Risk & Compliance

Tearing Down the Walls

Giving company buildings a green makeover can save money as well as meet new regulations.
Christopher WattsMarch 2, 2009

A growing number of companies are giving old office buildings and factories a green makeover. For some this comes as part of corporate social responsibility efforts while for others, legislation, such as the EU’s new Energy Performance for Buildings Directive, is the main motivation.

But in today’s dismal economic climate, CFOs can be forgiven for demanding strong business cases for a makeover. That won’t always be straightforward. For one thing, CFOs ought to resist focusing on energy savings alone, says Terry Dix, a UK-based director at Arup, an engineering and sustainability consultancy. “For most building occupiers, energy is only about 0.5% of operating costs,” he says. “Saving 20% of that is not financially very attractive for the average CFO.”

Yet there are other benefits of making old buildings more sustainable. When it moved to a new green site in England’s West Midlands, Arup experienced a 7% increase in productivity. “For a consulting firm, this is worth far more than energy cost savings,” he explains.

Even finance chiefs of companies that lease rather than own property are advised to keep abreast of the latest green developments. Legal & General, Hermes and Hammerson, which manage properties worth some £30 billion (€34 billion) in the UK, have all now introduced green clauses in their standard lease agreements and are slipping green memoranda of understanding (MOUs) into existing leases. Can tenants expect anything sinister? “Most clauses and MOUs are ‘light green,’” says Alex Edds, a consultant at Upstream, the sustainability advisory unit of property firm Jones Lang LaSalle.

Green clauses typically stipulate that both the owner and occupier have the right to take reasonable measures to improve a building’s efficiency, and that the tenant must not jeopardise the energy “rating” of the building under the new EU directive. If in doubt about green clauses in leases, says Edds, there is, of course, no obligation to sign.

But it’s a two-way street. For its part, Deutsche Bank, which occupies more than 2,200 leased premises worldwide, now includes green clauses in leases as they come up for renewal. These clauses include efficiency measures for both landlord and tenant. “In 2009 we’re rolling it out more widely,” says Ron Herbst, who’s responsible for the sustainability of the bank’s property. Along with introducing green MOUs in existing contracts, he says, the bank plans to engage building owners about joint investments in bringing buildings up to scratch.

How green a premise can become depends in part on the constraints of the existing structure, of course. But John Connaughton, head of sustainability at Davis Langdon, a UK consultancy, is confident that most existing buildings can be greened: “There aren’t many that are completely beyond hope,” he says.