The Dollars and Cents of Green Construction: Being Environmentally Friendly Brings Financial as Well as Social Benefits

By Meyerson, Andrew | Journal of Accountancy, May 2005 | Go to article overview

The Dollars and Cents of Green Construction: Being Environmentally Friendly Brings Financial as Well as Social Benefits


Meyerson, Andrew, Journal of Accountancy


EXECUTIVE SUMMARY

* WHEN PLANNING CONSTRUCTION PROJECTS, consider the tax implications, rebate offers and soft benefits associated with environmentally friendly construction. Construction companies may not be eligible for these on buildings they construct for others, but building owners and any subcontractors used on the projects are.

* IT'S MOST COST-EFFECTIVE TO CONSIDER green elements before beginning construction, but some elements such as solar panels can be added to existing buildings.

* FIRMS AND COMPANIES CAN BE environmentally friendly and also save or earn money in seven ways: Tax rebates; LEED incentives; recycling the core and shell of existing buildings; using energy-efficient devices; maximizing natural energy sources; building on HAZMAT and Superfund sites; and calculating the intangible benefits of green construction.

* WHILE CPAs MAY FIND IT DIFFICULT to quantify the soft benefits, studies show that environmentally friendly buildings raise employee retention and productivity rates, improve the retail customer experience and generate higher average revenues, and bring apartment building owners higher-wealth clients willing to pay more in rent.

My company has gone green--and as its controller, I've helped its management and customers recognize that the tax benefits, rebates and lower utility costs of being environmentally friendly add up to a real bottom-line reward for doing the right thing.

We've used many "green" elements in building three Stop & Shop supermarkets, and come to understand that green construction can be a smart business decision as well as a socially conscious one. In addition to the hard cost savings, studies show that natural light and fresh air improve employee productivity and retention, allow apartment-building owners to charge higher rents, and increase retail revenues by encouraging customers to stay in stores longer and spend more. In this article I'll share what I've learned to help my fellow CPAs suggest incorporating green concepts when their firms undertake construction projects or clients plan to build commercial or residential properties.

This year is a particularly good time for small and midsize firms and companies to consider construction projects, to take advantage of a two-year extension and upgrade to the U.S. Small Business Administration's 504 loan program. Loans can be used for the purchase of equipment, construction, renovation or acquisition of land by small businesses, and carry low fixed interest rates. For 2005 and 2006, the maximum for loans to general businesses has been raised to $1.5 million; minority- and women-owned businesses can borrow up to $2 million and manufacturers can borrow up to $4 million.

GOING GREEN FOR STOP & SHOP

Like many good ideas, the environmental approach we took actually was suggested by our client; Stop & Shop management already had the design in mind when it hired us to manage its construction project. Its vision was to earn tax incentives and rebates--as well as to improve the customer experience and maximize sales--by recycling the concrete from the demolition portion of the construction project and using high-efficiency heating, ventilation and air-conditioning (HVAC), energy management and hot water reclamation.

That translated into lots of skylights that allowed natural light into the stores, and a system that automatically dims or brightens the overhead fixtures depending on the amount of sunlight. Stop & Shop also installed a hot water reclamation system that draws off the heat being generated by the refrigeration units in the stores and uses it to preheat the water that runs into the hot water heaters.

Our interest in green construction began long before Stop & Shop hired us, though. If it's done right, green construction doesn't add cost, and its long-term return on investment (ROI) is real. It increases the value of the building and reduces operating costs every year. …

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