by Bob Hinkle and Carsten Kowalczyk for the California Management Review
Budgeting can motivate investment in sustainable energy. Corporate decision-making needs an update when it comes to reviewing and valuing investments in sustainable energy projects in buildings. The capital budgeting playbook used by many organizations (corporations, not-for-profit companies, and public entities) tomake these investment decisions does not accurately attribute, quantify, or calculate the benefits and costs of implementing (or not implementing) sustainable energy upgrade projects. Understanding where and how this flawed organizational decision-making takes place is the first step to a better capital budgeting process that can accurately value energy upgrade projects and tap into available financing solutions. Organizations need to quickly figure out how to assess the real costs of inaction versus the benefits of implementing sustainable energy upgrades since there are trillions of dollars of energy assets (ranging from efficient lighting to sustainable cooling, heating and ventilation systems) to be replaced or upgraded within buildings in many market sectors. Understanding the true cost and benefit of these capital-intensive upgrades means taking into consideration a broader range of economic, environmental, and operational factors, which could transform deferred or delayed investments into approved projects.
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