Tuesday, 13 January 2015

The Sustainability Crystal Ball – What’s Ahead for 2015?

By Rebecca Pearce
EMEA Head of Sustainability

A snapshot of the key sustainability issues and trends to watch for in the year ahead, as follows:

Clarity around energy efficiency legislation
There is widespread uncertainty across Europe about the implementation and implications of national energy efficiency legislation. The majority of EU member states failed to meet the July 2014 deadline for legislation to satisfy Article 8 of the EU Energy Efficiency Directive. One example of a framework to meet these requirements is the UK Energy Savings Opportunities Scheme (ESOS) requiring large organisations to assess their energy use and efficiency opportunities across property and transport http://green-perspective.blogspot.co.uk/2014/07/embrace-energy-savings-opportunity.html Many member states are expected to introduce similar requirements in 2015 with impacts on occupiers and landlords.

Also in the UK, the Energy Act 2011 legislates that from 2018 it will be unlawful to lease buildings with low rated Energy Performance Certificates (EPC’s). Often referred to as Minimum Energy Performance Standards (MEPS) this will have a large influence on owners, investors and occupiers, with many institutional owners already acting on the matter. The industry is now eagerly awaiting final details on how this legislation will be implemented and enforced, as well as what exemptions will be allowed, with pressure mounting as the 2018 deadline approaches http://green-perspective.blogspot.co.uk/2014/06/2011-energy-act-progress-is-needed-from.html

Expect more on this matter during 2015, although the UK election may well delay the release of definitive guidance. Similar requirements are expected throughout Europe although, apart from France http://green-perspective.blogspot.co.uk/2014/11/green-growth-for-real-estate-in-france.html clear action plans are not generally available.

The Circular Economy – A Zero Waste Programme for Europe
Responding to the EU policy agenda, the expectation is that the commercial sector will sit up and take note of the benefits and opportunities for innovation in waste management. Currently, consigned predominately to Non Government Organisations (NGO’s), the drive to boost recycling, prevent the unnecessary waste of materials, reduce CO2 emissions and its impact on the environment will create new business models to support a shift in thinking. Whilst the European Commission has set aside the Circular Economy Package proposed in 2014, this is apparently in favour of a “broader and more ambitious” proposal in 2015.

The implications for the property and construction industry, and also for society at large, are extensive. For example, for the built environment it could mean moving to a true lifecycle view of building construction including occupation and destruction; reducing waste from construction and fit-out processes; requirement for facilities and services to recycle tenants waste materials and rethinking materials and products to incorporate eco-design, deconstruction and industrial symbiosis.

These factors will impact the potential for energy supply from anaerobic digestion and energy-from-waste systems. The knock on effect will mean associated employment opportunities will surface including new skill requirements and a rethink, and potentially even a reconfiguration, of existing business models. It could lead to a complete shift in manufacturing as we know it.

The impact of commodity costs, spot prices and futures are well known in the financial community.  For those involved in commercial property, a key issue – related to commodity costs - is energy security. What are the risks for commercial users and consumers alike, and how do you balance security, risk and cost to gain the optimum solution for real estate assets. The energy security theme is set to be explored further.

The recent oil price movement on a downward trajectory could impact the attractiveness of large scale investment in renewables. This is already making alternatives, like shale gas, less attractive. How will this pan out and will the oil price reductions lessen the commitments in place for 2030 and 2050? On the flip side, non-commodity energy charges (such as renewables charges) are going up, making the wholesale cost of energy less important.

Broadly, the importance of demand side reduction (increasing energy efficiency of building fabric, systems and management activities) will continue to increase. We are seeing investment in energy efficiency projects increasing as risk and cost reduction come into focus and more capital is available to invest.

Flood Risk
While this is off the radar at the moment, it could well be prominent between now and spring. Location relative to flood zones is likely to have a long term impact on property risk profiles and values. Investors are becoming increasingly aware, so it remains to be seen whether all the mitigation projects recommended after recent floods have been adopted, or ignored.

The “Housing Crisis” and Rise of Garden Cities
Addressing the energy efficiency and material impacts of new housing development is vital to the long term sustainability of our communities. Further outcomes of the Lyons review will create some interest, as will the proposal by the Conservative government to build up to 100,000 new homes for young people at a “discount” by lowering environmental obligations such as the zero carbon homes standard (planned to be applied to new homes from 2016). 

Can the Garden Cities agenda deliver the solution to UK housing demand or is it just addressing part of the problem? Will the next government be able to create a balanced solution that addresses urban infill, extension and standalone developments? These questions remain unanswered, however, expect more after the general election.

Employee Wellbeing
Increasing attention is being paid to health and wellbeing for building occupiers, especially those in office environments. This will be an even more important driver for corporate occupiers as the link between staff health and wellbeing and productivity (& therefore business performance) is becoming clearer. Other benefits include improved staff attraction and retention. Smart companies have seen the link between what have previously been considered "green" building attributes (eg better indoor environment quality, better access to natural light) and healthy buildings. Whilst you can address health, wellbeing and environmental sustainability issues separately the smart money is looking at combining the features to get a balanced solution that provides the best benefits to humans and the built environment.

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