Beyond energy savings: How green buildings can cut labor costs

Editor's Note: To learn more about energy-efficient buildings, check out VERGE@Greenbuild, November 12-13, in San Francisco, where Riggs Kubiak will be speaking.

Many sustainability-minded businesses realize that green buildings usually have lower energy costs, but that may not be the most significant reason to incorporate sustainable design in your facilities. That’s because utility bills, and even construction costs, are typically a relatively small part of a business’s bottom line. The larger portion – as much as 92 percent of a building's design, construction, operations and maintenance – comes from labor and labor-related costs. (A white paper published in Building Design+Construction puts those costs at 78 percent, while CTG Energetics President Malcolm Lewis estimates they make up an average of 92 percent.) The good news: Buildings that utilize sustainable design can realize substantial savings in their labor expenses.

The relationship between green buildings and reduced labor costs is strong, with documentable reductions in the real costs of labor and overhead. Most of the labor benefits arise from some of the less sexy aspects of green building, the ones affecting indoor environmental quality. IEQ includes indoor air quality, which is enhanced in green buildings by fewer pollutants from building materials, cleansers, equipment, etc. Less obvious green building attributes, such as quality; the availability of fresh air, daylight and views of nature; as well as the controllability of lighting, heating and cooling, all contribute to better IEQ.

All of these aspects also define the experience of the people occupying the space, whether it’s an office, home, school, medical facility or even a store. For instance, studies have shown that students learn more, customers buy more, and patients recover faster in buildings with natural light and views.

Silhouette of worker by 1971yes via Shutterstock

 Increased productivity, reduced overhead

From the vantage of a business -- especially one with labor costs that make up a high percentage of its operations -- the benefits accrue in increased productivity and reduced overhead. Among the examples illustrating this is a Lockheed office facility in which daylighting and better energy efficiency resulted in a 15 percent increase in productivity and a 15 percent decrease in absenteeism. NG Bank’s new green headquarters netted a similar 15 percent drop in absenteeism. Other studies, including one called "Greening the Building and the Bottom Line" from the Rocky Mountain Institute, show decreases in factories' production errors. Many of these projects yielded returns on investments (ROIs) of less than three years and sometimes of less than one year.

That decreased absenteeism comes from several components. Better air quality, in and of itself, reduces sickness and lost work time, but it goes beyond that. One of the larger parts of labor overhead is turnover, which leads to new employee training costs. Staff in green buildings are not only healthier, they tend to feel they have more control over their environment -- due to heating, cooling and lighting controllability -- and they tend to be happier. This translates into higher productivity and better employee retention.

Some of the data on this are indeterminate and don’t necessarily point to significant bottom line savings or toward clear and specific indications that, say, having a view out a window or being able to control the air flow at a desk will result in higher productivity or improved company “spirit.” But there is enough data to add the value of improving IEQ to the already substantial list of reasons to build green.

Those conventional rationales for green building are well-established: reducing carbon and eco-footprints, lowering utility bills, garnering goodwill, reducing regulatory exposure. Some of these can have direct impact on the bottom line (utility bills) while others are more about public relations or other less quantifiable results.

And the cost of building green is often lower than one might think. While the question of cost has garnered a lot of attention, many studies -- including research from the Urban Green Council, construction consultancy David Langdon and GreenBiz's own Green Building Survey -- have shown that the cost premium may range from less than 1 percent to -- in instances where more intense or cutting-edge technologies are involved -- as much as 25 percent, with the majority coming in at far less than 10 percent

Frequently, though, these calculations do not into account take future savings, such as a continuing stream of reduced utility and maintenance expenses. When these are included, the cost premium can disappear entirely.

Long-term benefits, not the upfront (and sometimes miniscule) construction cost increases of ecodesign, should determine green-building decisions for businesses. And when labor savings are added to conventional calculations that include reduced utility bills, it becomes much easier to opt for green design.