Green-Building Labels Trigger A Race To The Top

Rib eye steaks, washing machines, and even buildings can don labels signaling their environmental sustainability. As the number of organizations that hand out these environmental certifications, or ecolabels, grows, some researchers wonder if the tags are merely window dressing or if they actually push producers to improve the sustainability of their goods. For the first time, a new study shows that an ecolabel for green buildings provides a marketing bonus that pushes firms to construct buildings that are more sustainable than they would have otherwise (Environ. Sci. Technol. 2014, DOI: 10.1021/es4042447).

Groups that award ecolabels aim to inform consumers of the sustainability of products, create a competitive advantage for the greenest items, and eventually push less environmentally friendly products out of the market. “The big question for ecolabels is whether they change behavior, or are they simply rewarding behavior that would have happened anyway,” says Paul F. Steinberg, a political scientist at Harvey Mudd College, who was not involved in the study.

Daniel C. Matisoff, an economist at Georgia Institute of Technology, and his colleagues wanted to study this question by looking at the Leadership in Energy & Environmental Design program (LEED) run by the U.S. Green Building Council. The council awards LEED certification to construction projects based on standards, such as use of sustainable building materials or the resulting building’s efficient use of energy and water. A LEED-certified building can boost the owner’s profits through energy efficiency and premium rental rates supported by LEED’s marketing cachet. But Matisoff wanted to know how much builders seek ecolabels to verify the building’s performance versus signaling a marketable image or status.

For their analysis, the researchers looked at the point scores for 5,238 new construction projects from the LEED database. A construction project can earn up to 69 points via one version of LEED scoring, depending on how far it goes to save energy, water, and materials. A project receives basic certification if it earns 26 points. But there are three higher levels of certification. At 33, 39, and 52 points, a building can achieve a silver, gold, or platinum certification.

Matisoff’s team developed an economic model to predict how the projects would be distributed across LEED scores based on a building owner’s goals. If builders were only interested in profits linked to efficient use of resources, the distribution of buildings across LEED scores would be smooth. However, if builders were primarily interested in the marketing advantage of a glittering LEED grade, then the researchers would expect to see clusters of buildings just above the threshold needed to meet each certification level.

When the economists plotted the number of buildings attaining each LEED point score, they saw clumps of projects just above the four thresholds. When the team compared the observed chunky distribution to an estimated smooth one, they calculated that about 15 to 20% of the buildings moved up past the next highest threshold to take advantage of the better marketing cachet.

Basically, firms “build greener buildings to take advantage of the marketing benefits conferred by the certification thresholds,” Matisoff says. He adds that the data suggest that the multiple levels for this ecolabel spur competition among builders to plan more and more efficient buildings.

Harvey Mudd’s Steinberg agrees, saying the study “shows that the LEED thresholds change behavior because people are stretching to gain points to make the threshold.” The fact that this ecolabel influences builders’ behaviors is extra impressive, because building and construction is one of the world’s largest industries, he says.