buscase for sustainability

8/7/2019 buscase for sustainability

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HOK Sustainable Design

Business Case

forSustainabilitySpeaker

GaganDeep Singh




Business Case for Sustainability

About HOK• Founded in 1955

• Ranked #1 US based A/E firm for 2002 by ENR &World Architecture

• 1800+ people

• 24 offices worldwide• HOK Consult ing focuses on aligning businessst rategies to space st rategies




AIA/COTE Top Ten Green Projects

2002l HOK Edificio Malecon

l HOK National Wildlife Federation HQ

2001l HOK Nidus Center for Scientific Enterprise

2000l HOK World Resources Institute

1999l HOK Missouri History Museum

1998l HOK S.C. Johnson Wax

HOK Sustainable Design Overview




LEED CertifiedProjects

2002

l Emory Whitehead - Atlanta GA

LEED 2.0 Silver2000

l NidusCenter – St. Louis MO

LEED 1.0 Silver





SILVERl San Mateo Lab – San Mateo, CAl St. George Intermodal – Staten Isl, NYGOLD

Transit Facility – Southern CAPublic Agency – San Francisco, CA

Commercial Interiors – PILOTHOK SF Office Design

Woodruff Renovation

PLUS MANY MORE…


LEED Pending





www.hoksustainabledesign.com/news


http://slidepdf.com/reader/full/buscase-for-sustainability 7/54HOK Sustainable Design


Business Focus on the Environment

Source: Price Water House Coopers

early 70’s to mid 80’s mid 80’s to late 90’s future




Why Businesses Focus on Sustainability

• Increased customer and employeeawareness

• Globalization

• Changing role of government

• Financial incentives

• Next generation accountability

• Redefinition of corporate assets




Sustainable Strategies Framework

Business CaseforSustainable

facilitiesstrategies canbe achieved

at four levels

StrategicBuildingDesign

W orkplace Operations

t t




usness ase or usta na ty

Sustainable Planning Process

Sustainability Impact

gap

strategy bldg. des workplace operations

Asset Development Lifecycle






Formulate long-term CRE

sustainable

strategic plan(SSP)

OutcomesSkillsProcessesGoalStrategy

Bu si ne ss Ca s e f or Su s tai na bi lit y St rategic Framework

• Dematerialization– Process

elimination

– Better processes

• Scenario planning

– Location

– Consolidate

– Renovate

– Build

• Distributed workmodels

– Telecommute

– Satellite office

– Hoteling• Stakeholder

engagement tool

– Internal

– External

• Incorporate theorganizationalsustainabilityinitiatives into CREstrategic planning

• Define the short(1-5 yrs) & long-

term (6-20 yrs)sustainability goals

• EngageStakeholders andcross-functionalcollaboration

• Communicate CREStrategic Plan toexecutive team

• Choose SSPperformanceindicators

• Strategic planningand analysis

• Scenario planning

• Changemanagement

• Stakeholder

engagement

• CRE statement ofoperating principles/ethics /values

• Understanding ofthe capacity andcapability tocontribute (short &

long• Project and

initiativeprioritization

• Enhanced internaland externalstakeholder value

• Impact reduction,risk mitigation,optimization plan




Formulateshor t t erm

building level

t act ical plan

OutcomesSkillsProcessesGoalBuilding

B usi ne ss C as e for S us ta ina b ilit y Building Design Framewor k

• Building Impactanalysis

– Structure – 60

– Skin – 30

– Service – 15

• Sustainabilityguidelines (LEED)

– Energy– Water

– Recycle

• Sustainable filters

– Material

– Finishes

– Services

• Developingsustainableobjectives andtargets

– Drivers

– Priorities

– Choices

• Choosing anddevelopingperformanceindicators andmeasures

• Ongoingstakeholderengagement

• Integration withexisting systems

– Project

management

• Tactical planning• Financial analysis

• Managementsystems andperformanceindicators

• Stakeholderengagement

• Investment analysis– Building cost

– Opportunity cost

• Value identificationand cost impact

– No cost / less

cost

– Trade-offs

– Green finance

• Selection andagreement onappropriateperformanceindicators andmeasures

• Development andintegration ofsystems basedsolution





Adding Value to the Design Process

A sustainable building is a valuable building.




n Drivers

n Prioritiesn Choices


Where should your Client’s money go?




Business Case for Sustainability –


• Drivers– Reap PR Opportunities

– Improve Quality of Life on the Planet

– Reduce Operating Costs– Improve Employee Productivity & Satisfaction

– Market Differentiation






•Priorities–What does your company produce?

–Who are your clients and what do they value?

–Is the building owned or leased?

–How long will the company occupy the building?

–Does worker productivity profoundly impact profits?

–Are energy costs high?

–Are water costs high?

–Cost and availability of capital?







•Choices- Higher quality carpet versus certified wood

- Better air quality versus nicer upholstery fabric

- HCFC free chillers versus Subzero refrigerator

- Higher levels of natural light versus photovoltaics

B i C f S t i bilit





Real Costs and Opportunity Costs

Choices made during the design phase impact far more

than the construction costs.





A Building’s Real Cost

First Cost + Operating Expenses = Real Cost




Operating Costs

60-85%

First Cost

5-10%

Other*

*Other includes land

acquisition, conceptualplanning, renewal orrevitalization, and disposal.From: National Research Counci1998



B i C f S t i bilit






How much should be invested to save expenses?

B i C f S t i bilit






How much should be invested to save expenses?

–Is the building owned or leased?

–How long will the company occupy the building?

–Are energy costs high?

–What is the cost and availability of capital?







Assessment Math

• Simple pay back:

$100 today saves $25 per year, so this has a 4 year payback

• Net Present Value with a hurdle rate of 11% and a

timeframe of 4 years:

$100 today saving $25 per year = a negative present value of($22.45), so investment is too high for the savings








NPV = CF0 + CF1 + CF2 + CF3 + CFn

1 1+Y (1+Y)2 (1+Y)3 (1+Y)n

NPV = Net Present Value

CF0= Initial Cash Flow or Investment

CFn= Subsequent Cash Flows or Savings

Y= Yield or Hurdle Rate = the rate of return on capital per period that will

satisfy the investor

n= the number of periods in the projection







NPV= -$100 + $25 + $25 + $25 + $251 1+11% (1+11%)2 (1+11%)3 (1+11%)4

NPV= -$100+

$25+

$25+

$25+

$25

1 1.11 1.23 1.37 1.52

NPV= -$100 + $22.52 + $20.33 + $18.25 + $16.45

NPV = - $22.45







Emory University

– They invested $450,000 to install an energy recoverysystem, which includes four enthalpy wheels, that use air

being exhausted from the facility to preheat outside airin the winter and to pre-cool outside air in the summer.

– Expected energy saving as compared to standard systemis $106,000 on an annual basis.

– Was this a good investment?







– How long will they be using/owning the building?100 years +

– Are their energy costs increasing?Yes, by at least 3%/year

– What are their investment parameters?

– Have they decided that savings equal to investment in 5 years is ago or do they want a return on their investment?

– If so, what rate of return? What time frame do they want to

consider?The real answer is that 5 years simple payback was sufficient, but let’s assume they wanted a 7.75% return over 5 years.Would they still have invested?



Emory University





Initial investment, CF0 = $450,000

Time of study, n = 5 years

Hurdle rate, Y = 7.75%

First year savings, CF1=$106,000

Subsequent year savings = CF1 increased by 3% each year

– Once again, we are ignoring residual value of system



Emory University





Cash Flow: Please note that savings are not actually paid to theuniversity, but rather cash that wasn’t spent on energy, so was free tobe invested somewhere else at a rate of 7.75%.

Initial: ($450,000)

Year 1 106,000

Year 2 109,180

Year 3 112,455

Year 4 115,829

Year 5 119,304



Emory University





NPV = $381.50

So it is positive and therefore the investment would be accepted,because it met the 7.75% hurdle rate.

Initial: ($450,000)

Year 1 $106,000

Year 2 $109,180

Year 3 $112,455

Year 4 $115,829

Year 5 $119,304



Emory University

Business Case for Sustainability - A Building’s Real Cost




Oper atin g Costs

ReplacementCost

Replacement

Cost

Residu al Value

PV Op. Costs

PV Rep . Costs

First Costs -

PV Res. Value

+

+

_________Net Presen t Valu e

Of Real Cost

Study Period

Present Value

Business Case for Sustainability A Building s Real Cost

Net Present Value Calculation of Real Cost

Business Case for Sustainabilit




$153.04$316.46Total spent for 5 years

$87.60$43.80Total bulb cost for 5 years

$20.00$0.75Cost per Bulb

$65.44$272.66Electricity cost for 5 years

$0.083.$0.083Cost per kWh (average)

788 kWh3,285 kWhkWh used over 5 years

4.3858.4No. of lamps used over 5

10,000750 hoursRated Lamp Life

18 W75 WWatts Consumed

CompactFluorescent

IncandescentBulb

Lamp efficiency data from Rocky Mountain Institute’s: Green Development Integrating Ecology and Real Estate

Business Case for Sustainabilit


5 years of Continuous Light

B i C f S i bili





A Building’s Opportunity Cost

How does your building affect your employees’:

Health?

Productivity?

Turnover?

Retention?

Recruitability?

B i C f S t i bilit




78%

9%


GSA Annual Operations Cost (Leased Space)

(Average cost per employee – 1999)% of Annual Operations Cost

Salary 54% ($35K)

Benefits 24% ($15K)

Technology 13% ($8K)

Rent 6% ($3.4K)

O&M 2% ($.6 to $1.5K)Churn 1% ($.75K)Courtesy of Carnegie Mellon University





“Daylighting in Schools” a study for PG&E

– Students learned from 15% to 26% faster in

response to more daylight.

– Students learned 7-8% faster if they hadoperable windows.


A Building’s Opportunity Cost

B i C f S t i bilit




100

70

116

0

20

40

60

80

100

120

Productivity in

Old Building

Productivity

During Move

Productivity in

New Building


West Bend Mutual

Insurance Company(West Bend, WI)





Real Cost + Realized Opportunity = Real Value


A Building’s Real Value





Real Cost + Realized Opportunity = Real Value



+ Employee Productivity & Satisfaction

+ Employee Recruitment & Retention

+ Environmental Benefit to the Local Community

+ Environmental Benefit the Planet

+ Corporate Identity / Branding

+ PR Opportunities

+ Market Differentiation

+ Savings in Operating Costs

+ Increased Residual Value





We need talk about “value”

Business Case for Sustainability A Building s Real Cost


1. Int egrated design creates more

value at the same cost .2. It may be in our clients’ interest to

invest more in their project in the

short run in order t o save in t he longrun.





How do we discuss value?… we need to understand our business economics

us ess Case o Susta ab ty u d g s ea Cost


Client type type of financing

Public Agency Federal Funds

Institution / Non-Profit Endowment Funds

Owner Occupant Debt Financing

Speculative Builder Debt Financing + ROI

Hurdle rate

5%?

8%?

11%?

15%?





What is the PV of $1.00 of annual savings in operatingcost with an initial investment of 0?

y g


Hurdle rate

5%

8%

11%

15%

10 years

$7.72

$6.71

$5.88

$5.02

15 years

$10.38

$8.56

$7.19

$5.85

5 years

$4.33

$3.99

$3.70

$3.35





How do we discuss Building value?… we need to clearly identify impacts on cost

y g


• No Cost / Less Cost Strategies

• Trade-offs

• Synergies

• Added Investment

• Financing

Case Study




Case Study

• Community driven

– Tivoli employees– Austin community

• Sustainability in all aspects ofdesign– Energy efficient systems

– IAQ program– Day lighting

• LEED certified• Posit ive impact

– Brand

– Attraction Retention– Energy efficiency– Productivity

IBM/Tivoli Project , Aust in Texas





workplace

tact ical plan

OutcomesSkillsProcessesGoalW orkplace

W orkplace Sustainabilit y Framework

• Sustainable lifestyle– Work life balance

• Flexible workspace

– Modularity

– Configurability

– Shared space

• Sustainable product

filters– Materials

– Finishes

– Services

• Social technologies

– Engaging users

• Developingsustainableworkplaceobjectives

– Sustainable

lifestyle

– Sustainable workprocesses

• Choosing anddevelopingperformanceindicators andmeasures

• Using workplace to

drive culture andbehavioral change

• Integration withexisting processes

• Workplaceplanning

• Organizationalpsychology

• Managementsystems andperformance

indicators• User engagement

• Investment analysis– Building cost

– Opportunity cost

• Selection andagreement onappropriateperformance

indicators andmeasures

• Development andawareness ofsustainableworkplacepractices

• Value identificationand cost impact

– Occupancy cost

– Trade-offs

– Green finance

Case Study




100

70

116

0

20

40

60

80

100

120

Productivity in

Old Building

Productivity

During Move

Productivity in

New Building

West Bend MutualInsurance Company(West Bend, WI)

Case Study

Case Study




Case Study

Positive

Positive

Positive

Positive

FinancialBenefits

Positive

Positive

Positive

Positive

Work / LifeBalance

N/AMixedSupplementspace in NY

PositiveN/AAttract Talent

PositivePositiveRetain Talent

N/APositiveWork / Life

Balance

OrganizationalProductivity

• Sustainable lifestyle

Investment bank Satellit e office Init iat ive

O





operations level

t act ical plan

OutcomesSkillsProcessesGoalOperations

Operat ions Framewor k

• ProcessImprovement

– Conserve

– Optimize

– Recycle

• Building operationsaudit

– Energy

– Water

– Recycling

• Performanceindicator scorecard

• Developingsustainableoperationsobjectives

• Choosing anddevelopingperformance


• Ongoingstakeholderengagement

• Integration withexisting systems

• Tactical planning• Financial analysis

• Managementsystems andperformanceindicators

• Stakeholder

engagement

• Investment analysis– First cost

– Ongoing cost

• Selection andagreement onappropriateperformance


• Development andintegration ofsystems basedsolution

Sustainability Scorecard




Sustainability Scorecard

Bottom Line

Brand

Business

Operations

CRE Tool

Reducedoverheads

Revenuegrowth

Improvedshareholder value

Stakeholderaccountability

Ecologicalprotection

Satisfiedcustomers

Satisfiedsuppliers

Satisfiedregulators

Satisfiedcommunity

Satisfiedenvironment

Effective assetmanagement

Enhancedcustomer prop.

Integrity in supplychain mgmt.

Effectivecompliance

Improvedpollution mgmt.

Better workpractices & IT

Performanceefficiency

Flexibility / Adaptability

Assetmarketability

Riskmitigation

Sustainabilit y Benefits




ToolResource

• Marketing• Community

• PR Opps

• Differentiation

• Health

• Productivity

• Retention

• Turnover

• Recruitability

Sustainabilit y Benefits

• Savings in operatingcost

• Increased residual

value

• Risk mitigation

• Green incentives

• ROI

Brand

$$$








•• ““ Business ignoresBusiness ignoressustainability at its ownsustainability at its own

peril. There's no way aperil. There's no way abusiness enterprise canbusiness enterprise cansurvive as an island ofsurvive as an island ofprosperity in a sea ofprosperity in a sea ofdisarray. It just won'tdisarray. It just won't

happen. Companies thathappen. Companies thatdon't meet theirdon't meet theirresponsibilities to all theirresponsibilities to all theirconstituencies will have aconstituencies will have adifficult time.”difficult time.”

- - William S. Stavropoulos, Chairman, Dow William S. Stavropoulos, Chairman, Dow Chemical Chemical





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