The three pillars of a scalable decarbonization program

Over the past decade, the real estate players leading on sustainability have tackled a LOT. They have set up core data infrastructure to track carbon emissions, engaged in annual reporting, established standards for new builds, and pursued green building certifications. 

As we step into the 'next frontier' of sustainability, leaders are now expected to shift from analysis to action. They must design and implement more holistic decarbonization programs that can predictably and consistently reduce carbon year-over-year to hit both interim and end state net zero targets.

Audette works with many of the leaders at the forefront of decarbonization, and through our work, we are exposed to emerging industry best practices and key lessons learned. 

In this article, we share our learnings on the three key pillars of building a strong, scalable decarbonization program:

1. An energy efficiency playbook & training program
2. A capital replacement schedule & retrofit strategy
3. Organizational incentive alignment

Pillar 1: Implement an energy efficiency playbook & training program 

This first pillar focuses on the day-in, day-out common sense measures your organization should be taking year-round to tune and optimize building performance.

These are low-cost, no-brainer actions that your team can take to ensure that you drive carbon efficiency and minimize your ongoing energy spend. Examples of operational protocols you should implement in your normal course of business include:

• Check that every large motor has a speed drive
• Ensure every ventilation system has air quality monitors to control fresh air
• Revisit the performance of your smart building systems every 3 to 5 years
• Make sure large hot water piping is insulated
• Ensure all water fixtures are low flow
• Establish procurement guidelines that ensure only high-efficiency lighting, motors, etc., are purchased.

While straightforward, implementing such a program takes work, with the first step being documentation. To identify the measures that will be most impactful for your specific buildings, you will want to work with either an in-house engineering team or a third party.

Once documented in a centralized playbook, train your team. Best practices to keep in mind here are:

• Keep it simple. Where you need to rely on humans to intervene, instead of lengthy operating manuals that no one reads, simplify processes as much as possible and use checklists and infographics to ensure better workflow integration. To the extent you can also tie in education with the relevant time or place of action, you will also see greater success. For example, if you have a condensing boiler in place, it only reaches high levels of efficiency if the return water temperature is within a certain range. If it doesn’t come back within that range, the solution is a water temperature reset algorithm. Attaching a reminder sign in the mechanical room with action protocols is likely to ensure you get better outcomes.
• Create space for feedback: Building staff manage maintenance and tenant requests constantly. They know exactly what might be causing issues and what equipment is likely to fail. Most of the time, there is an efficiency opportunity hidden (or in plain sight) in their ideas for operational efficiency improvement. Creating regular touchpoints will not only help you find ways to improve building performance, but also create a cohesive and proactive culture. 
• Make it fun. Nothing builds engagement like a little friendly competition! Create internal teams and gamify the activities where possible. Consider putting up a prize for the ‘winning’ team with the most successful results after implementing your program for a certain period of time. This also shifts the dynamic away from top-down compliance to peer-driven engagement.
• Celebrate and recognize team members. Has someone done a truly exceptional job of implementing your program? Profile them in a company newsletter, create an award to recognize their efforts, or share their story in your ESG report. The right forum(s) may differ for your organization but do not underestimate the power of recognition as a major motivating driver for your employees.
• Repetition, repetition, repetition. Especially when it comes to operational efficiency, the change you are seeking is never really done. It requires ongoing care and attention. As a result, you will need to set up reinforcing training and education on an ongoing basis. This serves as a refresh for existing team members and helps new hires understand the operational program at your organization. 

Pillar 2: Be prepared and proactive with a capital replacement schedule & retrofit strategy

This is where things can get crunchy.

Retrofitting your major building systems is not as simple as just designating "system X should be replaced with Y." There are a myriad of factors that need to be accounted for in your capital replacement strategy, such as your hold period, the pace of grid decarbonization (for electrification projects), the physical limitations and geometry of your building, the useful remaining service life of each system, building performance standards, incentives and more. 

Most organizations rely on traditional onsite energy audits for this analysis, but because these studies are so time- and cost-intensive ($15k to $40k and 2 to 3 months on average), they end up only being able to audit a small percentage of their assets. As a result, the majority of their assets have not been studied and do not have a plan in place.

The risks of not having a plan in place are clear. First, you are vulnerable to making poor decisions reactively. When equipment unexpectedly fails, without a clear "if/then" blueprint, property teams automatically default to like-for-like replacements as the clearest, easiest and fastest path to resolution. In many cases, these in-the-moment decisions inadvertently result in your getting locked in for another 20 to 30 years of emissions generating equipment, increased exposure to asset value destruction, and failure to make progress on your net zero targets.

Second, when it comes to your proactive decarbonization strategy, there is no path to achieving zero carbon by 2040 (or 2045 or 2050) without understanding which replacements, of which systems, at what time, are needed to get you to your end goal. This is where the rubber meets the road. Without reliable bottom-up, asset-level plans, you do not have a path to confidently achieving your top-down targets.

Take it from the leaders who have been at this for years, well ahead of the rest of the market. 

“We know the age of all of our assets, and we understand when, logically, they would need to be replaced in a regular replacement capital cycle,” Jonathan Flaherty, Global Head of Sustainability at Tishman Speyer, said in our recent webinar on carbon’s impact on future asset values.

“Sequencing the plan is great. You should lay out when you think you’re going to do it and how you think it’s going to all go down. We're certainly not going to replace in kind and put something that is obviously from the past into the building for future.”

By combining building science expertise and advances in AI & machine learning, Audette provides a tech-driven alternative to traditional energy audits that now makes it possible (for the first time) to build capital replacement transition plans for 100% of your assets quickly, affordably and scalably. If that's something you could use help with, let's talk.

Pillar 3: Align your organization by aligning incentives

While it can be a sensitive topic, incentives are the last critical piece of the puzzle.

Until teams outside ESG are formally incentivized on decarbonization outcomes, it can be extraordinarily hard to drive engagement and progress. Decarbonization is a team sport — it requires many different teams, including Sustainability, Asset Management, Property Management, Engineering and Capital Projects — to work in tandem towards a common goal. No one team can get it done unilaterally.

At the same time, all teams are strapped for resources and juggling multiple competing priorities. Given limited time and resources, the most rational way for any individual to prioritize where they spend their time is to focus on the activities against which their job performance and/or compensation is judged. Everything else is fair game for the chopping block when times are busy.

We don't have to look far afield for examples where organizations have implemented this with great success:

• Galvanize Real Estate has a purpose-built decarbonization fund, tying the long-term incentives of every team member to making progress against their asset-level decarbonization plans. "Everyone needs to be on the same page, and economic incentives move perspectives very quickly," Joseph Sumberg of Galvanize Real Estate, shared at CRETech last year.  
• In the opening panel at IMN this year, Tanja Milosevic of Grosvenor shared that 25 to 35% of the company's annual goals are ESG-related, and that those goals trickle down into bonuses.
• In the same panel, Daren Moss of Ares Management shared that they have ESG champions across the company for whom ESG is now formally part of their day jobs (and performance evaluation).

This is, of course, all easier said than done. Incentives are notoriously hard to influence and require buy-in from the very top. That said, we know from our customers that many have had success leveraging their ESG Committees to bring awareness to this issue and make the case for how critical incentives can be for embedding accountability across the organization. 

Until such time that decarbonization is meaningfully reflected into incentives organizationally, Sustainability teams will simply have to resort to beg/borrow/steal tactics to try and push their decarbonization agenda forward.

Recent Webinar Spotlight: Decarbonization in Multifamily Real Estate  

On September 17, our CEO Christopher Naismith moderated our first sector-specific webinar, focused on Multifamily, with Katie Rothenberg of AvalonBay Communities and Chris Laughman of Greystar. Featuring real-life lessons from industry leaders, Decarbonizing Multifamily Real Estate explored: 

• Striking the right balance between data collection vs. taking action
• Strategies for building the business case for decarbonization in Multifamily
• Best practices for engaging residents in sustainability efforts

If you missed it, you can still catch it on-demand here.