The Evolution to Sustainable Performance Governance

Sustainable Performance Governance (SPG) is emerging as a core goal of leading organizations, both public and private. Sustainable Performance Governance embodies the economic, energy, environmental and social challenges that organization’s face in today’s global community and assists them to

• Efficiently manage facility and asset portfolios
• Optimize capital, energy and maintenance budgets
• Reduce emissions and keep environmental commitments
• Improve security and safety, and
• Report on performance to all stakeholders

To understand why the Evolution to Sustainable Performance Governance is now being driven by the marketplace, it is necessary to appreciate the factors and societal impacts which have contributed to our decaying infrastructure and facilities and the future challenges we face.

North America experienced a significant building boom during the post World War II era through the mid 1980’s. During this time period the vast majority of the public’s assets, both infrastructure and facilities, were built.

With this build out came a focus on how to operate these vast facilities on a day-to-day basis; however, as the assets were in relatively sound condition, less emphasis was placed on capital renewal planning for long term facility needs.

Operational methodologies and processes then evolved to support these efforts. As technology came of age software systems began to be implemented to help track and monitor these operational activities. These years of experience have provided us with today’s “best practice” business models for facility operations. These models will continue to evolve and improve into the future.

As patterns of funding became established, it became more and more difficult to find capital renewal dollars for failing systems and building components as they aged. Much of this significant investment is now reaching the end of its useful lifecycle. As a result deferred maintenance is rampant and the capital renewal needs are daunting.

As we look to the future we find that a material building boom is once again upon us. A report published by The Brookings Institute examines a series of projected trends at the national, state, and metropolitan level to determine the estimated demand for new housing, commercial, and industrial space in the U.S. over the next quarter century. Its findings included:

• In 2030, about half of the buildings in which Americans live, work, and shop will have been built after 2000. The nation had about 300 billion square feet of built space in 2000. By 2030, the nation will need about 427 billion square feet of built space to accommodate growth projections. About 82 billion of that will be from replacement of existing space and 131 will be new space. Thus, 50 percent of that 427 billion will have to be constructed between now and then.
• Overall, most new growth will occur in the South and the West. There is tremendous variation in the total amount of buildings to be built between regions. In the Northeast, for example, less than 50 percent of the space in 2030 will have been built since 2000, while in the West that figure is about 87 percent, a near doubling of built space. Fast growing southern and western places—states like Nevada and Florida and metropolitan areas like Austin and Raleigh—will see the most dramatic growth.
• Though a small component of overall growth, the projected demand for industrial space in the Midwest outpaces that of the other regions, unlike the other major land uses. States with a strong industrial presence will see the largest amount of growth in industrial space even though other areas may witness faster growth. After California, which far outpaces the nation in terms of absolute square feet of new industrial construction, the next four largest producers of industrial space are all Rust Belt states in the Midwest: Ohio, Michigan, Illinois, and Indiana. By 2030, 70 percent of the Midwest's industrial space will be less than 30 years old.

While these projections may seem overwhelming, they also demonstrate that nearly half of what will be the built environment in 2030 doesn't even exist yet, giving the current generation a vital opportunity to reshape future development. Recent trends indicate that demand is increasing for more compact, walkable, and high quality living, entertainment, and work environments. The challenge for leaders is to create the right market, land use, and other regulatory climates to accommodate new growth in more sustainable ways.

Since the post WWII era, stewards of infrastructure and facilities have always sought the best methodology and available practices to operate and maintain these assets. Part of the challenge is that he best solutions to meet this challenge are, like everything else around us, in a continuous state of change and evolution driven by market conditions and emerging technologies.

Industry leaders are actively collaborating on SFG through numerous associations and non-profit organizations, focused on various disciplines, in an effort to raise awareness, educate the marketplace, and develop industry standards and benchmarks.

As one example, the Sustainable Building Industry Council (SBIC) is focused on these issues from the facility design perspective for both new construction and renovation projects.

Building construction and operation have an enormous direct and indirect impact on the environment. As illustrated in the following figure, buildings not only use resources such as energy and raw materials, they also generate waste and potentially harmful atmospheric emissions. As economy and population continue to expand, designers and builders face a unique challenge to meet demands for new and renovated facilities that are accessible, secure, healthy and productive while minimizing their impact on the environment.

The main objectives of sustainable building design are to avoid resource depletion of energy, water, and raw materials; prevent environmental degradation caused by facilities and infrastructure throughout their life cycle; and create built environments that are livable, comfortable, safe, and productive.

While the definition of what constitutes sustainable building design is constantly changing, there are six fundamental principles that nearly everyone agrees on.

• Optimize Site Potential. Creating sustainable buildings starts with proper site selection, including consideration of the reuse or rehabilitation of existing buildings. The location, orientation, and landscaping of a building affect the local ecosystems, transportation methods, and energy use. Siting for physical security has become a critical issue in optimizing site design. The location of access roads, parking, vehicle barriers, and perimeter lighting must be integrated into the design along with sustainable site considerations. Site design for security cannot be an afterthought. Along with site design for sustainability, it must be addressed in the preliminary design phase to achieve a successful project.
• Optimize Energy Use. With America's supply of fossil fuel dwindling, concerns for energy security increasing, and the impact of greenhouse gases on world climate rising, it is essential to find ways to reduce load, increase efficiency, and utilize renewable energy resources in federal facilities.
• Protect and Conserve Water. In many parts of the country, fresh water is an increasingly scarce resource. A sustainable building should reduce, control, or treat site-runoff, use water efficiently, and reuse or recycle water for on-site use when feasible.
• Use Environmentally Preferable Products. A sustainable building should be constructed of materials that minimize life-cycle environmental impacts such as global warming, resource depletion, and human toxicity. These environmentally preferable materials are defined by Executive Order 13101 to be "products or services that have a lesser or reduced effect on human health and the environment when compared with competing products or services that serve the same purpose." As such, they contribute to improved worker safety and health, reduced liabilities, reduced disposal costs, and achievement of environmental goals.
• Enhance Indoor Environmental Quality. The indoor environmental quality (IEQ) of a building has a significant impact on occupant health, comfort, and productivity. Among other attributes, a sustainable building should maximize day lighting; have appropriate ventilation and moisture control; and avoid the use of materials with high-VOC emissions. Additional consideration must now be given to ventilation and filtration to mitigate chemical, biological, and radiological attack.
• Optimize Operational and Maintenance Practices. Incorporating operating and maintenance considerations into the design of a facility will greatly contribute to improved working environments, higher productivity, and reduced energy and resource costs. Designers are encouraged to specify materials and systems that simplify and reduce maintenance requirements; require less water, energy, and toxic chemicals and cleaners to maintain; and are cost-effective and reduce life-cycle costs.

Another industry leading example is Ceres , which is a national network of investment funds, environmental organizations and other public interest groups working to advance environmental stewardship on the part of businesses. Ceres' mission is to move businesses, capital, and markets to advance lasting prosperity by valuing the health of the planet and its people.

Ceres works closely with a select group of companies that have made public commitments to stakeholder engagement, public disclosure, and performance improvements and share these core beliefs:

• Environmental stewardship and company value are strongly linked;
• The bedrock of sound corporate governance is measurement and disclosure;
• Responsible companies must provide their investors and stakeholders complete and transparent information about their environmental performance.

Sustainability Reporting is one of Ceres' four core program areas. Ceres is widely recognized as a leader in stakeholder engagement and corporate sustainability reporting. Since founding the Global Reporting Initiative (GRI) in 1997, which has now become the de-facto international standard for corporate reporting on economic, social and environmental performance, Ceres has promoted the adoption of the GRI by U.S. companies and has assisted many corporations in developing their reports. More than 700 companies from around the world now use the GRI reporting guidelines.

Ceres has also developed the Facility Reporting Project (FRP). The FRP has developed Sustainability Reporting Guidance in order to strengthen facility accountability to the public and other facility stakeholders by enabling them to report their economic, environmental and social performance to the public in a credible, comparable and consistent manner. The FRP reporting guidance was developed in consultation with the Global Reporting Initiative's (GRI) Sustainability Reporting Guidelines for organization-level reporting, which is emerging as the generally accepted sustainability reporting standard. The GRI Guidelines provide the best "compatibility standard" for facility level reporting.

The benefit of producing a facility-level sustainability report is the development of baseline performance information for key performance indicators. Additional benefits also include:

• Improved level of dialogue, enhanced reputation with key stakeholder groups
• Increased employee understanding of and commitment to environmental policies and programs
• New approaches to risk reduction associated with environmental, social, and economic performance
• External value gained from using environmental management systems for reporting
• Future cost savings from improvement of internal management systems

Another rapidly growing trend is the out-sourcing of facility related services by large public and private organizations. In a recent interview, Dr. Thomas Yoder, PhD, COO of Maricor Technologies, Inc. stated that “The processes for facility and energy governance have recently changed quite dramatically to a shared owner-outsourced service provider model. Coupled with this business process improvement is increasing stakeholder pressure for facility governance that is transparent, socially responsible, and that saves energy, money, and the environment.”

In response to this emerging business model, leading edge real state service companies, such as Equis Corporation headquartered in Chicago Illinois, are implementing business processes and technologies to support Sustainable Facility Governance and reporting requirements for its clients and their stakeholders.
Greg Robinson, Senior Vice President for Equis Corporation said “As we increasingly have a shared responsibility with our clients for the stewardship of their real estate portfolios, and the related economic, environmental, energy and societal impacts resulting from their operation during their lifecycle, it is critical that we deliver our facility management services in a manner that supports sustainable facility governance, while at the same time optimizing performance and return on investment”.

Additionally many utility based organizations are deploying business units geared at helping their clients improve supply, reduce demand and improve environmental performance. Direct Energy Business Services , provides energy related services offerings throughout North America that promote sustainability through various energy management programs. These initiatives include supplying green energy options as well as demand reduction through performance contracting and building automation and energy management systems and services.

“Our energy service offerings provide real value to our clients through cost reductions and improved efficiencies. These services also provide inherent societal and environmental benefits through optimal use of precious natural resources and enhanced control and reduction in emissions” said Derek Mathews, Director of Research and Development for DEBS.

A driving factor behind why organizations are seeking help to address these issues is the severally decaying conditions of their facilities and infrastructure. Over the last several decades a very simple problem has plagued facility executives: Inadequate funding levels to meet required capital investment needs. It’s no mystery that this ongoing circumstance has resulted in rampant deferred maintenance and significant capital renewal liabilities throughout both the public and private sectors.

The post World War II building boom of the 1950’s and 1960’s set the stage throughout North America for the current deferred maintenance crisis as a material portion of our built environment, including infrastructure, sites and facilities, reach the end of their effective useful lifecycle.

Over the years, stewards of facilities have always sought the best methodology to invest limited funds wisely. The best solutions to meet this challenge are, like everything else around us, in a continuous state of change and evolution driven by market conditions and emerging technologies.