It’s been more than 25 years since LEED was launched as the first green building standard and the landscape for these kinds of programs has expanded significantly since then. Green building certifications have become a popular choice for new development projects by both residential and office developers over the past several years. These certifications have taken on new meaning for many as the threat of climate change has led to more stringent building codes and rules surrounding carbon performance and energy efficiency.
Certifications like LEED are almost mandatory for new development projects in major urban markets these days, with many companies looking to the programs to enhance their reputation and meet ESG goals. One recent report from AMLI Residential found that 80 percent of renters believe their health benefits from living in a sustainably built apartment building. But while the efforts are well-meaning and an important step toward curbing emissions on a local and a global scale, some in the industry have criticized what they see as a lack of independent data reporting and large swaths of the sector that aren’t being included enough in the conversation.
Lay of the land
Put simply, green building certifications are achievements awarded to a building that meets certain requirements around energy efficiency and emissions. The programs are intended to reduce the building’s carbon footprint, cut down on energy use, and lower operating and utility costs. There are numerous programs available for owners and developers, the most popular of which is LEED, a standard from the U.S. Green Building Council (USGBC), which describes it as the most widely used rating system in the world. Buildings are awarded points after a verification and review process from Green Business Certification Inc (GBCI). The more points a building earns, the higher LEED level it achieves. Levels start at ‘Certified’ and go up to ‘Platinum,’ the most prestigious level and the rarest–only about a few thousand buildings in the country have earned the designation.
Energy Star, a program headed up jointly by the EPA and the Department of Energy, rates commercial buildings on a scale of 1-100 compared to buildings nationwide. Other building standard programs include the Living Building Challenge (LBC), which was started by the nonprofit group International Living Future Institute with the aim to create a regenerative built environment. The standard is based on actual performance and not modeled performance and projects must meet criteria in seven different categories to be certified.
Most certification programs cost money to join, and depending on size and scale, the price can get steep. For larger projects, LEED certification and various additional fees can add up to more than $25,000. However, in many areas, developers can receive tax breaks for building green, and can often save money on operating costs in the long run. One Cushman & Wakefield report found that LEED-certified office properties tend to command higher rents and sales prices.
The global push to cut down on carbon emissions and some cities’ aggressive goals to be carbon neutral are also driving more adoption by building owners. “We’re seeing in more and more cities in the U.S., LEED is becoming code for certain asset classes and buildings, which is really driving the volume of LEED certification,” said Billy Grayson, executive director for the center for sustainability and economic performance at the Urban Land Institute.
Worldwide, as of 2019, there were more than 100,000 commercial projects registered and certified to the LEED standard, according to the USGBC. It’s a number that has skyrocketed since 2005, when just 3,156 projects were LEED registered in the United States. Buildings that are LEED certified have reported nearly 20 percent lower maintenance costs than similar, non-LEED buildings, while green retrofits generally decrease operation costs by almost 10 percent in one year, according to the USGBC. Among the country’s 30 largest cities, 40 percent of office space has some kind of green certification.
While the numbers and figures sound promising, there are nuances that blur the picture a bit. Stuart Brodsky is the Director of the Center for the Sustainable Built Environment at New York University in Manhattan. He previously spent years at the EPA, working to get commercial real estate stakeholders involved with the organization’s Energy Star rating program. For Brodsky, sustainability in buildings is an important part of addressing the serious climate and environmental issues of our times. “I think it’s easy to be critical of LEED because it’s the most popular program,” he said. “It’s kind of like a broad spectrum antibiotic but we have a lot more than a mild infection in relation to the built environment and the natural environment.”
Brodsky pointed out that LEED’s lowest level achievement, Certified, can be awarded to a building with “fairly unexceptional” performance, particularly on an energy level. “Baseline LEED certification in many jurisdictions is pretty much on par with building code,” he said. “Anything less than that would be illegal.” Brodsky also took issue with the idea that a building with some kind of green certification means it must be energy efficient. He’s not alone. Others in North America and Europe have criticized how “overly optimistic” energy modeling has led to buildings failing to deliver promised savings. Last year, Carnegie Mellon published a study on whether LEED certifications actually save energy among federal buildings. Researchers found that trade-offs across attributes measured through the program led to an absence of energy savings on average, concluding that “if energy efficiency is the primary policy goal, LEED certification may not be the most effective means to reach that goal.”
Jerry Yudelson is a longtime environmentalist, engineer, and author who has written more than a dozen books on green building and sustainable design. Yudelson, who has been called the “Godfather of Green,” said he became concerned in 2009 that there wasn’t a lot of independent data that proved LEED certified buildings were more energy efficient. He called LEED certification a “marketing tool” that doesn’t deliver on its promises. “Right now it doesn’t have much integrity because no one’s holding anyone to any requirements,” he said, adding that he believes unless a building is net zero, it shouldn’t be called a green building.
While 40 percent of office stock in the top 30 markets is green certified, what about the rest of the country’s office market? According to Brodsky’s estimate, when the country’s entire office market is accounted for, only 10-15 percent of commercial space has achieved any standard of LEED certification. “It’s not exactly as if we’re transforming the market with green building standards,” he said. “We’re not achieving meaningful change with LEED. It is very difficult to ferret out the value of where energy efficiency is because most of the data released is by stakeholders in the achievement of certification.” He’d like to see tools like those available from the Energy Star program that would allow users to recognize achievement and improvement over a baseline, regardless of what that baseline is. “One of the challenges LEED has is it only recognizes and has a platform for what they consider top tier,” Brodsky said.
As the market for green certifications has expanded over the years, there are now hundreds of green standards and certification programs around the world. In the United States, a much smaller number is most common among office owners and developers, but it still creates a complicated landscape for the building industry, “I wish we’d all just pick one,” said Grayson. “It would be great if all inventors and regulators would agree on one to benchmark sustainability of new and existing buildings. It would make everyone’s lives easier.”
Critics point to a few major changes they say could make green certifications live up to their promises and help move the needle on curbing emissions. One concerns overhauling existing buildings. “We’re not even going to get close on climate change unless we tackle the building sector with huge retrofits,” said Yudelson. Some cities require building owners to disclose how much energy their buildings use on a regular basis, something that could drive owners to do better—especially with older buildings. Then there’s the huge chunk of the office market, much of it suburban, that isn’t always included in studies on green certifications and tends to be outside of target markets. Bringing those building owners to the table would be a big step toward green certification adoption on a larger scale. “We have a massive inventory among 5.5 million commercial buildings across the country that are under-engaged in the conversation,” said Brodsky.
Outside of certifications that focus on energy efficiency, there are a growing number of certifications focused on the health and wellness of building occupants. Fitwel is a leading program that was first created by the CDC and the General Services Administration and is now operated by The Center for Active Design. Buildings in the program are rated based on 12 health and wellness categories. WELL is another standard run by the International WELL Building Institute. The program measures and monitors things like light, air, water, fitness, and comfort. The group has even run TV commercials starring A-list celebrities including Robert DeNiro and J.Lo to help draw more participants to the program. There’s also Passive House, a stringent standard applied mostly on residential projects, though its use in office buildings has been picking up steam lately.
Independent reporting is the key issue for many critics who say some green certification standards aren’t doing enough. Earlier this year, the SEC proposed adopting rule changes that would require more climate-related disclosures from companies, including periodic reports and information about climate-related risks that could have an impact on their business. The rules would also include reporting on greenhouse gas emissions. “If that’s adopted, we will see great clarity,” said Brodsky. “The real estate industry should be grateful if there’s great clarity and consistency, then we’ll get all the noise out of the way.”
Buildings’ role in the worldwide effort to curb carbon emissions will continue to spark conversation and debate in the years to come and the contribution of green building certification programs will certainly be an important part of it. The real estate industry has made a lot of progress in bringing more awareness to green building standards and driving adoption, but more progress can certainly be made toward building a consensus on benchmarking and transparency.