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Ecological Indicators 66 (2016) 603–611

Contents lists available at ScienceDirect

Ecological Indicators
journal homepage: www.elsevier.com/locate/ecolind

Review

A framework for evaluating sustainability indicators in the real


estate industry
Tim Rogmans a,∗ , Mohammad Ghunaim b
a
College of Business, Zayed University, Dubai, United Arab Emirates
b
Diamond Developers, Dubai, United Arab Emirates

a r t i c l e i n f o a b s t r a c t

Article history: The growth in the use of sustainability indicators and ratings in the real estate industry has been accompa-
Received 7 June 2015 nied by strong criticism of the most commonly used rating systems designed to evaluate the sustainability
Received in revised form 26 January 2016 performance of real estate developments. Most of these criticisms focus on the content of the different rat-
Accepted 29 January 2016
ing systems. A systematic evaluation of the methodologies of sustainability ratings is lacking. This article
builds a framework that can be used to evaluate the methodologies of sustainability ratings and applies
Keywords:
the evaluation framework to five widely used sustainability ratings for homes and communities (BREAAM,
Sustainability indicators
CASBEE, Estidama, Green Star, LEED). The evaluation results highlight three major shortcomings in the
Ratings
Measurements
rating systems that have been evaluated. First, the systems lack unambiguous definitions of sustaina-
Built environment bility. They give insufficient explanation of why certain components are included in the ratings and on
Real estate what basis these components have been accorded their weights. Second, the rating systems put more
Evaluation emphasis on sustainable design than performance, especially for the ratings for communities. Finally,
Building the ratings are generally not responsive to local conditions of a project. Each rating system has its par-
Communities ticular strengths and weaknesses and no system is superior on all dimensions. The proposed evaluation
framework can be applied to sustainability ratings in different industries and is adaptable depending on
stakeholder requirements.
© 2016 Elsevier Ltd. All rights reserved.

Contents

1. Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 603
2. Sustainability indicators in the real estate industry . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 604
3. Evaluating sustainability ratings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 605
3.1. Results of existing evaluations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 605
3.2. Evaluation frameworks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 606
3.3. Developing a new framework . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 607
3.4. Evaluation of sustainability ratings in the real estate sector . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 608
4. Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 609
Appendix A. Criteria to evaluate sustainability indicators (Reed et al., 2006) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 610
Appendix B. Global Initiative for sustainability ratings (GISR) – CORE framework . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 610
References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 610

effects of ongoing urbanization on the environment make


1. Introduction
sustainability considerations in buildings and communities par-
ticularly relevant (Reith and Orova, 2015). The growing interest
Sustainability has been declared ‘the next megatrend’ facing cor-
in sustainability across the globe during the last two decades has
porations and governments (Lubin and Esty, 2010). The detrimental
resulted in a parallel growth in measures of sustainability, usually
expressed as sustainability indicators, ratings and indices.
Sustainability indicators and ratings are used in different
∗ Corresponding author. Tel.: +971 552893381. contexts. A number of ratings are available to measure the
E-mail address: tim.rogmans@zu.ac.ae (T. Rogmans). sustainability performance of countries (e.g. EIRIS, Robeco). Other

http://dx.doi.org/10.1016/j.ecolind.2016.01.058
1470-160X/© 2016 Elsevier Ltd. All rights reserved.
604 T. Rogmans, M. Ghunaim / Ecological Indicators 66 (2016) 603–611

measurement systems aim to assess the sustainability performance estate industry is developed. Subsequently, the sustainability indi-
of companies (Delmas and Blass, 2010). More recently, a number cators described in Section 2 are evaluated according to the criteria
of more focused sustainability rating schemes have emerged, most developed in Section 3. The conclusion summarizes the findings
notably in the agriculture (Freebairn and King, 2003; Pannel and and highlights ways in which indicator systems can be made more
Glenn, 2000) and real estate sectors (Berardi, 2012). Sustainability relevant to industry stakeholders.
is an important topic in the both agriculture and the real estate
sector. Estimates of the contribution of the real estate sector to
global greenhouse gas emissions range from 7.9% (IPCC, 2007) to 2. Sustainability indicators in the real estate industry
up to 30% (UNEP, 2009). These emissions are mainly the result
of energy consumption during the operational life of real estate Sustainability measures can take the form of indicators or
projects. However, energy consumption during the construction ratings. In the literature, sustainability indicators are measures
phase of a project and the embedded CO2 emissions of building that refer to one dimension of sustainability, for example energy
materials are also significant. In addition, the real estate sector is efficiency or water consumption. Different indicators can sub-
responsible for a host of other environmental impacts on water sequently be combined into a sustainability rating or index,
resources, waste generation, air quality and biodiversity (Sharifi resulting in a quantitative aggregation of underlying indicators.
and Murayama, 2013). Such aggregation typically involves the conversion of measures
Although sustainability ratings do vary in scope, approach and to common units and the application of weights to each mea-
objectives (Bell and Morse, 2008), there has been some com- sure according to its importance in the rating system’s overall
mon ground in the field of sustainability ratings for buildings view of sustainability (De Sherbinin et al., 2013). Ratings or indices
and communities globally. Sustainability ratings are intended to thereby provide a simplified, coherent, multidimensional view of
provide various stakeholders with a quick way to evaluate the sus- a system (Mayer, 2008). Reed et al. (2006) define sustainability
tainability performance of a construction project. The ratings are indicators as “the collection of specific measurable characteris-
produced for various stakeholders. Potential purchasers or tenants tics of society that address social, economic and environmental
of a property can check the development’s sustainability char- quality”.
acteristics and make informed decisions based on their findings. Defining sustainability is an ongoing challenge (Bell and Morse,
Government authorities can encourage and regulate sustainable 2001). If a concept or goal is not defined, then it becomes dif-
practices among industry participants. Policymakers can use sus- ficult to measure progress toward that goal. However, as long
tainability indicators to inform policymaking (Hezri and Dovers, as individual sustainability ratings clearly define what they are
2006). Architects, property developers and suppliers to the con- measuring, then there is the possibility of various rating systems
struction industry can use ratings to guide their work to reach a with different definitions of sustainability. As an overall theme,
desired standard of sustainability. They can also bolster their green sustainable development is often described through the decla-
credentials by being involved in projects with high sustainability ration of the United Nations Commission on Environment and
ratings. Pressure to use sustainability ratings has come from differ- Development (1987) as the “Development that meets the needs
ent stakeholders, with regulators playing a prominent role in many of the present without compromising the ability of future genera-
countries to develop and apply common standards of sustainability tions to meet their own needs”. Within this context, sustainability is
measurement. said to consist of three pillars: environmental, social and economic
The increasing attention to sustainability and to sustainability (Reith and Orova, 2015). In the real estate sector, environmental
ratings has been accompanied by strong criticism leveled at the sustainability considerations typically focus on energy consump-
most widely used rating systems. Most existing critiques of the tion and generation, water consumption and waste management.
available ratings in the real estate sector focus on the content of However, the lack of a common definition of sustainability
different ratings (Reith and Orova, 2015; Haapio and Viitaniemi, remains a challenge for every effort to develop sustainability
2008; Haapio, 2012; Sharifi and Murayama, 2013). Although debate indicators, regardless of the industry or country to which it
about the content of sustainability measures is important, most applies.
existing evaluations do not address the methodologies behind the There are two broad methodological paradigms in the liter-
rating systems. A critical evaluation of rating methodologies can ature on sustainability indicators (Bell and Morse, 2001). One
make discussion about the content of a rating system much more is an expert-led, top-down approach using explicitly quantita-
fruitful. tive indicators. Another approach is bottom-up and participatory
An analysis of the methodologies of sustainability rating which emphasizes the importance of understanding local context
systems inevitably starts with the question of what are the require- to set goals and establish priorities (Fraser et al., 2006). There
ments of a sustainability rating system. In other words, how can are also hybrid methods, combining expert led and participatory
various stakeholders of construction projects know whether a approaches (Reed et al., 2006). Expert led approaches are particu-
rating provides valuable information on relevant sustainability larly appropriate when the stakeholders in a project may lack the
characteristics? If the aim of sustainability ratings is to promote technical knowledge to define indicators. The key aim of indica-
sustainable practices, then ratings must satisfy a number of crite- tors using this approach is to enable comparisons in sustainability
ria in order to be usable, effective and impactful. The objectives performance across entities. In the real estate industry, residents
of this article are to develop a set of criteria to evaluate sustaina- typically lack the required technical knowledge to design sus-
bility indicators and to apply the criteria to several commonly used tainability ratings. In fact, enabling independent and objective
sustainability indicators in the real estate industry. The developed comparisons is the main driver behind the use of sustainability
framework and its application in this article aim to shed light on indicators. Hence, the most commonly used sustainability indica-
the effectiveness of these widely used sustainability ratings and tors in the real estate sector are expert-led. Bottom-up approaches
provide a usable mechanism for stakeholders to evaluate other to developing sustainability indicators are typically at the commu-
sustainability ratings. nity level rather than for homes or buildings. (Redefining Progress,
The remainder of this article is structured as follows. Section 2 2002; Valentin and Spangenberg, 2000; Reed et al., 2006). By
reviews the relevant literature and describes several sustainability definition these community driven indicator systems are highly
indicator systems in the real estate sector. In Section 3, a set of responsive to the local environment but not easily comparable
suggested evaluation criteria for sustainability ratings in the real across locations.
T. Rogmans, M. Ghunaim / Ecological Indicators 66 (2016) 603–611 605

Although sustainability indicators are used in a variety of different building types and a building’s entire lifecycle, including
industries (Bell and Morse, 2008), such indicators are particularly pre-design, new construction, existing buildings and renovation.
prevalent in the real estate and construction industry (Berardi, By 2014, the total number of buildings certificated by CASBEE was
2012). Over six hundred sustainability rating schemes related to over 350.
the built environment exist worldwide. Many ratings have a nar- Another national initiative is the BCA Green Mark system.
row focus on very specific items, such as the energy consumption Launched by the Singapore Building and Construction Authority
of a building or the sustainability impact of building materials. (BCA) in 2005, this scheme is an initiative to drive Singapore’s con-
These specialized ratings are most likely to be relevant to a rela- struction industry toward more environment-friendly buildings
tively small group of stakeholders, such as architects or regulators. and practices. As Singapore imports most of its energy from neigh-
Of greater interest to a wide variety of stakeholders are the Total boring countries, the Green Mark Scheme places much emphasis on
Quality Assessment systems, which combine a variety of environ- energy efficiency within buildings and developments. To date, there
mental sustainability considerations and often include economic are approximately 2200 Green Mark building projects in Singapore.
and social topics (Berardi, 2012; Moldan et al., 2012). Scores for A more recently developed country-specific sustainability
various criteria are combined into an overall rating, which provides assessment system is the Pearl rating system by Estidama, estab-
stakeholders with a summary assessment of the sustainability of lished by the Abu Dhabi Urban Planning Council in the United
a particular real estate project, typically a home or a community. Arab Emirates (UAE) in 2008. Estidama aims to create more sus-
Multi criteria rating systems exist for different types of buildings tainable communities, cities and global enterprises that balance
(such as homes, offices, schools and museums) as well as for neigh- four pillars of sustainability; environmental, economic, cultural and
borhoods and communities. social. Estidama’s Pearl rating systems cover communities, build-
The oldest and most widely used rating systems in the real estate ings and villas. The ultimate goal of Estidama is to preserve and
sector are BREEAM and LEED. These organizations now operate enrich Abu Dhabi’s physical and cultural identity in line with the
globally, with LEED being used in 150 countries (USGBC, 2015). emirate’s Vision 2030. To date, Estidama has awarded design rat-
In addition, there has been an increase in the number of coun- ings to over 40 developments in the UAE (Estidama, 2015). There is
try specific ratings, which have been developed in response to the no information available on the number of units covered in these
realization that the measurement of sustainability is context and developments.
location specific. The following section highlights some of the main These three national systems are described here for illustrative
characteristics of five widely used rating systems in the real estate purposes only. There is a significant and growing number of other
sector. national sustainability rating systems worldwide. Several trends
Launched in 1990 in the United Kingdom by BRE, BREEAM is point toward growth in the use of sustainability indicators in the
the oldest multi-criteria sustainability rating method for the built real estate industry. First, the number of buildings and other devel-
environment. The standard attempts to establish best practices in opments that have been rated has grown rapidly. Worldwide green
sustainable building design, construction and operation. BREEAM building certified space is forecast to grow from approximately 6
is a founding member of the UK Green Building Council and the billion square feet in 2010 to 53 billion square feet by 2020 (Pike
system is used by other Green Building Councils such as those Research, 2010). Secondly, there has been a substantial increase in
in Norway and the Netherlands. BREAAM has been the basis for the number of nationally based rating systems available to deve-
nationally based rating systems in Canada (Green Globes), Australia lopers. Meanwhile, existing systems such as LEED and BREEAM
(Green Star) and Hong Kong (BEAM). BREEAM has also released its continue to actively market their rating services internationally.
own international version. To date, BREEAM has certified 425,000 Thirdly, existing rating providers have broadened their scope from
projects with another two million projects registered and awaiting a focus on residential buildings, to other building types, includ-
assessment. BREEAM certifies new construction commercial build- ing commercial buildings, schools, museums and neighborhoods.
ings, residential buildings, residential homes, health care facilities, Finally, existing rating systems have broadened the topics they
prisons and communities. cover, expanding from an initial focus on energy consumption to
In 1993, the US Green Building Council (USGBC) was established broader considerations such as social and economic sustainability
with the aim of developing a standard that promotes sustainability (Berardi, 2011). These trends point toward a strong continuing
in the construction industry. With the involvement of USGBC mem- growth in the number and use of sustainability ratings in the real
bers and the assistance of over 60 organizations, the Leadership estate sector, thereby confirming the need for a framework that
in Energy and Environmental Design (LEED) green building rating evaluates these systems in a structured manner.
system was developed. LEED pays particular attention to energy As sustainability ratings grow in number and complexity, stake-
and water efficiency, reduction of CO2 emissions and the conser- holders in the real estate industry face some difficult decisions.
vation of resources. LEED encompasses several rating systems that Regulators must choose which rating scheme is most appropriate
include commercial, residential and civic buildings. To date, more to its circumstances and need to decide on local adaptations that
than 55,000 commercial projects and 154,000 homes have been must be made to better fit international rating systems to their
certified by LEED globally. Outside the United States, the countries unique environmental conditions. Architects and developers must
where LEED ratings are most prevalent are Canada, China, India and choose which, if any, rating to obtain for their projects and whether
Brazil (US Green Building Council, 2015). to adapt their designs to comply with the rater’s view of sustaina-
With more focus being directed toward sustainability standards bility. Investors and tenants need to interpret sustainability ratings
across the world, stakeholders in the real estate sector in some and must decide how to take these into account in their investment
countries determined that rating systems developed in the US and decisions. In order to make these choices, a good understanding of
UK, could not be applied to their specific regions and climates. As a the various rating schemes is necessary.
result, many countries have developed their own country specific
sustainability standards. For example, in 2005, the Comprehensive 3. Evaluating sustainability ratings
Assessment System for Built Environmental Efficiency (CASBEE)
system was established by the Japanese Sustainable Building Con- 3.1. Results of existing evaluations
sortium (JSBC). CASBEE standards and tools are written in Japanese
and are specific to local environmental conditions (for example, A number of evaluations of sustainability ratings in the real
earthquake risk). CASBEE environmental standards are applied to estate sector have been published. Most existing evaluation are
606 T. Rogmans, M. Ghunaim / Ecological Indicators 66 (2016) 603–611

from a technical perspective, comparing the contents of the param- Such case studies are often presented as potential models for others
eters of different rating systems. This section summarizes the main to follow.
findings from the literature. There have also been criticisms of sustainability ratings in the
Reed et al. (2009) compared the contents of different sustaina- professional press, arguing that the systems are bureaucratic, costly
bility ratings by analyzing the different components and weightings and time consuming to administer. Developers complain of being
that make up a rating. Their effort concluded that there is a high subject to ‘box ticking exercises’ that drain resources while doing
level of variability between rating systems. For example, they con- little to promote sustainability (Mouzon, 2014). Alternatives to
cluded that if the LEED and Green Star rating systems were applied multi-criteria sustainability ratings include environmental labels
to UK buildings, LEED and Green Star would rate the same building for specific parts of a project (e.g. sustainable timber, energy effi-
higher than the UK BREEAM assessment method. cient appliances) and sustainability reporting along recognized
Elgendy (2010) compared Abu Dhabi’s Estidama to BREEAM and standards such as those developed by the Global Reporting Initia-
LEED. He compared the weight given to items such as site selec- tive (GRI).
tion, water, energy and materials in the ultimate rating score. He Despite these recurrent criticisms of sustainability rating
concluded that the elements in the Estidama rating system contain methodologies, there has been no structured analysis of the
aspects of BREEAM and LEED, as well as some items that are unique methodology of leading sustainability indicators in the real estate
to the context of Abu Dhabi. industry.
Berardi (2011) provided a descriptive analysis of BREEAM, LEED,
CASBEE, SBTool, SBC-ITACA and Green Globes, with a focus on 3.2. Evaluation frameworks
the evaluation criteria used in these different systems. He con-
cluded that most of the multi-criteria rating systems still focus In the context of the numerous criticisms of existing rating sys-
exclusively on environmental sustainability and fail to take into tems, the question remains how the methodologies behind the
account social and economic aspects. Saunders (2008) made a tech- sustainability indicators may be evaluated. The necessity of an
nical comparison of CASEBEE, LEED, Green Star and BREEAM, with evaluation framework and the inevitable degree of subjectivity
a focus on the rating categories, weights and rating processes of involved in developing such a framework, have been pointed out
each system. Nguyen and Altan (2011) developed an evaluation of by the UN Commission on Sustainable Development (2001):
rating methodologies using a set of nine review criteria to evalu- “A framework for organizing the selection and development of
ate ratings. In their comparison, there was no discussion of how indicators is essential. Nevertheless, it must be recognized that
the evaluation criteria were developed. Siew et al. (2013) provided any framework, by itself, is an imperfect tool for organizing and
a descriptive comparison of building and infrastructure sustaina- expressing the complexities and interrelationships encompassed
bility reporting tools. Hes (2007) summarized research done on the by sustainable development. Ultimately, the choice of a framework
actual performance of buildings that have obtained sustainability and a core set of indicators must meet the needs and priorities of
ratings. users”.
Several studies have been done to compare neighborhood sus- In other words, a framework for the development of sustaina-
tainability assessment tools. Sharifi and Murayama (2013) analyzed bility indicators is required, but is also inevitably imperfect. Several
seven neighborhood assessment tools and concluded that ratings attempts have been made to develop methods to assess sustaina-
do not include a mechanism for local adaptability and participa- bility ratings. However, little work has been published in this area
tion. Reith and Orova (2015) provide a detailed content analysis that has direct relevance for ratings in the real estate and con-
of five neighborhood assessment systems. Their study is based on struction industry. Therefore, it is necessary to consider also rating
the premise that sustainability assessment systems must balance evaluation criteria that have been developed for sustainability rat-
dimensions of environmental, social and economic sustainability. ings outside the real estate sector and make adaptations where
By analyzing and classifying each of the components of each sys- required.
tem in their scope, they conclude that environmental aspects are Based on a wide-ranging review of the literature, Reed et al.
the most important dimension in determining an overall assess- (2006) provide a listing of potential criteria to evaluate sustaina-
ment score, followed by social conditions and then by economic bility indicators (see Appendix A). Although their work considered
issues. sustainability indicators for use by local communities rather than in
The evaluations in the existing literature share an approach that the real estate sector, their analysis has relevance for many types of
is heavily structured as far as the analysis of the contents of the sustainability indicators. They split the criteria to evaluate sustaina-
rating systems is concerned. However, evaluations of the rating bility indicators into two categories; objectivity criteria and ease
process and methodology remain largely anecdotal. For example, of use criteria. Objectivity criteria are designed to test whether the
Frankel and Nelson (2012) stressed the importance of coming to indicators accurately and objectively measure progress toward sus-
common standards in measuring sustainability in the real estate tainable development goals. Ease of use criteria assess how easy it is
sector and highlight shortcomings in existing systems. They argued for people in local communities to use the indicators. There can be
that sustainability ratings tend to reward effort over result and a conflict between objectivity and ease of use, in the sense that the
consider building design over actual performance. As a result, mea- most scientifically rigorous indicators may be difficult and costly to
surement systems can have the perverse effect that highly rated measure. In the real estate sector, rating systems are developed and
buildings actually have poor sustainability performance. Berardi implemented primarily by professionals in the industry. Therefore,
(2011) pointed out that the reasons behind choices regarding the the main focus of an evaluation of sustainability ratings in the real
selection criteria and the weight given to each criterion are not estate sector should be on objectivity criteria. Relevant ease of use
explicit in the most common systems. Reed et al. (2009) suggested criteria are most likely to center around the costs incurred to obtain
that greater transparency by rating providers would ultimately lead a rating and the clarity of information they provide to the end users
to a higher degree of consistency among them. King (2008) advo- of a property.
cates for a more participatory approach in designing assessment In addition, the Global Initiative for Sustainability Ratings
tools and argues that sustainability considerations should play a (GISR), a joint project by Ceres and the Tellus Institute, has devel-
larger role early on in the project appraisal process. Several case oped its own set of twelve principles that sustainability ratings
studies exist of the development of country specific assessment should comply with (Appendix B). The GISR principles are divided
schemes (e.g. Mateus and Braganca, 2011; Hikmat and Sabat, 2009). into process and content categories. Process principles relate to
T. Rogmans, M. Ghunaim / Ecological Indicators 66 (2016) 603–611 607

the “design, application and maintenance of a rating to ensure be some discussion of why an item such as water use has a certain
excellence, credibility and integrity” (GISR, 2013). Content prin- weighting in the overall rating score compared to other elements
ciples relate to the “scope, quality and measurement aspects of such as energy efficiency or waste recycling. This set of criteria can
ratings” (GISR, 2013). Although these principles apply to corporate be summarized under the term transparency.
sustainability ratings and are mainly used by the investment com- In relation to the criteria that indicators should provide timely
munity, several of the principles are equally relevant for ratings information and need to be able to assess trends over time, sus-
in the real estate industry. For example, GISR’s principle of trans- tainability indicators in the real estate sector need to measure
parency stipulates that stakeholders need to understand a rating’s sustainability performance at regular intervals, for example quar-
“assumptions, scoring methodology, and extrapolations”. Another terly or annually. This assessment needs to continue once the
relevant GISR principle is that of comparability, meaning that a rat- construction phase of a project is completed and has entered the
ing should allow users ‘to compare the performance of the same operational phase. For real estate projects to be verifiably sus-
company over time and of different companies within the same tainable, their sustainability performance must be measured on
period’. The principle of sustainability context requires that sus- an ongoing basis. Failure to do so would restrict a rating’s use to
tainability is assessed in the context of science based thresholds. measuring potential rather than actual performance (Hes, 2007).
The principle of balance stipulates that ratings should measure This criterion is referred to as the possibility of a post construction
historical and perspective performance. In this way, the GISR pro- rating.
vides an additional perspective on the conditions that effective In response to the need for ratings to be relevant to the local
sustainability ratings need to satisfy. The GISR is also developing context, sustainability ratings should be adaptable to local cli-
an accreditation system for corporate sustainability ratings on the matic conditions and other unique environmental aspects specific
basis of its principles. If such a structured evaluation system can be to that location. The ratings must also account for the needs of
applied to corporate sustainability rating systems, then the same the stakeholders and their requirements of the project. Mouzon
can be achieved for ratings in the real estate sector. (2014) pointed out that “a highly sustainable building on Cape Cod
Other studies (e.g. Dale and Beyeler, 2001; Singh et al., 2012; is ridiculously unsustainable on the Gulf Coast”. Across national
Moldan et al., 2012; Hak et al., 2007) have developed guides for the boundaries and climate zones, the need for local adaptation is
development of sustainability indicators that are not specific to the paramount for sustainability ratings to have local relevance.
real estate sector. Their frameworks point toward the same princi- With respect to ease of use criteria, in order to satisfy the needs
ples and criteria to be used as those provided by Reed et al. (2006) of different stakeholders, the calculation method and final score
and GISR (2013). The main guide with direct relevance to the real represented by sustainability ratings must be easy to understand
estate industry is the World Green Business Council’s draft ‘Quality by a variety of parties, including legislators, developers, suppliers,
Assurance Guide for Green Building Tools’ (World Green Building investors and end-users.
Council, 2013). This guide provides a step-by-step process model Finally, the costs and time required for a project to obtain a sus-
for the development of green building assessment systems. How- tainability rating are also relevant. If a good rating system is so
ever, the only required criteria for sustainability ratings explicitly resource intensive that the rating cost provides a significant deter-
referred to in the guide are transparency and impartiality. rent to the stakeholders in the project, then the system is less likely
to achieve widespread adoption. Costs related to obtaining a rating
3.3. Developing a new framework can include fees paid to the rating provider, time required to gather
information and submit documentation, time spent with external
Drawing from the criteria mentioned in the literature, as well assessors, as well as training to be followed by a company’s employ-
as the reported criticisms of some of the prevalent sustainability ees in order to become knowledgeable about a particular rating
indicator systems, it is possible to design a number of relevant system.
criteria for the evaluation of sustainability indicators in the real Based on the above analysis, it is suggested that the effectiveness
estate industry. On the basis of the objectivity criteria that sustaina- of sustainability indicators and ratings in the real estate industry
bility indicators should be accurate, bias free, reliable, scientifically can be assessed on the basis of the following criteria:
robust and credible (Reed et al., 2006), a first requirement of sus-
tainability indicators in the real estate sector is that there is a 1. Is there a clear definition or description of sustainability available
clear definition of sustainability or at least a description of what in the description of the rating methodology? (Definition).
the designers of the indicator system understand by the word sus- 2. Transparency of the rating system. Transparency can be broken
tainability. Only on the basis of a clear understanding of the overall down into information about the process by which the rating
concept that needs to be assessed, is it possible to design relevant system has been developed, the contents of the components of
measures and targets. the rating and calculations that are used to arrive at a rating
There can be valid reasons why sustainability would be defined and the level of justification for the contents of the rating system
differently across geographies, including variations in climate and (Transparency).
differences in culture and in social and economic conditions. How- 3. Is the rating system adaptable to local conditions? This crite-
ever, it is not realistic, necessary or even desirable to expect all rion concerns mainly local climates and other environmental
rating systems to have a common definition of sustainability. The conditions, but ratings that encompass social and economic con-
main point is that there must be a clear definition or description of siderations also need to be relevant to local conditions along
what any particular rating system is designed to measure. those dimensions (Local relevance).
In order to respond to the requirements of accuracy, credibility 4. Does the rating system measure the performance during the
and scientific robustness, it needs to be clear to stakeholders why operation phase of the project or is it limited to the design and
and how various individual indicators contribute to the overall construction phase? (post construction rating).
score of a project and how these indicators relate to the system’s 5. Are the scoring systems and final rating scores unambiguous and
overall concept of sustainability. First, there needs to be a descrip- easy to understand? (Ease of understanding).
tion of how the system has been developed. For example, has the 6. Costs involved in obtaining a rating (Costs).
design been driven by experts or through extensive stakeholder
consultation? Secondly, there should be an explanation of the Following Reed et al. (2006), the first four criteria relate to objec-
items and weights that make up the rating. Finally, there needs to tivity of a rating system, whereas the last two criteria deal with
608 T. Rogmans, M. Ghunaim / Ecological Indicators 66 (2016) 603–611

Table 1
Evaluation of sustainability ratings: homes and communities.

LEEDa BREEAMb CASBEEc Green Markd Estidamae

Ratings for homes


1. Sustainability definition
- Definition - No - No - No - No - No
- Description - Yes - Yes - Yes - Yes - Yes
2. Transparency
- Process - Yes - Yes - Yes - Yes - Yes
- Contents - Yes - Yes - Yes - Yes - Yes
- Justification - Yes - No - Yes - No - No
3. Local sensitivity - Possible - Possible - No - No - No
4. Post construction rating - Yes (existing buildings) - No - Yes - Yes - Under development
5. Ease of understanding
- Scoring system - Yes - Yes - No - Yes - Yes
- Final score - Yes - Yes - Yes - Yes - Yes
6. Costs (minimum) US $300 GBP 995 Yen 80,000 Sin $ 14,650 Free
(US $ 1450) (US $ 670) (US $ 10,750)

Ratings for communities


1. Sustainability definition
- Definition - No - No - No - No - No
- Description - Yes - Yes - Yes - Yes - Yes
2. Transparency
- Process - Yes - Yes - Yes - Yes - Yes
- Contents - Yes - Yes - Yes - Yes - Yes
- Justification - Yes - No - Yes - No - No
3. Local sensitivity - Possible - Possible - No - No - No
4. Post construction rating - No - No - No - No - Under development
5. Ease of understanding
- Scoring system - Yes - Yes - No - Yes - Yes
- Final score - Yes - Yes - Yes - Yes - Yes
a
LEED for homes (USA).
b
BREEAM code for sustainable homes (UK).
c
CASBEE for home (Japan).
d
BCA residential new building (Singapore).
e
ESTIDAMA Pearl Villa Rating System (United Arab Emirates).

ease of use. Using the GISR categories of process and content related of relevant aspects of sustainability, including an elaboration of
criteria for ratings, the criteria of ‘Definition’ and ‘Transparency’ are various environmental, economic and social aspects. The rating
process related, whereas ‘Local Relevance’ and ‘Post Construction systems also have explanations of why sustainability is important,
Rating’ are content related criteria. The criteria of ‘Ease of Under- the adverse effects of real estate projects on the environment and a
standing’ and ‘Costs’ are not part of the GISR principles but they description of each manual’s credit content that helps in achieving
relate most closely to content and process, respectively. the ultimate goal of becoming sustainable.
In terms of transparency, all rating systems provide a descrip-
3.4. Evaluation of sustainability ratings in the real estate sector tion of the process by which the system has been developed,
both for homes and communities. For example, in the case of
For the purpose of this study, five leading sustainability rating LEED, it is explained that the system has been developed largely
systems have been selected on the basis of their rate of adop- on the basis of input from industry participants through a struc-
tion, comprehensiveness and geographic origin. The United States’ ture of committees. Although this approach promotes transparency
Green Building Council’s LEED system is the most widely used rat- and consensus, LEED has been criticized by some for catering to
ing globally. The United Kingdom’s BREEAM system is the oldest manufacturers rather than basing credits on scientific research
international system in the world and has served as the inspira- (Inbuilt, 2010). In other cases, rating systems have been devel-
tion for a number of national schemes. Singapore’s Green Mark, oped by smaller groups of experts. In all systems, it is clear
Japan’s CASBEE and the United Arab Emirates’ ESTIDAMA schemes, what the components are those contribute to the rating and how
as described above, provide three examples of prominent schemes these contribute to the final rating score. In terms of justifica-
in different parts of Asia and the Middle East. tion of the individual elements and weights of ratings, LEED and
Each system has been evaluated according to the criteria devel- CASBEE provide more information than the other systems. Only
oped in Section 3. The evaluations have been carried out on the LEED and CASBEE have published worksheets showing back-end
basis of publicly available materials for each of the rating systems. calculations that justify why a number of points are awarded
In each case, the main source of information has been the technical to each credit. On the other hand, BREEAM, Green Mark and
manual that describes the rating system. The evaluation framework Estidama, have not published detailed explanations as to why cred-
has been applied to ratings for both homes and communities. The its are awarded a specific number of points and given certain
results are summarized in Table 1. weights.
As mentioned, there is an inevitable degree of subjectivity With respect to local responsiveness, only LEED and BREEAM
involved in the evaluations represented in Table 1. However, by provide the opportunity to adapt the rating system to local con-
clarifying and breaking down the evaluation criteria in detail, it is ditions, either within the country of the rating system’s origin or
the intention to remove the potential for bias. internationally. However, in both LEED and BREEAM there is no
From Table 1, it can be seen that none of the rating systems automatic tailoring of the system on the basis of local conditions.
provide a clear and unambiguous definition of sustainability in Instead, the real estate developer needs to engage in a process
their manuals. Instead, each rating system provides a description of communication with the rating organization to justify why
T. Rogmans, M. Ghunaim / Ecological Indicators 66 (2016) 603–611 609

its specific local conditions merit a different rating methodology wide range of sustainability information in an easy to understand
compared to the established standard. On the basis of such com- score. They tend to be transparent in terms of the development pro-
munication, a project may obtain a higher rating than it would have cess and contents of the systems. However, as the ratings are not
achieved if the standard measures and weights had been applied. based on a clear definition of sustainability but only on a general
Although flexibility to local conditions is necessary to make sus- description, there is insufficient justification for why the various
tainability ratings applicable to a variety of natural environments, components play a particular role in the ratings. There is also no
the process of communication and justification that must be initi- systematic way to tailor the ratings to varying local conditions.
ated by the developer in this case goes at the expense of clarity and Overall, there is a greater focus on sustainable design rather than
transparency. In addition, such adaptation can involve a lengthy sustainability performance, especially for the community ratings.
and costly communication process with the rating system manager. This is potentially a consequence of the need to involve residents in
CASBEE, Green Mark and Estidama are location specific standards. the development of community ratings, making the application of
Using these systems outside their intended countries of use will standard measures across communities a concept that is challeng-
often result in an inaccurate evaluation of a project’s sustainability. ing to implement. Finally, there is no easy way to evaluate the costs
These systems also do not have any international versions of their and efforts required to obtain a rating, but it appears that there are
manuals. significant cost differences between the various systems.
For post construction ratings, there is a significant difference Overall, there are important differences between the differ-
between the rating systems for homes and communities. LEED, ent rating systems. LEED is the system with the most detailed
Casbee and Green Mark require a commissioning agent to visit explanation about its rationale. LEED and BREEAM provide the
each home in order to verify that the home is operating as per greatest potential for local adaption, whereas CASBEE, Green Mark
its design. Although such verifications still do not measure actual and Estidama are country specific. CASBEE is scientifically rigorous
energy use or other environmental impacts of the building in oper- but relatively difficult to understand. Green Mark and Estidama
ation, it provides at least an assurance that the building is built with have similar profiles according to the criteria. On the whole, it
the sustainability characteristics of its original design. On the other is not possible to arrive at a clear conclusion of one system
hand, no commissioning or testing is required for BREEAM. LEED, being superior to others along all dimensions. Each system has its
CASBEE and Green Mark have a rating for completed homes, while particular strengths and weaknesses according to the evaluation
ESTIDAMA’s rating for completed homes is still under development. criteria.
For communities, only ESTIDAMA is reported to be developing a rat- The two main shortcomings that the rating systems evaluated
ing for the operational phase of projects. The other rating systems in this article have in common relate to local relevance and post
do not measure the sustainability performance of communities construction ratings. It would be a significant challenge to develop
once the design and construction has been completed. For exam- a rating system that is sensitive to local conditions and that meas-
ple, with energy being an increasingly important consideration in ures sustainability performance rather than just design. However,
assessing environmental sustainability, ratings reflect whether a developing such a system, possibly on the basis of the existing rat-
building or community has been designed for energy efficiency but ing systems, would significantly enhance the usability and impact
do not provide insight into actual energy consumption or genera- of sustainability ratings in the real estate industry.
tion in the community. Since the ultimate goal of these ratings is to
improve sustainability performance of our communities, an opera-
tional assessment of the sustainability of communities presents an 4. Conclusion
important area for future development.
For LEED, BREEAM, Green Mark and Estidama, the systems have Sustainability indicators and ratings offer many potential bene-
relatively easy to understand manuals, with clear intended objec- fits to stakeholders in the real estate industry. As a result, both the
tives associated with each credit. They also have an easy to follow number of sustainability rating systems and the use of these sys-
point and credit system. Upon calculating the scores for all credits, tems have grown rapidly over the last decade. Although there has
it is then easy to determine the total number of points achieved and been a lively debate in academic and professional circles over the
conclude which category of certification applies to a project. There contents of these ratings, there has been little systematic assess-
is a large degree of similarity in the designation of final rating scores ment of the methodologies used by the most common rating
between the various systems. Ratings are expressed as stars, pearls, systems. This article has developed a framework to assess sus-
platinum or other clearly understood classifications. Casbee on the tainability ratings in the real estate industry and has applied the
other hand, has a scoring system that involves point calculations framework to five leading sustainability ratings for both homes and
through equations and graphs for many of the credits. This makes communities.
the calculation of the total score a little more difficult to compute. The framework to evaluate sustainability ratings in the real
However, once the total number of achieved points is computed, it estate industry that have been developed in this article can be used
is then relatively easy to determine which overall rating a project in multiple ways. The organizations responsible for the ratings that
will obtain. have been evaluated can use the results as part of their efforts to
Finally, the minimum fee to be paid to the accrediting body in continuously improve the rating’s methodology. Other organiza-
order to obtain a rating for an individual home varies substan- tions that produce sustainability ratings can use the framework to
tially between different rating systems, ranging from no cost for evaluate their own ratings. Property developers can use the frame-
ESTIDAMA to US$ 10,750 for Green Star. Rating costs for commu- work to make informed decisions about which rating system to use.
nities are not easily available in a comparable way for the different The evaluation framework can also be tailored to meet the needs
rating systems and have not been included in Table 1. Obtaining of specific stakeholders in industries other than real estate.
a rating may involve more costs than just the fees paid to the The framework does not offer unambiguous or scientifically
rating provider and can include items such as staff training, consult- proven assessments of sustainability ratings, but does provide a
ing services and travel expenses for the assessors. This makes the step toward making a highly subjective assessment of a rating’s
comparison of rating costs difficult, especially for the community value more structured. At a minimum, the evaluation framework
ratings. provides a basis to debate the value and the design of rating sys-
In summary, the sustainability ratings that have been evaluated tems. Within the context of a binary ‘yes’ or ‘no’ evaluation of
are complex measurement systems that succeed to summarize a each of the criteria, stakeholders may argue how a rating system
610 T. Rogmans, M. Ghunaim / Ecological Indicators 66 (2016) 603–611

for particular evaluation criteria is appropriate to their needs. This Content


discussion itself can lead to new insights and improvements in the Materiality A rating should assess performance based on
sustainability issues relevant to the
rating systems. decision-making of stakeholders for which a
Future research could further reduce the degree of subjectivity rating is designed
in the evaluation framework and its application. New devel- Comprehensiveness Evaluating one or more aspects of
opments around Smart Cities greatly increase the amount and sustainability performance should
systematically assess for impacts on human,
types of data available to decision makers and provide additional
intellectual, natural and social capital
avenues for measuring sustainability performance. The framework Sustainability context A rating should assess performance in the
can be further developed to be applied to other sustainability context of science-based thresholds and
ratings in the real estate sector as well as to other industries, limits, or, if unavailable, widely-accepted
with the ultimate goal of improving measures of sustainability norms pertaining to long-term human and
ecological well-being
more meaningful to stakeholders and to enhance the sustaina-
Long-term horizon A rating should enable the evaluation of the
bility performance of industries with the greatest impact on the long-term performance of a company while
environment. simultaneously providing insights into short-
and medium-term outcomes in alignment
with the long-term
Appendix A. Criteria to evaluate sustainability indicators Value chain A rating should reflect all portions of a
(Reed et al., 2006) company’s value chain over which the
company exercises significant influence
Balance A rating should utilize a mix of measurement
Objectivity criteria Ease of use criteria techniques to capture historical and
prospective performance
Indicators should:
Comparability A rating should allow users to compare the
Be accurate and bias Be easily measured
performance of the same company over time
free
and of different companies within the same
Be reliable and Have social appeal and resonance
time period
consistent over space
and time
Assess trends over time Be cost effective to measure
Provide early warning Be rapid to measure
of detrimental
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