Can Green Business Practices Pay Off?

I recently spent a morning with Phil Baugh, a Chicago real estate developer whose latest project is the Green Exchange, a unique business center and professional community.

The Green Exchange is aimed at entrepreneurs looking to grow sustainable businesses –companies that promote sustainable products and services or support those that do.

Inspired by the green movement, a business is considered sustainable if it “has adapted its practices for the use of renewable resources and holds itself accountable for the environmental and human rights impacts of its activities.” This is the UN Development Programme’s definition.

It may be easier to use Phil’s shorthand: the Green Exchange exemplifies the triple bottom line of People, Planet, and Profit. Companies following the triple bottom line mantra are the target tenants for the Green Exchange.

The Green Exchange is a refurbished 270,000 square foot factory in an old industrial sector of Chicago. Its “green design” is built to Leadership in Energy and Environmental Design (LEED) Platinum certification standards. To earn this rating, Phil’s facility will be evaluated against six criteria:

1. Sustainable Site: erosion control, minimal site disturbance, high density area, alternative transportation
2. Water Efficiency: effective waste water and water use techniques
3. Energy and Atmosphere: energy performance, ozone protection
4. Materials and Resources: waste management, reduced toxic materials, recycling
5. Indoor Environmental Quality: outside air delivery, indoor chemical and pollutant control, thermal comfort, “daylighting”, “green cleaning”
6. Innovation and Design Process: basically, other ideas and practices that contribute to positive environmental outcomes

I asked Phil about the benefits to a small business of locating to such a building. Fundamentally, Phil said, it is about improved productivity, increased employee retention, decreased costs, and increased sales. Here are some facts he shared with me:

• A Harvard Business Review article said employee productivity can increase by as much as 15%.
• PNC Financial reports that employee retention and satisfaction was 50% better in its green facility compared to a traditional building.
• Toyota’s customer service unit moved to a LEED-certified facility and saw absenteeism fall by 14%.
• Genzyme’s 12-story, 350,000 square foot headquarters building uses 42% less energy and 34% less water than a like-sized standard building.
• "Green” retail space can boost sales by 40% while bringing down overall energy costs.

What is my bottom line? Well, as far as design principles go, LEED certification criteria make a lot of sense. It is easy to see the benefits to customers, staff, and financials. And green marketing is certainly popular and presumably effective. I guess the test for me is whether the Green Exchange is a marketing gimmick or a truly unique business community. I am rooting for the latter.

What do you think?

Craig