Greenwashing 2.0: When Smart Buildings Lie, and How to Keep Them Honest

In many cases, reported carbon fell because firms purchased renewable energy or benefited from cleaner regional grids. On paper, emissions declined. In reality, total energy use stayed flat or rose, suggesting reductions were driven more by cleaner grids or offsets than by actual efficiency gains. Similar patterns appeared in water performance. Sixty percent of data center REITs, 50 percent of office REITs, and a quarter of residential REITs showed rising water use despite efficiency claims. 

The same disconnect is emerging in social and governance metrics, a subject for forthcoming work. This decoupling between carbon accounting and performance is the quiet fault line running through today’s “smart” real estate portfolios.

The NOVA Dashboard standardizes sustainability data that REITs release each year, converting reports into comparable, sector-specific benchmarks so office, residential, industrial and data center portfolios are measured against peers. Current disclosures remain voluntary, inconsistent, and often designed for marketing rather than measurement. NOVA turns that collage into a coherent mirror — one that reflects actual performance instead of promotion.

Smart buildings do not just optimize; they can also obscure. Dashboards that promise efficiency may just as easily hide waste when no one is watching. The first wave of greenwashing was marketing fluff — glossy brochures and plaques that told one story while the kilowatt-hour meter told another. Greenwashing 2.0 is more technical. It lives in miscalibrated sensors, overridden automation, and hidden defaults in building systems. And, because the data comes stamped with “smart,” it looks credible even when it is not.

Certification systems such as LEED O+M require periodic recertification. WELL, Fitwel and global benchmarks like GRESB provide portfolio scoring. But these are still snapshots. A building’s performance can swing across a season or a week. Sustainability is not a once-a-year ritual; it is a daily discipline. A building that spikes in use during a heat wave can strain the grid when resilience is needed most — a reality invisible in annual averages. True accountability means tracking not just what buildings consume, but when and how they interact with the grid and community.

Finance was once in this same place. Before the 1929 crash, company disclosures were voluntary. Some firms published audited statements; others almost nothing. Investors had no consistent way to judge performance, and that opacity helped inflate the bubble. The reforms that followed created a model from which sustainability can learn. The Securities Acts of 1933 and 1934 made disclosure mandatory. Generally Accepted Accounting Principles (GAAP) standardized categories, and the 2002 Sarbanes-Oxley Act made executives accountable.

But here is the crucial difference. Financials work because money is cumulative and standardized. If a company has a bad month, the loss still appears in quarterly totals. Sustainability data is different. It is dynamic and situational. Timing matters. A ton of carbon avoided in January does not undo a ton emitted in July when the grid was buckling. Annual averages smooth away the volatility that investors and regulators most need to see.

The path forward is clear: Standardize the metrics, verify the performance, and align the incentives. Standardize by giving the industry both universal benchmarks and sector-specific yardsticks, as GAAP did for finance. Reporting should separate modeled projections from measured data and disclose calibration protocols so underlying streams are trustworthy. Verify by moving from annual to continuous audits that confirm data accuracy. Spot-checks of meters against dashboards catch calibration errors. Post-occupancy audits force models to be recalibrated against actual use, closing the performance gap instead of hiding it. Align incentives by tying executive pay, capital access, and valuations not to plaques but to verified results. When compensation depends on outcomes, firms will fix sensors, recalibrate models, and invest in transparency instead of narrative.

New players in capital markets are trying to fill this gap. The Green Impact Exchange (GIX) positions itself as a nexus between sustainability-minded companies and investors. Its founders know credibility is the currency of markets. The question is what framework they will use to separate real performance from green gloss. If GIX or others want investor confidence, they will need standardized, sector-specific and independently verified metrics — the foundation NOVA is building.

Do that, and smart systems will be what they promise: adaptive engines of efficiency and resilience. Fail to do it, and smart buildings risk becoming the most sophisticated liars real estate has ever produced. We learned this lesson once in finance; time to apply it to sustainability.

Suhail Y. Tayeb is clinical assistant professor at New York University’s Schack Institute of Real Estate and director of the Center for the Sustainable Built Environment, where he leads the NOVA Dashboard initiative. Amy Myers Jaffe is director of the Energy, Climate Justice and Sustainability Lab at NYU’s School of Professional Studies.