GHG and Retail

(This article appeared in the September '08 issues of Merchant Magazine and Building Products Digest.)

When the topic of green building comes up in our industry, it usually starts up the debate about certified lumber. SFI or FSC? Which is better? Is chain of custody certification worth the trouble? The questions are valid, but the debate is essentially over and has become a distraction from understanding the real issue driving the green building movement. Carbon. It may bring as much change to the hardware and building materials channel as the “big boxes” did decades ago. Let me explain.

The green building movement continues to gain solid support from state and local governments. Solid? San Francisco recently passed mandatory green building guidelines that are the most stringent in the nation, but it’s not another example of West Coast eccentricity. What’s driving the green building movement on the West Coast and the rest of the country isn’t some “tree hugger” ideology, but a science-based approach to curbing green house gas (GHG) emissions, which includes carbon dioxide.

The building industry accounts for nearly half of all green house gas emissions, which includes both embodied energy – the energy required to produce the building materials and move it to where its needed – as well as the energy required for operations, such as lighting, heating and cooling. (See www.architecture2030.com for more information on this, as well as really nice graphics that illustrate the depth of the issue.) Cities and states are focusing on green building related policies as one strategy for limiting GHG emissions because that’s the sweet spot.

A major component of every green building program concerns energy usage. Adding renewable energy, like solar or wind, can earn a building project lots of green points. So too, can adding a host of energy saving features. While federal rebates for solar may end soon, most pundits predict a future that includes more rebates for renewables and energy saving products, coupled with ever stricter building codes. In fact, there is a movement afoot to set the green building standard at carbon neutrality, or zero-energy, well before 2030.

This increasing focus on energy and carbon reduction will create business opportunities and threats. Ikea recently announced their intention to sell solar panels and other home energy products in the next five years. Is this a sign of some big changes headed for this retail channel? Could be. New products in the pipeline will make it easy for do-it-yourselfers to install small-scale solar and wind systems for room additions, out buildings, etc. There’s lots more new energy saving products coming our way, too. Because these products deliver big margins, it’s attracting the attention of retailers like Ikea. And because “alternative energy” is becoming mainstream, established “alternative energy” retailers, such as Northern California’s Real Goods, are seeing tremendous growth opportunities. It’s a sure bet that in the years ahead there will be new retailers focused on meeting the demand for carbon-free energy and challenging traditional home improvement/hardware dealers in that category.

What will all this mean for traditional home centers and building materials retailers? For those that are energy savvy, the new wave of carbon-busting products will add growth to the bottom line. Retailers today that have a solid lineup of Energy Star products and, perhaps, a relationship with a solar installation outfit, have a head start and will be well positioned to take advantage.