A low HERS Index and zero energy, once a market differentiator — not anymore.
Other than high-budget custom, or tiny-minimalist homes, homebuilding is a homogenous industry — with little ingenuity. Instead, builders attempt differentiation by advertising smart home features, energy saving strategies, the latest wall assembly, or announcing green ratings, certifications, and awards won. Some go a step further, and claim their energy efficiency strategies and low-flush toilets help the environment. Meanwhile, other builders compete on price and stay clear of sustainability claims.
When using an environmental angle or a green rating as a means to marketing, it often leads to confusion for the buyer and the salesperson.
Industry lingo and green ratings = confusion
Contrary to the statements from organizers behind green ratings and standards, homebuyers rank location, design, and price as the most important drivers in their purchasing decision — and rank energy efficiency and green features last. One explanation for the low ranking is the perception that green features cost more and sacrifice comfort and design. Another reason, buyers report confusion when presented the green building lingo of HERS, ZERH, LEED, EDGE, ENERGY STAR, and NGBS.
The reality is, when integrated early into the design process, green building strategies do not increase budget, comfort is improved, and operating costs are lowered. And, when communicated effectively, buyer confusion is replaced with perceived value. The challenge for builders then, translating the lingo of green ratings into a meaningful message that is cohesive and makes sense to the general public. But, few builders have found success in doing so.
If homebuilders cannot easily explain the difference between LEED and ZERH, or if they struggle with broad sustainability concepts like supply chain, SDGs, and LCA, then what should we expect from homebuyers when ranking green improvements?
Steve Tapio, Building Science Team Leader at New Tradition Homes, says, “Buyers do not care about energy efficiency and rank it low on their list of priorities.” New Tradition leads the industry for high performance homes. Each year, ENERGY STAR recognizes the top energy efficient builders in America; the highest honor is Partner of the Year – Sustained Excellence. New Tradition received this award in 2016, 2017, and 2018. Tapio states, “even though buyers rank energy efficiency low on their list of priorities, we are committed to building the best home, which includes reducing operating costs and energy demand — therefore, all of our homes are ENERGY STAR and Built Green certified.”
A rated home is a better home
If buyers are confused by green ratings and certifications, then why pursue them? The answer is simple, strategies guided by green ratings result is a better home.
Energy efficiency is at the heart of green ratings. The most widely accepted energy efficiency metric is the HERS Index. Buyers are told the lower the HERS Index the better the home; a claim that is true.
In years past, strategies that lowered the HERS Index were perceived as cost prohibitive for production builders. Now, with energy efficient products costing less, new product innovations, and broader acceptance — all builders can build a home with a low HERS Index, and do so affordably. The high cost of building energy efficient homes is no longer a barrier to entry. Which means, the majority of builders are easily making their homes energy efficient, featuring a low HERS Index (to the standards of ZERH or better).
It is estimated that by 2018, the green, single-family housing market will represent about 40 percent of the market, and 84 percent of all residential construction will have sustainable features. For builders, this means marketing campaigns that are angled toward green features and energy efficiency are no longer a differentiator. Instead, energy efficient homes are the new normal.
Once a unicorn → now nothing special
In 2008, I remodeled the first LEED Gold-certified home in the United States. They called me a pioneer. At that time, LEED for homes was a pilot program; the process was expensive and required extensive documentation — the process was not economically feasible or scaleable. Around the same time, I remodeled the first NGBS Platinum certified home in the U.S. Both projects resulted in PR and inspired a market shift, but significantly increased construction budget. Once perceived as unicorns, there are now over 400,000 such homes around the world. And, LEED continues momentum in developing markets, especially where codes and enforcement fail.
The LEED rating system helps advance the homebuilding industry and guide other green ratings and certifications, including the U.S. Department of Energy’s ZERH program.
Ten years ago, advocating LEED strategies (the same ones used by ZERH today), resulted in industry resistance. Early adopters and visionaries of LEED and zero energy homes, were considered industry outcasts and tree-huggers. Today, a decade later, the laggards are playing catch up. Soon, zero energy and LEED-like homes will be a requirement for all new construction. For example, Oregon is adopting policy to make zero net energy (ZNE) homes standard practice by 2020, and other states are following suit, including California.
High performance, ZNE homes are the new normal — in today’s market, a zero energy home is nothing special. Instead, the new special, and market differentiator, awaits builders who swiftly embrace SDGs, CSR, and shared values. The ones who do so, are the builders of the future.
The new market differentiator awaits builders who swiftly embrace SDGs, CSR, and shared values. The ones who do so, are the builders of the future.
The future of homebuilder marketing
Can marketing sustainability engage your target market? If Patagonia is an example, the answer is yes.
Builders can learn from leading marketers of sustainability. The lessons learned include the following key concepts:
The next era of homebuilder marketing should take note from leading companies that prioritize CSR, including Patagonia, Nike, CBRE, and Unilever. These companies utilize CSR, shared-values, and the SDGs to tell an engaging sustainability story. A key lesson for homebuilders, these companies use the words ‘sustainability’ and ‘environment’ very selectively — instead, they choose the word ‘responsible’.
As technology and industry trends evolve, the same goes for marketing and messaging sustainability. Dave Pogue from CBRE describes his company’s evolution. He says that over the past decade CBRE went from certifying over 1500 LEED EB projects to prioritizing their Shared Advantage program; he describes the shift as going from aspirational and operational to informational and influential, while integrating CSR.
CBRE is in the commercial real estate sector, but the residential market can learn from their journey and sustainability marketing strategies (learn more about CBRE’s corporate responsibility and Shared Advantage here).
2. Supply chain, reporting, and transparency
The next wave of homebuilder innovation will come from those who conduct thorough reporting of supply chain and carbon emissions, with an emphasis on transparency. (see point #8 below)
Homebuilders are most guilty of measuring their sustainability efforts by the end product or a green rating, while ignoring supply chain and social issues. For example, homebuilders are top heavy with men, and most of their leadership lack gender equality. In order to evolve and improve, the homebuilding industry must measure their social and environmental impact, beyond the walls of the house.
Homebuilders are not the only ones who forget the big picture when marketing sustainability. McDonald’s boasts about renewable energy at their stores while overlooking cattle and beef production as worse for the environment than automobiles. Coca-Cola is known for mismatching their sustainability marketing campaigns. Hotels are notorious, on one hand, saying they are ‘committed to the environment’ by telling guests to skip washing sheets and towels, and on the other hand, they distribute millions of tiny plastic bottles for lotion and shampoo that end up in landfills. Consumers are guilty too. Many who take a strong stand for the sustainability —me included, purchase from Amazon, contributing to the environmental burden of waste as the result of excessive packaging.
For those wanting the best example of supply chain reporting, look no further than Patagonia’s Footprint Chronicles.
3. SDGs (Sustainable Development Goals)
Earlier, I stated the marketing and PR value of being the first to market. Citing, when I remodeled the first LEED Gold-certified home and the first NGBS Platinum home in the U.S. Now, there are thousands of such homes. When something becomes ordinary, it maybe perceived as obsolete. But, becoming obsolete creates the next wave of opportunity. For builders, the next era of opportunity awaits; mainly for those who engage SDGs, and reporting transparency to the same level as GlobeScan sustainability leaders.
A truly global movement is underway. For companies, successful implementation of the SDGs will strengthen the environment for doing business and building markets around the world. The case is clear for companies to get involved by doing business responsibly and pursuing opportunities to solve global challenges through innovation, investment and collaboration.” Lise Kingo, Executive Director, United Nations Global Compact
Above, Dave Pogue says when companies commit to CSR and shared-values, it engages the consumer, the community, and employees. There is no marketing more powerful than shared values, brand activism, and telling a compelling sustainability narrative.
5. Employee engagement
In a lean job market, recruiting top talent is a challenge. Research shows top talent is attracted to companies that demonstrate CSR and corporate activism. This is especially true for attracting Millennials.
6. Corporate activism and purpose
Builders who wish to lead will become brand activists. For example, in some scenarios they will protect land instead of developing it. They will create preserves or align with and support NGOs who do so. In return, their business will be rewarded.
“I know it sounds crazy, but every time I have made a decision that is best for the planet, I have made money. Our customers know that—and they want to be part of that environmental commitment.” Yvon Chouinard, Founder, Patagonia
The first homebuilder to fully engage SDGs and TBL principals, will be rewarded; recognized as an innovator and market disruptor.
“Without a sense of purpose, no company, either public or private, can achieve its full potential. It will ultimately lose the license to operate from key stakeholders. ” Larry Fink, CEO, BlackRock
7. NGO alignment
8. Carbon emissions and homebuilding — the dirty truth
The environmental impact of homebuilding is damaging. It takes more than 30 years for a 2000 square foot, zero energy home, to offset the carbon emissions that result from its construction. This does not account for the carbon emissions that result from the homeowner(s) transportation needs, and infrastructure. (With this said, small-spaced — urban dwelling, is much more resource efficient compared to subdivisions.)
Before self-applauding zero energy efforts, builders must acknowledge the environmental impact of their industry and supply chain. A conservative estimate of emissions resulting from constructing the average U.S. home is 150 metric tons, however, with a growing world population we cannot stop building houses. But, we can do so responsibly, socially and environmentally.
Based on the above 8 key concepts, if a builder makes claims of ‘good for the environment’ or ‘sustainability’ as related to constructing energy efficient homes, it is nothing short of greenwashing. If a builder cannot connect the key sustainability concepts into a cohesive marketing message, then they are most likely greenwashing and/or impact-washing. The result is brand damage and bad PR.
“Prioritizing one or two SDGs might make sense internally (and might make for good sustainability PR) but, from an honesty and transparency perspective, governments, citizens and other stakeholders are likely to be less impressed.” Report: PwC
The best way to avoid greenwashing is to tell a sustainability story that is grounded in transparency, CSR, supply chain measurement and reporting, and LCA.
Tell your story
The key to market differentiation is telling a great sustainability story; every builder has the potential to do so. The next wave of homebuilder innovation will be the result of embracing SDGs — not from confusing zero energy homes with being responsible for the environment.
Will the next housing innovation help address social issues? Can builders discover ways to improve occupant health, beyond low-VOC materials and good air filtration? By reporting carbon emissions of the entire construction process, will it result in product and process innovation? In answering these questions, exists the next wave of opportunity.
The next era of builder innovation will come from those who embrace the TBL and SDGs, and report with transparency. The next era for builder innovation will include donating to causes that preserve land and natural resources. The next era of homebuilding marketing will emphasize purpose and shared values, with potential for brand activism. The next era for homebuilder marketing has arrived. The only question is, which builder will be first?
About the Author
Is your sustainability message relevant? Does it use correct lingo and silence the critics? Is it engaging and share-worthy? Are you inadvertently greenwashing or impact-washing? Does your sustainability message address supply chain? Are you looking to revamp your sustainability marketing efforts?
If you are willing to commit to sustainability and the process of telling a great narrative, I can help you. Schedule a 15-minute call with me here. Or, you may direct message me on LinkedIn, or email me at [email protected]. Download a list of my services here.
Update your sustainability marketing today and integrate it into your goals. By doing so, your business objectives will be accelerated.
Green to Gold by Andrew Winston
“Finally, Brand Activism!” – Philip Kotler and Christian Sarkar
Corporate Sustainability at a Crossroads In the final report of our eight-year study of how corporations address sustainability, MIT Sloan Management Review
CUSTOMER FEEDBACK & STAKEHOLDER ENGAGEMENT
Example of Sustainability Report: King Fisher Sustainability Report
“One very positive trend I see is a growing recognition that doing good in the world is good for companies. The question is no longer whether the private sector should be participating in social initiatives, but rather how best they should do so… This goes beyond tech across all industries. We’re seeing a generational change taking place that’s driven by a search for meaning.” David Fischer VP Business and Marketing Partnerships, Facebook
Campaigns like “Don’t Buy Our Jackets” could also be characterised as ‘instinctive marketing’. This was a term developed by Mark Earls in his marketing tome, “Herd: how to change mass behaviour by harnessing our true nature”. Earls defines ‘instinctive marketing’ as “marketing that is based on your beliefs and your values”. It is a form of marketing that is “motivated by a passion to make people think differently about the world” as much as it is motivated by a requirement to generate sales and shift units. Whatever term you use to describe it, it is an approach to sustainability that has proved highly profitable: Patagonia has tripled its profits in the last five years and earned over $600 million in 2013.