Introduction to business cases for sustainable commercial buildings

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This article introduces four fundamental questions that underlie all business cases for sustainable commercial buildings.

Summary

This article proposes that there are four fundamental questions that underlie all business cases for sustainable commercial buildings:

• How can a sustainable commercial building contribute to my company's profit?
• How can a sustainable commercial building affect my company's risk?
• How can a sustainable commercial building contribute to my company's business continuity?
• How can a sustainable commercial building help me realise my personal values and beliefs?

Within these four fundamental questions, the benefits sought by, and accruing to, each industry stakeholder group (and, in fact, each company) are different, and so each group will have its own business case as presented in the business case articles for owners, occupiers, developers, builders, designers and facility managers.

This article describes each of the four questions, and suggests how sustainable commercial buildings may provide benefits in each instance. It also provides an example of a business case framework and offers a 'how to' check-list that can be used to assist you to identify those benefits that may accrue to your company, and therefore to develop and present your business case.

This article will enable individuals – whatever role they play across the industry – to:

• more clearly understand and value the benefits of sustainable practices, products and processes related to commercial buildings
• be capable of presenting a business case to adopt sustainable practices
• gain a greater understanding of the motivations, benefits and value of sustainability to others in the industry
• communicate sustainability to their clients, customers and work colleagues in relevant terms and at critical stages of their decision making throughout the complete cycle of conceiving, financing, planning, developing, designing, building and occupying commercial buildings.

Primarily, it is the occupiers of a sustainable building that directly reap many of the benefits; however, all other users can strengthen their own business cases by linking the value created for others to their own organisation's value creation. So while it is important to read and review the factors that are key to your own industry group's business case, it is equally important to understand the business case motivations of those in other industry groups.

Definitions

The business case for sustainable commercial buildings

• A business case
• The business case for sustainability
• The business case for sustainable commercial buildings

A business case

A business case is a key form of advice used by executive decision makers. It is a key element in the decision-making and budgeting process, providing a substantiated argument for a project, policy or program proposal requiring a commitment of financial or human resources. A business case should present a detailed summary of the business benefits, market impact, financial benefits and potential risks of undertaking a new venture. It sets out, within the strategic framework of the company's mission, vision and values:

• the problem or situation addressed by the proposal
• the features and scope of the proposed initiative
• the options considered and the rationale for choosing the solution proposed
• the proposal's conformity with existing policies, regulations and processes
• the implementation plan
• the expected costs of the proposal
• the anticipated outcomes and benefits of the proposal
• the expected risks associated with the proposal's implementation.

All business cases are required to support core business strategy. The link between organisational strategy and sustainable commercial buildings is discussed in more detail in the Aligning mission, vision and strategy for sustainable commercial buildings article.

The business case for sustainability

The business case for sustainability covers the broad area of questions dealing with the relevance of beyond compliance; that is, the social and environmental activities that affect the business success of a company. In essence, the sustainability business case asks 'how can the competitiveness and business success of a company be improved through environmental and social performance?'

A large part of the business case for sustainability will still focus on the hard, tangible elements of a project, such as return on investment, cost of capital, hurdle rates, energy costs, and long-term operations and maintenance concerns. However, the soft, intangible assets of a project are also of great importance to a company's value and long-term business continuity (for more information about intangible assets, see An investor perspective on sustainability and commercial buildings). Intangible assets may include reputation, the ability to attract and retain increasingly sophisticated and knowledgeable employees, and perceptions of ethical organisational behaviour. It is important that the impacts on these soft assets resulting from the implementation of sustainable initiatives be included and accounted for in the business case. Although every company's culture, business strategy and branding are unique, the role of the business case should always be to show how sustainability will support the company's mission, vision and cultural values. This is the basis of distinguishing between profit and value in preparing and assessing a business case.

The business case for sustainable commercial buildings

In Australia, the business case for sustainable commercial buildings is in a rapid state of transition, as sustainable objectives are becoming increasingly relevant for all industry groups in the commercial building industry (see the snapshot case study on 2006 Australian survey data). A number of factors are driving the increased uptake of sustainability in the commercial building sector, including government regulation, stakeholder demands, environmental imperatives, cost efficiencies and brand value.

Consideration of profit and value

• Value
• Applying value to sustainable commercial buildings

Few projects come without a budget. This means that choices need to be made to distinguish between competing claims for the allocation of resources. To fully evaluate those claims, and the benefits that can accrue from investments in sustainable commercial buildings, it is critical to create a business case that looks beyond the traditional project-cost model towards one that recognises the value that such buildings can add to an organisation. What becomes important is the link between the costs and the added value (tangible or intangible) that may result from the investment, recognising that 'cost-savings' do not mean the same thing as 'value', and that cost savings do not necessarily add value to a building.

The argument has become not about profit or value, but about profit and value. Therefore, the business case needs to provide decision makers with a sound understanding of all the ways in which a sustainable approach to commercial buildings will help the organisation achieve business success. In this regard, it is important to have clear definitions of both profit and value.

Value

Factors that motivate individuals to incorporate sustainability in their decision making about commercial buildings will be a complex amalgamation that may not be well-documented or transparent. Notions of reputation, quality, prestige, and social good - intangibles - become part of the process of decision making, alongside more empirically defined motivations such as profit. These factors - and others like them - are what constitute value in decision-making considerations.

The relevance of value is not always a matter of quantification, but rather whether or not a factor supports a company's core business strategies.

Understanding and valuing the relationship between sustainability performance in the built environment and business strategy and competitiveness is receiving considerable attention, both in theory and in practice. While cost minimisation, rather than value optimisation, has driven much of the construction industry's decision making, increasing recognition of the influence of commercial buildings on market positioning, occupant productivity, and health, lifetime costs, and the environment is shifting assessment criteria from cost to value.

Applying value to sustainable commercial buildings

Value is applied to sustainable commercial buildings in a number of ways. Some sustainability initiatives, such as efficiency improvements, grow in value over time, continuing to deliver value throughout the life of the building, while notions of quality, prestige, and social good have become value considerations alongside more empirically defined measures, such as profit.

It is apparent that experience in sustainable commercial buildings helps users to understand their value. A 2004 US-based survey (bottom left figure) found that while those companies already in involved in sustainable buildings place a higher value on the benefits of sustainable buildings, those who are not already involved still recognised some value. Perceptions of value also appear to increase, based on the number of sustainable buildings in a given portfolio. The survey found that the number of green buildings in an organisation's portfolio increased the number of respondents who rated the benefits of green buildings as 'much higher' than those of non-green buildings (bottom right figure).

The four fundamental business case questions

• Profit
• Risk
• Business continuity
• Values and beliefs

Profit

Profit is the return received on a business undertaking, after all charges have been paid and operating expenses have been met. When considering profit in a business case, it is important to identify and communicate where there are opportunities for increasing bottom-line profit, and also to identify areas where profit risks being reduced.

An important business case consideration is where cost-saving benefits are allocated, as there may be a disassociation of benefits and costs due to market failures. For example, while the developer and owner pay the capital cost of many efficiency measures, they may not flow through to increased profit, as many of the operational savings will accrue to tenants by way of reduced occupancy costs.

More detailed discussion on profit and the business case for sustainable commercial buildings is available in the Profit and the business case for sustainable commercial buildings article.

Risk

Risk arises out of uncertainty, and is often measured in terms of the likelihood of something happening and the severity of the consequences on business activity if it does.

Risk management is intended to identify and evaluate risks, and to minimise and control their effects through avoidance or mitigation to the greatest extent possible. The Australian/New Zealand standard on risk management (AS/NZ 4360:2004) is regarded as the basis for best practice risk management concepts, process and framework in Australia. It requires a risk analysis to be undertaken to develop an understanding of the risks, including their sources, the likelihood that particular risks may occur, their positive and negative consequences, and the development of a course of action to mitigate or reduce the risk potential.

Discussion on risk and sustainable commercial buildings examines issues of compliance, the increased or reduced risks resulting from adoption of sustainability initiatives, and the risks of missed opportunities through not addressing sustainability in a project. Future-proofing is a key area of assets with a long life; how will a sustainable building, for example, perform in future markets, under future regulations, or against new business opportunities?

More detailed discussion on risk and the business case for sustainable commercial buildings is available in the Risk and the business case for sustainable commercial buildings article.

Business continuity

Inclusion of business continuity as a planning factor is important, because it asks the planners to look beyond the short term. As buildings are long-term assets, and as sustainability means whole-of-life performance, it is therefore critical to look at the benefits and performance of a building over its life cycle.

For any company to survive, it must continue to perform and be profitable in a competitive and changing environment. This implies the attainment and application of competitive advantages across both short and long time frames. How companies can achieve — and sustain — competitive advantage contributing to their survival is 'the fundamental question in the field of strategic management' (Teece, Pisano & Shuen, 1997).

However, as most sources of competitive advantage do not last forever, achievement of a competitive advantage does not mean that a company itself will survive in the long term. Apart from loss of competitiveness, companies may fail for any number of other reasons, including lack of suitable ownership or management succession, inability to attract and retain quality employees, poor financial performance, anti-social behaviour, or as a consequence of damaged reputation. How sustainable commercial buildings can contribute to both competitive advantage, and to these more intangible issues that can impact business continuity, is therefore a key consideration in business planning.

More detailed discussion on business continuity and the business case for sustainable commercial buildings is available in the Business continuity and the business case for sustainable commercial buildings article.

Values and beliefs

The motivations for people to pursue sustainable commercial buildings are varied, according to their own values and beliefs and to the cultural values and beliefs of both their industry group and their company.

Each industry group plays a role in the building process, and the nature of their particular role defines many of the social and financial considerations in decision making around sustainability. For example, a developer's behaviour will be governed by different social and financial norms to that of an occupier or builder. However, members of each industry group generally understand enough of other groups' social and financial norms to meet the expectations they place upon their own group.

Individuals within each group are motivated by the strategic objectives and cultural values and norms of their organisation. These are increasingly important as a framework for decision making, due to flatter organisational structures and time restrictions, both of which limit supervision and the use of codified standards.

In addition, personal motivations may influence decision making towards sustainability, even in situations where organisational policies and processes prescribe a particular approach. For example, a developer with a personal commitment to sustainability is likely to bias their decision making towards the achievement of sustainable outcomes.

While a business case will ideally be framed within the context of a company's mission, vision, and values, it is less likely that it will consider the diverse personal values and beliefs that underlie individual commitment to sustainability. Nonetheless, these are likely to influence both the formulation of the business plan and its implementation.

More detailed discussion on values and beliefs and the business case for sustainable commercial buildings is available in the Values and beliefs and the business case for sustainable commercial buildings article.

Barriers to a sound business case

There are a number of potential barriers to creating and implementing a sound business case for sustainable commercial buildings. These include:

• lack of understanding when assembling the business case
• perceptions of additional costs
• lack of knowledge across industry groups
• poor communication channels
• the widespread nature of the word 'sustainability'
• valuation techniques
• lack of hard data.

Each of these factors can have an impact on how the business case is formulated, presented, accepted and/or implemented.

Lack of understanding when assembling the business case

Groups and individuals within organisations are responsible for formulating, presenting and accepting the business case for a sustainable commercial building. Lack of shared understanding about the cost and benefits of sustainable commercial buildings on behalf of those putting the case together, and those approving it, may affect the success and viability of the business case. In particular, if the mindset of management, or the personal beliefs and values of the individuals involved in planning and decision making, do not include openness to sustainability, the business case may ultimately be doomed to failure. This risk is exacerbated by misinformation in the industry about the costs, performance, and life cycle approach required to ensure the success of sustainable commercial buildings, which is rife amongst those who finance, develop, design, construct, manage and occupy commercial buildings.

Perceptions of additional costs

There is a perception that sustainable commercial buildings cost significantly more than non-sustainable buildings. Although a shift is occurring, the discourse on the costs and values of sustainable design is dominated by these perceived additional costs, in part because methods for calculating costs are more highly developed and more readily accepted than methods for assessing intangible benefits and values.

A number of key Australian and international publications have sought to dispel myths about the costs of sustainable commercial buildings (see snapshot case studies: The dollars and sense of green buildings, The cost and benefits of green buildings, and Green value, green buildings). Initial dire predictions that sustainability measures could skyrocket the costs of a building to 20%-25% more than conventional buildings have somewhat been laid to rest by these recent research studies. For example, a recent study undertaken by Davis Langdon Australia (2007) found that the initial impact of sustainability measures on construction costs is likely to be in the order of 3%-10%.

Nonetheless, the debate about the cost of sustainability, and its effect on profit, remains a key barrier in the commercial building industry. For example:

• 'The relationship between benefits and costs is commonly assumed to be a major obstacle to the uptake of sustainable development' (Kam, Prasad & Robinson, 2002, p.1).
• 'The property and construction industry and its clients tend to focus on short-terms gains rather than long-term savings or investment opportunities. Perceived higher initial construction costs and maintenance costs are major obstacles, as they reduce profitability. The anticipated additional cost of ESD features is a reason for the perceived indifference of clients to environmental issues' (Lawther, Robinson & Low, 2006, p.4).

Davis Langdon Australia concluded that this 'perception of extra costs will diminish as the design strategies become the norm' (Davis Langdon Australia, 2006a, p.7). This means that the cost of 'business as usual' will gradually be revised to align with sustainable outcomes. In the meantime, additional value propositions are needed to justify any incremental increases in construction costs for sustainable buildings. Costs currently reflect risk premiums that will come down as volume deployment of these technologies and methodologies increases. It is also important to note that additional costs and the benefits that flow from them are well understood in terms of the costs of A-grade buildings and the rental returns these buildings bring.

Lack of knowledge across industry groups

Many stakeholders across all industry groups still have a wide-ranging lack of understanding about the benefits and costs of sustainable buildings. As well, there is an increasing knowledge gap when it comes to understanding how to own, develop, design, construct, manage and occupy sustainable commercial buildings. Knowledge gaps in the area of sustainable commercial buildings may make it difficult for one industry group to convince another of the business case, and for the widespread uptake within in each individual industry group.

There are some common barriers and knowledge gaps across all industry groups when it comes to understanding the business case for sustainable commercial buildings (RICS, 2005, p.7). These include:

• the continued assumption that it costs more to build sustainable buildings
• a general lack of awareness in the market
• a shortage of ESD knowledge, research and resources
• sustainable strategies not being widely understood
• the steep learning curve required for developers, owners and consultants
• a lack of construction companies with experience in sustainable construction
• a shortage of engineers with experience of operating green building systems
• an insufficient correlation between lower energy costs and benefits to the landlord
• the slow uptake of, and demand for, green leases.

Valuation techniques

Current valuation techniques lack the ability to reflect the additional capital and operating costs associated with sustainability that may be involved for owners and developers. These costs may not flow through into increased rents and building valuations, and so may reflect negatively on predicted profitability, even though operating cost reductions are of benefit to the occupiers. As a consequence, sustainability continues to be overlooked as a significant factor in valuation models used by most owners, investors and valuers. This situation may change in the near future, but at this point in time, valuation techniques continue to be a barrier to the development of a successful business case for sustainable commercial buildings.

For detailed discussion about this issue, see Valuation of sustainable commercial buildings for more information.

Further reading:
Reed, R. & Wilkinson, S. (2006), Green buildings — issues for the valuation process, Paper presented to Australia Property Institute, Queensland Property Conference, Gold Coast, Qld, 27-28 October, 2006.

Wallbank, C., Hilderson, P. & Apted, J. (2006), Assessing the value of sustainability, Accessed 18 May, 2007, from Jones Lang Lassalle website.

Lack of hard data

A lack of quantitative data, particularly around intangibles (such as the contribution of a sustainable commercial building to productivity, employee attraction and retention, and organisational reputation), is another barrier to assembling the business case. For example, because measuring the soft benefits of sustainable buildings may necessarily be qualitative in nature, and because it is often difficult to establish cause and effect of various strategies, convincing people that sustainable design can improve productivity, reduce operating costs, and future-proof an investment has proven to be difficult. Yet those assembling businesses cases for sustainable commercial buildings are increasingly being required to provide less anecdotal evidence and to substantiate their claims.

However, techniques are rapidly being developed to address issues of the value and benefits of green buildings.

Additionally, obtaining 'real' data on historic costs for sustainable commercial buildings can be elusive because:

• real and complete costs often are not published
• published tender prices may bear little relation to the final cost of a project
• quoted figures may or may not include thing like landscape, design fees and taxes
• nearly every project has its special features, site constraints and time pressures
• fit-out may often be excluded or not fully counted, as funds may be from other budgets
• local conditions (place and time) are highly influential
• clients may 'bury' costs for commercial or PR reasons.

In addition, only a handful of sustainable commercial building projects exist in Australia at present, and many of these have only been recently completed, which means that long-term data on the costs and performance of sustainable commercial buildings is not yet available.

Why every business case is different

There is not just one type of business case. Business cases can vary considerably across the commercial building sector, due to:

• different motivations and drivers of value across industry groups, which are often related to the group's role in the building life cycle
• the strategic objectives of individual organisations
• the values and beliefs of the decision makers at all levels.

As well as being industry-group specific, the business case for a sustainable commercial building will also tend to be company-specific. The motivations for each individual organisation to pursue sustainable outcomes for their commercial building will vary according to the level of emphasis placed on the different business case factors, which will be linked with the company's culture, purpose, and strategic objectives. A number of other differentiating factors, including the motivations of individual decision makers and their personal values and beliefs, will influence how the business case is shaped.

Different motivations of industry groups

Each industry group plays a particular role in the building process, and the nature of that role defines many of the social and financial motivations in decision making around sustainability. Further, because of its role during the life cycle of a commercial building, each industry group will be motivated by different combinations of business case factors, as outlined below.

• For an owner, building assets are just one of their potential avenues of investment, and ownership may indicate an interest in a long-term perspective on value.
• Developer's motivations include conceiving and delivering a facility that will sell and/or attract and retain tenants while creating a profitable outcome, probably with a short-term perspective.
• Designers may be motivated by the desire to achieve recognition by injecting individuality and style into a commercial building project, while meeting their client's brief. Designers respond to an array of clients, including developers, occupiers and owners, and seek to generate value both through the collection of project fees and by building their reputational capital through recognition of their style.
• A project manager's decision making is driven by their responsibility to manage the contracts and construction, and the coordination of the various consultants, so that the project is completed on time, within budget, and to the design specification.
• Regulatory authorities are charged with protecting the community interest by ensuring adherence with regulations.
• Builders are motivated to complete the construction to the satisfaction of the developer and to achieve a profit from the work, while sub-contractors are looking to stay in employment from project to project.
• Occupiers' decisions may be driven by the desire to fulfil their functional accommodation requirements, project their brand, and minimise future rental risk.
• Managers are charged with ensuring the efficient day-to-day operation of a building, as well as its maintenance and repair. They need to keep the occupiers satisfied and ensure that the building is operating as it was designed to.

The Business Case Sub-committee of the Australian Sustainable Built Environment Council (ASBEC) has developed a table that illustrates how the different industry groups are influenced by different drivers of value.

The strategic objectives of each organisation

Each individual company will have its own unique strategic plans and cultural values that will inform and influence how its business case is structured. The strategic objectives of each organisation are generally expressed in its mission, vision and cultural values, and are captured in its strategic plans.

The link between organisational strategy and sustainable commercial buildings is discussed in more detail in the Aligning mission, vision and strategy for sustainable commercial buildings article.

Values and beliefs of decision makers at all levels

Values and beliefs at both organisational and individual levels influence business planning and implementation.

At an organisational level, values are often formally defined by the board or company executives. Increasingly, these reflect a commitment to more than just delivering returns to shareholders, instead embracing a wider group of stakeholders and placing a value on environmental and social responsibility (see Values embracing more than shareholder profit). In these cases, it is to be expected that a business plan for commercial buildings would include consideration of sustainability, and that the decision making during implementation would support sustainable outcomes. However, the stated values may not be reflected in the company's culture and behaviours, with the result that decisions may not lead to the successful implementation of the business plan.

One reason for this is that personal values and beliefs may influence decision making towards sustainability, even in situations where organisational policies and processes prescribe a particular approach. For example, a developer with a personal commitment to sustainability is likely to bias their decision making towards the achievement of sustainable outcomes. Factors that motivate individuals to consider sustainability in their business planning and decision making about commercial buildings will be a complex amalgamation that may not be well-documented or transparent.

Building a business case

A business case may be presented in various formats, and should be tailored to suit the style and language of each individual organisation. However, there are certain elements that should be included in any written document. This section provides a logical sequence for preparing a business case. An example business case template can be found in the Tools section of this article.

When creating a business case, you should continually ask yourself the following questions:

• What are the risks associated with the 'do nothing' or 'business as usual' option?
• What are our competitors doing?
• What do our stakeholders expect?
• How can extra value be added?
• Does the initiative clearly link to corporate commitment and broader business goals? (Department of Environment and Climate Change NSW, 2007)

The contributing factors to a business case

The following articles provides a detailed discussion of the value factors across each of the four business case questions:

• How can a sustainable commercial building contribute to my company's profit?
• How can a sustainable commercial building affect my company's risk?
• How can a sustainable commercial building contribute to my company's business continuity?
• How can a sustainable commercial building help me realise my personal values and beliefs?
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Tools

Building a business case

A business case is used to obtain management commitment and approval for investment in a sustainable commercial building, through rationale for the investment. The business case provides a framework for planning and management of the investment. Project outcomes can also be monitored against the business case.

• Fitness for purpose check-lists
• Business case template

Fitness for purpose check-lists

When assembling your business case, the following questions can help you to ensure that the proposal is worth doing and is achievable:

• Is the business need clearly stated?
• Have the benefits been clearly identified?
• Are the reasons for and benefits of the project consistent with the organisation's strategy?
• Is it clear what will define a successful outcome?
• Is it clear what the preferred option is?
• Is it clear why this is the preferred option?
• Is it clear how the necessary funding will be put in place?
• Is it clear how the benefits will be realised?
• Are the risks faced by the project explicitly stated?
• Are the plans for addressing those risks explicitly stated? (Office of Government Commerce, 2007)

Business case template

This sample business case template has been adapted from the NSW Premier's Department (2000). It outlines a framework for the planning and management of business change, and provides a vehicle for benchmarking the ongoing viability of the project.

Measuring value

• Cost-benefit analysis
• Business value matrices
• Balanced scorecard
• Resources for sustainable features and performance and valuation
• Resources for value and sustainability

Cost-benefit analysis

A cost-benefit analysis is one of many useful economic tools for formulating a sustainable business case, as the total costs and benefits of a project can not always be adequately represented by market prices (Myers, 2004, p.172). However, not all industry groups will necessarily analyse projects in this manner. For example, a purchaser will look at yields on investment using capitalisation rates, and will examine potential increases in rental income or capital growth.

In a cost-benefit analysis, monetary values may be assigned to the less tangible costs and benefits of a project, such as reduced risks, increased reputation and brand value, long-term business continuity, and the benefits or costs to the natural environment (Gruneberg, 1997).

Common forms of cost-benefit analysis used in the property industry include:

• Residual analysis: Residual analysis is the simplest form of analysis used in the property industry, and expresses profit or land value as project costs minus revenues. It considers only the initial cost and return on a building project, and does not take into consideration operational costs and benefits throughout the building life cycle. It can however provide a useful indication of how much to pay for land to achieve a desired profit.

• Return on investment (ROI): Return on investment estimates the profitability of a project as a percentage of the capital outlay or investment, calculated as gross profit divided by total cost. A project is deemed acceptable if the return on investment achieves a desired target, generally referred to as the 'hurdle rate'. ROI is similar to residual analysis, in that it does not consider the life cycle costs of the building, and considers only the value that is achieved upon sale or letting of the building upon completion of construction.

• Payback period: Payback period is an analysis to estimate the number of years for cash inflows to equal (or pay back) the initial capital outlay. It can be a useful decision-making tool, providing investors with an indication of how long it will take to recover the initial capital outlay on sustainable features.

• Net present value (NPV): Net present value is an adaptation of the payback period method and is the present value of an investment's future net cash flow, minus the initial investment. NPV is used to determine the feasibility of investments, based on a specific target discount rate and investment period.

• Social cost-benefit analysis: Social cost-benefit analysis seeks to expand the project feasibility analysis beyond private costs and benefits, and to internalise the social costs and benefits of stakeholders external to the project. It is a useful way to incorporate triple bottom line considerations into the value equation (Lawther, Robinson & Low, 2006).

Business value matrices

A sustainable business value matrix can be used not only to identify all the sources of value, but also to identify the types of potential value that may result from a particular project. It provides a cognitive map for decision makers and outlines a summary of the tangible (hard) and intangible (soft) value sources. A value matrix can be designed to take a triple bottom line perspective, in order to define the economic, social and environmental values of an organisation. An example of a sustainable business value matrix is provided in the table below.

Balanced scorecard

The balanced scorecard (BSC) is a management system (not only a measurement system) that enables organisations to clarify their vision and strategy, and to translate them into action (Kaplan & Norton, 1996). It demonstrates that factors other than financial considerations are important and of interest to organisations. Organisations use the balanced scorecard framework to evaluate their performance, and therefore the scorecard can be used to conceptualise the potential links between sustainable commercial buildings and organisational performance outcomes. The balanced scorecard is useful for assessing value and the relationships between the built environment and an organisation's effectiveness. It encourages discussion of the full business value of design decisions, not just the cost implications. An example of the balanced scorecard approach for sustainable commercial buildings is provided in the table below.

Resources for sustainable features and performance and valuation

RICS (2005, p.18) suggests a number of resources that offer direct and indirect links between sustainable features and performance and valuation. These resources include:

• International Valuation Standards: http://www.ivsc.org

• Uniform Standards of Professional Appraisal Practice, Appraisal Institute of Canada: http://www.aicanada.ca

• Uniform Standards of Professional Appraisal Practice, Appraisal Foundation: http://www.appraisalfoundation.org

• Red Book (Manual of Valuation): Royal Institution of Chartered Surveyors http://www.ricsbooks.com/appraisalloose.asp

• Green Book, UK government's guidelines on incorporating green practices in business http://www.sustainable-development.gov.uk

• Multiple Account Evaluation Guidelines, Province of British Columbia

• Schaltegger, S. & Burritt, R. (2000), Contemporary environmental accounting – issues, concepts and practice, Sheffield: Greenleaf Publishing.

• Wilson, A., Seal, J.L., McManigal, L.A., Hunter Lovins, L., Cureton, M. & Browning, W.D. (1998), Green development: integrating ecology and real estate, Brisbane: John Wiley & Sons

• Baum, A., MacKmin, D. & Nunnington, N. (1997), The income approach to property valuation (4th ed.), South Melbourne: Thomson Learning.

• Britton, N., Davies, K. & Johnson, T. (1989), Modern methods of valuation (8th ed.), London: Estates Gazette.

• Various papers of the benefits of sustainable building, UK Building Research Establishment: http://www.bre.co.uk

Resources for value and sustainability

• Baum, A., MacKmin, D. & Nunnington, N. (1997), The income approach to property valuation (4th ed.), South Melbourne: Thomson Learning.

• Britton, N., Davies, K. & Johnson, T. (1989), Modern methods of valuation (8th ed.), London: Estates Gazette.

• Schaltegger, S. & Burritt, R. (2000), Contemporary environmental accounting ¿ issues, concepts and practice, Sheffield: Greenleaf Publishing.

• SustainAbility (2002), Developing value, London: SustainAbility Ltd. Also available at: http://www.sustainability.com/downloads_public/insight_reports/dev_value.pdf.

• SustainAbility & UNEP (2005), Buried treasure: uncovering the business case for corporate sustainability (2nd ed.), London: SustainAbility Ltd. Also available at http://www.sustainability.com/downloads_public/insight_reports/buried_treasure.pdf.

• Wilson, A., Seal, J.L., McManigal, L.A., Hunter Lovins, L., Cureton, M. & Browning, W.D. (1998), Green development: integrating ecology and real estate, Brisbane: John Wiley & Sons

Decision making

Case studies

This section of the Business case article provides examples, across the industry groups, of individual Australian companies' business cases for involvement in sustainable commercial buildings.

References

Australian Sustainable Built Environment Council (ASBEC) (2006), Business Cases value factors, ASBEC Business Case sub-committee, unpublished.

Baum, A., MacKmin, D. & Nunnington, N. (1997), The income approach to property valuation (4th ed.), South Melbourne: Thomson Learning.

Britton, N., Davies, K. & Johnson, T. (1989), Modern methods of valuation (8th ed.), London: Estates Gazette.

Davis Langdon Australia (2006a), The Davis Langdon sentiment monitor: construction sentiment (May 2006), Accessed 5 March, 2007, from Davis Langdon website.

Davis Langdon Australia (2006b), The Davis Langdon sentiment monitor: construction sentiment (November 2006), Accessed 5 March, 2007, from Davis Langdon website.

Davis Langdon Australia (2007), The cost and benefit of achieving green buildings, Accessed 1 May, 2007, from Davis Langdon website.

Department of Environment and Climate Change NSW (2007), Sustainability and Property Management, Sustainable property guide, Sydney: NSW DECC (http://www.livingthing.net.au, http://www.environment.nsw.gov.au).

Dunphy, D., Griffiths, A. & Benn, S. (2003), Organizational change for corporate sustainability, London: Routledge.

Gruneberg, S. (1997), Construction economics: an introduction, Palgrave: New York.

Heerwagen, J. (2000), 'Green buildings, organisational success and occupant productivity', Building Research & Information, 28(5/6), 353-67.

Kam, M., Prasad, D. & Robinson, J. (2002), The development of a framework for assessing client demand and capacities for the implementation of environmentally sustainable buildings, Paper presented to Sustainable Building 2002: 3rd International Conference on Sustainable Building, Oslo, 23-25 September.

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