Linking Green Buildings, Productivity and the Bottom Line

By George Boué


July 8, 2010

Can promoting green initiatives and certifying the workplace as green increase productivity? And if so, what is the impact to the bottom line?

A review of scientific literature and studies indicate quite conclusively that the answer is yes on productivity, but the challenge is in quantifying those gains in relation to profit.

Let’s first look at what is meant by a green workplace. The Society for Human Resource Management (SHRM) in a 2009 poll, “Green Initiatives, What has Changed in One Year,” defined a green workplace as one that is environmentally sensitive, resource efficient and socially responsible. This definition can be viewed from the perspective of a corporate strategy, easily fitting under the concept of sustainability.

There are plenty of surveys linking corporate sustainability practices to employee engagement.

In a recent “LinkedHR: Green” on-line discussion, website manager Liz Pellet referenced a Harris poll that found that 33 percent of Americans would be more inclined to work for a green company compared to an organization that does not make a conscious effort to promote socially and environmentally friendly practices. She wrote, “There are a lot of benefits and measurable Return on Investment to going green and increased employee engagement is one of them.”

To be more tactical, it is important to analyze the physical work environment. It helps to understand what goes into making a workplace or building green. A good approach is to look at the LEED system.

LEED is the international benchmark for buildings that are environmentally friendly and healthful. According to the U.S. Green Building Council, a LEED-Gold building has 50 percent less negative impact on the environment, and a LEED-Platinum building has at least 70 percent less negative impact than a conventional building.

Buildings that become LEED certified will typically have these features:

Advanced ventilating systems that increase air flow (decrease carbon dioxide levels and dilute contaminants) and maintain optimal temperatures.
Selection of building materials and furnishings that have low toxicity (prevent airborne chemical contaminants).
Elimination of sources of pollutants: paints, cleaning products, pest control, etc.
Increased use of daylighting (reduce energy, improve mood).
Use of high quality, energy efficient lighting (reduce glare, increase readability)
Promotion of wellness activities.
On the surface these green elements intuitively would be expected to contribute to productivity. However, as any HR professional in the service industry knows, objectively measuring productivity is difficult. White-collar jobs are knowledge intensive and qualitative, rather than task oriented which is easier to measure. The output of knowledge work is difficult to quantify. How can you measure the value added by thinking through a particular project?

Many scientific studies have been conducted in various workplaces and educational facilities to gauge the impact on human performance as defined by reading speed and comprehension, learning, word memory, multiplication speed, signal recognition, time to respond to signals, and typing speed. Obviously, these tasks could all contribute to productivity.

Here are some of the findings:

There is a strong link between the quality of the indoor air and the incidence of allergy and asthma symptoms. This is significant as 20 percent of the U.S. population has environmental allergies and 6 percent have asthma.
Higher concentrations of carbon dioxide, which indicate a lower rate of ventilation, can cause fatigue, headaches and increased risk of Sick Building Syndrome. Also, tests have shown poorer performance in computerized tests of reaction time.
Temperature matters. Performance increases with temperatures up to 60-72 F (21-22 C) and decreases with temps above 73-75 F (23-24 C). The highest productivity is at 71.6 F (22 C). (The optimal environment is one where the individual occupant can control the temperature.)
While studies of lighting with office workers has had mixed results, a study performed in a school showed improvements in standardized test of 16-26 percent in classrooms with the most day lighting or window area, respectively.
Health care maintenance has been shown to have a strong correlation to an employee’s productivity level. Successful wellness programs in particular improve future productivity.
There are also surveys that address this topic, but being surveys, they have to be considered more subjective. Many of these tend to focus more on the productivity elements of absenteeism, turnover, retention and engagement.

Next Page: What surveys by HR experts and Deloitte found.

In the previously mentioned SHRM poll, on a question regarding positive outcomes as a result of green programs, “increased workforce productivity” ranked No. 8 of 11 choices. But “improved morale” ranked No. 1 in both 2008 and 2009.

That is interesting because most, if not all, HR professionals link morale to engagement, and engagement to productivity. This discrepancy may likely be due to the challenge of quantifying productivity.

Deloitte Consulting conducted a survey of large employers in 2008 that had implemented green retrofits. Here are some of the results:

93 percent of respondents reported a greater ability to attract talent;
81 percent saw greater employee retention;
87 percent experienced an improvement in workforce productivity;
75 percent reported improvements in employee health;
100 percent experienced an increase in goodwill/brand equity.
Several studies, including the 2003 Report to California’s Sustainable Building Task Force (pdf), which involved 33 green building projects, calculate small percentage increases in productivity. The 2003 report recommends attributing a 1 percent increase in productivity and health to LEED-Certified and LEED-Silver buildings, and a 1.5 percent gain in LEED-Gold and Platinum level buildings. Those benefits resulted primarily from better ventilation, lighting and general environment.

In a five-year company case study, Researchers at Carnegie Mellon University measured a 3.2 percent productivity gain, or $1,600 per employee per year, on lighting improvements alone.

So how does 1 percent to 3 percent productivity gain impact the bottom line? The literature suggests multiplying annual payrolls times these increases. In such a case, the annual savings are substantial.

Indeed, the 2003 California report found average annual employee costs to be 10.25 times larger than the cost of space per employee. The author extrapolates these findings to calculate that a 1 percent productivity increase would therefore have a financial impact over time roughly equal to reducing property costs by 10 percent.

HR professionals should understand the correlations between sustainability, green initiatives that improve the work environment, and productivity.

At the 2008 SHRM corporate sustainability Executive Roundtable Symposium, participants — global HR and sustainability leaders — generally agreed that HR should have the knowledge required to take the lead in the people dimensions of sustainability.

It will help the environment, get employees more engaged, and contribute to the bottom line.

George Boué, SPHR, LEED AP ID&C, is vice president of human resources for Stiles, a commercial real estate services company in Ft. Lauderdale, FL.

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