GreenerBuilder Recap – “The Fruit Salad Problem”

by | Aug 13, 2017 | Economics

In July, our Chief BD Officer, Emma Stewart, along with sustainability experts from the City of San Francisco and SFO, spoke at GreenerBuilder 2017, attended by over 300 from the design community, of which 42% were LEED AP professionals. Below are a few photos, sounds bites and a synopsis of her comments.

Why Green Buildings Suffer from a “Fruit Salad Problem”

By Emma Stewart, Chief BD Officer, Autocase

For too long, greener designs have suffered from the “fruit salad” problem. Financial costs and benefits are quantified in dollar terms, while social and environmental costs and benefits are – if calculated at all – are measured in KwH of electricity or gallons of water saved, acres of land preserved, or just given a general hand-waving treatment like “we think tenants will enjoy more daylight” or “we suspect greenscaping will increase property values”. That means comparing apples to oranges to pineapples, a veritable fruit salad not conducive to real comparison or empirical decision-making. In the best case scenario, green design features like solar panels are slapped on because someone finds them important or newsworthy, even if they aren’t suited to that location or the best expenditure of money. In the worst case scenario, green design proposals are dismissed for being too expensive (in hard dollars) relative to their benefits (squishy fruit salad numbers).

That’s why, when major asset owners like the US Department of Transportation or the State of California wanted to optimize their designs for highest total value, they embraced a technique considered the gold standard among economists: “Triple Bottom Line – Cost Benefit Analysis (TBL-CBA)”.

TBL-CBA includes 3 core ingredients (none of which are fruit!):

  1. Cost-Benefit Analysis: Most of you are probably familiar with this. It determines whether the benefits of a proposed design justify its costs. But it also considers the gains and losses to all members of society, from the Owner, to the User, to the Community. It converts impacts into a single, familiar measure, the almighty dollar (not oranges and pineapples!) and allows you to weigh the relative importance of different impacts, like “should I be investing in water conservation measures or improving air quality”?
  2. Life Cycle Cost Analysis is also likely familiar and tackles the age-old problem of emphasizing first costs but forgetting about operating costs. It answers the question “what is my entire project worth over it course of its life” in today’s dollars?
  3. Triple Bottom Line is a term coined in the early 90s to describe quantification of financial, social, and environmental costs and benefits, all in dollars, in order to capture all the negatives and positives of a project, for all stakeholders. TBL values have traditionally been considered intangible benefits, such as tenant productivity, local air pollution, property value and recreational value. But TBL-CBA uses location-specific data to ensure those intangibles are valued and done so appropriately for their local resources.

Here’s a clip of Emma’s presentation discussing current advocates of TBL-CBA:  

The market demand for TBL-CBA is massive but doesn’t always make the front page. From Wall Street to the Mayor’s Office to multi-billion dollar development projects, the calls for TBL-CBA are becoming more forceful and the language more standardized:

  • An investor and asset manager, JP Morgan’s Asset Management arm, which represents 110 global institutional investors and $1.6 trillion dollars in assets, declared they will not invest in any infrastructure project that does not include long-term triple-bottom-line analysis from early planning into operations.
  • On the East Coast, a major infrastructure bond issuer, New York City, now wants a triple bottom line analysis across its $8 billion annual capital projects budget.
  • And on the West Coast, the two largest airports, Los Angeles International and San Francisco International, used Autocase – the only software tool to automate TBL-CBA – to prioritize their capital investments and design interventions.

Listen to SFO       and the City of San Francisco   speak to their experiences.

It would appear that once “squishy fruit salad” numbers are finally becoming comparable and defensible. And they will forever change the way green buildings are designed and cost-justified.

About the Author: Emma Stewart, Ph.D., LEED AP, is the Chief BD Officer at Autocase, sits on the USGBC Board of Directors, and chairs the USGBC global Advisory Council.


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