Greening property in the Public Sector can deliver £8billion gains

 Matthew Hancock MP, Chair of the Westminster Sustainable Business Forum Inquiry

The Public sector is facing tight budgets and a mandate to reduce carbon emissions by 35% in the next decade. Meeting these challenges simultaneously will not be easy, so the sector will need to manage its property innovatively if it is to continue to deliver effective services.

The importance of green buildings

The built environment accounts for a staggering 44% of the UK’s carbon emissions.

Public sector property alone represents 8% of total non-domestic carbon emissions. So it is clear that buildings will need to play a prominent role in softening the environmental impact of the public sector.

I have chaired two consecutive parliamentary inquiries by the Westminster Sustainable Business Forum investigating the benefits of a leaner and greener public sector estate. Our reports show how far public property’s carbon emissions can be cut. Moreover, more energy efficient buildings will lead to financial savings and better public service delivery. These inquiries have shown the size of the prize from the leaner and greener public portfolio, but also provide a practical roadmap for public sector organisations wanting to make the change.

The size of the prize

Our findings clearly demonstrate that there is a strong business case for environmental efficiency. Inefficient buildings are costing more and more to operate. In the first Leaner and Greener report, we found that every tonne of carbon produced by the public sector in 2010 cost the public purse between £150 and £200. Energy costs have increased by approximately 15%-20% and the Carbon Reduction Commitment (CRC) levy of £12 per tonne will increase utility bills by another 7%-8%,  - an overall increase in energy costs of approximately 25%.We found that the cost for an average public sector organisation will be £200,000 a year from 2012. Meanwhile building regulations are demanding greater environmental efficiency; by 2018, all new public sector buildings need to be zero carbon.

The introduction of ‘green’ measures for a standard administrative building, with staff on average public sector wages, can save £180-£200 per m² per year by spending less on energy. Energy efficient buildings would be better to work in too - with more natural daylight, better air quality, access to outside space and higher levels of control for those working within the environment. Carbon reduction measures of this scope represent a cost reduction of £650,000 for an average participant in the Carbon Reduction Commitment.

Environmental efficiency can be significantly enhanced by improving how efficiently space is used. Valued at £370 billion, and costing an incredible £25 billion to run every year, the public sector spends approximately one fifth of its annual expenditure on running its property portfolio. By decreasing the space they occupy by 20-30% and by being smarter about property related procurement, the public sector could save up to £7 billion a year.

Better workplace conditions could also improve workforce productivity, which in turn could generate financial benefits worth £8 billion. Such mammoth rises in productivity can be achieved by improving workplace conditions, addressing comfort factors such as temperature, ventilation, light and other environmental attributes. Such small changes have been shown to significantly reduce the number of sick days. Similarly, this can also be achieved by improved interaction through the increased accessibility of breakout areas or informal meeting spaces and flexible working increasing service contact hours.

But, how can the public sector deliver both environmental and economic savings, while maintaining the same quality of services? More to the point, how can they do all this, starting on Monday?

Leaner and greener buildings

We understand that streamlining public property is full of difficult decisions. Best practice is not always easy to replicate due to local circumstances. Knowing that one size does not fit all, we offer a number of bold, crucial recommendations in Leaner and Greener II, which can be followed in every locality.

Firstly, we argue that pan-public sector property working is critical to realizing the full potential of public property savings. Whilst increased financial constraints have driven the public sector to share certain services with their partners, there is still a lack of shared property resources.

Joining both front and back offices and developing common procurement strategies is vital to lower running costs and to benefit from the sale of freed-up property.

The results of such collaborative working are already yielding impressive results. In Hampshire, public sector organisations expect to reduce 36% of their combined floor space whilst improving service delivery; in total, they hope to save up to £324 million. In Cambridgeshire, the joint management and use of property is expected to deliver a 20% increase in disposals over five years and a 20% revenue saving.  The residual estate will at the same time become greener and services improved through co-delivery, producing tangible community benefits. Further examples of such best practice are included throughout our report.

We show that the public sector should also examine whether they can invest in energy efficiency measure more collaboratively, and in doing so, make considerable savings. Current financing arrangements for energy efficiency schemes are generally more favourable for programmes that are over £1 million in value. So bigger programmes are needed to secure project finance at a reasonable interest rate. Joining forces with other organisations could enable cost-effective implementation of carbon reduction schemes and the development of common investment solutions could increase the viability of energy efficiency projects. Suffolk have already demonstrated how working in partnership increases the cost effectiveness of green investment, and unlocks long-term opportunities.

While direct investment will generally create a better return (because there is no profit sharing) establishing an energy performance contract might effectively balance funding availability and risk management. Our findings suggest that Energy Service Companies (ESCOs) could help address barriers to energy efficiency and microgeneration by providing information, finance, installation and maintenance under long-term performance-based contracts. Woking, for example, participated in an ESCO arrangement. This has enabled the Council to create a ring-fenced capital fund for energy and environmental projects and moreover, has enabled systematic investment in new projects as it demonstrates savings from energy efficiency initiatives.

The Public Sector clearly offers brilliant opportunities which need to be explored. As Eric Pickles MP, Secretary of State for Communities and Local Government said at the launch of our findings: “Public sector estate management is not the world’s sexiest phrase – but what the heck – it gives us some eye-popping results.”