'Green' Could Increasingly Mean Profits Instead Of Sustainability As New Political Reality Sinks In

Many companies and large metros like Dallas-Fort Worth are still prioritizing sustainability and the environment as the nation prepares to celebrate another Earth Day on Tuesday.

But worries are growing that another kind of green — the kind that piles up in the bank — is already beginning to outweigh the benefits of renewable practices for some in commercial real estate, particularly its construction sector, as it sends 145 million tons of waste to landfills annually.

The Trump administration's assault on environmental, social and corporate governance initiatives, its immediate withdrawal from the Paris Agreement, and new policies — from drilling for oil on public land to an executive order halting enforcement of state laws around climate change — are sending a powerful message that the U.S. has cast aside ambitions to lead the world on environmental issues.

Green building advocates fear that message is penetrating, neutering already weak efforts to minimize construction waste and dissuading companies from making projects more sustainable in other ways.

And the bottom line for some is that the cost of incorporating green practices into new construction efforts is too large a hit on profits.

“There is no effort whatsoever in the entire industry for any contractor to try to minimize waste, and the reason is [that] to minimize waste costs more dollars than just sending it to a landfill,” said Coni Hennersdorf, principal of Fort Worth-based Coda Consulting Group, which offers engineering and environmental consulting to real estate professionals.

“There is a lot of work that needs to be done if we're ever going to get to a point that our construction projects are in any way done sustainably.”

Construction and demolition debris such as concrete, asphalt, wood and metal account for more than twice the amount of solid waste generated by municipalities alone, according to the Environmental Protection Agency.

So far, the Trump administration is moving forward with the selection process for the second round of two Biden-era waste management initiatives that some feared could face the ax.

But it isn't exactly touting them.

“The Biden administration did push some of these things,” Hennersdorf said. “The Trump administration is not tearing that apart. They're just not also calling it to the attention of everybody every day. It's just that [President Donald Trump is] focused somewhere else.”

Cities Step In

The void at the top is leaving local municipalities and private companies to pick up the slack. Cities like Dallas, Plano and Frisco have grabbed the reins to require renewable practices, and new mechanisms have emerged in recent years that make incorporating sustainability more affordable.

The hope is that as more companies realize cost savings associated with sustainability, renewable practices will build on themselves.

But Dallas-based general contractor K2 Construction found getting companies to buy in on sustainable waste management was an uphill battle even before Trump came on the scene.

“Twenty years ago, there wasn't any of that in this industry,” K2 Director of Operations Eddie Black said.

Construction sent 70 million tons of wood alone to landfills in the U.S. last year, according to waste management company Woodchuck, which uses artificial intelligence image recognition technology to separate wood and other reusable materials from waste streams. Woodchuck plans to launch in Texas in 2027, then process wood waste into biomass that can be used for energy production, remanufacturing and more.

But if companies aren't pressed into action, new tech might not mean much.

K2 has worked extensively with Metroplex cities and other contractors to meet different ordinances surrounding waste separation and recycling, but it is limited in how hard it can press as one of the primary movers of construction waste to landfills. 

In DFW, there are different levels of waste management separation, but those are contingent on costs and project budgets as well as how committed the building owner or tenant is to accomplishing them. Some are only interested in doing as much as required.

“Some of them want to comply with everything. Some of them want to comply with nothing. So we are kind of in the middle,” Black said. “We figure out what everybody would like to achieve, and then we're the facilitator for it.”

Reusing materials could get a big push from tariffs, which are already hitting construction spending, although they will also push up the costs of sustainable materials, he said.

“Everything that we used to think was made here in the States … are all imported from other countries,” Hennersdorf said. “The cost of the installation is not going up, but everything's going up 25% because of tariffs from other countries for the materials.”

Apathy to green building has grown since the election and new policies that directly counter former President Joe Biden's push for commercial real estate owners to make buildings and the construction process more resilient, Hennersdorf said. 

“If they're not pushing it and owners aren't having to respond to the requirement, they're not going to,” she said.

Changing Minds

Unsurprisingly, Texas’ sustainability practices differ from much of the nation’s, according to Evolution Sustainability Group CEO Chuck Hurchalla.

Throughout most of the U.S., construction sustainability was historically driven by financial benefits over sheer do-gooderism. A JLL analysis last year showed that U.S. properties with green credentials sell for about 7% more than less sustainable peers.

Now those practices are more often openly embraced for their impact on the planet, a sentiment that doesn't fly as well in major energy hubs like DFW and Houston, Hurchalla said. 

“They're less green-motivated. They're motivated more by the dollars as opposed to the sustainability,” he said.

To address that, Texas’ commercial property assessed clean energy financing has emerged as one tool to promote the economic benefits of sustainable practices statewide.

The program offers low-cost, long-term financing for energy- and water-efficiency improvements secured through a voluntary assessment on the property. Keeping PACE in Texas made the program more competitive earlier this year by altering its loan underwriting standards to boost allowed loan-to-value ratios from 25% to 35% and make interest-only payback periods more flexible.

Interest in the program was increasing even before the changes, according to Lone Star PACE Chief Operating Officer Glenn Silva, especially as high interest rates tore holes into capital stacks.

The company’s volume has increased from one deal in 2020 to 11 deals last year, “to the tune of $186M,” he said.

Popular improvements include new HVAC systems, LED lighting, low-flow fixtures, cool roofs and insulated windows for everything from office buildings to hotels and retail shops.

“Because of its pricing, investors and developers are really understanding that this is a very attractive way to incorporate long-term, cheap financing,” Silva said.

But generating widespread interest in sustainable construction practices is also going to require strong support from company ownership in states like Texas.

Without that and without an unlikely push from federal mandates, there isn’t enough incentive to make developers care about sustainability, including minimizing waste, Hennersdorf said

To meet green building requirements, construction projects must track waste and ensure a certain percentage doesn't end up in landfills, she said.

And “if a project is not trying to achieve a green building initiative program, then no additional steps are generally taken.” 

Local governments will play a role, Hurchalla said.

Plano and Frisco were among the first cities in the Metroplex to roll out sustainability requirements of their own. Dallas also has its own comprehensive green building standards for new residential and commercial construction. The standards include a list of more than 100 certified third-party providers for its green building program. 

Complying with Dallas’ green building program gets projects nearly to the minimum level to achieve LEED certification, Black said.

But companies can do more and save money by taking steps as simple as allowing buildings to go dark at night and putting lighting systems on motion sensors, Hennersdorf said.

“There is a lot we could be doing in the industry to change people's understanding and allow some of this innovation to be put into our systems,” Hennersdorf said. “But it just takes a lot of education.”