FEATURE ARTICLE: How Colleges and Universities Can Turn Green Without Some of the Typical Pitfalls
Colleges and Universities around the world are turning “green”1 and embracing sustainability for many reasons.
Some of these reasons are economic, some are because student bodies and faculties are requesting sustainability, and some are driven by ethical or political values.2 The “College Sustainability Report Card”3 even lists schools that have demonstrated their commitment to going green and provides guidance to those considering sustainability measures. But the decision to become more sustainable is only the first step. Going (and staying) green may also involve many legal issues with which the college or university never previously dealt.
To understand how to go green, one should first analyze an institution’s motives for becoming sustainable. When a school adopts sustainability practices (such as reducing energy and water consumption, greenhouse gas emissions, recycling, or using bike-sharing programs) it sends a strong message about what the institution’s leaders value and, at a minimum, a branding4 occurs. For example, Harvard University boasts that “Harvard Thinks Green.”5 Similarly, many schools now brag that by a given year they will realize carbon neutrality.6 Even membership in some higher education organizations such as The American College & University President’s Climate Commitment7 (“ACUPCC”) benefit members with coveted bragging rights. Because colleges and universities compete for the best students, this sustainability branding could be a deciding factor for many students.8 The Princeton Review's Guide to 322 Green Colleges suggests that if an applicant chooses to attend a school with a commitment to sustainability, the available academic, research, and extracurricular opportunities place that applicant a step ahead of the competition in obtaining one of the green jobs of the future, and make the college experience that much more enjoyable.9 But there are also practical reasons to go green.
Reducing operating expenses (primarily for energy and water consumption) increases a school’s bottom line, and in many cases, frees up capital that can be re-allocated for other projects.10 But sustainability is not just about smaller electric and water bills. Although important, there are other reasons to adopt sustainable building practices related to the people who live and work in the institution. Since it is now widely accepted that those who occupy green buildings are healthier, happier, and more productive,11 a building’s sustainable elements consist of anything with a positive effect on its occupants.12 These include incorporating more natural lighting, a greater exposure to seeing the outdoors, better indoor air quality, green cleaning and pest control, and ensuring that the paints, furniture, and carpeting used in the facility have low volatile organic compounds.
But construction jobs require money, and the first step for any institution is to determine how to pay for the sustainability measures13 for which many parties, including design professionals, contractors, and suppliers of products and services, will be involved. Once this is accomplished, the school’s attorney must hit the ground running. After all, there are numerous agreements to be negotiated, drafted, and executed; and if they are not explicit in requiring a satisfactory level of sustainability that, often requires reporting and accountability,14 failure to obtain the benefit of the bargain is only a part of the loss for the institution. Adding to this is the fact that many colleges or universities seek certification of the building or buildings that are becoming green,15 adding even more layers to the now already complex list of required activities and agreements.
Imagine that an institution has a fund drive for sustainability measures, but that after a charitable donor makes a gift with specific instructions regarding its use the school fails to deliver on the donor’s intentions. Major issues for the school could result. For example, a donor may require that her $10,000,000 contribution to the school (the “Gift”) be used specifically for retrofitting existing buildings with wind turbines and for the college’s obtainment of Leadership in Energy and Environmental Design (“LEED”) Gold certification. If the properties do not obtain the required certification, what happens to the Gift? There are numerous examples of negative monetary repercussions to institutions that fail to deliver when a donor makes a planned or restricted gift.
To better understand this legal predicament, the following hypothetical describes what could happen when a sustainability plan goes awry.16
A Practical Hypothetical
Green University (“GU”) is retrofitting two of its buildings so that both will obtain LEED Gold Certification (“Certification”). The retrofit is being paid for, in part, from an earmarked donation from Susan Donor (“Donor”) specifically for the retrofit and certification. Donor is a sophisticated businessperson and her personal attorney drafted a gift-agreement for the donation with a reversionary requirement for the funds if Certification is not obtained by the end of the 25th month after receipt of the Gift for both buildings (“Certification Deadline”). Keep in mind that getting to green is not a simple task and negotiating with Donor’s attorney began an extensive process, both with respect to physical management and legal wrangling. The physical logistics are, for the most part, issues to be resolved internally. The legal obstacles are another matter. For the purposes of this hypothetical, I will focus on the five main parties involved in the construction job: GU, the architect, the contractor, the renewable energy device dealer, and the rating agency.
The first contract that GU signs is with its architect and/or engineer (“Architect”) who will design the retrofits for both buildings and supervise the job. The first building (“Building I”) will have so many photovoltaic panels and wind turbines (“Renewables”) incorporated into it that it will become the first carbon-neutral university building in the state. The second building (“Building II”) will be adding a new wing with Renewables in addition to making the existing structure more sustainable (both Building I and Building II, collectively, “Project”). In this scenario, Architect guarantees (against counsel’s advice) that both buildings will receive Certification on or before the end of the 24th month.17 Initially, there are two timing issues related to the guaranty that raise potential legal red flags. The first has to do with the work itself. Although the Architect is supervising the Project, it is not performing the construction work. Hence, if the contractor has unnecessary delays, even though it will be out of the architectural firm’s control, the Architect will be liable. The second contract deals with the certification’s timing. The United States green Building Council (“USGBC”) through its certification body, green Building Certification Institute (“GBCI”) (both of which are third-party not-for-profit organizations), is the certifying body, which is totally unrelated to the Architect. Here too, because the process is completely beyond the architectural firm’s control with respect to timing of the certification, even if the construction work is completed timely, there is nothing to prevent a delay in GBCI delivering its certification on time. GBCI runs on its own schedule.
GU next contracts with the one who will perform the retrofit designed by the Architect — namely, the contractor (“Contractor”). Here, although not requiring Contractor to guaranty Certification, the contract permits GU to withhold its final installment of payment for the work until certification is obtained, which could be months after substantial completion of the job. The Contractor promises substantial completion of the Project no later than the end of the 21st month and assures GU that it has extensive experience with “sustainable building projects,” even offering to “assist in the certification process, if needed.” GU then enters into a purchase agreement with a renewable energy device dealer (“Solar/Wind Dealer”), recommended by the Architect, to deliver and install the Renewables no later than the first day of the 21st month.18 The scheduling and coordination of delivery and installation of the Renewables is, however, a Contractor requirement pursuant to the terms of Contractor’s agreement. Lastly, GU, which has a Chief Sustainability Officer (the “CSO”), agrees to perform all of the GBCI application and certification submission requirements for both buildings.
As is the case with many construction jobs, problems occur with this Project. Although the Contractor substantially completes the structural portions of the Project by the beginning of the 21st month, Solar/Wind Dealer had not yet delivered and installed the Renewables in Building I and it informs GU on the first day of the 21st month that delivery and installation may not occur until sometime during the 23rd month. Installation is a two-week process, which includes testing. Notwithstanding the possibility that all construction and delivery/installation could be completed just prior to the Certification Deadline, it is doubtful that GBCI would award certification in time. GU could apply and possibly obtain Silver Certification by the Certification Deadline (sans the Renewables and the credits associated therewith), but the Gift specified Gold and GU could lose $10,000,000 for failure to deliver Gold. So what can GU do?
Probably the best risk management action would be to first call Donor to see how firm she is with her Certification Deadline. GU should disclose the exact nature of the problem.19 Since the Donor’s intent was to provide the funds for the school to become more sustainable, it may be that the Certification Deadline was included just to prevent an overly open-ended construction project. Donor may agree to modify the gift-agreement to provide for a delayed Certification Deadline.20 By contacting the Donor, GU is also operating with clean hands, full transparency, and in good faith. However, if the gift-agreement is not modified and Donor insists upon return of the Gift if the Certification Deadline is not achieved, GU would have to return the $10,000,000.21 GU’s counsel may also advise it to return the funds because if the public found out about the school’s failure to comply with a gift requirement, other potential donors might not make similar donations. Keeping GU’s contributors happy is paramount to GU’s long-term goals. But, if the Gift must be returned, GU may have other available remedies.
There are four parties that may be liable for the failure to meet the Certification Deadline: Architect, Contractor, Solar/Wind Dealer, and GU itself. For litigation purposes, the first potential defendant is the Architect. Let’s assume that GU has withheld payments from all parties with which it contracted. GU could commence an action against the Architect alleging breach of contract (failure to supervise the job) and negligence because Architect was obligated to supervise the Project and knew or should have known that Solar/Wind Dealer would not be able to deliver/install the Renewables on a timely basis.22
Since Architect is a LEED Accredited Professional, GU could likely argue that Architect knew or should have known that without the Renewables, Gold Certification was impossible. Furthermore, because Architect was supervising the Project, it should have notified GU of a late delivery schedule for the Renewables, in which case GU might have pursued other options.23 GU might also claim that Architect should have recommended other methods by which GU could have garnered points towards Gold Certification that did not involve the Renewables. Lastly, because Architect recommended Solar/Wind Dealer, GU might assert that Architect was negligent in doing so and that Architect should have investigated Solar/Wind Dealer’s delivery track record. Architect would probably countersue GU for failure to pay its fee and blame the failure of issuance of the Certification on GU’s misfeasance in the GBI application. Furthermore, Architect might assert that it should have no liability in reference to any delay unless they directly caused it. Architect might join the Contractor and Solar/Wind Dealer as parties in its counterclaim.
GU might then sue the Contractor for negligence because Contractor also knew or should have known about the Renewables delivery delay and because it did not suggest a solution to the problem.24 Since the Contractor was responsible for scheduling and coordination of delivery and installation of the Renewables, GU could assert that Contractor was aware of the delay. Also, since the Contractor agreed to “assist in the certification process, if needed,” the Contractor should have recognized that its assistance was needed.25 The Contractor would likely countersue GU for failure to pay its final installment, and could blame the failure of issuance of the Certification on GU for untimely communication with Solar/Wind Dealer to ascertain if the Renewables would be delivered on time. Contractor here defends itself by stating that GU, not Contractor, had the obligation to ensure timely delivery from the Solar/Wind Dealer.26 Contractor may also sue Architect for not providing guidance on substitute renewable energy device dealers.
GU next may sue Solar/Wind Dealer. Clearly the delay in delivery/installation of the Renewables by Solar/Wind Dealer was one proximate cause of failure of GU in meeting the Certification Deadline. But for this delay, GU may argue, both Building I and Building II would have earned Certification on time. Solar/Wind Dealer however, has some reasonable defenses and limitations to liability. Although Solar/Wind Dealer promised delivery and installation of the Renewables on or before the first day of the 21st month, the contract explicitly carved out consequential damages.27 Another Solar/Wind Dealer defense could be impossibility of performance. Solar/Wind Dealer placed the order for Renewables with the manufacturers with plenty of time and was assured by the manufacturers that the Renewables would be available and delivered according to the contract’s schedule. Solar/Wind Dealer might join the manufacturers in the lawsuit in case they were found liable and seek indemnification if Solar/Wind Dealer lost the case. Solar/Wind Dealer could also allege that if they had known that the manufacturers would be delayed in their delivery that they could have ordered from other manufacturers for the same products. Solar/Wind Dealer may also suggest that GU’s CSO was negligent in obtaining the required points for Certification and that, notwithstanding the failure of delivering/installing the Renewables, points should have been obtained from other sustainable construction methods.
The bottom line in this case, however, is determining against which party GU would prevail in litigation and which has the deepest pockets or the best insurance coverage to pay for a claim of this nature. Dependent on the circumstances, it could be any of the aforementioned parties.
So, where do we go from here? At the outset of any green construction project, careful planning of sustainability measures is a must. Since any school intending to implement green changes must do so within the typical confines of higher education bureaucracy, all stakeholders should be cognizant of timing issues and all parties connected to the project in any way (including the school’s counsel) should be involved from the beginning. The scope of work needs to be finalized early in the process (subject to typical multi-stakeholder modifications) so that when a plan is in place, the parties implementing the greening process can do so successfully: the architects and engineers can draft the plans, the contractors can bid on those plans and build the project accordingly, and the renewable energy device dealers and manufacturers can deliver and install their products. Although the benefits of sustainable improvements far outweigh the burdens, leaders of academic institutions must minimize all potential obstacles and maintain realistic expectations. Before the job begins, liability for all involved parties should be discussed and memorialized in the many agreements to which the school will be a party. With sustainability now an integral part of most school construction projects, appropriate planning will make for a winning result, sans legal problems.
- 1. Although green is a term that can mean many things, for most of us in the sustainable building world it relates to being eco-friendly, which includes energy and potable water reductions, recycling, and other modes of behavior that reduces the use of natural resources and damage to the environment.
- 2. Cynthia Peters, New Pomona College Residence Hall Earn LEED Platinum, Making Them Among Greenest in the Nation, Oct. 12, 2011, http://www.pomona.edu/news/2011/10/12-leed-platinum-dorms.aspx.
- 3. The GreenReportCard.org website, and the College Sustainability Report Card are both initiatives of the Sustainable Endowments Institute. Sustainable Endowments Institute, The College Sustainability Report Card, http://www.greenreportcard.org/(last visited Feb. 15, 2013); SUSTAINABLE ENDOWMENTS INSTITUTE, http://www.endowmentinstitute.org (last visited Feb. 15, 2013). The Institute is a nonprofit organization engaged in research and education to advance sustainability in campus operations and endowment practices. Id.
- 4. Branding is a method by which a person, entity or other organization differentiates their products, services, or method of conduct from similar parties. When a branding effort is successful, the result is to remember the party by its brand rather than any other identifier.
- 5. SUSTAINABILITY AT HARVARD, http://www.green.harvard.edu/ (last visited Jan. 13, 2013).
- 6. For example, Colgate University pledges to be carbon-neutral by 2019 (its 200th anniversary). Barbara Brooks, Colgate targets 2019 bicentennial for carbon neutrality, COLGATE NEWS, (Sept. 16, 2011), http://news.colgate.edu/2011/09/colgate-targets-2019-bicentenn.html.
- 7. Developed so that the “signatories of the ACUPCC, and the higher education industry as a whole, are leading society by driving the thought and defining the cutting edge of what is necessary and what is possible in effectively fighting climate change.” The article goes on to describe that “The Annual ACUPCC Climate Leadership Summit offers a unique opportunity for senior leadership – including presidents and chancellors, provosts, and financial officers – from colleges and universities around the country to meet with one another and participate in a high-level dialogue about how to achieve the goals of the ACUPCC and promote sustainability on their campuses and throughout all of higher education." 2012 CLIMATE LEADERSHIP SUMMIT, http://www2.presidentsclimatecommitment.org/summit2012/about.php, (last visited Feb. 15, 2013).
- 8. Trevor Hughes, More Colleges Using Green as Selling Tool, USA TODAY, July 8, 2010, http://www.usatoday.com/news/education/2010-07-08-green-college_N.htm.
- 9. The Princeton Review's Guide to 322 Green Colleges, 2012, http://www.princetonreview.com/uploadedFiles/Sitemap/Home_Page/Green_Guide_and_Green_OA/Green_Guide/Guide%20to%20Green%20Colleges.pdf, p. 10. See also, Rebecca Buddingh, Go Green! How Colleges Across the Country are Becoming More Sustainable, HER CAMPUS, Nov. 5, 2011, http://www.hercampus.com/life/causes/go-green-how-colleges-across-country-are-becoming-more-sustainable?page=show (Addressing whether “the number or types of students that the schools attract” are affected by the implementation of sustainable practices); Cool Schools, SIERRA MAGAZINE, Sept. 2012, http://www.sierraclub.org/sierra/201209/coolschools/complete-rankings-cool-schools.aspx (listing the greenest colleges).
- 10. Murielle, Growing Trends Towards Green Campuses, GREENFUDGE.ORG, Oct. 21, 2011, http://www.greenfudge.org/2011/10/21/growing-trends-towards-green-campusses/.
- 11. Regine le Roux, Green Buildings are Healthier, Happier Places, GREEN BUS. GUIDE, June 15, 2011, http://www.greenbusinessguide.co.za/green-buildings-are-healthier-happier-places/.
- 12. Indoor Air Quality, Indoor Air Quality and Productivity, 2010, http://www.greenbuilding.com/knowledge-base/indoor-air-quality.
- 13. This could come from an existing budget line-item or through a sustainability fund drive, for example.
- 14. In many cases, a local municipality or rating agency imposes data reporting requirements to insure that the subject property is meeting the required level of sustainability.
- 15. Green Building Milestone: Harvard University Earns Its 50th LEED Certification from U.S. Green Building Council, HARV. GAZETTE, Aug. 1, 2011, http://www.prweb.com/releases/2011/8/prweb8686732.htm. (In some cases the impetus to obtain certification is because the certification "requirements ensure accountability").
- 16. These litigation problems are specifically addressed by Eric A. Manterfield in his article “Perfecting Donor Intent on Gifts to Charity—The Gift Agreement.” See generally, Eric A. Manterfield, Perfecting Donor Intent on Gifts to Charity - The Gift Agreement, J. OF PRAC. ESTATE PLANNING 41(2009)(discussing problems encountered with charitable gifts).
- 17. All references to timing for the Project are based on the original date of execution of the contract with Architect
- 18. Renewables provide fossil-fuel free energy and extra credits towards certification for Gold status.
- 19. The exact nature of the problem is merely timing. This is because the Contractor or Solar/Wind Dealer only indicated that the Project would be delayed by a few months, rather than never completed.
- 20. As long as the school was diligently pursuing certification, Donor could be reasonable in her expectations.
- 21. Another alternative for the school would be to litigate the matter and have judicial intervention to decide the fate of the Gift.
- 22. As background, the Architect, although not charged with the LEED application/certification process, was able to procure the contract with GU based in part on its sustainability expertise and the LEED Accredited Professionals status of all its architects.
- 23. For example, the opportunity to contract with another dealer for renewable energy devices so as to meet the Certification Deadline.
- 24. Potential solutions may have included (i) a substitute solar/wind dealer to meet the deadline or (ii) a method for obtaining credits towards Gold Certification that did not involve renewable energy devices.
- 25. Contractor should have recognized the need for its assistance whether GU asked for it or not.
- 26. Note that GU contracted directly with the Solar/Wind Dealer.
- 27. This means that only damages that resulted from a breach of the contract and those that were contemplated by the parties should be due from the Solar/Wind Dealer to the GU. In other words, if GU had to purchase Renewables from another dealer to meet its Certification Deadline, that Solar/Wind Dealer would have to reimburse GU for the cost of replacement (even if the cost exceeded the Solar/Wind Dealer-GU contract amount). It would not, however, include the loss of the Gift because Solar/Wind Dealer could argue that it would not have entered into the contract with GU if it knew it was obligated to pay to GU the Gift amount if Solar/Wind Dealer did not make a timely delivery of the Renewables.