Sustainability is increasing in importance for many organizations. The pressure to act and make a positive contribution to the environment continues to grow for building owners as more businesses pledge to reduce their carbon emissions as part of their environmental, social and governance (ESG) programs.

Currently, commercial buildings account for 37% of global energy-related CO2 emissions^[i], emphasizing the need for building owners to act on lessening their carbon footprint.

Honeywell and Reuters recently conducted a survey which found that nearly nine in 10 surveyed building portfolio executives believe that achieving carbon neutrality in their facilities is important to their overall ESG goals.

The survey also gave insight into what respondents believe are some of the most challenging aspects of creating more energy efficient facilities. Participants raised concerns about affordability; however, creating a more energy efficient building can be more affordable than you think.

Spreading costs as an operational expense to achieve a higher net operating income

According to 88% of the executives surveyed, affordability was the number one barrier in a building’s sustainability journey. While the cost of solutions that help reduce a building’s carbon output can require significant investment, the option exists to spread the cost over several years as an operational expense rather than an up-front capital investment.

This technique can be used as a financing mechanism for building owners looking to manage costs while reducing their carbon output.

Building owners that adopt technologies that help enable sustainability goals will generally see a reduction in energy consumption, helping to result in lower utility bills and operational expenses over time. This can allow facility executives to achieve a higher net operating income (NOI) and ROI.

Government incentives: an area of opportunity for building owners

Many countries are investing in programs to support sustainability initiatives. For example, the U.S. Inflation Reduction Act (IRA) provides substantial tax incentives to help support building owners looking to meet building performance standards and reduce their carbon emissions^[ii] .

The IRA nearly tripled the available deduction for completing projects that demonstrate an increase in a building’s energy efficiency from $1.80 per square foot to potentially $5.00 per square foot^[iii].The IRA also provides up to a 30% investment tax credit to building owners that invest in qualifying renewable and energy storage solutions.

As the EU aggressively looks to become carbon neutral by 2050, the region will see 30% of its expenditures go to climate-related projects through 2027. The EU is also implementing a transition mechanism that aims to provide up to €90 billion in financial support to regions most heavily affected by the transition to a low-carbon economy^[iv].

Splitting carbon and energy reduction expenses with tenants

In recent years, the commercial building space has seen an increase in green leasing to help building owners recoup their investments in carbon reduction measures.

Green leasing allows building owners and tenants with shared ESG commitments to collaborate on efficiency and sustainability practices through clauses in their leasing agreements. These leasing contracts create split incentives, including recovery cost, submetering and a sharing of minimum efficiency standards^[v].

Lastly, building owners can expect to see ROI when creating more operationally efficient sites because tenants may be more willing to pay a higher premium for more environmentally friendly spaces. As we move towards a more sustainable future, tenants are looking for buildings that align with their company’s ESG goals and help create healthier work environments for employees.

Reducing carbon taxes, a win-win equation

Creating an emphasis on energy reduction efforts may also help save on carbon taxes^[vi]. In some markets, governments are using carbon taxes to charge companies and organizations for each ton of greenhouse gas emissions they emit. Implementing infrastructural changes like electrifying systems to deploying new technologies like advanced building controls software, may help reduce emissions and the potential tax impact.

How Honeywell can help you on your sustainability journey

Honeywell offers a suite of ready now solutions to help you navigate through your sustainability journey. Honeywell Forge Sustainability+ for Buildings helps building owners both optimize IAQ and reduce a building’s environmental impact – with the aim of supporting carbon reduction goals.

Contact one of our experts for more information about the Honeywell Buildings Sustainability Manager or learn about how to fund your sustainability project.

^[i] World Economic Forum, "Why building greener is crucial to meeting Paris climate targets," Patrick Henry, November 1, 2021. [Accessed Dec. 5, 2022]

^[ii] "FACT SHEET: Biden-⁠Harris Administration Announces First-Ever Federal Building Performance Standard, Catalyzes American Innovation to Lower Energy Costs, Save Taxpayer Dollars, and Cut Emissions" The White House, Dec. 7, 2022 [Accessed Dec. 12, 2022]

^[iii] "FACT SHEET: Biden-⁠Harris Administration Announces First-Ever Federal Building Performance Standard, Catalyzes American Innovation to Lower Energy Costs, Save Taxpayer Dollars, and Cut Emissions" The White House, Dec. 7, 2022 [Accessed Dec. 12, 2022]

^[iv] The European Council, Climate Change: what the EU is doing, [Accessed Jan. 6, 2023]

^[v] Forbes, "The Green Lease is the Next Phase of Built Environmental Sustainability" Mark Zettl, March 2022, [Accessed Jan. 6, 2023]

^[vi] The World Bank, What is Carbon Pricing?, [Accessed March 3, 2023]