling, members of our Environmental Sustainbility Group (ESG) and contributors to the recently published BCO On-site Renewables report. 

The On-Site Renewables report is a follow up to the BCO's 2007 report on the Greater London Assembly's (GLA's) target for acheiving emissions reductions through on-site renewables from 10% to 20% of a building's regulated energy demand.

Whilst investigating our original concerns that the policy would not be effective, the research also offers an insight into:

• the implications of using on-site renewables
• identifying the factors driving performance
• the potential to cut costs and increase environmental benefits from reduced emissions in the future.

Gareth Roberts

What led to the On-site Renewables report being commissioned?
Previous to this report no quantitative work has ever been undertaken examining the actual costs and benefits of on-site micro-generation in the UK and Sturgis Carbon Profiling felt that given the large amounts of money being spent on this it was worth trying to understand if value to environment and developers was being achieved.

What do you think the commercial property industry can learn most from this report? 
That you need to think holistically about carbon emissions to achieve accurate, comprehensive results. That Government and Local Authorities when developing policies to promote carbon reduction need also to look at the indirect losses that take place before considering if a policy is effective.

Are there any findings in the report that surprised you?
The aggregate scale of the inefficiency of the use of renewables in London Offices is quite staggering, in that for every £10 spent by developers and taxpayers to provide benefit to the environment through micro-generation less than £1 is actually being delivered.

Where should we be looking to for best practice at present? 
Us!

Who/what most inspires you in the world of commercial property? 
Anyone who is thinking ahead and looking to a more efficient future in office design.

What couldn’t you live without in your daily routine?
Simon - Lunch
Gareth - Coffee

Join Simon and Gareth on Thursday 7 February 2013 for the BCO ESG Breakfast, where they will be discussing and debating the findings of the On-site Renewables report with a response from Celeste Giusti from the London Plan Team at GLA. Click here to find out more and book your place.

60 seconds with...Richard Francis, Director - Environment & Sustainability, Gardiner & Theobald Chair of the BCO Environmental Sustainability Group (ESG)

Richard Francis takes over as chairman of the BCO Environmental Sustainability Group (ESG) in Summer 2012. He leads the sustainability team, at Gardiner & Theobald, and is an expert in providing strategic sustainability advice from a business perspective.

How long have you been involved with the BCO and what do you see as the key strengths?

I have been involved with the BCO for three years as a member of the ESG.

The BCO has numerous strengths that are recognised not only in the UK but across the world – it provides the gold standard for work on offices. It has a well-recognised ability to bring together individuals with unparalleled experience who are eager to share their knowledge and confront common challenges. That is a pretty unusual combination.

The BCO is a first class organisation pursuing innovation in a country that is determined to be ahead of the curve in sustainability. Who could ask for a better assignment than to help guide this change?

Earlier this month you took over the role of chair for the BCO ESG from Paul Edwards. What would you like to achieve in this role?

It was great to work with Paul and to see him develop and reach a clear set of forward-looking research goals – I learned a lot from him and other members of the committee.

As we move forward, I would like the BCO to become the go-to organisation for providing the industry with evidence-based, actionable intelligence that BCO members and others can trust. Compliance can be difficult and costly, but BCO members will need to think beyond merely meeting standards in order to effectively prosper in an evolving and more sophisticated market.

The moral and the fiscal are converging and the lesson of carbon is that “soft issues” can have hard edges. The ground is shifting under our feet. I would like BCO members to not only avoid the risks but also profit from the opportunities that are here now and will continue to emerge.

What do you see as the main purpose of the ESG within the BCO?

To provide realistic, honest, rigorous analysis of the sustainability issues affecting BCO members and to help them simplify what is an unnecessarily complex subject.

When it comes to sustainability, members of the BCO should ask themselves three simple questions: Where am I now? Where do I need to be? How do I get there?

The main purpose of the BCO ESG is to help members answer these questions in a way that minimises costs, maximises (fiscal and environmental) benefits and adheres to the scrutiny given other business decisions. 

What do you see as the main challenge for the industry regarding the environment & sustainability?

What the industry needs most is to systematically incorporate feedback, and learning, into new projects. We can be highly imaginative and innovative in theory and design, but our understanding of actual outcomes and our implementation of improved processes lags other industries. Consequently, we invest a great deal of time and money at the front end without appreciating or understanding the consequences, and sometimes make the same mistakes long after we should have known better.

As an industry we have a great understanding of potential but a poor understanding of performance – reinforced by regulation and market drivers that can reward appearance rather than reality. The financial and environmental price for this is high.

The biggest challenge is to find cost-effective, easily implemented solutions that will ease the burden on businesses and lead to actual reductions in impacts.

The industry has to answer the same three questions as raised above: Where are we now? Where do we need to be? How do we get there? At the moment, that last – and perhaps most important - question remains less clear than it should be. 

If you had the power to change one thing within the property industry, what would it be?

I would change the perception in the industry to focus more on what buildings do rather than what they are, particularly with regards to sustainability. Sustainability must be about achieving real results rather than cleverly meeting prescriptive requirements. This is not just in energy, water and waste, but in helping buildings achieve their mission – optimising the experience of occupants. Sustainable hospitals can and should heal people faster, sustainable schools should enable students to learn better and sustainable offices should enable healthy and productive workers.

We know our buildings can do more – and we need to realise the integrated benefits of buildings that help achieve purpose. We are beginning to see occupiers reward these building and I would like to see this trend accelerate. 

Who has most inspired you in the Commercial Property Sector?

There are many people I look up to in the Commercial Property Sector, so it is difficult to isolate a single person. There are a lot of people who have been pushing sustainability in the industry for a long time and who have enabled the changes we see today.

I am thinking of people like Angus McIntosh, Derek Clements-Croome, Ken Yeang and Paul McNamara – all of whom have contributed to the BCO greatly over the years. They are usually people with one foot in industry and another in research who have a gift for teaching and have helped bring important ideas into the commercial marketplace.

To get to know these individuals in the last few years has been a great privilege. They have been very kind to me as I have started my professional life here in the UK. 

What’s your favourite office development in the UK? And why?

Actually, I have two favourite developments that are seemingly unlike each other but have a common theme.

The first is The Co-operative’s new head office in Manchester. The building has the highest BREEAM rating possible, will have EPC and DEC ratings of “A” and is designed to promote the health and wellbeing of its occupants.

The second is The Carrochan, the headquarters for the Loch Lomond and Trossachs National Park Authority. This building is a winner of the Carbon Trust Low Carbon Building Award and the BCO National Award winner. It uses cost-effective, locally available renewable energy, the finest local and sustainable materials and a design that is sympathetic to the landscape and the local community.

Two very different buildings achieving very different missions, but proving to be best in class at what they provide. 

What is your guilty pleasure?

I have a small, old motorboat that I use for fishing and clamming back where I am from on Cape Cod. Friends and colleagues tell me that I should be sailing, as this is the more environmentally friendly alternative. I like sailing, but sometimes it can be a little boring (just like sustainability consultants), especially when the fish are biting. My sailing skills are no match for a fast-moving school of bluefish and striped bass.

What couldn’t you live without in your daily routine?

Hearing what my little boy has been up to during his day.

He reminds me of that most important of questions:“Why?”

60 seconds with...John Connaughton, Davis Langdon (an Aecom Company) & member of the BCO ESG

In March 2012 the BCO launched Whole-Life Carbon Footprint Measurement and Offices. Here we spend 60 seconds with a member of the BCO Environmental Sustainability Group (ESG) who chaired the steering committee behind the research.

Dr John Connaughton is Head of Davis Langdon's knowledge team in Europe. Read his full bio here...

How long have you been a member of the BCO and what do see as a key benefit of membership?

Since 2010. The greatest benefit is meeting people who are genuine leaders in the development and operation of office buildings. 

As a member of the BCO ESG you have chaired the steering group for the research Whole-LifeCarbon Footprint Measurement and Offices. Can you sum up in a few sentences what whole-life carbon measurement is? 

Yes. Buildings are responsible for significant carbon emissions over their life-cycles – not only during use (from energy consumption) but initially during construction, and later during maintenance as well as demolition and eventual disposal also. Whole life carbon measurement is a way of measuring all these carbon emissions so that we understand the total carbon footprint of buildings. 

Why is it important?

Carbon Dioxide (C02) is a major contributor to global warming. The UK Government wants to reduce CO2 emissions by 80% by the year 2050. Those involved in construction and property have a huge part to play in meeting this target, as over 50% of CO2 emissions arise from our use of buildings. 

What are the key topics covered by this report?  

The report focuses mainly on measuring ‘embodied carbon’ (ie the CO2 associated with the production of a building’s constituent materials and components).  Embodied carbon is often overlooked in conventional approaches to carbon footprinting, but can account for up to 40% of a building’s total emissions over its life cycle. 

Aside from whole-life carbon, what are the other hot topics on your agenda?

Another key environmental issue is water, seen both as a resource (have we enough in the right places?) and a risk (how do we avoid flooding?). 

Who/what has most inspired you in the Commercial Property Sector? 

Stuart Lipton, for his genuinely inspiring office developments since the 1980s, and his continuing belief in the value of good design.

What’s your favourite office development (either in the UK or wider afield)? And why? 

This will probably annoy my colleagues working in sustainability, but the Johnson Wax building in Wisconsin, by Frank Lloyd Wright, gets my vote. Not perhaps the most obviously sustainable of developments, but as an inspiring place to work…. Wow!

What do you think will be the most influential tool in the commercial property toolkit in the coming years?

A mechanism for linking sustainability directly with commercial property value. It doesn’t yet exist, but is coming….

What couldn’t you live without in your daily routine?

Shredded Wheat – preferably two of them!

What is your guilty pleasure?  (Something you enjoy but feel a bit guilty for. Possibly an embarrassing taste, whether it be music, fashion, food etc)

The Guard – one of the most politically incorrect and funniest films I’ve seen in years. 

Davis Langdon Director John Connaughton appears at no. 33 in Building Design's Sustainability 50 list, showcasing the most influential voices in the UK sustainability sector. Former Davis Langdon Senior Partner, and current government chief construction adviser, Paul Morrell, heads the list. (Building Design 09-03-12 pp8-13)