Nike Considered designs will lower the company's environmental footprint.
Earlier this month, I attended a seminar on sustainability innovation in the tech industry at Dreamforce 2010, salesforce.com’s 8th annual conference (anyone familiar with Dreamforce, or with salesforce.com’s CEO Marc Benioff, should recognize this massive understatement—imagine a sales event-rock concert-thought leadership expo and you’ll get a rough idea). Titled “How Efficiency, Collaboration & Innovation Can Help Mitigate Climate Change”, the session brought together Eric Olson, Senior Vice President at Business for Social Responsibility; Lorrie Vogel, General Manager of Nike Considered; and Ted Howes, co-lead of IDEO’s Energy Practice, to share their thoughts on the role of technology in solving one of society’s biggest challenges.
I was particularly intrigued by Lorrie Vogel’s discussion points, which covered two exciting topics: Considered Design, Nike’s closed-loop design vision, and the GreenXchange, an open platform for sharing patented design information (which I will cover in my next blog post). For this discussion, I want to discuss Considered Design and some thoughts about the broader implications that sustainability implementers of all types can draw from Nike’s model.
At its core, Considered Design represents a coordinated approach to tackling what sustainability means (definition) and how it is achieved (implementation). For a major footwear and apparel manufacturer, sustainability issues cut to the heart of business: making core products in a completely new way, without sacrificing quality. Considered Design serves as Nike’s big first step toward realizing a long-term vision of closed-loop design for all of its products.
The initiative began as a set of design ideals (or “ethos” in Nike-speak) adopted by the company. Yet, despite clear vision from company leadership, Nike’s designers struggled with the task of incorporating sustainability principles into their work. The overarching issue the designers faced resonates with many who have considered the issue of sustainability: How, and where, do we start? Nike management answered with the Considered Index, a technology-based tool that gives designers real-time feedback on how well their products measure up against the expectations and goals embedded in the Considered Design ethos. To develop this tool, Nike calculated the lifecycle environmental footprint of all products and processes—from idea generation through final production—and used the results to identify the four areas where design could most influence the company’s overall environmental impact: materials; waste; solvents; and innovation. The Considered Index provides designers with real-time feedback on the predicted environmental footprint of a given product using detailed data for all materials used in Nike’s commercial products. Every available material and design element carries a score within the Considered Index, and built-in benchmarking shows how a product-in-development would rate against the company average. Some highlights of the impact this effort has had so far:
Reduced waste: A new shoe box, planned for use with all shoe products by 2011, uses 100% recycled fiber and features a design that reduces fiber content by roughly 30% over previous models.
Reduced pollution: By 2009, 76% of Nike shoes contained environmentally preferred rubbers (up from 3% in 2004), which are patented formulas that reduce toxins by more 95% yet mimic the performance and look-feel of traditional rubber. There is no cost difference.
Reduced GHG emissions:
Eliminated the use of potent greenhouse gas SF6 from all footwear products.
Reduced carbon emissions from owned facilities and business travel by 18% between 1998-2005 despite facility growth of 6% over that period.
Better farming practices & industry transformation: Organic cotton represents 14% (>21 million pounds) of the cotton fiber used in Nike Apparel products, making Nike the 3rd largest retail user of organic cotton in the world. Nike currently incorporates most of the organic cotton fiber as blend material in apparel, using a minimum 5% blend for 86% of cotton products. The 5% blend has become an industry standard for yarn suppliers who supply a range of other brands and Nike plans to double the minimum to 10% by 2015, a decision likely to ripple across the apparel supply chain.
The Nike Environmental Design Tool, a public version of the Considered Index, was recently released along with supporting data and methodology for public use. Nike documents its sustainability goals and progress in detail in its Corporate Responsibility Report. So what can we pull from this, apart from a clear illustration of Nike’s elegant approach to lightening the environmental load of its consumer products? One of the lessons is that successful sustainability efforts require at least two key elements: first setting a clear vision for sustainability within the organizational context (definition), and then providing employees with the tools to incorporate that vision into their regular job function (implementation).
One of the leading contenders in change.org's Ideas for Change in America competition is the notion of an energy performance label for homes that works like the miles-per-gallon sticker that comes with a new car. Called the Energy Performance Score (EPS), the concept heralds from the Pacific Northwest and is more than just an idea, having been developed and piloted by Earth Advantage in 2008, and then adopted on a voluntary basis for new homes in Oregon and Seattle.
The scorecard is similar to the UK's Energy Performance Certificate, which has been mandatory for all buildings on construction, sale or rental, since 2008. Both of these labels go beyond the EnergyStar and ASHRAE EQ energy labels, which measure energy performance, but not CO2 emissions.
The EPS scorecard is completed following a home energy audit by a certified EPS auditor, who reports the home's current score in terms of energy use and carbon emissions. The scorecard indicates where the home falls in relation to the state average and also how the home would score if all of the recommended upgrades were completed. Earth Advantage report that there has been a lot of interest in the label from across the country:
This comprehensive initiative has attracted national interest. The City of Chicago, City of Houston, Clinton Climate Initiative, U.S. Department of Energy, New York State Energy Research and Development Authority, and the World Business Council for Sustainable Development are all assessing the final recommendations from the pilot report issued in August 2009.
We look forward to seeing versions of the EPS appearing elsewhere in the not-too-distant future.
Washington DC is leading the way in many aspects of sustainability, and may be the first place in the nation where building energy performance labeling becomes mandatory. Starting this year, the owners of approximately 260 of the largest commercial buildings in the District will be required to record their performance data in the EPA’s Portfolio Manager website. According to the Washington Post, the initiative has supporters and opponents:
Cliff Majersik, executive director at the Institute for Market Transformation, an environmentally focused, Washington-based nonprofit group, said the law should fix a long-standing problem. It's tenants, not landlords, who typically pay the energy costs for a rented corporate space, he said. "The people in the best position to improve the energy efficiency of buildings don't pay the energy bills, and the people who pay the energy bills are unaware that they could be saving money," he said. The Apartment and Office Building Association of Metropolitan Washington and the Cato Institute opposed the bill, noting that it calls for the District to fund a third-party contractor to conduct sustainable energy programs for the city. "It's something else that will make it more expensive to live in Washington or run a business in Washington," said Pat Michaels, a senior fellow on environmental studies at the Cato Institute, a libertarian think tank. "If left to its own, the market would produce these efficiencies better."
The Washington program closely mirrors similar initiatives in other states, notably New York and California, and at the Federal level.
Section 204 of the American Clean Energy and Security Act of 2009 establishes a plan for a national building energy performance labeling program. The Act, which also includes the controversial “Cap and Trade” legislation, is currently awaiting action in the Senate.
California was the first state to draft energy performance labeling legislation, with AB 1103 in 2007, which requires that, as of Jan. 1, 2010, non-residential buildings release their Portfolio Manager-benchmarked data and ratings to parties in a commercial real estate transaction involving the sale, lease or financing of a whole building.
In December 2009, New York passed the Greener Greater Buildings Plan, which includes the disclosure of energy performance for large commercial buildings by September 2011.
In June 2009 ASHRAE introduced a prototype building energy performance label, the Building Energy Quotient Label, which is currently being piloted. The Building EQ program is a more sophisticated version of the EPA’s Energy Star program, which has been in existence since 1992 and provides performance labels for buildings and appliances. In Washington, the building performance data will not be made public knowledge until 2012, giving building owners time to improve their scores by installing energy saving upgrades.
As one of the leading global real estate services firms, CB Richard Ellis (CBRE) made an early commitment to the promotion of sustainability in real estate, both in its work with clients and in its own operations. Reflecting this, the firm released corporate responsibility reports in 2007 and 2008 and declared its goal to be carbon neutral in operations by 2010. CBRE's December newsletter, "6 Degrees of Sustainability", provides a good insight to the kind of activities that CBRE is initiating across the green building spectrum. These include:
Training of staff in green building practices: CBRE now has 400 LEED Accredited Professionals.
Developing tools to assist owners and occupiers, such as eTrack, a web-based tool that monitors building energy performance and allows owners to track tasks related to building operations and initiatives such as LEED EB accreditation.
Real estate professional service firms like CBRE have a key role to play in the promotion of green building practices, and we expect to see that role - and their influence - increasing as sustainability becomes mainstream in the commercial real estate industry.
The California Public Utilities Commission (CPUC) last week approved a $3.1 billion budget for energy efficiency programs for the years 2010-2012, a 40% increase over the previous program cycle. The funds will be directed through the state’s publicly owned utilities and are expected to create energy savings of almost 7,000 gigawatt hours, avoid 3 million tons of greenhouse gas emissions and create between 15,000 and 18,000 skilled green jobs.
The $3.1 billion budget includes hundreds of millions that will be available for commercial real estate owners who want to improve their sustainability and who have the smarts to take advantage of the subsidies and incentives that are available.
Never before have there been so many programs, subsidies and incentives available to building owners. Here are five steps to tap into state funds to transform your CRE business from a green laggard to a green leader:
1. Find out your energy efficiency score
The state has ambitious goals to make all new buildings Zero Net Energy by 2030 and achieve major energy reductions in existing buildings...
But there’s currently a lack of data about how existing buildings perform, which the CPUC wants to overcome through benchmarking:
“Benchmarking is a beginning step in managing a building's energy cost, one that should motivate the building's owner or manager to take actions to improve the building's energy profile."
The public utilities are charged with implementing massive benchmarking programs. You can get them to measure the performance of your building and provide you with valuable information about its current energy usage and how it compares to buildings of a similar type.
2. Get an energy efficiency audit
An energy audit takes benchmarking a stage further by first assessing the building’s current technologies and systems, and then identifying energy saving opportunities. The state owned utilities operate various programs that provide commercial building energy audits, such as Direct Install, which provides free energy efficiency audits and hardware upgrades through third party contractors.
3. Prioritize and plan for retrofits and upgrades
Your energy audit will identify the low cost or no-cost initiatives that can be implemented immediately. It will also list retrofit options and other major initiatives that have a longer payback. At this stage you’ll need to assess retrofit options against the available incentives and upgrade programs that are available. You should also use life cycle cost analysis to assess the true financial impact of the retrofit options, and make sure the full impacts of tax incentives and other subsidy programs are incorporated in the ROE calculation.
4. Acquire financing and incentives
Financing initiatives, such as on bill financing, and AB-811 municipal district financing programs, are already being developed and implemented across the state; expect to see new programs and pilots being rolled out after the CPUC’s adoption of the enhanced budget. Ambitious owners should contact their local public utility to get in early with pilot programs while funding is available.
5. Complete the transformation with green leasing, training and recognition
Greening a commercial building requires more than retrofits to the building systems. Most of the benefits of an energy efficient building are only harvested if the building is maintained and operated using sustainable principles and procedures. For a leased multi-tenant building this means ensuring that the occupants adhere to the building’s green policies and procedures. Green leasing provides the framework for green behavior using a modified version of the commercial lease. Expect to see new programs from utilities that focus on promotion of green leasing.
Training for jobs in the green economy is a key component of the state and federal government’s sustainability strategy. Take advantage of subsidized programs to get your property managers and engineers trained in green building technologies and practices.
Your building may also be a candidate for certification under LEED and/or EnergyStar. Certification provides great publicity for the building and the owner. Studies show that certified buildings have higher values and better rental and occupancy performance than their non-green peers.
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