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It’s hard to deny the reality of climate change when the summer’s heat beats 125,000-year-old records, more wildfires are consuming more acreage than ever before, and the warming ocean fuels more frequent and intense hurricanes.
It’s increasingly making sustainability, net zero and ESG (environmental, social and corporate governance) reporting not just nice-to-have, but must-have goals. The construction industry is among those with a huge stake in addressing the issue as one of the biggest contributors to global warming: The built environment accounts for 39 percent of the world’s gross annual carbon emissions, according to the World Economic Forum.
Getting on board with sustainability should be the logical goal. Avoiding the greenwashing trap in the process is one of the challenges. Green certifications are one answer. But facility managers working on new construction projects with reputable builders can also adopt practices that make their buildings more environmentally responsible without formal certification.
The options for green building materials and environmentally responsible construction practices are expanding.
One of the biggest contributors to greenhouse gas is cement, accounting for about a twelfth of global carbon dioxide emissions due to the process to make it. “Green” cement has been building considerable buzz, but concerns over performance hinder widespread adoption.
Recently, though, a California startup with a new process for making cement received third-party certification that its product looks and performs as well as conventional cement; its ability to align with current standards makes a convincing case for commercialization.
Mass timber is also gaining growing acceptance as its renewable nature and negative carbon impact add to its appeal over traditional building materials. And for road construction, solutions include recycling road materials for reuse and innovations like paper ash processed for application on a road near Valencia, Spain. The material looks and acts like concrete but can save up to 75 percent of its associated carbon emissions.
As green building options grow, various tax incentives make them worth pursuing. The federal Inflation Reduction Act, for example, provides huge incentives for energy efficient building. New Jersey has become the first state to adopt a green concrete tax credit of up to 5 percent of a project’s total concrete costs when materials with low levels of embodied carbon dioxide emissions are used.
It’s said that talk is cheap, but it turns costly when a business lays claim to an environmental commitment that doesn’t hold up. It causes more than just loss of public trust. Insurers are concerned about the construction industry’s exposures, especially in light of rising ESG class actions. A survey by law firm Norton Rose Fulbright found 28 percent of respondents reported deeper exposure to ESG litigation, and 24 percent are expecting more exposure this year.
The best way for builders to show that their commitment is more than just greenwashing is through audits for green certification. The best-known is LEED, or Leadership in Energy and Environmental Design, but others are well-regarded as well. Another, Energy Star, measures the energy efficiency of everything from appliances to entire office buildings.
By 2022, more than 30 percent of office buildings in the U.S. were LEED-certified. Even more were certified in such cities as Chicago, Minneapolis, and San Francisco.
Even without formal certification, the best environmental practices can be worth putting in place informally. They improve the satisfaction of occupants, for starters, which helps LEED-certified properties generate 60 percent more rent and sell for 60 percent more per square meter than non-certified buildings.
They also can reduce a building’s operating costs. For example, LEED lighting systems create energy savings (75 percent) and have a long life (25 times greater than incandescent lights). The University of California/Davis saves nearly $150,000 a year on electricity and maintenance with its LEED system.
It’s also worth noting that certification tells a good story to insurers as a sustainable building speaks to high operating standards and lower claims risks. Some carriers may give premium discounts in recognition of the certification, which can offset the LEED certification fees.
Firms that intend to demonstrate their sustainability commitment should determine their end goal before construction begins, even before materials are procured.
It takes a deep assessment of every stage of a building’s lifecycle, from inception to demolition, looking at issues like:
Ultimately, LEED projects should make a reverse contribution to climate change while also enhancing human health and well-being. Water resources should be protected and reserved, and so should biodiversity and the ecosystem. Sustainable and regenerative resource cycles should be promoted even while a greener economy is built. And ultimately, they should enhance community, social equity, environmental justice, and quality of life.
As the demand for more sustainable building options increases, green construction – mass timber, green concrete, LEED certification – has become increasingly desirable within the global construction market. But while the new materials will make construction safer, cheaper and easier, insurers and construction companies continue to examine the implications.
Ray Monteith is Senior Vice President with global insurance brokerage HUB International’s Risk Services Division. He leads the Organizational Resilience practice and is the Risk Control Services Leader for the Canadian Region. Phil Casto is Senior Vice President for Risk Services at HUB International. He has extensive experience in the construction, manufacturing and petrochemical industries. Phil also serves as a resource for the insurance brokerage operations, providing solutions in the areas of risk mitigation, safety, regulatory compliance, and workers compensation.