The Leader Magazine

MAR 2017

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MARCH 2017 45 1 CB Richard Ellis, "Driving an Aggressive Occupancy Cost Reduction Program." January 2009. 2 IBM (2010). Creating a Smarter Planet One Building at a Time, IBM Corporation, and Federal R&D Agenda for Net-Zero Energy, High Performance Green Buildings. 3 Environmental Protection Agency (EPA). Energy Effi ciency in Non-Governmental Buildings. 2014. 4 Carbon Trust, "Opportunities in a resource constrained world." 2014. 5 World Green Building Council, "The business case for green building." 2013. 6 Cone Communications, social impact study. 2013. We combine our data-driven performance and advisory services with our Navigator energy and sustainability platform. For organizations looking to gain control over their energy, the platform unlocks key insights into building performance indicators. Siemens experts draw from these to benchmark a building's performance against best practices and compliance requirements, as well as to prioritize investments for maximum ROI and risk mitigation. This helps reduce complexity and speeds up the time-to- value of improvements. ROI is not just measured in energy savings but also in the benefi ts of having a process that is consolidated, centralized, automated and provides accurate forecasting of costs for budgeting. Further value is also seen in terms of data quality, increased process effi ciency, risk mitigation and better resource utilization. Unlock the hidden value of carbon reduction and compliance Gaining transparency into how buildings perform can reduce the effort and cost of navigating through and complying with the myriad of national regulations and voluntary certifi cation schemes for environmental compliance. In Europe, the 2012 Energy Effi ciency Directive established a set of binding measures that apply to central government and large commercial organizations to help the EU reach its 20 percent energy effi ciency target by 2020. Under the Directive, all EU countries are required to use energy more effi ciently at all stages of the energy chain, from production to fi nal consumption. The benefi ts of making building portfolios more "green" are both fi nancial – slower building depreciation, higher utilization rate, lower management cost, reduced obsolescence risk, even productivity improvements – and reputational, with increased attractiveness to customers or investors, opening a wider range of fi nancing options (USD $42 billion green bonds were issued in 2015 alone). There are also incentives in the form of tax credits introduced to drive green developments and retrofi ts. The key is to defi ne measurable action plans to meet short- and long-term energy and carbon effi ciency targets, and to implement a framework that facilitates the integration of new reporting requirements. This again requires a know- how that is increasingly best sourced outside the organization. Capture further value through internal effi ciency Process effi ciency is another area where partnering with experts can deliver big returns, a case in point being utility-bill-management outsourcing as offered by Siemens. Important utility data are often scattered throughout an organization and, if managed manually, can lead to errors in data capture, missed opportunities to lower utility costs, or the inability to report on sustainability performance. Partnering with a management expert can help resolve these issues and optimize tax and tariff structure to drive savings. For corporations leasing their premises, the accurate and consolidated capture and retrieval of utility contracts and costs can also be a fi rst step in preparing for the IFRS16 new lease accounting rules. Coming into effect in 2019, these rules will require greater transparency of leasing contracts, with tracking and reporting on both lease contracts and services – such as utilities – separately. The accuracy of this reporting will affect both compliance with regulations and the impact on a company's market valuation based on lease liabilities. Data analytics and energy-management platforms can also help remove the "split incentive." With accurate measuring and reporting of project costs and energy savings, it is easier to share the rewards between landlord and tenant as well as internally across departments. Internal staff incentives and effi ciency targets should certainly not confl ict with an organization's long-term strategy and growth objectives. For example, if a goal is set to reduce facility costs year-to-year, implementing a program that has upfront costs that are paid back over a number of years does not give a fair target, as energy savings will not be truly seen until after the payback period. Understanding these dynamics is the key to successfully implementing projects and to obtaining alignment and buy-in at all levels of the organization. More generally, engaging with the entire organization is an essential part of any effi ciency-improvement project. The World Green Building Council estimates that 5 to 15 percent additional cost savings can be derived from direct communication of successes and lessons learnt. Turn buildings into true stakeholder value creators Optimizing building performance – from improving energy effi ciency to understanding its impact on carbon footprint and contribution to workplace innovation – can lead to greater value creation. By reducing risks and costs and easing budget pressures, effi ciency projects can free up resources that can be reinvested to deliver new and better products or services. With public opinion valuing transparency above all, companies that invest in data analytics and reporting systems and services are better positioned to prove what they claim. When you consider that 78 percent of Millennials take into account social and environmental issues in their decision of where to work 6 , building performance has a direct impact on an organization's ability to attract and retain the skilled employees it needs to respond to disruption. This is also why Siemens is investing EUR €100 million in effi ciency projects over the next three years, with a view to becoming carbon-neutral by 2030. Many companies struggle to build a compelling business case around sustainability and energy effi ciency. Often, they are the same companies that are disrupted by the new "asset-less" business models. One could argue that taking building-performance improvements in the sole context of sustainability is part of the reason why such projects often struggle to establish a measurable link to value-capture. As the pace of disruption accelerates, organizations that fail to form the right partnerships to improve the performance of their buildings are not just leaving money on the table; they are restricting their ability to invest in business model and service innovation – and ultimately to respond to this disruption. Peter Halliday is head of Building Performance and Sustainability for the Siemens Building Technologies division in Zug, Switzerland.

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