Green building certification: a smart investment for sustainable business growth

In South Africa's maturing green industry, green building certification is proving good for business as well as for the planet and people. 

The strong business case for building green is shown in the Green Building Council South Africa's (GBCSA) fourth edition of the internationally acclaimed research study, "Green Building in South Africa: A Guide to Costs and Trends", launched on Wednesday. 

This coincides with the World Green Building Week taking place this week to shine a light on the encouraging developments in sustainability in the built environment.

This year, for the first time, these costs are connected to the investment performance of certified buildings, delivering a clear "Green Building Business Case". 

Lisa Reynolds, CEO of GBCSA, says they are excited to share the findings of the study, answering the question: “What is the real cost of green?” and making the strongest business case to date for building sustainably. 

“Property owners need to understand that certification isn’t the end goal. It’s how you prove that a building is actually performing in practice and on paper. It gives owners, investors, and tenants confidence that a building will deliver environmental and financial value over time.”

The fourth edition builds on prior research and begins to explore the data around green investment returns as well as green costs. This partnership, spanning almost 10 years, continues the collaboration between GBCSA, ASAQS, and UP, and is now supported by data from the MSCI South Africa Green Annual Property Index.

It expands on the subject matter of previous editions to bring both green cost and green returns together into the flagship Business Case for Green Buildings.

The report is based on empirical costing data from 199 Green Star certified office buildings, that has been analysed to distil the specific green cost from each project’s overall spending. The projects studied cover a range of certification levels, project sizes, and project locations.

“The study confirmed a very modest and constantly declining green building ‘cost premium’ (GBCP) that totally refutes the often held perception of an unaffordable cost of green building," says Dr Danie Hoffman, lead researcher for the Department of Construction Economics at the University of Pretoria.

“Green certification and the GBCP also unlock the superior operational performance of green buildings for property owners, as repeatedly confirmed by the MSCI Property Index.”

The researcher said they were pleased to share what is now a scientifically sound and academically valid metric for industry use. 

“The report reflects that the average green cost premium for office projects certified in the period 2022 – 2024 has positively decreased from 3,15% for the previous period 2019 – 2021, to 2,40%,” says Georgina Smit, GBCSA head of technical and executive director. 

“The average since 2009 for the green cost premium as expressed by the median has reduced from 5,95% to 3,43%. But what is particularly pleasing is that there is now clear evidence that these green buildings are more profitable in the long run, so it is an investment that just makes business sense.”

The buildings sector is responsible for 37% of all energy-related GHG emissions, wrote Sandeep Singh, the Global Business Development Lead, EDGE Green Building Program, at the International Finance Corporation in April last year. 

He said that by extrapolating annual growth in the total floor space in the world, it is expected that the total built-up floor area in the world today will double by the year 2060. 

“Approximately 70% of this new construction will be residential, primarily in emerging markets.  Unless the residential sub-sector is addressed and transitioned en masse towards low carbon, a meaningful reduction in total emissions from the buildings’ sector will not be possible.” 

Singh said the good news is that the know-how and the technologies for reducing operational and embodied emissions in new residential buildings not only exist but are easily available. 

He said the incremental costs of these green buildings typically range from 1% to 3% when compared with business-as-usual buildings and usually get paid back in 1-3 years through savings in utility costs. 

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