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BD+C White Paper Chapter 4: Selling Green to Retail Markets

This is my second post in what I hope will continue to be a series reacting to each chapter of the 2006 Building Design + Construction White Paper: Green Buildings and the Bottom Line. Chapter 4 discusses retail stores and their comparatively slow adaptation of sustainable design principles. Why care? Retail stores are the largest sector of the construction industry- more than 21,000 new stores are built each year in the U.S., constituting 23% of all new building projects (excluding single-family homes).

As of this past September, though, less than fifty stores had been certified with any ratings program (185 retail projects have registered with LEED). Chapter 4 speculates as to why this is the case. First, it notes that chain retailers want every new store to “mesh with the fabric of their brand” so that each new store is “absolutely consistent with the look and feel of its predecessors.” Essentially, it blames green certification as representing a departure from the branding concepts that are so critical to retail’s bottom line and thus anathema to chain executives and franchisees. While this may be true, there are ways that rating systems can adapt themselves to the unique needs of this particular sector of the construction industry, and USGBC’s LEED Portfolio Pilot Program (discussed below) is attempting to do just that.

However, Chapter 4 does observe that many retail giants- like Wal-Mart, Starbucks, and Home Depot- have adopted green design practices, largely because of the “triple bottom line” that it promises- higher profits from higher economic efficiency, enhanced experience for the customer, and a stronger community presence. For example, Wal-Mart has incredibly sophisticated lighting controls, such that if a refrigerator in any store in the world remains open for more than fifteen minutes, that store’s manager will get a phone call from Bentonville informing him or her to shut the door. Starbucks has its own prototype green store in Lakewood, Washington, designed with eighteen different variations to reflect various local weather and site conditions. (Note that its corporate architect, Tony Gale, was just elected to the Board of Directors of USGBC).

While major retailers are interested in green building, Chapter 4 blames LEED application costs as being the main culprit behind the limited number of certifications to date. I had posted a blurb from the Wall Street Journal a few weeks ago about the LEED Portfolio Pilot Program, which will allow multiple structures in a retail chain’s portfolio to register, and receive certification, together, rather than individually. Just to expand on what the WSJ article reported, PNC Bank certified an original prototype branch building and a second prototype at regular cost. It then certified, at no additional cost, seven variations on the original designs (incorporating, for example, separate entrances and compensating for different geographic locations). According to Chapter 4, one of these designs has already been used in 27 new branch buildings, and every tenth building will be audited by USGBC for compliance with the orginal, certified designs. The designs cut construction time by 4-6 weeks, cost $100,000 less than a conventional branch building, and have already saved PNC forty percent over typical energy costs.

Retail represents a significant portion of the construction industry. It also presents some unique challenges for green building. USGBC’s Portfolio Program is a good idea, but whether it adequately balances a sufficiently stringent review with a sufficiently low cost for owners and/or franchisees remains to be seen. The Portfolio Program is also geared towards large retail owners and not at local franchisees. Most of retail is franchised and franchise agreements generally require franchisees to build, stock, and operate their stores within a very strict contractual framework before they can stick up a Best Buy logo. In negotiations over such agreements, franchisees have very little bargaining power. USGBC and the Green Building Initiative should put pressure on retail to make sure its franchise agreements contain enough wiggle room to allow franchisees to pursue certification independently without fearing the termination of their agreement. Large retailers that choose not to participate in the Portfolio Program should also be mindful of the prohibitive cost of LEED certification for a local franchisee, and provide the means in the franchise agreement for its franchisees to participate in lower cost programs like Green Globes.

Also, Page 20 of the White Paper provides a good overview of green building programs at Albertson’s, Lowe’s, Target, Ikea, and Whole Foods. Like Starbucks, Ikea has its own company-certified green building standard, and Lowe’s saves $137,000 each year by computer modeling thermal energy systems it installs in its various stores.

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