The Risks and Rewards of Sustainable Building Design

Caroline A. Harcourt and Adam Weaver | Gravel 2 Gavel

The shift towards a “greener” environment has resulted in cities and states implementing electrification mandates, which will have a major impact on both current and future building design. Currently, most commercial and residential end users are already all-electric. However, there are some exceptions, such as space and water heating, that use a significant amount of energy. Several states, including California and New York, have cities that have introduced legislation requiring new construction to be all-electric. This means, for example, using electricity for heating rather than fossil fuels such as natural gas. Mandate or not, building owners and developers should consider the risks and rewards of an all-electric design.

General Rewards

  • Reaching Climate Goals: As part of the Clean Energy Plan, as described in a previous post, President Biden has created a goal for the United States of achieving a carbon pollution-free American utility sector by 2035. Because residential and commercial building account for 40 percent of energy consumption in the United States, all-electric building designs will help governments and businesses reach the ambitious climate goals that have been set for the coming years.
  • Positive Health Outcomes: All-electric building designs will greatly reduce harmful emissions put off into the air. Residential and commercial fossil fuel combustion accounts for almost 30 percent of greenhouse gas emissions in the United States. (See NYC building emission goal in previous post.) Replacing natural gas heating systems in commercial buildings with electric equivalents alone would result in a drastic reduction in emissions and a healthier environment.

Rewards for Landlords and Tenants

  • Financial Incentives for Owners: Financial savings from fitting a building with an all-electric design comes from not having to install natural gas lines and savings from the costs of having to switch to an all-electric power grid down the road.
  • Attract New Tenants: Tenants are giving the sustainability efforts of potential building spaces greater consideration when deciding where to live or work. As employees are becoming more conscious of the environmental impact of their homes and offices, employers looking to rent space will take this into consideration as an additional way to entice employees, and we are likely to see sustainable building systems as a deciding factor on where companies decide to lease space.
  • Smaller Utility Bills: Lower operating expenses are a deciding factor for tenants in selecting a potential space. By using sustainable all-electric systems, owners can create lower energy usage and ultimately a lower utility bill, which is passed through to the tenants.

Possible Risks

  • Potentially High Up-Front Costs: While including a new all-electric system into a new building is not a significant increase in cost, replacing a current fossil fuel-based system with an all-electric system can be expensive due to any adjustments necessary to accommodate the new all-electric equipment that may require more space and other material changes to the existing structure.
  • Weather Concerns: A building powered by an all-electric system may face issues in inclement weather if utility companies are unable to provide the required electricity to operate the building’s systems. In February, when Texas was hit by an extreme winter storm, the state’s power grid was unable to maintain a constant flow of electricity to the state’s residents. This inability to provide the necessary power would have resulted in a shut down of buildings operating under an all-electric system, whereas buildings operating under traditional fossil fuel-based systems would not have been as severely impacted. This extreme weather is rare in places like Texas, but in other states where cold weather is the norm, this issue could pose a problem.

Both landlords and tenants could benefit greatly from the incorporation of sustainability into building designs and the adoption of all-electric building systems. The trend towards sustainability will continue to grow in the coming years, and as the positive incentives from electrification continue to increase, so too will the number of building developers and owners who make the switch.

Legal Risks of Green Building

Mark D. Shifton | Construction Executive

All construction projects involve elements of legal risk. Insurance and indemnity claims, delay claims and professional negligence claims are simply accepted risks when involved in construction. Green building projects are no exception to this rule, and often involve unique issues that are not present in typical construction projects. 

Green building projects commonly employ new or untested construction materials, require construction methods that lack significant track records, and ultimate building performance often fails to meet design expectations. As such, green building projects may give rise to entirely new types of legal risk that should be considered and allocated early in the process. 

In the past 15 years, the number of buildings for which green certifications have been sought has grown exponentially, and the growth rate of green building and sustainable construction has far outpaced the growth rate of the construction industry as a whole. As green building projects become increasingly common (and often increasingly required by the federal, as well as state and local governments), the unique legal risks presented by green building projects take on an increase importance.

BUILDING CERTIFICATION ISSUES

Green building projects may create unique issues of building certification that are completely foreign to typical construction projects. Ultimately, in a typical (non-green) construction project, the various parties are obligated to deliver a building that may be put to its intended use and that is substantially in conformance with the contract documents.

Developers of many green building projects, however, often aim to receive a specific certification from a green building certifying agency. There are many certifications from several such agencies, such as the LEED® certification (from the U.S. Green Building Council) or Green Globes (from the Green Building Initiative). These certifications are independent verifications that a building, once substantially complete and put to its intended use, meets certain specified criteria, such as indoor air quality, energy savings or grey-water usage. Green building certifications—in addition to providing a certain “cachet” in a competitive market—may allow a developer to qualify for certain tax breaks or favorable financing terms. Failing to achieve a desired certification, therefore, often carries significant negative financial consequences. As a result, significant legal issues may arise after a developer spends significant resources with the intent of developing a building that meets certain green building criteria, yet the building ultimately falls short of receiving that certification. 

As a result, owners failing to receive a certain green building certification may seek to seek to shift the blame to their design professionals and green building consultants for their “failure” to achieve a desired result. In allocating for this risk, owners may seek to negotiate with design professionals and construction managers to make green building certification a contractual requirement (with concomitant penalties should the building not qualify for the certification). Accordingly, failing to achieve a desired green building certification (which is often an ever-moving target) can have costly ramifications, and the risk of failure can lead to significant legal issues after substantial completion.

CONTRACTUAL INDEMNITY ISSUES

Green building projects—and the issue of green building certifications in particular—will likely give rise to significant contractual indemnity questions. Indemnity allows a party to shift its liability risk to another party (such as the owner to the general contractor, or the general contractor to its subcontractors), so that the downstream party bears more of the risk. Contractual indemnity and risk transfer issues are significant in any construction project, and are likely to be more complex in green building projects. 

In a typical construction project, questions of indemnity (such as which party is ultimately responsible for something, and is thus liable), are generally answered by reference to the contract documents, which usually incorporate the project’s specifications. Because green building projects often incorporate novel construction materials and techniques, however, construction materials and techniques are often determined “on the fly,” based on fit in the field. Because of this, the original project specifications often do not ultimately reflect the building after substantial completion. As a result, when a building fails to achieve a desired certification, the contract documents do not necessarily shed much light on which parties are responsible, leading to complex questions of responsibility and indemnity.

PROFESSIONAL LIABILITY ISSUES

Finally, as the green building market continues to expand, green building projects are increasingly likely to give rise to significant professional liability issues. As the green building industry is relatively novel (and continues to quickly evolve), issues regarding the standard of care to which design professionals are measured against will be complicated.

In a typical construction project, design professionals are held to a specific standard of care. The American Institute of Architects, for example, holds the standard against which architects are to be measured to be “consistent with the professional skill and care ordinarily provided by architects practicing in the same or similar locality under the same or similar circumstances.” Because green building projects often include novel or untested construction techniques and materials (or at least techniques and materials lacking a significant track record), determining whether the design professional acted with the skill “ordinarily provided” by other professionals may be difficult, if not impossible, and will almost always result in a fact-intensive inquiry. From a design perspective, green building projects often occupy the bleeding edge of the industry, and without a significant track record and history, it can be difficult to determine whether a subsequent failure in building performance is due to professional negligence, or is simply because a novel construction method ultimately did not work.

CONCLUSION

There is little dispute that green building and sustainable development is the future of the construction industry. As a result, the industry is likely to see more (and more complex) claims of contractual indemnity and professional liability. Many of these claims will ultimately be resolved through litigation. As the market continues to expand, increasing efforts should be taken to recognize and allocate these risks early in the process.

Five LEED and Green Construction Trends to Watch in 2020

Tommy Linstroth | Construction Executive

To succeed in any field, you can never stop learning—especially in the green construction industry where standards and technology are always growing and changing.

Here are a few of the exciting trends in LEED certification and green construction learned about during this year’s Greenbuild International Conference and Expo, which is the largest annual event for green building professionals in the world.

1. MORE TRANSPARENCY ABOUT PRODUCTS

In 2020, the product sustainability information provided by manufacturers will continue becoming more transparent and accessible. Manufacturers are coming to the table and presenting more useful information on environmental and health impacts, conducting life cycle analyses and making the information available for the design and construction marketplace.

Although this means even more information for construction and design teams to take into account when planning green construction projects, it’s a definite positive. We’re starting to see the actual environmental performance getting taken into account in product specification.

2. REGENERATIVE BUILDING THRESHOLDS

In 2020 and beyond, the industry will continue seeing progression in green building efforts. At this year’s Greenbuild, the U.S. Green Building Council (USGBC) announced an effort call LEED Positive, which goes well beyond the sustainability measures of the current rating system. The initiative is meant to push the LEED standards toward the thresholds in the Living Building Challenge building certification program.

The USGBC initiative envisions ways to make new and existing buildings go beyond reducing energy/climate impact to actually becoming a regenerative force and net positive for occupants and their communities. While implementation of the effort is years down the road, it’s a high-level vision for where the built environment needs to go.

3. CONTINUED GROWTH IN GREEN CONSTRUCTION

Green construction will continue to grow in 2020. LEED will remain the go-to standard, and the adoption of v4.1 will help teams overcome the practical implementation barriers that were created under v4. Other rating systems, such as WELL and FitWell, will continue to see growth as owners and teams work to create healthier buildings. Finally, teams will accelerate their adoption of technologies to design, construct, and deliver green buildings easier, faster and more cheaply than in the past.

4. EMBODIED CARBON ANALYSIS

Another trend is an increasing mindfulness of the entire carbon footprint of the construction industry. Embodied carbon analysis, an emerging environmental impact assessment technique, will have a profound effect on green construction.

Embodied carbon analysis broadens the view of where the environmental cost of the built environment takes place. Traditionally, calculating the carbon footprint of a structure is based on the energy used by the building after it is occupied, but that ignores the enormous amount of carbon dioxide generated during the manufacture of building products and materials. What is called “embodied carbon” also encompasses what is emitted during the construction and full lifecycle of a building.

Forward-thinking design and construction teams are now starting to look at using building products and materials with the lowest amount of embodied carbon. This pushes sustainability and accountability further down the supply chain, encouraging the reduction of carbon emissions at the source.

5. BETTER TOOLS

There are continuing innovations in tools meant to make the green building process easier and more environmentally friendly. At Greenbuild, the Embodied Carbon Construction Calculator was released, which is a great tool to help teams analyze the various carbon impacts of products. The Carbon Leadership Forum and C Change Labs developed the tool with significant leadership from Skanska, the multinational construction and development firm.

Meanwhile, USGBC is trying to make it easier to find green products with the newly announced Better Materials search function, which helps search across multiple databases, by recommending products that have been reviewed and approved by the Green Building Certification Institute. It should definitely help simplify the LEED documentation process.

EXCITING TIMES AHEAD

It’s impossible to encapsulate the full Greenbuild experience in just a few words. The trends featured are just the tip of the iceberg. It’s an exciting time to be a green construction professional as the industry continues moving forward to make the built environment a safer and healthier place.

New Sustainability Ordinances for Construction Enacted in Florida and Colorado Cities

Joshua Atlas | Construction Industry Counselor | June 6, 2019

The City of St. Petersburg, Florida is one of the latest municipalities to incorporate the concepts of sustainable construction, sometimes referred to as “green building”, into the requirements of their municipal code.  On April 26, 2019, the City adopted Ordinance No. 359-H; which requires City-owned buildings over 5,000 square feet, which are either existing and being substantially modified or are being newly constructed, to achieve a rating of LEED Gold from the U.S. Green Building Council.  

The new ordinance makes clear that the purpose of adopting the sustainability requirement is to uphold the City’s responsibility to lead by example. The City is focusing on its goals of becoming a more sustainable community by pressing the conservation of resources, a reduction of waste, and increased energy and water efficiency for its own facilities.

The new ordinance also applies to City-funded municipal infrastructure projects exceeding $2,000,000.  For these projects, the work must achieve a Gold rating under the Envision program, a sustainable construction framework developed by the Institute of Sustainable Infrastructure.  While compliance with the sustainability requirements is not mandatory for non-qualifying municipal projects (or private projects), the ordinance furthers the City’s overall goals by also requiring that all City construction projects implement LEED or Envision principles even if certification is not required. 

The City of Denver also recently enacted a revised, stricter sustainability ordinance.  It requires property owners to use a “green roof” design to incorporate either reflective roof surfaces, solar panels or green space/vegetative roofs.  Subject to a few exemptions, the Denver ordinance applies to all new construction and renovations of buildings larger than 25,000 square feet.  The stated purpose of the Denver ordinance is to reduce the “heat island” effect associated with urban environments, which are prone to capturing and retaining solar heat.  In a suburban or rural environment this heat gain is reduced by the presence of larger areas of plant life and vegetation.  If not feasible for a certain project, the Denver ordinance also gives property owners the alternative of either obtaining a LEED Gold certification for the entire project, purchasing off-site renewable energy credits or paying an additional per-square-foot development fee.  The fee revenue would be invested in other municipal projects to advance the City’s sustainability goals.  Denver became the second U.S. city to enact a green roof requirement after San Francisco passed a similar ordinance in 2016.

Green Construction Trends Contractors Can Expect in 2019

Emily Folk | Construction Executive | February 25, 2019

The construction industry has come a long way since it was started building homes out of logs and sticks. Modern homes and buildings are marvels of engineering filled with wood, concrete and steel—much of which could be recycled if the building were ever torn down. Green construction is a growing field that will continue to expand in the coming year. What green construction trends can we expect to see in the coming year?

AUGMENTED AND VIRTUAL REALITY

Augmented reality (AR) is growing more popular every year for games and entertainment, but it also has some applications in green construction. AR and virtual reality (VR) programs, either through a headset or on a smartphone, can be used to improve collaboration between companies, allowing each company to see a virtual overlay of their stage of the project.

For green and eco-friendly construction, it can be used to show how a finished product will look on undeveloped land, making it easier to judge the ecological impact of the project. The use of AR and VR in green construction is still in its infancy, though we will likely start to see more of it in 2019.

NET-ZERO BUILDINGS

Net-zero buildings, or buildings that produce little to no waste and nearly zero energy consumption, are becoming more popular. As green technology advances and becomes more affordable, more companies and home buyers can build the net-zero building of their dreams.

These buildings are not limited to homes and businesses. Schools, hospitals and other facilities can all be designed from the ground up to use no energy from the local power grid, relying instead on green energy alternatives such as solar, wind or geothermal energy.

IMPROVED ENERGY EFFICIENCY

The United States has a $6 trillion energy industry. The majority of this energy is produced through the burning of oil and natural gas. To continue as a leader in energy production, the country will need to develop more effective and efficient solutions. Starting in 2019 and continuing in the coming years, green energy solutions such as solar or wind power will continue to advance and become more energy efficient, which will enable them to be adopted across a wider part of the infrastructure.

Homes and buildings are becoming more energy efficient as well to reduce their power use. Advanced insulation, multi-pane, windows and other building materials are becoming more common and more affordable, and consumers will see more of them used in construction in 2019 and beyond.

OFFSITE CONSTRUCTION

Traditional construction requires nearly everything to be built onsite from the ground up once the foundation is laid. New construction techniques enable offsite construction to be possible. This change reduces the time spent assembling a building because the pieces are constructed elsewhere and then moved to the jobsite for assembly. It also decreases the carbon footprint of each construction project by reducing the amount of time that heavy equipment is used.

GREENING EXISTING STRUCTURES

While using green construction methods for new buildings is a great way to reduce carbon emissions and create a greener future, it doesn’t do anything for the thousands of homes and buildings that already exist. Residential homes use upwards of 30 percent of the world’s energy, and the majority of that expenditure is due to existing homes. Greening existing homes and buildings—an initiative that was introduced early in 2018—can reduce a structure’s energy expenditure by up to 60 percent and its carbon footprint by up to 30 percent.

This movement could be an excellent alternative for historic buildings that cannot be torn down and rebuilt and homeowners who don’t have the funds or the credit to tear down and rebuild their home with greener construction methods. Greening existing properties will likely become more prevalent in 2019 as more home and business owners look for ways to reduce their carbon footprint.

This list offers just a small sample of the new green construction trends that are expected for 2019. Energy efficiency, green construction materials and renewable energy are all becoming easier to afford with every passing year, and 2019 may prove to be a turning point for this industry.