The Benefits of Driving Sustainability with a Portfolio Budgeting Approach
Corporate sustainability is center stage, as organizations and real estate executives aim to do their part to reduce energy consumption and pursue green projects. Although overhauling building designs or retrofitting the built environment to be more efficient seems tedious, it’s more doable than you may think with the right approach.
The solution? Portfolio budgeting to speed up project completion, save on costs, and boost overall efficiency across all properties at once. Explore the portfolio approach to budgeting and how it can help real estate leaders like you set their portfolios up for long-term success.
Taking a Portfolio Approach to Budgeting for Sustainability
Think about how your organization approaches sustainability upgrades. Are you tackling projects in a piecemeal fashion at individual locations? This only serves a fraction of your total operations as your lofty corporate sustainability goals remain stagnant.
A portfolio budgeting approach ensures that every property across your portfolio is making the same upgrades—and making progress to improve your long-term energy efficiency and sustainability posture. Budgeting your projects this way offers several key benefits:
1. Speed to Scale
How long will an initiative take compared to your goals? Many companies waste time by not improving their entire portfolio in one fell swoop, but energy savings equal dollar savings. A portfolio approach to budgeting streamlines your efforts across all properties with shorter project timelines, allowing incremental improvements everywhere at once and saving you more money.
And remember: You don’t have to go it alone. Don't be afraid to partner with Energy-as-a-Service (EaaS) companies, lenders, property assessed clean energy (PACE) programs, or state-level assistance that serve your industry or locations. Allies across the financing spectrum are ready and willing to support your sustainability projects, making portfolio budgeting more accessible even when your own capital is sparse.
2. Asset Mixing
Energy conservation measures are not created equal, and the same project in two different locations may have vastly different paybacks. Portfolio budgeting helps you get more done. By mixing assets or offsetting high-payback projects with low-payback projects across locations, you can use that difference to your advantage.
Budgeting for Sustainability
The ideal budgeting approach may vary based on an organization’s unique goals. If a company has an overall sustainability goal—carbon reduction, for example—a site-by-site approach may require asking individual sites to find projects that meet specific payback requirements.
The struggle is that every site may qualify for different payback terms, making them unable to proceed across locations. However, a portfolio approach allows you to blend projects, meeting overall requirements and leveraging buying power for better pricing on sustainability projects, such as lighting retrofits.
3. Standardizing Equipment Specifications Across Similar Locations
If you have upward of hundreds of similar locations, portfolio budgeting can make life easier. Retail and food service are prime examples, as retail stores and fast food restaurants are designed for consistency across locations, making sweeping upgrades easier.
Are you working in a more complex industry, like manufacturing? Portfolio budgeting for sustainability projects, such as LED lighting or solar power, may still make sense if the layouts and structures of your manufacturing floors are the same. Plans for one location lay the groundwork for the entire portfolio, allowing for greater pricing power and reducing long-term maintenance costs.
4. Evidence for Stakeholders
If you’ve kicked the can down the road since you committed to achieving sustainability by 2050, you aren’t alone. Many organizations established broad-stroke goals—but without a clear path and the clock ticking down to meet energy efficiency and net zero targets.
Tackling sustainability projects with a portfolio mindset provides your organization an edge to cross the finish line faster and gives stakeholders confidence. Instead of saying, “We want to accomplish this”—and risking greenwashing—you send a powerful message to stakeholders by showing actual progress, up to and including proactive environmental, social, and governance (ESG) reporting and formal announcements about initiatives.
5. Incremental Progress
Asking questions is better than standing still, giving you a jumpstart toward saving money and solving your sustainability challenges. So what could portfolio budgeting look like if you took the plunge right now? Let’s say your company has a whopping 500 properties in its portfolio that need LED lighting. If enough of them have a similar footprint, you can knock out 150 at a time instead of just a few each year—turning a 20-year plan into a three-year plan.
Real businesses across industries have reaped the rewards of portfolio-wide energy and sustainability upgrades. National workwear company Cintas transitioned to LED lighting across nearly 500 facilities to support net zero targets. The result? A savings of more than 23 million kWh (and counting!) and a 16,500-metric-ton annual reduction in CO2 emissions.
Achieve Your Sustainability Goals with the Right Approach
Portfolio budgeting for sustainability projects could be your strategic advantage. Get your real estate footprint to net zero at lightning speed—instead of waiting until 2050 like everyone else. Making an extra upfront investment in a third-party partnership, such as with an EaaS provider, can help you mitigate costs and make sweeping changes that pay dividends for years to come.
