What Happens If Everyone Gets a Star?

By: Stephanie Judd, MBA/MS Candidate at the University of Michigan's Erb Institute, 2011 EDF Climate Corps fellow at Belk

Belk, a major regional department store company based in Charlotte, NC with 303 locations across the South, is working to improve energy efficiency as part of its sustainability program. And it tapped the Environmental Defense Fund's expertise as it started down the path toward smarter energy management. That's where I come in.

This summer Belk hired me on as an EDF Climate Corps fellow to evaluate the company's store portfolio with the EPA's ENERGY STAR program and study the risks and advantages of using ENERGY STAR as a benchmark for energy efficiency over the long term.  While wading elbow-deep into all things ENERGY STAR, I realized that other companies may in fact be seeking answers to the same questions I was. So in the holiday spirit of sharing and helping others, here are the four big questions I asked myself and some of the answers I dug up:

1.       Is the ENERGY STAR standard a good one?

ENERGY STAR scores for commercial buildings are based on how a building's energy efficiency compares to that of other buildings with similar uses.  In 2003 the Commercial Building Energy Consumption Survey (CBECS) analyzed different buildings and their energy use intensities to create a baseline understanding of energy efficiency in buildings across the country.  To be eligible to receive the ENERGY STAR, a building must score at least a 75, indicating it is in the top quartile of energy efficiency for its building category.

In theory the ENERGY STAR model is robust, addresses the risk of market saturation and maintains integrity as a standard over time. As building owners invest to improve the energy efficiency of their buildings, the baseline average energy performance will improve, thereby increasing the level of efficiency required for ENERGY STAR qualification.  To remain eligible for the ENERGY STAR, building owners must continually invest in new efficiency measures.  However, ENERGY STAR scores are based on formulae discerned from data collected by CBECS, which is supposedly conducted on a quadrennial basis.  Yet the last time the survey was conducted was in 2003.  The standard's baseline hasn't been updated in almost a decade and there's no news about plans for this year.

2.       What will ENERGY STAR mean to Belk's store guests?

Part of the consideration for adopting a standard is Belk's expected customer response and the affect of the ENERGY STAR on Belk's brand identity.  But ENERGY STAR is widely associated with home appliances, electronics and other products because of the huge success the standard enjoys in that space.  Will customers be confused if Belk stores earn the ENERGY STAR?  When discussing buildings consumers recognize the LEED standard more readily, but LEED requirements for energy efficiency are actually lower than those for ENERGY STAR. That said, LEED does address additional issues like human comfort, air quality, sunlight and even human health.  How will the recent adoption of the ENERGY STAR standard by other retail chains change customers' ideas and emotional response to the stores that display the ENERGY STAR logo on their doors?  (Hint: Read the fabulous blog my peer EDF Climate Corps fellow wrote about creating an ENERGY STAR plan for Target). Because Belk has opened a new LEED-accredited store and is planning others, it will be important for the company to maintain clear messaging around building quality and energy efficiency standards.

3.       How will ENERGY STAR impact the business?

The ENERGY STAR online portfolio manager helps users calculate the expected kilowatt hour savings and avoided emissions should a building's score improve.  What's harder to determine is the financial and human resource commitment required to achieve that improvement in the first place.  ENERGY STAR calculations consider many variables, including weather information from NOAA, so stores with higher scores do not necessarily require less investment to become ENERGY STAR qualified.  A store in South Carolina rated a 53, which is just above the national efficiency average, and requires only a 22% reduction in energy use to be ENERGY STAR qualified. Meanwhile another store in Mississippi with the same score requires an energy use reduction of more than 75%.  Without running an in-depth audit of the entire suite of stores it's tough to reasonably estimate the resources necessary to make the Belk portfolio one that boasts the ENERGY STAR across the board.

4.       Will the ENERGY STAR program effectively guide energy efficiency investment?

Perhaps the most salient characteristic of the ENERGY STAR program is that a building has either earned the ENERGY STAR or it hasn't.  Yes – technically the buildings are scored from 1-100. And yes – an 86 is better than a 79.  But everything over a 75 earns an ENERGY STAR label.  Obviously, as Belk works to achieve the ENERGY STAR across its portfolio, a clear yes/no data point helps prioritize investments and formulate measurable goals.  But what happens when the entire portfolio is ENERGY STAR qualified?  What will be the motivation to keep improving?  This has already become an issue with the ENERGY STAR label on products. This year marked the launch of a new "Most Efficient" designation that recognizes the products in several categories that rank in or about the top 5% of energy efficiency.  Will buildings have the opportunity to earn a similar specialty label when ENERGY STAR alone no longer distinguishes a building?

Good news is some success came from asking all these questions. My work culminated in the creation of a large-scale energy strategy for Belk and a 5 to 10-year goal that is aggressive, but achievable and ties into the sustainability and carbon footprint reduction strategies of the company. I also developed a system of prioritizing stores for energy efficiency improvement and constructed financial models that illustrated the necessary expense and expected energy savings throughout the building portfolio.  These recommendations could result in almost a 20 percent reduction in Belk's carbon footprint, and save the company over $10 million annually in energy costs if the entire project were implemented. Whether it's through ENERGY STAR or not, there's no question that energy efficiency measures are certainly worth it.

EDF Climate Corps places specially-trained MBA and MPA students in companies, cities and universities to develop practical, actionable energy efficiency plans. Sign up to receive emails about EDF Climate Corps, including regular blog posts by our fellows. You can also visit our Facebook page or follow us on Twitter to get regular updates about this project.