Between covid, climate change, remote work, interest rates, and the new federal financial incentives, the buildings we live and work in are being reinvented and restructured. Those are the findings of a new study by The Conference Board, a global nonprofit think tank and business organization. A key driver is the push toward decarbonization, because the built environment accounts for 37% of overall carbon emissions, according to the World Economic Forum and the UN Environmental Programme (UNEP).
“I think we are really at an inflection point for a couple different reasons, the first being climate change and the fact that buildings are the cause of so much carbon emissions,” Erin McLaughlin, Senior Economist at The Conference Board told me.
“The second one, as you sort of referred to, is the pandemic, and our intersection with how we use our residential and commercial buildings is different,” McLaughlin said in an exclusive interview on Electric Ladies Podcast recently, adding, “we also have to acknowledge the expense and the financing costs around some of the changes that we are seeing underway and what that may mean.” She’s the author of their new report, “Decarbonizing Buildings: Understanding the Urgency and Strategizing For Success.”
Nearly every aspect of buildings today – the materials they’re built from, where they’re built, who uses them, how and what people need there, what they cost, how they’re financed, what they’re inspected and permitted for, and how they are powered – is being evaluated under new criteria in a new economy, with new demands and a new workforce, using the buildings in new ways.
Here are five key findings from McLaughlin’s report on how buildings are being reinvented:
· Need human-centered, ‘WELL’ buildings: Buildings over the past 50 years or so have been designed for “performance,” McLaughlin said, and now the focus needs to be “thinking about employee wellness, attracting employees, keeping employees by having good design, human-centric design and health design.”
“Now there’s such a humanistic conversation and there’s more of a ‘WELL’ movement, you know, and there’s even a ‘WELL’ certification now. So, it’s not just about the materials of how a building is designed and constructed, or heated or cooled, but it’s also about how the humans exist and how, well, and healthy these buildings can be including air quality and, and all of the other things that become even more amplified after the pandemic.”
· Need building codes to be revised: There are safety codes for buildings, but no energy codes and permitting does not require builders and developers to disclose how the building will be powered. “It’s not just about how your building was designed and constructed, it’s how, your building is almost like a living organism, like a living thing. How your building is going to perform for the rest of its life,” McLaughlin explained. There are the well-known L.E.E.D. building certifications from the U.S. Green Building Council, but those are voluntary.
“So, it’s much more impactful in many ways for us to design and construct buildings that right now can be as close to net zero as possible,” she added, “and so that they have resilience, which is another word that we just hear so much about, so that they are resilient against both all of the natural hazards, which are increasing due to global warming.”
· Increased demand for sustainable features: “I think companies that own their own real estate are making headway and creating sustainable real estate, including electrifying their buildings with renewable energy. so that they can be in line with their own, you know, 2030, 2050 commitments,” McLaughlin said.
Companies that lease their buildings are also focused on sustainability. “Instead of renewing maybe when their lease comes up, they’re looking for leases within buildings that are more sustainable, that are more attractive and that are healthier for their employees as well.”
· 15% less space needed: With remote work proliferating as a result of the pandemic, many companies are cutting back on the space they need, but it’s less than one might expect.
“They find maybe they need a little less space, maybe 15% less space than they had before the pandemic, because people aren’t coming in five days a week,” she said. But they still need significant space because they need to be able to accommodate everyone in the office at the same time and because they’re offering more amenities. The space may be used differently, but it’s “a much higher quality space that meets their sustainable and employee needs better than it did before.”
· Carrots and sticks as drivers: The Inflation Reduction Act and Infrastructure Act incentivize companies to decarbonize their buildings, but, “it is sort of the sticks versus the carrots that’s driving things,” McLaughlin said. “In many US cities, especially cities that are maybe more progressive than others, they are instituting their own laws about carbon emissions,” such as in New York City,
“So the combination of carrots and sticks, whether it’s federal tax incentives or local sticks – ‘we’re going to fine you if you don’t change your heating and cooling systems essentially to get within our carbon goals’ – are really what’s taking place.” She cautioned that, “These are really just emerging, but so far it seems to be working.”
The team doing it matters too. “I think what’s really interesting, and I heard this at our conference last week from so many of our member companies, is making sure they have the right people internally doing this,” McLaughlin insisted.
Because decarbonizing the built environment, and the related compliance issues, intersect with various departments, “I think we’re going to see, and we probably already are really, a meeting of the minds between finance, accounting, and sustainability and the ESG folks in ways that we haven’t seen before.” I would add the legal and operations teams too.
Listen to the full interview with Erin McLaughlin on Electric Ladies Podcast here.
