PRINT THIS STORY:

CHANGE TEXT SIZE:

MEASURING SUCCESS BY COUNTING 'CARBS'

DEVELOPERS ARE STARTING TO MONITOR AND REPORT THEIR PROPERTIES’ CARBON OUTPUT AND IMPACT ON THE ENVIRONMENT

By Jennifer Hopfinger

Retailers and shopping centers in Europe are increasingly concerned about their “carbon footprint” — the amount of pollution they generate. Companies are beginning to disclose the carbon footprints of their properties and products to tenants and shoppers in a move that is in some cases voluntary and in others a regulatory requirement. Moreover, the issue is not limited to Europe; consumers and governments everywhere could begin demanding more transparency about energy consumption and efficiency.

Rising levels of carbon dioxide emissions, or greenhouse gases, in the atmosphere are increasingly linked to global warming. A company’s carbon footprint is a measure of the amount of energy it consumes and how much carbon dioxide it creates in the process. A carbon footprint is generally measured in metric tons of carbon dioxide emitted annually. The carbon footprint has become a hot topic in Europe, particularly in the U.K., where individuals and companies alike are working to reduce the impact. Even Britain’s Queen Elizabeth has ordered a review on how the royal households can save energy.

Supermarket chain Tesco, Britain’s largest retailer, announced in January that it plans to assign a carbon rating to every product it sells. Tesco, which operates some 3,200 stores in 12 countries, has yet to provide a time frame for when the labels would appear, but the chain is working with Oxford University to devise a standard measurement for a universal product label.

Product labeling is tricky because it involves complicated calculations and must account for every step in the supply chain, from raw materials through production, distribution, consumption and disposal. Further, if labeling is to be meaningful, it needs to be standardized so consumers can compare. Tesco’s work is spurring debate about the ways carbon footprints are measured and communicated to shoppers, says Ian Cheshire, CEO of U.K.-based home improvement retailer B&Q, in an address to the World Retail Congress in March. Cheshire says he expects there will be a standard within the next two years.

The U.S. could follow Europe’s lead, says Eric Carlson, executive director of Carbonfund.org, a Silver Spring, Md.-based nonprofit that promotes renewable energy and energy-efficiency projects. “Europeans are certainly a few years ahead of the U.S. in terms of awareness about climate change, but consumer interest in the environment is growing in the U.S., and retailers here are starting to realize that this issue is central to their success,” Carlson said. “At the very least, companies need to keep up with consumer demand for it, if not take the lead in developing ways to create better transparency. U.S. companies are learning they need to do this to stay competitive.”

In addition to product labeling, Tesco has committed to cutting its own carbon footprint in half by 2008 and its emissions by the same amount by 2020.

Commercial structures are another area of environmental concern, as buildings consume considerable energy, by some estimates accounting for up to 40 percent of the world’s energy demand. And their heating and cooling systems produce significant emissions.

Interest in creating and managing environmentally responsible properties is growing around the world, but in Europe certain environmental requirements are now mandated for commercial structures.

The European Union is requiring that all commercial buildings meet certain energy standards by 2009. Both newly constructed and existing properties are to be inspected and rated with a letter grade for energy efficiency. Developers and owners must provide this information to investors and potential tenants. Fines will be levied on buildings that come short of basic standards.

Portuguese developer Sonae Sierra is a step ahead of the legislation, as it has already implemented more-stringent environmental standards in the design of its shopping centers than even the EU will require. Sonae Sierra owns or co-owns 44 shopping centers in Portugal, Spain, Italy, Germany, Greece, Romania, and Brazil and is developing 15 more projects in Europe. In May ICSC presented Sonae Sierra with an award for its commitment to sustainable development and management of its centers.

European shopping center developers and managers that fail to make such efforts can expect to incur up-front costs getting up to code, but they will save on operation and maintenance costs in the long term, says Elsa Monteiro, Sonae Sierra’s head of institutional relations, environment and communications. Carlson agrees that initial outlays will eventually pay off. “You can’t manage what you don’t measure, and once you start measuring your carbon footprint, you can start finding ways to be more cost-effective,” Carlson said. “Energy efficiency is almost always a positive for the bottom line.”

In time, shopping centers may have to be environmentally competitive to attract the best tenants, even though “this is not yet a discerning factor for tenants when they choose where to install a new shop,” said Monteiro. Banks, investors and municipalities are more interested in environmental issues, she says, and Sonae Sierra’s environmental approach has set it apart from the competition as far as those groups are concerned. Monteiro says she believes it would behoove retailers to choose shopping centers based on their energy efficiency, because reductions in energy and water consumption result in lower common charges.

U.S. companies have been slower to adopt green standards for commercial buildings, but with energy costs rising and environmental awareness growing, they are starting to act. The LEED (Leadership in Energy and Environmental Design) rating system developed by the U.S. Green Building Council is gaining ground. LEED criteria include sustainable site development and materials selection and energy efficiency. In recent years U.S. retailers have been jumping on the LEED bandwagon, and grocery chains have once again been at the forefront. Giant Eagle, for example, opened the first LEED-certified grocery store in the U.S. in 2004, and Albertsons opened the second the following year.

Shopping center developers are following suit, with such firms as Cleveland-based Forest City Enterprises developing LEED-certified properties. Baum Development, a Chicago-based real estate development firm, is using LEED standards to develop The Green Exchange, the first U.S. shopping center exclusively for green businesses. The Green Exchange is set to open in Chicago early next year. The 250,000-square-foot building will contain about 100 stores, including an organic restaurant, a sustainable furniture store and an eco-friendly apparel retailer.

Carlson says it is in corporate America’s best interest to be proactive on the environment to stay ahead of the inevitable regulations. “The U.S. government will eventually have to adopt international standards for reducing emissions,” he said. “It cannot stand on the sidelines forever.”