CEMS MIM | EAESP-FGV BUSINESS PROJECT
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The ROI of Sustainability Certification in Residential Buildings in Brazil
Edward Dostine, Gordon Murphy and Jo達o Rafael Brites June 2014 1
EAESP-FGV The Escola de Administração de Empresas de São Paulo - Fundação Gertúlio Vargas is one of the leading academic institutions in Brazil. The school was established in 1954 and was a pioneer in Business Administration teaching in Brazil. Applied research and the dissemination of its results, mainly through study centers, make FGV-EAESP, as a part of the Getulio Vargas Foundation, an international think tank responsible for generating important knowledge for Brazilian society and for the world. The challenges in educating leadership in the 21st century and developing innovative projects and knowledge is present in all courses and activities at FGV- EAESP .
About the business project The purpose of this business project is to quantify the return on investment of sustainability certification in residential buildings across Brazil. Up to this moment, extensive research has been conducted regarding the benefits of sustainability certification to the user, but few focus on the issue of the return on investment for the developer, and the few which do were done outside Brazil. We hope this report will shed light on this issue and support developers understand how can they better reap the benefits of sustainability trends.
About the authors The authors of this business project are students from the CEMS Masters in International Management. In addition to this, Edward Dostine (Australia) holds a Environmental Science Degree from the University of Sidney, Gordon Murphy (Ireland) a BA in Modern Language and Business & Management at the University of Manchester and João Rafael Brites (Portugal) a Economics Degree at Nova School of Business and Economics.
Credits We would like to thank Camargo Côrrea, in particular Camargo Correa Desenvolvimento Imobiliário (CCDI), Even and Odebrecht for the data they provided and which made possible our research. We would like to thank personally to Camila Fachim and Rosely Botti from CCDI for their on-going support, supervision and advice, and to Paulo Pinheiro, (Even), Fábio Giamundo (Odebrecht), Luiz Pereira (CCDI), Anderson Benite (CTE), Xavier Daniel (CERQUAL), Elaine Santana (Fundação Vanzolini), Adriana Hansen (CTE), Ingrid Pinto (Fundação Vanzolini), Marcos Casado (SUSTENTECH), Maria Auler (CCDI), Mônica Almeida (CCDI), Manuel Martins (Fundação Vanzolini), Bruno Casagrande (Fundação Vanzolini), Celso Ferreira de Oliveira (CCDI), Giziane Dias (CCDI), Gustavo Pellicciari de Andrade (CCDI), Leandro Marveis (CCDI) and Luiz Lervolino Pereira (CCDI). Finally, we would like to give a special thanks to Professor Mauricio Morgado from EAESP-FGV and Victor Matos Chagas (Academic Masters EAESP-FGV).
www.eaesp.fgvsp.br/ 2
Contents 01 | Quick overview on sustainability certification - The Concept - Historical Evolution - Green Building Trends Worlwide - Green Building Certifications Worldwide - Green Building Trends in Brazil - Green Building Certifications in Brazil 02 | Literature Review - The Advantages of Certification - The Disadvantages of Certification 03 | An analysis of The Green Building ROI in Brazil - Abstract - Literature Review - Methodology - Data and Definitions - Model Specification - Results - Conclusions 04 | Reccomendations 05 | Final Remarks 06 | References
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01 | Overview
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ustainability “went from being a nice thing to do to a must do”, according to Steve Howard, the Chief Sustainability Officer at IKEA. In fact, since the first concerns around sustainability arouse in 1962 with the book Silent Spring from Rachel Carson, that more and more organizations have been trying to understand what is their role in a world increasingly more connected and in a society increasingly more aware about its impact on the planet. 1.1. What is sustainability? Sustainability has been a dynamic and holistic concept. Its origins can be traced back to the energy crisis and environmental pollution concerns of the the 1960s and 1970s. Thus, in the beggining it was thought of mainly as an idea of environmental preservation. Nowadays its a much broader concept, it revolves around of social issues as much as environmental issues. Its about the so called “tripple bottom line”: people, planet and profits. 1.2. Sustainability in the construction sector The green building movement originated from the need and desire for more energy efficient and environmentally friendly construction practices, as a consequence of increased environmental awareness and of the Oil Embargo of 1973, among other energy concerns, which gave to the movement the kick start it needed (Marble Institute, 2014). These concerns brought together a forward thinking group of architects, environmentalists, and ecologists committed to take the green building concept further, lead by initiative of the American Institute of Architects (AIA) of forming a committee on Energy. Even when energy concerns slowed down with the end of the embargo, a core-group of architects kept working on the issue and were responsible for building some of the first buildings to clearly incorporate sustainability principles (see below).
1.3. The rise of Sustainability Certification The first type of sustainability certification would only arise in the US the 1990s, when the the USGBC (United States Green Building Council) and the American Society of Testing and Materials started working together in order to create a rating system for sustainability. This process culminated with the release of LEED 1.0 in 1998, which standed for Leadership in Energy and Environmental Design. The first certification was called BREEAM, and it was launched in the UK in 1986. After thiese, more rating systems and types of certification were created and other countries started to adopt them. 1.4. Green Building Market Trends For this section of our report we used the “World Green Building Trends SmartMarket Report 2013” launched by McGraw-Hill Construction. The conclusions presented in the report were drawn from a survey fielded between August and October 2012 by Specialist/ Consultant firms (27.7%), Architect/ Design firms (21.4%), Owners/ Developers (18.3%), Contractor/ Builder (14.3%), Enginnering Firms (12.3%), among others (6%). This survey had 803 respondents and received statistically a significant sample from 9 countries, including Brazil Some of the most insightful results were: 1.4.1. On average, 38% of all Building Project Activity is Green for the whole sample. For Brazil, this percentage is 39% (see graph below). 1.4.2. 51% of the firms in the sample expect that in 2015 Green Projects will acount for more than 60% of all their work, up from 28% in 2012. For Brazil, it is expected that in 2015 Green Projects will account for more than 60% of all the work of 50% of the Braziliam Firms, up from 10% in 2009.
After that, due to uncertainty on sustainability outcomes, during the 1980s and early 1990s much research was commissioned on efficient energy processes. It was only with President Clinton’s initiative to “Green the White House“ that the idea was put forward in the radar of everyday American society and companies started to get interested.
Figure 1 — Willis Faber and Dumas headquarters, 1974 (Seferin, 2014)
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01 | Overview 1.4.3. Planned Green Building Activity for the next 3 years is concentrated in three sectors: New Commercial Construction, Existing Buildings/ Retrofit and New Institutional Construction. Residential Buildings are less important. In the case of Brazil, only 26% of the firms have planned green building activity for New High-Rise Residential Buildings, while 83% have activity planned in the sector of New Commercial Construction. This is coherent with the usual assessment made to the Brazilian green building market as being driven by the commercial sector.
1.5. Green Building Rating Systems across the World In this section we will briefly present the major Green Building Rating Systems being used across the world, with a brief characterization of their characteristics and adoption rates. 1.5.1 LEED (United States) LEED (Leadership in Energy & Environmental Design) is a US Green Building Council initiative that recognizes best practice building strategies and practices. It is a leader in green building certification in the US and internationally, adopted in 150 countries worldwide a total of 11 billion square feet across 175,000 projects (Katz, 2012). Residential certification launched in February 2008, to date there are over 50,000 residential units certified by LEED worldwide (Katz, 2012). By offering a variety of rating systems this accreditation addresses multiple project types as required, including; building design and construction, interior design and construction, building operations and maintenance, neighbourhood development and homes. Projects use the appropriate accreditation system to guide design and operational decisions. To determine the level of LEED certification the project is judged on the number of points it earns, namely; certified, silver, gold & platinum.
1.4.4. In more mature markets like the US the cost of green design has dropped in the last few years as the number of green buildings has risen. In the US, the trend of declining costs associated with increased experience in green building construction has been experienced in Pennsylvania, as well as in Portland and Seattle. Portland’s three reported and completed LEED Silver buildings were finished in 1995, 1997, and 2000. They incurred cost premiums of 2%, 1% and 0% respectively. Seattle has seen the cost of LEED Silver buildings drop from 3-4% several years ago to 1-2% today.
Figure 2 — The Cyan Building, one of Portland’s LEED Gold Buildings
1.5.1 BREEAM (United Kingdom) Based out of the UK, BREEAM carries out environmental assessments and ratings of buildings worldwide. It was created in 1992. This certification pays particular attention to the design of the building and how correct measures taken in this phase can reduce the carbon footprint left by its construction. That said, the rating assess all aspects from design to construction and management of the building. A broad range of the building’s characteristics are assessed: energy and water use, pollution, transportation, materials, waste and management processes. It is used by planners, developers, design teams, property agents and managers for varying reasons such as understanding the sustainable performance of the building, promoting its environmental qualifications and reducing the running costs. It is the most used certification scheme worldwide with over 1.200.000 buildings certified or under certification processes. 5
01 | Overview 1.5.1 HQE (France)
1.5.1 DGNB (Germany)
HQE is the French High Environmental Quality certification. It is awarded to projects related to the construction and operation of buildings and urban planning.
The DGNB assess buildings and urban districts for their sustainable performance and has a certification system that can be applied internationally.
HQE aims to create a sustainable living environment. Projects seeking to obtain the certification must meet the standards set by HQE in terms of best practices and sustainability throughout the whole lifecycle of the building - construction, renovation and operation. It covers residential and non-residential buildings, as well as detached house
The DGNB assess buildings and urban districts for their sustainable performance and has a certification system that can be applied internationally.
It differentiates itself from other certification types by placing equal importance on the economic performance of a sustainable building as it does on its environmental measures. DGNB considers the The certification is awarded internationally as well as following areas when assessing a building and places in France. In Brazil, the certification is called AQUA, equal importance on the first four: environmental and is operated by the Fundacao Vanzolini. AQUA quality; economic quality; sociocultural and functional rates the sustainability of a project using 14 different quality; technical quality; process quality; site quality. indicators which are divided into four groups: comfort; It is a comprehensive measurement tool that assesses eco-construction; eco-management; health. The 14 the building or urban district throughout its entire indicators are rated either Good, Superior or Excellent. lifecycle. Up to 50 criteria are assessed and if a building meets the standards, it is awarded either a HQE trademark has worldwide over 230.000 projects Bronze, Silver or Gold DGNB certificate. and over 36 million square meters already certified. Worldwide there are already over 850 projects either 1.5.1 NABERS (Australia) certificated or in the certification phase. NABERS (National Australian Built An investigation by the consulting company Drees & Environment Rating System) is the Sommer found out that the extra financial cost for Australian standard for property DGNB Certification is between 0 and 4 per cent of the sustainability accreditation. construction costs. The additional costs for planning and consulting are even less than 0.5 per cent. On the other hand, NABERS Star Rating is the industry benchmark for green building certification, focusing On the other hand, they also argue the risks of on commercial real estate. Adoption of NABERS vacancies are minimized for sustainable buildings and certification allows businesses to demonstrate their that rental income can be increased. In turn, this leads commitment to the environment, reap cost saving to better market prices and higher resale values for the property. opportunities and improve their triple bottom line. The NSW Office of Environment and Heritage administers and manages NABERS nationally. Unlike other certifications, NABERS rates the operational performance of existing buildings or workplaces where many other rating systems rate the design and construction of new building or workplace. Over 72% of Australian office space has been rated while certified buildings report an average improvement in energy efficiency of 8.5% (NABERS, 2013). Moreover a 5 star NABERS energy rating is proven to deliver a ROI in terms of a 9% green premium in value and the 3-4.5 star rating delivers a 2 -3% premium. Additionally positive returns were obtained in reduced vacancy, reduced outgoings and reduced yields (NABERS, 2013).
Figure 3 — Advertising from the AQUA Certificated Leroy Merlin
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01 | Overview 1.6. Green Building Rating Context in Brazil
1.6.3. An unattractive residential sector
In this section we present various insights about the Green Building Movement in Brazil, using as reference the research study “Sustainable Buildings in Brazil” published by Ernst & Young on October 2013 and the study “O Mercado da Construção Sustentável no Brasil” published this year by Sustentech.
In fact, as we can see from the graph below, the residential sector seems to have somekind of “unattractiveness” for sustainability certification, as it seems to be, according to the most recent data available from Pesquisa Anual da Construção Civil from IBGE, the major sub-sector in terms of the total construction value created by companies in Brazil with over 30 employees.
1.6.1. A recent but increasing trend From the research we can easily conclude that the movement for sustainable construction in Brazil is very recent. It was only in June 2007 that a building in this country received a LEED Certification. However, using data for the major types of certification used in Brazil we can see that growth has been strong.
This finding generates a question which is at the core of our research: why is a sub-sector responsible in 2011 for 51% of all the construction sector value in Brazil associated only with 16% of the sustainability certificates that were issued from 2007 to 2013?
1.6.2. Commercial sector on the lead
1.6.4. What is making it “unattractive”
However, despite the strong growth, sustainability certification has not been evenly adopted by all subsectors of the construction sector. If we divide the construction sector in two broad sub-sectors, residential and non-residential we can see that the great majority of registrations for sustainability certification was done for non-residential buildings (either commercial or institutional).
One argument that is commonly used to explain this fact is that while for commercial buildings the buyer represents the user (and the user is the one who benefits from lower maintenance, energy and water consumption costs created in the future by having a sustainable building), for residential buildings that is not always the case. In such cases there is often an incorporator or “incorporador” which buys the building and then sells to customers. This incorporador will not benefit from lower costs in the future so it does not think it should pay a premium for a sustainable building.
However, before we take any conclusions we need to compare this percentage with the actual proportion of residential buildings in the construction sector. For that purpose we used data from the PAIC (Pesquisa Anual da Indústria de Construção) of IBGE. There would be no problem of having larger share of certificated commercial buildings if the only reason is that there are more commercial buildings being built.
1.6.5. What we believe is the real reason Without taking importance out of this fact, we believe that this reason is not good enough. We believe it is just a symptom of a more engraned problem related to uncertainty. Even if the incorporator company is not the user and does not benefit from lower costs in the future, if it believes that customers will be willing to pay a premium for a sustainable building, then it will be comfortable with paying also a premium price when buys the building. So the problem in our view is not so much having a user that is not the actual buyer, but an incorporator company that does not know if customers are willing to pay that extra price for a sustainable building. We hope our analysis will shed light on this issue. But before that, let just understand the certifications that exist and how sustainability impacts price. 7
01 | Overview 1.7. Types of Residential Certifications in Brazil We will now present the major types of residential certification that exist in Brazil and their respective market shares. 1.7.1. Referencial GBC Brasil Casa
1.7.5. Other Certifications
Currently, GBC Brazil is adapting their framework for residential buildings. Until recently its main focus was on the commercial and institutional sector, where it is the clear leader.
Other certifications include DGNB Brasil and BREEAM Brasil but they are not currently very relevant in the residential building context. They were both launched recently in the country.
Out of the total of 150 LEED certified buildings, only 17 are residential, which explains why GBC Brazil is currently adapting the framework to better meet this market.
BREEAM was created in the UK and DGNB in Germany and, despite used widely in Europe they are still not so common in Brazil and the rest of Latin America.
1.7.2. AQUA-HQE Certification
1.8. Cost Comparison
The AQUA certification stands for “Alta Qualidade Ambiental” and its the Brazillian representative of the international certification network HQE that we have seen before.
To make a cost comparison we assumed we wanted to certify one building with 40.000 sq feet and found out the approximate values for the cost of each of the certifications presented above, except for BREAAM and DGNB to which there is no enough information available. For GBC Referencial Casa we took as reference the usual LEED Certification Costs. The estimates are presented below:
It was launched in 2008 and its technical framework was adapted to the Brazilian culture, climate and regulations. It considers 14 indicators, each evaluated either as Good, Very Good or Excelent. The exclusive right to give this certification belongs to Fundação Vanzolini and this is by far the most used certification for residential buildings. So far there were 238 registrations for AQUA certification in Brazil, and 98 correspond to residential buildings. 1.7.3. Selo Casa Azul—CAIXA CAIXA has developed the first sustainability certification and rating system in Brazil for residential buildings only. The goal is to minimize their environmental impact. Construction companies can apply to receive this certification, which can be granted in 3 levels—gold, silver and bronze—depending on their ability to meet different criteria under 6 categories. So far there were 19 registrations to receive Selo Casa Azul and were granted already 7 certificates. 1.7.4. PROCEL EDIFICA PROCEL EDIFICA—Programa Nacional de Eficiência Energética em Edificações was created in 2003 by ELETROBRAS/ PROCEL in a collaboration with the public and private sector.
GBC Referencial Casa | $R 18.269 (without consulting) (source: GBC Brasil website) AQUA-HQE | $R 108.200 (source: Online Calculator AQUA-HQE website) Procel Edifica | $R 15.000—$R20.000 (source: orcamentofederal.gov.br) Selo Caixa Azul | $R 328 (source: CAIXA website) It is interesting that AQUA-HQE is simultaneously the most expensive and the most used, perhaps because its higher cost gets diluted in buildings with many residential units. 1.9. Market Shares Finally, it was important also to see the market shares of the market for certification of residential buildings. Using 2013 as the reference year we can see that the AQUA-HQE is the clear leader. However, the market is such in a young stage that market shares might change abruptly, especially with the entry of GBC Referencial CASA, BREEAM and DGNB.
PROCEL promotes energy efficiency since the very early stage of a building and with PROCEL EDIFICA its reach was extended to include also the conservation and efficient usage of the natural resources (water, light, ventilation, etc.). So far there were granted 93 certificates: 24 correspond to residential buildings and 73 to commercial or institutional buildings. 8
02 | Literature Review
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efore we present our research on the return on investment of green certification in the Brazilian residential market we believe it is important to give the reader a list of the reasons why companies tend to certificate or not their residential buildings and also provide him/her some insights coming from international research on how researchers all over the world assess and evaluate the potential and shortcomings of sustainability certifications . Thus, in this section we start by presenting the reasons why buildings are certificated and then why they are not. For both we will provide a table at the end resuming research on the potential and shortcomings for the items we enumerated. 2.1. Why do companies certificate residential buildings? The business case for green buildings is strong. The economic benefits of building green invariably overcome the higher upfront capital costs in the longterm. In fact there has been an overall trend towards the reduction of construction costs associated with green buildings as the industry matures due to stricter international building codes and greater uptake of sustainable development (WGBC, 2013).
2.1.3. Lower operational costs Green buildings reduce long-term maintenance and operational costs. This benefit is directly related to reduced energy costs from heating, cooling, lighting and ventilation and reduced water consumption. Quantification of impact: studies on green building energy savings estimate reductions lie between 25%30% (based on LEED buildings in the US) or even 35%-50% (based on green buildings in NZ) (Heschong, 2003). Furthermore, a study by Kats in 2003 found that a 2% additional investment in construction costs yields savings of over ten times the initial investment, based on a life cycle of 20 years for 33 LEED-rated projects within the US. These cost savings come in the form of lower maintenance, operational, energy and water consumption costs and elss emissions. While the values below might not be accurate today, their relative weight is likely to be.
Below we present a list with the major arguments in favour of sustainability certification: 2.1.1. Price Premium Green buildings tend to have price premiums in relation to non-certified buildings. Studies have shown that rental rate premium often exist, and they come often in the form of higher rental rates. This is due to prospective tenants understanding the benefits of sustainable accreditation i.e. lower operational costs, enhanced marketability and environmental attributes (WGBC, 2013). Quantification of impact: A global study by the World Green Building Council across various types of accreditation cites price premium ranges between 0 and 30%. Furthermore higher levels of accreditation result in higher price premiums, particularly for LEED and Green Star (WGBC, 2013). It is important to compare this premium against the costs of certification from the same study, -0.4% to 12.5% which suggests market value premium is generally higher than the cost premium.
Source: Business Case for Green Building Report from WGBC (2013)
A relationship of interest is that, the more demanding the certification level the higher the level of savings achieved by the sustainable construction, as we can see in the graph below, taken from the WGBC research mentioned before.
2.1.2. Higher Occupancy Rates Green buildings often also have higher occupancy rates, providing owners with lower volatility and higher rate of return. In fact, in some markets where green buildings are more mainstream, the opposite is true; where non-certified buildings have lower rental and occupancy rates because they are not certified. This phenomena is called ‘brown discounts’. This results in a higher market value for Green Buildings. Source: Business Case for Green Building Report from WGBC (2013)
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02 | Literature Review 2.1.4. Because it is the right thing to do
2.1.4. Increase Investors’ Attractiveness
According to the 2014 Annual Report of the IPCC— Intergovernmental Panel of Climate Change in 2010 the Buildings Sector was responsible 18.4% of all the Greenhouse Gas Emmissions Worldwide (as shown in the graphic below).
The higher market values in terms of price premiums and occupancy rates of green buildings are attracting investors who see these investments as safer and with the ability to generate higher returns.
Source: 5th Assessment Report of the IPCC (2014)
Some of these investors are also becoming more focused on investing in Green Buildings by means of the creation of Green Building Funds. Most of these funds are in the US and European Market but they actively look for international opportunities.
Moreover, these buildings use intensively our resources: they are accountable for 40% of the world’s energy consumption and for the usage of 20% of the world’s available water. Without a strong international mobilization of all agents internationally in order to mitigate this issue global mean surface temperature is expected to increase 3.7º to 4.8º compared to pre-industrial times (the period before 1750), increasing the likelihood of harsh natural disasters and the rise of the overall sea level, which might have catastrophic impacts all over the world. According to this same report, for new buildings, the adoption of very low energy building codes is important and has progressed substantially. Moreover, there is robust evidence that recent advances in technologies, know-how and policies provide opportunities to stabilize or reduce global energy buildings sector energy use by mid-century. They argue that: “recent large improvements in performance and costs make very low energy construction and retrofits economically attractive, sometimes even at net negative costs”.
This higher interest from investors in sustainable investments can be seen by looking to the evolution of the number of sustainability indexes across time. 2.1.5. Sustainable Companies perform better A 2011 study by researchers at Harvard Business School and London Business School concluded that companies that voluntarily embraced a sustainable business culture over many years “significantly outperform their counterparts over the long-term, both in terms of stock market and accounting performance.” They used data for the US Market for a period of 18 years, dividing companies in two groups (“High” and “Low” Sustainability) with 90 companies app. each group. This finding suggests that developing a corporate culture of sustainability may be a source of competitive advantage the long-run.
2.1.5. Corporate Image and Prestige Value There are also said to be gains in terms of Corporate Image and Prestige Value for the companies investing in Green Certification, however these are hard to quantify and we did not find any research to date on this particular topic.
Source: “The Impact of a Corporate Culture of Sustainability on Corporate Behavior and Performance”, paper by Eccles et al.
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02 | Literature Review 2.1.6. Future Energy and Capital Cost Trends
2.2.1. Higher Upfront Costs
The business case for green buildings is further supported particularly as energy costs continue to rise and capital costs of green buildings continue to decrease (WGBC, 2013).
The major obstacle is related to cost. In fact, the cost of building green is significantly higher than the one from building a conventional building. For example: compressed wheat board is used as a green substitute for plywood, yet it costs ten times as much.
The case of rising energy costs is particularly evident in the graphic displayed below, created using IMF data on an index including oil, natural-gas and coal price indices. The upward trend tells us that in the future the gains of sustainability certification will be even higher than what they are today, as the same reduction in energy consumption in the future will be worth more to prospective buyers.
And by larger costs we mean not only the cost of the ‘green’ materials, but also the cost of searching for these materials, both financially and in terms of time spent. For these reasons, the adoption of green building methods has not been favourable to property developers. In page 13 we present a graph published recently by WGBC representing the distribution of cost-premiums across years according to different papers and researches. It is always worth to note that cost premiums tend to increase with the level of certification. A study on this ubject by Environmental Consultant Capital E in 2003 focused in office and school buildings found the overall cost premium for green buildings to be about 2%, averaging 0.7% for simple LEED-certified buildings, 2.1% for the LEED-Silver, 1.8% for the LEED-Gold and 6.5% for the one LEED-Platinium building. They also found that these costs declined as regional experience increased. Perception Gap regarding Higher Upfront Costs
2.1.7. Increased Health, Well-Being and Productivity Another reason stated in the World Green Building Trends SmartMarket Report of 2013 is improved health and productivity. Interestingly, in all countries assessed there were the top two most important social reasons to build green. Compared to 2008, when the percentage was 29%, as of 2013, 55% of firms rate greater health and wellbeing as the top social reasons for building green. 2.2. Why do companies do not certificate their residential buildings? After reading throughout the extensive list of benefits of green building, the reader is now probably wondering: if sustainability certification is that good, why there are so few green residential buildings in Brazil still? This section was done to answer this question and here we identify the major risks, barriers and obstacles for the construction of residential green buildings, and also do some comments regarding their relevance in our context. This section was highly based in the 2007 Research “The Green of US Investment Real Estate—Market Fundamentals, Prospects and Opportunities” from Andrew J. Nelson. We also based some of our work in the 2012 paper by Hwang a Tang called “Green Building Project Management: Obstacles and Solutions for Sustainable Development.
Interestingly, research has found that upfront costs of certification are not as high as real estate pratictioners tend to estimate it. Real estate pratictioners dramatically overstate the cost differential typically with a premium of 15%. In fact, as you will see in page 13, cost premiums are usually much lower, especially as green markets become more mature. The 2 studies we used to study this issue were both focused on LEED certificates in the US. 2.2.2. Lack of Awareness and Experience Nelson (2007) sights a lack of awareness and experience as being barriers to its adoptions due to the fact that green building certification, relative to traditional construction methods, is still a new concept. According to his research, although LEED certified buildings were in 400 cities in the US at the time of the study (2007), just 32 of these cities accounted for 40% of the buildings. The same is applicable to Brazil Green Residential Building Market. Furthermore, as green building is still in the early phases of the experience curve there is a lack of experienced professionals who have worked with green building certification. This amounts to a slowdown in the possible adoption of green building practices. This knowledge and experience takes time to build up, especially as it is often required from all parties involved in the building’s conception, design, construction and marketing. Traditional building methods still prevail when developers consider the risks involved in going green (Hwang and Tan, 2012).
These factors will now be presented. 11
02 | Literature Review 2.2.3. Lack of Data and Green Product Information
2.2.7. Timing of Certification
A lack of substantial data related to the costs and benefits of green certification creates institutional uncertainty when deciding to go green or not. Like Roger’s diffusion of innovation curve, the early majority want to wait until the early adopters have tested the water, they require the certainty that pursuing green certification is worthwhile. Developers have to hire specialised consultants which adds to their costs. Furthermore, given the lack of information in the field regarding green materials, if a material or process is used that is not green, it could deny the developer from obtaining certification, or indeed it would cost money to replace the material for the certified type (Hwang and Tan, 2012).
When building a green unit companies need to apply right from the conceptual phase of the building’s lifecycle sustainability principles, yet they do not receive the certification until much later.
2.2.4. Misalignment between owner costs and tenant benefits The incentive for the owner to build green is not there (if we consider that in most cases the owner does not occupy the building). The benefits are reaped by the tenant (energy and water savings and indoor environment) (Hwang and Tan, 2012). This helps explain why green buildiong adoption among commercial and institutional clients has been greater. They tend to own a great share of their facilities as compared to other types of tenants, which makes these sectors better positioned to internalize the benefits from green buildings (Nelson, 2007). 2.2.5. Higher Payback Periods The pay-back period for the costs of certification sometimes go beyond the average real estate investment period of five to ten years (Nelson, 2007). That is to say, the owner would be required to hold on to the building for longer than average to reap any financial reward from green certification - and this has driven investors away from green certification as they look to buildings with shorter payback periods.
2.2.8. Incentive Misallignment This mostly applies to non-residential buildings but it’s important to note: leasing structures are often agreed so that the owner pays for energy and water, which means the tenants have no incentive to monitor their energy and water use, which may outset part of the lower energy consumption costs. 2.2.9. Lack of Political Support & Incentives In the previously stated report of the World Green Building Trends SmartMarket Report of 2013, the Lack of Government Support and Incentives was rated by respondents as the second most important challenge in Brazil (48%). Especially in Brazil, where only 35% of the firms report regulation, this result is expected. Still in terms of regulation, only 25% of Brazilian firms report governmental tax-incentive initiatives for green building. 2.2.10. Lack of Public Awareness In the same report stated just below this factor was rated as a key challenge by 43% of the Brazilian Firms. We can read in the report that this suggests that “educational resources and marketing materials are needed in these countries”.
2.2.6. Complexity in Green Building Certification As green building certification evolves, it becomes more complex. The effect on developers is uncertainty in the processes and requirements of certification. To adhere to the procedures requires extra time and effort and many developers do not see the benefits to be had from going through this complex environment. To supplement their analysis, Hwang and Tan (2012) carried out a survey of managers of local green building construction projects in Singapore to understand what obstacles they encountered along the way. The survey was sent to 101 managers and professionals listed under BCA’s Certified Green GMM and GMP Scheme, of which 31 responded. According to the results, the top five obstacles managers cited were: High cost premium, Lack of communication and interest amongst project team members, Green building practices are costly, Lack of credible research on the benefits of green buildings and Lack of expressed interest from client and market demand.
Figure 4 — Green Buildings are more expensive
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03 | The Green Building ROI in Brazil 3.1. Introduction
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3.3.1. Sales Price Premium of Certification
e have just seen and quantified the main pros and cons of sustainability certification across the world. In this section we use econometric analysis to estimate the average impact of sustainability certification on the prices of apartments in the city of São Paulo. As far as we know, this is the first study in Brazil using hedonic regression modelling to estimate price premiums of certification. We based much of our methododology in the paper “The Impact of Energy Performance Certificates on the rental and capital values of commercial property assets” by Franz Fuerst and and Patrick McAllister. 3.2. Abstract The focus of this research is to study the effect of sustainability certification on the prices of units in residential buildings in the State of São Paulo. The study is based on a cross-section of 483 residential property assets. We use hedonic regression procedures to estimate the effect of AQUA-HQE certification on the prices of these units, controlling for location and building characteristics. We find evidence of a statistical significant relationship between certification and price: on average, ceteris paribus, having a certificate increases the price per square meter by 6%. This finding is in line with price premiums found in previous literature. This provides evidence in favour of the argument that sustainability certification is already having the positive effects on market values, in relation to buildings that only follow basic regulation. 3.3. Literature Review For this section, we used a graph of the “Business Case for Green Building Report” (2013) from the World Green Building Council which studied 30 papers/ publications analysing the effect on sale price of green building certifications. This graph will give us an idea of the range of sale price premiums and, afterwards, will allow us to locate our estimation to the Brazilian market in it. Moreover, in the same report we also find a similar graph regarding cost premiums of certification which analysed 73 papers/ publications published between 2000 nad 2012. We also decided to put it in our report since only with information on costs can we take conclusions regarding the Return On Investment. From complementar literature review we conducted we found that most of the research conducted to date is focused on commercial buildings and uses LEED & Energy Star Certification Data. Besides, almost all the studies we found are focused on developed economies where green building certification is more mature and allows for the use of larger samples. Thus, there should be caution in comparing directly the results from the graphs we present and the ones we got from our analysis.
Source: Business Case for Green Building, WGBC (2013)
In this graph we can see that across the wide range of studies comparing sustainability-certified buildings to simply law-compliant buildings that a majority of them lies between the sales price premium range of 0 to 30%, even though we should note the presence of outliers. For residential buildings, the range goes from –2.5% to 27%, with only one study showing negative sales price premiums. Again, the higher sales price premiums tend to be found in studies focusing their research on building samples with higher sustainability ratings. This might be true because these buildings have both higher costs than their counterparts but are also because they are more valued by prospective customers. It should be noted that one of the studies found discounts as low as 13% for buildings certified with the lower levels of performance according to the NABERS accreditation system. 13
03 | The Green Building ROI in Brazil 3.3.2. Cost Premium of Certification
3.3. Methodology We have seen before that there seems to be a substantial list of advantages of sustainability certification. One of the most commonly cited of these advantages is that certification creates price premiums which can be explored by sellers. Thus, from an econometric point of view what we want is to isolate the effect of sustainability certification on the price per square meter of residential units. This requires us to identify an appropriate certification benchmark and to use a method that allows us to measure the contribution of a specific attribute in price differences across units. 3.3.1. An Appropriate Benchmark As we have seen in previous sections, there are many available types of sustainability certification in the market. For the purpose of our study we decided to study the AQUA-HQE certification as this is the one that allows us to use the larger number of observations and the only certification to which there is a statistical significant sample of observations. This is also the type of certification that is more used here in the case of residential buildings, which gives iurther credibility to our study. On the other hand, most of the papers we used in the literature review took LEED as a benchmark. This may make comparisons more difficult and less valid. 3.3.2. Measuring contribution of specific attributes So we can answer the question “Does sustainability certification have any effect on the market value of units in residential buildings?” we need information on 3 sets of variables associated with these assets:
Source: Business Case for Green Building, WGBC (2013)
As for cost premiums, we can see that the actual cost premiums lie usually in the 0%-12,5% range. In the report we can read that “the results from these studies, published between 2000 and 2012, are based on a wide variety of building types and present data from the United States, United Kingdom, Australia, Singapore and Israel”. If we focus only on residential buildings we can see that the extra-costs usually fall in the range 0%-3% for three of the studies anaysed, with an outlier registering a cost-premium of 12.5%. An importat note is that all these studies were done in relation to simply code-compliant buildings. However, most of these countries have strong Green Building Councils that advocate and drive forward the national green building agendas. This makes legislation for code-compliant buildings more demanding and may narrow the gap between the cost of a code-compliant building and a certificated. green building. Since Brazilian legislation has still low emphasis in the green agenda, the actual cost price premiums that will be found may be higher. This seems to be the case, since inudstry experts in Brazil claim the actual cost premium to be between 3%-5%
1. Actualized Prices Per Square Meter 2. Sustainability Performance/ Certification 3. Other variables that influence sale value regarding building characteristics and location controls The state-of-the-art method to measure what customers actually pay (not what they say they would be willing to pay) consist of modeling asset prices as dependent on the assets attributes described above. As stated in the paper that served as main reference for this research (Fuerst and McAllister, 2011): “econometric hedonic modelling is used to identify and quantify the price effect of each variable”. Under such hedonic regression, sustainability performance is included as one of a number of attributes in the model specification so that its effect on price can be isolated and measured. The authors further argue: “the robustness of any modelling exercise is dependent on the data inputs in terms of their scope (or coverage) and scale (or sample size).” The next part of this section is dedicated to this robustness check, explaining data, definitions and offering some descriptive statistics in matters of their scope and scale.
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03 | The Green Building ROI in Brazil 3.4. Data and Definitions This study is based upon a cross section of 400 residential property assets in the city of São Paulo. From these, 333 have Even as incorporator and 67 have Odebrecht. All values are current as of March 2014 and were obtained through market research.
Number of Dorms and Suites
Parking Slots per Unit
Field Area
Within this sample we have 73 different units in buildings with AQUA-HQE certification and 327 units in buildings without such a certification, all within the city of São Paulo. It is important to note that, despite all observations are located in the same region, this sample is small. This might hinder our ability to find statistically significant results.
Total Area
Number of Units
Number of Floors
Natural Gas in the Pipeline
Dummy Variable if beauty facilities
We had a considerable amount of asset-specific variables from which to draw information. We will now name these variables and provide their respective descriptive statistics.
Dummy if Lanhouse
Pool for Kids
Dummy if Grass Court
Dummy if Rest Room
Dummy if Bar
3.4.1. Variables pertaining to Market Value
Price per Square Meter actualized using INCC
Price per Square Meter actualized using CUB
Price per Square Meter actualized using IGPM
3.4.5. Summary Statistics of the Dataset
3.4.2. Variables pertaining to Certification
AQUA-HQE Certification (Yes or No)
3.4.3. Controls
Average Income in the Neighbourhood (Census 2010) in thousands of R$
Number of people in the Neighbourhood (Census 2010) in thousands
Value of the Dollar at the Launch Date
9 Dummy Variables for Launch Year (2006, 2007, 2008, 2009, 2010, 2011, 2012, 2013, 2014)
Real GDP Growth in the Launch Year
Basic Unit Construction Cost in the Launch Date
Distance to Av Paulista (in km)
3.4.4. Variables pertaining to the building’s characteristics
Launch Date (Year)
Delivery Date (Year)
Age (in years)
4 Dummy Variables for Standard (Medium-Low, Medium, Medium-High and High)
Number of elevators in the building
Number of towers
Incorporator
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03 | The Green Building ROI in Brazil 3.4.6. Comments of Summary Statistics The table presented just before provides us with some intuition already regarding major characteristics of certificated and non-certificated buildings. Relatively to noncertificated buildings, certificated buildings are more expensive, have less towers, less elevators, less units, less dorms, are smaller, have less floors, are more exclusive, have less suites, less parking slots, less grass courts and other equipment/ facilities such as Lanhouse, Gourmet Areas, Pool for Kids, Gym, Pool for Kids and Playground. Finally, sustainable buildings are also more exclusive with most of the buildings with such a certification being High or Medium-High Standard. 3.4.7. Summary Statistics (part 2)
Again, the small size of the samples across years may compromise our ability to find statistically significant results. Our Log-Linear hedonic price model takes the following form:
Where Log(Price) is the natural log of the unit sale price per square meter, Ai is a vector of explanatory physical characteristics of the unit, Bi is a vector of control variables for time, location and structural characteristics of the economy and the last element is a random error and stock disturbance term that is expected to take the form of a normal distribution with a mean of zero and a variance of sigma squared. To account for year-fixed effects we have dummy variables for each of the years in which the buildings were launched. We also tried to make some interactions between certification and these dummiers, but there was not a statistically significant number of observations. 3.5.2. Drawbacks The data and methods we are using have a couple of drawbacks we want to highlight and that we should take into account when interpreting the results we will present afterwards.
3.4.6. Comments of Summary Statistics (part 2)
The first is the fact that the cross-sectional samples were not randomly chosen from one year to the other (we used information only from CCDI competitors).
In the table above we present summary statistics but However, the sample seems to be quite this time for the relevant control variables we are representative of the population of residential using in our regression analysis. buildings built from 2006 to 2014, as we found no Interestingly, certificated buildings are not much evidence in previous research that building closer to the Central Business DIstrict (Av Paulista) characteristics and their effects on price differ from than non-certificated buildings, but they are in company to company, once all locational and physical attributes are accounted for. neighbourhoods with much higher average income. They are also in slightly more populated neighbourhoods and they are all very recent. As we can see from the table above, over 94% of the certificated buildings were only launched in 2012, 2013 or 2014. The trend for non-certificated buildings in our sample is the opposite. 3.5. Model Specification
Moreover, in a regression analysis when we find a statistical significant effect between, lets say, certification and price, it means that there is no statistical evidence against the fact those 2 variables are correlated. So we are at most proving that such a relationship is possible for a given confidence level, not that is necessarily true.
Finally, even though we are considering all AQUA-HQE certificated buildings in S達o Paulo the size of the sample is quite small when compared to other more Hedonic regression modelling is the state-of-the-art mature certification markets like the US. methodology to decompose the price of a given asset in terms of the contribution of its different attriibutes. To avoid omitted variable bias that is always an issue in this type of regressions we included several Since the data we have goes from 2006 until 2014, we location controls, year dummy variables to control for are required to use Pooled OLS Estimation. This is the year fixed effects and other variables such as the CUB leading method of estimation when we have a the real GDP Growth. independent cross sections of different samples In the next pages we will present the results of the obtained in different time periods. regression and interpret how the different variables The size of our sample is 39 for 2006, 76 for 2007, 49 are impacting price per square meter of residential for 2008, 24 for 2009, 35 for 2010, 64 for 2011, 35 buildings in the city of S達o Paulo. for 2012, 63 for 2013 and 15 for 2014. 3.5.1. Introduction
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03 | The Green Building ROI in Brazil 3.6. Results 3.6.1. Impact of sustainability certification The table with the regression results is presented on the left-hand side. We used 2 model specifications: one has the dummy variables for the years (often used in pooled OLS Estimations) and the other does not. We decided to use the 2 specifications because the effect of certification changes significantly with the decision to include or not the years dummy variables. Our regression using model specification number 1 is able to explain 90.53% of the variability that we find in the price per square meter of the units (actualized accordingly to INCC). The results are consistent regardless of whether we actualize the prices per square meter using INCC, IGPM or CUB. The variable that is the focus of our analysis, certif, which measures whether the unit has certification or not, has a positive sign. We can say that, on average, ceteris paribus, the sales price per square meter of a residencial unit in a sustainability-certificated building is 11% higher relatively to a unit in a noncertificated building. When we do not account for year-fixed effects the size of the coefficient of the variable certif is significantly lower. A possible reason for this might come from the fact that most of the certificated buildings are post 2010, a period characterized by the lower dinamism of the Real Estate Market in Brazil, when compared to the period of 2010. Thus, in the second model, certification was probably capturing part of the effect of that lower dinamism and so the coefficient was smaller. When running the regression we computed heteroskedasticity-robust standard errors, so our estimates would be robust to heteroskedasticity. We also did another robustness check by running another regression with more 83 observations of residential units outside São Paulo, and the effect of certification remains statistically significant and with a relatively large coefficient. If we run the regression taking into account only the units either only from Even or from only Odebrecht, certification loses statistical significance, but for the former its still significant at a 10% significance level and for the latter still significant at a 1% significance level. This loss of significance seems to be more linked to the fact we are dealing with small samples. 3.6.2. Impact of other variables Regarding the other variables we can say that: As the number of towers increase the price per square meter tends to decrease (because to build more towers its needed more space, and to have more space companies need to go further away from the center, where prices of fields per square meter are significantly lower). On average, c.p., adding one further tower is associated with a decrease in the price per square meter of –0.39%.
Adding dorms is associated with a negative effect on the price per square meter (explained by the fact that appartments with more dorms are usually bigger and bigger apartments have a lower price per square meter relatively to smaller ones). However, the sign of dorms2 (dorms squared) tells us that the more dorms we had the less negative is the effect on price. The sign of parking slots has also the expected sign. On average, one further parking slot per residential unit is associated with na increase in the price per square meter of 6.76%. 17
03 | The Green Building ROI in Brazil 3.6.2. Results: other variables (continuing) The variable total area is not significant, once we account for all the other variables. The variables related to units in the building are positive and statistically significant, but their coefficients are very small. Regarding standard the results are also meaningful: on average, a medium standard building is 6.5% more expensive than a medium-low standard building, a medium-high standard is 17.7% more expensive and a high standard is 22.8% more expensive. Having Natural Gas in the Pipeline also seems to be associated with a price per square meter that is 6.53% higher in comparison to buildings without such na infrastructure. Then we have 4 variables—woodstove, beauty space, bar and LanHouse—with coefficients larger than expected. They have an impact on price of -9.2%, -15.4%, 12.9% and -10.8% respectively. They are probably correlated with another variable not included in our regression that is very important to explain price, which would also explain why 2 of these variables have a negative sign. The same reasoning applies to other variables such as playground, gourmet area, gym and barbecue, which have an impact of –4.5%, +5,8%, -4.9% and –3.7% respectively on price. Field Area is very significant and its coefficient has a negative sign as expected. On average, c.p., when field area goes up by 1000 square meters the price goes down by 0,4%. Our three location controls are very significant also: on average, c.p., when income in the neighbourhood goes up by R$ 1000, the price per square meter goes up by 4,63%; moreover, when the number of people in the neighbourhood goes up by 1000 people the price per square meter goes down by 0,02% (only significant at the 10% significance level); finally, when the distance to Av. Paulista increases by 1 kilometer, on average, c.p., the price goes down by 0.4%. We used this last variable as location control and not regional dummies because the huge majority of the buildings in the sample, even though built in São Paulo City, were evenly spread in few quantities by many different municipalities. The variable Pool for Kids is not significant. The variable Grass Court is statistically significant at a 10% significance level. On average, a unit in a building with grass court is 5.6% more expensive. The variable of real GDP growth is only slight significant at a 10% confidence level. It has a negative sign, which might suggest some kind of countercyclical behavior between prices of residential units in the city of São Paulo and Brazilian GDP. Also of interest is the CUB, which, designates the basic costs of construction and is (naturally) strongly associated with price.
On average, c.p., when unit basic construction costs go up by R$ 1000 the price of the building increases on average, c.p., by 77.78%. Such a strong coefficient was expected since we are speaking of na index translating the basic costs of construction for the Southeast of Brazil. Finally, we found the year dummy variables to be statistically very significant. On average, c.p., buildings launched in 2006 or 2007 have a price per square meter 17.73% lower than buildings launched in 2010 or 2011. 18
03 | The Green Building ROI in Brazil 3.6.2. Results: other variables (continuing) For buildings launched in 2008 or 2009 this value is –13.83%% and for buildings launched in 2012, 2013 or 2014 this value is –6.88% (though only significant at a 10% significance level). Overall, our regression seems to be a good fit and the coefficients and its signs are in most of the cases relatively intuitive. The last variable that is important to analyse is Field Area. As expected, the higher the field area the lower is the price per square meter, as larger fields are located outside the more central and crowded areas. On average, c.p., when the size of the field increases by 1000 square meters, the price per square meter goes down by 0.1%. In other trials of this regression we included other variables, which we removed later in the cases we found them not to be statistically significant, once other variables were accounted for. 3.7. Conclusions From this regression analysis we are able to conclude that there is no statistical evidence against an effect of sustainability certification on price in the order of 11%. This value is completely in line with the sales price premiums we found in the literature review. It is possible that there are higher price premiums of certification for first movers, but the literature also provides some evidence that cost premiums are also larger in the first stage. However, some notes of caution: There seems to be ommitted variable bias in some of the variables we have seen before, namely beauty space, which probably does not have the effect on price that its coefficient is showing. This is likely the result of having that variable capturing another variable we did not control for that exerts a large influence on price. This may cause some concern regarding whether the variable “certification” may also be suffering from endogeneity. Still, the estimate we found is in line with the ones seen in previous literature and we are already controlling for diverse locational and time factors. Also, we are not sure if this is the effect of “having certification” or the effect of the attributes of the certification. It is likely that both matter, but with the data we had available we could not answer this question. Further research is needed. Finally, we have a quite lower number of observations in relation to what would be desirable, but in all the regressions we performed certification showed consistently a statistical significant effect on price. Furthermost, having to work with a small sample is the price to pay for doing such a research in such an initial stage of the Brazilian Green Residential Buildings Market. To conclude, regardless of its faults, we believe this regression analysis shows it exists a good market potential for the construction of green residential buildings.
Figure 5 — Distance to Av Paulista (above) is very significant
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04 | Reccomendations In this section of our report we would like to write down our reccomendations to companies considering entering the green residential building market in Brazil, with a special emphasis in SĂŁo Paulo, where most of our research was done.
Your company can use this high bargaining power to take some of your suppliers to adopt sustainable pratices. By doing this, you are standing out from your competitors in the sense you are assuming a commitment to make a green building supply chain, beyong a Green Construction Company. And you are 4.1. Enter the Market for Green Residential Buildings also creating the conditions for a more competitive Our research found evidence of a significant sales (and less costly) green building market. price premium in Brazil of AQUA-HQE certificated 4.6. Start as soon as you can buildings of about 10%. According to out literature review, cost premiums very rarely get to that value As sustainable residential buildings become more and even taking into account that cost premiums may mainstream it is likely that price premiums start to be larger for a less mature market like Brazil the decrease. And remember that some of your probabilities that the overall Return On Investment is competitors are already ahead of you. positive are large. 4.7. Consider Entering the Retrofit Market Moreover, the trend is for legislation to get more demanding regarding sustainability requirements. By There is one particular green building market segment making sure your buildings are built in a sustainable with very high growth potential. A building does not away you are getting ahead of the learning curve in need to be new to be efficient and there is an increasing trend of building owners wanting to regards to other companies. transform their old buildings in models of 4.2. Run a couple of High-Standard pilot projects sustainability. As far as we know, no construction before hand company in SĂŁo Paulo entered this market so far. Before committing to only build sustainable residential buildings run a couple of pilot projects focused on high-standard buidings where price premiums are larger as a way to ofset larger initial cost premiums and get ahead in the learning curve.
4.8. Do not expect immediate returns
The ability to charge higher sales price premiums is directly linked with a company’s ability to communicate the value of sustainability. When a few years ago the Company Even started to build sustainable buildings they made a public committment and generated a media buzz around it.
4.10. Communicate the Outcomes
across the Supply Chain
4.12. Align sustainability with payroll
Construction Companies have a high bargaining power relatively to many of its suppliers, as they order in large bulks and there is plenty of competition for many of the resources they look for (ex. concrete).
Use financial incentives to promote sustainability practices, as beyond everyhting we said so far, this signals your committment is serious and your efforts are credible.
Investing in sustainability takes time to take effect. Bear in mind the Harvard Business School and London Business School Research we presented before that investing in sustainability seems to payoff, but only in 4.3. Train your sales personell to be able to sell the the long-term. In fact, for that research, only after 5 benefits of certification years did the performance of low-sustainability and high-sustainability companies started to diverge. During the course of our research we called a few times incorporator agencies responsible for selling 4.9. Monitor and Evaluate the Outcomes of a units in sustainable buildings. Most of the sales Sustainable Strategy representatives knew that AQUA-HQE was a sustainabilty-certification but approximatey half of Make sure you measure the impacts of assuming a them were not able to quantify its benefits. Make sure committment to make all redidential buildigns your sales team knows what sustainability sustainable in terms of, for example: quanity of carbon certification and provide them the data and emissions avoided; decrease in energy consumption relatively to normal buildings; number of suppliers in information they need to sell it properly. the supply chain that also adopted afterwards 4.4. When ready, make a public committment sustainable practices; etc. Measure the outcomes so you can communicate them and show shareholders, employees and customers that is worth the effort to be sustainable. That it is a reason to be proud of. Work on your ability to tell good sustainability stories as they will raise We believe that this public committment is important awareness and build a market base. as it signals to the employees and the market as a whole that your company values sustainability and is 4.11. Be systematically sustainable ready to walk the talk. Try to associate this public Being sustainable goes well beyond meeting committment to the launch of a particularly different deadlines, it is really about changing processes, green residential building, and use this chance to changing the way people make decisions and generate media buzz, invite green investors and other generate new models of doing business. Invest time to stakeholders. make sure your people naturally think of 4.5. Use your bargaining power to push sustainability sustainability in their day-to-day decisions.
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05 | Final Remarks & Bios We wanted to thank once again for everyone who made this report possible. It was a privilege to be part of a study which, if communicated, can potentially contribute so much to the change of mindsets, production and consumption standards we so desperately need. If you have any comments or remarks feel free to email us at: eddie.dostine@gmail.com gordonmurphy1@gmail.com joao.rafa.brites@gmail.com Bios of the authors Edward Dostine is a CEMS Masters in International Management Candidate at (FGV, NOVA, USYD). Having completed his Environmental Science Degree in 2011 at the University of Sydney, Edward moved his focus towards business management in his postgraduate studies and is engaged in opportunities regarding the convergence of science and business worlds. Having interned in the innovation department at Deloitte’s Sydney office and most recently at the Google-backed, Silicon Valley start-up ‘Uber’, Edward is known for his ability to utilise data analytics to developing client-specific insights and implement bespoke solutions.
Gordon Murphy is a CEMS Master in Management student at University College Dublin and Fundacao Getulio Vargas. He completed his undergraduate degree in Business and Spanish from the University of Manchester in 2013. His professional experience includes internships with Walmart in Santiago, Chile and Vita Coco (which imports coconut water from Brazil into Europe) in London, UK. His main commercial interest is business development and this has led him to securing a role working with Pernod Ricard in Angola starting in September 2014. In his personal life he enjoys a variety of sports from rugby to surfing and likes to read in his down time.
When he isn’t glued to his MacBook, he can be found frollicking on the beaches of Gauruja or mumbling his way through Portuguese class.
João Rafael Brites is also a CEMS Masters in International Management Candidate. He completed his Economics Science Degree in 2012 at Nova School of Business and Economics, in Lisbon, and moved towards a Masters in Economics at the same university in 2012. In this Masters Degree he achieved top grades in courses such as Econometrics, Macroeconometrics, Public Economics, Macroeconomic Analysis, among others. From September 2013 to February 2014 he was invited to be teaching assistant at this university. Currently, besides working on this research and on his Masters, he is doing an internship at the Amazonas Sustainable Foundation and teaching break-dance to kids from the favela of Heliópolis, in São Paulo. Due to its outreach work with youth in Portugal through the Transformers Project he was selected as British Council Global Changemaker in 2009 and was one of the representatives of world youth at the 2010 World Economic Forum, in Davos. He is part of the Sandbox Community and the Global Shapers Community of the World Economic Forum. 21
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THE END OF HOW IT USED TO BE THE BEGGINING OF GREEN BUILDING 22