Earth Notes: BRE SME Low Carbon Innovation Workshop 2 (2017/09)

Hotel energy challenge: BREEAM, ethical sourcing, Responsible Hospitality Partnership, ClearlySo impact investment.
BRE workshop

Brief notes from the workshop at BRE in Watford 2017/09/06.

What is BREEAM?

The "Building Research Establishment Environmental Assessment Method".

From the BREEAM site:

BREEAM is the world's leading sustainability assessment method for masterplanning projects, infrastructure and buildings. It addresses a number of lifecycle stages such as New Construction, Refurbishment and In-Use. Globally there are more than 530,000 BREEAM certified developments, and almost 2,200,000 buildings registered for assessment since it was first launched in 1990.

Pre-dates LEED, launched in 1990, third-party certification scheme. Assessed on the target (final) use, eg that after a conversion to a new use.

BREEAM is non-domestic only, and focusses on the client over the building.

The Home Quality Mark for domestic properties replaced the scrapped CSM (Code for Sustainable Homes).

Always voluntary, used by ords such as IKEA, The Crown Estate, John Lewis. Whitbread formal commitment for all its buildings.

Outcome-focussed; performance is specified, not the route to it.

BREEAM is credible CSR (Corporate Social Responsibility).

Ratings are tiered: from "Pass" above regs minimum up to an aspirational (~1%) "Outstanding".

Listings of BREEAM certified buildings, products and services are on GreenBookLive.

Not just about energy use, but also materials, pollution, waste, transport, etc.

In energy for example, the majority of credits are awarded for doing better than baseline building regs part L TER for example. There are additional credits for (eg) metering and monitoring, passive design and renewables. (This applies to BREEAM UK NC 2014, updates are coming.)

There is no extra credit for passive-zero energy design over net-zero energy (yet) even though the former is more robust/sustainable and does not require the gris as a battery for example.

BREEAM is now looking to certificate not only as designed and delivered, but also in-use after a year, to address the common "performance gap".

BREEAM Innovation Credits

Two routes to these credits (nominally only available once per innovation):

Sourcing, Materials, EPDs

Embodied impact, responsible sources, ethical labour sourcing...

Building embedded energy rising from ~23% in 2009 to ~34% in 2025, partly by virtue of reducing operational energy use by 50%!

LCA (Life Cycle Assessment): cradle to (factory) gate to grave energy use, etc. (Cf cradle-to-cradle product design.)

Assessed per tonne or unit of product leaving factory gate, eg starting with material/energy inputs and distances travelled and wastes produced.

An expert prepares an EPD (Environmental Product Declaration) and then has a third party verify. An EPD may be input to a CE mark for example.

A product manufacturer can join a verified EPD scheme, submit data to it, and get the product EPD certificate. BRE is the biggest programme operator in the UK.

Document typically 10 pages and includes carbon footprint.

LCA process quite involved, and had third-party assessor. BRE LINA is a (software) tool to enable more to be done in-house.

See CEN TC350: Sustainability of Construction Works.

Various IMPACT compliant tools (eg BIM Tool F) can be tried before commercial use.

Responsible Sourcing

Consumer and industry awareness per marks from FairTrade to FSC is growing.

BES 6001 Framework Standard for Responsible Sourcing.

At top level, for a compliant organisation, the following have to be right: governance, suppliers' management systems, environment and social practices.

Four ratings from Pass to Excellent.

BES 6001 is a requirement for some projects, eg Crossrail, HS2.

Responsible sourcing also applies to labour, eg legally because of The Modern Slavery Act 2015.

BRE's Ethical Labour Standard (ELS) exists to help companies assess risks, etc, eg along the supply chain.

ELS: who is it for? Publicly available, can demonstrate good practices.

Innovation for Energy Efficiency in Hotels

The tourism and hospitality sector: energy/water/waste cost reduction. Some altruism, mainly lots of good business sense. From x% reductions in waste, to bird-friendly travel.

Tourism is growth industry, but maybe uneven.

What are the barriers ("I had a bad LED from IKEA once, never again!") to improvements.

Hospitality: SIC 55.100 to 56.30/2.

Top-down database (eg UK government, ONS), bottom-up Caterlyst (paid for) contact for every hospitality unit in UK, Horizons is a hybrid.

Not perfect data, email open rate to contacts may be ~1% or less.

Budget businesses may already be very (energy and other) efficient.

Pub with rooms not necessarily very energy efficient, at least centrally.

Maybe for energy efficiency: maybe think of anything with beds, such as holiday camps, private members clubs, halls of residence, schools, prisons, hospitals... Do not over-segment the market!

Lots of hotels, etc, outsource though central suppliers too. (Be aware of ethical practices of smaller outsources...)

Hotel brands ~10% of businesses but ~30% of rooms. High percentage are micros, often lifestyle business and will not invest.

Big chains may well not own many of their buildings; so fabric changes harder.

Often there will be split incentives between operators and building owners.

Tenanted pubs possibly a big opportunity for energy and efficiency services. End-to-end efficiency work may be best for them...

Odd beasts like marketing consortia (eg Best Western) also.

English hotel room occupancy ~80% year-round.

There is a Green Tourism Business Scheme in England; about process not buildings. Uneven enthusiasm for green in the industry, eg Cornwall good, SE less so.

May need to have more than one language for instructions for staff.

Energy costs ~4th on list, 4--10% in UK hotels.

Good staff training, and enthusiasm in key.

Solar PV often not well maintained.

Carbon is a Big Issue for Tourism

Tourism emissions expected to grow ~170% by 2050. From accommodation growing ~3%/y.

There may be 20% savings available; 2% just from reading the meters!

Strong building efficiency regulations in China.

Efficiency are one of few available profit/competitiveness levers for hotels, though it also at least looks like CSR too...

Risks from future energy costs alone are not clear.

Pitching Your Innovation

First, research and understand the client/company!

Problem, solution, anticipate risks/worries (eg customer annoyance).

Elevator pitch, show and tell (have a product sample).

Identify your USP.

Assurance: certifications, test results, case studies.

Investment Funding for Low Carbon Innovation

ClearlySo does impact investment. Thus social and environmental returns alongside financial. Sector agnostic; not just cleantech.

ClearlySo wants to prove to the market that there is no trade-off between financial and the other returns.

Not investing its own money currently: connecting investors with businesses.

ClearlySo works end-to-end, including due dil in the middle as well as the nominally glamorous initial location of opportunities and final execution.

ClearylSo wants to be involved in seed and later rounds. It makes money from success fees, and those get bigger in later rounds!

A subset of ClearySo investors (48 members) are social angels, who have time to work with businesses. (Out of ~700 investor network.)

How To Assess an Opportunity

The investment funnel: 1200 business per year at top ClearlySo's funnel, 150 through due dil, 25 raise money.

Filtering process involves a liquidity analysis to find likelyhood of their network investing.

ClearlySo reviews the business plan and financial model.

Team: needs grit, stamina, charisma, integrity, comms skills. Also, industry experience or plans to hire it, and credible advisors.

Minimum raise of £350k, sweet spot at £500k.

Impact: sensible narrative, clear impact goals, scaling business scales impact. Evidence of impact, ongoing KPIs / impact reports.

Business: needs a clear opportunity and USP, and strong model. Lean sales and marketing strategy. Plans for strategic partnerships.

Traction: evidence of product development over time, customer/user growth. Should have: minimum 6 months' revenue growth or reason why not.

Three dimensions for ClearlySo investment: risk, return, impact.

Maybe in 20 years all investment will have a significant impact element.

Some of the case studies shown: EnergyDeck, PowerVault, Q-Bot.

With Q-Bot, ClearlySo has a continuing finance advice relationship.

ClearlySo does debt as well as equity finance raises.

ClearlySo helps work out an exit for your investors (eg share buy-back or secondary sale) where your model does not exit!

Typical process length to investment ~3 months.

~1443 words.