In recent years, many companies have worked to cut costs and reduce their environmental footprints. Now, with research showing that the physical risk from climate change will continue to accelerate unless the world achieves net-zero emissions by 2050, no business can afford to hesitate on the path toward this mission-critical goal. Every journey along that path must begin by addressing Scope 1 and 2 emissions, both of which a company can take steps to eliminate through its own direct actions related to energy management.
Scope 1 emissions originate from facilities or equipment that your company owns or controls. Scope 2 emissions consist of indirect emissions from the generation of purchased energy. Given the urgency of the Paris Agreement’s international mandate to limit the mean rise in global temperature to less than 2°C above pre-industrial levels, Scope 1 and Scope 2 emissions represent quick-win opportunities for decarbonization through best-in-class energy management. At the same time, Scope 3 emissions — emissions resulting from the full supply chain — must undergo mitigation and eventual elimination via the implementation of a robust, holistic sustainability policy integrated across a company’s entire footprint.
To put it simply, a better future must start with energy management.
Everything Begins with Energy
The economy today remains carbon-intensive and must transition rapidly — a transition that takes energy use and generation as its starting point. Commercial real estate leaders understand the risk, given that the built environment accounted for 40 percent of global energy use and 33 percent of global energy-related CO2 emissions in 2019. More than a third of CBRE’s top 75 enterprise occupier clients have announced science-based, fully funded plans to achieve those targets.
The right approach to energy can differentiate a company from its peers — an approach that must encompass cutting-edge asset management, building systems monitoring and energy procurement.
Lessons from the Pandemic: Investment in Energy-Saving Infrastructure Pays Off
Unfortunately, energy reduction efforts of all kinds encountered a major obstacle in 2020, as the COVID-19 pandemic necessitated urgent and not always eco-friendly changes to energy management procedures. Companies had to develop a better understanding of indoor air quality’s role as a critical component of employee well-being, productivity and safety. This meant that energy efficiency and savings goals needed to account both for increased ventilation air requirements for occupant health as well as increased energy costs to condition higher percentages of outside air and maintain thermal comfort.
Fortunately, advances in energy technology had already enabled companies to curtail energy use prior to the pandemic, thereby cushioning the blow of cost increases resulting from the increases in ventilation air rates.
The past few years have seen the emergence of several strong drivers for cost reduction: decarbonization of utilities procured and used, decentralization of local energy needs where off-grid solutions are viable, and improved technology supporting automated fault detection and diagnostics to resolve building services anomalies efficiently.
The Road to Net Zero
Together, these innovations point the way toward net-zero carbon emissions. But without a clear plan, piecemeal investments even in the latest innovations may fail to yield optimal results.
A phased approach can be used to reach net zero. This typically entails addressing utility bill payment and procurement in phase one, maintenance management and building automation systems as well as central utility plant upgrades in phase two, on-site renewable energy and smart building system implementations in phase three, and finally continuous commissioning and remote monitoring and control of major building systems in phase four.
This process results in significant carbon emissions reductions and energy savings.
Asset Data Collection and Improved Asset Performance
Facilities management costs associated with “controllable” utility outlays and operating expenses tied to repair and maintenance generally constitute only 25 percent of actual facilities spend, obscuring typically higher hidden costs such as emergency capital expenditures, variance in energy pricing, excessive reactive maintenance and carbon emissions.
Put simply, methodically addressing asset total cost of ownership (ATCO) creates a future of increased performance and uptime along with decreased emissions and capital spend. An asset performance program like APEX gathers client asset data, which in many cases does not exist in a cohesive format. Then, using the data-driven insights derived from a technology platform like Asset Insight, the APEX team can work with the client to develop an understanding of asset replacement costs and engage in accurate short- and long-term capital forecasting.
The average age of a commercial real estate building in the U.S. is 53 years, with capital sometimes lacking to fund the infrastructure upgrades needed to meet sustainability initiatives. Deferred asset replacements can increase OPEX/CAPEX costs by as much as 400 percent to 1500 percent Assets operating beyond their useful life use 30 to 50 percent more energy and emissions than new assets.
One of the looming challenges in the built environment has to do with an increasing number of building assets, such as HVAC systems, nearing or exceeding the end of their useful lives. Replacement deficits accumulate as these assets age, leading to much higher future expenses when the assets fail. All failures of equipment negatively impact operations, and some can halt operations.
After building an accurate asset data set and developing benchmarks appropriate for the program, asset replacement can begin. Making strategic investments at this stage can change the game for clients, providing the impetus to reach net zero.
Take This with You
Companies recognize that they have an obligation to invest in a net-zero future.
Addressing Scope 1 and Scope 2 emissions through renewable energy procurement, asset upgrades, building optimizations and even on-site renewable energy generation constitutes a necessary step in the process for all companies striving to achieve net zero.
John Hagen is Global Senior Managing Director of Asset Performance & Excellence Services in CBRE’s Global Workplace Solutions division. He is based in Newport Beach, Calif.
