The business case for net zero and why landlords can’t use cost as an excuse for failure

It was surprising to read last month that just under half of UK landlords believe that it is too costly to implement environmental regulations, with many landlords complaining that it is difficult to keep up with regulations on energy efficiency standards, or that it is too costly to improve commercial property energy efficiency.

What was especially telling was that more than half of landlords were unsure how to effectively improve energy efficiency in buildings, and almost all of them were outsourcing their sustainability policies to third parties.

There’s a perception that the road to net zero will be prohibitively expensive and the knee-jerk reaction is to focus on how much should be spent on refurbishments or retrofits. However, with roughly 30% of energy used in office buildings being wasted, doesn’t this waste seem like the most sensible place to start? A staggering amount of progress can already be achieved through simple behavioural change and minor technical reprogramming.

In fact, the CUBE Competition has proved that the UK market as a whole could be saving £3.8bn annually just by applying some of these simple changes to office buildings.

For context, CUBE is the UK’s first initiative of its type to challenge energy efficiency in commercial buildings through gamification, and in its first year it helped save more than 6,000 tonnes of C02 across 540,895 sqm of commercial space.

By tackling the dual challenges of energy efficiency improvement and occupier engagement in commercial buildings, we are seeing buildings reduce energy consumption by up to 39%.

Changing behaviour by communicating best practices and sharing energy consumption reports with tenants comes at very little cost and can have a marked effect on a building’s energy use. Even small commitments to educating tenants about the energy savings that can be made, for example through ‘lights off working practice’ that encourages people to switch off lights after completing a task to save energy, can really add up.

In terms of minor building reprogramming, another prudent and inexpensive initiative is to review the use of boilers. Do they really need to be operating all summer when the external temperature exceeds 28^oC?

Taking CUBE as an example. For sceptical landlords who are worried about the costs of transitioning towards net-zero, the inaugural year of the initiative featured 30 participating buildings, ranging from small grade II listed buildings to iconic skyscrapers such as the ‘Walkie-Talkie’ and the ‘Cheesegrater’. Collectively they saved over 31GWh of energy, the equivalent of £8m in energy costs.

Applying these savings to the circa 860m sq ft of office space across England, a staggering £3.8bn a year in energy costs could be saved, not to mention nearly three million tonnes in carbon reduction.

And this applies to all sorts of buildings, from newbuilds and existing stock, to large and medium sized buildings. In fact, the expectation was that large buildings would do significantly better, but medium-sized buildings managed to save 18% annually, compared with 12% for large buildings.

Even BREEAM-certified buildings still had a large capacity for energy savings, with a substantial average energy saving of 22%. In all, the average energy intensity of CUBE buildings before the competition was 262 kWh/m², but after the competition, this reduced considerably to 215 kWh/m². This is impressive, but buildings across the UK will still need to continue their efforts to meet UK Green Building Office Intensity Targets of 90 kWh/m2 by 2030.

While acknowledging that simple behavioural change will not deliver net zero by itself, it can prove a very good starting point, and showcases that significant improvement isn’t unaffordable. In fact, given the cost of energy and the increasing cost of carbon, it is often highly profitable to adopt net zero policies.

Ultimately, real estate contributes a disproportionate percentage of worldwide carbon emissions, but despite the industry’s best efforts, the latest Savills research still indicated that 39% of global carbon emissions still come from the sector, with operational emissions alone accounting for 28%. So, we cannot hide behind cost figures in a bid to delay tackling the problem. Instead, we need to keep galvanising the industry into taking stronger action.