If your business leases its real estate, it may be overpaying for energy and other operational costs. As noted in the prior 2017 Energy Action Month post many commercial tenants are paying higher energy bills than they need to. 

​While the U.S. commercial building stock is becoming more energy efficient, there are still institutional barriers and disparate incentives between building owners and tenants that leaves many buildings needlessly wasting energy. This Energy Action Month post provides more in depth information about green (aka “high performance”) leases and how tenants can take more control over their energy costs.
 
Beyond the broader “green” (or better termed “high performance”) building movement there are several initiatives addressing the sometimes split incentives between landlords and tenants that have historically resulted in lots of wasted energy. Some key activities include:

• EPA is currently piloting a tenant version of the ENERGY STAR building program–called ENERGY STAR for tenants (formerly Tenant Star)—to recognize energy efficient tenant spaces. Under the Energy Efficiency Improvement Act of 2015 (EEIA), tenants that meet design criteria set by EPA will soon be eligible for ENERGY STAR Tenant Space recognition.

• Some states and municipal governments are requiring (e.g., City of San Francisco, City of Portland (OR), City of Boulder (CO)) and many others are encouraging increased efficiency and disclosure of energy use in commercial buildings.

• Many utilities, states, municipalities, and related non-governmental organizations offer businesses financial incentives, technical guidance, and other assistance to become more energy efficiency. See e.g., DESIRE (“Database of State Incentives for Renewables and Efficiency” which describes federal and state incentives for businesses and individuals), California Sustainability Alliance’s Green Tenant Guide, City of Seattle’s Green Tenant Improvement Guides and Free Energy Assessments, City of Portland’s Tenant Improvement Guide.

 
There are three phases during which businesses that lease their real estate have opportunities to optimize the rented space for energy (and other resource) efficiency: (1) pre-lease (including pre-renewal or extension of existing leases); (2) lease - design and construction of space build out (including new building construction); and (3) lease - post occupancy.

​Pre Lease Considerations
Prior to entering a lease for new space (or before negotiating an extension or expansion of an existing leased space), companies can undertake several activities to ensure their leased space gets optimized for energy efficiency. For example, a company can adopt a high performance building leasing policy. The policy should reflect the company’s objectives and aspirations in seeking high performance buildings to lease. For a starting place, California Sustainability Alliance has prepared a sample policy.
 
These defined objectives and aspirations can be used to convey the company’s real estate preferences to its representatives (e.g., real estate broker/agent, lawyer) and in the request for proposal (RFP) stage. California Sustainability Alliance has also prepared a sample “green” request for proposal.
 
Whether formally in a policy and/or RFP or informally in internal discussions, the pre-lease phase typically identifies and documents the company’s priorities with regard to the following four areas (usually along with cost and timing parameters):

• Site criteria: location attributes (e.g., near public transit, bike paths, other amenities such as daycare, banks, restaurants) and other locational efficiencies (e.g., proximate for your workforce and clients who regularly visit the space).
• Building criteria: energy efficiency design and features (e.g., white roof, on-site renewable energy, efficient windows), energy cost (e.g., past bills, cost per square foot or $/sf), and energy performance (e.g., energy use intensity or EUI measured in kBtu/sf/year), energy rating of the building (e.g., ENERGY STAR label and score), and/or other environmental impacts (e.g., LEED, Earth Advantage, Green Globes, Living Building Challenge).
• Space criteria: efficiency in the amount of space, the layout, and the attributes of the rentable/tenant usable space such as natural light, space configuration, flexibility, functionality, and adaptability.
• Partner criteria: owner’s and/or property manager’s knowledge of, expertise in, and desire to collaborate to optimize the building’s energy performance and other sustainability performance.

 
A sample energy-focused checklist might look something like this:

Lease Considerations
Traditionally, standard commercial leases have failed to align the initial cost of energy efficiency improvements with the resulting energy savings. High performance leases, especially those that feature energy efficiency practices can correct these “split incentives” and offer many financial, environmental, and social benefits. These benefits can often provide long-term, shared value to both tenants and landlords. How the benefits are allocated and accrued will often depend on the lease terms and the parties’ ability to monitor energy performance. The following table, from the U.S. General Services Administration (GSA), summarizes some of these benefits to both landlords and tenants.

A high performance building lease differs from a standard lease by specifying and re-aligning the financial incentives of energy and/or other sustainability measures. While these are sometimes also referred to as “green” leases, that term and the environmental focus can dissuade some. These leases ensure a broader set of benefits so the term “high performance” better captures the efficiency objectives.
 
In simplified terms, traditional commercial leases typically present these split incentives because the tenant generally pays for the utilities (arising both in net and modified gross leases either directly to the utility or via rent payment) and the landlord is solely responsible for capital improvements. Alternatively, in full service leases where the landlord pays the utilities, the tenant(s) won’t see financial reason to be energy efficient. Coupling together the investment and savings opportunities results in more efficient operations and the shared benefits.
 
A 2015 study from the Institute for Market Transformation (IMT) estimates that high performance building leases have the potential to reduce energy office consumption in office buildings by 11 to 22 percent. The IMT study estimates that these efficiencies could reduce utility expenditures in U.S. commercial buildings up to $0.51 per square foot (sf). IMT further found that simple modifications to existing lease terms (or the addition of the terms to prospective leases) can yield these shared benefits to owners and tenants. Interestingly, per IMT, much of the projected savings comes from the tenant space (up to 12.5%), with smaller savings coming from the building core systems (up to 5.8%) and common areas (up to 4%).
 
One day soon, these provisions will be market-standard. In the meantime, companies seeking to optimize their operational costs will do well to incorporate these terms. Additional high performance lease resources, including sample lease provisions are provided in the Appendix to this post.
 
Apart from the lease terms, businesses that rent space can seek to improve their energy efficiency by addressing several key areas that may be within the company’s control (as specified by current lease terms) and also by letting the building owner or property manager know of their: (a) interest in the building’s energy use and (b) desire to collaborate to reduce costs.
 
Before you engage with your building owner or property manager, learn a little about the building’s energy use and characteristics by seeking answers to the following:

• Is the building already an ENERGY STAR building (if so, what’s the score or EUI – it is going up or down)?
• How is the building heated, cooled, and otherwise powered? For example is it all purchased electricity? Any natural gas or any on-site renewable energy sources?
• If you have access to electricity or other energy data compare the use per square foot to US national averages shared in the previous blog post. Is the building above/below the average?
• Is each tenant space sub-metered (or, does the building have multiple electricity/gas meters perhaps by floor)?

Also, if there are other tenants in the building, seek out their interest level in reducing energy costs. You can research any federal, state, municipal, or utility provided incentives (e.g., rebates or tax credits for more energy efficient lighting) and/or technical assistance (e.g., free energy audits) for energy efficiency improvements in your area. And, identify some no- or low-cost improvements that you and/or the building owner could make. Focus on things with an 18-month or less payback. Lighting retrofits, including adding sensors often have a very short payback.

High Performance Leases | Recommended Criteria
​The High Performance Leasing Task Group of GSA’s Green Building Advisory Committee (GBAC) developed materials that provide very simple and action oriented guidance. The EEIA of 2015 required GSA to develop voluntary “model commercial leasing provisions” to encourage building owners and tenants to use greater cost-effective energy efficiency measures in commercial buildings.
 
The recommendations and sample lease clause language in the remainder of this Appendix are derived, in large part, from the Task Group’s report. We have made some minor modifications to and have focused only on the energy and fuel efficiency suggestions from the Task Group’s recommendations. For additional context about the GBAC initiative and its other high performance building recommendations (e.g., water conservation, indoor air quality) check out the Task Group’s full recommendations report and cover letter. 

High Performance Leases | Sample Clauses
The following sample clauses, gathered from expert input and a variety of publicly available sources (including those listed in the Additional Sources section of the Task Group’s recommendations report), provide some examples of specific high performance building lease language designed to implement the criteria listed above. The lease clauses below generally map to the criteria included in the table above, though there may be small variations since they were gathered from a variety of sources. Each of these clauses is written in the traditional lease manner of imposing an affirmative obligation to do (or not do) something. However, a lease clause may be made simply aspirational by limiting it to require only (in ascending order of obligation), “good faith efforts,” “reasonable efforts” or “diligent efforts” to perform. In practice, some of these clauses may be of more interest to tenants and some may be of more interest to landlords. Any actual lease language to be used should be developed by or adapted to the particular needs of the parties involved, with full legal review and input.

Energy Usage and GHG Emissions Management

​1a:  Achieve and maintain ENERGY STAR labeling for the building
The building must be ENERGY STAR labeled by achieving an ENERGY STAR rating of 75 and ENERGY STAR certification must be maintained for the duration of the lease term:

• In buildings where an ENERGY STAR rating cannot be obtained (i.e., because the building is too new to have a sufficient operating history to generate the requisite data or because the building’s vacancy exceeds the vacancy allowed for an ENERGY STAR label), a lease may include the provision that the landlord has one year after the building reaches the requisite threshold in operating history and/or occupancy to achieve the ENERGY STAR label. In general, any building over 5,000 gross square feet (gsf) with a year of utility bills can get an ENERGY STAR score (exceptions and details).
• If an ENERGY STAR rating is not available for the reasons identified above, the landlord must show it has implemented all cost-effective energy upgrades.
• Tenant shall collaborate with landlord to incorporate efficiency into energy-using equipment, (e.g., by using ENERGY STAR-labeled equipment) and optimize its operating schedules (e.g., by not operating during non-standard business hours without paying the incremental cost).

1a Alternate:  In the initial lease, where no previous energy use data is available, the parties shall construct an estimate of potential future energy usage by the tenant using such principles and data as can be agreed upon. Upon the accrual of a sufficient number of years of energy use data for the structure, the Parties/Landlord shall themselves or through a third party conduct an overall energy assessment based on the usage history to determine overall usage rates, trends, time sensitive of usage patterns (if metered to that level), and other relevant data. The Parties will then meet to review the usage data and identify patterns and trends, and compare the results to the original projected usage projections. The parties will then discuss any lease modifications or other energy related modifications/changes to the premises that may be suggested from or supported by the data, towards an overall review of the level of energy and cost savings relevant to the original lease rates for the property.

1b:  Provide periodic recommissioning (every 3 years)
Landlord shall incorporate recommissioning requirements to verify that the installation and performance of energy consuming systems meet project requirements. Recommissioning shall occur every 3 years at a minimum. Recommissioning shall comply with ASHRAE Guideline 0.2 (for initial commissioning and retro-commissioning of base building systems) or ASHRAE Guideline 202 (for new commissioning of tenant fit out equipment). Recommissioning shall address at a minimum: heating, ventilating, air conditioning, and refrigeration (HVAC&R) systems and associated controls, lighting and lighting controls, and domestic hot water systems. Commissioning and a written report should be provided triennially. Tenant shall triennially commission the energy using equipment in its premises, including plug loads. Opportunities for efficiency shall be coordinated between both parties.

​1c:  Aspire to net zero energy
The building shall [achieve][aspire to] net zero energy, as defined by the U.S. Department of Energy[i] as of the date of this lease, within one year after occupancy and shall maintain that status for the remainder of the lease term.[ii]

1c Alternate: The Parties agree in the original lease to incorporate all energy saving measures necessary to achieve net zero energy, with the understanding that net zero may not be achievable initially. On that basis, the parties agree to periodically (every x years) assess and review the incremental progress/movement towards net zero energy use as measured by the actual usage numbers. The Parties agree, in good faith, to discuss future potential lease amendments and distribution/assignment of cost savings, along with possible lease cost adjustments, based on the resulting information.

2a:  Install Lighting Power Density to comply with ASHRAE 90.1 2016 at a minimum
The building shall comply with lighting power densities (LPD) at or below ASHRAE 90.1 2016 (e.g., commercial office maximum LPD 0.79 watts/sf). For additional space types or calculation compliance paths and exceptions, please refer directly to the ASHRAE 90.1 2016 standard.

2b:  Add lighting controls to adjust to occupancy/vacancy and daylight levels
Daylight dimming controls shall be installed in atriums or within 15 feet of windows and skylights where daylight can contribute to energy savings. Daylight dimming controls shall be either integral to the fixtures or ceiling mounted and shall maintain required lighting levels in workspaces. Lighting controls (including vacancy sensors[iii] and scheduling controls) shall be provided for all lighting equipment.

2b Alternate:  Implement lighting controls, including daylight dimming controls for at least 50% of lighting load and vacancy sensors for at least 75% of connected lighting load. This measure is to be implemented if the simple payback period is demonstrated to be five years or less based on projected savings and estimated cost subject to building management team's review. Design and build to optimize daylight and views for occupants, which may be achieved through a design that includes interior rather than perimeter offices, or perimeter offices with glass fronts if perimeter offices are a design requirement.

2b Alternate:  The Tenant shall initiate a review of lighting needs in all areas of the workplace [x] times within the year to accumulate lighting measurement data to compare with usage patterns. In conjunction with this effort, the specified energy rates for various areas will be reviewed and compared to the data to attempt to identify patterns and potential adjustment to lighting controls and sensors. (Dependent on metered/measured power usage within areas.)

3a: Share whole building or tenant space energy use (either actual or estimated)
Landlord shall provide reports for the amount of electricity, natural gas, and fuel oil (where applicable) consumed at the building broken down by utility type, energy unit usage (e.g., kWh, therms or ccf, gallons), cost per month for each energy source for the duration of the Lease and the Energy Use Intensity (EUI measured in kBtu/sf/year). Unless disclosure is prohibited by state or local law or if data is not available or is confidential, estimated energy use per tenant may be provided.[iv] Such reports shall be provided within ninety (90) days after the end of each [calendar quarter] [June 30 and December 31] [calendar year].[v] Where applicable, Landlord shall provide read-only access to tenant of the building’s ENERGY STAR Portfolio Manager account and vice versa. To the extent Tenant obtains electricity independently of the building, Tenant shall give Landlord access to Tenant’s data on energy use for inclusion in Landlord’s annual reports, ENERGY STAR annual rating and similar purposes.[vi]

3b: Submeter electricity use per tenant
Landlord shall install an electric meter/submeters to service the leased premises to measure the consumption of electricity in the leased premises. Where Tenant does not occupy the entire building or an entire floor, the partial floor or leased premises shall be separately metered.[vii]

3c: Submetered energy use for major energy end uses (e.g., heating, cooling, lighting, plug loads) per tenant
Landlord shall install an electric meter and submeters to service the leased premises to measure the consumption of energy (e.g., electricity, natural gas, and other sources, where applicable) broken out by each major energy end use as well as broken out by tenant. Actual or estimated breakdowns may be used, depending on the granularity of the data provided. Energy end uses shall include, at a minimum heating, cooling, lighting, fans, pumps, plug loads, domestic hot water, elevators, and parking structures (where applicable).

4a: Use ENERGY STAR equipment for all imaging equipment (i.e., copiers and printers). Space heaters banned.
All imaging equipment (i.e., copiers, printers, multi-function imaging devices) used by Tenant shall be ENERGY STAR Certified and energy savings modes must be activated. Space heaters are not permitted in the leased premises.

4b: Maintain automatic controls (night setbacks, sleep modes) for office equipment[viii]
Tenant shall provide sensor or timer controls for all of its major office equipment, including personal computers, laptops, and copiers/printers.

4c: Use ENERGY STAR equipment for all central HVAC equipment, computers, monitors, displays, and appliances
All Tenant equipment and appliances shall be ENERGY STAR certified (where applicable) and energy savings modes must be activated. Such equipment shall include, but is not limited to, computers, external displays, imaging equipment, phones, enterprise servers, network equipment, data center storage units, refrigerators, freezers, dishwashers, vending machines, and coffee makers. All central HVAC units shall be ENERGY STAR certified and (where possible) utilize variable speed compressors, fans, and pumps that are appropriately sized for the heating and cooling loads.

4c/5a, b, c – Combined Language
Reduce plug loads by specifying equipment and appliances (including, without limitation, computers, monitors, printers, refrigerators, dishwashers, water coolers, copiers, and A/V and IT equipment) that meet or exceed ENERGY STAR requirements.

5a, b and c: Plug load demand
Installed electrical wiring and facilities for plug load equipment including personal computers and other standard office equipment shall be limited to [3.5/2.5/1.5] watts per usable square foot.

6b and c: Green power purchasing or Renewable Energy Credits (RECs)
At least [50/100] percent of [the building’s][Tenant’s] electricity shall be purchased from renewable sources. Where direct green power purchasing is not available from the utility, utilize Renewable Energy Credits (RECs) or carbon offsets. For the purposes of this lease, “renewable sources” [shall][shall not] include nuclear-generated power.

Shared Savings and Commitments
1a:  Conduct regular meetings between landlords and tenants to discuss energy efficiency opportunities and annual reporting[ix]
Landlord and Tenant shall meet annually and review energy [and water] use data, recommissioning outputs and recommendations and the effectiveness of efficiency programs and mutually establish an energy optimization plan, including energy management and cost effective savings opportunities for the building and the leased premises. Annual reports shall be produced summarizing both tenant and landlord efficiency efforts. Tenant and landlord shall work together to attain third party green building certifications.

1b:  Include clause for landlord cost recovery for efficiency-related capital improvements[x]
Landlord may include the costs of certain capital improvements [intended to][that] improve energy efficiency in operating expenses. The amount passed through by Landlord to Tenant in any one year shall not exceed the prorated capital cost of that improvement over the expected life cycle term of that improvement [and shall not exceed in any year the amount of operating expenses actually saved by that improvement]. Interest/the cost of capital can be included.

1b Alternate: Another potential structure derived from New York City’s Energy Aligned Lease template[xi]: Landlord may include the costs of certain Capital Improvements in Operating Expenses pursuant to Section 1.1(a)(v)(16) in accordance with the following:

(i) In the case of any capital improvement that an independent engineer experienced in energy efficiency matters and selected by Landlord certifies in writing will, subject to reasonable assumptions and qualifications, reduce the building’s consumption of electricity, oil, natural gas, steam, water or other utilities, and notwithstanding anything to the contrary elsewhere in this lease:

1. The costs of such capital improvement shall be deemed reduced by the amount of any government, utility or other incentives for energy efficiency improvements actually received by Landlord to defray the costs of such capital improvement, and shall further be reduced by any energy efficiency tax credits or similar energy-efficiency-based tax incentives actually accruing to Landlord as a result of such capital improvement.
2. For the purposes of this Section, “simple payback period” means the length of time (expressed in months) obtained by dividing (x) the aggregate costs of any such capital improvement, by (y) the projected annual savings. By way of example: If the aggregate costs of such capital improvement are $2,000,000 and the projected annual savings are $500,000, then the simple payback period for such capital improvement is forty-eight (48) months.
3. Commencing with the first full [calendar][lease] year following the [calendar][lease] year in which such capital improvement is completed and placed in service, and continuing for the duration of the adjusted payback period (as hereinafter defined), Landlord may include in operating expenses a portion of the aggregate costs of such capital improvement equivalent to eighty percent (80%) of the projected annual savings so that the aggregate costs of such capital improvement will be fully amortized over one hundred twenty-five percent (125%) of the simple payback period (such 125% period of time being the “adjusted payback period”). By way of example: If the aggregate costs of such capital improvement are $2,000,000, the projected annual savings are $500,000 and the simple payback period for such capital improvement is therefore forty-eight (48) months, then Landlord may include $400,000 of the aggregate costs of such capital improvement (i.e., an amount equivalent to 80% of the projected annual savings) in operating expenses payable by Tenant for five consecutive [calendar][lease] years (i.e. five years equals sixty (60) months, which is 125% of the 48-month simple payback period in this example).

1c:  Identify and implement all efficiency measures deemed cost effective
Landlord shall perform a retro-commissioning study of base building systems that consume energy [or water] every [3] [5] year(s). Tenant shall perform a retro-commissioning study of the equipment (including plug loads) installed by it in the leased premises every [3] [5] year(s).[xii] Within [2] [3] months after the conclusion of their respective retro-commissioning studies, each party shall start to implement recommendations identified by the retro-commissioning study that are deemed cost effective. For purposes of this section, the term "cost effective" means an improvement that will result in substantial operational cost savings by reducing electricity or fossil fuel consumption, [water, or other utility] costs and where such operational cost saving over the then-remaining term of this lease (or some other period of time that is mutually acceptable) is sufficient to pay the incremental additional costs of making the improvements.

1c Alternate: Perform commissioning of energy systems within the space (including, without limitation, lighting, HVAC, electrical, and plug loads) to ensure design optimizes performance and systems are constructed and function per efficient design.

Transportation
1a, 1b, and 1c:  Transportation management plan including alternative transportation solution[s]
Landlord will develop a Transportation Management Plan for the building to describe the various alternative mobility opportunities available to building occupants. Tenant and Landlord shall work together to implement [one][three] [or X] of the following provisions:[xiii]

1. Tenant shall provide at least [$X] [$30] per month towards a transit pass or vanpool pass (or the full cost of a pass if it is less than $30) to each employee who commutes using transit or a vanpool. This credit may also be used with an alternative mobility company to enable alternative modes (such as a credit with Uber/Lyft), especially during peak times or adverse weather.
2. Tenant shall institute a telework program that reduces the number of commuting trips employees make by at least 6 percent.
3. Tenant shall provide at least [$X] [$30] per month (in lieu of providing a parking spot) to each employee who leaves their car at home and commute another way.
4. Landlord shall provide bicycle storage (racks) in the building and showering/locker room facilities in proximity to the bicycle storage facility. Landlord shall operate, maintain, and secure the bike storage facility and showering/locker room facilities in first-class condition. Tenant shall provide at least one bicycle available to its employees for use.
5. Landlord shall establish preferred parking programs for hybrid and alternative fuel vehicles (at a minimum of 3% of all parking stalls) in the building, and [install][study the feasibility of installing] electric vehicle charging stations in the building for use by tenants and their visitors at no additional charge.
6. Landlord shall establish a preferred parking program in the building’s parking facility for high occupancy vehicles (carpool or vanpool).
7. The costs for parking shall be charged/paid separately from each tenant’s rent[xiv] and shall be charged on a uniform or near-uniform basis to all.
8. Tenant organization must also offer access to an Emergency Ride Home program.

APPENDIX ENDNOTES
[i] U.S. Department of Energy (2015), A Common Definition for Zero Energy Buildings,
https://energy.gov/sites/prod/files/2015/09/f26/bto_common_definition_zero_energy_buildings_093015.pdf  

[ii] A landlord or a tenant will probably require that the definition of net zero energy, an ASHRAE standard, a LEED® certification, a Green Globes® certification, or any other standard, be a definition known to exist on the date of the lease or some other fixed date.

[iii] Vacancy Sensors require someone to manually turn ON the lights when required. The sensor will then automatically turn lights OFF when no presence is detected for a specified amount of time. These sensors ensure the highest level of energy savings since the lights will never automatically turn ON.

[iv] For additional guidance from GSA on reporting, refer to: U.S. General Services Administration, Utility Consumption Reporting, http://www.gsa.gov/ucr).

[v] Material included in annual reports to tenants should include both energy [and water] use data, [data on the recycling program, whether the build-out materials and systems installed elsewhere in the building] within the particular reporting period comply with the requirements of this particular lease, the degree to which other tenant spaces within the building are leased with similar provisions, sustainability achievements, certifications and awards won, violations received (and the corrective actions taken), etc.

[vi] Source: Building Owners & Managers Association International (2011), Commercial Lease: Guide to Sustainable and Energy Efficient Leasing for High-Performance Buildings, https://store.boma.org/shopping_product_detail.asp?pid=52168.

[vii] A metering requirement invariably generates a lengthy negotiation between the landlord and the tenant over which of them will pay for the meter. Often, the cost of the meter is negligible and is exceeded by the time and legal fees debating who should pay for the meter.

[viii] As noted previously, plug loads often account for more than 30% of a building’s electrical demand. Reducing plug load can therefore have a substantial effect on electrical consumption.

[ix] Background and comprehensive lease language is available at: https://www.nrdc.org/resources/energy-efficiency-lease-guidance

[x] The concept of passing through to tenants as an operating expense the capital cost of improvements that save operating expenses is well-established in commercial leasing. But its implementation is highly negotiable (i.e., the capital cost could be repaid to the landlord over the projected payback period).

[xi] Background and comprehensive lease language is available on energy-aligned leases at: http://www.nyc.gov/html/gbee/downloads/pdf/eac_&_overview.pdf. Consider allowing cost recovery to begin the first month following completion of improvement measure so the landlord does not have to wait until the beginning of the next calendar year to begin recovering the cost of the improvement through operating expenses.

[xii] Additional resources on recommissioning can be found at: http://www.peci.org/sites/default/files/epaguide_0.pdf

[xiii] Additional resources, tools and information available from Best Workplaces for Commuters, https://www.bestworkplaces.org

[xiv] It may not be possible for all landlords to do this. For example, Real Estate Investment Trust (REIT) landlords may have issues with unrelated business income and therefore prefer to bundle parking charges into the rent.

There are lots of energy efficiency and high performance lease resources available to companies seeking to reduce their energy bills. In addition to the links elsewhere in this and the earlier Energy Action Month post, here are a few other favorites:

• A Better City’s Green Leasing: An Effective Tenant/Landlord Strategy for Energy Efficiency. December 2014. http://www.abettercity.org/docs/abc-rpt%20green%20leasing%2012%2014.pdf?utm_source=New+ABC+Report%3A+Green+Leasing+12%2F14&utm_campaign=New+ABC+Report%3A+Green+Leasing+1.9.15&utm_medium=email

 

• Boston Bar Association’s Green Lease Guide: Issues, Sample Clauses and Leases, and Links. August 2012. http://www.bostonbar.org/docs/default-document-library/green-lease-guide-2012.pdf

 

• Building Owners and Managers Association International (BOMA)’s Commercial Lease: Guide to Sustainable and Energy Efficient Leasing for High-Performance Buildings. 2011 (as an update to the 2008 Green Lease Guide). Premium. https://store.boma.org/shopping_product_detail.asp?pid=52168

 

• BOMA and the Rocky Mountain Institute (RMI)’s Working Together for Sustainability: The RMI-BOMA Guide for Landlords and Tenants. June 2012. https://www.boma.org/sustainability/info-resources/documents/workingtogetherforsustainability.pdf

 

• California Sustainability Alliance’s Green Leases Toolkit 2.0, including Green Lease Provisions. https://sustainca.org/green_leases_toolkit

 

• Institute for Market Transformation’s Green Lease Library website: http://www.greenleaselibrary.com

 

• Natural Resources Defense Fund (NRDC)’s Energy Efficiency Lease Guidance. November 2011. https://www.nrdc.org/resources/energy-efficiency-lease-guidance

 

• New York City’s Plan NYC: The Energy Aligned Clause. October 2012. http://www.nyc.gov/html/gbee/downloads/pdf/eac_overview.pdf

 

• New York University’s Green Lease Guide. August 2011. https://www.scps.nyu.edu/export/sites/scps/pdf/real-estate/sbe-green-lease.pdf

 

• Real Property Association of Canada (REALpac)’s National Standard “Green” Office Lease for Single-Building Projects. February 2010. http://c.ymcdn.com/sites/www.realpac.ca/resource/resmgr/leases/nsgolsinglev1-03cleanrelease.pdf

 

• REALPac’s Green Lease Guide for Commercial Office Tenants. February 2010. http://c.ymcdn.com/sites/www.realpac.ca/resource/resmgr/leases/greenleaseguidefinal05feb10.pdf

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Thank you for reading this blog post. Here at Corporate Sustainability Advisors LLC blog and on LinkedIn and Medium, I regularly write about organizational, community, and personal sustainability. If you would like to read my future posts then please subscribe via the adjacent link. Also, feel free to connect via Twitter and Facebook.

October, being Energy Action Month, presents a perfect opportunity for all businesses to learn about and begin taking action to become more energy efficient. Developing an energy management plan will help your company reduce its energy use, costs, and impacts. 

When I talk with business owners—especially of small or medium sized businesses—about their energy use and impacts, a typical response is:

1. We’re small so we don’t use much energy.
2. We don’t manufacture things so we don’t use much energy.
3. We rent our space so we can’t do much to reduce our energy use.
4. Our greenhouse gas emissions don’t really contribute that much to climate change.
5. All of the above

 
When I ask two follow up questions—how much energy does your company use each year and how much does it cost—very few have even a ballpark guess. One other question I’ll ask, especially to small or startup business owners – what would you do with an extra few thousand dollars to advance your business?
 
Yes, being a sustainability professional often involves being a gadfly and asking a few pesky questions. A core part of the job is to help businesses be more financially successful – spending their precious cash flow on strategic pursuits rather than on unproductive energy costs that don’t contribute to the company’s success. The old adage ‘you manage what you measure’ is just as true today as when it was first spoken and applies to energy bills as well as other inputs and outputs.
 
While a large business can save hundreds of thousands (if not millions) of dollars a year by becoming more energy efficient, smaller companies also have an opportunity to reduce operating costs. While the savings scale may be smaller, the impacts can be priceless.
 
Startup companies—especially those in clean tech or energy sectors—have a unique opportunity to bake in energy efficiency (and other sustainable practices) from the earliest days when cash flow is scarce. Robust energy efficiency has the added benefit of demonstrating management excellence to prospective investors, lenders, customers, and employees.

​The financial benefits from energy efficiency can also accrue to sustainable businesses such as B Lab Certified B Corps, benefit corporations, or other social enterprises. And, energy efficiency has the added benefit of contributing to the company’s commitments on reducing its environmental footprint.  Actively managing the company’s energy use, costs, and impacts, can also help companies be more accountable and transparent with their stakeholders.

1. Learn how much energy the company uses, how much it costs, and what impacts that creates. 
​Gather all the energy bills that the company pays directly to your utilities (e.g., electricity, natural gas, fuel oil, other). Many utilities allow you to download historical usage and cost data into spreadsheet applications. If you don’t already haven an online account, sign up for one. 
​
If your utilities costs are embedded with your rent payment, seek the information from your building owner or property manager.
 
If you can’t obtain the actual data on your company’s energy use, the table below provides some average US energy data to help to estimate your company’s usage and cost. The table below provides the energy use and cost for an average commercial building in the U.S. Note: the building(s) your company leases may not use all these energy sources. 

​For example, if your company leases (or owns) 10,000 square foot of commercial space (e.g., office, retail, warehouse), your estimated annual energy cost is about $19,000 ($1.90 x 10,000). These data come from the U.S. Energy Information Administration’s (EIA) 2012 Commercial Buildings Energy Consumption Survey (CBECS for shorthand), Table C14 (purchased electricity). Table C24 (natural gas), and Table 34 (fuel oil).
 
You can also use the CBECS data to develop a more refined estimate based on the variables of your company’s commercial space (e.g., geographic region, type of building, age of building, number of floors, principal activities). Or, if you have your company’s direct energy usage and cost data, you can use this table (and/or the underlying CBECS data) to benchmark your company’s usage and costs against national averages.
 
If the environmental impacts are also critical to your business mission and/or stakeholders, you can also assess the environmental impacts from the energy used in your facility. The greenhouse gas (GHG) emissions and other impacts are highly variable based on the company’s energy sources, including where any purchased electricity comes from. Developing a precise GHG emissions inventory can be very complex.
 
The U.S. Environmental Protection Agency (EPA) provides a simple tool in which you plug in the company’s energy usage units to roughly calculate the associated emissions. Note: for a building’s energy use, the tool can only calculate units of purchased electricity and natural gas (i.e., no heating oil).
 
The following table shows the results from the EPA GHG Carbon Calculator, applying the CBECS average annual usage for the sample 10,000 building referenced above.

​EPA’s calculator also provides some more tangible equivalents to help contextualize otherwise amorphous figures. For example, 129 metric tons of CO2e is about the same emissions from driving an average passenger car about 315,000 miles.
 
Another visualization technique I frequently use to provide a more concrete illustration of the otherwise unseen emissions: 1 pound of GHG emissions fills 1 exercise ball. And, a metric ton equates to almost 2,205 pounds. So, the energy to light, cool, heat, and power that average 10,000 square foot commercial space spews out about 285,000 exercise balls of CO2e each year.
 
That image alone usually makes me go hunting for wasted energy.

2. Plan, pledge, and reduce your company’s energy use and costs.
Once you know how much energy the company uses (and how much it costs financially and environmentally), you can develop a plan to reduce. Set a goal to reduce and a timeframe (both base year and target year). You can try the always popular “20 by 2020” goal. That means committing to using 20% less energy (e.g., kWh of purchased electricity, and/or therms of natural gas, gallons of heating oil) by 2020 (for example, compared with calendar year 2016).
 
So for the above sample 10,000 sf space, the target would be to reduce purchased electricity use to 116,800 or less kilowatt hours in 2020. The 20% energy use reduction for this space would:

• reduce operating costs by about $3,800 a year, and
• avoid about 57,000 exercise balls of CO2e emissions.

 
Goals can be absolute or normalized on an intensity basis. Two common intensity-based measures that many businesses use are:

• kWh (and/or MT of CO2e) per $ of revenue
• kWh (and/or MTof CO2e) per employee

 
Publicizing your reduction goal provides additional incentive to reach the goal and helps engage support from the company’s partners.

• How you dispose of things: While proper disposal after a product’s useful lifetime won’t directly save your company money, reusing and recycling reduces energy use (and raw natural resource extraction) across the broader society.

 
If your company has already tackled (or has a plan to reduce the energy use in the company’s facilities), you can try more advanced energy and emissions management by assessing and addressing things like energy associated with: employee commuting, business travel, waste management, and the company’s supply chain.
 
And, if the company decides to also measure and reduce the environmental impacts from its energy use, it might make sense to explore renewable and other clean energy options.

3. Engage with your employees (and other stakeholders).
To successfully implement an energy management plan, it’s important to identify roles and responsibilities for:

• Measuring and monitoring energy use, costs, and impacts,
• Assessing and pursuing energy efficiency projects and practices, and
• Setting and achieving reduction goals.

 
Also, once you decide to actively manage your energy use and budget, don’t forget to engage all your employees! They are critical to reducing usage. 
 
One fun exercise is to conduct an energy treasure hunt (and October is the perfect month do to one). These are based on the kaizen practices made famous by Toyota. Kaizen is Japanese for continual improvement. Energy kaizens can be designed to be very comprehensive and technical audits (even lasting several days for larger, more complex businesses) or short, focused, and fun team building (and money saving) exercises.

4. Keep measuring and monitoring (and reporting).
Set a regular schedule to measure the company’s energy use and costs. Most companies will conduct an annual assessment on a calendar year or fiscal year basis. For companies that spend more on energy, a quarterly (or even monthly) check in may pay off. The data collection process may be a bit cumbersome the first couple times, but should become more efficient over time.
 
Be sure to document what energy efficiency steps the company takes. Track the date(s), cost(s), activity(ies), and location(s) of your efficiency action(s) to ensure you can (1) measure the delta from the “business as usual” costs and impacts and (2) share your successes and lessons learned.
 
Most companies will also calculate the GHG emissions on the same cycle and in conjunction with the company’s energy measurement.
 
How your company reports and shares (internally and externally) its energy management activities should reflect the reasons you’ve engaged in the journey. Many of your company’s stakeholders will benefit from learning about your energy efficiency (and any associated emissions reduction) efforts and progress. As stated earlier, investors, supply chain partners, customers, and employees value energy efficiency as a very concrete demonstration of your management prowess.

5. You Too - Companies That Lease!
If your company leases all of its building space and other real estate – don’t fret, you too can and should pursue an energy management plan! The green buildings movement (e.g., spurred by improved state building code requirements, Energy Star, LEED, Green Globes, The Living Building Challenge) is helping to transform America’s building stock. Buildings are becoming more energy efficient and healthier places more conducive to a highly productive workforce.
 
Unfortunately, there are still institutional barriers and disparate incentives between building owners and tenants that leaves many buildings needlessly wasting energy. Usually, it’s the tenant companies who are stuck paying the costs of the inefficiency. According to the EIA CBECS, for example, there’s a clear difference in the energy use and costs between owners and tenants.

​It’s incumbent on and in the best interest of companies that rent real estate to actively engage on the building’s energy performance. Fortunately, there are emerging advances in “green” lease terms that are helping tenants have more of a say in the energy performance of their leased space. And, more and more property management companies and building owners are interested collaborating with tenants to improve energy efficiency.
 
I’ll be posting another article later this month with more in depth information about green leases and how tenants can take more control over their energy costs. In the meantime, give us a call if you are interested in help developing an energy management plan or conducting an energy treasure hunt.

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Thank you for reading this blog post. Here at Corporate Sustainability Advisors LLC blog and on LinkedIn and Medium, I regularly write about organizational, community, and personal sustainability. If you would like to read my future posts then please subscribe via the adjacent link. Also, feel free to connect via Twitter and Facebook.

With so many climate change stories in the news these days, what's an owner of a medium-size or small business to do? There's a lot of talk about what governments and large, global companies are doing to climate-ready their businesses, but fewer tips for smaller businesses.

Owners of smaller businesses face similar risks (and may also have opportunities) from climate-related impacts:

• physical hazards such as increased temperatures, storm events or sea level rise; 
• regulatory changes such as voluntary or mandatory CO2 emissions reporting or green building standards; and
• market changes including energy and other resource cost increases, new provisions to "green" your lease terms, or shifts in workforce and consumer valuation of sustainability practices.

While the scale of these risks is certainly smaller in terms of overall costs/revenue/GDP, the relative risk to each business can be significant,  even making the difference between thriving or going under.  

Here are 5 things any business owner or leader can do to take action on climate change and make their business more resilient. 

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Thank you for reading this blog post. Here at Corporate Sustainability Advisors LLC blog and on LinkedIn, I regularly write about organizational, community, and personal sustainability. If you would like to read my future posts then please subscribe via the adjacent link. Also, feel free to connect via Twitter and Facebook.

Summary
Federal agencies have amended the Federal Acquisition Regulations (FAR) to require certain contractors to indicate whether or not they publicly share information about their corporate greenhouse gas (GHG) emissions inventory or goals. Published in the Federal Register on November 18 (81 FR 83092), the new rule does not actually require contractors to calculate or reduce their GHG emissions, just that they indicate whether they publicly disclose either emissions or goals information.
 
In the final rulemaking the government clarified the purpose and goals of the FAR modifications. The representations are intended to help the government better understand, not regulate, the GHG management practices of its industry partners. The rule is designed to be a low-burden, minimally intrusive effort to enable greater insight into the GHG management practices of the federal supply chain.
 
Effective December 19, 2016, the final FAR rule establishes an annual representation requirement for contractors to indicate whether or not they publicly disclose GHG emissions data and/or emissions reduction goals. For companies that do publicly disclose such information, they must also indicate where it is publicly available on the Internet. The requirements are applicable to companies that had $7.5+ million in federal contract awards in the prior federal fiscal year.
 
The final rule is almost identical to the proposed rule released in May 2016 (81 FR 33192). Some minor clarifications where made to address comments made to the draft rule.

Representations Required
New FAR provision 52.223-22 (and an equivalent at 52.212-3 for commercial/COTS items) representations:

1. The Offeror (itself or through its immediate owner or highest-level owner) [ ] does, [ ] does not publicly disclose greenhouse gas emissions, i.e., makes available on a publicly accessible Web site the results of a greenhouse gas inventory, performed in accordance with an accounting standard with publicly available and consistently applied criteria, such as the Greenhouse Gas Protocol Corporate Standard.
2. The Offeror (itself or through its immediate owner or highest-level owner) [ ] does, [ ] does not publicly disclose a quantitative greenhouse gas emissions reduction goal, i.e., make available on a publicly accessible Web site a target to reduce absolute emissions or emissions intensity by a specific quantity or percentage.
3. If the Offeror checks "does" [under either provision], the Offeror shall provide the publicly accessible Web site(s) where greenhouse gas emissions and/or reduction goals are reported: ___________________.

 
Implications
The new rule may be a target for repeal by the incoming administration because it is based on an Executive Order of President Obama (EO 13693). On the other hand, the EO and rule mirror the supply chain practices of many successful US-based and global corporations. Applying such practices to the US government’s $400 billion supply chain could well have bi-partisan appeal as they will likely result in cost savings to the companies and taxpayers alike.
 
GHG management is closely connected with cost savings from energy use reduction, and serves as an indicator of operational efficiency and excellent management practices.  Thus, organizations that purchase large volumes of goods and services (e.g., AT&T, Bank of America, Coca-Cola, Nike, Walmart) have started asking their supply chain (i.e., the companies they buy from) about these practices.
 
Private and publicly-traded companies are enhancing their environmental, social and governance (ESG) practices, including disclosing details about their GHG management and other sustainability practices through tools such as the CDP and the GRI Sustainability Disclosure Database. For example, nearly 10,000 organizations have submitted more than 35,000 reports via the GRI database. Last year, companies representing more than 50% of the combined market capitalization of the G20 reported emissions data to CDP.  These public disclosures, and the management efforts behind them, help the bottom line. 

• “The strong performance of three-year reporters [to the CDP] is also displayed in the carbon and cost savings in the reporting cohorts…Those reporting for three or more years reported an average savings of US$1.5 million per initiative, versus first-time reporters, which had an average savings of US$900 thousand per initiative.” ~ From Agreement to Action: Mobilizing Suppliers Toward a Climate Resilient World: CDP Supply Chain Report, 2016.

​In response to these efficiency opportunities, supply chain management practices, and investor expectations, many federal contractors already have GHG and energy management programs. This is especially true of the largest contractors. The Council on Environmental Quality (CEQ) just released the 2016 Federal Supplier GHG Management Scorecard that reflects a survey of approximately 80 companies and represents $214+ billion in FY15 federal procurement spending (about half the annual contracted amount). Of those surveyed, about 57% (by count) or 73% (by contracted dollars) have public GHG emissions inventories in 2015 or 2016. 

​Slightly fewer have public GHG reduction goals for 2016 or beyond—about 44% (by count) or 62% (by contracted dollars). 

​Whether or not the new rule remains in effect throughout the next administration’s term, there are compelling business reasons for federal contractors and other companies to manage their GHG emissions and energy use.

A dash of this. A dash of that. Like the best dishes, each company’s social responsibility recipe will be slightly different and evolve over time. Creating a recipe from scratch is both daunting and exciting.

The Silicon Valley Community Foundation (SVCF) recently published a helpful guide, Starting With Purpose, about why and how startups should bake in sustainability and other corporate responsibility as an integral part of creating a new business.

Investors, customers, and employees are increasingly seeking out companies that integrate environmental, social, and governance practices into their business strategy and purpose. The nimbleness and innate creativity of new companies provides an optimal atmosphere in which to embed social responsibility practices into the corporate strategy and culture. 

Doing so early can help the business thrive with a triple bottom line: prosperity, people, and the planet. This is especially true for businesses that are built around products or services designed to create positive environmental or social impact such as clean tech, clean and/or renewable energy, and energy management and efficiency companies.
 
Here are six ingredients recommended in the SVCF guide:

• Cultivate a Culture Committed to Social Change
• Connect with Local Communities
• Donate or Discount Products or Services to Drive Social Change
• Lay the Groundwork for a Sustainable Supply Chain
• Translate Diversity Values into Practice
• Make a Public and Formal Commitment to Social Responsibility

 
Does your startup seek to impart social change in addition to generating bottom line profit? We’d love to help you create your secret sauce. For more information on how we can help your company, please contact us at info@corporatesustainabilityadvisors.com. Let’s cook-up something great together.