Green Building Policy and Real Estate Development:
A Causal Mapping Study Derived from Qualitative Data
Erin Rae Hoffer
Northeastern University, 360 Huntington Ave, Boston, MA 02215, USA
erin@ erhoffer.com
Abstract
Policymakers in the U.S. have taken steps to slow climate change, and significant policy
activity has taken place at the local level with a focus on the built environment. An investigation
of the dynamics which influence business responses to sustainable building policy is timely as
regulatory changes oriented toward resiliency of the built environment are under consideration
by cities and states. This paper presents the results of a study of the dynamics of public policy
and corporate decision-making and action. Qualitative data drawn from interviews with
professionals in corporate decision-making roles suggests that green building policy change is a
mechanism which ignites forces driving practice changes across a production ecosystem of
companies linked by business relationships. Causal maps derived from multi-pass coding of
qualitative data reveals the perceptions of real estate developers and describe the dynamics of a
complex ecosystem including policy, market and project forces. Policy-oriented practice change
is driven initially by two sets of forces - those of public interests as expressed through policy,
and those of the marketplace understood in terms of supply and demand. The propagation of
these forces through a production ecosystem is studied at three levels - the cause and effects as
perceived by developers, the behaviors as described by developers, and the interpretations and
responses to specific types of climate change regulation.
Keyword: Green Building Policy, Real Estate Development, Grounded Theory.
1. Introduction
The real estate industry is a large and influential commercial sector of the U.S. economy
which derives income from creating, renovating and managing the built environment. Starting in
2005, municipalities across the U.S. began to impose new built environment regulations aimed at
reducing the impact of building construction, renovation and occupation on climate change.
Because these regulatory changes introduced new models of compliance and implementation
into the marketplace, they provide a context for inquiry into the thought and value systems which
govern how businesspeople map their understanding of regulation to the processes of business
and profitability. The pervasive activity of the real estate industry provides opportunities to study
the dynamic relationship between forces of policymaking and of the marketplace, and to gain a
deeper understanding of the way these forces interact and result in practice change. The
fundamental question of this research is - how do individuals with authority to make real estate
investment decisions respond, and how do professional practices evolve in dynamic economic,
social, and marketplace contexts, when policies change.
Built environment changes are executed by commercial businesses including real estate,
architecture, engineering, and construction companies which form business networks to execute
specific projects. As a first step in understanding the impacts across the wider network of
businesses which participate in the transformation of the urban environment, this study focuses
on the perceptions of individuals who launch the development process and initiate the formation
of project teams, the professionals who work actively on projects in the commercial real estate
industry. When regulators implement green building policies, it is generally with a clear
understanding of the objectives that are being sought, combined with a hypothetical
understanding of the way that regulated parties will behave in response. By providing insight
into corporate processes, thoughts and values, in order to increase policymaker understanding of
the likely consequences of specific regulations, the research aims to improve the effectiveness of
policymaking related to the built environment. A better understanding of the dynamic system of
actions, causes and effects leading to specific investment decisions will enable policymakers to
more effectively create, adopt and enforce policies aimed at driving desired behaviors and
practices.
How do perceptions and attitudes evolve, in light of policy change as well as economic
change? How do investors interpret policy amid the complex set of factors surrounding
investment decisions? This research proposes a theory about the way real estate developers
change their practices and experience the process of discovering new business opportunities and
executing business in light of green building policy change through the development of a causal
map. Real estate developers must anticipate and ameliorate risks associated with transforming
the urban built environment, while they manage a complex set of business partner, consultant
and policymaker relationships. By studying the dynamics of practice change propagating
throughout a network of affiliated real estate professionals and partners, this research observed
that green building policy change is a mechanism for transformation of the entire production
ecosystem, in which the real estate developer is the initiator.
Sustainability and Green Buildings
In the past decade, municipalities incorporated climate actions among high priority
objectives targeting the built environment. Since 2005, hundreds of U.S. mayors opted to sign
the “U.S. Conference of Mayors Climate Protection A greement”' drafted and endorsed by the
73" annual U.S. Conference of Mayors meeting in Chicago, committing to reduce climate
impacting emissions in their respective jurisdictions to seven percent below 1990 levels by 2012
("The U.S. Mayors Climate Protection Agreement," 2005). Municipalities observed that action
was not being taken at the Federal level and over six hundred cities and towns in the U.S. opted
to create their own policies aimed at reducing the impact of the built environment (Millard-Ball,
2012). Stated objectives of these policies focused on the intention to make good on climate
" http://www.usmayors.org/climateprotection/documents/mcpagreement. pdf
action commitments and make urban environments more energy- and resource- efficient,
healthful and appealing”.
Climate Change action plans adopted by states or municipalities incorporate regulations
specific to the development or management of the built environment. For local governments in
the US with climate action plans, the plans are used at the strategic or overarching policy level.
Climate actions and their measurements focus on reducing climate-impacting emissions in
regulated areas. These plans set targets for emissions reduction, establish measurement practices
and lay out initiatives designed to achieve reductions. Recognizing the significant impact that
occupation of built environments has on urban emissions, actions often include extensions of
traditional building regulations - such as building codes or zoning ordinances - to limit the
greenhouse gas production caused by building development, and to require completed building
projects to be more energy efficient through design and construction innovation.
2. Theoretical Background
This study builds on existing theories about the perceptions of regulation and their
impacts on the behavior of individuals in roles with corporate decision-making authority. By
studying the perceptions of regulated company representatives in the specific context of building
regulation, it is possible to formulate a theory about the way businesspeople convert their
understanding into action and gain insight to inform future policy design. (Millard-Ball, 2012)
Mental Models and Dynamic Systems
A concept which the research explored is whether perceptions of the dynamic
relationships between the work of development corporations, the regulatory environment and the
marketplace impacts the way decisions are made and the eventual outcomes and effectiveness of
policy. To this end, the application of causal mapping to business strategy was incorporated.
Models of real estate and construction which appear in the System Dynamics Modeling literature
* http://www.epa.qov/statelocalclimate/local/local-examples/action-plans. html
support the value in applying causal models to this specific industry literature (Sterman, 2000)
(Ford, 2010). Causal or system dynamic models of the intersection of green building policy
change and real estate development have not yet been developed. Texts covering model-building
in groups (Vennix, 1996) and in communities focused on environmental issues (Van den Belt,
2004) provide context for structuring causal mapping sessions to gather data for the research.
This study applies qualitative coding procedures to the development of causal maps of mental
models, adopting a method of coding and identification of causal references which system
dynamics modeling researchers have applied in other policy and economic contexts, including
that of the Federal Reserve economic policy discussions and of floodplain management (Kim,
2012) (Deegan, 2011).
Industry Practices and Norms in Real Estate
The field of real estate development has, over time, evolved more rigorous standard
practices pertaining to investment and project execution. Prior to 1960, the field of real estate
investment lacked a development methodology for evaluating real estate investment property.
There was a need for better understanding of modeling and theory building at that time.
Practitioners now have access to a range of standard tools and methods to support analysis of
business alternatives and decision-making. These methods include a number of financial
calculations which compare parameters such as a loan to value ratio - the dollar value of the loan
required to complete a project compared to the expected value of the asset. Researchers have
compared these financial measurements to project outcomes, such as revenue, and come to
conclusions about which variables shed the most light and most accurately predict project
profitability and success (Jaffe & Sirmans, 1995) (Jaffe, 1979; Jaffe & Sirmans, 1982)
Industry practices in real estate suggest that decisions are made according to established
rational models and processes. The literature of real estate development practices provides a
useful set of tools and calculations for investment evaluation (Lindholm, 2008) (Miles & Urban
Land Institute., 2007). Economic models for real estate markets in urban settings provide a useful
context for development of system dynamics models which capture the elements of these
complex systems and their interactions. (DiPasquale & Wheaton, 1996)
References in real estate economics (Geltner, 2007) and market analysis (Schmitz &
Brett, 2001) suggest how specific projects should be evaluated in terms of risk and potential
reward as investment opportunities (Long, 2011) (Sah, Gallimore, & Sherwood Clements, 2010)
and (Lutzkendorf & Lorenz, 2007) conducted research on the process of investment decision-
making which provides insight into the ways that real estate investment decisions diverge from
established practices such as Markowitz portfolio theory’, and are impacted by non-financial
parameters (Markowitz, 1952). The backdrop of assessment and professional practices,
including financial modeling, projection and evaluation, are important contexts for discussions
with real estate industry participants. Behavioral theory for questions of capital asset investment
has been studied in the context of corporate real estate decisions made by manufacturing
companies under environmental regulation (Bromiley, 1986). A comparable study of which
includes real estate developers in the context of green building policy is needed to expand this
discussion, and a qualitative investigation yielding insights about behavioral factors would
augment the body of work based on quantitative studies.
Market Transformation
The final idea which informs this study is the concept of market transformation, which
has been defined as a policy objective to drive changes in energy industry and increased adoption
of innovations termed “clean”, such as solar, wind, biofuel-based energy disassociated with
climate impacting greenhouse gas emissions. Researchers have begun to approach market
transformation with theories connected to the idea of ecosystems of interlocked providers. There
is an opportunity for this research to study the concept of market transformation within the
production ecosystem of real estate companies, architects, engineers, contractors and interlocked
providers for the buildings in urban environments. (Blumstein, Goldstone, & Lutzenhiser, 2000)
3 Modem Portfolio Theory is a theory about how portfolios should be optimally constructed.
3. Methodology
This study investigates the way green building regulation affects industry practices in the design
and construction of major buildings in urban environments. Commercial or multi-family
residential construction is executed by groups of companies with specialized expertise. It is
comprised of many disciplines, including architecture, engineering, interior design, construction,
sub-contracting, finance, brokerage, building product manufacturing and specialized consulting.
A study of real estate development is confronted by the complexity of the design, construction
and asset management process, which is executed as a collective undertaking by a group with
many perspectives. One way to gain insight into this process is to focus on a single group in
order to develop a theory about the overall system through their perspectives. In order to gain
insight into the workings of this complex industry sector, this research focused on the business
practices and perspectives of one set of especially influential actors - the individuals with
authority, accountability and resources to launch and complete projects. The scope of this
research project was limited to gathering data directly from individuals in real estate roles -
individuals with authority to make decisions and to respond to policy and regulation changes
within their professional responsibilities - as opposed to the other professionals active in the
process of delivering completed buildings or renovations to a client, owner, potential customers
or occupants. The research focused on the changes in practices and perspectives of real estate
developers who produce new buildings or renovate existing buildings in urban environments.
Grounded Theory and Causal Mapping
The two primary areas of focus which drove the grounded theory research direction were
a> _ understanding the thoughts and actions of real estate professionals given changes
in green building policy, and
b> understanding the real estate professional's perceptions of economic and social
systems, in other words, the context for these changes.
Empirical data consisted of expressed perspectives of individuals with authority to make real
estate decisions. By gathering the perspectives of professionals working in organizations which
initiate and complete urban building projects - real estate developers or corporate business
entities charged with overseeing real estate - this research proposed a theory about the
interactions between policy and market factors in this economic sector.
The principle research question described in this paper is:
Research Question: How is the system of policy and market forces perceived by individuals who execute
urban development or renovation projects?
To gain insight into the nature of practice change and formulate a theory about policy
impacts, the grounded theory method was combined with causal mapping to derive a theory from
qualitative data. Grounded theory method (GTM) was developed by Bamey G. Glaser and
Anselm L. Strauss nearly fifty years ago (Glaser & Strauss, 1968) and the method has been
applied to many research areas, including questions of corporate activity and management
decision-making which are related to the focus of this study (Goulding, 2002). GTM provides a
means for researchers to build theory in a topic area which has not yet been thoroughly
investigated. Practitioners in real estate make decisions based on an understanding of the likely
consequences of specific actions, based on their professional training and experiences. A theory
about the impact of policy on real estate decisions benefits from insights about ways practitioners
conceive of the economic and social systems within which they operate to achieve their
objectives. The concept of mental models and the value of representations of these models in the
form of images or diagrams has been demonstrated through research, which defined types of
mental representation such as “strings of symbols that correspond to natural language, mental
models which are structural analogues of the world, and images which are the perceptual
correlates of models from a particular point of view” (Johnson-Laird, 1983). A causal map or
causal loop diagram (CLD) is a method of depicting relationships as they are understood in
mental models. Causal mapping is particularly useful in understanding systems where factors or
resources interact in complex or unanticipated ways, such as when two factors combine to
counteract one another, or to form a feedback loop. Applications of cognitive mapping in the
context of complex policy situations incorporated causal assertion and demonstrated impact in
decision-making in military and political arenas (Axelrod, 1976).
Causal maps provide insight about the way a system is understood to be organized by the
participants. Studies of the application of causal mapping in qualitative research suggest that
eliciting information from mental models of individuals experiencing a phenomenon could lead
to the creation of useful theories about the system as it is conceptualized by participants and
described through focus groups or individual interviews (Luna-Reyes, 2003). A technique for
coding cause and effect was drawn from causal mapping studies applied to related situations of
policy impacts in natural resources and economic situations, which share aspects of the problem
of sustainable buildings which are developed through business enterprises (Morecroft, 2007)
(Deegan, 2011) (Deegan, 2009) (Kim, 2012).
A theoretical sampling strategy was employed to gather data from twenty-four
individuals in professional roles which enabled them to influence real estate projects in Boston or
New Y ork City. The objective of the sample selection was to gather responses from a wide range
of individuals so as to yield sufficiently diverse points of view from which to draw theoretical
observations. A focus on commercial or large scale residential development (i.e. multifamily)
was emphasized so that the sample could reflect the perspective of industry segments critical to
urban growth and economic development, and which have been a focus of green building policy.
By keeping the industry focus consistent, while varying the sample by firm and interviewee
characteristics, geographic location and degree of sustainable project focus, the intention is for
the research to yield a theory with broad applicability.
Following the protocol of grounded theory, analysis of the data began with open coding.
The list of codes was grouped by characteristic and initial approaches to categorization, which
related the actors, actions, events, and decision-making, was developed. Ultimately, the open
coding and categorization process yielded a code hierarchy with 230 code items grouped into
eleven main categories. The main categories were Causes and Effects, Company, Ecosystem,
10
Governance, Groups, Marketplace, Measurement, Policy, Professional, Project Examples, and
Sustainable Tactics.
The Straussian GTM concept of “axial coding” is a means to organize the fragments
identified by open coding into more coherent structures. The use of a well-defined paradigm or
framework to guide coding is advocated (Strauss & Corbin, 1998), suggesting that codes will
emerge from the data based on specific categories - conditions, actions, consequences. For the
purposes of this project, axial coding focused on causality progressed as transcriptions were
closely coded for evidence of cause and effect perceptions. Each instance was noted in a
cause/effect chart which provided an identifier, a cause and an effect interpretation, and a direct
quote of the associated text as evidence. For example, when the interviewee said “So for me it’s
an opportunity to be somewhat more daring because I have some equity to spend down”, this
was interpreted to represent the fact that “Financial Resources” (Cause) is a condition which
leads to Openness to Risk (Effect on a Resource) (Figure 1).
ERH- Cause/Effect Table
Cousot | Cause Efecton 7] Evidence 7] Description Comments 7
Link 10 Resource
74062 | Financiat (Opennessto) | =| Soforme rs i ing Financ Being open torts | =
tn | Resources isk Thave some equity to spend down resources available, | Taking opportunity
cashor accessto wo innovate;
funding for (positive = willing to
innovation, toinvest | accept risk)
in practice change.
14062 [Ambition of | Demandtor | +| Wesetup a goal of building a building which would cut into use by ‘Change technical | =
4-18 | Project Goals _| Technical 80% and we had architects who were very willing tosay that they knowledge in
Expertise could do that and they could not -- we went to five architects, ‘community
building in
German Engineers to help designit. So they can do it, no question.
‘thatincludes COMPANY were completely incapable of doing itand
once they were dragged through it they weren't capable of doing
that in acost effective way.
14062 | Divergence of | Project cs is it that Passi ail, Rigorof 5
41C | Project Goals | Requirements but they essentially overdesigned it in order to make sure they met | | not aligned with policy | Requirements for
from Policy | and Cost. it’s certification program and huge amount of superfluous work. requirements, evenit | designand
Requirements they are both aiming | construction of a
forthe sameresult, | specificproject
developers face
14062 | Ambition of | Project Cost | - | So we were looking at Passive House pricing at 20% to 30% above “Ambitious goalstor | +
Figure 1 - Cause and Effect Chart Excerpt
In order to gain insight into mental models and the perception of the system of economic
and social factors, diagrams were created to illustrate the model fragments identified in the cause
and effect analysis. Each cause/effect instance was diagrammed individually (see appendix for
11
illustrations). The cause and effect diagrams were then aggregated and restructured around three
theoretical codes - Discovering Opportunity, Experiencing Difficulty and Changing Practices.
The three aggregated diagrams suggested a theory about the way these theoretical concepts were
impacted by forces such as policy change, economic, social or technological factors. Throughout
the mapping process, the researcher was mindful of the fact that the diagrams represented the
interviewee perception of causality rather than actual causality.
Elements of extant theories were employed as relevant concepts emerged in data analysis.
For example, as the formation of professional norms reoccurred in a number of conversations,
the code “attitude about practice change” began to capture individual progression through a
social space of professional expectations. The connection of this attitude to established theories
about behavioral change, such as the Theory of Reasoned Action (Fishbein & Ajzen, 2010),
aided in understanding and led to theory-building (Charmaz, 2008).
4. Discussion
The data indicates that real estate professionals perceive that their work is impacted by
two sets of forces - social forces which include the attitudes and perceptions about policy, social
inputs which affect policy, the specific requirements, and changes and implementation of those
requirements, and market forces which include the social context which enables the market to
function, the economic context and demand factors which drive performance.
In this analysis, cause and effect coding revealed the mental models and identified
instances where interviewees described perceptions of the economic, social and technical
systems in which they operated. The set of cause/effect relationships spanned policy, market,
ecosystem and project situations. To compile the fragments into aggregations, each C/E
relationship was sorted into sets based on common cause or effect elements. For example, an
interviewee commented on the impact of agency communication about changes in policy. This
relationship was coded as a Cause Effect where “Cause” was “Communication about Programs
and Benefits” and “Effect” was “Awareness, assessment, ultimately adoption’. The
interpretation of this relationship was that Program Communication had a positive impact on
12
Developer Awareness which had a positive impact on Developer Engagement. In this case, a
new implicit element was incorporated into the Causal Fragment Diagram to represent the
intermediary step of awareness between communication and engagement.
expersse.
140624- | Communicatio | Awareness, _| +| Not that! can Keep up, Im just — there so much goingonthat| | Increased publication =
aN about | assessment, there are things that are going on that Ijust dont —haven'theard | | about rogers
programs and | ultimately bout. [had no idea that— well, we had aboilof conversion whieh | | through public
benefits adoption ips channels enables
1g had developers and
Save would give ws $500,000. owners to adopt
So Ijust poked around the website them. The other
| not able to reach
140625 | Growth which | Infrastructure | +1 Thats cht. and # A. Gut. mean thats.altofWs drven—Il | Pokey to address =
Figure 2 - Cause Effect C oding Chart element
140624-1N
Figure 3 - Causal Fragment Diagram
The total set of causal fragment diagrams were generated and sorted according to their
association with one of the three primary categories - “discovering opportunity”, “experiencing
difficulty”, or “changing practices”. The fragments were then combined based on common
elements. For example, the causal fragment in Figure 3 was combined with two other fragments
which shared the Effect element of “Developer Engagement” (Figure 4).
13
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‘Natt Ines:
106244 eg ee YY
* Matest Dazand
140
ae Neptitoa fexbilty 140624
> epideg Practice Cree
‘Space
‘Sie Evahaton * Dayar
+ *F 3406241
Denant fx Rest
Developer
avsrenass_
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Figure 4 - combination of multiple causal fragments which share an effect on Developer Engagement in "Discovering
Opportunity"
This first stage analysis resulted in four aggregated causal loop diagrams containing all
83 causal fragments - “Discovering Opportunity”, “Experiencing Difficulty”, and two separate
variations of “Changing Practices”, reflecting the Developer perception of the policymaker
practice change and Developer practice change.
14
1082s
Figure 5 - Policy Elements among Causes and Effects when Discovering Opportunity
In Figure 5, policy oriented cause/effect relationships are highlighted to distinguish the
role that policy is perceived to have when developers seek and evaluate new business
opportunities. Developers perceive that the way a particular zoning policy is communicated
impacts both market awareness of a trend and shifts in market demand. As market preferences
change, program communication helps developers become aware that these shifts produce
15
business opportunities. There is also a perception that projects which align with agency goals as
expressed by regulation increase the flexibility in negotiations between agencies and developers.
In other words, as developers adopt the practices motivated by regulatory changes, agencies look
favorably on projects and may be willing to consider altemative solutions or proposals which
benefit the developer. A final element that factors into developer awareness and engagement
with practice change is the recommendation or perceived position of other businesses in the
production ecosystem. If architects who provide design services to developers are advocating for
more sustainable project features and anticipating regulatory pressure and market demand for
such, developers are more likely to be aware and engaged by the prospects of practice change.
16
Figure 6 - Policy Impact on Cause and Effects for Experiencing Difficulty
In Figure 6, policy oriented cause/effect relationships are highlighted to distinguish the
role that policy is perceived to have as developers encounter obstacles when constructing new
buildings or renovations. Often, obstacles are interpreted as situations which negatively impact
project cost or which increase the risk of project success. Regulations are perceived to pose
obstacles to projects when there is gap between the goals of a project and policy requirements.
17
The gap drives changes in project requirements, which in turn is perceived to impact project
costs. After projects are completed and as building owners move into business operations,
regulatory constraints are perceived to pose increase costs to landlords. There is a positive
opportunity when compliance with regulation enables landlords to gain increased rents or to
realize gains through reduced energy costs, since that benefit is sometimes associated with green
building requirements. Within organizations, approval hierarchy levels are mentioned as a factor
which can impact the availability of internal resources to execute practice change in the
development company. Within organizations, the complexity of the way regulatory changes are
processed can prove an obstacle to compliance.
140705 and Go
Changing
Practices in
Policymaking
(as percy'd by
Developers)
Figure 7 - Policy Impacts on Cause and Effects for Changing Practices - Policymaker aspects as articulated by Developers
18
The causal map in Figure 7 depicts developers’ perceptions of the forces associated with
policy development, implementation and change. Developers understand the loop which drives
ongoing changes in policy requirements. As policies roll out through implementation,
policymakers receive feedback, complaints, and suggestions for modifications, which in tum
lead to revision. Developers also observe that increasing stringency, such as through changes in
the standard building energy code, is a common factor over time. Other factors impacting the
degree of opportunity for policy innovation, which in turn affect requirements over time, include
education of the professional community and the marketplace about the need for regulation and
its impacts, industry experience in observing actual impacts of regulation on projects, and the
openness of agencies and companies to innovate.
Changing
Practicesin
— Real Estate
fon in Measurement j_— fiz
Yomparison Systems
Figure 8 - Policy Impact on Cause and Effects for C hanging Practices - Developer aspects
19
Figure 8 depicts developers’ perceptions of the forces associated with business practice
change within the developer organization. The hub of this causal map is clearly the willingness
to change practices, which is influenced by a range of marketplace and policy factors. Practice
change - new methods or approaches to completing tasks associated with the business - results in
changes in the demand for products in the marketplace, changes in the products themselves, and
changes in the process by which products are developed. Practice change willingness is impacted
by the degree to which disclosure of building performance impacts business performance, as
evidenced by the causal loop which connects levels of disclosure to scrutiny to complaints to
expertise to measurement revisions and ultimately to increased practice change willingness.
‘ost 3. Values Con
to Pri
Degree of Measurement
Ean System Acceptance
fo
om —
Complaints
Levels a in
Besebesnia| Policy 1 140525-1H
Technical
Expertise
Revision in Measurement a4
and Comparison ——
Figure 9 - " Disclosure/scrutiny" excerpt from Figure 8
The degree of difficulty of policy compliance also has an impact on willingness to change.
Respondents mentioned the connection with regard to the level of stringency of green building
rating systems as well as disclosure or benchmarking. The opportunity for financial advantage,
either in the form of outright incentives given for compliance, or when compliance leads to
favorable treatment such as permitting schedule acceleration, is noted by developers as a factor
which can influence whether or not a project investment goes forward to completion.
20
After reviewing the causal maps associated with these four important business aspects,
the next step in the analysis was to aggregate the entires set of causal factors into a single map
(Figure 10). For clarification and legibility, the integrated causal map clusters the forces into the
Policy or Marketplace drivers, the forces which operate within the Project Ecosystem with the
particular focus on the owner developer, and the forces with connect directly to specific Projects.
The Market and Policy forces are fundamental drivers for change in the Production Ecosystem,
which includes real estate companies and other ecosystem participants, as experienced through
the decisions made on projects. The data suggest that green building policy change is a
mechanism for practice change across the entire production ecosystem, within which the real
estate developer plays a key role.
Pobey Fateee
Attitudes /Perceptions Social Context
5 about Poli e @ fae =
3 2 or 2 mows =
5 Social Inputs to Policy 3 Economic Context
a Change al —
e nari 3 =
= Policy Changes, = Demand Factors
& Implementation 3
Policy Requirements M4 8 Z
4 S- = Ecosystem
FE esa Readiness for | :
‘xpertise Ouse Devel f
: Pe Practice Change |e z
2 Forces of Awareness / Resource / so
3 | RegulatoryForces Fcagement / Strategy / Cost Forces. ~ Under liens
5 on Owner New wine me || cat, Wing |] oy
a = vi is
; : = Evalua |] 8
£ Metrics/Information -tion @
° ===
Teast Fasces
Financial ?
‘inanci 5)
Factors e Aggregated
Secanal | Causal Map
= i =
8
&
Figure 10 - Integrated Causal Map with Policy, Marketplace, Ecosystem, (Real Estate) Company, Project factors.
Policy Forces
Figure 11 - of Policy Forces segment
Market Forces
Social Context Economic Context
rabies
Figure 12 - Integrated Causal Map enlargement of Market Forces segment
21
22
Production Rgosystem Fortes 1"
aude
Figure 13 - Integrated Causal Map enlargement of P segment, ‘ining Owner Company segment
Figure 14 - Causal Map of O Company segment
23
Design fi
Figure 15 - Integrated Causal Map enlargement of Project Forces segment.
24
Theory of Practice Change
The analysis of the qualitative data gathered from practitioners resulted in a theory about
the way real estate developers experience public policy change specific to green building
regulation. The data suggest that green building policy change is a mechanism for transformation
of the entire production ecosystem, of which the real estate developer is an igniting element. The
theory incorporates causal loop diagrams depicting perceptions of cause and effect in three
developer business modes (“Discovering Opportunity”, “Experiencing Difficulty” and
“Changing Practices”) and observations about the drivers of individual professional behavior,
suggesting that developers perceive both policy and market interactions as they devise strategies
to compete within a private marketplace govemed by public regulations.
As real estate developers negotiate the risks associated with transforming the urban built
environment, they are positive about the prospects for change and for the collaborative working
relationship between company and public agency which enables successful project realizations.
Interviewees spoke about alignment of goals, in that developers and agencies share an interest in
creating economic opportunity for the community. At the same time, both are aware that at
times, they sit on opposite sides of the table. The data suggest that green building policy change
is a mechanism for transformation of the entire production ecosystem, within which the real
estate developer is an igniting element.
5. Conclusion
The objective of this research was to gain a deeper understanding of the impact of green
building policy change and to study policy effectiveness through direct engagement with the
targets of the policy, real estate developers. Data supports the argument that policy is understood
as a set of elements which echo through the production ecosystem of the built environment as
causes and effects. Although there are aims at achieving economic benefits to drive new
corporate behavior through practice change which incorporates a strong influence on the real
estate developers who invest in the built environment, to be maximally effective policy must be
designed and implemented so as to impact the entire production ecosystem as well as the
25
individual companies which comprise it. Interviewees expressed understanding of the need to
navigate the requirements of green building policies impacting their projects. However, the
implications of the research are that availability of comprehensive and rigorous data can be a
powerful tool to drive marketplace preference for sustainable building and increase policy
compliance, and to inform owners and occupants of buildings who might not yet be aligned
toward community objectives for increased energy efficiency or carbon emissions reductions.
By understanding how developers process changes through their organizational actions
and decision making processes, insight has been gained through this research to support the
assessment of new building policies in the future. The opportunity to create a dynamic system
model to represent the ecosystem and to quantitatively define its transformation could lead to
new assessment models for green building policy change. The potential impact of green
imperatives and policies like benchmarking on the different categories of urban building stock is
yet to be determined.
The real estate developer has an enormous impact on society by shaping environments in
which we work and live. The policymaker transforms the work of the developer and the
production ecosystem for buildings, aspiring to provide incentives for innovation. Through
innovation, developers can create new models of social interaction and achieve a built
environment which sustains our aspirations as well as our economic health and natural resources.
Looking across the landscape as firms execute project after project and drive toward the
practice change made necessary by regulation, policymakers can extend policy design and
assessment innovation to explore the potential to support practice change within each component
of the development ecosystem from developer to designer to contractor to owner/operator. The
research has further implications when one considers how the discourse of green buildings and
climate action has evolved since the members of the U.S. Conference of Mayors signed the
Kyoto Protocol agreement in 2005. While standard updates to building codes proceed in many
jurisdictions on a regular basis and Boston and New Y ork continue to improve green building
regulations, the emphasis on climate action is shifting towards adaptation and resiliency. The
26
theoretical model developed through this research provides a method for considering the impact
of changes in discourse or technology or economics on the way regulations should be designed,
implemented and assessed to greater effect on the overall production ecosystem which drives the
built environment in cities.
As policy change interacts with market factors to drive practice change through noted
forces, the model can be applied to track and confirm that incentives and causes are driving
effects as projected and to answer future questions, such as:
How can policy shift to a focus on built environment outcomes vs. prescriptive
approaches to technology opportunity and trends? Benchmarking is a step in this
direction, but the next step beyond energy consumption may he to seek more detailed
understanding of the parameters of reduced carbon emissions or increased resiliency and
the ability to support human occupation at times of calamity.
How can policy provide flexibility to reward projects and companies which go beyond
compliance while at the same time allowing more lax interpretations as companies move
toward higher levels of performance, i.e. to drive towards innovation such as net zero
implementations or absolute reduction in municipal energy consumption?
How can policy enable the production ecosystem to evolve in a more coordinated way, to
achieve the benefits of the whole at a faster pace than the benefits of the individual
elements?
This theoretical model adds insight about the way causal models can be developed from
qualitative data, and suggests a new approach to assessing the effectiveness of policy and the
impact of regulation on the dynamics of the production ecosystem. In order to understand the
transformation of the entire ecosystem, and impacts that policy change can have in the future,
this methodology should be expanded to create a holistic model incorporating the perspectives of
other elements of the ecosystem which reveals the nature of practice change which each
discipline is experiencing.
27
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