Published during the first industrial revolution, Adam Smith’s The Wealth of Nations used the metaphor of “the invisible hand of the market” to describe how the decisions of self-interested individuals in a free market economy could promote the general betterment of the society as a whole. To this day, free market proponents use Smith’s metaphor to argue for elimination of regulations for a more efficient economy. But the “invisible hand” only makes societally beneficial decisions to the extent that it has good information. In the case of carbon emissions, where the costs are typically externalized and not reflected in the “market price”— the cost of climate change is not reflected in the price of a gallon of gasoline, for instance — the “invisible hand” fails to make self-interested decisions that benefit society as a whole. Or, as stated more succinctly on a bumper sticker I once saw:
“The invisible hand of the free market touched me in a bad place.”
Recent actions by the U.S. Environmental Protection Agency notwithstanding, there is increasing recognition that governments and the business community need to tackle carbon emissions if we’re to avoid, or at least mitigate, the negative economic impacts of catastrophic climate change. In April, Google announced that it had for the first time met its goal of purchasing enough renewable energy to meet all of its electricity needs. The State of Hawaii, where experts forecast sea level rise could result in more than $19 billion in lost coastal infrastructure, became the first to adopt a 100 percent renewable energy portfolio energy standard in 2015. In May, state legislators passed House Bill 2182, committing to a net-zero carbon footprint by 2045, including a companion bill for the development of a carbon offset program to support the zero-emissions target (awaiting the Governor’s signature when this story went to press).
Businesses have several strategies at their disposal for reducing or eliminating carbon emissions associated with operations. In the field of architecture, efforts to address carbon emissions and climate change have generally focused on designing to reduce the operational energy used by buildings. The American Institute of Architects’ reporting framework, “2030 Commitment,” based on the Architecture 2030 Challenge, calls for elimination of fossil fuel energy use by the building sector by the year 2030 (buildings that use Net Zero Energy [NZE] produce the renewable energy they need to operate). Lord Aeck Sargent (LAS) adopted the 2030 Challenge in 2007, the year it was released. Our Kendeda Building for Innovative Sustainable Design at Georgia Tech, designed in collaboration with the Miller Hull Partnership, is now under construction and pursuing Living Building Challenge Certification, which requires that it be Net Positive (a net exporter of renewable energy, producing more than it requires to operate). LAS has a Sustainability Strategic Plan in place to help transfer lessons from such high-performance projects with a goal of improving our entire portfolio of projects under design.
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In addition to improving energy efficiency in the buildings we design, arguably the largest carbon emissions impact of an architecture firm, LAS also addresses the carbon emissions associated with operating our own business. We set a goal of carbon-neutral operations in 2007.
Our emissions-reduction strategies have included energy efficiency measures — our recent headquarters relocation and expansion achieved LEED Platinum certification and employed LED lighting to achieve an efficient 0.5 watts per square foot lighting power density — and installation of ubiquitous video conferencing capabilities in all six of our offices. Though there are cost savings associated with video conferencing, ironically the “invisible hand of the market” didn’t help with energy efficiency: Utilities are included in the leases for each of our offices, a common practice in commercial real estate, so we see no direct financial benefit from investment in energy-efficiency measures.
We have achieved “carbon-neutral operations” consistently each year since 2007 through a combination of REC and carbon offset purchases. We have bounded our scope to include accounting for estimate direct emissions (furnaces), indirect electrical emissions (office energy use), and indirect travel emissions (air and rental car business travel). Since 2007, this has totaled more than 5,000 megawatt hours of office energy use and nearly 3,400 metric tons of travel emissions. Putting this in perspective, the combined benefit is equivalent to eliminating emissions from burning approximately 40 rail cars full of coal.
Though there are societal benefits to these actions, the “invisible hand” didn’t help with this decision to address our carbon emissions. There was no direct payback for the cost of procuring RECs and offsets over the past decade. However, the benefits are not just limited to the societal. There are also both tangible and intangible benefits to LAS. From a staff recruitment and retention standpoint, there is the benefit of walking the talk, of authentically operating in a manner consistent with our values. Our 2017 RECs are framed and displayed proudly in each office. We also have clients who expect to see a sustainability commitment that reflects their own institutional priorities, and this commitment to carbon-neutral operations provides direct proof of action behind the words.
Until the currently externalized costs of climate change are fully reflected in the cost of fossil fuels, and that time is hopefully fast approaching, the “invisible hand of the market” will continue to require some active guidance from employees, firms and clients committed to seeing the market truly work for the betterment of society.