The solar energy generated by current technologies may not be the cheapest source of electricity available, but it still has a lot to recommend it. It's clean, it's renewable, and it doesn't require unsightly turbines. It also presents enormous opportunities for the distribution community. Distribution centers across the United States have hundreds of millions of square feet of roof, almost all of it flat. Install electricity-generating solar panels on even a portion of that space and you've converted those rooftops to power plants.
No one expects a widespread conversion among DCs to solar power anytime soon. Still, the vision of these facilities' generating some or all of their electricity needs—or perhaps more than they need—is not unrealistic now that the growing worldwide movement toward "sustainable development" has reached the distribution center.
What exactly is "sustainable development"? While there appears to be no single, widely accepted definition, the general idea is to build in a way that will do no harm to the planet or to future generations. Thus, the concept of sustainability incorporates not only environmental, or "green," considerations, but also looks at the long-term effects that development will have on local communities and on resource consumption.
To some, sustainability equates to environmentally conscious development, while to others it means a focus on long-term issues, says Christopher Park, a principal with Deloitte Consulting and a registered architect who focuses on sustainability. Deloitte itself uses the following standards to define sustainability: the project must reduce waste and promote recycling; minimize consumption of resources for products and services; emphasize the use of natural and organic materials; and reduce what the consultant calls the "net global impact footprint." Toward that end, Deloitte is exploring ways to develop zero net energy and zero net emissions buildings that can internally generate all necessary power.
Sustainability's influence extends beyond the buildings themselves. It's also becoming a factor in the site selection process, says Park. Along with the traditional considerations like an area's labor pool and access to transportation, he says, companies are beginning to look at factors like the availability of mass transit service, which could reduce employees' dependence on cars for commuting. They're also looking at access to energy grids and local alternative-energy requirements. (Nearly half the states have set standards specifying that electric utilities generate a certain amount of electricity from renewable sources.)
As for what's driving the movement, Park points to three recent trends. One is the rapid increase in regulatory and legislative initiatives affecting the environmental impact of development. Another is the emergence of environmentally friendly technologies that are not only cost-neutral but also drive cost efficiencies. The third is increased public awareness of green practices. "All else being equal," he says, "customers would rather buy a sustainable product."
Pepsi takes the LEED
One of the leaders in promoting sustainable development is the U.S. Green Building Council, a Washington, D.C.-based organization that encourages construction of buildings that are both environmentally responsible and good investments for developers and their customers. Its principal initiative is the Leadership in Energy and Environmental Design (LEED) Green Building Rating System.
LEED, established in 2000, offers certifications for developers and end users based on evaluations of buildings for sustainable sites, water efficiency, energy and atmosphere, materials and resources, and indoor environmental quality. The council says that more than 1 billion square feet of facility space in the United States has been built to or is being built to the program's standards. (Details about LEED are available at the council's Web site, www.usgbc.org.)
PepsiCo and several of its subsidiaries, including Frito-Lay, have earned LEED certifications. In 2005, a newly opened Frito- Lay distribution center in Rochester, N.Y., earned a Gold certification, the second-highest award. What does it take to earn that distinction? According to Frito-Lay, the award-winning DC featured responsible site development, environmentally responsible construction management and materials, renewable energy sources, recycling programs, water efficiency, atmosphere and air-quality measures, alternative transportation for employees, and a reduction of the building's "heat island" effect. (A heat island is a building or area that is usually warmer than surrounding areas because of heat retention. Think of an asphalt parking lot under the summer sun.)
PepsiCo has been able to duplicate the DC's success elsewhere. Earlier this year, the council recognized its Gatorade division with a Gold certification for its 950,000-square-foot manufacturing facility in Wytheville, Va.
Developers come clean
Similar to LEED but on a broader scale is the Global Reporting Initiative (GRI), an Amsterdam-based program that is sponsored by the United Nations Environmental Program. GRI is a network of business, labor, and other groups that encourages organizations to report their economic, environmental, and social performance. Although GRI's sustainability reporting framework encompasses many types of business scenarios, companies can apply that standard to their distribution centers.
That's exactly what ProLogis did earlier this year when it issued its first annual sustainability report based on the GRI guidelines. In that report, the company, which is one of the world's largest developers of distribution and logistics properties, set targets for the next four years that include use of 20 percent recycled construction materials at all new DCs; diversion of 75 percent of construction debris from disposal in landfills or incinerators; a 50-percent reduction in the use of potable water in landscape irrigation at all new developments; installation of renewable energy sources with combined generation capacity of 25 million kilowatt hours per year; and achievement of "carbon-neutral" business operations through a combination of reductions and offset purchases (the process of balancing carbon dioxide emissions by buying a product or service that saves the equivalent amount of CO2).
On the design side, the company plans to emphasize the use of skylights and other types of windows that introduce more daylight into DCs. It also plans to take advantage of modern fluorescent lighting technologies that can reduce electricity usage by 35 to 70 percent compared to conventional lighting methods. Designs for new buildings call for greater use of "gray water," or retained rainwater, for landscape irrigation. And wherever possible, white roofing materials and white parking lot paving will reduce a facility's "heat island" effect.
ProLogis is also testing solar and wind energy technologies, with notable success. Solar projects in Europe generate enough electricity that the company sells some back into the power grid, says Jack Rizzo, a ProLogis managing director who's responsible for DC design and construction. A pilot wind-energy project at a building in Osaka, Japan, generates enough electricity to light the facility's common areas.
Carrots and sticks
Incorporating principles of sustainability into distribution centers carries a cost, however. "The challenge we have is that the cost of a DC is so much lower than malls and other developments that a dollar a square foot to us is a big deal," Rizzo says. "We have to be cognizant of that in selecting design elements."
Rizzo reports that initial construction costs for green DCs run 5 to 7 percent higher than those for traditional designs. To ensure that environmentally responsible elements provide a reasonable return on investment, his company focuses on design elements and components that pay for themselves in three to five years.
Though green building techniques may be more costly than traditional construction, companies may not have much choice in the future. "I think we will have federal mandates to reduce carbon footprints," says Rizzo, who adds that he expects to see similar initiatives at the state and local levels. At the same time, he believes that governments will offer more incentives for generating renewable energy from wind, hydro, and the sun within the next two to five years. According to Park, however, it's not yet clear whether federal, state, and local rules will lean more toward incentives or penalties to assure compliance.
Incentives can, in fact, make or break a project. Rizzo notes that solar projects work in Europe because of government incentives that, for example, pay a premium for renewable energy sold into the power grid. Such projects have been less successful in this country, he adds. "The only place solar works in the United States is a state like California, which offers rebates and tax incentives."
Even businesses that are fully committed to sustainable development have to balance short- and long-term cost considerations. The big question, Park says, is "Do I invest more now and pay a premium for construction for a lower lifecycle cost?" He reports that he is seeing fundamental changes in the way companies are making decisions about whether to retrofit or build new. "What is new about the analysis is that it is incorporating energy, water, and waste into what was a financial decision before," he observes. "We are seeing decisions that are a little more costly but are resulting in substantial reductions in energy and other footprints."
That's an indication that companies are realizing that sustainable development isn't just good public relations; it's also good business. Take risk management, for example. Companies today have to factor risk management into their site decisions, accounting for potential environmental changes that could have a negative impact on their business. Ensuring the availability of renewable energy and clean water is an important part of reducing that risk.
Government authorities, moreover, tend to look more favorably on sustainable projects. In Europe, for instance, developments that do not include renewable energy in their design face more hurdles in the approval process than their greener counterparts do, Rizzo notes.
As for what lies ahead, Rizzo says he's confident that the sustainable development movement will continue to gather momentum. ProLogis's clients are already starting to judge facilities based on sustainability goals, he says. And their interest in "green" features isn't limited to high-profile locations like corporate headquarters and retail outlets, he adds. "We are … now seeing companies request warehouses that are LEED certified."