19 July 2012 – When The Fifth Estate met Tania Melikian it was aboard the Knight Frank entry, Sydney Crystal, in the Property Industry Foundation regatta in March . It was late in the day and Melikian was enjoying the perfect sunshine and harbour breezes, not so keen to be distracted from this rare time-out. But it didn’t take long to chip away at the reluctance and strike the note of passion that clearly underlies her job.
Melikian, a valuer, real-estate and construction professional, is vice-president real estate Oceania Asia Pacific for logistics and transport giant DHL. She has been in charge of DHL’s property assets for six years since leaving her former role with Cushman and Wakefield.
Under her bailiwick is more than 650,000 square metres of space in 110 facilities: 80 per cent in Australia and the balance in New Zealand, Fiji and Papua New Guinea.
Asked if DHL had a sustainable agenda, Melikian was quick to respond.
The Deutsche Post DHL GoGreen program started in 2008, and is no token nod to environmental concerns and a bit of cost savings, she said.
Expanding in an interview this week, Melikian talked through policies that show a keen understanding of the nexus between environmental gains, global trends towards more efficiency and cost savings.
There was also an insight into a kind of “under the radar” use of Green Star and NABERS methodology, without registering and gaining official recognition for the ratings.
DHL was the first logistics and transport company to set a carbon target, Melikian says.
“The idea was that by 2020 we would have a 30 per cent reduction in carbon and now we’re moving towards water,” she says.
“The baseline used was our carbon footprint calculation based on 2007 consumption. As a group we exceeded the 10 per cent reduction target set for 2012 and we have revised our global target for 2012 to 12.5 per cent.”
The targets included all suppliers.
“As we procured our suppliers we looked at their carbon emissions and their processes in reducing carbon and what their initiatives were and how they were contributing to our supply chain.”
Melikian says the program is central to the company’s competitive agenda and crucial to its business objectives to be “investment of choice and employer of choice”. Throw in logistics and transport provider of choice.
Highest on the list, she said, was improving working conditions for staff.
“Indoor air quality is massively high on the list,” Melikian says.
“We’re situated [in many cases] in the western suburbs of Sydney and when it’s 40 degrees [Celsius] outside it’s 50 degrees in the shed.
“Things like insulating the walls and designing so you can increase the fresh air rate into the building by opening the dock doors or by mechanical ventilation, are big things.”
A typical industrial building of 20,000 square metres for DHL might have 80 to 120 staff working inside it, depending on the type of work carried out.
This work ranges from transport and storage to managing the logistics for companies such as Johnson & Johnson, which requires airconditioning.
Melikian says the company first commissioned several reports on how to set targets. “We did a lot of research because I was developing a program that allowed you to benchmark your buildings against NABERS and Green Star: indoor air quality, building materials, water and so on.
“Whenever we did due diligence against new buildings we had a tool to calculate the carbon offsets.”
The company doesn’t register the buildings.
“No, we don’t bother. It doesn’t mean anything to us. We can say we’ve built along Green Star four-star lines using a design professional who follows the design principle, the building materials, the low VOC [volatile organic compounds], the orientation and the sun shading, all that stuff.”
To some extent Section J plays a part by requiring certain thermal qualities and items such as motion sensor controls on lighting.
“What we do is look at all the various aspects of that and at initiatives and we do a cost benefit analysis and based on our lease terms if there is a payback then we will implement the initiatives.
“There’s a lot of initiatives, like trigeneration and solar, that we’ve looked at, but they’re capital intensive and they don’t have the payback period that justifies implementation. But things like lighting and power factor correction do.”
A power correction system that smoothes the peak period power consumption on which a power bill is typically based might cost $10,000 or $15,000 to install but can save a huge part of the energy bill, she says.
“By using power factor correction you do two things: there is more electricity available in the grid for use and it also decreases your power bill automatically.
“The idea is it will neutralise the highs and lows so you don’t have fluctuations or peaks.”
The biggest use of energy in a DHL facility is lighting, unless it’s an airconditioned building, such as for Johnson & Johnson.
“If we use a particular developer we get them to price [the options].”
If it’s an existing building where a lighting retrofit might be in order, the company will use its regional lighting provider.
Lighting efficiencies are “an extremely quick win… and have a very short payback period”.
The cost benefit analysis is critical because DHL is based on a “cost plus” basis, Melikian says.
“We present our cost of rent and outgoings such as electricity and facilities so the customer sees that, and there is a margin applied so they can see the win [of energy-saving initiatives] and the benefit of the win.”
One cost benefit analysis for an energy saving initiative at the Johnson & Johnson facility at Goodman Group’s new Horsley Park estate which, unusually, has a 10-year lease, came in with a $585,000 additional cost. But this translated to a $820,000 reduction in power bills, or 33 per cent over the 10 years.
That’s a seven-year payback.
Aslo at Horsley Park the company looked at providing a trigen system for its two facilities totalling 35,000 square metres. But the total energy required fell short. The combined demand from a minimum of 60,000 sqm would have pushed the business case over the line.
The other barrier is that with trigen the tenant or power customer needs to sign up for 10 years, but most leases are for five years or so.
Companies like DHL are not sure if they want to stay beyond the five years, so Melikian thinks the logical answer is for developers to find a way to own and manage the systems.
“It really needs to be the developers who own the estate, who have the critical mass and who have the long-term tenure…
“There has to be a lot more work done around the development, investing up-front capital which then generates a saving for the tenants.”
For analysis that she developed to support the GoGreen program, Melikian collated data that showed the transport sector represents 14 per cent of global carbon emissions, is faced with increasing legislation, experiences growing customer pressures and plays an important role in finding solutions.
The global trends the company identified in a strategic review, its Delphi study, showed:
- Climate change will become the big issue and unleash a “green” revolution of products and services; sustainable energy production is on the threshold of a breakthrough.
- Customers will have new expectations for eco-friendliness, and conscientious consumption will determine purchasing behavior to an increasing degree.
- Of the 500 global businesses included in the Carbon Disclosure Project in 2009: 70 per cent reported their emissions in annual corporate reporting, 51 per cent had publicly stated carbon targets and 6 per cent already deselected suppliers who failed to manage carbon.
- 63 per cent of business customers believe logistics will become a strategic lever for CO2 abatement.
- 84 per cent of consumers in China, India, Malaysia and Singapore said they would accept higher prices for green products, compared with 50 per cent in Western countries.
- Up to 80 per cent of warehouse energy consumption is due to lighting.
- Urgency to reduce carbon emissions would increase once a price tag is attached to carbon emissions.
Current sustainability targets by DHL in the Oceania South Pacific sub-region are:
• Retro-fitting energy-efficient T5 lighting in existing sites.
• Staff engaged in coming up with initiatives.
• Switch off campaign – light switches.
• Retro-fitting more efficient heating and cooling systems when at the end of useful life.
• Strategic positioning of new facilities: close to major arterials, collocation of sites, truck route planning.
• Waste reduction: engaging customers on reducing packaging, using different products that reduce repacking waste.
• Water: rain water re-use for flushing and irrigation, water-saving taps.