Three myths about
the cost of

Eliminate misconceptions about up-front costs, payback periods and more

October 23, 2020

Today’s organizations are under more pressure than ever before to prioritize sustainability — especially as individuals increasingly want to invest in, buy from and work for organizations who are actively committed to operating in a sustainable fashion. But many organizations assume that sustainable practices are expensive — too expensive — especially when wrestling with a global pandemic and the resulting need to cut costs.

In reality, many cost-effective opportunities exist for organizations to become more sustainability-focused and real estate is a smart place to start: Real estate accounts for nearly 40% of the world’s carbon emissions and energy typically accounts for 20% to 40% of operating costs for most buildings.

Taking a sustainable approach to corporate real estate (CRE) can be a way to reduce environmental impact and realize savings over time. But many decision makers have misconceptions about up-front costs, payback periods and ways to show the true value these strategies can deliver.

When it comes to the calculating the costs of sustainability practices, it’s important to know what’s a myth and what’s a reality.

Myth #1: Finding meaningful energy conservation measures requires significant up-front investment.

Most organizations have low-hanging fruit they can target to make speedy progress towards sustainability goals — without requiring massive upfront investments. One way to assess your building operations is by conducting energy audits to identify no- or low-cost opportunities to reduce energy consumption. Chances are you’ll find immediate opportunities to reduce costs through efficient energy programs that require little to no capital investment,  such as lighting, or heating and cooling. You’ll also gain insight that can help you prioritize high-ROI, energy-saving capital improvements.

One example: After conducting on-site energy audits across eight of its high-energy-intensity sites to identify both no- and low-cost energy conservation measures, one organization discovered 90 energy conservation measures with the potential to deliver $2.2 million in cost savings and $400,000 in utility incentives.

It’s also important to focus on building sustainability culture and mindset, so it becomes a consideration in every initiative the organization puts forth. Not all sustainability initiatives have to be developed from scratch — you can embed sustainability into decisions you’re already making with minimal incremental cost.

For instance, consider incorporating sustainable thinking into project design and product purchasing standards. Or factor it into capital asset renewal and capital planning, such as when replacing an existing HVAC system with a more energy-efficient model. And make sure you’re not missing out on energy efficiency incentives or rebates for new construction or fit-outs of existing space — in many cases, it’s just a matter of identifying the available incentives and filling out and submitting the paperwork.

Myth #2: Sustainability technologies are always more expensive than traditional ones.

More and more organizations have been adopting bigger and bolder sustainability commitments, which has inspired technology providers to double down on ways to meet growing demand for cost-effective sustainable technologies. These innovations make many sustainable technologies a smarter, more cost-feasible investment for organizations to continue meeting their sustainability commitments.

LEDs: The manufacturing costs of energy-saving LEDs are decreasing and the growth rate of the market is increasing. As a result, LEDs — which are up to 80% more efficient than traditional fluorescent or incandescent lighting — are more accessible than ever for organizations looking to decrease their carbon footprint and save money.

IoT sensors: The IoT sensor market’s expansion between 2016 and 2020 brought costs down considerably, which has made implementing that technology to monitor consumption of resources such as energy and water much more affordable.

Renewable energy: Prices of renewable energy sources such as wind and solar fell to record lows in 2019. These and other falling costs make many sustainable technologies a smarter, more cost-feasible investment for organizations who want to make progress on sustainability commitments now, or lock in these low prices for future initiatives.

Myth #3: Payback period is the best metric to use to evaluate sustainability capital projects.

Evaluating sustainability investments based on their financial payback period alone doesn’t paint a full picture of an investment’s potential ROI. Take those who own their own buildings or have long-term leases, for example. Finance teams in these organizations usually also look at the internal rate of return (IRR) for capital investments, which is a forward-looking metric that calculates an investment’s potential return over a future time period. You’ll likely want to consider both payback period and IRR when evaluating capital investments.

There are also other ways to measure the value that sustainability initiatives can deliver. Many help improve internal conditions, potentially leading to such health-focused benefits as enhanced employee wellness and productivity. This can reduce time and money lost from workers who aren’t feeling or performing their best. A study from the Harvard T.H. Chan School of Public Health, SUNY Upstate Medical University and Syracuse University reported better (61% higher) cognitive function scores in green building conditions compared to conventional building conditions.

And some sustainability solutions don’t just save money — they also earn it. The Washington Metropolitan Area Transit Authority, for instance, is hosting a solar power installation to bring in new revenues while making a major contribution to advancing regional clean energy pools, including the Clean Energy DC Plan. The agreement lets solar energy provider SunPower install solar panel carports or canopies over parking lots and garages at four Metrorail stations, which will generate power to nearby communities and provide a $50 million revenue stream over a period of 25 years to support Metro’s operations.

Learn more

Perhaps more than ever before, organizations are expected to operate in a manner that considers society, the economy, and the environment. What’s more, key stakeholders are using their platforms to hold these organizations accountable.

Find out how you can take a sustainable approach to CRE that saves dollars and makes sense. Or visit our website to learn more about how to accelerate your organization’s journey to become a more sustainable, more resilient, more responsible enterprise.