Building a business case

Why it matters

Ultimately, the strength of a business case for retrofit will determine whether the project ever gets off the ground. If the business case is not compelling and grounded within the context of your organisation, it will not get the attention of senior management or compete with other worthwhile causes such as fire safety, building new social housing, community investment, regeneration or other improvements to existing housing stock.

Government’s recommended approach to creating a business case is set out in HM Treasury’s Green Book. This sets out a structured approach to developing a business case; you will find more about the Green Book later on this page.

Your organisation may have its own requirements for a business case, so you should work with colleagues to establish how best to shape and present the case for your retrofit project.

Key steps to take

1. Understand your organisation’s approval processes: which boards, directors or management committees need to sign off a business case? How often do they meet? When would you need to provide your business case for them to review? This can be crucial as many funding opportunities emerge at short notice.

2. Understand your audiences: different teams and departments will have different roles to play in developing or signing off your business case. Which teams/departments will need to be involved and consulted? What strategies do they already have in place? What language do they use? How and how often do they set their budgets? The most likely departments that you will need to engage are those responsible for asset management, energy and sustainability and planned works.

3. Align to the organisation: the business case will need to be grounded in your organisation’s existing strategies including Asset Management, Sustainability and Resident Satisfaction.

4. Understand your housing stock: analyse your organisation’s stock energy data and current position in terms of energy efficiency improvements to meet your project objectives (for example, meeting EPC Band C or net zero carbon).

5. Understand the costs and benefits: you should also research the likely impacts of the project, including carbon reductions, energy bill savings for residents and maintenance savings for your organisation. Think also about the wider benefits that the project may bring (see Co-benefits below). You will also need to set out the total costs and how these will be met, including the size of the grant contribution and how much will be required from internal budgets.

6. Build confidence in the project: find case studies from similar organisations in terms of size, scale and geography to reassure senior management that it has been ‘done before’. Very few housing associations like to be risk-taking pioneers in this space so it is helpful to demonstrate approaches and technologies are already being delivered in the sector.

7. Get your message across: use the language of your organisation, explain acronyms clearly and remove jargon so the business case can be easily understood by a wide range of non-expert stakeholders.

Success factors

Link and align to your organisation’s strategic priorities; without these links, the business case will not be integrated into your organisation’s ‘ways of working’. For example, most social housing providers have a strong focus on providing excellent customer service and sustainable tenures: how does this link to the business case for retrofit?

Highlight the legislative and regulatory position: in recent years, the energy efficiency retrofit of housing has moved from a ‘nice to do’ to a ‘must do’. Making links to policy and regulation such as the national Fuel Poverty Strategy and national carbon reduction goals will help to reinforce the importance of your project.

Make links to the things that matter to residents. Building a strong resident voice for retrofit can be a powerful way to generate senior management buy-in. Talk to your resident liaison or customer service teams about what your customers are saying and what their priorities are.

Be clear and realistic about:

• Risks: we often think about the risks associated with delivery, but you should also consider the risks of not taking action: what happens if you don’t do this work or apply for funding?
• Savings for residents: do not oversell or over-promise the savings. Cost savings from retrofit can be modelled, but be upfront and clear about this in your business case and set out how any information gaps will be filled through the project.
• Other resident benefits: make sure you highlight other potential benefits as these are often more important to residents and housing providers than energy efficiency in itself.
• Capacity and skills to deliver and/or manage the project: who in the organisation will be involved in development and delivery of the project? Who will manage the outcomes of the project, for example, retrofitted homes with new heat pumps? Our guidance on creating a team sets out some requirements and considerations for skills.
• Additional costs: what costs are associated with the project, above and beyond the costs of the retrofit measures? This might include surveys or assessments, resident communications, monitoring and evaluation or the costs of additional works such as rewiring or re-decorating.

Deep dive

The Green Book approach

The Government’s Green Book sets out the “Five Case Model”, in short, five key areas to consider when building a business case. Each area is built around a series of questions, underpinned by more detailed guidance. You can read more here.

Some detailed parts of the Green Book may not seem directly appropriate to your project, but the broad questions are very helpful in shaping the initial thinking of a business case. The five areas to consider are:

1. Strategic considerations

• What is the case for change? What are you trying to achieve?

• What is the current situation?

• What is to be done?

• What outcomes are expected? What are your key deliverables?

• How do these fit with wider policies and objectives? This includes policy and legislation, local or corporate commitments such as declarations of Climate Emergency or net zero commitments, and existing strategies.

2. Economic considerations

• What is the net value of the intervention compared to continuing with business as usual? The Green Book talks in terms of value to society, so this brings in some of the wider co-benefits of retrofit such as improvements to health or creation of employment opportunities (see more on this below).

• What are the risks and their costs of the project, and how are they best managed?

• If you are comparing different project options, or a project against business-as-usual, which option reflects the optimal net value to society?

3. Commercial considerations

• What commercial strategy will best bring about the project? There is an interplay between financial and economic considerations (ie, costs and benefits) and the commercial strategy which will best deliver them (eg, a joint venture, a certain procurement approach). How best can a realistic and credible commercial deal be struck?

• Who will manage which risks?

• What procurement approach should be taken?

4. Financial considerations

• What is the impact of the proposal on the public sector budget in terms of the total cost of both capital and revenue? The Green Book financial case looks at costs to the public purse whilst the economic case looks at impacts and benefits to society more widely.

• How much does retrofit cost? How will this be funded, including both internal and external sources? How can costs be reduced through careful planning, for example, by programming retrofit work alongside planned maintenance? Could this also help you generate more buy-in by linking to other priorities – eg by connecting in to fire safety or estate regeneration work to bring down costs?

• What are the financial risks, including cash flow?

5. Management considerations

• How can the proposal be delivered?

• Are there realistic and robust delivery plans? Other sections of this guidance go into more detail about the management and delivery of retrofit programmes. From a business case perspective, you will need to have confidence that you can deliver what you set out and to understand and mitigate the risks should there be any changes to the plan.

Co-benefits of retrofit projects

The central benefits of retrofit projects are well understood: energy bill savings for residents, reducing the risk of fuel poverty, and carbon emissions reductions.

Retrofit can achieve a lot more than this, and it’s important to articulate and include the wider benefits of retrofit in your business case. This can be hard when the benefits don’t obviously accrue to your organisation or your residents. However, it is also helpful in demonstrating the broader social and community impacts of your project.

Benefits to your residents

There are strong links between living in a cold home and impacts on physical and mental health. Providing homes that are easier and more affordable to keep warm helps your residents stay healthier, improving quality of life, supporting independent living and reducing demands on health and social care services.

Benefits to your organisation

Cold, damp homes can cost a lot to maintain, especially if there are issues with mould affecting the building or fittings for which you are responsible.

Homes with gas boilers carry requirements for annual gas safety checks. There will be safety checks associated with new forms of heating system but these are likely to be less frequent if gas is removed from the property.

Retrofit projects are also an opportunity to get better data about how your homes work – from temperature and relative humidity sensors, to smart meter data to help plan further energy saving work with residents.

If people are more comfortable and healthy in their homes, your organisation should see a reduction in complaints and an increase in customer satisfaction. There are also links between more energy efficient homes and reductions in rent arrears and voids: a home in EPC Band B typically remains void for 31% less time than a home in Band E or F. Reducing void periods can help to cut administration costs for housing providers.

Wider social or community benefits

Retrofit projects are firmly rooted in their local communities. They are often delivered by local contractors, helping to boost the local economy and create job opportunities. New ways of heating and powering homes also create skills and training opportunities, both for new entrants into work and for people looking to retrain later in their working lives.

Retrofitted neighborhoods can also be transformative for local pride, helping to build a sense of community and cohesion from a “new look” neighborhood.

Further resources

Where can I find out more about the Green Book and the Five Case Model?

You can explore The Green Book on the gov.uk website.

Visit Website (https://www.gov.uk)

You can also download a Guide to Developing the Project Business Case, which goes step by step through the process:

View PDF

What are the financial benefits of retrofitting for my organisation?

Touching the voids: the impact of energy efficiency on social landlord income and business plans, Sustainable Homes – this research report provides evidence for how energy efficiency can reduce costs for social landlords, taking account of rent arrears, void periods and administration costs.

Visit Website (https://hqnetwork.co.uk)

Positive energy: the business case for retrofit, GLA – this report builds on the Sustainable Homes research and includes potential cost savings associated with repairs, customer contacts and customer complaints, as well as voids and arrears. It includes a detailed real-world case study of how Orbit Housing Group could save more than £4m over a 20 year period.

Visit Website (https://www.london.gov.uk)

What are the wider benefits of retrofit? How do I calculate them for my business case?

Climate Action Co-Benefits Toolkit, Ashden - this is a great resource for understanding the wider benefits of carbon reductions, including those from retrofit. It includes examples and figures for some of the wider co-benefits of retrofit and links to sources of local information that can help you build your business case. Whilst the toolkit was written for local authorities, it’s an invaluable resource for any organisation looking at retrofit projects.

Visit Website (https://ashden.org)

The International Energy Agency has also produced analysis of the wider benefits of energy efficiency, incorporating some of the themes outlined above as well as air quality, energy access, energy security and productivity gains.

Visit Website (https://www.iea.org)

Get in touch

If you would like to discuss ways of creating a great business case for retrofit project, please contact the RISE support team - rise@turntown.co.uk

We would love to hear about your experiences. What has worked for your organisation? What lessons have you learned? What documents, reports or tools have you found most helpful? Please contact rise@turntown.co.uk if you would like to share your experiences.