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November 12, 2009

Sustainable Property Management: Reducing Carbon And Cost

Simon Parsons
IBM Global Business Services

Many organizations are facing increasing cost challenges and pressure to reduce their carbon dioxide emissions. One area of opportunity they’re beginning to recognize for both cost and CO2 emission reductions is their real estate portfolios.

Buildings, particularly older structures, are a major consumer of energy — for heating and cooling, for lighting, for powering all types of business and industrial equipment, and for providing all the services that people and institutions need to live and conduct their business.

The numbers tell the story. According to various analyses, buildings are responsible for some 45 percent of the UK’s overall greenhouse gas emissions. In the U.S., buildings represent 70 percent of all energy use and 38 percent of all CO2 emissions.

The very size of those figures indicates a significant opportunity for improvements in efficiency, cost and environmental impact. For example, The Carbon Trust estimates that 20 percent energy savings — with corresponding improvements in cost and CO2 emissions — are possible in UK office buildings alone.

Meaningful action to address these potential savings requires wide-ranging yet detailed insight based on reliable data. However, many organizations carry out a one-off exercise when estimating CO2 emissions associated with their real estate portfolio and then struggle to build a strategic plan to drive lasting improvements.

A holistic approach

What’s required is a holistic approach for maximizing cost savings, reducing energy consumption, and improving the environmental sustainability of the property portfolio. Rather than looking only at building infrastructure such as insulation, lighting and air conditioning, this approach should also consider how a building is operated in practice, the processes deployed to manage and maintain it, and how efficiently its space is used.

This can be done by assessing the maturity of a building’s management systems and processes, combining detailed quantitative analysis with the insights gleaned from focused interviews across all functions that influence – directly or indirectly – property use and the associated energy and emissions. This exercise should include consideration of organizational structures, internal processes, facilities management suppliers and how they are procured and managed. To help gain a complete understanding, these aspects must be considered at the strategic, management and operational levels.

As a direct result of this analysis, immediate “quick-win” opportunities can typically be identified and at the same time provide a solid platform for prioritizing — from the strategic property level down to operational issues — a range of competing initiatives that may offer varying returns in different time frames.

The business strategy link

A property strategy should be linked upward to the overall business strategy and downward to the maintenance and operational use of corporate property. The property portfolio must support corporate objectives and standards: increasingly, businesses and public institutions alike are demanding that their properties be more energy- and cost-efficient. These demands impact the property strategy and how it informs the maintenance and use of the buildings. This raises an obvious question: how can the energy efficiency and related CO2 emissions of properties be rigorously determined and managed?

First an organization must complete a detailed, fact-based analysis of CO2 emissions from its property portfolio. This analysis should include a health-check on the quality of the available data and any cleansing required, as well as a review of the current energy and CO2 emissions data management processes and systems.

This will provide insight into how property management and the associated CO2 emissions are related to business and property strategies, internal processes, organizational structures and supplier management. Then the organization must conduct a qualitative analysis to understand underlying factors behind the numbers.

In my experience working with both public and private institutions, I’ve noted the same common findings repeatedly. Often, there is no clear functional responsibility for property CO2 emissions data management and there are no property CO2 emissions data management systems or processes. There are errors in previous high-level reporting and CO2 emissions are not factored into investment or procurement considerations. The analysis I’ve outlined here is frequently the first detailed view of organizational CO2 emissions baseline, yielding significant opportunities for cost savings, in terms of space use, energy management, investment prioritization, etc.

Next steps

The quantitative and qualitative analyses will produce a prioritized list of opportunities for emissions reduction. Typical areas warranting immediate investigation include:

- Property strategy/portfolio optimization — matching accommodation to current and future business needs;

- Workforce transformation — improving staff mobility and flexibility of working practices to make the most efficient use of property;

- Supplier procurement rationalization and performance management — reaping the most value from a competent and innovative supply chain;

- Process and/or organization optimization — helping to maximize the benefits of increasingly outsourced service provision;

- Carbon management information systems — IT systems to help provide ongoing reporting and insight into emissions and the impact of reduction initiatives;

- Building asset management — a detailed investigation into the efficiency of specific items of mechanical and electrical plant.

Case study: Her Majesty’s Revenue & Customs

The case of Her Majesty’s Revenue & Customs — the British government’s tax agency — illustrates how such a detailed and comprehensive analysis can identify problems and suggest solutions.

Keen to be at the forefront of sustainable development within government, HMRC was performing well against many of the environmental targets set by the Sustainable Development Commission for 2010. Nevertheless, it was eager to ensure that it did not fall behind on the ambitious target to reduce carbon emissions from offices by 12.5 percent.

HMRC consists of around 85,000 people and 900 buildings. The sheer size of the organisation made it difficult for HMRC to get a reliable overview of carbon consumption and the priority areas for action.

Recommendations for HMRC’s estate revolved around creating a strategy that enabled buildings to be managed from both sustainability and cost perspectives. A data management system was suggested to capture energy readings and allow an “at a glance” view of which buildings are performing above or below benchmark so that informed action can be taken.

HMRC has long-term PFI contracts in place to manage its estate and was pleased to discover that much could be achieved to reduce carbon output by working within existing contracts. A potential saving of up to 50 percent of the estate’s carbon emissions was identified if the entire set of recommendations could be put in place.

What the HMRC did many other organisations can do – with the right data and plan. The time to begin is now.

Simon Parsons is a business consultant for IBM Global Business Services, assisting clients with a range of environmental sustainability issues regarding properties and asset management.

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