Carbon Footprints of Real Estate in India

By- Anurag Pathak Institute Of Management, Nirma University

The resources in the earth is not only for us but also for the generations to come - Mahatma Gandhi Background: The global warming is more than just environmental phenomenon .Threatening environmental challenges due to high CO2 emission levels is a major concern today. Carbon emission across the industries needs to be reduced to mitigate the risks related to environmental sustainability. Real estate Industry-both residential and commercial; has the potential to curb the emissions in myriad ways. But lack of awareness and innovative thought leadership are impediments to overcome.

Introduction: Carbon Footprint is defined as "the total sets of greenhouse gas emissions caused by an organization, event, product or person. With forward and backward linkages to many carbon emission activities, Real estate is one of the most critical sectors contributing larger carbon footprint. Unfortunately awareness to this subject is so low that many real estate professionals believe that carbon emissions come primarily from vehicles and power plants; yet few recognize the magnitude of the contributions from real estate. With this threat also comes the opportunity of investment in energy efficiency improvements (EEI) and green marketing which can further be monetized to achieve the triple bottom line of social, environment and economical gains. Research Objective: 1. To figure out potential factors contributing to carbon foot prints of Indias real estate sector. 2. To analyze challenges in calculation of Carbon Footprint of commercial real estate.

3. To propose the Energy Efficiency Improvements and innovative strategies that can help reducing the carbon footprint of the sector.

Literature Review:

Groppi, Burin (2007) conducted a research to find out the role of commercial real estate owners, users & managers in meeting the carbon challenges ahead. They defined carbon footprint as a measure of the amount of carbon dioxide emitted through an activity. However, in the
case of a business organization, they estimated it as the amount of CO2 emitted either directly or indirectly as a result of its everyday operations. They found that the largest global sources of emissions are generation of electricity and heat, followed by transportation. The real estate sector has inseparable linkages with electricity, transportation and many other activities which contribute to substantial carbon emission. Owners and occupiers of significant amounts of real estate have an opportunity to curb the effects of global climate change by influencing day to day operations. This imposes a challenge for real estate managers to be proactive in helping lessen the increase of greenhouse gas emission both supply as well as in demand side. It provides an opportunity to establish more efficient building operations and systems that can create long-term cost savings for the owners and occupants both. The subject engulf challenges as well as opportunities with Worlds largest financial services firms, including AIG, Fund Insurance company and Marsh & McLennan are concluding that climate change is a business reality that must be faced, dealt with and perhaps even profited from. Binkley & Brian (2011) studied the hidden opportunities related to carbon market of real estate. They found that though real estate is one of the largest contributors to CO2 emissions, the industry knows very little about this development. The lack of awareness may result into few unwelcomed challenges and some missed opportunities as well. According to a report by The Stern Review, it has been argued that the financial implications of attempting to mitigate the global greenhouse emissions could be approximately 1% of worlds GDP. It has been estimated that the operational carbon footprints potential reduction of U.S. commercial real estate is nearly $3 billion on an annual basis. A survey by Mckinsey & Co shows that in the U.S., commercial and residential buildings account for more than 39% of all carbon emissions, which is greater than either the transportation or industrial sector. Out of the total of 39%, commercial buildings contribute 18% of total carbon emissions and residential buildings contribute 21%. The standard measure of CO2 emissions is one metric ton of carbon dioxide equivalent (CO2 e), the global warming impact of one metric ton of atmospheric carbon dioxide. An efficient carbon market will offer ample opportunities to support greater investments in energy conservation that mitigates the carbon emissions in the commercial real estate industry. Climate Smart Businesses Inc. which is a social enterprise providing training, coaching, and software for businesses to measure their carbon footprint, identify opportunities for cost, energy, and carbon savings; conducted a research to find out why companies should adopt the carbon efficient measures

specially related to real estate, they interestingly found that marketing and brand lift prove to be strong motivators for carbon management within the construction and real estate industries, indicative of a competitive marketplace. Perhaps due to a combination of these reputational drivers plus regulatory pressures, environmental practices are becoming embedded in construction operations: four in ten businesses surveyed by them wish to build upon their existing green initiatives. At the same time, the prospect of cost savings drives four in ten businesses to look at managing their emissions as a way to cut operating expenses and improve efficiency. Rajat, Malhotra (2012) mentions in a research on sustainability of Indian real estate sector that real estate provides large scale employment and contributes significantly to the GDP. With the massive growth, it is also directly affecting the environment. To make the business more viable, it needs to bring sustainability in the business. Sustainable development is about minimizing the impact and we make sure that we keep the environment and planet green and healthy. Awareness of the same among the end user is still limited and it first needs some of the myths to dispel. Typically, more than 90% of the total cost of ownership of a building is attributable to its operating and maintenance cost. Since, energy accounts for 50% of the O&M cost, green buildings ensures that the initial investment is recovered within a roundabout period of five years. There are other myths such as the market demand for green spaces will wane and etc which needs to be addressed first. IBM Which is active in business of IT consulting also provided effective application based services to curb the real estate carbon emission. In the product review of one of its famous product in this market- TRRIGA- it mentions that to implement an environmental sustainability management strategy, one must first accurately measure and assess the overall environmental footprint of the portfolio. Next, one must manage the environmental impact by identifying and evaluating opportunities for improvement. Finally, one must implement changes to reduce costs and environmental impact. Thus the steps are measure, manage and reduce. After product setup, the first step in implementing an environmental sustainability strategy is to collect the environmental data that is needed to measure the environmental impact of the organization. IBM promises to its clients that such IT service can give those eases and effectiveness to perform the processes for carbon management.

Conceptual Framework: The Carbon footprints of real estate are influenced by many factors and hence are complex to calculate. If different potential factors can be determined, the total footprints for various real estate organizations can be estimated in a better way. Once we measure something we take the first step to manage it. Managing may not seem to be very effective in Indian context as of now but the real estate is characterized by neck to neck competition, leadership is determined here with the ability to search and tap the needs of time to come. To make this sure various ways need to be discovered to reduce the carbon footprints of the real estate players. From use of energy efficient lightings to plantation of bamboo tree there can be many cost effective and innovative solutions that can add to this analysis. Moreover, the carbon footprint reduction is not just a challenge but also the energy efficiency management is a long term investment that is bond to pay well in carbon markets.

Methodology This would be an exploratory study attempting to provide clear understanding of the issue and its implications. The paper is proposed to be following below stated approach to meet the objectives Review and analysis of available secondary data - company reports, previous research data of environmental sustainability measures in India with a focus on Real estate. Series of benchmarking tools for a comparative analysis. Depth interview of leading real estate consultants in India as well as environmental experts. Estimation of overall monetary gains through reduced carbon footprint with the help of data models.

ReferencesBinkley, Aaron & Ciochetti, Brian (2011): Carbon Markets: A Hidden Value Source for Commercial Real Estate? http://www.costar.com/uploadedFiles/JOSRE/JournalPdfs/04.67_90.pdf; Carbon Markets: A Hidden value Source for Commercial Real Estate? Groppi, Michael & Burin, Jerry (2007): Meeting the Carbon Challenge: The Role of Commercial Real Estate stake holders Climate Smart Businesses Inc. research on Carbon Marketing https://climatesmartbusiness.com/wp-content/uploads/2013/10/CS-Construction-Industry-Brief .pdf IBM research on IT enabled services for real estate carbon emission management. http://www-01.ibm.com/software/tivoli/welcome/tririga/ Rajat, Malhotra (2010 ): Indian Real Estate and Sustainability http://www.moneycontrol.com/news/auto-insurance/indiasustainable-real-estate_698428.html Bibliography: http://realestate.msn.com/article.aspx?cp-documentid=27585858 http://www.carbonfootprint.com/ http://www.emeraldinsight.com/journals.htm?issn=1463-001X&volume=11&issue=2&articlei d=1793759

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