The Economics of Green Buildings

This article is contributed by Mr Ishan Palit, President and CEO, TÜV SÜD Asia Pacific Pte Ltd. He dispels the myth that green buildings are cost prohibitive and reveals how to turn them into lucrative investments.

Over the years, green buildings have rightly become a cornerstone in the global drive to enhance environmental sustainability. The construction and operation of buildings, after all, consumes roughly 30-40% [1] of the world’s energy usage – quite an astonishing figure – and building-related CO2 emissions are predicted to increase from 8.6 billion tonnes in 2004 to 11.4 billion tonnes in 2030 [2], under a low-growth scenario. Under a high-growth scenario that number is estimated to increase even more dramatically to 15.6 billion tonnes.

Progression towards a sustainable built environment, however, is slow. Why? The most common answer from building owners in Singapore is that ‘going green’ is not economically viable. In today’s world, however, this is little more than a myth. Personally, I would argue that green buildings are one of the most astute investments you can make in the current global economic environment. Here’s why…

Investment credentials

In 2005 the Building and Construction Authority (BCA) in Singapore launched The Green Mark Scheme, an initiative to drive the country’s construction industry towards more environment-friendly buildings. Essentially it is a benchmarking scheme that incorporates internationally recognized best practices in environmental design and performance. It is split into four categories: Certified, Gold, Gold Plus and Platinum. These are based upon the green credentials of the building.

The table below demonstrates the green cost premium (as a percentage of the building’s total cost) across each of Green Mark award type and the respective time required for energy and water savings to pay back the initial fixed cost.

As you can see, payback periods for even the most significant investments can be as little as two years and at most eight years. These figures are applicable to any green building in any country that complies with recognised best practice standards. After these payback periods building owners are simply saving money, and vast sums at that.

One building the BCA is working with, City Square Mall in Singapore, is expected to save an impressive US$1.5 million in energy savings per year from green features alone. These include eco restrooms, a twin chute (organic and inorganic waste) pneumatic waste disposal system and motion sensors to control the lighting in the basement car park. Xilinx Asia Pacific Headquarters is another great example of the savings that can be made from best practice green principles. Features such as high performance low-emissivity double glazing for its windows, extensive use of low volatile organic compound (VOC) paint and zero-formaldehyde emission carpets are expected to help the firm save nearly US$400,000 per year.

Direct cost savings are by no means the only tangible benefits of green buildings. Increased demand for buildings certified to respected green standards, for example, has lead to higher property values. This negates common concerns that green buildings are only economically viable over a long time horizon. It must also be noted that green buildings offer better indoor environmental quality, which leads to enhanced staff productivity and health.

Getting it right

A building’s ability to reap significant rewards, like those outlined above, is dependent on how efficiently green features are woven into its very fabric. To maximise your rewards it is essential to get your plans right from the start. That means shrewdly selecting the most suitable materials, construction methods and green features for your project. Importantly, it also means identifying and adhering to the most appropriate green standards for your building and location.

To help you navigate the vast sea of national and international standards – there are currently hundreds – you can call on an independent testing, inspection and certification partner. They not only have the extensive knowledge and expertise required to select the correct standards for your individual needs but can develop a simple step-by-step approach to achieve them. Some leading independent providers, like TÜV SÜD, also offer a variety of additional value add services including preconstruction tests and analysis that project the future financial benefits of your project. The results can help identify areas for improvement before construction takes place and be used to develop an invaluable cost benefit analysis.

Changing behaviour

Whilst the ‘hardware’ alterations outlined above are paramount to improving the efficiency of a green building, they cannot be solely relied upon. ‘Software’ modifications, namely through inculcating good green practices in staff, are also an integral part of the process. For example, in a hot climate like Singapore, setting the air-con thermostat at 25°C as opposed to 18°C can render an approximate saving of 450 kg of carbon dioxide per household per year. This is a significant saving and one you will lose without changing the behaviour of your occupants. Again independent third party providers can help instil best practice behaviour in staff through training but sustaining long-term changes requires a degree of dedication.

It’s in your hands

In conclusion, the financial benefits of green buildings are very real, sustainable over long periods of time and – with a little support – tantalisingly achievable. The level of rewards you reap is also dependent on the effort and funding you put in. In essence, unlike many financial investments products, such as bonds and equities, the rewards you receive from your eco investment are firmly in your hands – a compelling reason for investment.

[1] Approximately 80-90% of the energy a building uses during the entire life cycle is consumed for heating, cooling, lighting and other appliances. The remaining 10-20% percent is consumed during the construction, materials manufacturing and demolition phases.

[2] The Kyoto Protocol, The Clean Development Mechanism, And The Buildings And Construction Sector, 2008

About Ishan Palit, Chief Executive Officer of TÜV SÜD Asia Pacific

Mr Ishan Palit was appointed Chief Executive Officer, TÜV SÜD Asia Pacific on 1 October 2009. He is responsible for profit and loss, sales revenues and budget for all business operations in the Asia Pacific region.

He started his career with the “American Multinational Rotary Corporation”, a supplier to the Automotive and Small Engine industry. As Manager – Quality Assurance & International Business Development, he was responsible for productivity projects and production part approval processes (PPAP) as well as business and distribution channel development in Europe. Ishan Palit also worked as an internal & second party auditor and Management Representative for ISO 9002 certification for the manufacturing plant in Georgia, USA. After joining TÜV SÜD Group in 1994 as General Manager for Indian Operations, he attended several General Management training courses in Germany and USA to commence operations in India. In the USA, he trained and qualified to become a Lead Auditor for management system certification ISO 9000, QS 9000 & TS 16949.

In 1999, Ishan Palit was appointed Managing Director of TÜV SÜD South Asia where he was responsible for all activities of TÜV SÜD Group in India and Sri Lanka. Under his leadership, the sales turnover tripled and operations expanded to 30 office and laboratory locations throughout India, Bangladesh and Sri Lanka.

In January 2009, Ishan Palit was promoted to Chief Operating Officer of TÜV SÜD Asia Pacific, where his main responsibilities included the business development of current and new businesses and the top and bottom line accountabilities of the business units in the Asia Pacific Region.

Ishan Palit, 41, was born in Mumbai, India. Educated in the US and UK, Ishan Palit holds a Bachelors Degree in Economics / Engineering from Davidson College USA, a Masters in Business Administration from Georgia Southern University, USA and later earned a General Degree in Economics at the London School of Economics, UK.

About TÜV SÜD Asia Pacific Pte. Ltd.

TÜV SÜD is one of the world’s leading technical service organizations. Established over 140 years ago as a steam boiler inspection association, TÜV SÜD is a globally active, future-oriented company. It is represented internationally in Europe, Americas and Asia Pacific. As process partners, our teams of specialists are engaged in optimizing technology, systems and know-how, enhancing the competitive strength of our customers throughout the world. TÜV SÜD’s objectives are reliability, safety, quality as well as environmental protection and cost effectiveness.

Headquartered in Munich, Germany, TÜV SÜD has revenues of EUR 1.427 billion in 2009. TÜV SÜD employs 15,000 highly skilled staff in more than 600 locations worldwide. In Asia Pacific, TÜV SÜD is represented by over 3000 employees at 69 locations in Bangladesh, China, Hong Kong, India, Indonesia, Japan, Korea, Malaysia, Philippines, Singapore, Sri Lanka, Taiwan, Thailand, Vietnam as well as the Middle East.

TÜV SÜD’s activities in Asia Pacific began in 1989 in Hong Kong and Japan. The initial business scope focused primarily on product testing and certification, gradually expanding to encompass today the entire range of TÜV SÜD’s service portfolio offering testing, certification, inspection, training and knowledge services. TÜV SÜD’s services spans the entire value chain from R&D to recycling, supporting a wide range of industries including automotive, medical devices, electrical and electronics, construction, consumer products and chemical.

Clients benefit from TÜV SÜD’s one-stop interdisciplinary solutions and international accreditations, enabling the fast, efficient access to global markets for their products and systems.

To find out more, visit http://www.tuv-sud.com.

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