Hitting the green wall

Sustainability has in recent years become a business-critical issue for all those involved in the UK development industry. This is a far cry from just a few years ago, when sustainability was at best regarded as a nice-to-have and certainly not core to business strategy.

However, with the worst recession in recent memory savaging the British economy, and the property industry being particularly hard hit, would the importance afforded to sustainability drop? In addition, how would the industry now view the Government’s stretching zero-carbon targets?

These, and other pressing issues, were examined in a recent report, entitled Hitting the Green Wall…and Beyond, a collaboration between international law firm Taylor Wessing, communications consultancy Spada and the British Property Federation. This report, based upon a survey of over 7,000 developers, contractors, technical advisors, investors and end users, is believed to be the most comprehensive of its kind.

Key findings included the fact that the importance accorded to sustainability remains high despite the recession. Over 68 percent of respondents said sustainability was either ‘very’ or ‘highly’ important. When compared to the 2009 findings of previous report Behind the Green Facade, importance dipped only marginally by three percent, a sign of durable commitment in the face of a severe recession.

However, the report also discovered that all sectors of the UK development industry are sceptical of Government’s policy objectives. 76 percent of respondents think that the Government’s plans for making all new housing zero carbon by 2016 are unrealistic, while 73 percent percent believe plans to make new commercial property zero carbon by 2019 are unrealistic. With an industry that clearly rates sustainability as important, scepticism around Government targets could prove to be a significant block to change. The remainder of this article is dedicated to examining the potential causes of this scepticism and how it could be addressed.   

Sector divide
Developers are a little more optimistic about the 2019 target for zero carbon commercial property than in the residential sector, with almost one third considering the target to be realistic – compared with less than a fifth of developers who feel that the residential property zero carbon target is realistic. Non-technical advisers and Investors are notably more negative about the commercial property targets.

The greater optimism of developers about the commercial property zero carbon target may suggest that developing technologies in the commercial property sector, coupled with the additional time period for compliance and the element of control they can retain over commercial buildings, results in them viewing this target as more achievable. 

The fact that non-technical advisers and investors were more sceptical suggests that economic confidence is lagging somewhat behind operational confidence – perhaps the product of the recession and lower awareness as these groups are more removed from the delivery process. On the whole however, the industry is highly sceptical about these targets.

The previous Labour Government’s stated targets for making all new residential housing and commercial property zero carbon by 2016 and 2019 respectively are well publicised. However, a key problem could be the lack of a precise definition of ‘zero carbon’. The Coalition Government has publicly committed to defining what is meant by a “zero carbon” home as no definition had ever been officially published. The Coalition Government has also stated that it will seek to meet the target of making all new homes zero carbon by 2016, but has not made any statements regarding either definitions or timescales in the commercial property arena.

Measuring progress
One of the major problems facing sustainability in the development industry is the absence of a universally accepted benchmark against which to monitor sustainable performance. The report shows that the plethora of benchmarks and ratings in relation to sustainable measurement may be broadly broken down into four categories; those that relate to buildings and products, those that relate to organisations, those addressing corporate and investment performance and league tables and other ratings. Hitting the Green Wall found that respondents ranked most highly those assessment methods that were derived from regulation and so were compulsory. These included Energy Performance Certificates and Environmental Impact Assessments.

As to other assessment methods specified in the survey questions, there was a clear geographical bias towards UK-based standards such as BREEAM. Whilst this result may be expected, it serves to highlight the need to have an internationally recognised uniform assessment method such that performance on international projects or involving many multi-national parties can be easily assessed and understood by all.

With an industry that believes the sustainability agenda to be important, and a Government that is committed to at least residential sector targets, it is clear that closer collaboration and communication between Government and the industry is essential. The importance of such collaboration is underscored by the fact that respondents believe that regulation and legislation are the most powerful factors driving the sustainability agenda, when compared to factors such as consumer pressure.

Closer industry-government collaboration could perhaps involve the establishment of working parties alongside more in-depth consultation procedures. This collaboration could seek to achieve the setting of realistic targets and timeframes and working together to meet them. Collaboration would lead to an understanding of the attitudes of all sectors in the development industry to these targets and why some sectors feel the targets are more achievable than others. Another advantage of closer collaboration is the possible establishment of a consistent approach to regulation, thus lessening industry frustration and enhancing the likelihood of meeting sustainability targets.

Communication and the agreement of consistent frameworks and language will be essential for this coalition to be successful. Traditional industry divides, the complexity and fragmentation of the industry and the lack of a common currency of frameworks and measures combine to create a major communications challenge. Agreeing and adopting common frameworks and language is essential to ensure that all parties understand exactly what is being measured, discussed and agreed. Progress then needs to be clearly communicated to both internal and external audiences.

Intra-industry collaboration is as, if not more important, than industry-government collaboration. The development industry is made up of diverse sub-sectors and it is essential that traditional divides are bridged.

Is green the colour of money?
If the Government is to truly incentivise the industry to meet these targets there must be a clearer understanding and acceptance in the market, particularly amongst end users and investors, of a concept of “green value”. If the industry can equate an economic value to a sustainable building this will go far in driving the demand for such buildings and so enhance the prospects of meeting these targets. Even if it is not accepted that sustainable buildings generate additional value, the Report indicates that the market may move further in reflecting a “brown tariff” on buildings which do not meet specific sustainable criteria leading to a similar end result.

The recently implemented Carbon Reduction Commitment legislation has introduced penalties for poor environmental performance. However, Government incentives to the industry to come aboard, embrace and seek to meet the carbon reduction targets are manifestly less clear. If the Government is serious about meeting the targets for new residential buildings by 2016 and new commercial buildings by 2019 it needs to incentivise a sceptical industry to meet these ends. There is an absence of green tax advantages which could provide a clear catalyst to the industry.

The concept of green value may already be gaining momentum in the market. This is evident from the fact that almost 60 percent of respondents used a green agreement, being either a green lease, building contract or protocol or other memorandum of agreement. This was a significant increase from a similar question proposed in Behind the Green Facade where only 36 percent of respondents indicated such usage. The take-up of green agreements is becoming more widespread within all industry sectors and it is predicted to continue, reflecting a wider held concept of green value in the industry.

Beyond the Green Wall
It is clear that sustainability is an essential agenda item, both for Government and all sectors of the development industry. It is also clear that a reservoir of goodwill towards achieving sustainability exists. Urgent, collaborative action now needs to be taken to translate this goodwill into progress. A clear definition of zero-carbon is needed so that the development industry can work together to tackle the sustainability challenge.

Helen Garthwaite is head of Construction and Engineering at Taylor Wessing and Gavin Ingham Brooke is managing director at Spada