THERE is sometimes a misconception that investing in sustainability represents a cost to the business that cannot be justified from a commercial point of view. Or, where there is a return on investment (ROI), that this return will be over a longer period than would be the case for other investments.
Certainly there are long ROI periods associated with projects that require capital investment in major plant. But there are also ‘quick win' options that will deliver cost savings from day one and increase access to capital. And when total cost of ownership is considered, also provide a very quick ROI.
A case in point is lighting, which in most commercial buildings represents a significant proportion of energy costs - and can represent a significant waste of energy. In larger organisations lighting also impacts on the carbon allowances that have to be purchased under the Carbon Reduction Commitment Energy Efficiency Scheme. In a notional office building, the lighting accounts for around 30% of carbon emissions and the figures are very similar for a typical retail building. This is higher than heating, cooling or ventilation.
A further contribution to overheads comes from the need to replace the light sources (bulbs and tubes) on a regular basis through planned or reactive maintenance.
In addition, when the layout of a building changes - perhaps to accommodate an increase in staff density when space usage is optimised - further expense can be incurred in reconfiguring the lighting.
A less quantifiable aspect of lighting is its contribution to the quality of the working environment. It has been shown that lighting can influence employee performance and productivity and has an impact on staff retention, so better lighting may also contribute to a reduction in recruitment costs. In fact, the Centre for Performance at Work at City University London not only recommends investment in workplace lighting it also suggests lighting is so important that it should be considered at board level.
Therefore, any measures that will reduce the energy consumption and maintenance requirements of a lighting installation while also providing inherent flexibility are worthy of consideration from a financial management perspective. So while such matters may traditionally have been left to the facilities management department, there is a strong case for financial professionals to take a closer interest.
Investing in sustainability
As well as making sound financial sense, tackling energy consumption and carbon emissions also contributes to Corporate Social Responsibility and the image that is presented to stakeholders, potential investors and customers. In the case of new buildings it also contributes to the sustainability credentials of the building through rating schemes such as BREEAM. Having BREEAM accreditation increases the asset value of a property by around 12% and ‘green' buildings attract higher rents from tenants while enjoying higher occupancy levels.
Many organisations have gone some way down the route of reducing lighting energy consumption by installing the latest fluorescent lighting technologies with some limited control. Indeed, until relatively recently this was about as far as energy efficient lighting could go.
Now, though, the latest generation of light emitting diode (LED) lighting with lighting controls offer a real choice with very impressive energy savings and returns on investment. The unique characteristics of controlled LED lighting solutions also open the doors to more creative, dynamic lighting that enhances the brand, quality and flexibility of the working environment.
One of the key features of LED lighting is its energy efficiency. LED lighting can deliver energy savings of between 50% and 80% when coupled with lighting controls, depending on the type of traditional lighting it is being compared to.
Furthermore, LED light sources have a longer life - around 45,000 hours compared to around 8,000 hours for a typical fluorescent tube and just 1,000 hours for the halogen spotlights that may be used in a reception area. This means that the duration between replacing the light sources can be greatly extended - taking the pressure off in-house maintenance staff or opening the doors to renegotiation with maintenance contractors.
Laying waste to waste
Investment in energy efficient lighting is only part of the story, as it's also important to prevent waste of energy through poor management of the lighting. For example, there are many office buildings where lighting is left on when it is not needed. Most office buildings are only occupied for 25% to 30% of a week, so leaving any of the lighting on at other times equates to 70-75% wastage.
Where a sophisticated lighting management system is not in place, or has not been configured properly, there may be further wastage. Lights may be left on in unoccupied areas; or there may be sufficient natural daylight entering the building that artificial lighting is not required at certain times of the day.
In such instances major savings can be achieved by ensuring the lighting is responsive to change. For instance, lighting can be dimmed automatically in response to daylight levels (daylight linking), or switched off when areas are unoccupied. A combination of daylight linking and presence detection will typically deliver energy and cost savings in the order of 55% when compared to manually switching lights on and off.
Such lighting control strategies are already found in some commercial buildings, of course, but they may be based on outdated technologies that fail to deliver maximum benefits. It has been estimated that 75% of Europe's office lighting is based on outdated or inefficient lighting systems.
Very often, inefficiency is a by-product of changes to the building not being reflected in the control strategy. Older lighting control systems can be difficult and expensive to re-configure, so that many building operators simply ‘leave well alone'. And it has been estimated that only 1% of office lighting uses lighting management systems at all.
Modern intelligent lighting information management software overcomes these issues because it is able to monitor lighting energy consumption, in real time, within different areas. This information provides clear visibility of where energy is being consumed so that lighting control strategies can be optimised and fine-tuned to accommodate change.
For example, at the London headquarters of Freshfields Bruckhaus Deringer a Philips Dynalite lighting management system was retrofitted to the existing lighting installation. The result was a reduction in the total cost of ownership of the lighting by around 50%.
When all of these factors are taken into account it's clear that there is a strong business case for assessing a building's lighting and, where appropriate, investing in more efficient, well managed lighting. And where the capital is not available schemes are available to repay the capital through the energy savings achieved over an agreed period of time.
Increasing the capital budget will reduce maintenance budget and costs associated with energy and carbon. It's time to look at the bigger picture and leave the ‘silo budgets' approach where it belongs - in the past. Investing in energy efficient lighting is a triple bottom line win for people, planet and profit.
So rather than considering the cost of an investment in lighting, it's more meaningful to consider the cost of not investing.
Lee Bensley is a director at Philips Lighting
Sign up for Financial Director email alerts
Please enter your email below to receive your profile link
Search by job title, salary, or location - we only list senior financial roles
Our panel of experts explore the major pension pain points and discuss what actions finance professionals should be taking in order to alleviate them
This Financial Director web seminar with Anaplan, the planning cloud for sales, finance, operations, and HR discusses how businesses can use enterprise data
Send to a friend