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Report: Green Bldg. Holdouts Have Everything to Lose
Businesses, Landlords that Resist Sustainability Will be at a Financial, Competitive Disadvantage, Study Finds
Three years: That's how long before the market turns non-green buildings into financial and competitive liabilities for the tenants that occupy them, and the firms that own them, according to a report released last month by Deloitte and green building consultant Charles Lockwood.
Within that timeframe, companies that do not occupy energy efficient or sustainable "green" space will find themselves at a "competitive disadvantage from higher operating costs, lower productivity, declining attraction and retention of skilled workers, and an increasingly negative brand image," the report stated.
It also found that investors and owners of non-green buildings would be similarly affected as tenants increasingly seek to occupy only green space.
The Deloitte/Lockwood study polled organizations involved in at least one green property retrofit (either LEED-EB or LEED-CI) to determine cause and effect. The results, the authors said, were a little surprising.
The expectation that operational cost savings (of which much has been made lately) would emerge as the main driver behind green retrofits was largely debunked. Instead, "corporate environmental commitment" and "greater indoor air and environmental quality" tied as the top reasons for pursuing green building retrofits, both cited by 88 percent of respondents.
Also polling high were "greater workforce productivity," "value of public relations and free publicity," and "operational cost savings from energy efficiency," all at 75 percent, further underscoring the importance of both practical and image-enhancing concerns among those who chose to pursue retrofits. "Attraction and retention of quality workforce" was cited by 69 percent of respondents.
Polling lowest, at 13 percent, was greenhouse gas reduction, indicating that the climate change issue is not a prime motivator behind green building retrofits, at least without some other bottom line business-side benefit. According to one respondent who completed a retrofit: "We wanted to make a statement ... 'Hey look, there is a way to be economically responsible to your business and environmentally responsible to your community.' "
The effects of the retrofits, if not surprising, were certainly enlightening.
More than 90 percent of respondents reported a greater ability to attract talent, and more than 80 percent reported greater employee retention (81 percent) or improved worker productivity (87 percent). Seventy-five percent saw improved employee health, and 73 percent reported operational cost reductions.
Those results add some heft to the argument that green buildings directly result in healthier, more productive workplaces, as advocates have pitched, though concrete evidence remains scarce.
Of course, the benefits do have a price. Respondents said cost premiums for green retrofits ranged mostly from 1 percent to 10 percent, although a quarter said they paid more than that.
Many organizations and property owners that want sustainable space are waiting for the price of green consultants, contractors and products to come down, which is beginning to occur. Some are waiting until financial returns and other benefits, such as employee productivity and recruiting gains, are proven.
But waiting may itself be the biggest risk, the study concludes. As the market baseline shifts from conventional to green buildings, companies in non-green space will lose out on employee recruiting and retention; miss opportunities for a green brand image; and watch as financial incentives to retrofit are replaced by government mandates.
"Timing is important for companies seeking to use green retrofits as a point of competitive differentiation," the study says. "All things considered, we believe the business imperative is clear: The earlier a company adopts green building practices, the bigger the gains it stands to reap."