Energy disclosure can be good for business

Building owners in a handful of states and municipalities are required to publicly disclose their building’s annual energy and water performance. These laws aim to better inform the public, who lease space in and visit these buildings, and to give owners incentive to become more efficient through market forces and societal nudges.

Akin to calorie counts on a menu, some feel these laws are unnecessary. However, as our culture begins to focus as much on what we do to the environment as what we do to ourselves, having this information available is a natural progression of conscientious consumerism. Even if you are just consuming space.

Should Tennessee adopt a similar law? What are the benefits for building owners and tenants and how can they prepare?

Entwined benefits

High efficiency isn’t expected from some buildings, but even then, efficiency results often come as a wake-up call. Seeing performance ratings of similar buildings side by side inevitably alters the considerations of building owners, businesses that lease space and even those businesses’ customers.

Many businesses spend thousands every month on utilities. Aggressive reductions can easily save enough to hire employees or make other investments, improving the company’s long-term outlook. By requiring public efficiency reviews, business owners may see competitors with an advantage, spurring them to re-create the results.

Owners and tenants of highly rated buildings are viewed more favorably by the public. For the growing portion of the public that makes decisions partially based on environmental concerns, a high rating can directly drive business.

Cost savings and public perception come together to create a third consideration specific to building owners. Because efficient buildings present advantages to tenants, these buildings have notably higher occupancy rates, which yield a higher net operating income.

The most commonly used benchmarking tool is the Energy Star Portfolio Manager, which provides a rating of 0 to 100. New York City’s first results using this scale proved old buildings can compete with new when the right steps are taken. The new 7 World Trade Center scored a 74 and the recently updated Empire State Building rated an impressive 80. By starting early, buildings in Tennessee can avoid the fate of the Seagram Building, which posted a 3.

Start by benchmarking the building with Portfolio Manager (EnergyStar.gov/istar/pmpam) to get an initial indication of performance through comparison with peers. The program uses information from 12 months of utility bills and basic data about the building to provide this important baseline.

If a building is not already equipped, install water and electric sub-meters. These are well worth the investment because they allow the highest-demand areas of a building to be identified and addressed to make the most notable reductions.

With these in place, highlight trends and anomalies throughout the building and identify additional energy and water saving projects, tracking performance over time. Consistent, incremental improvements will prepare a building for public disclosure and, regardless of public disclosure, benefit all those who use it.

This is a trend garnering attention across the U.S., and Tennessee may face it soon. It is important for building owners and tenants to understand the ramifications of disclosure and make sure their building is ready to perform when called on stage.