en-us Wed, 31 Aug 2011 01:00:00 PST Wed, 31 Aug 2011 01:00:00 PST webmaster@tririga.com (TRIRIGA Webmaster) 10 http://www.tririga.com The Global Leader in IWMS IWMS 2012 TRIRIGA INC. Wed, 31 Aug 2011 09:00:00 PST communication@tririga.com (TRIRIGA Communications) http://www.tririga.com/information-center/infocenter-insights?aid=72 http://www.tririga.com/information-center/infocenter-insights?aid=72 The U.S.–based Financial Accounting Standards Board (FASB) and the European–based International Accounting Standards Board (IASB) are jointly preparing a new standard for lease accounting. The primary objective of the new standard is to recognize all leases as obligations that should be included on company balance sheets. Under current lease accounting rules, leases categorized as operating leases are not included on the balance sheet. While the new lease accounting standard has not yet been issued, much of what is likely to appear in the new standard from a tenant/leasee perspective is detailed in a Exposure Draft released by FASB in August of 2010 and subsequent decisions documented on the FASB website.¹ Although the same fundamental principals apply to the landlord/lessor side of new lease accounting standard, the joint–boards will focus attention on this aspect of the standard in the next months. Due to the substantive changes since the last exposure draft and the pending changes for lessors, the joint boards have made a decision to re–expose the standard for comments in the second half of 2011. The last Exposure Draft issued in August 2010 resulted in 760 letters with comments submitted by interested parties. The boards anticipate that many of the concerns raised as a result of the last exposure draft will have since been resolved, but they determined that it will be important to re–expose the standard to validate concurrence with the interested parties. Why is a new lease accounting standard needed? Presently, operating leases do not appear on company balance sheets even though, for many companies, these lease obligations are the single biggest category of long–term liabilities. This creates a problem because balance sheets are supposed to provide a snapshot of a company’s financial position. Ideally, the balance sheet shows what a company owns and owes. Investors, lenders, customers and others rely on the balance sheet as a primary data source to understand the financial health of a company. The absence of operating leases on the balance sheet distorts financial statements in today’s economy where many companies employ a workforce of knowledge workers who predominately work in leased space. Failing to account for these lease obligations on the balance sheet leaves a big gap in the complete disclosure of a company’s financial position. And, while it is true that companies are required to include information about their minimum lease obligations in the notes to their financial statements, this information is insufficient to provide investors with a complete picture of actual liabilities. How will companies transition to new lease accounting? The transition rules are not yet finalized, but the accounting boards have suggested a course of action. On the date a company adopts the new standard, operating leases would all be added to the balance sheet as if they were new leases on that date. Although existing capital leases will already be on the balance sheet, an adjustment may be needed to account for renewal options where the company plans to exercise renew options within leases. In addition, for those companies prepared to adopt the new accounting standard prior to the Effective Date, FASB and IASB may permit early implementation. The impact on real estate The new lease accounting standard will increase the contribution and profile of corporate real estate in the financial reporting of companies. The size of lease obligations will become very visible since leases will have their own line items among the other assets and liabilities on the balance sheet. The size of lease obligations will be very large for many companies. Retailers and restaurant–chains will post some of the largest lease obligations. Some of these companies will add more than US$10 billion of liabilities to the balance sheet, according to estimates from the U.S. Securities and Exchange Commission (SEC). The size of lease obligations, that non–retail companies post, although smaller than that of retailers, will be eye–opening to investors. While it is widely understood that many retailers lease a significant percentage of their real estate, the lease obligations of non–retailers have historically attracted little attention. Companies with a large number of knowledge workers sitting in leased offices will be particularly affected by the new standard. Several industries will add more than $1 billion of obligations to their balance sheets (see Figure 1). No matter the size of the company, the value of leases added to the balance sheet will be surprising to many. For many companies, lease liabilities will exceed those of any other type of long–term liability on the company balance sheet. Figure 1: Impact of front ended lease cost for selected sectors—S&P 500 only The spotlight on leases will extend to those who are involved in managing or accounting for the real estate portfolio. As lease obligations become more visible, investors will begin to ask questions about how lease obligations are managed and company executives will direct these questions to corporate real estate departments. The new attention paid to corporate real estate will deliver a mixed blessing. The questions asked by investors and executives may be hard–hitting and difficult to answer. At the same time, the corporate real estate function will gain new–found respect from senior executives and some corporate real estate executives will be included in top strategic discussions related to company cost–structure and profitability. Moreover, those involved in corporate real estate will find a host of new responsibilities and challenges including the following: Rethinking strategy Reformulating budgets Communicating the implications of the new accounting to stakeholders Creating and managing processes to comply with the new standard. Prepare for the new lease accounting standard In the near term, to prepare for the new lease accounting standard, organizations should assess the completeness of their lease inventory. The real estate and asset management groups should work with business units and other functions to identify missing leases and add them to the inventory. Organizations should review the structure of information in the lease databases and gauge to whether an upgrade is required to track the additional data required to comply with the new lease accounting standard. Click here to view and download the white paper, “Action plan to prepare for the New Lease Accounting Standard.” TRIRIGA 10 delivers the real estate management software that your company needs to track existing leases and assess lease inventory. TRIRIGA is also currently enhancing its lease accounting functionality to track the additional data required to comply with the new lease accounting standard. ¹ http://www.fasb.org/cs/ContentServer?c=FASBContent_C&pagename=FASB%2FFASBContent_C%2FProjectUpdatePage&cid=900000011123 Tue, 09 Aug 2011 09:00:00 PST communication@tririga.com (TRIRIGA Communications) http://www.tririga.com/information-center/infocenter-insights?aid=71 http://www.tririga.com/information-center/infocenter-insights?aid=71 Executive Order (EO) 13514, “Federal Leadership in Environmental, Energy, and Economic Performance,” was signed by President Obama on 5 October 2009. This Executive Order builds upon and expands the energy reduction and environmental requirements of EO 13423. The goal of EO 13514 is “to establish an integrated strategy towards sustainability in the Federal Government and to make reduction of greenhouse gas emissions (GHG) a priority for Federal agencies”.¹ EO 13514 compels Federal agencies to measure, manage, and reduce energy use and environmental impact. Under EO 13514, Federal agencies are required to prepare and update a Strategic Sustainability Performance Plan (SSPP) that includes goals to reduce energy, carbon, water, and waste, and outline planned actions to achieve those goals. These plans must align with the White House goals to reduce Federal direct emissions (Scope 1) and indirect emissions from purchased energy (Scope 2) by 28 percent, and reduce other indirect emissions (Scope 3) by 13 percent by 2020, from a 2008 baseline. While each of the Scope 1, 2, and 3 GHG sources play an important role in reducing an agency’s GHG emissions, buildings are, by far, the greatest contributor of GHG emissions for virtually every agency. For this reason, reducing the energy use from buildings provides the cornerstone of the strategic sustainability plan for most agencies. This objective is especially difficult for agencies that have plans to expand over the next decade. Section 2 of EO 13514 outlines the goals for agencies preparing and implementing their Strategic Sustainability Performance Plans. In sub-paragraph (g) the EO stipulates that agencies shall: Implement high performance sustainable Federal building design, construction, operation and management, maintenance, and deconstruction including... managing existing building systems to reduce the consumption of energy, water, and materials, and identifying alternatives to renovation that reduce existing assets’ deferred maintenance costs; when adding assets to the agency’s real property inventory, identifying opportunities to consolidate and dispose of existing assets, optimize the performance of the agency’s real-property portfolio, and reduce associated environmental impacts. As agencies investigate strategies to simultaneously balance the need for additional space with the need to reduce energy consumption and GHG emissions, they must also consider the lifecycle return on potential investments. Agency actions must be prioritized based on the combination of environmental, economic, and social benefits. Optimized investments in energy efficiency and other sustainability projects under EO 13514 requires capabilities to measure your agency’s energy and environmental impact, analyze financial and environmental benefits of sustainability investments, and evaluate short and long–term capital planning scenarios. Strategic Facility Planning analyzes supply (existing and proposed facility inventory) and demand (agency program needs) to optimize facility utilization and reduces environmental impact. To provide support for core agency goals and initiatives and meet the objectives of EO 13514, leading agencies utilize a decision support process known as Strategic Facility Planning. Within this process, facility planners establish two-to-five year plans focused on an entire facilities portfolio of owned and/or leased facilities as strategic stepping stones toward future goals such as those defined in an agency SSPP. Implementation of strategic facility planning starts with the collection and compilation of critical agency and facility asset information, including objectives, goals and future space requirements. In the context of EO 13514, most agencies have collected core facility information required for the 'comprehensive GHG inventory' and established SSPP plans. Facility planners build on this core with forecasts of program space needs and performance metrics to understand the space demands and their impact on facility performance over time. Once requirements have been gathered and impacts understood, facility planners explore what-if scenarios to develop comprehensive facility plans that align with core agency strategies. Scenarios are evaluated and scored based on their fit with planned financial, portfolio, environmental and operational targets. EO 13514 is not just a planning exercise. Environmental goals are specified for many of the objectives, therefore approved scenarios must be moved into execution through real estate transactions, new construction, renovation, consolidation projects and implementation of environmental opportunities. For agencies that plan to expand or consolidate and meet the goals of EO 13514, Strategic Facility Planning delivers a high-value planning environment to explore and identify opportunities to consolidate and dispose of existing assets, optimize the performance of the agency’s real-property portfolio, and reduce associated environmental impacts. IWMS: A solution for Strategic Facility Planning and EO 13514 compliance Due to the number of facilities, spaces, employees/consultants and the complexity of maintaining the volume of data across mid– to large–sized agencies, effective organizations understand the need for enterprise–class software to manage their combined space management and environmental programs. Best–in–class agencies use an Integrated Workplace Management System (IWMS) to plan and execute their space management and environmental programs to optimize space utilization, reduce cost, comply with government regulations and assure the best use of mission-critical people, facilities and equipment. TRIRIGA's integrated suite of products deliver solutions for EO 13514 compliance TRIRIGA Facilities TRIRIGA Facilities provides advanced space management features to increase space utilization, manage moves and changes, and reduce occupancy costs. Integrated AutoCAD® and MicroStation® tools and interactive web-based floor plans provide bi-directional links and visual management of facilities, people and organizations. Click here to view a 2 minute video now. TRIRIGA Strategic Facility Planning (SFP) TRIRIGA SFP delivers the industry’s most advanced facilities planning capabilities to accelerate the understanding of core agency demands, simplify complex planning analysis and streamline implementation of facilities plans. Click here to view the whitepaper, “How TRIRIGA SFP meets IFMA's Strategic Facility Planning Process: An Analysis” TRIRIGA Real Estate Environmental Sustainability (TREES) TRIRIGA TREES delivers the environmental sustainability software that your agency needs to lower energy costs and generate higher savings from carbon reduction projects. Powerful, flexible and easy-to-use features identify carbon intensive facilities and processes, analyze financial and environmental benefits of environmental sustainability investments, and automate carbon reduction actions. With TREES, your organization streamlines carbon accounting and environmental investment analysis to reduce energy costs and achieve carbon management strategies. Click here to view a 2 minute video now. ¹ Federal Register / Vol. 74, No. 194 / Thursday, October 8, 2009 / Presidential Documents, http://edocket.access.gpo.gov/2009/pdf/E9-24518.pdf Tue, 02 Aug 2011 09:00:00 PST communication@tririga.com (TRIRIGA Communications) http://www.tririga.com/information-center/infocenter-insights?aid=70 http://www.tririga.com/information-center/infocenter-insights?aid=70 In a previous Insights posting, TRIRIGA, an IBM company provided an overview of a new report titled Crossing the Sustainability Chasm¹. This Insights provides a deeper look at the results centered on achieving sustainability goals through improved facility energy efficiency. TRIRIGA evaluated survey data from 130 sustainability–focused executives and professionals from companies and agencies with revenues of more than $1 billion and found that 75 percent or more of organizations that achieved their sustainability goals (Achievers) currently invest facility energy efficiency to support green initiatives as one of their top three priorities. This is not surprising since real estate and facility assets consume more than 70 percent of electricity. According to survey results, 91 percent of Achievers invest in improving facility energy efficiency today. And, almost 100% are planning to invest by the end of the decade. The benefits are substantial since energy efficiency retrofits can reduce energy use by 20 to 60 percent. Unlike operational improvements that are usually funded through operating funds, building retrofit projects usually require a capital investment. Energy efficiency retrofits can reduce energy use by 20 to 60 percent. These projects range from “low hanging fruit” projects such as relamping of facilities to full building retrofits that require large amounts of capital and extensive design work. Investment in building retrofit programs was also selected by a majority of Achievers and Planners. Top 5 ways to save energy According to the BOMA International Energy Efficiency Program (BEEP) energy savings potential can be found in the following²: Improving operations and maintenance through implementing energy efficiency methods can achieve 7% to 28% in energy savings Changes in occupant behavior, such as turning off equipment or implementing energy awareness programs, can achieve an additional 3.5% to 15.2% of energy savings. Dramatic financial returns can be achieved through lighting retrofits and controls. Approximately 29% of energy consumed in office buildings is for lighting. Many lighting projects have a less than one year return and can achieve savings between 9.4% and 25%. Monitoring and calibration of control devices can reduce energy consumption from 7.3% to 22.9% Changes in Heating, Ventilation, and Air Conditioning (HVAC) systems and controls can result in savings from 3.5% to 15.9% Capital projects achieve significant savings The ASHRAE Energy Efficiency Guide for Existing Commercial Buildings recommends taking an integrated approach to investments in capital projects. For instance, relamping or updating a roof to a “green” roof will reduce HVAC requirements. It is recommended to identify an organization’s worst performing facilities and prioritize them to analyze financial and environmental benefits of environmental sustainability investments for a given site. Examples of high priority projects may include:³ Commissioning to take corrective action to make sure that buildings operate as designed has been shown to average 15% in energy savings Relamping and implementing lighting controls can achieve savings between 9.4% and 25% Installing Energy Star rated equipment reduces plug loads. Energy Star equipment uses up to 60% less energy than standard equipment Implementing HVAC controls and updating systems can result in savings from 3.5% to 15.9% Enterprise Project Management contributes to success Many Achievers have dedicated budget for sustainability and 68% of Achievers use an enterprise project management system to track the success of their sustainability projects. Enterprise-class technology streamlines sustainability initiatives, and in particular, enterprise project management systems provide a mechanism to manage the budget and schedule of sustainability projects, tracking the “I” of ROI. Enterprise project management systems also enable inter-departmental data sharing and workflow processes. TRIRIGA Projects delivers sustainability initiatives on time and on budget TRIRIGA Projects, our enterprise project management (EPM) software, delivers increased financial returns and accelerates project schedules through advanced project planning and project management features. Specifically, TRIRIGA's project management software identifies priorities for funding allocations within capital programs, analyzes project risks and financial benefits and automates project management controls and alerts essential to deliver ad-hoc projects and complex programs of any size in an effective manner. ¹ IBM Corporation, “Crossing the Sustainability Chasm: Strategies and Tactics to Achieve Sustainability Goals”, 2011 ² Building Owners and Managers Association International (BOMA), BOMA Energy Efficiency Program (a series of six courses), 2006 ³ American Society of Heating, Refrigeration, and Air Conditioning Engineers (ASHRAE), Energy Efficiency Guide for Existing Commercial Buildings, 2009 Thu, 14 Jul 2011 09:00:00 PST communication@tririga.com (TRIRIGA Communications) http://www.tririga.com/information-center/infocenter-insights?aid=69 http://www.tririga.com/information-center/infocenter-insights?aid=69 A convergence of factors has contributed to a renewed corporate/agency focus on workplace settings as a viable tool to achieve cost and energy reduction strategies. The current economic climate, increased emphasis on energy reduction and cost control, federal executive orders and congressional acts that mandate telework, and pending FASB/IASB lease accounting changes have made increased facility utilization a strategic business priority within mid– to large–sized organizations. No Space is better than Green Space Figure 1 below depicts the breakdown of costs to support a thousand offices – each 100 square feet in size – the equivalent of a medium size office tower. It assumes an additional 25 percent to accommodate support space. What is apparent from the numbers is that the most significant facility cost and energy savings measure an organization can implement is to reduce its total space requirements. In this simple scenario, an organization that eliminates 125,000 square feet of space generates the following reductions: Occupancy Costs:$562,500 Operating Costs (excluding energy):$727,500 Other Costs:$281,250 Total Carbon Emissions:1,701 metric Tons of CO2e (the equivalent of 70,874 propane cylinders used for home barbeque) Figure 1. Percent of total occupancy costs to support 125,000 square feet of space Advancements in technology enable the flexible workplace in ways only imagined when the concepts were first explored. Measuring actual utilization of office space suggests that greater than 30% of offices are vacant at any given point in time. The challenge for real estate, facility and environmental executives is how to plan and manage the combined bricks and mortar/virtual office environment to accommodate business needs while optimizing and reducing space use. IWMS: A solution for Strategic Facility Planning and Space Reduction Due to the number of facilities, spaces, employees and the complexity of maintaining the volume and associations of space and worker data across mid– to large–sized organizations, effective organizations understand the need for enterprise–class software to manage their combined space management and flexible workplace programs. Better understanding of space utilization produces more effective strategic facility plans. Click here to read and download the whitepaper, “Why leading organizations implement Integrated Workplace Management Systems (IWMS)”. Best–in–class organizations use an Integrated Workplace Management System (IWMS) to plan and execute their space management and flexible workplace programs because they deliver three critical components to optimize space utilization, reduce cost and assure the best use of mission–critical people, facilities and equipment: Single technology platform and database repository: The IWMS platform provides a single unified database with real–time access to information that helps facility, real estate and environmental professionals consolidate space availability and utilization data across a global portfolio – ensuring a common consolidated view by all parties. Streamlined processes: Effective Strategic Facility Planning starts with an understanding of business needs and space use (past, present and future). Supply/demand modeling delivers interactive planning that allows facility planners to match availability of space (supply) to forecasted business unit space needs (demand) across a planning time horizon. Supply–side controls allow planners to model scenarios which add or remove owned facilities, lease renewals and terminations to achieve planned goals. This high–level strategic analysis identifies when and where facilities are over or under utilized and focuses real estate decisions on those that generate highest utilization of facilities. Scenario planning allows facility planners to model business unit allocations within planning scenarios for a given planning period. Side–by–side comparison of the costs, space utilization, financial and environmental returns and risks associated with each space planning scenario assure that the best strategic plans are selected. Approved strategic planning scenarios transition to Real Estate transactions (sub–lease the now vacant space, or dispose of the unused building) and Facility projects (execute the moves to consolidate the organizations based on the strategic plan move sequence). Simplified analytics and metrics: The IWMS platform provides pre–built performance management metrics and reports that evaluate business unit demands and facility performance characteristics to identify underperforming facilities. Forecast metrics assess utilization and cost impact of business demands to identify target facilities for scenario modeling. Embedded performance metrics compare facility plans against objectives, risks and planning goals to contrast strengths and weaknesses of status–quo and planned scenarios for improved investment decisions. Real estate, facility and environmental professionals and executives responsible for managing real estate assets need to maintain high capacity utilization, low cost of utilization, and are charged with providing workspace conducive to worker productivity. In addition to these day–to–day management requirements, real estate, facility and environmental professionals must plan for future business needs and focus on opportunities for space (rooftop) reduction. Space reduction (either through direct reduction or consolidation to accommodate growth without the need for new facilities) results in operational, financial and environmental reductions. No space is better than green space; an integrated flexible workplace practice and software solution offers compelling reductions in facility capital and operating costs, reduces consumption of energy (the largest contributor to greenhouse gas emissions) and increases worker productivity and satisfaction. Tue, 28 Jun 2011 09:00:00 PST communication@tririga.com (TRIRIGA Communications) http://www.tririga.com/information-center/infocenter-insights?aid=68 http://www.tririga.com/information-center/infocenter-insights?aid=68 The U.S.–based Financial Accounting Standards Board (FASB) and the European–based International Accounting Standards Board (IASB) are jointly preparing a new standard for lease accounting. For many years, there has been general agreement in the accounting and investment communities that a revised lease accounting standard was needed. FASB and IASB have been working diligently over the last few years to create this new standard. For some sectors such as Consumer Products, Telecommunications and Industrials the new standard will result in a multi–billion dollar impact on company balance sheets (see Figure 1.) Figure 1. S&P 500 – sectors sorted by lease payments as a % of liabilities The proposed lease accounting standard will precipitate fundamental changes in the management of corporate real estate. As investors and senior executives realize the impact of leases on the balance sheet, a giant spotlight will fall on corporate real estate. Real estate executives will need to reevaluate real estate strategy once operating leases can no longer be left off the balance sheet. New processes, systems, personnel and skills will become necessary to meet the new standard. The lease accounting changes will create a host of ancillary effects that companies will have to address; ranging from the potential need to renegotiate existing debt covenants to the effect on internal budgeting and business unit contribution margins. Corporate real estate will become integral to discussions about corporate financial structure and performance. The Lease Accounting Standard is scheduled for release later this year The accounting boards plans to issue the Final Standard by the end of 2011. The standard has peaked a lot of interest and before they issue a final standard, the accounting boards will issue a revised exposure draft to allow for comments from interested parties. An earlier Exposure Draft issued in August 2010 resulted in 760 letters with comments submitted by interested parties. The board anticipates that many of the concerns raised as a result of the last exposure draft will have been resolved with the updates since the last exposure draft. Estimates of how much time the accounting boards will give companies to comply vary, but most observers think the Effective Date will fall in early 2015 and may require comparison financials with the new methodology for the previous two years. It is important to note that the new lease accounting rules will most likely require that existing leases entered into prior to the Effective Date be added to the balance sheet and be accounted for as a new lease with a start date on the same day as the adoption of the new lease accounting standard. In this case, the new standard will affect any leases signed prior to the Effective Date that are still active when the lease accounting standard is implemented. Key changes since the exposure draft Based on the tentative decisions issued in statements by the accounting boards, all “likely” lease obligations based on “significant economic benefit” will be included on the balance sheet. This accounts for the term for renewal, termination, and purchase options which provide a “significant economic benefit”. The accounting boards have simplified this requirement since the exposure draft which required substantial statistical analysis to define thelikely term. This differs significantly from existing capital lease accounting standard that require only the “minimum” lease obligation be accounted for on the balance sheet. The incremental borrow rate at the commencement of the lease determines the discount rate used for amortization of the likely term, based on tentative decisions made by the board. The assumption for this rate will not need to be adjusted unless the payment terms of the lease change substantially. Also, when the lease payment provisions or option to renew sets the rental rate based on a future market rate or index, an assumption of that future rate would be required, based on tentative decisions by the accounting boards. According to tentative decisions by the accounting boards, a projection of likely lease obligations would also have to include an estimate for variable rents when the lease payments are structured as variable payments, but actually are “in–substance” fixed payments. Again, the accounting boards have simplified this requirement since the original exposure draft to address concerns presented in the comment letters. Assumptions related to likelihood of renewal, future indexes/market rates and variable rents will all have to be updated periodically as business conditions and company strategies change. If the structure of the lease changes substantially, the amended lease will likely be treated as a new lease contract with the inception date as the new basis for the likely term. Lease accounting rule changes create a need for new and improved lease accounting software With the new lease accounting rules, companies will need processes and tools to improve the completeness and accuracy of lease data collected. Large companies with worldwide operations and/or autonomous business units will have an especially difficult time in verifying that the lease inventory is complete. Companies must collect accurate information for each and every lease in the company’s real estate and asset portfolio. For many companies this will total thousands of leases and add billions of dollars to the balance sheet. The scale of the lease accounting process is likely to be large relative to the size of the company, whether it has 1,000 or more leases or very few. Automating specific steps and tasks will be necessary to improve accuracy and productivity. A Deloitte survey of 284 companies reveals that new or enhanced lease accounting software will be required. Two–thirds of companies with 1,000 or more leases anticipate a need for new software of major upgrades to existing lease accounting software (see Figure 2.) Figure 2. Which is the most likely action regarding your real estate information technology systems to comply with the new lease accounting standard? These systems should be scalable to accommodate growth, flexible to accommodate changes, globally accessible for data entry and access, and integrated with the company”s financial accounting system. In the near term, to prepare for the new lease accounting standard, organizations should assess the completeness of their lease inventory. The real estate and asset management groups should work with business units and other functions to identify missing leases and add them to the inventory. In addition, organizations should evaluate decision–support tools such as TRIRIGA Strategic Facility Planning to help identify underutilized facilities that can be consolidated to reduce the balance sheet impact of lease accounting rule changes. As mentioned earlier, leases signed prior to the Effective Date will probably not be grandfathered and will be added to the balance sheet once the new lease accounting standard is implemented. Wed, 08 Jun 2011 09:00:00 PST communication@tririga.com (TRIRIGA Communications) http://www.tririga.com/information-center/infocenter-insights?aid=67 http://www.tririga.com/information-center/infocenter-insights?aid=67 Today’s Challenges Facility executives and managers are typically responsible for the operations and maintenance of the most valuable assets and third largest expense in your organization. They manage these building assets over their lifecycle with the challenge to reduce maintenance expenses, deliver high–quality service and provide environments that support the business mission. And therefore must accomplish these objectives during difficult financial times with aging buildings. If not properly maintained, these buildings suffer from deferred maintenance, under–funded or disproportionately–managed preventive maintenance and under–funded capital renewals which results in higher asset lifecycle costs, declined reliability and poor support for mission–critical activities. Yet, these same executives and managers often lack tools to provide insight on key issues such as the impact of workplace operations on the facility condition. They lack tools to optimize the productivity and effectiveness of services provided and apply improvements to achieve objectives. As a result, organizations fail to capitalize on potential opportunities to save millions of dollars each year. Workplace Operations Performance Management evaluates maintenance processes to balance work¬loads, reduce maintenance costs, identify systemic failures and down–time, assess facility condition, sup¬port capital planning and detect labor inefficiencies. Workplace Performance Management integrated with Operations and Maintenance Management applications deliver three types of performance measures. Historic Operational Performance: Using Historic Operational Performance management, metric performance data is captured by the system on a periodic basis (usually monthly) and is based on day–to–day records such as work orders/tasks, contracts, customer satisfaction surveys and operations costs. The data is stored in a data structure optimized for large data sets. The data is retained for comparison between capture periods. Metric charts display both the current capture period (the last month’s data) and a view over time for trend analysis. Historic operational metrics measure the success of process improvement initiatives to operational practices and identify under–performing assets for further evaluation. Real Time Operational Performance: Metric performance data is based on active transactional data such as in–progress work tasks, current contact center call logs and technician work backlog. Deriving metric graphs directly from transactional data can cause system performance issues. Today, well–designed IWMS systems present real time metrics in the form of graphs and gauges without performance delays. Real time operational metrics tactically analyze current performance (this week or today) and are critical to identify and resolve day–to–day issues. Strategic Operational Performance: Strategic performance metrics generate forward–looking analysis of data based on planning decisions such as technicians available for future work tasks. Strategic operational metrics allow managers to analyze potential future issues and take corrective action before the issue occurs. A balanced Operations Performance Scorecard prescribes performance objectives and aligns workplace resources to business objectives. Both a measurement and management system, the balanced Operations Performance Scorecard provides a view of workplace performance with the following five dimensions: Financial Performance: Measures the costs and financial impact of workplace assets and operations such as operating costs, maintenance costs, capital costs, total occupancy costs, and budget adherence. Customer Satisfaction: Customers require responsive, high–quality, cost–effective workplace services. The Maintenance Operations organization needs to ensure that services meet customer expectations, and that services conform to Service Level Agreements while balancing quality, resources, responsiveness, and cost. Operational Performance: Reduces maintenance costs and improves overall financial performance. The Maintenance Operations organization must maximize the efficiency of the maintenance and operations staffs, align building availability with business needs and efficiently operate building systems. Portfolio Performance: Evaluates facility health and optimizes building and asset lifecycle costs. The Maintenance Operations organization must appropriately forecast and budget maintenance costs and services. They must also plan preventive maintenance activities to prolong asset life and reduce long–term maintenance costs. Environmental Performance: Measures the en¬vironmental impact of workplace assets and operations with respect to energy consumption, greenhouse gas emissions, water ef¬ficiency, overall waste, sustainable site management and indoor air quality. Operations Performance Metrics for Integrated Workplace Management The following matrix provides a guide to facilities operations and maintenance metrics by scorecard category and suggests the appropriate type for each metric (see figure 1). Figure 1. Facilities operations and maintenance metrics by scorecard category Integrated Workplace Management Systems (IWMS): A solution for effectively integrating operational applications with Workplace Performance Management across the facility lifecycle Without Workplace Performance Management embedded within an IWMS solution, delivering the metrics described above requires a significant amount of work each reporting period to query disparate systems and aggregate the data into home–grown or stand–alone reporting solutions. Leading enterprise–class IWMS software vendors deliver pre–built metrics tightly integrated with the operational solutions producing performance metrics as a consequence of managing the day–to–day tactical work. Progressive vendors are moving beyond historical metrics to include real time and strategic metrics. Due to the number of facilities, systems, assets, internal and external service providers, work tasks, resource assignments, timesheet entries and the complexity of maintaining the volume of data across mid– to large–sized organizations, effective organizations understand the need for enterprise–class software to manage their combined IWMS and Performance Management programs. Best–in–class organizations use an Integrated Workplace Management System with embedded Workplace Performance Management because they deliver three critical components to increase cost reduction and assure the operations of mission–critical facilities, equipment and systems: Single technology platform and database repository: The IWMS platform provides a single unified database with real–time access to tactical information and capture of historic information that helps facility operations managers and professionals consolidate workplace performance information across a global facilities portfolio – ensuring a common consolidated view by all parties. Streamlined processes: The IWMS platform provides process automation tools to extract performance management information from day–to–day management activities. Integrated maintenance, operations and performance data and processes ensure that executives, managers and individual contributors can assess their performance against objectives over time and real time. Simplified analytics and metrics: The IWMS platform provides pre–built performance management metrics and reports in each of the categories noted above to show the effectiveness of the operations and maintenance practice within an organization and at a facility–level. Users filter and drill–through metric graphs to analyze performance data from different perspectives such as by location, by geography, by service provider and by technician. For executives looking for a high–return on investment, an IWMS with embedded Workplace Performance Management offers compelling reductions in facility operating costs, ensures the right capital and operating purchases and projects are presented and approved, and reduces consumption of energy. Wed, 25 May 2011 09:00:00 PST communication@tririga.com (TRIRIGA Communications) http://www.tririga.com/information-center/infocenter-insights?aid=66 http://www.tririga.com/information-center/infocenter-insights?aid=66 Executives want repeatable, predictable project results and the most reliable way to insure predictability is to instill best practices within their organizations. What are the best practices for project management? Well that is certainly debatable. The Project Management Institute (PMI) provides a set of standards with a predefined set of industry accepted rules and guidelines. According to PMI, “A best practice is an optimal way currently recognized by industry to achieve a stated goal or objective.” (OPM3® Overview, PMI®, p. 9) In today’s rapid business environment, progressive organizations often expand best practices beyond standards to retain both strategic advantage and operational excellence. PMI’s Organizational Project Management Maturity Model (OPM3) provides a standard to help organizations a way to measure their maturity against best practices. This is significant since industry research¹ suggests that project failure rates have actually increased since 2002. 31% of projects are cancelled before being finished 53% of completed projects are completed, but with cost and/or schedule overruns Average cost overruns of 189% Average time overruns of 222% Only 16% of projects are completed on time, on budget, and on scope Over 80% of all projects will fail to deliver the desired organizational outcome Best practices are included in Enterprise Project Management software Enterprise Project Management (EPM) software includes best practices in the pre–defined processes and data collection. This spans the basic PMI project lifecycle including: initiation, planning, execution and control, and close out. EPM software optimizes the management of resources, scope, costs, quality, and schedule throughout the project lifecycle while minimizing risk. In the past EPM tools may have been limited in view to project managers; the visibility and use of these tools have now expanded to full project team. Financial tracking, resource management, schedule tracking, collaboration, safety compliance and many other project activities may be tracked in the EPM software. Industry experts indicate that EPM software can reduce project–related costs by 5%– 30%. TRIRIGA Projects streamlines project management TRIRIGA Projects, our EPM software, includes best practices with adaptable business processes. TRIRIGA Projects delivers increased financial returns and accelerates project schedules through advanced project planning and project management features. Specifically, TRIRIGA’s project management software identifies priorities for funding allocations within capital programs, analyzes project risks and financial benefits and automates project management controls and alerts essential to deliver ad–hoc projects and complex programs of any size in an effective manner. TRIRIGA Projects includes extensive application features coupled with adaptable business logic and scalability to perform as demands grow. The TRIRIGA platform technology behind the applications; its architecture, its ability to integrate with other critical business systems and its ability to adapt are crucial to successful deployment and user adoption. ¹The Standish Group, “CHAOS 2007 REX: A Standish Group Research Exchange.” 2007 Wed, 11 May 2011 09:00:00 PST communication@tririga.com (TRIRIGA Communications) http://www.tririga.com/information-center/infocenter-insights?aid=65 http://www.tririga.com/information-center/infocenter-insights?aid=65 The Oil Crisis of 1979 resulted in lines of cars at gas stations, solar panels on the White House and the famous ‘Crisis of Confidence’ speech where President Jimmy Carter outlined his plans to reduce oil imports and improve energy efficiency¹. The oil crisis of 1979 fostered innovation focused on energy efficient facility architectural and engineering design, operations and maintenance practices and experimentation in alternative workplace strategies that pioneered many of best practices still deployed in modern day workplace planning, design and management. During that era, Franklin Becker² and others focused on the concept of ‘integrated workplace strategies’. And in 2001 a research partnership between Gartner, MIT, and 22 industry sponsors (including many corporations experimenting with flexible workplace strategies at the time) released the results of that collaborative study in a research paper entitled ‘The Agile Workplace: Supporting People and their Work’³. The agile workplace is also a system – a bundle of interacting occupancy, connectivity and managerial services that interact with the particular work of the organization…The emergence of agility as a key driver of corporate performance has made system thinking even more compelling, and a decade of experience with non–fixed, unbounded workplaces has made the agility concept better understood and accepted. At the same time, new technologies for connectivity and new workplace products are making that concept easier to implement. The shifting concept of the workplace in terms of agility also suggests a new way to think about the “workplace portfolio”. To most organizations, the workplace portfolio is about real estate – a collection of properties that are owned, leased or acquired in some other way. Shifting the focus from the workplace as real estate to the workplace as a bundle of services that enables the particular work of the particular organization helps us reframe the notion of “portfolio” to a network of places, electronic connections and management policies that enable agility. (Excerpt: The Agile Workplace: Supporting People and their Work) Over the ensuing years many companies and government agencies experimented with and deployed agile workplace strategies. Studies report benefits attributed to increased worker productivity, retention and satisfaction resulting from a more balanced work/life relationship. Others studies evidence space reductions resulting in significant financial and environmental savings. Today, the current economic and environmental climate, increased corporate emphasis on energy reduction and cost control, federal executive orders and congressional acts mandating telework and environmental initiatives, and the eminent FASB/IASB lease accounting changes have all contributed to a renewed corporate/agency focus on the flexible workforce and ‘agile’ workplace settings as viable space, cost and energy reduction strategies. In 2010 for example, the TRIRIGA Customer Advisory Board composed of workplace executives from 31 major corporations and government agencies noted that ‘flexible workspace is required to optimize space use and to accommodate the evolving work styles of organizations and that reservation management is critical to all large organizations’. While the architectural, engineering, operations, environmental and human resource management constructs noted above have all matured since the oil crisis of 1979, the objectives and benefits remain the same. Today, however, advancements in technology enable the agile workplace in ways only imagined when the concepts were first explored. Today mobile hand–held devices, laptop computers, wired and wireless networks, Wi–Fi onboard airplanes, video and web–based conferencing and high–bandwidth enabled homes and public areas make the flexible workplace a viable option for many companies and agencies. The challenge for real estate and facility executives: how to plan and manage the combined bricks and mortar and virtual office environments to accommodate flexible workforce needs while optimizing space use. A personal friend once likened management of the flexible workforce to a parking lot: some workers require dedicated office space (the employee of the month and executive parking spaces); some workers require reserved office or meeting space for short–term use (the pool of valet parking spaces); and some workers require office or meeting space on–demand (the self–parking lot). Real Estate and Facilities managers must manage this workplace supply/demand parking lot and plan for future space needs based on availability and utilization metrics. Today’s technology delivers the information and processes required for informed space capacity and strategic planning decisions. IWMS: A solution for effectively enabling flexible workplace strategies Due to the number of facilities, spaces, employees and the complexity of maintaining the volume and associations of space and worker data across mid– to large–sized organizations, effective organizations understand the need for enterprise–class software to manage their combined space management and flexible workplace programs. Best–in–class organizations use an Integrated Workplace Management System (IWMS) to plan and execute their space management and flexible workplace programs because they deliver three critical components to optimize space utilization, reduce cost and generate the best use of mission–critical people, facilities and equipment: Single technology platform and database repository: The IWMS platform provides a single unified database with real–time access to information that helps facility and real estate managers and professionals consolidate space availability and utilization data across a global portfolio – ensuring a common consolidated view by all parties. Streamlined and automated processes: The IWMS platform provides process automation tools to integrate traditional space management (assigned offices/workstations) with the transitional flexible workforce needs (reservation management) into a single unified process. Simplified analytics and metrics: The IWMS platform provides pre–built performance management metrics and reports such as the cost of operations/person, density (area/workpoint), mobility space ratio (flexible workspace area / total workspace area), mobility worker rate (total flexible workers / total workers), workpoint utilization rate (workpoints used / total workpoints available) and employee satisfaction metrics to show the effectiveness of the flexible workplace practice within an organization and at a facility–level. Real Estate and Facility executives and professionals responsible for their organization’s real estate assets need to maintain high capacity utilization, reduce the cost of utilization, and provide workspace conducive to worker productivity. An integrated flexible workplace practice and software solution offers compelling reductions in facility capital and operating costs, reduces consumption of energy (the largest contributor to greenhouse gas emissions) and increases worker productivity and satisfaction. ¹ http://en.wikipedia.org/wiki/1979_energy_crisis ² Workplace by design: mapping the high–performance workscape by Franklin D. Becker and Fritz Steele ³ http://www.gartner.com/1_researchanalysis/focus_areas/special/agile_workplace/agile.jsp Tue, 26 Apr 2011 09:00:00 PST communication@tririga.com (TRIRIGA Communications) http://www.tririga.com/information-center/infocenter-insights?aid=64 http://www.tririga.com/information-center/infocenter-insights?aid=64 In a previous Insights posting, TRIRIGA, an IBM company provided an overview of a new report titled Crossing the Sustainability Chasm¹. This Insights provides a deeper look at the results centered on achieving sustainability goals through improved facility energy efficiency. TRIRIGA evaluated survey data from 130 sustainability–focused executives and professionals from companies and agencies with revenues of more than $1 billion and found that 75 percent or more of organizations that achieved their sustainability goals (Achievers) currently invest facility energy efficiency to support green initiatives as one of their top three priorities. This is not surprising since real estate and facility assets consume more than 70 percent of electricity. According to survey results, 91 percent of Achievers invest in improving facility energy efficiency today. And, almost 100% are planning to invest by the end of the decade. The benefits are substantial since energy efficiency retrofits can reduce energy use by 20 to 60 percent. Achievers prioritize their worst performing facilities Achievers prioritize their worst performing facilities’ improvement opportunities. These organizations have gathered key attributes about each facility to identify which require focus. Once facilities are identified, organizations typically focus on facility energy efficiency projects that have ROI with quick payback. But, more than 40 percent of Achievers are moving from simple payback analysis to full life cycle cost assessment within owned facilities. Life cycle cost assessment requires a higher level of analysis, and consequently provides a more accurate approach to evaluating projects. See figure 1. Figure 1: Primary method for evaluating energy projects Enterprise Project Management contributes to success Many Achievers have dedicated budget for sustainability and 68% of Achievers use an enterprise project management system to track the success of their sustainability projects. Enterprise–class technology streamlines sustainability initiatives, and in particular, enterprise project management systems provide a mechanism to manage the budget and schedule of sustainability projects, tracking the “I” of ROI. Enterprise project management systems also enable inter–departmental data sharing and workflow processes. See figure 2. Figure 2: Sustainability functions supported by enterprise–class system TRIRIGA TREES streamlines sustainability initiatives TRIRIGA TREES delivers the environmental sustainability software organizations need to lower energy costs and generate higher savings from sustainability projects. Powerful, flexible and easy–to–use features identify an organization’s worst performing facilities, analyze financial and environmental benefits of environmental sustainability investments, and automate carbon reduction actions. With TREES, organizations streamline carbon accounting and environmental investment analysis to reduce facility energy costs and sustainability initiatives. ¹ TRIRIGA, “Crossing the Sustainability Chasm: Strategies and Tactics to Achieve Sustainability Goals”, 2011 Wed, 20 Apr 2011 09:00:00 PST communication@tririga.com (TRIRIGA Communications) http://www.tririga.com/information-center/infocenter-insights?aid=63 http://www.tririga.com/information-center/infocenter-insights?aid=63 Integrated Facility Condition Assessment and Environmental Sustainability practices increase return on facility investment Integrating Facility Condition Assessment and Environmental Sustainability practices and systems drives increased return on investment, reduces energy consumption, reduces carbon and other emissions and delivers a holistic analysis of the health and condition of the facility portfolio. Facility Condition Assessment (FCA) and Environmental Sustainability (ES) teams often report to different organizations within the company. The FCA team typically resides within Maintenance and Operations, while the ES team typically resides within the Environmental organization. FCA and ES teams often work from different program management offices and funding sources and therefore lack visibility into each other’s initiatives. However, FCA and ES teams have similar goals and objectives. Common statements include: ‘If we had known that the operations group was replacing the worn out chiller we could have recommended a lower energy consumption model.’ ‘If we had known that the facilities group was replacing the carpet in the headquarters building we could have recommended a low emission alternative.’ ‘If we have known about the environmental groups lighting program we could have significantly lowered our long–term energy cost with more efficient fixtures.’ ‘If we had known that the damaged roof was being replaced we could have coupled that project with our insulation program.’ FCA and ES have similar process and system needs. Both groups perform assessments of facilities and structures categorized by building system to measure the current state, to identify and prioritize systems, and to assess system fit with business need. Both groups identify opportunities for improvement (commonly referred to as deficiencies in FCA and Energy Conservation Opportunities in ES). FCA identifies the useful life of buildings, structures, building systems and equipment – data valuable to ES. Both groups estimate deficiency/opportunity costs, savings and return on investment and propose renewal, replacement and disposition projects and tasks. The Environmental group could benefit from the mature FCA processes and nationally–recognized Facility Condition Index (FCI) benchmark. FCI describes the existing state and condition of a building. A corollary System Condition Index (SCI) provides similar information at a system–level. The FCI and SCI are ratios that compare the cost of the capital renewal and deferred maintenance deficiencies to the Calculated Replacement Value (CRV). The FCI and SCI provide a means for objective comparison of facility condition and allow decision makers to understand and compare building renewal funding needs. The Environmental group adds the sustainability dimension to the overall assessment process with energy and carbon saving estimates and calculations typical in Energy Conservation Opportunity (ECO) analysis. This dimension can positively impact the benefit and return on investment for FCA–driven initiatives. Similar to the FCI, the Green Condition Index (GCI) describes the comparative environmental health of facilities by calculating the ratio of environmental opportunity cost to the Calculated Replacement Value (CRV). IWMS: A solution for effectively integrating facility condition and environmental assessment practices Due to the number of facilities, systems and individual assets, and the complexity of maintaining the volume of assessment and environmental data across mid– to large–sized organizations, effective organizations understand the need for enterprise–class software to manage their combined FCA/ES program. Best–in–class organizations use an Integrated Workplace Management System (IWMS) to plan and execute their FCA/ES program because they deliver three critical components to increase cost reduction and assure the operations of mission–critical facilities, equipment and systems: Single technology platform and database repository: The IWMS platform provides a single unified database with real–time access to information that helps facility operations and environmental managers and professionals consolidate assessment, asset, cost and schedule information across a global facilities portfolio – ensuring a common consolidated view by all parties. Streamlined processes: The IWMS platform provides process automation tools to integrate FCA–related deficiencies and ES–related opportunities into a single unified process, assign assessment and remediation tasks and projects to internal and external service providers, and update task, cost and condition information upon completion. Integrated maintenance, operations and assessment data and processes ensure that assessment data remains current. Simplified analytics and metrics: The IWMS platform provides pre–built performance management metrics and reports such as the FCI, SCI and GCI benchmarks, energy use, financial costs, and program/project cost and schedule performance to show the effectiveness of the integrated FCA/EA practice within an organization and at a facility–level. For executives looking for a high–return on investment, an integrated FCA/ES practice and software solution offers compelling reductions in facility operating costs, ensures the right capital and operating purchases and projects are presented and approved, and reduces consumption of energy – the largest contributor to greenhouse gas emissions. Wed, 06 Apr 2011 09:00:00 PST communication@tririga.com (TRIRIGA Communications) http://www.tririga.com/information-center/infocenter-insights?aid=62 http://www.tririga.com/information-center/infocenter-insights?aid=62 A new report titled Crossing the Sustainability Chasm¹ from TRIRIGA finds that although the majority of the world’s largest corporations and government agencies have set environmental and energy reduction goals, two–thirds failed to achieve them. TRIRIGA evaluated survey data from 130 sustainability–focused executives and professionals from companies and agencies with revenues of more than $1 billion and found that 75 percent or more of organizations that achieved their sustainability goals currently invest in three clear activities to support green initiatives: 91% improve facility energy efficiency, 77% improve equipment servicing and maintenance, and 75% improve space utilization (i.e. space optimization) Energy efficiency improvements within facilities can deliver 50 percent savings Tackling energy efficiency within facilities provides an opportunity for high–returns and fast payback. One study by the National Renewable Energy Lab (NREL) and U.S. Department of Energy (DOE) examined an array of facility operations and capital improvements aimed at a 50 percent reduction in energy over ASHRAE 90.1–2004 design standard in a retail setting and concluded that results organizations can achieve reductions of more than 40% in less than 5 years, across all U.S. climate zones². See figure 1 and 2. Figure 1: Sample Facility Improvements from DOE study Figure 2: Energy Savings Pareto Curve by U.S. Climate Zone Proper maintenance of building systems provides many benefits at a relatively low cost As discussed in previous TRIRIGA Insights, facility maintenance processes such as continuous commissioning and preventive maintenance offers compelling reductions in facility operating costs, defers the need for large capital purchases and reduces consumption of energy that amount to a 545 percent return on investment. Furthermore, the Federal Energy Management Program (FEMP) advises that switching from a reactive maintenance program to a predictive maintenance program can result in savings of 12 to 18 percent over a reactive maintenance program. Space Management: A critical component of successful sustainability programs With more than 275 billion square feet of space available within U.S. facilities³, space reduction provides the greatest opportunity for organizations to reduce their environmental impact and account for the largest use of electricity (more than 70 percent). For many organizations the amount of space available greatly exceeds the need for it as many employees now work from home or travel as a routine part of their function. TRIRIGA’s report highlights the importance of space reduction as a crucial component of a successful sustainability program. Strategic facility planning and space optimization programs deliver on reduction goals based on the adage that “No space is better than green space” – that is a building that does not exist, does not consume energy. As your organization evaluates its sustainability program, please consider whether you have the right environmental and energy management software to measurably implement these three leading tactics used by those who have delivered measurable reductions in energy and greenhouse gas emissions. ¹ TRIRIGA, “Crossing the Sustainability Chasm: Strategies and Tactics to Achieve Sustainability Goals”, 2011 ² NREL, “Technical Support Document: Development of the Advanced Energy Design Guide for Medium Box Retail–50% Energy Savings”, 2008 ³ Architecture 2030, http://www.architecture2030.org Wed, 23 Mar 2011 09:00:00 PST communication@tririga.com (TRIRIGA Communications) http://www.tririga.com/information-center/infocenter-insights?aid=61 http://www.tririga.com/information-center/infocenter-insights?aid=61 Capital investments in facilities equipment remain challenged in recovering economy Despite official news that the U.S. economy is on its way to recovery from a low in 2009, capital remains constrained and generally unavailable to those who seek to reduce facility costs – which represents a top four cost of business in two–thirds of companies – or reduce their organization’s environmental impact. For facilities executives looking for a high–return on investment, a preventive maintenance program offers compelling reductions in facility operating costs, defers the need for large capital purchases and reduces consumption of energy – the largest contributor to greenhouse gas emissions. Preventive maintenance is the practice of keeping fixed assets, equipment and systems, in acceptable operating condition throughout its expected life through the use of scheduled periodic inspection, calibration, cleaning, lubrication, parts replacement and minor repair. It typically consists of one or many checklist–related tasks that would interfere with essential operation, endanger life, result in high–cost of long–lead–time for replacement, if not completed. Preventive Maintenance generates high financial returns While the idea that well–maintained facilities and equipment extends the life and reduces the number of costly repairs, the relationship between the costs and returns related to a well–run preventive maintenance program are less understood. To determine the value of preventive maintenance, a study by Jones Lang LaSalle¹ across a portfolio of 14 million square feet of mixed property types examined the following variables: Actual cost of preventive maintenance Cost of repair/corrective maintenance Cost of replacing equipment Expected useful life of equipment Effects of preventive maintenance on expected useful life Frequency of required repairs when equipment is not maintained Effect of preventive maintenance on energy consumption The results were impressive. When no preventive maintenance was compared to industry standard preventive maintenance, the results showed that preventive maintenance not only paid for itself it generated a Return on Investment (ROI) of 545 percent. Most of the savings were achieved through extending the useful life of the costly equipment such as centrifugal pumps, boilers and chillers (see figure 1) though a seven percent reduction in energy consumption was also realized. Figure 1: Return on Investment from Preventive Maintenance by equipment type Preventive Maintenance extends the life of costly equipment and systems To illustrate how preventive maintenance contributes to extended asset life and energy consumption, consider what would happen if you purchased a brand new car. Before you left the dealer’s lot they would undertake their standard multipoint inspection to ensure the vehicle operates at peak efficiency – a similar process to facility commissioning – and your brand new car achieves the 28/15 miles per gallon on the highway and city roads. From there, imagine if you never performed any of the preventive maintenance such as lubrication, oil changes, filter replacement, correct tire pressures, etc. Under normal operating conditions, your car would likely remain at optimum power and fuel efficiency for a period of time, and then degrade at a steeper rate of decline than a similar vehicle that was correctly maintained. Without preventive maintenance, the National Research Council² reports that facilities and equipment would experience a shortened life expectancy similar to this example (See figure 2). Figure 2: Effect of adequate and timely maintenance and repairs on the service life of a building Preventive Maintenance reduces energy consumption Second behind extending the useful life of equipment, the study concluded that preventive maintenance produced a seven percent reduction in the amount of energy consumed. This fact may help to explain why in a recent TRIRIGA survey³ 91 percent of sustainability–focused executives and professionals that achieved their organization’s sustainability goals – Achievers – reported that they currently invest in improved facility energy efficiency, ahead of capital–intensive building retrofits and space optimization (see figure 3). Figure 3: High–level tactics to reduce energy use in facilities IWMS: An integrated solution for effective preventive maintenance Due to the number of assets, the complexity of maintenance schedules and the volume of scheduled tasks across mid– to large–sized organizations, effective organizations understand the need for enterprise–class software to manage their preventive maintenance programs and they put the right systems in place now. Best–in–class organizations use an Integrated Workplace Management System (IWMS) to plan and execute preventive maintenance because they deliver three critical components to increase cost reduction and extend life of equipment and systems: Single technology platform and database repository: The IWMS platform provides a single unified database with real–time access to information that helps facility managers and other maintenance management professionals consolidate asset, cost and schedule information across a global facilities portfolio. Streamlined maintenance processes: The IWMS platform provides process automation tools to generate preventive maintenance tasks, assign these tasks to internal and external service providers, and update tasks and cost information upon completion. Simplified analytics and metrics: The IWMS platform provides pre–built performance management metrics and reports such as corrective/preventive maintenance activities, energy use and financial costs to show the effectiveness of preventive maintenance within an organization and at a facility–level. ¹. Jones Lang LaSalle, “Determining the Economic Value of Preventive Maintenance” ². National Research Council (NRC), “The Fourth Dimension in Building: Strategies for Minimizing Obsolescence” ³. TRIRIGA, “Crossing the Sustainability Chasm: Strategies and Tactics to Achieve Sustainability Goals”, January, 2011 Tue, 08 Feb 2011 09:00:00 PST communication@tririga.com (TRIRIGA Communications) http://www.tririga.com/information-center/infocenter-insights?aid=60 http://www.tririga.com/information-center/infocenter-insights?aid=60 A new analysis from the world’s largest analyst firm, Gartner, finds seven leaders in the integrated workplace management system (IWMS) market. The report entitled “Magic Quadrant for Integrated Workplace Management Systems¹” analyzed integrated workplace management systems to rate their ‘Completeness of Vision’ and ‘Ability to Execute’. According to Gartner, Leaders “have strength in applications and platform technology, demonstrate a high level of quality in product reliability and service, have strong operational and organizational capabilities and financial stability, have global reach and offer a strong vision of customer needs, reflected in a robust development road map.” Gartner defines an ‘ideal’ IWMS software: In its report, Gartner took care to identify five core functional areas that comprise an IWMS software: real estate management, construction project management, facilities space management, maintenance management, and environmental sustainability. According to Gartner, “the effective integration of these disciplines ideally operates off of a single database with common workflow tools, executive dashboards and robust predefined and customized reporting capabilities.” Further to this suite of applications and technology platform, the system must deliver robust interoperability with other enterprise application systems, via increasingly robust Web services technologies. In alignment with other IWMS market analysts such as IWMSconnect and IWMSNews, Gartner expanded its definition for integrated workplace management systems to include environmental sustainability as a core functional requirement for IWMS software, for the first time. Benefits of an Integrated Suite: Unlike IWMS solutions acquired through merger and acquisition, Gartner advises that integrated suites developed by a single vendor “yield tighter, more seamless integration, less complexity, a better, more standardized interface, a more seamless customer experience, and often faster and more effective implementations.” The results of this report were based on evidence gathered from submitted questionnaires and in-person interviews across all vendors rated, more than 30 detailed customer reference questionnaires and interviews and other research, Gartner created weighted evaluation criteria by which to score each of the 11 IWMS applications rated. From this process, Gartner assembled their proprietary “Magic Quadrant” which is based on two primary dimensions: 1) Completeness of Vision and 2) Ability to Execute. TRIRIGA delivers an ideal IWMS system: TRIRIGA delivers all the requirements identified as components of Gartner’s ideal IWMS software: including all five functional modules; a single technology platform and data repository; and interoperability with other enterprise application systems. ¹ Gartner “Magic Quadrant for Integrated Workplace Management Systems” by Rob Schafer, January 31, 2011 About the Magic Quadrant The Magic Quadrant is copyrighted 2011 by Gartner, Inc. and is reused with permission. The Magic Quadrant is a graphical representation of a marketplace at and for a specific time period. It depicts Gartner’s analysis of how certain vendors measure against criteria for that marketplace, as defined by Gartner. Gartner does not endorse any vendor, product or service depicted in the Magic Quadrant, and does not advise technology users to select only those vendors placed in the “Leaders” quadrant. The Magic Quadrant is intended solely as a research tool, and is not meant to be a specific guide to action. Gartner disclaims all warranties, express or implied, with respect to this research, including any warranties of merchantability or fitness for a particular purpose. Thu, 03 Feb 2011 09:00:00 PST communication@tririga.com (TRIRIGA Communications) http://www.tririga.com/information-center/infocenter-insights?aid=59 http://www.tririga.com/information-center/infocenter-insights?aid=59 This Sunday, the Pittsburgh Steelers take on the Green Bay Packers in Super Bowl XLV. Not only does this have the potential to be one of the most competitive Super Bowl games ever, but it will also be one of the greenest due to the NFL’s efforts to address the environmental impacts of the event. Amazingly, the Super Bowl, along with all the media and fan events leading up to the game, use approximately the same amount of energy that it takes to power 1,500 homes for a year. This year, in addition to an extensive tree planting program and recycling effort, the NFL will buy Renewable Energy Certificates (REC’s) equal to the total amount of energy used for the Super Bowl and all related events. These initiatives demonstrate clear steps to reduce the environmental impact on the part of the NFL. However, for most organizations, REC’s do not provide the most economic way to improve environmental performance. REC’s are an effective means to promote renewable energy, but they are primarily used to build an organization’s reputation for environmental stewardship. The truth is that, beyond the intangible public relations value, REC’s provide a relatively poor return on investment (ROI). A much more effective and economical way to improve environmental performance is to focus on implementing energy efficiency improvements within new and existing facilities. The Dallas Cowboy’s stadium, the venue for this year’s Super Bowl, would appear to be a good candidate for energy efficiency improvements (even though the stadium is barely a year old). According to a recent article in Forbes, Dallas Stadium is “an energy-guzzling Colossus averaging $200,000 in monthly utility bills and consuming about as much power as Santa Monica, California.” 1 Fortunately, a growing number of NFL teams understand the bottom-line benefits of energy efficiency and are investing in stadium improvements to reduce energy use and carbon emissions. Several teams are currently considering energy efficiency improvements along with on-site renewable energy. The NFL team that has arguably gone the farthest to reduce the environmental impact of their stadium is the other team from Pennsylvania - the Philadelphia Eagles. In 2003, the Eagles teamed with the National Resources Defense Council to conserve energy and reduce waste. These initiatives generated more than $5 million in real cost savings. And, beginning next season, the Eagle’s Lincoln Financial Field will produce almost all of its energy needs from a combination of on-site wind turbines, solar panels and a co-generation plant. This investment, financed through a power purchase agreement, will save $60 million in energy costs over the next two decades. In many ways, energy use reduction in a stadium is an easier task than tackling energy efficiency across a portfolio of buildings. In a stadium, the energy hogs are fairly easy to identify. For instance, the gigantic high-tech scoreboards found in most stadiums can use as much electricity as 100 homes. And, capital intensive projects, such as renewable energy installations, are usually more feasible for large energy-intensive facilities, like stadiums. Conversely, within a large portfolio of diverse facilities, the identification of cost-effective energy efficiency opportunities can prove much more difficult. For organizations with large portfolios, enterprise-class energy and environmental management software provides data collection and analytic capabilities to target poor-performing facilities and “tackle” the projects that will provide the best ROI. 1 “Can Professional Sports Do More Than Politics to Save the Planet?”, Forbes, Amanda Little, 11/15/2010 * NFL, Super Bowl and the NFL shield design are registered trademarks of the National Football League. The team names, logos and uniform designs are registered trademarks of the teams indicated. All other NFL-related trademarks are trademarks of the National Football League. Other marks are properties of their respective owners. Tue, 01 Feb 2011 09:00:00 PST communication@tririga.com (TRIRIGA Communications) http://www.tririga.com/information-center/infocenter-insights?aid=58 http://www.tririga.com/information-center/infocenter-insights?aid=58 As covered in a previous TRIRIGA Insights post, the Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB) have been working together on a major revamp of lease accounting rules. An exposure draft released in August 2010, details proposed changes to lease accounting rules that effectively remove the distinction between operating leases and capital leases; requiring all leases (both real property and personal property leases) to be accounted for as assets and liabilities on the balance sheet. The U.S. Securities and Exchange Commission (SEC) has estimated that these rule changes will add an estimated $1.3 trillion to corporate balance sheets. Between August and December of 2010, interested parties were encouraged to submit comment letters detailing their concerns with the proposed lease accounting rules. The financial accounting boards are currently in the process of reviewing the 760 letters received during this period. The boards plan to release the final rule change by mid-2011. TRIRIGA conducted a targeted analysis of the 94 comment letters submitted by Fortune 500 companies. Within this group, almost all companies agreed that lease accounting rules should be modified in order to improve the accuracy of financial reports. However, there was also nearly unanimous agreement that the lease accounting rules, as proposed, present an incredibly costly and time consuming compliance burden. TRIRIGA’s analysis identified three areas of the proposed rules that were especially troublesome to a large majority of companies; lease term estimates, future rent estimates and financial reporting considerations. Lease term estimates Under the proposed lease accounting rules outlined in the Exposure Draft, for each lease, a company will be required to estimate the longest possible lease term that is “more likely than not” to occur based on the probability that lease renewal options will be executed. Under the proposed rules, the lease term along with estimated future rents are used to calculate the value of the asset and liability associated with the lease. Among the Fortune 500 companies that submitted comment letters, there is nearly unanimous agreement that renewal options should not be included in the calculation. Many companies expressed considerable skepticism that their reported lease terms would be accurate given the guesswork required to estimate the probability that future options would be executed. This is an especially contentious issue for retailers with leases that include multiple renewal options that will only be executed under acceptable future market conditions. According to the Starbuck’s Coffee Company (Fortune #261), the world’s leading coffee chain with approximately 9,000 store leases worldwide, “the effort to assess the ‘more likely than not’ lease term would be a very time-consuming and imprecise process, involving several hours of work for each lease at inception and again when a renewal or other trigger requires re-evaluation.” In addition to the time involved to estimate the lease term, most companies also expressed the belief that renewal options do not constitute a true liability since lessees are under no obligation to execute renewal options. Future rent estimates Along with estimating lease terms, the proposed accounting rules also require companies to estimate future rent levels based on the impact of contingent rental agreements. The accounting boards believe that including assumptions that affect rent levels, such as Consumer Price Index (CPI) changes and future sales projections into future rent estimates will provide a more accurate valuation of the lease asset and liability. Almost every Fortune 500 company that submitted a comment letter disagreed with the proposed approach due to the high volatility of business and economic conditions that effect contingent rents. They contend that future rent estimates based on contingent rents would be incredibly imprecise and expensive to administer. Retailers will have an especially difficult time estimating future rents given the sector’s wide use of contingent rental agreements based on variables such as store sales and co-tenancy requirements. According to Gap Inc. (Fortune #178), an apparel retailer with thousands of leased stores across the world, “about 90% of our leases contain contingent rent provisions and many contain multiple contingencies.” Financial reporting impact Under the proposed lease accounting rules, the asset and liability created by a lease will initially be valued identically based on the present value of future rent payments. After the initial valuation, the asset and liability will decrease over the life of the lease until they are both valued at zero when the lease expires. The proposed lease accounting rules require that the asset is to be depreciated in a straight line manner and the liability is to be reduced by a periodic principal amount using an amortization schedule based on the actual rent level and an implied interest rate. Under this treatment the asset value will decrease faster than the liability value. Using this amortization approach will also front-loads expenses since, under the proposed lease accounting rules, rent expense is accounted for on the income statement as a financing expense comprised of depreciation and interest expense. With this structure, rent expense will be higher during the first half of the lease than the lease expense under the existing lease accounting rules. A majority of Fortune 500 companies expressed major concern with the lack of consistency in the measurement of asset and liability that front loads expense in first half of lease term. As previously reported, these proposed lease accounting changes will have an enormous impact on the balance sheets and income statements of companies with large portfolios of leased assets. According to Wells Fargo And Company (Fortune #42), a major diversified financial services company which leases approximately 6,000 banking locations, “the Proposed Update will unnecessarily inflate a company’s balance sheet with assets and liabilities that are not truly representative of its financial position.” Other concerns In addition to these areas of concern, there were numerous other areas addressed by Fortune 500 companies. Throughout the submitted comment letters, a common concern was that the proposed rules will require a significant and costly modification to existing systems and processes. For instance, under the proposed rules, in each financial reporting period a company will be required to update the lease term and rent level for any leases where the underlying assumptions have changed. For organizations with hundreds or thousands of leases this creates a recurring and incredibly expensive exercise. The effort becomes even more daunting when personal property leases for assets such as equipment or vehicles are included. Although real estate leases usually make up the majority of leases in terms of value, personal property leases often make up the majority of leases in terms of volume. Scale and complexity of problem requires new IT systems In order to reduce the time and cost necessary to administer real estate and property leases under the proposed rules, companies will require a system to first prepare for the upcoming rule changes and then perform ongoing lease accounting and administration once the rules take effect (most likely in 2012 or early 2013). As previously discussed, some key features of a lease accounting system include: lease option tracking, critical data tracking with alerts, automated audit capabilities, and direct integration to financial systems. Implementation of a system with these capabilities will greatly reduce the time and cost to comply with the new lease accounting rules. Discover the impact of lease accounting rule changes on your company If you are new to the lease accounting rule changes and want to learn more, TRIRIGA encourages you to explore our series of whitepapers on the subject: The New Lease Accounting Standard and You and Action Plan to Prepare for the New Lease Accounting Standard. Thu, 20 Jan 2011 09:00:00 PST communication@tririga.com (TRIRIGA Communications) http://www.tririga.com/information-center/infocenter-insights?aid=57 http://www.tririga.com/information-center/infocenter-insights?aid=57 According to the Federal Energy Management Program (FEMP), “Effective O&M (Operations and Maintenance) is one of the most cost-effective methods for ensuring reliability, safety, and energy efficiency.” As most facility maintenance professionals know, proper maintenance of building systems provides many benefits at a relatively low cost. These benefits include the following: Decreased energy costs Decreased equipment failures and down-time Increased life expectancy of equipment Increased comfort, health, and safety for facility occupants Studies have demonstrated that well-maintained older buildings often outperform much newer buildings with ineffective maintenance programs. There are a number of facility maintenance tactics that can cut energy costs by 10 to 20 percent with little to no capital investment. In a recent study by Gartner, in collaboration with TRIRIGA, 65 percent of respondents reported that they were currently investing in improved equipment servicing and maintenance to achieve their sustainability goals, while an additional 28 percent of respondents reported that they planned to invest in improved equipment servicing and maintenance within the next three to five years. See Figure 1. Figure 1. Percent of survey respondents investing in improved equipment servicing and maintenance Although the benefits of a proactive maintenance program are well understood, according to FEMP, more than 55 percent of organizations still follow a reactive maintenance program that reserves maintenance activities for equipment failures. Preventive maintenance programs that focus on time-based or cycle-based maintenance to prevent equipment degradation and failure are utilized in just over 30 percent of organizations and predictive maintenance programs that use performance measurements to identify impending problems are used by only 12 percent of organizations. Although the cost to implement a preventive or predictive maintenance program can be significant, the benefits will usually justify the investment. According to FEMP, switching from a reactive maintenance program to a predictive maintenance program can result in savings of 12 to 18 percent over a reactive maintenance program. Furthermore, following a predictive maintenance program can save 8 to 12 percent over a preventive maintenance program (or approximately 30 percent over a reactive maintenance program). Increasingly, organizations are implementing reliability centered maintenance (RCM) programs that utilize a preventive, predictive, or reactionary approach depending on the specific building system. According to FEMP, “RCM is a systematic approach to evaluate a facility’s equipment and resources to best mate the two and result in a high degree of facility reliability and cost-effectiveness.” Done right, RCM is the most cost-effective approach to facility maintenance. Under an RCM approach, each building system must be evaluated based on system characteristics, criticality, and cost of down-time. This approach acknowledges the fact that, for some non-critical building systems, it is more cost effective to fix after failure then to perform more resource intensive proactive maintenance. Table 1 below highlights some of the criteria to evaluate when deciding which maintenance approach to pursue for a given system. Table 1. Reliability centered maintenance element applications 1 According to FEMP, there are eight key steps to developing a RCM program: Develop a Master Equipment List that identifies the equipment in your facility Prioritize the listed facility components based on importance or criticality to operation, process, or mission Assign facility components into logical groupings Determine the type and number of facility maintenance activities required and periodicity using: Manufacturer technical manuals Machinery history Root cause analysis findings Good engineering judgment Assess the size of facility maintenance staff Identify tasks that may be performed by facility maintenance personnel Analyze equipment failure modes and impacts on components and systems Identify effective maintenance tasks or mitigation strategies. For large organizations looking to move toward a more proactive facility maintenance program, an Integrated Workplace Management System (IWMS) will provide the capabilities necessary to streamline the implementation and management of the facility maintenance program. In addition, IWMS software provides the ability to track energy and resource use, evaluate lease terms, and request capital funding. 1 Operations & Maintenance Best Practices: A Guide to Achieving Operational Efficiency, FEMP, August 2010 Tue, 11 Jan 2011 09:00:00 PST communication@tririga.com (TRIRIGA Communications) http://www.tririga.com/information-center/infocenter-insights?aid=56 http://www.tririga.com/information-center/infocenter-insights?aid=56 A week of disasters With flags flying at half-mast across the U.S., many executives and professionals responsible for the security of personnel and continuity of business operations are considering what can be done to avoid suspension of operations at mission-critical facilities. Whether we examine the recent mail room bombings in Washington, the shootings in Tucson or reflect on the anniversary of Haiti’s earthquakes, an organization’s inability to act quickly in response to disasters can rapidly translate into the loss of millions of dollars. Minimize the impact of terrorist actions and natural disasters To minimize the impact of terrorist actions and natural disasters on mission-critical facilities such as headquarters, data centers, call centers, laboratories, manufacturing sites and retail locations, facilities departments must formulate a business continuity plan and specific disaster recovery scenarios that include the following: Robust information on facility capacities, contract obligations and values The location, identity and roles of essential staff, and establishing a contingency plan for these personnel Contingency plans for mission critical facilities in the event of a catastrophic business disruption Facilities disaster recovery processes that align and support enterprise business continuity plans Additionally, they must position themselves to execute these plans rapidly and in alignment with IT, human resources, corporate risk management, operations management and corporate communications functions. Unfortunately, inadequate and disparate facilities systems seriously weaken the facilities department’s ability to plan and execute business continuity and disaster recovery plans by creating duplicate data and failing to correlate and integrate essential information such as personnel, their business locations, IT equipment and alternate back-up sites with planned responses. IWMS: An integrated solution to accelerate disaster recovery Best-in-class organizations use an Integrated Workplace Management System (IWMS) to plan and execute business continuity and disaster recovery plans. They do so because an IWMS delivers three key components to minimize risk and accelerate disaster recovery: Streamlined access to crucial information: The IWMS platform provides a single unified database with real-time access to information that helps first responders and others assess impact. Simplified contingency planning process: The IWMS platform provides tools and essential information to complete a business impact analysis (BIA), including floor layouts, location of staff and other information required to perform an over-all BIA. Accelerated Business Continuity Management: The IWMS platform provides embedded and pre-built processes to automate planned responses in the event of a disaster. For example, an IWMS can automate processes such as: Damage assessment process to coordinate the activities of local contractors and service personnel Emergency responder process to coordinate the activities of medical, fire and public safety personnel Site recovery process to activate back-up sites, and notify critical business and support staff of the redeployment process Supply fulfillment process to procure and deploy critical office supplies, maintenance supplies, back up communication and computer equipment Since it is fully web-based, the system remains accessible from any remote location. To discover how IWMS supports disaster recovery plans, read Integrated Workplace Management System – A critical tool in business continuity and disaster recovery management, a whitepaper authored by leading industry analyst Michael Bell. Tue, 11 Jan 2011 09:00:00 PST communication@tririga.com (TRIRIGA Communications) http://www.tririga.com/information-center/infocenter-insights?aid=55 http://www.tririga.com/information-center/infocenter-insights?aid=55 2010 became one of the most important years in corporate real estate history, the big story was changes to lease accounting rules that will require real estate and finance executives to report leased assets on the balance sheet. TRIRIGA has collated the most read stories and whitepapers on this topic to help you prepare for the year in which discussion moves to action: New Lease Accounting Standard Increases Importance of Corporate Real Estate - Under the proposed lease accounting changes, Corporate Real Estate (CRE) professionals will be tasked with new and critical responsibilities related to the preparation of financial statements. >Read More The New Lease Accounting Standard and You - In this white paper, Bob Cook, Real Estate and Financial Strategist provides insights about the new lease accounting standard being put in place, how they will affect companies, what will be needed to comply, and how your life will change as a result. >Read More Exposure Draft for the New Lease Accounting Standard Released - The IASB and FASB issued the Exposure Draft of the proposed lease accounting standards. The new lease accounting standard will require companies to capitalize all leases which will place an enormous strain on the financial statements of most companies. >Read More 7 Steps to Prepare for the New Lease Accounting Standards - Insights to the major implications that the new lease accounting standards will have on corporate real estate strategy, processes, and internal budgeting. >Read More Alternative Workplace Arrangements Require Strategic Planning - Given that real estate represents one of the most significant costs for most organizations, reducing space per employee and increasing utilization through Alternative Workplace programs can provide an excellent return on investment. >Read More In 2011, the International Accounting Standards Board (IASB) and the U.S. Financial Accounting Standards Board (FASB) expect to release their amended lease accounting rules and set forth a date at which time all companies will be required to report their leases – real estate and equipment – as assets on their balance sheets. This will have a profound and lasting effect on the real estate strategies and processes of global companies. Wed, 05 Jan 2011 09:00:00 PST communication@tririga.com (TRIRIGA Communications) http://www.tririga.com/information-center/infocenter-insights?aid=54 http://www.tririga.com/information-center/infocenter-insights?aid=54 In 2010, organizations around the world established and executed plans to achieve energy reduction and sustainability goals and improve their overall environmental performance. This trend is reflected in the following year-in-review of the most read environmental sustainability stories from TRIRIGA Insights: EPA Mandatory Greenhouse Gas Reporting Starts - Beginning January 1, 2010, organizations were required to track and report on greenhouse gas (GHG) emissions from those facilities that fall within the EPA Mandatory GHG Reporting guidelines. The EPA Mandatory GHG Reporting rule was just the first step in the regulation of GHG emissions. >Read more. New York City Implements TRIRIGA TREES to Reduce Energy and Carbon Footprint – New York City took an unprecedented step toward reducing its greenhouse gas emissions and $800 million energy bill. The City will use TRIRIGA’s environmental sustainability software, TREES, to track energy use and GHG emissions in more than 4,000 government buildings throughout New York City. >Read more. US Government Asks 600,000 Suppliers to Track Carbon Emissions – During the summer of 2010, the U.S. Government announced that it will begin asking all 600,000 suppliers to provide greenhouse gas (GHG) data. Companies with low carbon intensity compared to their competitors will have an advantage in procurement decisions. >Read more. Federal Agencies Provide Blueprints to Improve Energy and Environmental Performance – The White House released the first of the Federal Agency Strategic Sustainability Performance Plans on September 9, 2010, which detail initiatives to achieve the environmental, economic and energy goals called for in the Executive Order on Federal Leadership in Environmental, Energy and Economic Performance (Executive Order 13514)†. These plans provide a blueprint of best practices for government and commercial entities alike. >Read more. New Study Identifies Leading Software Companies in Carbon and Energy Management – Verdantix, an independent analyst firm focused on sustainable business strategies and market opportunities released the report, “Green Quadrant® Carbon and Energy Management Software, 2010” which identified 10 leaders in the carbon and energy management software market. This study used an expert customer panel comprised of decision-makers within enterprises with more than $1 billion in revenue that were using, or plan to use, carbon and energy management software. >Read more. While 2010 was a year dominated by economic concerns, an increasing number of government entities and private corporations showed commitment to improve energy and environmental performance. 2011 presents an opportunity for organizations to accelerate efforts to achieve sustainability goals and implement strategies to make more informed investments that will deliver superior returns from sustainability projects. † http://www.whitehouse.gov/administration/eop/ceq/sustainability/plans Tue, 14 Dec 2010 09:00:00 PST communication@tririga.com (TRIRIGA Communications) http://www.tririga.com/information-center/infocenter-insights?aid=53 http://www.tririga.com/information-center/infocenter-insights?aid=53 Now is the time of the year when many real estate professionals prepare their budgets for the new fiscal year. For some, 2011 will be the year that their organization implements an integrated workplace management system (IWMS) to reduce operating costs or achieve sustainability goals. In order to receive approval to add IWMS to the budget, managers must be able to adequately justify the investment. Although the benefits of IWMS are well known within the real estate community, the group that holds the purse strings in your organization will likely be unfamiliar with IWMS and will need to see convincing business rational for making the investment. This is especially true in today’s difficult economic climate where every investment is scrutinized and competition for capital is fierce. With this increased scrutiny in mind, there are five basic steps that should be taken to improve the chances that a proposal to invest in an IWMS solution will secure approval. Step 1: Align investment to strategic goals The first step to budget approval is to determine how an investment in IWMS supports strategic enterprise objectives. Understanding, and communicating, how your budget request supports strategic goals is critical. Here are three basic examples to help get you started: if your organization has a strategic goal to expand to a new market, you may want to emphasize the benefits of an IWMS solution as they relate to faster project cycle times, streamlined site selection, and improved transaction management. if your organization has a strategic goal to reduce operating costs, you may want to emphasize the benefits of an IWMS solution as they relate to facility space reduction. if your organization has a strategic goal to reduce its environmental impact, you may want to emphasize the benefits of an IWMS solution as they relate to sustainability and energy use reduction. For a brief introduction to the value of IWMS and other examples take a look at the TRIRIGA whitepaper entitled Why Implement IWMS?. Step 2: Understand the unique value of IWMS to your organization The second step to budget approval is to evaluate how IWMS will uniquely benefit your organization. Every organization will have unique requirements that will drive the type and amount of benefits that can be derived from an IWMS solution. This is especially true for large organizations with very specific processes and real property assets that can be managed with an IWMS solution. Accurately estimating the dollar amount of the IWMS business value can be a challenge. TRIRIGA has a variety of complimentary tools and resources to help organizations estimate their unique IMWS business value. For more information on these tools and to receive a personalized business value estimate unique to your organization please contact TRIRIGA. Step 3: Gather empirical evidence Estimates of business value will likely need to be supported by real world examples and research. Success stories (aka case studies) provide examples of the business benefits that other organizations have achieved with an IWMS solution. Whitepapers and analyst reports provide expert analysis into the ways that IWMS can provide value. TRIRIGA offers a variety of complimentary success studies, whitepapers, and analyst reports that cover a wide range of industries and functional areas. Step 4: Build a coalition Once you have an understanding of how IWMS aligns with business strategy, an estimate of business value, and empirical information to reinforce your analysis; you can then take that knowledge and use it to build a coalition of people within your enterprise who will support the investment proposal. This coalition may include executives from your own group or people from other functions who would directly or indirectly share in the benefits derived from an IWMS system. Ideally, you will identify groups of users who will benefit from an IWMS solution and are willing to contribute some of their budget and resources to the project. Either way, finding champions for the IWMS investment is integral to the eventual budget approval. Step 5: Prepare your business case The final step to budget approval is to consolidate all of the information gathered into a clear and concise business case. The business case should clearly communicate how IWMS aligns with the strategic goals of the organization, what benefits can be expected from the investment, and what evidence you have to back up your proposal. The business case should include a cost benefit analysis that presents the financial return metrics that are important to your organization. Once the business case is complete you are ready to present your proposal to whomever controls funding decisions in your organization. Following these five steps will greatly increase your odds of budget approval. Obviously, completion of these steps is easier said than done in practice. TRIRIGA has years of experience helping organizations develop the business case for IWMS. Contact TRIRIGA for more information on how we can help you develop your business case for IWMS. Tue, 30 Nov 2010 09:00:00 PST communication@tririga.com (TRIRIGA Communications) http://www.tririga.com/information-center/infocenter-insights?aid=51 http://www.tririga.com/information-center/infocenter-insights?aid=51 A new survey from independent analyst firm, Verdantix, identifies 10 leaders in the carbon and energy management software market. The report entitled “Green Quadrant® Carbon and Energy Management Software, 2010” analyzed the 28 carbon and energy management software applications (out of a field of more than 100) deemed most capable of supporting large companies (i.e., companies with revenues exceeding $1 billion). In order to better understand the market, Verdantix used an expert customer panel comprised of decision-makers within enterprises with more than $1 billion in revenue that were using, or plan to use, carbon and energy management software. Similar to the findings of the recent Gartner survey in collaboration with TRIRGA, almost 50 percent of the companies interviewed by Verdantix reported that energy use reduction is a priority (second only to carbon target setting). The Verdantix report also found that facilities, sustainability and supply chain professionals comprise the primary users of carbon and energy management software and, of those user groups, facilities professionals are most often responsible for collecting necessary data to measure carbon emissions and energy use. Based on the company interviews and previous research, Verdantix created weighted evaluation criteria by which to score each of the 28 applications. Each software company provided Verdantix with a two-hour live product demonstration and a completed questionnaire covering almost 100 categories. From this process Verdantix assembled their “Green Quadrant” which is based on two primary dimensions: 1) carbon and energy management capabilities and 2) alignment with strategic success metrics such as product strategy and financial resources. Out of the 28 applications evaluated, TRIRIGA was named as a leader and the only application to earn a “Best in Class” designation for the “Master data management” criteria which measured the ability to organize data, track assets, and configure the software. According to the report, “Powerful data management functionality is the essential building block to deliver more advanced carbon and energy management tools.”† TRIRIGA also earned a Best in Class designation for Internationalization, Product strategy and architecture, and Partnerships. † Verdantix, GREEN QUADRANT® CARBON & ENERGY MANAGEMENT SOFTWARE, November 2010 Wed, 10 Nov 2010 09:00:00 PST communication@tririga.com (TRIRIGA Communications) http://www.tririga.com/information-center/infocenter-insights?aid=50 http://www.tririga.com/information-center/infocenter-insights?aid=50 The International Facility Management Association (IFMA) recently held its annual World Workplace conference in Atlanta, Georgia. The conference featured education sessions across a wide variety of facility topics; almost a quarter of which were focused on sustainability. TRIRIGA contributed with an informative session on how Integrated Workplace Management Systems can help drive cost reduction and environmental improvement strategies. Based on results from an informal poll, the audience appeared to be in a similar situation as the respondents to the recent Gartner survey done in collaboration with TRIRIGA. A majority of the audience was focused on energy efficiency with only a small percentage investing specifically in carbon reduction. Many were using ENERGY STAR as a tool to measure energy performance in their facilities. And, most were not yet using an Integrated Workplace Management System (IWMS) to manage energy and environmental performance. According to the results of the Gartner survey, IWMS solutions still lag behind spreadsheet applications as a primary tool to support energy and environmental performance initiatives (see Figure 1 ). Just over 20 percent of survey respondents stated that they were using an IWMS solution to measure energy and environmental data. Less than 15 percent of respondents reported that they were using IWMS to evaluate energy and environmental performance. And, slightly more than 10 percent stated that IWMS was used to implement energy and environmental projects. Figure 1. Solution Breakdown (IWMS vs. Spreadsheets) to Support Energy and Environmental Performance Initiatives Not surprisingly, the survey found that spreadsheet applications are still the tool most often used to manage sustainability initiatives. As mentioned in a previous TRIRIGA Insights post, spreadsheets are adequate for organizations with small portfolios that wish to simply measure and report on energy and environmental performance. However, for those organizations with a large portfolio of buildings and assets that wish to invest in projects to improve energy and environmental performance, spreadsheets lack several capabilities identified by survey respondents as important to effectively manage a sustainability program. Below is a list of some of the most important capabilities identified: 1) Respondents identified data collection and data verification as two of the most important capabilities when managing a sustainability program. Organizations that need to capture a large amount of data from many sources will likely encounter performance and data quality issues with spreadsheets. An effective IWMS solution provides a number of ways to automate the data collection process and includes quality checks to flag when data is missing or incorrect. 2) The capability to perform multi–level analysis and reporting was also a high priority for many respondents. Once data has been collected, organizations need to perform analysis to determine where to focus efforts. Once again, spreadsheets are likely to be cumbersome and inflexible when aggregating large amounts of data. An IWMS solution allows for robust reporting capability across all levels of the organizations. Role based dashboards and security effectively filter information so that users see only information that is relevant to a specific role or process. 3) Management of facilities and other real property assets was rated as a high priority by survey respondents. Spreadsheets lack the workflow capability and project management tools to effectively implement projects to reduce energy use and environmental impact. A complete IWMS solution provides the capability to plan and manage facility projects and verify that expected results are achieved. 4) Spreadsheets are especially ineffective when multiple roles need to access the same data to evaluate energy and environmental performance. The survey found that, throughout each stage of a sustainability program, a number of different roles play a part in the decision–making process. The graph below (see Figure 2) details the results from a survey question which asked respondents to identify the roles that are responsible for each high–level stage of a sustainability program. In each stage a number of roles were identified as having some responsibility. Figure 2. Sustainability Program Role Breakdown A truly integrated workplace management system allows multiple roles to simultaneously view and analyze data in a single database. Role specific dashboards provide aggregated information that is applicable to specific responsibilities. An effective IWMS solution should have the capability to seamlessly transfer information (data, reports, approval requests, etc.) between roles and across processes. Given the broad and expanding range of IWMS, fully–integrated and agile technology is critical to realize extraordinary ROI and effective management of your organization’s sustainability initiatives. To learn more, click here to view and download TRIRIGA’s complimentary whitepaper, “Why do Leading Organizations Implement Integrated Workplace Management Systems (IWMS)?” Mon, 18 Oct 2010 09:00:00 PST communication@tririga.com (TRIRIGA Communications) http://www.tririga.com/information-center/infocenter-insights?aid=49 http://www.tririga.com/information-center/infocenter-insights?aid=49 A recent study by Gartner, in collaboration with TRIRIGA finds that many large organizations primarily focus their environmental initiatives on energy efficiency and are still in the early stages of implementation of such projects. Gartner surveyed a wide range of professionals responsible for the planning and implementation of sustainability initiatives across large public sector organizations and corporations. The survey questions covered all aspects of energy and environmental programs, with an emphasis on how facilities and technology contribute to meeting sustainability goals. The goal of the survey is to discover how organizations prioritize their sustainability initiatives, the strategies they currently have implemented and their planned strategies to maximize efficiency, reduce costs, and manage environmental impact and energy consumption across their real estate portfolio. Early analysis of the survey data reports the following: While most organizations reported having a sustainability program, a majority of organizations surveyed have not yet implemented projects to reduce energy and environmental impact. Energy efficiency and waste reduction are considered a higher priority than other initiatives such as - reducing GHG emissions. The majority of respondents rated energy efficiency and reducing operational waste as a top three environmental initiative. And, surprisingly, less than one-fifth of respondents reported that reducing GHG emissions was a top three priority. When asked which environmental initiatives each organization planned to invest in over the next 10 years, almost all respondents indicated that they would invest in energy efficiency. Less than 20 percent of respondents reported that they were currently investing in the tracking and management of GHG emissions. And, less than 75 percent of respondents indicated that they planned to invest in GHG management over the next 10 years. A large majority of respondents reported that their organization attempted to focus on their worst performing facilities when prioritizing sustainability investments. Given the respondents’ focus on energy efficiency, the majority reported that they use external energy benchmarking ratings such as ENERGY STAR to evaluate building performance. Less than 15 percent of respondents reported using GHG emissions as a variable to determine building level environmental performance. When evaluating specific projects to invest in, payback period was most often rated as the primary method used to evaluate projects. Conversely, a slightly smaller number of respondents indicated that a full lifecycle cost assessment based on incremental costs and benefits was the primary method used to evaluate projects. 50 percent of respondents reported that quantifying the cost-benefit of a project was a top two challenge to decide what projects to invest in. This challenge along with competition from other capital projects may be a primary reason that less than 40 percent of respondents reported that their organizations are currently implementing projects to reduce energy or environmental impact. These are just a few of the preliminary findings from this joint research study by TRIRIGA and Gartner. Over the next few weeks, we will provide additional details and insights about the approaches taken and challenges faced when addressing sustainability in facilities. Wed, 06 Oct 2010 09:00:00 PST communication@tririga.com (TRIRIGA Communications) http://www.tririga.com/information-center/infocenter-insights?aid=48 http://www.tririga.com/information-center/infocenter-insights?aid=48 A new survey from Deloitte and the Government Business Council finds that Federal agencies face many of the same challenges as private sector companies when it comes to establishing an effective sustainability program. The report, entitled “The Challenges of Implementing Sustainability in the Federal Government”, surveyed over 300 Federal executives from a wide range of government agencies. The report confirms that, in general, Federal agencies have a strong commitment to sustainability. However, this commitment has yielded mixed results due to a number of challenges. According to the report, the overwhelming majority of respondents (74%) believe that sustainability efforts are “very important”. Reduced energy use, a reduction in carbon emissions and an increase in alternative energy sources are ranked as “very important” sustainability elements. As expected, given Federal initiatives to reduce energy use and environmental impact, respondents ranked “Reducing costs” and “Fulfilling a mandate” as the top two reasons for pursuing sustainability within their agency (see Figure 1). Figure 1. Reasons for Agency Action to Increase Sustainability In addition, the highest ranked sustainability related goals coincide with Executive Order 13514 and the corresponding Strategic Sustainability Performance Plans. Since, for most Federal agencies, buildings and fleet represent the majority of direct (Scope 1) and indirect (Scope 2) emissions, the top four sustainability related goals involve buildings, fleet, or both (see Figure 2). Figure 2. Most Important Sustainability Related Goals As is the case with many organizations, the survey found that a gap exists between the sustainability goals that agencies find important and actual actions taken. While 52 percent of respondents reported that reducing water, gas, electric consumption, and waste production was an important sustainability goal, only 39 percent of respondents stated that their agency had taken an action toward those reduction goals. Similarly, although 43 percent of respondents identified energy efficient retrofits as an important sustainability goal, only 35 percent of respondents reported that their agency was actively retrofitting existing buildings. The survey identifies several reasons for the misalignment between priorities and actions. First, a majority of respondents characterized the level of effort and resources invested in sustainability by their agency as “inadequate”. Conversely, only 4 percent of respondents reported that their agency’s sustainability investment was “excessive”. In addition, “lack of funding” was reported as the top obstacle to meeting sustainability goals. It was also no surprise that “Antiquated facilities or fleets” was the second highest obstacle to meeting sustainability goals. A lack of funding coupled with aging buildings and vehicles is a reality in many public and private organizations. Fortunately, investment in energy efficiency projects is often justified by superior risk adjusted returns. However, in this climate of uncertainty and tight credit, capital budgets have dwindled and the scrutiny placed on all capital requests has increased significantly. To receive approval for energy efficiency and environmental improvement projects, energy and facility managers must have access to data and tools to accurately and effectively identify the opportunities that will provide the best financial and environmental return. Click here to view an on–demand webinar series, Bringing a Green Lens to Fixed Assets with Dan Esty, leading business strategist and former environmental advisor to the Obama transition team, and George Favaloro, Managing Partner at Esty Environmental Partners to discover proven strategies and practical ideas to implement sustainable practices for your organization today. Wed, 22 Sep 2010 09:00:00 PST communication@tririga.com (TRIRIGA Communications) http://www.tririga.com/information-center/infocenter-insights?aid=47 http://www.tririga.com/information-center/infocenter-insights?aid=47 Last October, President Obama signed Executive Order (EO) 13514, aka “Federal Leadership in Environmental, Energy, and Economic Performance”. This EO compels Federal agencies to measure, manage, and reduce energy use and environmental impact. Since then agencies have been busy setting short and long–term reduction goals and putting plans and controls in place to achieve those goals. Under EO 13514 Federal agencies are required to prepare an annual Strategic Sustainability Performance Plan (SSPP) that includes goals to reduce energy, carbon, water, and waste, and outlines planned actions to achieve those goals and details any progress made to date. These plans align with White House goals to reduce Federal direct emissions (Scope 1) and indirect emissions from purchased energy (Scope 2) by 28 percent, and reduce other indirect emissions (Scope 3) by 13 percent, by 2020 from a 2008 baseline. The initial SSPP reports from the 56 Federal agencies were submitted over the summer and have recently been approved by the White House Council on Environmental Quality (CEQ). The reports are available on the CEQ website. The SSPP reports reflect how each agency is implementing specific sustainability projects that align with the agency’s unique mission. For instance, the Air Force plans to certify that all USAF aircraft can operate on a 50/50 alternative fuel blend by 2011. The Department of Housing and Urban Development has a program to perform energy efficiency retrofits on 126,000 public housing units by 2011. And, the Centers for Disease Control implemented a laboratory recycling program that is a model for safely recycling lab materials. At a high level each of these projects contributes to a specific greenhouse gas (GHG) reduction goal. There are five primary sources of GHG emissions that all agencies are required to address in the SSPP: buildings, fleet, employee travel, waste disposal, and energy transport and distribution. Buildings and fleet represent the majority of Scope 1 and Scope 2 emissions for most Federal agencies. Within the SSPP, agencies must detail their goals and plans to reduce the energy intensity of their buildings and increase the percent of electricity from renewable sources. Agencies must also provide details on targets to reduce petroleum use from agency owned vehicles while increasing the use of alternative fuels. Based on building and fleet goals, agencies also provide annual targets for reducing Scope 1 and Scope 2 emissions from 2010 through 2020. Employee travel, waste disposal, and energy transport and distribution represent the bulk of Scope 3 emissions for most agencies. Agencies are encouraged to provide Scope 3 reduction targets from each of these areas. The Scope 3 emissions are much more difficult to estimate and manage since the source is outside the direct control of the agency. In addition, Scope 3 emissions represent a significantly smaller percentage of overall GHG emissions. While each of the Scope 1, 2, and 3 GHG sources play an important role in reducing an agency’s GHG emissions, buildings are, by far, the greatest contributor of GHG emissions for virtually every agency. For this reason, reducing the energy use from buildings is the cornerstone of the strategic sustainability plan for most agencies. This objective is especially difficult for agencies that have plans to expand over the next decade. For example, the Department of Health and Human Services plans to reduce absolute Scope 1 and Scope 2 emissions from facilities by 10.4 percent by 2020. Given the agency’s planned increase in facilities over the next decade, the reduction in carbon emissions requires a corresponding reduction in energy intensity of 22.8 percent. The Interior Department, one of the largest federal agencies, also plans to reduce overall Scope 1 and Scope 2 emissions. Once again, considering the department’s plans for building new facilities, the targeted GHG reduction of 20% by 2020 will require a reduction in energy intensity of 30% by 2015. As agencies investigate strategies to simultaneously balance the need for additional space with the need to reduce GHG emissions, they must also consider the lifecycle return on potential investments. Under EO 13514, agency actions must be prioritized based on the combination of environmental, economic, and social benefits. Optimizing investment in energy efficiency and other sustainability projects under EO 13514 requires capabilities to measure your agency’s energy and environmental impact, analyze financial and environmental benefits of sustainability investments, and evaluate short and long–term capital planning scenarios. TRIRIGA delivers solutions to assist Federal agencies with EO 13514 compliance, alongside on–going environmental sustainability success. Click here to view an on–demand webinar series with Dan Esty, leading business strategist and former environmental advisor to the Obama transition team, and George Favaloro, Managing Partner at Esty Environmental Partners as they discuss proven strategies and practical ideas to implement sustainable practices for your organization today. Mon, 13 Sep 2010 09:00:00 PST communication@tririga.com (TRIRIGA Communications) http://www.tririga.com/information-center/infocenter-insights?aid=46 http://www.tririga.com/information-center/infocenter-insights?aid=46 Carbon management is a strategic business issue that will only increase in importance. This is the conclusion of a new report from the Carbon Disclosure Project entitled, “The Carbon Management Strategic Priority”. The report highlights several key market drivers that contribute to the strategic importance of carbon management, including energy costs, employee expectations, recruiting, and physical impacts from climate change. The combined impact of these and other drivers make carbon management a strategic imperative for companies today. Furthermore, carbon management will greatly increase in importance over the next decade if, as many climate experts predict, the causal link between carbon emissions and climate related natural disasters is established. These severe weather events will result in tough Federal legislation that will place a national price on carbon emissions and result in increased costs of energy produced by carbon intensive fuels such as coal and oil. In addition, this increased regulation and scrutiny will cause more organizations to follow the lead of organizations like Wal-Mart and the Federal government that plan to evaluate suppliers based on their management of carbon emissions. Even for those companies that remain skeptical about the importance of carbon management, a program to evaluate carbon emissions still makes sense in order to identify opportunities to improve operational efficiency. Increasingly, companies use carbon emissions as a proxy for inefficiency and waste. Wherever carbon emissions are high, companies see opportunities to reduce costs while improving environmental performance. Given that buildings are a primary contributor of carbon emissions for many organizations, addressing energy use within facilities is a top priority for many organizations. There are three primary strategies that companies can use to reduce energy use from facilities in a cost effective manner. Improved building operations, such as a comprehensive condition assessment and preventative maintenance program, reduces energy use and increases equipment life. Space management initiatives, such as alternative workplace arrangements, reduce energy use through increased asset utilization. Targeted capital investments in retrofit projects improve energy efficiency and increase the value of the facility asset. In order to maximize the effectiveness of these strategies, organizations require access to critical data regarding the utilization, performance, and condition of each facility in the portfolio. The facility level data must be evaluated in relation to the goals and objectives of the organization in order to align energy use and carbon emission reduction programs with the organization’s overall mission. Fri, 17 Apr 2009 09:00:00 PST communication@tririga.com (TRIRIGA Communications) http://www.tririga.com/information-center/infocenter-insights?aid=45 http://www.tririga.com/information-center/infocenter-insights?aid=45 Earlier this week, plans were unveiled to dramatically reduce the energy use and carbon footprint of the iconic 79 year old Empire State Building. When work is completed in 2013, this multi-phase retrofit project is expected to reduce energy use by 38 percent and greenhouse gas emissions by over 6500 metric tons per year. This equates to approximately $4.4 million a year in energy cost savings. With a total incremental cost of approximately $13.2 million, the simple payback period for the project will be only 3 years. Although any reduction in energy use and carbon emissions will ultimately be the result of the specific building improvements implemented, superior financial returns, such as those projected from the Empire State Building retrofit project, are due to adequate time spent in the analysis and planning phase. During this phase it is critical to evaluate the entire building as a system in order to determine the ideal combination of building improvements that will optimize energy efficiency, carbon reduction, and return on investment. In addition, with careful planning, a project team can reduce incremental costs by redesigning scheduled capital projects to make them more energy efficient. Although additional time spent in the planning and analysis phase will add up-front cost, the added improvements in energy efficiency will almost always make up for the investment. Extensive planning and analysis is especially important for organizations with large real estate portfolios. In order to cost effectively improve the energy and environmental performance at the portfolio level it is critical to have detailed information on the energy use and carbon footprint of each individual building. This is the starting point from which an effective building retrofit plan can be implemented across an entire portfolio. Thu, 02 Sep 2010 09:00:00 PST communication@tririga.com (TRIRIGA Communications) http://www.tririga.com/information-center/infocenter-insights?aid=44 http://www.tririga.com/information-center/infocenter-insights?aid=44 This summer, the House and Senate approved two distinct, but similar, telework bills, H.R. 1722 and S. 707 respectively, that would require Federal agencies to create formal telework policies and programs. Final passage of the telework legislation is expected to save Federal agencies approximately $11 billion annually and contribute to the reduction of carbon emissions from commuting. This coincides with last month’s announcement by President Obama that the Federal Government will reduce carbon emissions from indirect sources (e.g., employee travel, commuting, etc.) by 13% by 2020. In addition, according to analysis by the Telework Research Network, the five-year cost to implement the Federal telework program (Approximately $30 million) is equivalent to just half a day of lost productivity when Government employees cannot commute to work due to an extreme weather event like the blizzard that crippled Washington D.C. last winter. According to Kate Lister, lead researcher for the Telework Research Network, “The staggering costs of lost productivity from federal workers during last winter's snowstorms -- estimated by the government at $71 million a day -- would pay for the five-year cost of the bill in one day”. Increasingly, public and private organizations alike recognize the multiple benefits of alternative workplace (AW) strategies such as teleworking or hotelling. Given that real estate represents one of the most significant costs for most organizations, reducing space per employee and increasing utilization through AW programs can provide an excellent return on investment. According to research conducted by the Telework Coalition, an effective telework program can produce savings of $10,000,000 over a five year period per 100 full-time teleworkers (see Figure 1). Figure 1: “What Every Senior Executive Needs to Know About Distributed Work”, New Ways of Working/ TelCoa The economic uncertainty over the last several years has intensified the move toward alternative workplace arrangements for many companies. According to a 2009 survey by the New Ways of Working Network (NewWOW), forty-five percent of respondents reported that their organization had launched their AW program within the past two years. In addition, 40 percent of survey respondents reported that they were expanding existing AW programs as a means of reducing costs due to recessionary pressures. As companies pursue cost savings through AW strategies, they must also be aware of the impact to the most important asset–employees. According to NewWOW, companies that pursue an AW strategy solely to reduce costs risk a backlash by employees in the form of lost productivity, alienation or lack of engagement. NewWOW recommends that companies focus on increasing productivity as a primary goal of an AW program. As Figure 1 shows, the productivity gains and increased employee retention possible from a well executed AW program can greatly exceed the substantial real estate savings. An effective AW strategy must simultaneously increase productivity, reduce cost, and accommodate future space requirements based on projected growth. In order to achieve these objectives, organizations require a system to align business objectives with workforce requirements and the current and future demand for space. To learn more about how this process works, click here, to read the TRIRIGA Whitepaper, “How TRIRIGA SFP meets IFMA's Strategic Facility Planning Process”. Mon, 23 Aug 2010 09:00:00 PST communication@tririga.com (TRIRIGA Communications) http://www.tririga.com/information-center/infocenter-insights?aid=43 http://www.tririga.com/information-center/infocenter-insights?aid=43 Begin to prepare your organization for the new lease accounting standard The IASB and FASB recently issued the Exposure Draft of the proposed lease accounting standards. As many expected, the Exposure Draft is nearly identical to the initial Discussion Paper issued in March 2009. The new lease accounting standard will require companies to capitalize all leases; placing an enormous strain on the financial statements of most companies. IASB and FASB will accept comments on the proposed standard until mid-December 2010, and plans to release the final standard in the second quarter of 2011. The Effective Date of the new standard may not be known until the final rule is issued, but many expect that 2013 will be the first year that companies must follow the new lease accounting standard when preparing financial statements. Although this date may seem remote, companies should start to prepare now in order to successfully transition to the new standard and reduce the negative impact on their financial statements. As Bill Bosco, member of the IASB’s International Working Group on Lease Accounting, explained in the recent Learn from the Leaders Webinar entitled “Action plan to prepare for the new lease accounting standard”, preparation for the new lease accounting standard can be broken down into a transition action plan and an ongoing process action plan. The focus of the transition action plan is to fully understand the proposed changes, collect the necessary data about existing leases, and then prepare necessary accounting entries to book existing leases under the new standard. In general, the transition project would include the following steps: 1.Become familiar with proposed lease accounting standard 2.Create a project team with members from all departments involved (Lease Administration, IT, Accounting, Finance, etc.) 3.Verify that lease administration, accounting, and other software systems meet the requirements of the new rule 4.Implement system enhancements or new systems 5.Extract all pertinent lease information: Lease term and rents – timing and amounts Renewal option terms and rents Contingent rent/percentage rent terms Residual guarantee terms Purchase options terms (currently not needed for accounting but good to know) Service elements in lease 6.Identify internal sources for the following information: Intentions regarding renewal and purchase options (Business Management) Incremental borrowing rate (Finance/Treasury) Sales projections for percentage rents (Business Management) CPI for percentage rents (Finance) Residual guarantee payments (Business Management) 7.Prepare necessary transition entries to book the leases In parallel with the transition plan, companies must also plan for ongoing operations after the new lease accounting standard becomes effective. To learn more about the transition action plan and the ongoing action plan, please watch the on-demand presentation by Bill Bosco, “Action plan to prepare for the new lease accounting standard”. Thu, 19 Aug 2010 09:00:00 PST communication@tririga.com (TRIRIGA Communications) http://www.tririga.com/information-center/infocenter-insights?aid=42 http://www.tririga.com/information-center/infocenter-insights?aid=42 Recently, the National Oceanic and Atmospheric Administration published the annual State of the Climate Report summarizing the key climate indicators of 2009. The report, compiled by 300 scientists from 48 countries, concludes that “global warming is undeniable”. Not only was the past decade the warmest on record, but almost every climate indicator shows that climate change is occurring at a more dramatic pace than was predicted by scientists just a few years ago. Although the United Nation’s International Panel on Climate Change (IPCC) predicted in their 2007 report that climate change would bring increased flooding, heat waves, and glacier melting; the severity of the flooding and heat waves experienced around the world over the last few months has been more intense than most expected. Increased flooding This year the United States has experienced widespread flooding from New England to Oklahoma. Intense rain in Northern Iowa caused a dam to fail and Middle Tennessee experienced a “1000 year” flood after receiving 19 inches of rain over a two day period. In Pakistan, intense flooding has killed at least 1,600 people and 20 million have been injured or displaced. Approximately one third of the country’s land mass has been affected by the flood. China has also experienced intense rain and flooding this summer. Floods and landslides have killed more 1,100 people and hundreds more are missing. Intense heat waves The New York Times reports that record highs are outpacing records lows by a factor of two to one. This correlates with climatologists’ theory of what should occur during a period of rapid global warming. In Russia, this summer has been the warmest ever recorded with temperature in Moscow topping 100 degrees Fahrenheit for the first time in the city’s long history. Thousands of people have died and drought has reduced Russia’s wheat harvest by over 30%. Accelerated ice melt Although not a weather event, per se, the dramatic decrease in arctic and glacial ice cover is perhaps the most alarming evidence that increased carbon emissions are warming the planet. This summer a 100-square-mile mass of ice fell off of the Petermann Glacier in Greenland. Since 1979, approximately 1 million square miles of sea ice, equivalent to the area of Alaska and Texas combined, has disappeared. According to Scientists at the National Snow and Ice Data Center and the National Center for Atmospheric Research, Arctic ice cover is decreasing faster than any of the 18 computer models used by the IPCC had predicted. What does this mean for your organization? This is just a sample of the severe weather events that have occurred this year. Globally, the average number of weather-related disasters is three times greater than the average at the beginning of 1980. The recent weather disasters around the world have only reinforced the consensus that global warming is one of the most serious challenges mankind has ever faced. Every country and region will be affected, both directly and indirectly, by the increased frequency and severity of weather events. All indications are that the extreme weather events experienced this summer will continue to increase in the future. Unless there is a concerted worldwide effort to reduce greenhouse gas emissions, these extreme weather events along with rising sea levels will result in trillions of dollars of damage and millions of lives displaced, injured, or killed. As this reality continues to sink in, investors, customers, and regulators will increase pressure on companies to measure and manage their carbon emissions. Investors will increase their scrutiny of a company’s exposure to climate change risks, and an increasing number of customers will evaluate a company’s environmental stewardship when making purchasing decisions. And, even if the Federal Government fails to enact carbon legislation, individual states will continue to take the lead and implement climate change regulations that will directly and indirectly place a price on carbon and increase the price of energy. Learn more about TRIRIGA’s environmental sustainability software, TREES, to help your organization prepare for the increased focus on carbon emissions. Thu, 12 Aug 2010 09:00:00 PST communication@tririga.com (TRIRIGA Communications) http://www.tririga.com/information-center/infocenter-insights?aid=41 http://www.tririga.com/information-center/infocenter-insights?aid=41 As detailed in the new whitepaper by Bob Cook, “The New Lease Accounting Standard and You”, the proposed lease accounting changes will force most companies to significantly change their lease administration processes and systems in order to comply with the new rules. Since the new standard will likely not include a grandfather clause for existing leases, companies must begin to prepare for the changes today. The additional complexity introduced by the proposed changes, especially for companies with medium to large portfolios of leased properties, will require an advanced lease accounting system to manage existing leases and prepare for the upcoming lease accounting standard. There are a number of capabilities that a lease administration system should have in order to manage leases under the new rules. Here are five of the most important features to look for: 1. OSCRE Lease abstract support: To prepare for the new lease accounting standard companies must collect critical information for each lease in their portfolio. For many companies, the collection and verification of applicable lease data will require the help of third-party lease abstractors. Support for the OSCRE (Open Standards Consortium for Real Estate) Lease Abstract standard streamlines the exchange of lease information between third-party abstraction firms and the company’s lease administration system. 2. Lease option tracking: Under the new lease accounting standards, the book value of the lease asset will be the present value of the lease payments over the “most likely” lease term. This “most likely” lease term is determined based on the likelihood any renewal options will be exercised. A lease administration system should include the capability to identify all available lease options including renewals, expansions, early terminations and purchase options. In addition, the lease accounting system should be able to track other lease terms, like contingent rent agreements that will have a material impact on lease valuation under the proposed lease accounting changes. 3. Critical date tracking with alerts: The lease administration system should have the capability to track important lease dates and alert lease administrators in advance when an action is required. For example, a lease may have an automatic extension clause that extends a lease if the lessee does not formally terminate the lease within a specified timeframe. The lease administration system should send alerts to the appropriate person and then automatically adjust the lease value based on the decision taken (extend vs. terminate). This feature is especially important given the impact that a lease may have on the balance sheet on the new lease goes into effect. 4. Automated audit capabilities: Due to the increased visibility placed on leases under the new lease standard, automated audit capabilities and compliance with Sarbanes Oxley (SOX) section 404 becomes critical. Under the new lease accounting standard, assumptions regarding the exercise of renewal options and estimates of contingent rents can have a significant impact on the book value of leases. The lease administration system must track changes to data values, actions taken by users and provide explanation for the required change. These assumptions and changes should be easily audited. 5. Integration to financial accounting systems Increased collaboration between the lease administration function and the financial controller will be important to prepare for the new lease accounting standard. The lease administration system should include integration capability to transfer data to and from financial accounting systems. Initially, lease administrators may need to extract data in order to make or validate assumptions about renewal options or contingent rents. Once the new lease accounting standard has been implemented, the lease administration system can send necessary data to the financial accounting system to accurately account for leases on the financial statements. Once the exposure draft is released and the specific are better understood, additional capabilities for the lease administration system will likely surface. To learn more about how to prepare for the new lease accounting standard, please view the “TRIRIGA Learn From Leaders On-Demand Webinar: Action Plan to Prepare for the New Lease Accounting Standard”. In this webinar session, Bill Bosco, a member of the International Accounting Standards Board’s (IASB) International Working Group on Lease Accounting, discusses the actions that companies must take today to prepare for the changes to the lease accounting standard. Wed, 28 Jul 2010 09:00:00 PST communication@tririga.com (TRIRIGA Communications) http://www.tririga.com/information-center/infocenter-insights?aid=40 http://www.tririga.com/information-center/infocenter-insights?aid=40 Recently, the U.S. Government announced that it will begin asking all 600,000 suppliers to provide greenhouse gas (GHG) data. This program is in support of Executive Order (EO) 13514, signed by President Obama in October or 2009, that calls for Federal agencies to “establish an integrated strategy towards sustainability in the Federal Government and to make reduction of greenhouse gas emissions a priority for federal agencies.” Collecting GHG data from suppliers specifically supports section 13 of the EO. This section focuses on measuring, managing, and reducing the greenhouse gas emissions from the governments vast supply chain. In accordance with section 13 of the EO, the General Services Administration (GSA) has prepared a recommendation of how the Federal Government should track and use GHG emission data from suppliers. The GSA’s recommendations potentially have a significant effect on which suppliers are chosen to supply the $500 billion in goods and services procured by the government each year. What is the GSA recommending? In order to incentivize Federal suppliers to provide GHG data, the GSA has recommended that Federal agencies should be encouraged to use GHG emission data as a “procurement preference” when making purchasing decisions. Suppliers that comply with the request for GHG emission data can reasonably expect some level of preferable treatment from Federal agencies. According to the GSA, “Federal agencies should use suppliers GHG emissions reporting status as an evaluation factor in contract awards.” It is important to note that today and Federal agency has the ability to use supplier GHG emission data as an evaluation factor to award contracts. In addition, the GSA has proposed that suppliers who demonstrate leadership in carbon management should receive public recognition from the Federal government. Finally, the GSA recommends that GHG emissions reporting should eventually be a mandatory requirement for a supplier to simply be considered in procurement decisions. When will recommendations be implemented? Using a phased approach, the GSA’s recommendations could start to take effect as early as fiscal year 2011. Initially, suppliers will be asked to voluntarily provide GHG emission data for direct emissions (Scope 1) and emissions from purchased energy (Scope 2). Although Federal agencies will not be required to use GHG data as a factor when selecting suppliers, many will factor the data into the decision making process based on their commitments to reduce indirect emissions under EO 13514. In the second phase of the program, beginning as early as 2012, suppliers will also be asked to provide data about other indirect emissions (Scope 3). For certain products categories, Federal agencies may be able to use GHG data as an “evaluation factor”; enabling them to select a product with a low carbon footprint over the least costly choice. In this phase, suppliers will be expected to have emission data verified by a third–party. How will the recommendations affect procurement decisions? According to the GSA’s recommendations, “The most significant incentive for Federal suppliers to submit GHG inventory data is the desire to remain competitive in the Federal marketplace.” As Federal agencies look for ways to comply with EO 13514, they will inevitably evaluate their supply chains to identify ways to reduce indirect (Scope 3) greenhouse gas emissions. All else being equal, agencies will select goods and services from companies that track and manage carbon emissions. What should suppliers do to prepare for the recommendations? The GSA’s recommendations to meet the requirements of EO 13514 are yet another reason why companies must address carbon emissions and energy use today. Companies with low carbon intensity compared to their competitors will have an advantage in procurement decisions. Not only does this apply to the Federal Government, but Wal–Mart and other large companies have begun to track, and make decisions based on, the carbon emissions of its suppliers. Suppliers who fail to account for their carbon emissions will be at a significant disadvantage in the near future. Even more important than simply tracking emissions, is the fact that efforts to reduce carbon emissions often equate to energy use reduction that saves money and improves general profitability and competitiveness. To optimize this alignment between carbon reduction and energy efficiency, organization must understand what area of the business represents the best opportunity for improvement. For many companies, facilities are a major contributor to GHG emission and represent a huge opportunity to reduce environmental impact and energy use. In order to effectively compete within a procurement system that evaluates carbon emissions in the purchasing process, companies need the ability to measure their carbon emissions and then identify cost–effective opportunities to reduce emissions and energy use. Fri, 09 Jul 2010 09:00:00 PST communication@tririga.com (TRIRIGA Communications) http://www.tririga.com/information-center/infocenter-insights?aid=39 http://www.tririga.com/information-center/infocenter-insights?aid=39 Last week hurricane Alex slammed into the northeast coast of Mexico; bringing with it winds of over 100 miles per hour. Although Alex ranked as a relatively low intensity Category 2 hurricane, the storm still caused over $1 billion of damage and affected hundreds of thousands of people. Experts predict that this is just the start of an unusually strong hurricane season. The National Oceanic and Atmospheric Administration (NOAA) predicts an “extremely active” season with between 8 to 14 hurricanes. The Tropical Meteorology Project at Colorado State University’s Department of Atmospheric Sciences estimates that there is a 76 percent chance that a hurricane will hit the US coast between June and November of 2010. This probability is more than 20 percent greater than the average hurricane season. Figure 1: Hurricane Alex. Given the very real risk of hurricanes, earthquakes and other disasters, organizations must be prepared to deal with the potential damage and business disruption that natural and manmade disasters can cause. Effective disaster recovery and business continuity plans are critical to minimize business downtime and property damage. A major component to these plans is facilities. Real estate and facilities management departments must have access to facility information critical to emergency preparedness and disaster recovery management. According to industry analyst, Mike Bell, a business continuity plan must include the following information related to facilities: Robust information on facility capacities, contract obligations, and values The location, identity, and roles of essential staff, and an established contingency plan for these personnel in the event of a business disruption Contingency plans for mission critical facilities in the event of a catastrophic business disruption Facilities disaster recovery processes that align and support enterprise business continuity plans Unfortunately, many organizations struggle with inflexible and cumbersome legacy systems that have incomplete and inaccurate data, poor integration, and a lack of pre-defined processes. Integrated Workplace Management Systems streamline emergency management An Integrated Workplace Management System (IWMS) streamlines the creation and implementation of disaster recovery and business continuity plans. IWMS provides critical insight into mission-critical facilities and delivers the centralized repository of essential facility information, processes, and procedures necessary for an effective emergency response. To learn more about how IWMS delivers the capabilities to support your organization’s disaster recovery plans, read Integrated Workplace Management System – A critical tool in business continuity and disaster recovery management, a whitepaper authored by leading industry analyst Michael Bell. Thu, 08 Jul 2010 09:00:00 PST communication@tririga.com (TRIRIGA Communications) http://www.tririga.com/information-center/infocenter-insights?aid=38 http://www.tririga.com/information-center/infocenter-insights?aid=38 The new lease accounting standards will increase the importance and role of Corporate Real Estate professionals. Under the proposed lease accounting changes, Corporate Real Estate (CRE) professionals will be tasked with new and critical responsibilities related to the preparation of financial statements. To comply with the proposed lease accounting standards, CRE professionals must develop, maintain and supply accurate lease information, and create new portfolio planning processes in order to inform the forward looking assumptions necessary under the new lease accounting standards. See Figure 1 below. Figure 1: New Responsibilities for Corporate Real Estate. In the third and final session of TRIRIGA’s webinar series, The New Lease Accounting Standards and You, Bob Cook, Real Estate and Financial Strategist, provided insights into the increased responsibilities for Corporate Real Estate professionals including, but not limited to the following: Maintenance of complete, accurate and timely lease data Process design for hand-off’s, data checks, global processes and SOX-compliant processes Technology integration requirement plans for re-designed processes, including the need for global access and/or entry, database of record and getting IT support for new and enhanced technology Assumption-making processes, long-term planning, alternative workplace strategy, rights to renew and ethics training Creation and management of an effective communications program in order to streamline understanding of all downstream effects Figure 2: Increased Responsibilities for Corporate Real Estate. To learn more about how the new lease accounting standards will change your processes and strategies, click here to view the TRIRIGA webinar series, The New Lease Accounting Standards and You. Wed, 30 Jun 2010 09:00:00 PST communication@tririga.com (TRIRIGA Communications) http://www.tririga.com/information-center/infocenter-insights?aid=37 http://www.tririga.com/information-center/infocenter-insights?aid=37 The intent of new lease accounting is to shine a spotlight on the lease obligations of companies to make them more visible to investors than they are today. Under proposed changes to lease accounting rules, the SEC estimates that $1.3 trillion of operating lease obligations will be added to balance sheets. All companies with leases will be affected, some more than others, and some industries more than others. While retail companies will have their balance sheets affected most, the impact on non-retail companies might be the most surprising. See Figure 1 below. Figure 1: Future operating lease obligations to go on balance sheets. The spotlight on lease obligations will lead to a spotlight on the policies, practices, processes and people who manage real estate assets within U.S. companies. In the second session of TRIRIGA’s three-part webinar series, The New Lease Accounting Standards and You, Bob Cook, Real Estate and Financial Strategist, provided insight into the challenges created and how companies must re-think their corporate real estate strategy under the proposed standard. New Challenges: New lease accounting rules require that all leases be recognized as capital assets and require an adjustment in the way they are recognized on the Profit and Loss Statement (P And L) of companies. Rather than a “Rent Expense”, companies will recognize lease obligations as “Depreciation” and “Interest” expenses. While payments to landlords remain the same, for accounting purposes they will be divided into principal and interest payments – similar to a self–amortizing loan. As a result, the interest component will be greater in the early years than in later years. Figure 2 illustrates how the proposed lease accounting changes will have a negative effect on earnings during the first half of the lease term. Figure 2: Example lease under new accounting standards. Implications on Real Estate and Financial Strategies: The longer the lease term, the worse the problem! A 5-year lease (or one with 5-years remaining at the effective date) will increase the lease obligation by 9.52% in the first year, while a 15-year lease will increase the lease obligation by 23.02% in the first year of new accounting rules.† Therefore, companies must re-evaluate real estate and financial strategies in the context of new lease accounting standards. Traditional Own vs. Lease strategies may flip based on a company’s focus on Return on Assets (ROA) and EBITDA, or P And L impact. See Figure 3 below. Figure 3: Strategy Re-Think: Own vs. Lease. Similarly, corporate real estate strategies may change relative to lease term. Long-term leases may look more attractive to companies that previously looked to avoid increases to the balance sheet, as all leases will be capitalized. Short-term leases may look more attractive to those companies eager to avoid heavy P And L expenses in early years. See Figure 4 below. Figure 4: Strategy Re-Think: Short vs. Long Leases. To learn more about the impact and preparation required to comply with the new lease accounting standards, click here to view the second session of the three-part webinar series, The New Lease Accounting Standards and You. † Assumes a 6% Discount Rate Mon, 21 Jun 2010 09:00:00 PST communication@tririga.com (TRIRIGA Communications) http://www.tririga.com/information-center/infocenter-insights?aid=36 http://www.tririga.com/information-center/infocenter-insights?aid=36 More than 100 Corporate Real Estate and Finance professionals registered for the TRIRIGA’s New Lease Accounting Standards and You webinar series in order to understand and prepare for the anticipated lease accounting changes. In the first of the three-part webinar series, Bob Cook, Real Estate and Financial Strategist provided insights to the major implications that the new lease accounting standards will have on corporate real estate strategy, processes, and internal budgeting. In this thoughtful presentation, Bob outlined the steps everybody involved in Corporate Real Estate will need to take in order to prepare for the new lease accounting changes: 1. Prepare for the spotlight- With an estimated $1.3 trillion of new assets being added to the balance sheet of major companies, the new standards will shine a huge spotlight on corporate real estate; and result in increased scrutinized by CEOs and CFOs. 2. Understand the budget shortfall- Permanent ratcheting up of lease expenses will create an estimated 5-15% increase in contribution to the Profit and Loss (P And L) of companies. Figure 1: Lease accounting changes will create impact on income statement 3. Re-think your strategy- The new lease accounting standards will financially impact your current real estate strategies. As companies re-asses their real estate strategy, companies must understand the impact of ownership and term. Figure 2: Lease accounting changes will force a rethink in real estate strategy 4. Consider the downstream effects- New processes for each downstream effect will need to be implemented to conform to new lease accounting standards. Figure 3: Lease accounting changes will impact downstream processes 5. Prepare for compliance challenges- New tools, technology and personnel will be required to create, test and implement processes to be compliant with both the new lease accounting standards and SOX. 6. Evaluate leases based on no grandfathering- Leases signed today will follow the new lease accounting standards on the effective date which means that the new lease accounting rules affect today’s decisions. 7. Prepare for the leadership gap- The new lease accounting standards create a challenging multi-functional and cross-business unit project in which ‘point’ person(s) must be assigned. To learn more about the changes, impact and preparation required to comply with the new lease accounting standards, click here to view the first of the three-part webinar series, The New Lease Accounting Standards and You. In the next session of this series, Bob Cook will provide insights to the strategic and practical implications of the proposed lease accounting changes. Click here for more details. Thu, 17 Jun 2010 09:00:00 PST communication@tririga.com (TRIRIGA Communications) http://www.tririga.com/information-center/infocenter-insights?aid=35 http://www.tririga.com/information-center/infocenter-insights?aid=35 Obama asks Federal agencies to “accelerate efforts to identify and eliminate excess properties.” On Thursday, June 10, 2010, President Obama issued a memorandum that directs Federal agencies to eliminate excess properties and use existing properties more effectively. This directive would save $3 billion by 2012 and aligns with the administration’s increased focus on cost reduction and environmental stewardship throughout the Federal Government. Real property assets represent one of the best opportunities to save costs and reduce carbon emissions. The Federal Government’s real property portfolio consists of nearly 900,000 buildings with a total area of almost 3.3 billion square feet †. According to the Office of Management and Budget (OMB), the Federal government has more than 20,000 properties that are designated as excess ‡ and more than 55,000 properties that are partially or completely vacant. Besides simply selling excess and vacant facilities, the administration has asked agencies to optimize the use of real property assets by addressing utilization and occupancy rates, operating costs, and energy efficiency. These combined efforts support the administration’s initiatives to reduce costs and improve environmental performance. First, since real estate expense is often a top-three operating expense item, disposal of unneeded real estate provides one of the most effective ways to reduce costs. For example, General Electric reduced facility costs by more than $1 billion over the last seven years through a concerted space reduction effort. Through a similar program of space management and reduction, the Obama administration expects a reduction in facility costs of $3 billion by the end of 2012. This objective aligns with a recent memorandum from the Office of Management and Budget (OMB) directing non-security Federal Agencies to reduce 2012 budgets by at least five percent. Secondly, given that buildings are responsible for a large percentage of the Federal Government’s carbon footprint, disposal of vacant facilities and increased utilization of existing facilities provides a critical component to meeting GHG reduction goals. Based on conservative estimates, a 3 percent decrease in real property inventory would equate to a reduction in energy costs of almost $80 million per year and a reduction of GHG emissions of almost half a million metric tons per year. This opportunity supports the Federal Government’s commitment, based on Executive Order 13514, to reduce GHG emissions by 28 percent by 2017. In a recent memo discussing budget reduction initiatives, the Director of the OMB, Peter Orszag, wrote “agencies should not simply reduce spending across the board. Instead, agencies should aim to restructure their operations strategically.” Similarly, a strategic approach is needed to reduce and optimize real property assets without impinging on the effectiveness of agency operations. In addition to identification and disposal of excess assets, agencies are encouraged to eliminate lease arrangements that are not cost effective, pursue consolidation opportunities within and across agencies, and increase occupancy rates through innovative space management and workplace arrangements. In order to apply these tactics effectively, agencies need tools to fully manage the current portfolio and, more importantly, to create an accurate forecast of future space requirements. With this information, agencies can create a strategic plan to increase the effectiveness of real property assets which contribute to Federal cost reduction and environmental performance goals. † Federal Real Property Report, August 2009, FRPC ‡ According to the Federal Real Property Council, “Excess” buildings have been formally identified as having no further program use of the property by the landholding agency. Mon, 07 Jun 2010 09:00:00 PST communication@tririga.com (TRIRIGA Communications) http://www.tririga.com/information-center/infocenter-insights?aid=34 http://www.tririga.com/information-center/infocenter-insights?aid=34 As discussed in a previous posting, the Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB) are considering major changes to the financial accounting standards for leases (FAS 13). Under the proposed changes, all operating leases would be reclassified as capital leases and, as such, be accounted for on the organization’s balance sheet. This reclassification would also change the way that leases are accounted for on the income statement. The Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB) will release the much anticipated exposure draft detailing the latest proposed lease accounting changes updated with modifications made due to feedback received during the comment period. The exposure draft is the last step before IASB and FASB issue the final standard. Although these changes will likely go into effect in 2012, professionals responsible for the real estate and facilities assets must understand today how their current portfolio strategy will affect financial statements after the new standard takes effect. There are several potential points that organizations need to be aware of today in order to prepare for the upcoming lease accounting changes. No grandfathering The most important point to consider in regards to the proposed lease accounting changes is that, in all likelihood, existing operating leases, signed prior to the implementation of the new rules, will require reclassification as capital leases that must be accounted for on the balance sheet. This means that real estate professionals must immediately consider the effect that existing and planned leases will have on financial statements once the proposed rules are implemented. Since operating lease obligations often represent a larger liability than all balance sheet assets combined, lease reclassification can significantly alter an organization’s balance sheet. Based on SEC estimates, U.S. public companies will have to reclassify more than $1 trillion in operating leases under the proposed FAS 13 changes. Lease duration Under the proposed changes, accounting for leases with renewal or termination options will become much more complex. Currently, renewal and termination options are not accounted for in any financial statement. Under the proposed lease accounting change, for each lease containing options, an organization must specify the most likely lease term based on contractual, non-contractual and business factors. This most likely lease term is used to calculate the value of the asset and liability recorded on the balance sheet. Organizations must update the most likely lease term each reporting period to reflect any new facts or assumptions that are material to the lease term estimate. These changes to the lease term can have a major impact to the value of the leased asset on the balance sheet. This is especially true when a lease has an option to purchase the leased property and exercising the option is deemed the most likely lease term. Under this scenario the discounted exercise price of the purchase option would be added to the asset and liability associated to the lease. Adjustable rent Accounting for leases with adjustable rent (aka, contingent rent) provisions will also become more complicated under the proposed changes. Under the current FAS 13 rules, there is no requirement to account for anticipated changes in rent due to a change in revenues, an inflation index, or another metric. Under the proposed lease accounting changes, the asset and liability arising from leases with adjustable rents will be calculated using estimated future rent levels. In order to estimate future rents, FASB has recommended using an approach similar to the lease duration estimate that would require a “most likely” rent to be identified from the range of possible rents. As with the estimate for lease duration, the most likely estimate of future rents would need to be adjusted each reporting period based on any new material information. Unlike the estimate for lease duration, adjusted future rent estimates will usually not have a large affect on the balance sheet since contingent rents generally make up a small percentage of total rent expense. Start preparing for FAS 13 lease accounting changes today Since the proposed lease accounting changes will likely require organizations to reclassify existing operating leases to capital leases, it seems reasonable that real estate professionals would start factoring these changes into their current real estate portfolio strategy. However, in a recent survey conducted by Jones Lang LaSalle and CoreNet Global, 83 percent of respondents were either unfamiliar with the details or completely unaware of the proposed lease accounting changes. In the same survey, 90 percent of respondents reported that at least 95 percent of their real estate leases were structured as operating leases. Given the potentially enormous impact that the FAS 13 changes will have on the balance sheet, the time to address these changes is now. To learn more about the FAS 13 changes please register for TRIRIGA’s upcoming Learn from the Leaders Webinar Series: The New Lease Accounting Standards and You. During this three part series, real estate and financial strategist, Bob Cook, will review the proposed lease accounting changes in detail and provide insight into how real estate portfolio strategy may be affected. Tue, 18 May 2010 09:00:00 PST communication@tririga.com (TRIRIGA Communications) http://www.tririga.com/information-center/infocenter-insights?aid=33 http://www.tririga.com/information-center/infocenter-insights?aid=33 Energy benchmarking is crucial to optimize return on energy efficiency investments. In order to capture energy savings in a cost effective manner, organizations need to understand which facilities offer the most room for improvement. From TRIRIGA’s Webinar Series: Maximize Return from Energy Benchmarking, Laurie Gilmer, P.E., CFM, LEED-AP reported that $200 Billion per year is spent on electricity, gas and water in commercial facilities throughout the U.S. A 10 percent improvement in building energy efficiency would save about $20 billion in operating cost, reduce greenhouse gases, and provide a significant contribution to the bottom line. Energy Use Intensity (EUI) provides a good metric to evaluate buildings with a similar use in a similar geographic location. An understanding of a building’s energy performance helps organizations formulate high return plans that maximize the investment of time and capital. Buildings with the highest EUI represent good candidates for energy efficiency improvements. Buildings with the lowest EUI should be properly maintained to preserve energy performance. See Figure 1. Figure 1. Portfolio Priorities Based on Energy Use Intensity While EUI provides an appropriate metric to evaluate a group of relatively similar buildings, owners of large geographically and functionally diverse portfolios require a way to normalize energy performance by weather, building use, and other factors. The ENERGY STAR® rating compares the energy performance of buildings across an entire real estate portfolio and has become the de facto external energy benchmarking standard in the United States over the past ten years. ENERGY STAR’s 0 to 100 rating system makes it easy to identify facilities that are prime candidates for energy performance improvements. Similar to the EUI analysis, buildings with the lowest ENERGY STAR scores are good candidates for investment and buildings with the highest ENERGY STAR scores should be properly maintained. See Figure 2. Figure 2. Portfolio Priorities Based on Energy Star Rating Performance Based on a sample of 4,000 ENERGY STAR rated buildings nationwide, top performing buildings use 3-4 times less energy per square foot than the worst performers. Newer buildings are surprisingly equally represented across all performance quartiles which means that new does not always equal efficient. Buildings with an ENERGY STAR score of 50 are considered average and buildings that score 75 or higher are eligible for ENERGY STAR certification. See Figure 3. Figure 3. EPA Performance Rating Increasingly, many states and municipalities require public and private organizations to obtain an ENERGY STAR rating. “Mandatory building energy rating policies are now in place in more than 30 countries worldwide and are in place in some form or other in California, Nevada, Washington, Oregon, New Mexico, and, most recently, in New York City, which in December enacted a landmark measure to require building benchmarking and labeling,” according to The Corporate Social Responsibility Newswire. Read how New York City Implements TRIRIGA TREES to Reduce Energy and Carbon Footprint. To learn more about how to formulate and improve your overall environmental strategies for your facilities, watch this on-demand webinar, Identify and Prioritize Efficiency Opportunities in Commercial Buildings. Thu, 25 Mar 2010 09:00:00 PST communication@tririga.com (TRIRIGA Communications) http://www.tririga.com/information-center/infocenter-insights?aid=32 http://www.tririga.com/information-center/infocenter-insights?aid=32 As discussed in a previous posting, the Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB) are considering major changes to the financial accounting standards for leases (FAS 13). Under the proposed changes, all operating leases would be reclassified as capital leases and, as such, be accounted for on the organization’s balance sheet. This reclassification would also change the way that leases are accounted for on the income statement. Rent payments would no longer be included in EBITDA (Earnings Before Interest Taxes Depreciation and Amortization). Instead, a before tax depreciation and interest amount would be calculated to account for the annualized use of the property. FAS 13 changes will affect financial statements The impact of the FAS 13 changes on an organization’s financial statements will vary based on a number of factors. For organizations with a small percentage of operating leases, in relation to their total real estate portfolio, the effect of the FAS 13 changes will be minor. Initially, total expenses will increase slightly due to additional depreciation and interest expense that exceeds the previous rent expense. However, as the interest expense falls over the life of the lease, the initial expense increase will eventually turn into an expense decrease with the net effect being no change in net income over the life of the lease. On the balance sheet, equity will decrease slightly at first since the asset book value will decline faster than the liability book value during the first half of the lease term. This equity decrease diminishes over the life of the lease and eventually disappears. Large organizations will see dramatic impact For larger organizations with many operating leases, the impact of the FAS 13 changes will be more dramatic. A 2009 Jones Lang LaSalle survey found that 90 percent of respondents reported having almost all leases structured as operating leases. For these organizations, the effects of the FAS 13 changes are more difficult to predict. A recent CBRE study found that the effect of the FAS 13 changes become more significant when applied to an entire portfolio of operating leases. Since large portfolios of operating leases will generally expire at different times, the decrease in total equity on the balance sheet will remain as leases are constantly created or renewed. Similarly, the combined operating expenses for a large portfolio of leased properties will eventually stabilize at a level similar to the expense level under the current accounting standard and will not negate the initial decrease in EBITDA. Although the size of an organization’s leased portfolio in relation to all properties and assets will be the major factor in determining the impact of the FAS 13 changes on financial statements, lease duration and the incremental borrowing rate are also important factors. An increase in either of these factors will have a negative impact on equity and expenses under the proposed changes. This does not imply that a short-term lease is always preferable over a long-term lease under the proposed changes. Short-term leases with options for renewal will likely have to account for the renewal options when calculating the value of the lease asset and liability. And, as discussed previously, the impact on financial statements is just one of many variables that need to be considered when evaluating lease strategies. Real estate decision support will be critical According to Ross Selvidge, managing director with CBRE Strategic Consulting, transitioning to the new accounting changes will require "accurate, centralized, and standardized lease data with projections of the anticipated rent obligations for each and every year for each individual lease". This applies today considering that the FAS 13 changes do not "grandfather" existing operating leases. Existing operating leases will need to be converted to capital leases as soon as the change takes effect. Real estate professionals need to understand the potential financial statement impact of the FAS 13 changes when entering into new lease agreements. The proposed FAS 13 changes illustrate the fact that, more than ever, real estate executives and professionals require a real estate decision support system that provides the ability to prioritize real estate and facilities objectives and make tactical decisions that align real estate actions with the organization’s overall business strategy. Wed, 10 Mar 2010 09:00:00 PST communication@tririga.com (TRIRIGA Communications) http://www.tririga.com/information-center/infocenter-insights?aid=31 http://www.tririga.com/information-center/infocenter-insights?aid=31 A year of natural disasters So far, 2010 headline stories have been marked by a series of natural disasters of almost unprecedented scale. Whether we examine the earthquakes of Haiti and Chile or the winter storms that have battered the Northeastern United States, structural damage to facilities, electrical grid failures and transportation disruptions limit the continuity of business operations and disaster recovery efforts within these affected areas. (see figure 1.) Figure 1: Storm causes havoc in the Northeast – 2/27/2010 Suspension of operations at mission critical facilities such as headquarters, data centers, call centers, manufacturing sites and laboratories can rapidly translate into millions of dollars of lost productivity and customer disaffection. Lack of an integrated facilities database can hamper disaster recovery To minimize the impact of natural disasters on mission critical facilities, real estate and facilities departments must deliver vital insights required to formulate an overall business continuity plan and specific disaster recovery scenarios. From these plans, real estate and facilities departments must be prepared to execute these plans immediately with other members of the recovery team including IT, human resources, risk management, operations management and communications. Unfortunately, many organizations lack the unified and integrated facilities database and process support that are crucial in the planning and execution of a comprehensive facilities disaster recovery plan. Make sure your company is prepared While the February 27th 8.8 magnitude earthquake in Chile was measured to be 500 times stronger than that of Haiti’s, Chile’s preparedness and rapid response translated into less loss of life and critical infrastructure. Use of an Integrated Workplace Management System (IWMS) within your business continuity planning can similarly prepare your organization to respond immediately and minimize disastrous consequences. At a high–level, IWMS identifies mission critical facilities and serves as the centralized repository of essential facility information, processes and procedures for an effective emergency response. To discover how IWMS delivers the capabilities to support your organization’s disaster recovery plans, read Integrated Workplace Management System – A critical tool in business continuity and disaster recovery management, a whitepaper authored by leading industry analyst Michael Bell. Fri, 26 Feb 2010 09:00:00 PST communication@tririga.com (TRIRIGA Communications) http://www.tririga.com/information-center/infocenter-insights?aid=30 http://www.tririga.com/information-center/infocenter-insights?aid=30 On Monday (February 22) the Environmental Protection Agency (EPA) announced that planned regulation of greenhouse gas (GHG) emissions under the authority of the Clean Air Act would be phased in over the next several years. As reported previously, the EPA’s proposed regulation of GHG emissions from large emitters was expected to take effect in 2010. Since the EPA’s announcement in September, a number of legislators and business leaders have expressed concerns about the cost of complying with new regulations in a struggling economy. In response to these concerns, the EPA has decided to postpone the start of the regulation and take a phased approach to implementation. Starting in the first half of 2011, the largest GHG emitters who are already required to comply with other provisions of the Clean Air Act will be required to obtain a GHG permit by demonstrating that best practices and technologies are being used to minimize GHG emissions. Depending on the amount of GHG emitted, other large emitting organizations will be phased into the program between 2013 and 2016. In addition to the delay in implementation, the EPA may also increase the GHG emission threshold used to determine whether an organization is required to obtain a GHG permit. This could significantly decrease the number of organizations that are required to obtain permits. Impact to Your Organization: Although the changes to the EPA’s proposed regulation will reduce the compliance burden for most large emitters of GHG, it is important to note that this announcement has no effect on the EPA Mandatory GHG Reporting rule or any other federal, state, or local GHG legislation. And, given the fact that the material risks from climate change are not limited to the direct impact from legislation and regulation, the EPA’s announcement should have little influence on an organization’s carbon management strategy. The bottom line is that organizations should not interpret the EPA’s announcement as a devaluation of GHG reduction efforts. More than ever, organizations that manage energy use and GHG emissions today will have a competitive advantage over those that wait for regulation to compel action. Thu, 11 Feb 2010 09:00:00 PST communication@tririga.com (TRIRIGA Communications) http://www.tririga.com/information-center/infocenter-insights?aid=29 http://www.tririga.com/information-center/infocenter-insights?aid=29 Facilities and real estate assets represent a top-four cost of business for more than 67% of organizations. As organizations seek to contain their facilities operating costs, the real estate and facility management function has become strategic to the enterprise with the majority of C-suite executives having moderate (55.6%) to high (27.8%) awareness and priority for this function - see Figure 1. Figure 1. CRE Function While many organizations will struggle to contain escalating energy, occupancy and maintenance costs, Aberdeen Group reports that best-in-class organizations achieved annual savings rates of more than twice the annual TCO savings per square foot when compared to others – see figure 2. Figure 2. Annual Savings Rates Achieved A real solution to cut facility costs When asked, 65% of these high-performers are more likely than their peers to rationalize their facilities portfolio to reduce costs and 55% develop a strategic real estate and facilities plan. According to the Aberdeen report, they understand the need for enterprise-class software to increase their utilization of space and achieve 20% higher space utilization than those that don’t. Wed, 03 Feb 2010 09:00:00 PST communication@tririga.com (TRIRIGA Communications) http://www.tririga.com/information-center/infocenter-insights?aid=28 http://www.tririga.com/information-center/infocenter-insights?aid=28 January 23, 2010, the U.S. Securities and Exchange Commission (SEC) agreed for the first time that corporations are required to disclose climate change risks to investors. According to a joint press release from CERES and EDF, the SEC’s guidance is “the first economy-wide climate risk disclosure requirement in the world”. The SEC’s decision was influenced by repeated requests over the past three years by investor groups who urged the SEC to require full corporate disclosure of climate-related business risks and strategies for addressing those risks. The announcement highlights a number of areas where disclosure of climate change risks would be required. These include: direct impact from legislation and regulation, indirect consequences of regulation or business trends, and the physical impact of climate change. Direct impact from legislation and regulation Increasingly organizations will face material impacts from climate change legislation and regulation. This is especially true for organizations that directly emit large amounts of carbon emissions. Many of these organizations are already experiencing the risks and challenges of complying with the EPA’s Mandatory Greenhouse Gas (GHG) Reporting rule and potential regulation. Under the SEC’s guidance, the potential material impact of this regulation should be addressed in financial reports to investors. As proposed legislation sits in the U.S. Senate, a price on carbon becomes more probable, organizations will certainly need to disclose the potential financial impact of direct carbon emissions. Indirect consequences of regulation or business trends Large direct emitters of carbon emissions will not be the only organizations affected by the SEC’s guidance. Many organizations with modest direct GHG emissions will still be affected by regulations and business trends related to carbon management. As discussed previously, regulation that puts a price on carbon will have the indirect affect of increasing energy costs for all organizations. And, increasingly, organizations that have direct or indirect carbon emissions in excess of the industry average will face a material risk of increased costs and decreased customer demand. Physical impact of climate change Certain industries such as insurance and finance will be directly affected by the climatic changes predicted by many scientists. Increased natural disasters such as storms and droughts will result in increased insurance payments and investment write-offs. As the evidence for climate change grows, organizations located in areas most affected will be required to disclose the risks of business disruption due to climatic changes and the risk of increased insurance premiums and capital costs. With the SEC’s announcement, organizations that fail to disclose material risks from climate change face the real threat of lawsuits from investor groups or punitive action from the SEC. Mindy Luber, president of CERES and directory of the Investor Network on Climate Risk called the SEC’s announcement, “a clarion call about the vast risks and opportunities climate change poses for US companies and the urgency for integrating them into investment decision making”. There is little doubt that the trend towards increased scrutiny of climate change risks by investors, regulators, and customers will continue. The longer an organization ignores the risks from climate change, the greater the negative effect on company valuation and profitability. As TRIRIGA CEO, George Ahn, stated in an article in the Environmental Leader last August, “All else being equal, companies that adequately disclose and address risks from climate change will be rewarded with higher valuations and a lower cost of capital.” The first step toward accurately addressing risks from climate change is to baseline your organization’s energy use and environmental impact. To gain a sense of where and how to start reporting, consider real estate. Buildings represent 48 percent of energy consumption and present the most significant opportunities to reduce environmental impact, improve operating costs, and demonstrate carbon reduction accountability. Wed, 03 Feb 2010 09:00:00 PST communication@tririga.com (TRIRIGA Communications) http://www.tririga.com/information-center/infocenter-insights?aid=27 http://www.tririga.com/information-center/infocenter-insights?aid=27 March 2009, the Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB) issued a joint discussion paper highlighting proposed changes to financial accounting standards for leases (FAS 13) which governs the accounting treatment of operating leases. The FAS 13 changes outlined could have an enormous impact on the balance sheets and income statements of companies with significant operating lease obligations. Today, FAS 13 requires that operating leases are classified as an off-balance sheet transaction and only the current year operating lease expense is accounted for in the income statement. Corporations must also include a note in their Security and Exchange Commission 10-Q and 10-K filings detailing the anticipated rent expense for the next five years. Proponents for changing the FAS 13 rule argue that the current standards fail to give an accurate view of a company’s liabilities. This argument seems valid given the fact that operating leases represent the single largest source of off-balance sheet financing for most organizations. Furthermore, for many organizations, operating lease obligations represent a larger liability than all other liabilities on the balance sheet combined. For this reason, the FASB has spent decades debating the proper accounting treatment of operating leases. Highlight of proposed changes to FAS 13 The FAS 13 changes proposed in the March discussion paper would require that all operating leases be reclassified as capital leases. Capital leases differ from operating leases in that they must be recorded on the balance sheet and are treated as a financing transaction on the income statement. The right to use the leased property would be capitalized as an asset and the present value of future lease payments would be accounted for as a liability. Rent payments would no longer be included in EBITDA (Earnings Before Interest Taxes Depreciation and Amortization). Instead, a before tax depreciation and interest amount would be calculated to account for the annualized use of the property. For a more in depth summary of the proposed changes read “FAS-Talking: Unpacking Real Estate’s Impact on Financial Statements” in the September 2009 issue of the CoreNet Leader magazine. The proposed changes are currently being reviewed by FASB, IASB, and others. The next draft of the new lease accounting standards should be available later this year and the final rule could be put in place as early as 2011. Impact of FAS 13 change to financial statements There is little doubt that the proposed FAS 13 lease accounting changes would have an enormous impact on financial statements. Simply moving operating leases onto the balance sheet would add over one trillion dollars to the balance sheet of U.S. companies. The income statement changes would have a positive effect on EBITDA due to removal of rent expense from operating expenses. However, the additional depreciation and interest expense required by the proposed FAS 13 changes would result in an overall decrease to net income during the first half of the lease term. For companies that control most of their real estate through operating leases, the proposed lease accounting change will have a significant effect on financial statements. Balance sheet and income statement changes have the potential to adversely affect debt covenants and performance ratios. All else being equal, financial metrics such as the debt-to-equity ratio and interest coverage ratio could increase significantly. There is much debate about the effect this will actually have on a company’s valuation and cost of capital since many investors and financial institutions already factor in operating leases into financial analysis. Regardless, companies who are affected by the proposed FAS 13 accounting change will need to thoroughly predict and explain upcoming changes to financial statements. Impact of FAS 13 change on strategic real estate decisions It is important to keep in mind that the proposed FAS 13 lease accounting changes do not have a direct effect on cash flow; arguably the most important indicator of financial performance. However, companies will need to invest time and money to evaluate lease structures, determine the impact to financial statements, and communicate the impact to investors well in advance. Although this exercise is critical, real estate executives and professionals must not lose focus on the primary goal to align real estate assets with the business strategy. Although the proposed FAS 13 rule change may alter the buy versus lease decision or add a new variable to lease negotiations, accounting rules are seldom a primary driver of real estate decisions. The proposed FAS 13 changes illustrate the fact that, more than ever, real estate executives and professionals require a decision support system that provides the ability to prioritize objectives and make tactical decisions that align with the business strategy. Fri, 01 Jan 2010 09:00:00 PST communication@tririga.com (TRIRIGA Communications) http://www.tririga.com/information-center/infocenter-insights?aid=26 http://www.tririga.com/information-center/infocenter-insights?aid=26 Although the economy has been the number one priority of business and political leaders over the last twelve months, climate change has remained a top issue across the globe. State and local governments continue to lead the way on legislation to reduce energy use and greenhouse gas emissions. As President Obama finishes his first year in office, federal legislation designed to reduce carbon emissions and address climate change gained momentum and will likely become law in 2010. Below is a recap of climate change legislation as 2009 comes to an end. The clear trend is for more stringent climate change legislation in the near future. International The much anticipated Copenhagen climate summit failed to deliver the legally binding climate treaty that many hoped for. However, the non-binding Copenhagen Accord that came out of the summit does demonstrate a commitment on the part of industrialized and developing countries to reduce global greenhouse gas emissions. Most importantly, China and other large developing countries made a commitment to reduce the carbon intensity of their economies. This step will help remove a key barrier to the passage of climate legislation in the United States. Federal The EPA Mandatory Greenhouse Gas Reporting rule is the first nationwide GHG regulation. Although this rule is focused on heavy emitters and requires only emission reporting and not actual abatement, it will most likely be used as a foundation on which to build federal legislation designed to reduce GHG emissions. Both of the climate change bills currently in Congress call for a cap and trade program that will likely use the EPA benchmark data to determine carbon emission allocations. The Waxman-Markey bill passed the House earlier this year and the Kerry-Boxer bill is still making its way through various committees. Although it is likely to take several months before a consolidated climate bill is passed by the House and Senate, the process is likely to move forward at a steady pace as long as EPA regulation of greenhouse gas under the Clean Air Act remains a possibility. States As is often the case with environmental legislation, California is leading the way with energy and greenhouse gas legislation. California's version of mandatory GHG reporting started in 2008. This year was the first year that organizations were required to report greenhouse gas emissions to the California Air Resources Board. In addition to California, at least 16 other states have passed some sort of mandatory GHG reporting legislation. A number of states, including California, have also enacted laws requiring large private buildings to provide an annual benchmark of energy use. Cities Many cities are also aggressively addressing carbon and greenhouse gas emissions within their jurisdictions. Since 2005, more than 1,000 mayors across the country have signed the U.S. Conference of Mayors Climate Protection Agreement. Participating cities commit to implement policies that will reduce GHG emissions in line with the targets set in the Kyoto Protocol. Although much of the effort to date has been focused on city owned buildings and operations, there is an increasing push to require private buildings to track and manage energy use and GHG emissions. Washington D.C. recently announced legislation that will require large privately owned buildings to provide an annual benchmark of energy use. New York City recently introduced a series of bills that require large privately owned buildings to benchmark energy use, make lighting improvements and sub-meter multi-tenant buildings. Several other cities will soon follow suit and, undoubtedly, legislation will include tougher measures to require privately owned buildings to make energy improvements to meet a minimum performance level. Climate change legislation is a part of doing business Increasingly organizations realize that the risks from climate change are real and have a material impact on the bottom line. Legislation to address this threat will only become more stringent and most organizations will likely be required to measure and manage energy use and greenhouse gas emissions. Organizations that begin managing energy use and GHG emissions today will have a competitive advantage over those that wait for regulation to compel action. Tue, 22 Dec 2009 09:00:00 PST communication@tririga.com (TRIRIGA Communications) http://www.tririga.com/information-center/infocenter-insights?aid=25 http://www.tririga.com/information-center/infocenter-insights?aid=25 Last Friday, President Obama addressed the United Nations Climate Change Conference in Copenhagen. During his short speech to the plenary session, the President reiterated the commitment of the United States to reduce greenhouse gas (GHG) emissions. As expected, the President specifically stated his GHG emission reduction goals of 17% by 2020 and over 80% by 2050 from 2005 levels. President Obama also expressed his disappointment with the lack of progress at the conference toward forming a legally binding climate change treaty while also reaffirming his conviction that, "America is going to continue on this course of action to mitigate our emissions and to move towards a clean energy economy, no matter what happens here in Copenhagen." As was widely expected, the Copenhagen conference ultimately fell short of delivering a binding international climate change treaty. However, due in large part to President Obama's direct negotiations with China, India and several other key developing and industrialized countries, the conference did produce an interim climate change accord that received nearly unanimous approval by the attending nations and kept the possibility of a future legally binding treaty alive. Although certainly not as strong as a legally binding international treaty, the Copenhagen Accord will likely influence climate change legislation in the US simply because China, India and many other developing countries have made a commitment to reduce their own GHG emissions. China's previous reluctance to commit to reducing the carbon intensity of its economy was an especially large barrier to US climate change legislation. By accepting the Copenhagen Accord, China has certainly made it easier for sponsors of US climate change legislation to gather the sixty votes necessary to break a filibuster and pass climate legislation in the Senate. As long as developing countries continue to show a commitment to reduce their own emissions and as long as the Environmental Protection Agency's (EPA) regulation of GHG emissions through the Clean Air Act remains a real possibility, climate change legislation will likely become law within the next two years. In contrast to the uncertainty surrounding the timeframe and structure of federal climate change legislation, large organizations will likely be affected immediately by the EPA's Mandatory GHG Reporting rule or by one of the increasing number of state and local energy and environmental laws. The EPA's Mandatory GHG Reporting rule and other proposed regulations will directly affect organizations with carbon intensive facilities. At the state level, California continues to lead the way with legislation to track and reduce GHG emissions and energy use in facilities. At the local government level, cities are competing for the title of "Greenest City" by enacting tough energy standards in building codes and requiring large public and private buildings to monitor and report on energy use. The City of New York recently enacted a series of bills to reduce energy use in public and commercial buildings. These measures include more stringent building codes and periodic energy audits and retrocommissioning for large buildings. This trend towards legislation that addresses GHG emissions and energy use in existing buildings is certain to spread to more cities in the near future. Each new energy and GHG law that is enacted will make it more expensive for organizations to ignore their own energy use and carbon emissions. In order to effectively comply with the multitude of current and planned energy and GHG laws and make cost effective improvements to reduce environmental impact, large organizations require environmental sustainability software to track and manage carbon emissions, energy use and environmental impact. Fri, 11 Dec 2009 09:00:00 PST communication@tririga.com (TRIRIGA Communications) http://www.tririga.com/information-center/infocenter-insights?aid=24 http://www.tririga.com/information-center/infocenter-insights?aid=24 Beginning January 1, 2010, organizations will be required to track and report on greenhouse gas (GHG) emissions from those facilities that fall within the EPA Mandatory GHG Reporting guidelines. The EPA Mandatory GHG Reporting rule is just the first step to actually regulating GHG emissions. The EPA has taken the next step with the signing of the Endangerment Finding that officially places GHG emissions under the regulatory authority of the Clean Air Act. The EPA has also recently proposed a rule that would require carbon intensive facilities to implement "best practices and technologies" to minimize GHG emissions. In addition, both houses of Congress have proposed GHG regulation to significantly reduce emissions over the next several decades. Finally, President Obama is expected to address the United Nations Climate Conference in Copenhagen on December 18th and formally announce a non-binding GHG reduction commitment for the United States that aligns with the reduction levels proposed by Congress. As with the EPA Mandatory GHG Reporting rule, the GHG regulations being proposed would directly affect large emitters of GHG. Facilities that fall under the EPA Mandatory GHG Reporting rule would most likely also have to comply with any GHG regulation. In total, somewhere between 10,000 and 14,000 facilities would fall under the proposed GHG regulations. For these facilities, there will be a direct cost to emit GHG. A recent study by Trucost and the IRRC Institute found that carbon intensive industries could experience a reduction in EBITDA (earnings before interest, tax, depreciation, and amortization) of between 1 and 117 percent as a result of proposed GHG legislation. These carbon intensive organizations need to look beyond mandatory reporting of GHG emissions and begin to implement programs to reduce the carbon intensity of facilities and processes. In order to accomplish GHG reduction in a cost effective manner, organizations need tools to identify carbon intensive facilities and pinpoint opportunities to reduce emissions. With the right decision support system in place, industrial facilities have an enormous opportunity to reduce energy use and carbon emissions. All of the proposed GHG reduction regulation is designed to place a cost on carbon for those organizations that directly emit large amounts of GHG. This means that most organizations will not have facilities that fall under the GHG regulations. However, all organizations will be affected through increased energy prices and increased prices for carbon intensive inputs. GHG regulation with reduction targets in line with what Congress and President Obama propose could increase electricity prices by 30 percent over the next five years. Given the increased probability of GHG regulation, organizations must prepare for significantly increased energy costs in the near term. The good news is that there are many cost effective strategies that organizations can implement to reduce energy costs and environmental impact. The bad news is that few organizations have the tools to gather the energy and environmental information necessary to optimize capital and resource allocation to the projects with the highest financial and environmental return. Whether your organization is directly or indirectly affected by GHG regulation, the time to prepare is now. Organizations that proactively prepare for GHG regulation will be positioned to capitalize on opportunities to reduce energy use and improve environmental performance. Thu, 03 Dec 2009 09:00:00 PST communication@tririga.com (TRIRIGA Communications) http://www.tririga.com/information-center/infocenter-insights?aid=23 http://www.tririga.com/information-center/infocenter-insights?aid=23 Beginning January 1, 2010, organizations will be required to track and report on greenhouse gas (GHG) emissions from those facilities that fall within the EPA Mandatory GHG Reporting guidelines. As is often the case with federal environmental legislation, the EPA has followed California’s lead in developing the federal Mandatory GHG Reporting rule. California enacted its own Mandatory GHG Reporting Rule in 2008. Similar to the EPA Mandatory GHG Reporting rule, the California rule requires carbon intensive facilities to track and report annual GHG emissions. June 2009 was the deadline for the more than 500 California facilities that fell within the rule to report on their 2008 emissions. The types of facilities represented in the California rule closely match the EPA rule. Similar to the EPA estimate of facilities covered, facilities with over 25,000 metric tons of emissions from stationary combustion sources accounted for 35 percent of the total reporting facilities. These facilities represented a range of industries and organizations including food processing, pharmaceutical, higher education, airports, and a wide variety of manufacturing sectors. Many of these facilities have cogeneration plants that directly exceed the 25,000 metric tons threshold. However, for the majority of facilities under the stationary combustion source category, emissions were from manufacturing equipment and other stationary combustion sources. In total, California facilities reported almost 175.5 million metric tons of GHG emissions. Our analysis shows this equates to the same GHG emissions from driving 33.5 million passenger cars annually or sequestered by 4.5 billion tree seedlings grown for 10 years. Only 11% of the total emissions came from the 180 California facilities that exceed the stationary combustion threshold. This is due to the fact that, on average, the stationary combustion facilities are much less carbon intensive. As discussed in previous TRIRIGA Insights, facilities that fall under the stationary combustion source category have an enormous opportunity to save energy costs, cut carbon emissions, and potentially remove the mandatory reporting. Organizations with large complex facilities require a system to help measure energy and carbon emissions and pinpoint the most cost effective opportunities for improvement. Mon, 23 Nov 2009 09:00:00 PST communication@tririga.com (TRIRIGA Communications) http://www.tririga.com/information-center/infocenter-insights?aid=22 http://www.tririga.com/information-center/infocenter-insights?aid=22 Beginning January 1, 2010, organizations will be required to track and report on greenhouse gas (GHG) emissions from those facilities that fall within the EPA Mandatory GHG Reporting guidelines. For the first three months of 2010 the EPA will allow organizations to estimate GHG emissions using "best available monitoring methods" that are less stringent than the EPA requirements. Starting April 1, 2010 organizations must create, document and implement a GHG Monitoring Plan that meets the full requirements of the EPA Mandatory GHG Reporting rule. According to the EPA, the purpose of the GHG Monitoring Plan is to "document the process and procedures for collecting and reviewing the data needed to estimate annual GHG emissions." Every facility covered under the EPA Mandatory GHG Reporting rule will be required to create and maintain a GHG Monitoring Plan. Each plan will include the following information: Identification of the job functions that will be responsible for the collection of emission data. Explanation of the processes and methods used to collect the necessary data for the GHG emissions calculation. Description of the procedures that are used for quality assurance, maintenance and repair of all monitoring equipment used to provide data for the GHG emissions reported. Although the GHG Monitoring Plans are not submitted to the EPA, the plans must be readily available for the EPA to review. The EPA will use the plan during facility audits to verify that emission collection procedures and reporting rules are followed. Organizations with multiple facilities covered by the EPA rule will benefit from a system with the capability to centrally manage GHG Monitoring Plans. Wed, 18 Nov 2009 09:00:00 PST communication@tririga.com (TRIRIGA Communications) http://www.tririga.com/information-center/infocenter-insights?aid=21 http://www.tririga.com/information-center/infocenter-insights?aid=21 Beginning January 1, 2010, organizations will be required to track and report on greenhouse gas (GHG) emissions from those facilities that fall within the EPA Mandatory GHG Reporting guidelines. The EPA estimates that more than 10,000 facilities will have to report carbon emissions under this rule and approximately 30,000 facilities will need to invest time and money to evaluate their carbon emissions to determine whether they are required to report to the EPA. Although the majority of these facilities will be large industrial plants, many facilities that are not engaged in heavy industry still exceed the EPA threshold of 25,000 metric tons of CO2 equivalent (CO2e) emitted per year. As previously discussed, many of the facilities covered by the EPA rule will fall under the stationary combustion provisions; meaning they produce a large amount of carbon emissions from stationary combustion equipment such as boilers, process heaters, and central plants. Although it is unlikely that a single commercial building would exceed this threshold, the combined GHG emissions from all the buildings on a campus property could. This is an important detail since the EPA’s definition of a facility includes campus properties owned or controlled by a single entity. "Facility means any physical property, plant, building, structure, source, or stationary equipment located on one or more contiguous or adjacent properties in actual physical contact or separated solely by a public roadway or other public right-of-way and under common ownership or common control, that emits or may emit any greenhouse gas." - EPA Mandatory Reporting of Greenhouse Gas Rule A campus with an on-site central plant that produces electricity, steam, or hot water may exceed the EPA threshold for GHG emissions from stationary combustion (especially if the central plant burns coal or an equally carbon intensive fuel). Facility types that could fall into this group include: universities, hospitals, government entities, resorts, and other public and private organizations that control large campus properties. These large campus properties will need to perform a thorough evaluation of on-site stationary combustion to determine whether they must report carbon emissions to the EPA. At a high level, this evaluation can be can be conducted by answering two questions. First, is the combined maximum rated heat input capacity from all stationary fuel combustion sources at least 30 million Btus per hour? Second, do the combined GHG emissions from stationary combustion equipment meet or exceed the threshold of 25,000 metric tons of CO2e per year? If the answer to both of these questions is "Yes", then your facility must report GHG emissions to the EPA. Assuming your organization has accurate data regarding each piece of stationary combustion equipment on site, answering these questions should be relatively straight forward. However, As Lisa Campbell discussed in the recent TRIRIGA "Learn from the Leaders" webinar, Get Ready for Mandatory Reporting of GHG Emissions, many organizations lack complete and reliable data necessary to accurately evaluate their facilities. Organizations lacking the necessary information about stationary combustion equipment will need to quickly gather this data and determine which carbon calculation method is required for each piece of equipment. For many organizations, this effort will be costly and time consuming. According to the EPA, the cost to comply with the mandatory reporting rule will be more than $7,000 per facility per year. However, the cost of not complying could be much worse. Under the power of the Clean Air Act, the EPA can pursue administrative, civil, and criminal penalties against organizations that fail to comply with the EPA Mandatory Reporting of GHG rule. These penalties include a $37,500 per day per violation fine for organizations that blatantly violate the rule. Organizations with large campus properties will require a system that reduces the time and effort necessary to gather data and provides tools to help determine whether a particular facility should be included in the EPA Mandatory GHG Reporting rule. Wed, 04 Nov 2009 09:00:00 PST communication@tririga.com (TRIRIGA Communications) http://www.tririga.com/information-center/infocenter-insights?aid=20 http://www.tririga.com/information-center/infocenter-insights?aid=20 Beginning January 1, 2010, organizations will be required to track and report on greenhouse gas emissions from those facilities that fall within the EPA Mandatory GHG Reporting rule. The EPA estimates that approximately 10,000 facilities will have to report carbon emissions under this rule and approximately 30,000 facilities will need to invest time and money to evaluate their carbon emissions to determine whether they are required to report to the EPA. As Lisa Campbell outlined in the recent TRIRIGA Learn from the Leaders webinar, Get Ready for Mandatory Reporting of GHG Emissions, many of the facilities covered by the EPA rule will be large manufacturing plants that produce carbon emissions from stationary combustions equipment such as boilers, process heaters, and central plants. For these facilities, the cost of complying with EPA Mandatory GHG Reporting rule adds an additional incentive to implement energy reduction projects that will eliminate this burden. Furthermore, although the industrial sector has made tremendous energy efficiency gains over the years, there is still a huge opportunity for industrial facilities to improve energy and environmental performance. According to the National Association of Manufacturers (NAM) the industrial sector on average has increased energy efficiency by over 50 percent since 1970. Even with this significant improvement, NAM estimates that almost 60 percent of energy used today by industrial facilities is wasted. According to NAM, a 10 percent energy efficiency improvement across the U.S. manufacturing sector would equate to reduced energy costs of over $10 billion per year. This equates to: almost 917 million metric tons of carbon emissions avoided, or the carbon emissions from almost 10 million homes. In addition, NAM estimates the average simple payback for energy efficiency projects at industrial facilities is 2.3 years. And, when non-energy benefits such as reduced resource use and improved equipment performance were factored in, the simple payback was reduced to 1.4 years on average. In addition to these savings, the EPA Mandatory GHG Reporting rule provides another incentive for industrial organizations to implement energy and carbon reduction measures. Facilities that reduce their annual 2010 carbon emissions below the 25,000 metric ton threshold set by the EPA will not have to report to the EPA in any year until they exceed the threshold. For future reporting years, facilities covered by the EPA rule that can reduce their emissions below 25,000 metric tons for five consecutive years, or below 15,000 metric tons for three consecutive years, will no longer be required to report carbon emissions to the EPA as long as emission remain below the threshold in subsequent years. Based on EPA estimates, facilities that eliminate their EPA carbon reporting burden will reduce environmental compliance costs by approximately $8,000 per year. Although the potential for reducing energy use and carbon emissions in the industrial sector is substantial, facilities in this sector face challenges that facilities in other commercial sectors do not. Often, energy efficiency opportunities in industrial facilities are closely tied to production processes that are designed to operate unchanged for years. In order to effectively plan and manage energy efficiency projects in industrial facilities, managers must have an understanding of the timeline in which production processes can be upgraded with more energy efficient equipment. To effectively track and manage opportunities to reduce energy and carbon, organizations in the industrial sector require a decision support system with the tools necessary to evaluate and plan projects based on the financial and environmental return as well as the optimal timing of a particular improvement opportunity. Such a system will allow your organization to optimize the limited capital and employee hours allocated to implementing energy efficiency projects in industrial facilities. Fri, 30 Oct 2009 09:00:00 PST communication@tririga.com (TRIRIGA Communications) http://www.tririga.com/information-center/infocenter-insights?aid=19 http://www.tririga.com/information-center/infocenter-insights?aid=19 Beginning January 1, 2010, organizations will be required to track and report on greenhouse gas (GHG) emissions from those facilities that fall within the U.S. Environmental Protection Agency (EPA) Mandatory GHG Reporting rule. As Lisa Campbell from ERM outlined in the recent TRIRIGA “Learn from the Leaders” webinar, Get Ready for Mandatory Reporting of GHG Emissions, many organizations are unprepared to meet the requirements of the EPA’s rule. The longer organizations wait to assess their facilities to determine whether they fall within the EPA’s reporting thresholds, the more difficult it will be to put the necessary procedures and tools in place to begin tracking carbon emissions. The need to understand your organization’s exposure to carbon legislation will only become more critical as congress and the EPA move closer to regulating GHG emissions. The EPA has already taken the first steps towards GHG regulation based on their authority under the Clean Air Act. In April the EPA submitted an Endangerment Finding outlining the risk to public health and welfare posed by the current atmospheric concentration of the six major greenhouse gases. This step gives the EPA authority to regulate greenhouse gases under the Clean Air Act. In late September, the EPA took two more steps towards GHG regulation. First, the EPA and the Department of Transportation published proposed regulation to limit certain greenhouse gas emissions from light-duty vehicles. Second, following this announcement, the EPA proposed a rule that would require any facility that emits at least 25,000 metric tons of CO2 (or an equivalent amount of other GHG) to obtain a permit from the state environmental agency. In order to obtain a permit, a facility would need to demonstrate that best practices and technologies are being used to minimize GHG emissions. The EPA estimates that 14,000 facilities would need to obtain permits under this rule. This rule will soon be published in the Federal Registry and will likely go into effect in 2010 unless congressional legislation overrides the rule. Although the timing and specific rules are uncertain, there is little doubt that greenhouse gas regulations are on the way. Organizations that can accurately evaluate greenhouse gas emissions across all facilities will not only be prepared to comply with upcoming regulations, but they will also have the information necessary to make strategic decisions about reducing their exposure to climate change risks. Thu, 15 Oct 2009 09:00:00 PST communication@tririga.com (TRIRIGA Communications) http://www.tririga.com/information-center/infocenter-insights?aid=18 http://www.tririga.com/information-center/infocenter-insights?aid=18 Beginning January 1, 2010, organizations will be required to track and report on greenhouse gas emissions from those facilities that fall within the EPA Mandatory GHG Reporting rule. According to the EPA, approximately 30,000 facilities will need to conduct an assessment to determine whether their GHG emissions meet the mandatory reporting threshold. During TRIRIGA's Learn from the Leaders webinar - Get Ready for Mandatory Reporting of GHG Emissions, Lisa Campbell, Director of Climate Change Services for Environmental Resources Management (ERM), presented an overview of the EPA Mandatory GHG Reporting Rule and provided details about activities that organizations need to do today to prepare for this rule. According to Lisa, many organizations are still unprepared to evaluate whether their facilities will need to report. For some organizations, this lack of preparation will prevent them from implementing improvements to reduce carbon emissions below the threshold set by the EPA. To learn more about the EPA Mandatory GHG Reporting Rule watch last week's Learn from the Leader's webinar with Lisa Campbell. Tue, 06 Oct 2009 09:00:00 PST communication@tririga.com (TRIRIGA Communications) http://www.tririga.com/information-center/infocenter-insights?aid=17 http://www.tririga.com/information-center/infocenter-insights?aid=17 Alert: Yesterday, President Obama released the anticipated Executive Order requiring Federal agencies to improve "environmental, energy, and economic performance." This Executive Order builds upon and expands the energy reduction and environmental requirements of Executive Order 13423, requiring Federal agencies to "measure, manage, and reduce greenhouse gas emissions." Impact On Your Agency: As a first step, Federal agencies have 90 days to set a 2020 target for greenhouse gas emissions. Beginning with fiscal year 2010, Federal agencies will also be required to prepare an annual GHG emission report that includes Scope 1, Scope 2 and specified Scope 3 emissions. In addition, the Executive Order sets guidelines and targets for water use, recycling and waste diversion, regional and integrated planning, green building standards, procurement and environmental management. How to Prepare: In order to comply with this new mandate, Federal agencies must have tools to access current performance, determine the best course of action for improvement and manage the implementation of a Strategic Sustainability Performance Plan. A Real Solution: While many agencies will struggle with this Executive Order, the prepared ones understand the need for enterprise-class software to reduce their dependence on energy in order to cut carbon emissions and costs. Use TREES . (TRIRIGA Real Estate Environmental Sustainability), our environmental sustainability solution, to meet the requirements of this new Executive Order. TREES delivers the software capabilities to measure your agency's carbon intensive facilities, analyze financial and environmental benefits of sustainability investments, and automate carbon reduction actions: Comprehensive assessment tools, performance metrics and reports to measure GHG emissions, energy, water, and waste. Integrated analysis tools evaluate energy efficiency opportunities to manage the most cost effective GHG improvement opportunities. Automated preventive and corrective maintenance procedures reduce GHG emissions and keep facilities operating at peak energy efficiency. Call TRIRIGA today to learn how TREESTM can help your agency meet the requirements of this new Executive Order. Thu, 01 Oct 2009 09:00:00 PST communication@tririga.com (TRIRIGA Communications) http://www.tririga.com/information-center/infocenter-insights?aid=16 http://www.tririga.com/information-center/infocenter-insights?aid=16 Too often the conversation about green buildings centers on new buildings, when in fact, the greenest building is the one you don’t build. Efforts to improve existing buildings require fewer resources than starting from scratch, while offering significant environmental and financial benefits. When deployed, many green building technologies can instantly reduce energy costs, with efficient lighting and windows as two key examples. Because of this, an organization can often achieve 100 percent return on investment within a year on every dollar spent on improving a building's efficiency. One organization leading the charge when it comes to green buildings is Denver Public Schools (DPS). The district recently launched an initiative to renovate its 154 school buildings in ways that will significantly reduce their environmental impact. Using a $454 million bond from the city of Denver – the largest in state history – the district will increase the energy efficiency of its buildings, and it anticipates a return on its investment in the form of lowered operating costs. “Environmental sustainability is a top consideration for our school system,” said Mr. Michael Thomas, director of purchasing for the Denver Public Schools. “In today’s economy, energy savings leads directly to cost savings.” The district will use TRIRIGA’s TREES software to measure, manage, and reduce carbon emissions. TREES uses a series a metrics to help identify locations and facilities that are underperforming environmentally, and then uses financial analysis tools to prioritize building retrofits and maintenance projects. Given that buildings account for 48 percent of energy used in the United States – more than industry (25 percent) or transportation (27 percent) – Denver Public Schools– focus on its improving its buildings allows the district to hone in on the single greatest opportunity to improve energy efficiency and reduce operating costs. “The district is very excited about this new partnership with TRIRIGA to manage the complex intersection of facilities, construction, planning and environment,” said Trena Deane, executive director of facilities. “Our environmental sustainability project is an exciting new chapter in our long history of improving the quality of life in the communities we serve, and at the same time it helps us manage and reduce the operating expenses of our schools and departments.” Now that President Obama has allocated $44 billion dollars in stimulus funds for local school districts, other districts may soon follow Denver–s example and launch green building initiatives of their own. The stimulus bill specifies that education funds may be used for school modernization and repair, with energy efficiency projects as one approved use. In revamping their old buildings, though, many districts will need to do more than just change their approach to facilities management: they will also need to report transparently on the use of all government funds. In revamping their old buildings, though, many districts will need to do more than just change their approach to facilities management: they will also need to report transparently on the use of all government funds. Today, school districts are in a position to take a leading role in the green building movement. The allocation stimulus funds and the availability of technologies make it easy and practical to pursue environmental improvements. In this challenging economic climate, organizations need to use their facilities as a center for both economic and environmental sustainability. Further, they need to put technology infrastructures in place that take the complexity and confusion out of reporting on projects and how they are funded. Note: This content was first published on Sustainable Facility, September 1, 2009. Thu, 10 Sep 2009 09:00:00 PST communication@tririga.com (TRIRIGA Communications) http://www.tririga.com/information-center/infocenter-insights?aid=15 http://www.tririga.com/information-center/infocenter-insights?aid=15 Reach green building performance goals by actively managing building energy and environmental performance Few would disagree that green building rating systems have elevated the standards for what constitutes a high performing building. However, as with non-green buildings, effective building management is the only way to insure that green buildings perform as expected. Even though the majority of certified green buildings meet the high performance standards expected with respect to energy use and environmental impact, an alarming percentage of buildings constructed to LEED (Leadership in Energy and Environmental Design) and other green building standards fail to meet expectations. A 2008 New Buildings Institute study of the energy performance of LEED for New Construction (LEED-NC) certified buildings found that 40 percent of the 121 buildings surveyed used more energy than expected and 20 percent actually performed worse than the average code compliant building. These statistics are even more troubling considering that only 121 of the 552 LEED certified buildings originally surveyed were able or willing to provide actual energy use data. This study highlights the fact that energy modeling, although very useful for comparing the energy performance impacts of different design options, is often a poor predictor of actual building energy use. A number of potential factors contribute to the variance between expected and actual energy use including construction defects, unforeseen occupancy habits, or poor building maintenance. Regardless of the reason for the discrepancy, building owners and occupants cannot assume that energy models are an accurate representation of actual energy performance. In order to verify and improve energy performance, owners must actively track energy use and perform routine building maintenance and inspections to confirm that systems are performing as expected. LEED v3, the latest version of the rating system launched earlier this year, addresses the need to track actual performance against expected performance by requiring that all certified projects provide energy use and water use records to the USGBC for a period of five years after the building is occupied. According to the USGBC's vice president of LEED technical development, Brendan Owens, "This is fundamental to helping us close the performance gap between modeled energy and actual energy use." Owners of medium to large real estate portfolios require an enterprise class software solution to accurately track energy use and insure that buildings, green or otherwise, are performing as expected. Our solution, TRIRIGA TREES ®, uniquely delivers the software capabilities required to identify buildings that are underperforming and allocate capital budget to the most effective projects that will improve energy and environmental performance. Thu, 27 Aug 2009 09:00:00 PST communication@tririga.com (TRIRIGA Communications) http://www.tririga.com/information-center/infocenter-insights?aid=14 http://www.tririga.com/information-center/infocenter-insights?aid=14 A new report from the Carbon Disclosure Project (CDP) finds that although the majority of the world's largest corporations have set carbon reduction targets, most of these targets are not aggressive enough to meet the recommendations of the Intergovernmental Panel on Climate Change (IPCC). According to the report, entitled The Carbon Chasm , 73 percent of the Global 100 has set some form of carbon reduction goal. The average target equates to a 1.9 percent reduction in greenhouse gas (GHG) emissions per year - less than half of the 3.9 percent annual GHG reduction necessary to meet the IPCC's recommended 80 percent reduction in carbon emissions by 2050 required to avoid dangerous climate change. The primary reason for the "chasm" between the GHG reduction targets of large companies and IPCC recommendations is that most large companies align their carbon reduction goals with business objectives rather than scientific recommendations. Companies set carbon reduction targets in order to save money, address shareholder pressure, mitigate climate change risk, or improve environmental performance. As pending carbon legislation is enacted and the cost to emit carbon increases, companies will undoubtedly increase the pace of carbon reduction targets; possibly to a level approaching the IPCC recommendations. The CDP report highlights the importance of setting challenging but achievable carbon reduction targets. However, tangible business, environmental, and societal benefits are only realized when carbon emissions are actually reduced. According to Paul Dickinson, CEO of the CDP, "This is a time of huge opportunity for businesses to gain competitive advantage by reducing their own impact on the climate and benefit from associated cost savings". Despite evidence that climate change risk will quickly transition from a proposal to a business imperative, many companies have not started to abate their carbon emissions and realize the associated cost savings. While companies appreciate the risks, they often lack the tools necessary to address them. In order to seize this opportunity, mid- to large-sized companies require an enterprise sustainability solution. One that not only measures their current carbon footprint, but also manages abatement opportunities, facilitates emissions reduction initiatives and tracks progress and ROI to effectively identify the best opportunities to meet carbon reduction objectives. As your company evaluates its carbon reduction targets, ask yourself this: do you have the right tools to measurably reduce carbon emissions, or will you let your competitors gain an advantage? Fri, 07 Aug 2009 09:00:00 PST communication@tririga.com (TRIRIGA Communications) http://www.tririga.com/information-center/infocenter-insights?aid=13 http://www.tririga.com/information-center/infocenter-insights?aid=13 A new study from McKinsey finds that a comprehensive program of cost-effective energy efficiency measures could reduce US annual energy consumption by 23 percent by 2020. This reduction in energy use would require a $520 billion investment but save $1.2 trillion in energy costs (these figures are discounted to present dollars). McKinsey estimates that 65 percent of these savings would come from improvements made to the industrial and commercial sector; the remaining 35 percent would come from residential improvements. According to the report, these impressive results would require an annual investment of approximately $50 billion in energy efficiency - an increase of 400 to 500 percent over US spending on energy efficiency in 2008. McKinsey recommends a "Holistic Implementation Strategy" to rapidly scale this increase in energy efficiency investment. This strategy requires recognition across all sectors of the economy that energy efficiency is a critical component to meeting the country's energy needs while the United States transitions to low carbon energy sources. The strategy also requires public and private sector support to develop innovative funding vehicles and strengthen national building codes. Finally, all stakeholders in the energy economy will need to align in a common pursuit of increased energy efficiency. Thu, 11 Jun 2009 09:00:00 PST communication@tririga.com (TRIRIGA Communications) http://www.tririga.com/information-center/infocenter-insights?aid=12 http://www.tririga.com/information-center/infocenter-insights?aid=12 New school modernization legislation on its way On May 14th, 2009, significant new legislation focused on improved education, school modernization and energy efficiency passed through the 111th House of Representatives on its way to becoming law. The 21st Century Green High-Performing Public School Facilities Act (H.R. 2187) is designed to mitigate the hundreds of billions of dollars in funding short-fall required to improve the physical and learning condition of America's schools. TRIRIGA's own analysis of the bill provides insight into the impact these legislative measures may have on your school district's educational, financial and environmental goals: Provides schools with access to $6.4 billion in funding for fiscal 2010, and ensures that school districts will quickly receive funds for approved projects. Requires the majority of funds (100 percent by 2015) to be used for projects that meet green building standards. Requires school boards to publicly disclose the energy and environmental benefits of projects, without the purchase of carbon offsets. Requires grantees' contacting procedures for approved projects to utilize a full and open bidding competition. Make sure your school district is prepared Many school districts will struggle with these legislative measures, the prepared ones understand the need for an enterprise sustainability solution to take advantage of the $6.4 billion in funding available within H.R 2187 and increase the energy efficiency of your schools. Fri, 29 May 2009 09:00:00 PST communication@tririga.com (TRIRIGA Communications) http://www.tririga.com/information-center/infocenter-insights?aid=11 http://www.tririga.com/information-center/infocenter-insights?aid=11 The third annual Energy Efficiency Indicator (EEI) survey, released earlier this month by the International Facility Management Association (IFMA) and Johnson Controls, reports that 71 percent of executives and facility managers indicate an increased awareness of energy efficiency this year compared to last. In addition, 58 percent of the 1,422 survey respondents rated energy management as very or extremely important. And, energy efficiency in buildings was most often selected by survey respondents as the top strategy going forward to meet carbon reduction goals. At the same time, the EEI survey results show that the number of respondents who expect their organization to make investments in energy efficiency improvements in 2009 using capital budget or operating budget declined significantly (10 percent and 6 percent, respectively) from 2008. A majority of respondents, 60 percent, also indicate that they expect their organizations to allocate less than 10 percent of facilities related capital budget to energy efficiency projects. Clearly, a contradiction exists between the increased importance of, and decreased funding for, energy efficiency. The inconsistency revealed in the EEI survey is understandable considering the capital preservation strategy that many companies are following in order to weather this unusually severe recession. However, companies that place extreme limits on capital spending may overlook cost-effective opportunities to improve energy efficiency. A relatively modest investment in targeted energy efficiency projects can yield reduced energy use and carbon emissions, and a superior risk adjusted return and a quick payback. Mon, 11 May 2009 09:00:00 PST communication@tririga.com (TRIRIGA Communications) http://www.tririga.com/information-center/infocenter-insights?aid=10 http://www.tririga.com/information-center/infocenter-insights?aid=10 According to a recent TRIRIGA survey of 149 organizations, 32 percent of respondents reported that they used a spreadsheet based system to track and manage facility greenhouse gas emissions and energy use. For organizations that simply want to measure the energy consumption and environmental performance of a few facilities, a spreadsheet application may provide the functionality and performance required. However, a spreadsheet will most likely be inadequate for organizations that need to actively manage the environmental performance of even an average size portfolio. In general, there are four areas where spreadsheets fall short: performance, accuracy, flexibility and accountability. Performance Performance encompasses speed, capacity and interoperability. Depending on the size of an organization’s portfolio and the level of facility information collected, the volume of data can quickly grow to a level that severely degrades the response speed and reliability of spreadsheet based systems. In addition, data collection is often the most time intensive step in the energy and environmental management process. When collecting data for a large number of facilities, a software system that can easily interface with other existing systems can significantly improve the efficiency and accuracy of this process. Accuracy Since spreadsheets lack the validation and logic necessary to insure data accuracy, collecting energy use and environmental performance data using a spreadsheet is extremely error prone. The risk of accuracy errors increases significantly as organizations attempt to track more facilities at a greater granularity. Flexibility For organizations that need the flexibility to set baselines and track performance against dynamic sustainability goals, a spreadsheet based system is probably not adequate. Spreadsheets are also poor reporting tools for organizations that report GHG emissions to multiple carbon registries and/or multiple times throughout the year. Furthermore, spreadsheets are a cumbersome tool for analyzing and comparing opportunities to reduce energy use and improve environmental performance. It is extremely difficult to add logic to spreadsheets to drive action and prioritize green improvements. Accountability Although spreadsheet programs allow data edits by multiple people, accountability is significantly diminished as more users access the system. The ability to audit all changes made is especially important for organizations that are required to accurately report on GHG emissions. Fri, 01 May 2009 09:00:00 PST communication@tririga.com (TRIRIGA Communications) http://www.tririga.com/information-center/infocenter-insights?aid=9 http://www.tririga.com/information-center/infocenter-insights?aid=9 A new study from the World Business Council for Sustainable Development (WBCSD) finds that energy use from buildings will need to decrease by 55 percent by 2050, compared to a "Business-as-usual" scenario, in order to bring greenhouse gas emissions to the levels recommended by the UN Intergovernmental Panel on Climate Change (IPCC). This reduction is equivalent to the energy consumed today by the entire transportation sector. According to the WBCSD, 40 percent of the building energy improvement required could be achieved through cost-effective projects that fall within a five-year discounted payback. Projects with a discounted payback between five and ten years would account for an additional 12 percent of the building energy improvement needed. Recommended policies will increase energy prices In order for organizations to increase investment in energy efficiency projects with a longer payback period, there must be a clear signal that energy prices will remain high enough to justify a large capital expense. The WBCSD recommends policies that add a price on carbon emissions to energy prices. Stringent regulations will encourage energy efficient buildings In addition to carbon-related regulations, effective rules should be introduced in order to influence increased energy efficiency in building. The WBCSD recommends a combination of more stringent building codes (for new buildings and retrofits) with incentives for exceeding energy efficiency requirements. Other suggestions included mandatory energy ratings for all buildings and subsidies for achieving significant energy efficiency improvements. Behavior changes are necessary to meet energy reduction goals According to the WBCSD, "Significant behavioral changes and improved knowledge are needed to create an energy-aware culture to deliver our ambitious energy targets." This shift in the general attitude towards energy use will help reduce wasteful practices and increase conservation. This transformation alone can dramatically improve energy efficiency in buildings. The WBCSD study delivers clear evidence that the way we price, regulate and consume energy must change significantly in order to adequately address the climate change risk from anthropogenic greenhouse gas emissions. Considering the high priority given to energy security and climate change in the Obama administration and the current congress, at least some of the changes recommended by the WBCSD will become a reality in the near future. Organizations that effectively abate the risks from increased energy related regulation will gain a competitive advantage and achieve a high return on their investments in energy efficiency. Thu, 23 Apr 2009 09:00:00 PST communication@tririga.com (TRIRIGA Communications) http://www.tririga.com/information-center/infocenter-insights?aid=8 http://www.tririga.com/information-center/infocenter-insights?aid=8 This week the EPA released their study on the economic impact of the cap and trade program proposed in the Waxman-Markey Energy Bill. The study concluded that carbon will likely be priced somewhere between $13 to $17 (in 2005 dollars) by 2015. Under this scenario, the EPA estimates that electricity prices will increase more than 25 percent in real terms over the next decade, compared to an estimated 6 percent real increase in energy prices under the base case scenario with no price on carbon. As you can see from the graph below, derived using EPA data, there is a clear correlation between expected carbon price and electricity price. This conservative scenario is based on a number of assumptions about energy demand, the pace of technology innovation, and the availability and pricing of carbon offsets. Given the added uncertainty of future energy prices in a carbon-constrained economy, organizations must thoroughly evaluate their exposure to energy price increases. Since buildings are the largest consumer of electricity, organizations need to understand how energy price increases will affect their bottom line. For example, a 30 percent nominal increase in the price of electricity over the next five years, consistent with EPA estimates, equates to increased electricity costs for an average 100,000 square foot office building of approximately $65,000. This cost increase is even more alarming when you multiply it by the total number of buildings in your portfolio. Thankfully, the risk of steep energy price increases can be significantly abated through increased energy efficiency within your organization's real estate portfolio. Improved energy efficiency and environmental performance can be accomplished with a high return on investment, but it requires the ability to identify and prioritize opportunities across your entire portfolio in a cost effective manner. Fri, 27 Mar 2009 09:00:00 PST communication@tririga.com (TRIRIGA Communications) http://www.tririga.com/information-center/infocenter-insights?aid=7 http://www.tririga.com/information-center/infocenter-insights?aid=7 When President Obama and the 111th Congress passed into law the American Recovery and Reinvestment Act of 2009, they delivered more than $150 billion allocated to infrastructure investment, energy efficiency, healthcare, and education projects focused on short-term economic and environmental goals. As part of this important legislation, agencies receiving these stimulus funds and those responsible for delivering related capital programs and projects are required to provide an unparalleled level of transparency and accountability back to the Federal government. Following passage of the bill, the Office of Management and Budget provided specific guidance which included three critical action steps to meet these requirements and to implement the Act effectively: The recipients and uses of all funds are transparent to the public, and the public benefits of these funds are reported clearly, accurately, and in a timely manner; Projects funded under this Act avoid unnecessary delays and cost overruns; Program goals are achieved, including specific program outcomes and improved results on broader economic indicators. Agencies are also required to report information to the recovery.gov website and will soon have to submit information via automated feeds. Thu, 19 Mar 2009 09:00:00 PST communication@tririga.com (TRIRIGA Communications) http://www.tririga.com/information-center/infocenter-insights?aid=6 http://www.tririga.com/information-center/infocenter-insights?aid=6 Over the past five years, 55 percent of organizations have established policies to reduce energy consumption. However, only 19 percent of organizations have measurably reduced their energy costs and carbon emissions, according to the Economist. Organizations fail because more than 77 percent of executives surveyed report challenges in the identification and establishment of meaningful sustainability benchmarks and key performance reports necessary to achieve their reduction goals, according to the same report. Effective performance metrics must align with the corporate sustainability strategy and any external reporting requirements. At the highest level, environmental performance metrics divide into three broad categories: Environmental, Financial, and Portfolio. Environmental Metrics provide critical analysis to evaluate energy consumption, resource use, waste production and greenhouse gases emitted. Within each of these areas, intensity metrics facilitate comparative analysis between facilities. To accurately compare energy performance between facilities, metrics such as total energy used need to be normalized by a factor such as gross square feet or total building occupants. Financial Metrics provide vital information about the cost and risk associated with an organization's environmental impact. Executives need to know the amount of money spent on energy and the revenue or operating expense available to mitigate pending environmental regulations. Portfolio Metrics provide crucial insights into the condition of individual facilities across an organization's entire real estate portfolio. Executives use these metrics to prioritize scarce capital resources across environmental improvements. Thu, 12 Mar 2009 09:00:00 PST communication@tririga.com (TRIRIGA Communications) http://www.tririga.com/information-center/infocenter-insights?aid=5 http://www.tririga.com/information-center/infocenter-insights?aid=5 In a release on March 10th, the Environmental Protection Agency (EPA) announced a proposal that all major sources of U.S. greenhouse gas emissions be reported into a national database. According to the EPA's release, approximately 13,000 facilities would be covered across the United States. Organizations with energy intensive operations or those with large multi-building campuses will likely be required to report carbon and other greenhouse gas emissions in a new rule under the Clean Air Act. According to a report published by The Economist, organizations reported significant challenges in achieving their sustainability goals including: Establishing meaningful benchmarks or metrics to measure sustainability performance (80 percent) Access to reliable internal data (77 percent) Tools to monitor global performance e.g. IT, scorecards etc. (79 percent) Many organizations will struggle with this new rule unless they understand the need to measure and report their greenhouse gas emissions. Wed, 04 Mar 2009 09:00:00 PST communication@tririga.com (TRIRIGA Communications) http://www.tririga.com/information-center/infocenter-insights?aid=4 http://www.tririga.com/information-center/infocenter-insights?aid=4 Alert: The U.S. Energy Information Administration has forecast increases in the price of energy throughout 2009, and electricity is expected to rise by two (2) percent. Impact on Your Business: Government programs mandating energy conservation standards will create force energy suppliers to increase the prices they charge consumers. How to Save: Consumers need to be prepared to handle these price increases, and building efficiency provides a clear and critical opportunity for organizations to save money. A recent study from the California Energy Commission that shows electricity consumption per square foot continues to rise across every industry (see chart below), so electricity savings will deliver considerable cost savings. These price increases bring increased need to reduce your buildings' dependence on energy in order to reduce costs. Thu, 26 Feb 2009 09:00:00 PST communication@tririga.com (TRIRIGA Communications) http://www.tririga.com/information-center/infocenter-insights?aid=3 http://www.tririga.com/information-center/infocenter-insights?aid=3 Alert: CFO Research concludes that real estate and facility assets rank among the four highest costs of business within sixty-six percent (66%) of companies. For twenty-two percent (22%), it ranks as their first or second biggest expense. Impact on Your Business: CFOs now view real estate as a rising priority that must be addressed. They have already extracted savings from sourcing, process redesign and T&E expense management and are now focused on real estate operating and occupancy cost reduction. How to Save: CFOs also agree that there are three clear steps to improve real estate performance. Centralize the real estate function to improve operational effectiveness. A centralized real estate function creates economies of scale to reduce costs. Integrate real estate and corporate strategy to ensure alignment with business goals. Integrated strategies control cost of occupancy by removing excess space and locking in leases at reduced costs. Implement a real estate lifecycle management system (IWMS) to improve operational efficiency. These systems provide critical date alerts to vacate underperforming locations, embedded payment reconciliation processes and performance management metrics to identify underperforming assets, resources and processes. Thu, 19 Feb 2009 09:00:00 PST communication@tririga.com (TRIRIGA Communications) http://www.tririga.com/information-center/infocenter-insights?aid=2 http://www.tririga.com/information-center/infocenter-insights?aid=2 In breaking news yesterday, The New York Times reported that the Environmental Protection Agency (EPA) is expected to act for the first time to regulate carbon dioxide and other greenhouse gases. The decision would have a profound impact on how utilities generate power in the future, which will create significant new costs for suppliers and drive prices higher for consumers. Beyond the negative cost impact, the EPA decision to act over a period of months through regulation could accelerate legislation through Congress as lawmakers and the Obama administration look to work in concert. The clean air law would subject any organization emitting more than 250 tons of CO2 to regulation, potentially including schools, hospitals, shopping centers, even bakeries. Today's executives must understand which successful business strategies driven by environmental considerations drive lasting value. The U.S. government concludes that buildings account for a staggering 48 percent of energy consumption and produce the majority of greenhouse gas emissions. Real estate strategies focused on the reduction of buildings' environmental impact represent the greatest opportunity to reduce costs and generate energy savings. Over the past five years, 55 percent of organizations have established policies to reduce energy consumption, yet only 19 percent have measurably reduced their carbon emissions, according to a report published by The Economist. Organizations reported significant challenges in achieving their sustainability goals including: Establishing meaningful benchmarks or metrics to measure performance (80 percent); Access to reliable internal data (77 percent); Tools to monitor global performance e.g. IT, scorecards etc. (79 percent); As a result of these proposed regulations, organizations should accelerate plans to reduce their dependence on energy and mitigate the detrimental impact of escalating energy prices. As TRIRIGA watches these important developments, look for more Insights on what impact this important development will have on your organization. Thu, 12 Feb 2009 09:00:00 PST communication@tririga.com (TRIRIGA Communications) http://www.tririga.com/information-center/infocenter-insights?aid=1 http://www.tririga.com/information-center/infocenter-insights?aid=1 "We'll lead a revolution in energy efficiency, modernizing more than 75 percent of federal buildings" it will cut the federal energy bill by a third and save taxpayers $2 billion each year" - President Barack Obama In 2009, President Obama and the 111th Congress, as well as their state counterparts in the West and Midwest, will deliver significant legislation focused on short-term economic and environmental goals. American Recovery and Reinvestment Plan Government-directed spending and tax credits for energy and infrastructure improvements over the next two years will provide more effective stimulus than tax cuts. With the passing of the American Recovery and Reinvestment Plan, more than $150 billion will be allocated to infrastructure investment, energy efficiency, healthcare, and education projects. Recent research provides insight into the impact these legislative measures may have on organizations' environmental goals: Energy suppliers and consumers will be impacted by programs mandating energy conservation standards, which will create significant new costs. To provide the intended economic stimulus the money must be spent quickly, extended Tax Credits and other incentives catalyze private-spending that would otherwise be delayed. $6.7 billion for renovations and repairs to federal buildings including at least $6 billion focused on increasing energy efficiency and conservation. Projects are selected based on GSA's ready-to-go priority list. $6.9 billion to help state and local governments make investments that make them more energy efficient and reduce carbon emissions. Congress includes a series of transparency and accountability provisions such as a Recovery Act Accountability and Transparency Board to provide oversight in the management of recovery dollars. Infrastructure and building efficiency projects that are fully planned, and provide transparent reporting can be expected to receive economic stimulus funding over those that don't.