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Accelerating Green Building Market Transformation with Information Technology

CHRISTOPHER PYKE
U.S. Green Building Council

ABSTRACT

The green building movement seeks to transform the way that built environments are designed, constructed, and operated. Over the past decade, the tools of this transformation have included market interventions such as professional training and accreditation, project rating systems, and the third-party certification processes. These interventions have made a demonstrable difference in the industry with levels of participation exceeding 10% of new commercial construction in leading metropolitan areas. Today, the movement is envisioning the interventions it will need to dramatically scale up and extend this impact. The foundation for these new approaches will rest on information technology and analytics—tools that will provide unprecedented insights into market activity and allow near-realtime comparison and benchmarking. These emerging capabilities will create new dimensions for market competition, competitive advantage for high-performing projects, and increasing risks for low performers. Taken together, these approaches will accelerate and intensify the movement toward high-performance, green buildings and communities

INTRODUCTION

The green building movement seeks to advance the design, construction, and operation of built environments to promote human health, well-being, and the restoration of the natural environment. The contemporary green building movement began two decades ago with a powerful mental image and a simple idea. The image was a classic curve—the distribution of practice across the industry



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Accelerating Green Building Market Transformation with Information Technology chriStopher pyke U.S. Green Building Council ABSTRACT The green building movement seeks to transform the way that built environ- ments are designed, constructed, and operated. Over the past decade, the tools of this transformation have included market interventions such as professional training and accreditation, project rating systems, and the third-party certification processes. These interventions have made a demonstrable difference in the indus- try with levels of participation exceeding 10% of new commercial construction in leading metropolitan areas. Today, the movement is envisioning the interventions it will need to dramatically scale up and extend this impact. The foundation for these new approaches will rest on information technology and analytics—tools that will provide unprecedented insights into market activity and allow near-real- time comparison and benchmarking. These emerging capabilities will create new dimensions for market competition, competitive advantage for high-performing projects, and increasing risks for low performers. Taken together, these approaches will accelerate and intensify the movement toward high-performance, green build- ings and communities INTRODUCTION The green building movement seeks to advance the design, construction, and operation of built environments to promote human health, well-being, and the restoration of the natural environment. The contemporary green building move - ment began two decades ago with a powerful mental image and a simple idea. The image was a classic curve—the distribution of practice across the industry 101

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102 FRONTIERS OF ENGINEERING ranging from a few scofflaws, through the average-performing majority, to a small group of innovators—a variation on a pattern recognized across many industries (Roger, 1962). The idea was to use strategic market interventions to permanently shift this distribution toward higher performance. At the time, very little informa- tion existed to define this conceptual distribution of practice, and there was little experience with specific market interventions. The lack of experience or data did not deter the movement. The nascent green building industry set course and went to work with passion. The early areas of focus included efforts to create a broad-based industry coalition, grow a trained workforce, create assessment tools, and reward buildings based on performance and achievement. There are clear signs of success in each of these areas. Here, we will focus on new opportunities pertinent to project-based information and analytics. Green building practice rests on tools and processes to design and assess high-performance green buildings and communities (i.e., projects). These tools and processes allow practitioners to identify and communicate about relative merits of green building strategies (e.g., integrative design, energy efficiency, or water conservation), the achievement of milestones (e.g., facilities management policies), and, ultimately, the performance of whole systems ranging from interior spaces to neighborhoods (e.g., whole-building energy performance). 1 These tools and processes are codified in building rating systems, such as the U.S. Green Building Council’s Leadership in Energy and Environmental Design (LEED™) 2 and a number of analogous systems around the world (Cole, 1999). LEED provides practitioners with a platform to advance the consideration of issues related to location and transportation, design and engineering processes, construction activity, site planning, energy, water, materials, indoor environmental quality, and innovation. One of LEED’s fundamental benefits to the market is greater transparency about the achievements and performance of buildings with regard to these previously invisible characteristics. Over the past decade, the day-to-day tools underlying LEED have been a simple paper scorecard and, at the end of the process, a glass plaque displayed in a building lobby. It is remarkable to consider the impact that these simple ele - ments have had on the industry. Today, we have the opportunity to build on these fundamental goals and concepts with information technologies that can vastly accelerate and scale up their impact. This paper describes one vision for this new phase of information-powered, analytically driven market transformation. 1 In this context, the term “performance” refers to a measurable, typically quantitative metric, such as energy efficiency, renewable energy generation, water consumption, or occupant satisfaction. The term “achievement” refers to binary or qualitative activities, such as policies, procedures, or discrete choices (e.g., green cleaning, commissioning, or the use of third-party certified building products). The terms are often used together as “performance and achievement” to reflect the typical range of green building practice. 2 See www.usgbc.org/leed for more information.

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103 ACCELERATING GREEN BUILDING MARKET TRANSFORMATION MARKET EFFICIENCY Classical economics assumes that market participants have equal and imme- diate access to information (Fama, 1970; Malkiel, 2003). Markets use this infor- mation to set prices and value assets. Today, real estate markets have developed sophisticated tools to provide information on the financial aspects of individual buildings and portfolios. Commercial information services provide data and benchmarking related to capital cost, sales price, tenancy, and a myriad of other factors. Markets for this information are sophisticated and highly segmented. However, there are no readily accessible, consistent, or comprehensive resources to address the non-financial dimensions of assets, such as energy use, water con - sumption, or occupant experience in or around the property. The absence of this information contributes to inefficient markets, impairs innovation, and, in some cases, contributes to market failure (Gillingham et al., 2009). The most direct remedy to this situation is to create public and private mecha - nisms to provide information on the non-financial aspects of assets, that is, the green dimensions of homes and commercial buildings. This can be accomplished through public labeling programs and private efforts to create asset dashboards and key performance metrics. The development of these programs is accelerating, witnessed by the success of building-level Energy Performance Certificates in the European Union, green building certification, and, in a few major metropolitan areas, municipal energy benchmarking (IEA, 2010). However, these efforts only scratch the surface. Ultimately, we need to connect information about energy performance with detailed information about project attributes (e.g., technologies, management strategies, etc.) and utilization (e.g., occupancy schedules and occu - pant density). These data must then be embedded in tools and services explicitly designed to foster constructive competition and accelerate market transformation. ACCELERATING THE DIFFUSION OF INNOVATION Information about outcomes and performance are the foundation and cur- rency for the next generation of green buildings. However, by itself, this is not sufficient to propel market transformation. Information alone does not drive the change. It needs to be interpreted and attached to mechanisms that create clear market opportunities for high-performing projects and, by extension, competi - tive risks for low performers. This is where our interest diverges from agnostic market analytics. The green building movement seeks to use this information to drive permanent, self-sustaining change. Simply providing richer reporting on the status quo is inadequate. Our success will ultimately be measured by the rate and magnitude of change. This means that we seek to use information technology to actively accelerate the diffusion of innovation. This concept refers to the rate with which new prac - tices are taken up by market participants. Some industries have a long tradition

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104 FRONTIERS OF ENGINEERING of embracing diffusion theory and working across research, development, and deployment to accelerate change. For example, programs to increase appliance efficiency have raised the bar repeatedly over the past decades and achieved notable success (Gillingham et al., 2006; Nadel et al., 2003). The building sector as a whole has not traditionally embraced these concepts, particularly for whole buildings or real estate portfolios. Yet, information tech - nologies create opportunities for new, scalable market interventions. We recognize and address three key dimensions in our work: • Define outcomes—dimensions for performance and evaluation. Green building is not, in isolation, an outcome. It is a framework, and we have developed new approaches to define and evaluate specific outcomes expected from green buildings. These outcomes provide the basis for market competition and differentiation. • Understand and reward relatively high performers. These new perfor- mance dimensions can be used to sort and rank projects, discover their underlying practices, products, and services, and create performance- based reward systems. • Inspire and assist relatively low performers. Conversely, this information creates the opportunity for low-performing projects to identify higher- performing peers and potential solution providers. Outcomes Over the past decade, green building has been rooted in a single, simple perform dimension: the total number of points a project achieves with respect to the criteria of a rating system. This dimension is segmented into categories, such as LEED’s Certified, Silver, Gold, and Platinum. The act of certification and, at times, the level certification became a goal in itself. Over the past several years, we have explored new approaches to expand this traditional focus, including developing and implementing a multidimensional framework linking green building outcomes and practices. Our terminology has evolved with our understanding. An initial version of this framework was released with LEED 2009 (USGBC, 2008). In this framework, every green build - ing “credit” (a.k.a. strategy) is quantitatively associated with 13 environmental “impact categories,” such as greenhouse gas emissions, resource depletion, and smog formation (Figure 1). This is used to assign weights (points) to individual credits. It also allows credit achievement to be used to track specific outcomes— literally unpacking information collected during certification. In LEED 2012, these categories will be adapted to include seven core green building outcomes (e.g., greenhouse gas emissions reduction) supported by a set of more than 30 metrics (e.g., energy efficiency, renewable energy production). The bottom line is that the design of the next generation of ratings systems will

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105 Figure 1 ACCELERATING GREEN BUILDING MARKET TRANSFORMATION Outcome 1 Outcome … Outcome n Outcome 1 Outcome 1 Outcome Outcome Strategy 1 (credit) Strategy … (credit) Strategy n (credit) FIGURE 1 LEED is an outcome-oriented rating system. Points (relative weights) are assigned based on the association between credits (a.k.a., strategies) and outcomes (e.g., greenhouse gas emissions reductions). be closely tied to specific outcomes. In turn, these design tools will create oppor- tunities for advanced analytics relating project performance and achievement to specific outcomes. We can unpack certification-based data to focus on specific outcomes and their associated strategies. Taken together, a paradigm is rapidly emerging that will allow green buildings to be defined and analyzed across a set of well-defined, sometimes standardized, performance dimensions or outcomes (e.g., UNEP SBCI, 2010). These outcomes or performance dimensions can be as “simple” as energy use intensity (e.g., annual energy use per square unit of floor space) or much more complicated, synthetic measures, such as the 29 weighted factors included in the LEED 2009 GHG Index. Each of these metrics provides a new dimension to rank and sort green building projects with respect to different goals and outcomes. Higher Performers Each performance dimension is populated with real projects using third-party verified data collected during the certification process. In every case, we have the opportunity to identify and reward high performers. Simply scoring based

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106 FRONTIERS OF ENGINEERING on performance (e.g., an Energy Star score) is a first step. However, technology allows us to create and share more valuable information. We seek to understand the factors that contribute to a level of performance and achievement (Figure 2). Fundamentally, we want to understand how projects achieve a given level of relative performance. This means identifying and tracking relationships between people, organizations, practices, technologies, and a myriad of other factors. Each high-performing project has value as a model for lower-performing projects and a milestone for those that achieved it. Today, we can use a demonstration information system called the Green Build- ing Information Gateway (www.gbig.org) to begin to identify and explore high- performing projects across multiple outcome dimensions. For example, Table 1 illustrates the performance and achievement of an exemplary office building in Chicago, Illinois, across six categories. The accompanying density plots compare the selected project (the dark triangle) with others certified using the same rating system, in this case LEED for Existing Building: Operations & Maintenance (more information is available from http://www.gbig.org/projects/10049661). Figure 2 Distribution of performance across the market Frequency How? Increasing rewards Outcome Low High Performance Performance FIGURE 2 The Green Building Information Gateway (GBIG) provides data on the dis - tribution of performance across populations of green building projects. This information can be used to understand “how” high-performing projects deliver above average results. This provides the basis for recognition and competitive advantage.

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107 ACCELERATING GREEN BUILDING MARKET TRANSFORMATION TABLE 1 A sample “nutrition” label for an exceptionally high-achieving LEED-certified project. Source: Green Building Information Gateway (www.gbig.org), URL: http://www.gbig.org/projects/ 10049661. Our ambition is to use this type of data and information technology to shorten cycles between innovation, market uptake, operational performance, and positive recognition. This means creating highly-scalable information systems to collect data on performance, practice, and technology in near real time and provide dynamic, context-relevant benchmarking and recommendations. This will pro - vide decision makers with clear and timely information for their market; green “comps” not currently available in the real estate industry. Lower Performers The green building industry has always been comfortable recognizing high performers. The preceding approach to high performers accelerates this process

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108 FRONTIERS OF ENGINEERING and increases the timeliness and relevance of information flows as tools for market transformation. However, for every high performer there are a commensurate number of underperformers. Outside of Lake Woebegone, such underperformers are statistically inevitable. Yet, we have been less aggressive in rigorously searching them out and trying to understand and assist them. We must find a way around our inhibitions regard - ing underperformance and low achievement. We must pursue an understanding of these projects that is equal to or greater than our energies devoted to recognizing and rewarding high performance. Fortunately, we can adapt the same foundation of information technologies to identify projects that underperform or achieve less than their peers (Figure 3). We can then dive deeper to understand why these projects lag their peers and recommend specific strategies for improvement based on practices used by com - parable higher-performing projects. We want to understand the challenges and, if necessary, create new or improved interventions to barriers such as technology limitations, technical understanding, or first costs. Figure 3 Distribution of performance across the market Frequency Why? Increasing risks Outcome Low High Performance Performance FIGURE 3 Information in GBIG can also be used to understand “why” relatively low- performing projects deliver below average result. This provides the basis for critical evaluation and improvement.

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109 ACCELERATING GREEN BUILDING MARKET TRANSFORMATION Again, we can use the Green Building Information Gateway (www.gbig.org) to begin to identify and explore relatively low-achieving projects across multiple outcome dimensions. Table 2 illustrates selected metrics for a LEED for New Construction (version 2.2) project in Washington, DC (more information is avail - able from http://www.gbig.org/projects/10100317). Fundamentally, this is a simple mirror image of our approaches to high performers. We seek to use information technologies to “unpack” projects, iden - tify similar, higher-performing projects, and use data analysis to flag potential problems. We have the opportunity to use information technologies to highlight strategies used by comparable higher-performance projects. TABLE 2 A sample “nutrition” label for a relatively low-achieving LEED- certified project. Source: Green Building Information Gateway (www.gbig.org), URL: http://www.gbig.org/projects/ 10100317.

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110 FRONTIERS OF ENGINEERING CONCLUSION The success of green building over the past decade attests to the ability for relatively simple interventions to produce demonstrable market transformation. The coming decade requires new tools and approaches to bring these concepts to scale and to generate the pace of change needed to achieve our mission of creating sustainable, healthy, high-performance built environments. My belief is that this change will be powered by a new generation of infor- mation technologies specifically designed and deployed to promote market-based competition across multiple dimensions, to understand and learn from high performers, and to recognize and improve low performers. Every performance dimension we track provides an opportunity for competitive differentiation. Every high-performing project we identify and rank provides an opportunity to learn, recognize, and reward. Every low-performing project we touch provides an opportunity for education, investment, and improvement. The critical technologies are in hand or rapidly emerging, including search, recommendation engines, distributed sensors, social media, service-based soft - ware architectures, and cloud solutions. We will engage orders-of-magnitude more projects and, ultimately, move from an episodic “certification event” to a regime of continuous performance and real-time monitoring. We can see the contours of this new world and envision its sweeping implications for green building practice. REFERENCES Cole, R. J. 1999. Building environmental assessment methods: Clarifying intentions. Building Research and Information 27(4/5):230–246. Fama, E. 1970. Efficient capital markets: A review of theory and empirical work. Journal of Finance 25(2):383–417. Gillingham, K., R. Newell, and K. Palmer. 2006. Energy efficiency policies: A retrospective examina - tion. Annual Review of Environment and Resource Management 31:161–192. Gillingham K., R. G. Newell, and K. Palmer. 2009. Energy Efficiency Economics and Policy. Re - sources for the Future Report No. RFF-DP-09-13. IEA (International Energy Agency). 2010. Energy Performance Certification of Buildings. Interna - tional Energy Administration Policy Pathway Report. Available at http://www.iea.org/papers/ pathways/buildings_certification.pdf. Malkiel, B. G. 2003. The efficient market hypothesis and its critics. Journal of Economic Perspec - tives 17(1):59–82. Nadel, S., J. Thorne, H. Sachs, B. Prindle, and R. N. Elliott. 2003. Market Transformation: Substantial Progress from a Decade of Work. American Council for an Energy-Efficient Economy, Report No. A036. Roger, E. M. 1962. Diffusion of Innovations, 1st edition. New York: The Free Press. UNEP SBCI (United Nations Environment Programme, Sustainable Buildings and Climate Initiative). 2010. Common carbon metric for measuring energy use and reporting greenhouse gas emissions from building operations. Available at http://www.unep.org/sbci/pdfs/Common-Carbon-Metric- for_Pilot_Testing_220410.pdf. USGBC (U.S. Green Building Council). 2008. LEED 2009 Credit Weighting. Washington, DC: USGBC. Available at http://www.usgbc.org/DisplayPage.aspx?CMSPageID=1971.