In North America, we use LEED certification to rate the sustainability of buildings. It was designed by the United States Green Building Council (USGBC). LEED was initially a standard for energy and water conservation. Today, it has expanded to include a wider range of factors. Some examples are building materials, greenhouse gas emissions and community impact. LEED is the environmental “gold standard” in the building and community impact.
There is plenty of evidence that LEED certification is worth pursuing. Building managers and investors are aware of its many advantages. LEED buildings perform better than buildings without sustainability features, in multiple ways. Studies show several areas where they excel. Here are some examples:
- Lower operating costs due to less energy use
- Greater market demand from both occupants and investors
- Hold value better over time
- Maintain higher occupancy levels
- Better corporate branding and building attractiveness
- Increased health and wellness of employees and occupants
The USGBC highlights many of these findings in more detail.
There is plenty of market evidence for the value of LEED certification. But how do you measure the return on investment (ROI)? Building managers and investors need to establish their own criteria for measuring ROI of green initiatives and LEED certification. ROI is not always a financial metric. This is especially true for organizations that are owner-occupiers. It’s also true for investors who take a long term approach to their property investments.
Developing Your ROI for LEED Certification
That is where our “four pillars” way of looking at sustainability comes in. Is your organization trying to become more sustainable? Keep in mind that sustainability isn’t just about what’s good for the environment. It’s what’s good for your business, too.
Sustainable practices are ones that you can keep using far into the future. To ensure long-term success, you’ll need to consider the three other key business pillars. These pillars include financial sustainability, social impact and economic rationale. Organizations should look at both quantitative and qualitative ROI measures for LEED certification.
- Cost benefit analysis. What are the upfront investment costs relative to long term value?
- Lifecycle cost analysis. What is the total operating or capital costs over the lifespan of a property? Look at this both with and without LEED certification.
- Created market value. What is the created market value for the asset after it’s certified?
- Portfolio impact. What are the portfolio level impacts and gains with LEED certification? Where do investments across the portfolio make the most impact?
- Technology impact. What technologies do you need to track a building’s environmental impact? What reporting do you need to do moving forward?
- Market validation. How will the property be seen in the market? What is the benchmark standard?
- CSR and ESG commitment. How does certification fit with your corporate social responsibility policies? What is your SROI (social return on investment)?
- Tenant and occupant needs. What are your tenants and occupants’ sustainability goals? Are they more likely to renew if the building is certified? Are tenants in your market attracted to green buildings and certifications?
Software for Understanding Your LEED ROI
4tell™ Solutions’ property management software helps firms see the advantages of LEED certification. Our analytics will help you understand your energy efficiency and capital investments. To develop true ROI metrics, you need good data. Contact us to see how.
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