Breaking the ‘circle of inertia’ on energy efficiency in the commercial buildings sector

Low carbon opportunity in buildings

Buildings use energy. Generating energy produces carbon emissions. Carbon emissions cause climate change. It seems obvious, but these three facts lead to one clear conclusion: if we can change buildings so that they use less energy, they will emit less carbon, helping us to achieve our ambitions to combat climate change.

In fact, buildings have a huge role to play in achieving the UK’s legally binding target to reduce its carbon emissions by 80 percent by 2050. Buildings produce around 37 percent of the UK’s carbon emissions, split approximately 60/40 between domestic and non-domestic buildings. This is a total of around 200 million tonnes of CO2 – roughly the same as the annual emissions of the United Arab Emirates, or those of Greece and Chile combined.

Fundamentally there are two ways to reduce emissions from buildings: either new energy efficient buildings need to be built, or existing buildings need to be refurbished to make them more energy efficient. Both are essential. The Carbon Trust predicts that approximately 60% of the buildings that will be in use in 2050 have already been built today, which means that refurbishing existing buildings will be a huge part of the emissions reduction challenge.

The good news is that there is an enormous opportunity to reduce building emissions. Carbon Trust research into the potential energy savings that can be made in non-domestic buildings found that a 35 percent CO2 reduction could be achieved by 2020 through cost-effective measures. The net benefit of these measures to the UK economy would be at least £4 billion. Over the longer term, CO2 reductions of as much as 75 percent can be achieved by 2050 at no net cost to the UK economy.

The challenge of commercial buildings

Over recent years we have seen a raft of policy measures introduced to encourage the adoption of energy efficiency and low carbon technology in buildings. The Energy Technology List, CRC Energy Efficiency Scheme, interest-free loans for SMEs, Energy Companies Obligation and Green Deal are just some recent examples. And many companies are currently preparing to comply with the new Energy Savings Opportunity Scheme, which implements the EU Energy Efficiency Directive.

However, in spite of these and other measures, progress has been slower than hoped for. A number of barriers exist, including misaligned incentives (the ‘landlord-tenant divide’), a lack of knowledge on how to develop and operate low carbon buildings, and capability gaps within the supply chain. These create inertia where no one party feels they can make a difference and consequently little happens.

Meeting the challenge

For the inertia to be broken, energy efficiency needs to be placed at the centre of building development. This requires three things to happen. First, everybody involved in the development process need to buy into a shared vision to develop an energy efficient building. The process involves lots of stakeholders (investors, landlords, developers, contractors and tenants) and it’s very hard for any individual stakeholder to make it happen in isolation.

Second, energy efficiency needs to be an end-to-end focus, rather than an afterthought or bolt-on. The focus needs to begin at the design stage and remain central to the process through construction and commissioning. Then, crucially, it needs to remain a focus after the tenants move in, because in order for energy efficient buildings to realise their potential, they need to be used intelligently.

Third, development decisions need to reflect commercial pragmatism as well as sustainability best practice, because the reality is that for energy efficient buildings to become mainstream, they need to be economically sustainable as well as environmentally sustainable.

Breaking the circle of inertia: Low Carbon Workplace

It is comparatively easy to say what needs to be done, but it can be hard to do it. This is why the Carbon Trust developed Low Carbon Workplace, a partnership with investment manager Threadneedle and property developer Stanhope. The partnership acquires commercial office buildings and refurbishes them into modern, energy efficient workplaces.

Occupiers of Low Carbon Workplace buildings benefit from ongoing support from the Carbon Trust, helping them to minimise their energy costs and carbon emissions. Energy and carbon performance is monitored and assessed against the Carbon Trust’s Low Carbon Workplace Standard, and occupiers that successfully meet the criteria can be awarded with certification to the Standard.

In essence, Low Carbon Workplace delivers refurbished low carbon buildings to occupiers who are both motivated and empowered to ensure potential energy and carbon savings are achieved. Occupiers reap the benefits of an efficient, comfortable and environmentally-sensitive workplace, and investors and landlords profit from having attractive, ‘future-proofed’ buildings in their portfolios.

The Low Carbon Workplace Fund raises money from institutional investors looking for strong returns from property with a CSR focus. Overall investments in the Fund to date stand at £130m and fundraising is ongoing. The portfolio now comprises eight buildings, of which five are occupied and three are in development.

Occupier support is key: better buildings, used better

The Carbon Trust frequently talks about ‘better buildings, used better’. It is easy to focus on the ‘bricks and mortar’ first half of this phrase when thinking about energy efficient buildings. How properties are designed and built, as well as the heating, cooling and lighting solutions they incorporate, obviously have a major impact on their energy efficiency performance. Because these are tangible things, they are easy to grasp and understand.

The second half of the phrase – ‘used better’ – is much less visible and therefore risks being overlooked or downplayed. However, it is absolutely essential to successful outcomes. It doesn’t matter how well designed a building is or how theoretically energy efficient it is: if it is used badly then efficiency will suffer. Badly. This is why ongoing occupier support is key to the success of the Low Carbon Workplace model.

A condition of leasing a Low Carbon Workplace building is signing the Low Carbon Workplace Charter. This signals occupiers’ commitment to work collaboratively with the Carbon Trust to minimise their carbon emissions. It also sets out what occupiers can expect from the Carbon Trust in terms of support.

Support begins immediately, with advice on fit-out and how to make optimal use of the available space. This is essential, because a poorly thought through office fit-out can work against a building’s energy efficient design. For example, if a building has been designed to incorporate natural ventilation from open windows, then introducing heavy partitioning in what was intended to be an open-plan space will prevent air from circulating as envisaged and force the occupier to rely more heavily on mechanical ventilation systems.

Once occupiers have completed their fit-out and moved into the buildings, there is then an unavoidable period of bedding in, when systems and settings are being tested and fine-tuned. This is a critical period in relation to a building’s energy efficiency performance, because many issues can arise at this stage. If not nipped in the bud then these can result in significant ongoing performance implications.

Perhaps the single most important element of occupier support is the ongoing monitoring and reporting on performance provided by the Carbon Trust. This is essential to get the most out of buildings, because the old adage that ‘what gets measured gets managed’ proves to be very true.

Low Carbon Workplace buildings use sub-meters and occupancy sensors to monitor energy consumption and compare it with occupancy levels. Comparing energy consumption with occupancy levels helps to identify opportunities to modify to the building’s operating programme to more closely match the occupancy timetable.

Recognising and rewarding performance

Occupiers that successfully meet the specified criteria are awarded with certification to the Low Carbon Workplace Standard. The Standard was developed by the Carbon Trust to provide a robust and transparent approach to measuring the carbon emissions associated with workplaces, supporting building occupiers in improving the emissions performance of their workplace.

Achieving the Low Carbon Workplace Standard allows businesses to benchmark their performance relative to their use of the workplace, allowing them to minimise energy costs. It also offers new opportunities for improving employee engagement on environment issues and demonstrating tangible progress towards better corporate social and environmental responsibility.

The Low Carbon Workplace Standard is based on three core aspects of measurement and assessment that combine to provide occupiers with a holistic approach to workplace emissions assessment:

  • Quantitative performance: Workplace carbon emissions are quantified per unit of floor area and occupancy. Occupiers that meet a best practice emissions benchmark can apply for certification. Alternatively, occupiers can apply for certification by showing year-on-year reductions in emissions per unit of either floor space or occupancy.
  • Qualitative criteria: An assessment of qualitative criteria looks at a wider set of emissions-related performance indicators, together with water use and occupant satisfaction. This approach provides a more holistic assessment of the workplace’s overall environmental performance.
  • Carbon management: Recognising the importance of embedding lower emissions activities in the day-to-day activities of the workplace, the implementation of a building or workplace-level carbon management and governance structure is required.

Investec Wealth and Investment Management recently became the first occupier to be awarded the Low Carbon Workplace Standard. The company achieved the Standard by reducing carbon emissions at its Guildford office by 1.4% year-on-year, in spite of an increase in the building’s usage of 46% over the same period.

Delivering impact at scale

Proving that a collaborative model can work for both landlords and tenants is just one step on the journey to meeting our low carbon ambitions. A lot more needs to be done to drive forward energy efficiency in commercial buildings. Fortunately, things seem to be moving in the right direction, even if the pace could be quicker.

There are a number of reasons for optimism. High performing energy efficient equipment and renewables are becoming cheaper every year. Levels of energy awareness are increasing amongst the public, as are the number of skilled energy professionals working for organisations. Equally importantly, regulations are becoming stricter, ensuring that certain types of buildings meet minimum performance requirements, or that organisations fully consider their potential opportunities in energy efficiency.

By the middle of the century we expect that the vast majority of commercial property in the UK will be better buildings that are being used better. At the Carbon Trust we are pleased to be accelerating this move to lower carbon workplaces for everyone.