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Illinois Small Businesses Can Capitalize on Global Use of LEED

Posted By Matt Baker On March 27, 2014 @ 8:31 am | No Comments

By Laura Flamm, Illinois SBDC International Trade Center

Illinois boasts an active green building industry and recently made the USGBC’s [1] 2012 list of the top 10 states [2] for implementation of the LEED green building rating system. The Illinois chapter of the USGBC [3] counted 137 members who manufacture or distribute green building products as of early 2014, in addition to hundreds of local consulting, architectural and engineering firms with green building expertise. Many of these companies are small businesses that are well placed to take advantage of growing export markets for their products and services.

Sustainable construction materials and interior furnishings, efficient HVAC systems and components, energy-efficient lighting and water conservation solutions are just a few of the green building products offered by Illinois companies. Demand for these products, in addition to Illinois-based design and engineering expertise, is increasing around the globe as US green building standards continue to spread.

piechart [4]The Illinois SBDC International Trade Center at the Industrial Council of Nearwest Chicago [5] recently identified the top international markets for US green building products and services. The emerging markets of China, the United Arab Emirates, Brazil, India and Mexico rank alongside Canada as the world’s leading markets for usage of LEED green building standards outside the US. In addition, The highest growth in LEED certified projects in recent years has occurred in developing markets, with China, India and Brazil adding a total of 176 LEED certified projects in the first 11 months of 2013.

Drive toward certification highest in Asia

While markets with a high number of LEED projects naturally have demand for related green building products and services, markets in which official certification of these LEED projects is common may have even greater demand for them. A building can be registered as a LEED project as early as during the design phase. However, official certification of a LEED rating comes later in the process and incurs additional costs, so a number of projects that are registered may never actually get certified, especially in foreign markets. Markets in which certification is more common are therefore more likely to have greater demand for later-stage green building products and services such as sustainable interior finishes and furniture.

Next to Canada, Asian markets have the highest rate of certification of LEED registered projects. Singapore leads the region with 61% of all LEED projects in the market certified as of November 2013, followed by Japan at 55%, Taiwan at 52% and Hong Kong at 46% of all projects. China is a relative exception to this regional trend with just over one quarter of total projects certified.

The rate of certification of registered projects is lowest in the Middle East region, where LEED standard usage has nonetheless been growing since 2006. Despite having the third highest number of LEED projects in the world, the United Arab Emirates had a certification rate of just 13%. Similar rates prevail in Qatar (15%), Saudi Arabia (4%), Jordan (10%) and Bahrain (9%). In addition, none of the 25 registered LEED projects in Oman have been certified.

This is largely due to the more recent nature of building growth in these markets. LEED projects in the UAE are overwhelmingly “New Construction” (72%), indicating that many of the registered projects not yet certified there are still in the process of being built and don’t qualify for certification yet. This may imply healthy future demand for later-stage US green building products in these markets.

The rate of certification in Latin American markets is also lower than in Asia or Europe. The lower overall certification rates in the region are not necessarily due to recent construction booms, however. The majority of projects in Mexico, for example, are “Core and Shell,” “Existing Building” and “Commercial Interiors.” This may be due to LEED standards being only more recently adopted by the industry in Latin America.

India provides rich opportunity for LEED credit-driven products and services

Out of the top global markets for LEED system usage, India presents especially high potential for products and services that increase a project’s LEED credits. This is due to the high rating levels targeted by LEED projects in the Indian market. “Smaller” products and services that can contribute to a higher LEED rating include anything from water meters to green cleaning equipment to special shields for exterior light fixtures that reduce light pollution.

According to USGBC data, India boasts both the sixth highest number of registered—but still uncertified —LEED projects in the world (235) and a relatively high rate of certification at 41%, on par with developed markets such as the United Kingdom and Austria.

In addition, India has the highest percentage of LEED Platinum certified projects out of the top global LEED markets at 38%. LEED Gold certified projects—the second highest possible rating—make up another 50% of total certified projects in India. USGBC data thus indicates that there is a clear push in the Indian green building industry toward achieving not just LEED certification, but the highest possible certification available.

Domestic green building certification systems limit potential for LEED use in Europe

While Europe has experienced rapid overall growth in the use of LEED standards, entrenched domestic green building certification systems in European countries present the most significant challenge to growth in implementation of LEED in the region. In particular, the UK’s BREEAM [6] and Germany’s DGNB [7] green building systems dominate two of the region’s largest markets. The potential demand in Europe for US green building products and services that are engineered to meet LEED-based standards is thus limited. On the other hand, products and services that can support a wide range of standards may have opportunity there.

The BREEAM system, originally launched in the UK in 1990, claims to be “the world’s leading design and assessment method for sustainable buildings.” There are 3,345 BREEAM certified projects in the United Kingdom compared to only 33 LEED certified projects, indicating that LEED commands just 1% of the British green building certification market.

In Germany, the German Sustainable Building Council launched its DGNB certification system in 2007. According to CONJECT [8], a Munich-based real estate consulting firm, DGNB commanded 80% of the German market for green building certification by May of last year. The core of DGNB is based on existing European building standards, making it a more attractive and potentially easier certification for German and other European building projects to achieve. Due to these factors, the potential for LEED certification to spread further in Germany, similar to in the UK, is limited, along with the market potential for related US products and services.

International LEED certified projects aim for higher standard levels

The majority of certified projects in the top 10 international markets for LEED certification are either Gold or Platinum certified, indicating an overall drive toward high rating levels outside the US. This trend suggests that smaller, later-stage US green building products such as sustainable interior furnishings, green cleaning equipment and other ancillary products are well suited for export.

Of the top 10 international markets (based on certified projects), India and Germany lead in terms of rating levels, with over 85% of certified projects in both markets at the Gold or Platinum level. Certified LEED projects in Spain, China, Hong Kong and Finland also tend to be at higher levels, with over 60% of certified projects at Gold or Platinum in those markets.

Certified projects in Canada had the lowest overall level of certification, with 69% of Canadian LEED projects at the “Certified” level. This rate was largely influenced by the LEED rating of 40 Starbucks coffee chain locations in Canada in 2012 and 2013 only to the “Certified” level, however, suggesting that US-based chains have a heavy influence on the market for LEED-related green building products and services in Canada.

Multinational companies spearhead the spread of LEED standard usage globally

Both US and foreign multinational companies with multiple locations are increasingly implementing green building standards as part of their sustainability policies. This is good news for small business, green building suppliers to these companies, since they can piggyback on their customers to foreign markets.

Starbucks is the global leader in LEED projects [9] outside the US, with 107 LEED registered foreign locations, almost half of which are in Canada. Citibank [10], Coca-Cola [11], Bloomberg [12] and PepsiCo [13] follow, all with at least 10 LEED registered foreign locations. Siemens [14] tops the list of foreign-based companies pursuing LEED standards in their subsidiary facilities around the world, followed by fellow European multinationals HSBC [15], Nokia [16] and Zara [17]. US green building products suppliers that are already serving these companies domestically thus have an opportunity to utilize their existing relationships to expand export sales.

In conclusion, there are a number of markets and strategies that Illinois companies offering green building supplies and services can focus on to expand their global reach. The Indian market might be a good long-term target for export while the high certification rates in other Asian markets such as Hong Kong, Singapore and Japan suggest the forging of strategic partnerships. The slow growth in sustainable standards—despite a booming construction industry—in the Middle East indicate that companies can capitalize later on marketing now, before the trend truly hits its strides in the region. Finally, investigate how multinational companies implement green building standards internationally, including whether related products and services are sourced centrally or locally in foreign markets; marketing directly to these companies could be the key to expansion into any region around the world.

Laura Flamm is Director of the Illinois SBDC International Trade Center [5] at the Industrial Council of Nearwest Chicago [18] (ICNC) and has a background in international market research and foreign market entry consulting. Funded in partnership with the Small Business Administration [19] and ICNC, the International Trade Center is part of the state of Illinois DCEO [20] small business development network and is focused on helping local small businesses think globally. For additional information, no-cost consulting and further resources for international expansion, contact the International Trade Center at laura@industrialcouncil.com [21].

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URL to article: http://www.sustainable-chicago.com/2014/03/27/illinois-small-businesses-can-capitalize-on-global-use-of-leed/

URLs in this post:

[1] USGBC’s: http://www.usgbc.org/home

[2] list of the top 10 states: http://www.usgbc.org/articles/usgbc-releases-2012-list-top-10-states-leed

[3] Illinois chapter of the USGBC: http://www.usgbc-illinois.org/

[4] Image: http://www.sustainable-chicago.com/wp-content/uploads/2014/03/piechart.png

[5] Illinois SBDC International Trade Center at the Industrial Council of Nearwest Chicago: http://www.industrialcouncil.com/international-trade-center.html

[6] BREEAM: http://www.breeam.org/

[7] DGNB: http://www.dgnb-system.de/en/

[8] CONJECT: http://www.conject.com/us/en/index

[9] Starbucks is the global leader in LEED projects: http://www.starbucks.com/responsibility/environment/green-building/leed-certified-stores

[10] Citibank: http://blog.citigroup.com/2012/06/citi-becomes-worlds-first-bank-with-200-leed-certified-projects.shtml

[11] Coca-Cola: http://www.coca-colacompany.com/topics/environment

[12] Bloomberg: http://www.bloomberg.com/bsustainable/

[13] PepsiCo: http://www.pepsico.com/

[14] Siemens: http://w3.usa.siemens.com/buildingtechnologies/us/en/Pages/buildingtechnologiesusa.aspx

[15] HSBC: http://www.us.hsbc.com/1/2/home/personal-banking

[16] Nokia: http://www.nokia.com/global/about-nokia/people-and-planet/strategy/casestudies/nokia-is-leeding/

[17] Zara: http://www.zara.com/us/

[18] Industrial Council of Nearwest Chicago: http://www.industrialcouncil.com/

[19] Small Business Administration: http://www.sba.gov/

[20] DCEO: http://www.illinois.gov/dceo/Pages/default.aspx

[21] laura@industrialcouncil.com: mailto:laura@industrialcouncil.com

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