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The Gold Rush: The Popularity of the “Gold” Tier in LEED Certification
... This is even more the case in developing countries, where air pollution causes serious health consequences due to high industrial growth (Khoshnevis Yazdi & Khanalizadeh, 2017). Although there exist different building assessment tools, such as CASBEE (Japan), BREEAM (United Kingdom), DGNB (Germany), Green Star (Australia) and Green Mark (Singapore) 1 , LEED symbolizes a highly prominent type of EI and is a priority for CS scholarship and practice (Gauthier & Wooldridge, 2012;Sandoval & Prakash, 2016;York et al., 2018). LEED was developed in 1998 by the 1 For a comparative review of the different certification systems for green buildings please refer to Suzer (2015) and Gou & Xie (2017). ...
... There are four main categories of LEED buildings: platinum, gold, silver and certified (Berardi, 2012). All of these ensure sustainable facilities that are well above average, but gold certified buildings are the most common (Sandoval & Prakash, 2016). As EIs often require high investments (Ramus & Montiel, 2005), executives who adopt LEED provide tangible proof of their change agency (Eichholtz et al., 2016). ...
... As highlighted by Edwards (2006) in their UK-based study, LEED buildings can galvanize competitiveness beyond energy cost reductions. In this vein, LEED has been analysed to understand whether it really M A N U S C R I P T A C C E P T E D ACCEPTED MANUSCRIPT 9 does promote safer environments, leading to improved employee productivity, retention rates and financial results (Eichholtz et al., 2016;Hoffman & Henn, 2008;Sandoval & Prakash, 2016). ...
By integrating and diffusing environmental innovations (EIs), executives act as important change agents who promote the corporate sustainability (CS) agenda. This article borrows a sensemaking lens to examine the influences behind executives’ adoption of Leadership in Energy and Environmental Design (LEED), a prominent EI for building sustainability. Through qualitative fieldwork with 30 local executives deliberately adopting LEED and operating in the Bangladeshi apparel
industry, this article reveals that the executives are driven by collective influences, that is, homogeneous assumptions co-created in their social circle. It also demonstrates that the executives translate these assumptions in line with individual influences, ultimately displaying four distinct sensemaking patterns and investing differently. While highlighting the importance of analysing EIs in specific industries in
developing countries from the perspective of the chief change agents in the firm, this article contributes to the on-going conversations on EI adoption in the CS literature.
... The increasing LEED scores appear associated with improvements in environmental performance, a key requirement of a RTT. However, multiple mechanisms could explain this trend (Sandoval & Prakash, 2016). On the one hand, the trend toward higher tiers could arise from increasingly substantive adoption, as real estate developers compete to be greener over time. ...
... Over time, experience with and the availability of green building technologies have lowered barriers to certification (Simcoe & Toffel, 2014). As a result, higher tiers of LEED certification become more feasible, and the distribution of LEED scores shifts upward toward higher tiers (Sandoval & Prakash, 2016). Moreover, there are practical returns to adoption and verification of environmental quality at LEED scores between the tiers (Eichholtz, Kok, & Quigley, 2013). ...
Does voluntary participation in eco‐certification become more substantive over time, or less? Although past research on voluntary programs suggests that later participants are more likely to greenwash by only symbolically adopting voluntary standards, theories of regulatory competition suggest a possible “race to the top.” We argue that participation in voluntary programs can facilitate competition that enables a race, and we advance a theory of self‐regulatory competition to explain dynamics of participation in voluntary environmental programs. Under this perspective, environmental self‐regulation may facilitate a race to the top, despite possibilities for purely symbolic adoption. Analyzing data from a voluntary green building certification program in the United States, we introduce a methodology to distinguish propensities for symbolic certification from more substantive environmental performance. Data demonstrate that later adopters invest additional resources to attain higher certification, becoming greener and suggesting a race to the top in a voluntary greenbuilding certification program.
... The increasing LEED scores appear associated with improvements in environmental performance, a key requirement of a RTT. However, multiple mechanisms could explain this trend (Sandoval & Prakash, 2016). On the one hand, the trend toward higher tiers could arise from increasingly substantive adoption, as real estate developers compete to be greener over time. ...
... Over time, experience with and the availability of green building technologies have lowered barriers to certification (Simcoe & Toffel, 2014). As a result, higher tiers of LEED certification become more feasible, and the distribution of LEED scores shifts upward toward higher tiers (Sandoval & Prakash, 2016). Moreover, there are practical returns to adoption and verification of environmental quality at LEED scores between the tiers (Eichholtz, Kok, & Quigley, 2013). ...
Firms invest in green building to capture performance benefits and non-performance reputational benefits associated with green certification. Using Leadership in Energy and Environmental Design (LEED) certification data, the extent to which firms invest additional resources to attain a greater non-performance signal through higher levels of certification is observed in a multi-tier setting, as firms earn higher LEED scores to achieve a higher certification and provide a greener signal to stakeholders, with evidence of additional investments to accrue stronger signals occurring across all sectors. Over time, as the market becomes more crowded, signaling becomes less pronounced, particularly at the higher certification levels. Further, while buildings certified just above the highest thresholds cluster spatially, overall trends suggest decreasing clustering of non-performance signaling as the market becomes more crowded. Together, these findings provide a nuanced view of competitive pressures in green signaling.
... LEED (Leadership in Energy and Environmental Design) is one of the main rating systems implemented in Costa Rica by developers and corporations that have included it as a requirement for their work centres. Sandoval and Prakash (2016) emphasise the importance of having a LEED Gold certification in construction projects: "LEED is not the only green building program. Other programs offer similar certification, specifically Green Globes. ...
Population growth has increased climate impact and it is one of the reasons for the conception of sustainable management. Sustainability management has become an integral part of the business environment and decision-making processes. It is important to mention that construction sectors represent one of the main polluters. This article introduces the path for Costa Rica in the last five years in terms of development and the increasing number of companies with green building certification. Interviewing the professionals with vast experience in the sustainable sector is the tool used to compile the current situation of Costa Rica and the journey through this path as a pioneer in Latin America and the Caribbean. The study explores the situation lived by the companies in Costa Rica to set their projects according to the regulations established by the authorities in the sustainable management field and examines the position of the governmental authorities as a barrier or a facilitator. Therefore, this article aims to contribute to the discussion about the status of sustainability management in Costa Rica in the last five years as the scope of the investigation.
... Therefore, the results reveal the popularity of Silver and Gold under other certification schemes, with 33% and 56%, respectively, for LEED-EB (Cheng and Ma 2015) and with 38% and 35%, respectively, for LEED-NC (Wu et al. 2017). As concluded by Sandoval and Prakash (2016), the popularity of Silver and Gold is due to the best cost-benefit ratios, wide range of experience of the building practitioners, and more reasonable time frames associated with these certification levels. ...
Leadership in Energy and Environmental Design Commercial Interiors (LEED-CI) is more relevant to interior design, which, according to the sharing layer concept, differs from exterior design (which is usually evaluated with the LEED New Construction sub-scheme). LEED-CI requires separate empirical analyses of LEED-CI certified buildings to further improve this sub-scheme. Therefore, in this study, Silver and Gold projects certified under LEED-CI-2009 in 14 US states were considered. Three project performance analyses, (i) certification, (ii) category, and (iii) cross-certification, were studied. The following results were revealed: (i) the range of the medians for Silver- and Gold-certified projects were 51–57 pts and 62–71 pts, respectively; (ii) in both Silver- and Gold-certified projects, Sustainable Sites (SS), Water Efficiency (WE), and Innovation in Design (ID) were the best-performing; Energy and Atmosphere (EA) and Indoor Environmental Quality (EQ) were intermediate-performing; and Material and Resources (MR) was the worst-performing categories; and (iii) in Silver-Gold cross-certification, category-focused (in 10 of 14 states) and category-unfocused (in four of 14 states) strategies were determined; in the category-focused strategy, the highest popular category was EA; the intermediate popular categories were WE, MR, and ID; and the lowest popular category was SS. Pooling all projects and all states into one frame can lead to the obscurement of the actual LEED-CI-2009 strategy(ies) in the transition from Silver to Gold certification in the US.
... Similar results were reported by other researchers (Fuerst 2009;Wu et al. 2016;Wu et al. 2017;Pushkar and Verbitsky 2018). It may be suggested that building practitioners prefer to pay for a certification level rather than for proper green building performance, as was originally suggested by Sandoval and Prakash (2016). ...
This study aims to evaluate the Silver-to-Gold LEED-NC 2009 (Leadership in Energy and Environmental Design for New Construction and Major Renovations) cross-certification performance and categorize the cross-certification performance in eight US states in 2012–2017. The following three statistical analyses were used: (a) pooling LEED projects within a single state and single year in a single-state-year group with the subsequent use of a replication method, (b) pooling the medians of the LEED projects in each state from all years in a state-and-total-years group, and (c) pooling the LEED projects from all states and years in a total states-and-years group. The Silver-to-Gold cross-certification performance has a low propelling effect. Considering the Silver-to-Gold category cross-certification performances, the Energy and Atmosphere (EA) category has a high propelling effect, the Sustainable Sites (SS) and Environmental Quality (EQ) categories have moderate propelling effects, the Water Efficiency (WE), Materials and Resources (MR), and Innovation in Design (ID) categories have low propelling effects. Six of the eight states used an EA-high emphasized strategy, and two of the eight states used a SS/EA/WE/EQ/ID-moderate emphasized strategy. The single-state-year group and state-and-total-years group analyses are more robust than the pooling LEED projects using the total state-and-year group analysis.
... ese results can be approximately correlated with the results presented by Cheng and Ma (2015) for EB projects certified in 2010-2015 (33% and 56% of Silver and Gold certification projects, respectively). e popularity of the Silver and Gold certification levels was explained by several reasons related to the practice of these levels, including a better cost/benefit difference, more experienced building practitioners, and reasonable time frames (Sandoval and Prakash 2016). ...
The Leadership in Energy and Environmental Design (LEED) for New Construction and Major Renovations v3 (NC) and LEED for Existing Buildings: Operations and Maintenance v3 (EB) schemes were studied to examine the application of the shearing layer concept to green buildings. The manners in which (i) rating systems in their current configurations and (ii) certified projects in their practical applications treated the long life-expectances in buildings and short life-expectancies in systems were questioned. To maximally reduce nondemonic intrusion, we studied only those states in the United States in which statistically viable numbers of projects had been completed in 2016. A two-way mixed analysis of variance (ANOVA) model was used to evaluate the interaction between two types of buildings (i.e., NC vs EB) and two sets of sub-layers (i.e., Site, Structure, and Skin from the Building layer and Services, Space Plane, and Stuff from the Service layer). The discrepancy in the case of a new building and the similarity in the case of a renovated building between rating schemes and certified projects were revealed: (i) the NC rating scheme prefers to emphasize the Service layer (SL), whereas newly constructed projects prefer to emphasize the Building layer (BL) due to the high performance of the Site and Structure sub-layers; (ii) the EB rating scheme prefers to emphasize the Service layer, as do renovated building projects, due to the high performance of the Stuff sub-layer.
... These results are associated with the results presented by Wu et al. (2017) (38% and 35% of Silver and Gold projects, respectively), who studied the same LEED version from 2010 to 2015. Several reasons for the preference for both Silver and Gold certification by building practitioners were revealed by Sandoval and Prakash (2016), who concluded that the Silver and Gold certifications have better benefit-cost ratios, building practitioners have the most experience with these levels and the levels can be attained within reasonable time frames, etc. ...
The Leadership in Energy and Environmental Design (LEED) rating system has been widely used in the US. However, until now, there has been no clear understanding of the strategies that should be used to make the transition from Silver to Gold certified projects. The aim of this study was to determine the trends in certified projects for both Silver and Gold LEED for New Construction and Major Renovations (LEED-NCv3) in 2016. Three performances, including (i) certification, (ii) category/subcat-egory/sub-subcategory certification, and (iii) cross-certification, were evaluated for both Silver and Gold LEED-NCv3 certified projects. For an ordinal measurement scale, a two-tailed Mann-Whitney U test was used. For a ratio measurement scale, an unpaired two-tailed t-test was used. If eight or more Silver and Gold certified projects occurred in the same state, then the state was selected for statistical analysis. As a result, ten states were selected. The following was revealed: (i) low certification performances for both Silver and Gold; (ii) high category performance for Sustainable Sites and Innovation in Design and low category performance for Energy and Atmosphere for both Silver and Gold projects; and (iii) three different strategies of certified projects in transition from Silver to Gold that include (a) energy-emphasized (e.g., CA), (b) non-energy-emphasized (e.g., NY), and (c) integrated (e.g., GA) strategies. We speculate that the possible reasons for such deviations in the decision strategies were due to differences between the adopted ASHRAE 90.1 standards (ASHRAE Standard 90.1 2007 or ASHRAE Standard 90.1 2010) in each of the states.
Despite pressing attention on construction waste management (CWM) issues, low rates of construction waste (CW) reuse and recycling (R&R) remain a limitation in construction projects. In recent years, Building Information Modeling (BIM) has gained momentum for CWM purposes; its data-richness, visualization, and simulation capabilities provide an opportunity to enhance CW R&R planning at the project level. In this context, this study proposes temporal-based algorithms integrated with 4D-BIM for the planning of concrete and drywall waste R&R throughout construction projects. Two case studies from Central Texas were used for the demonstration of the algorithms, and estimates were validated with ground truth data and literature values from different projects in North America. The overarching objective of the proposed algorithms is to streamline estimation and visual planning of CW for on-site reuse, and off-site recycling – therefore promoting a more proactive and schedule-based CWM plan. In addition, the approach improves team communication around CWM goals of the project. Moreover, through the use of 4D-BIM, on-site waste reuse opportunities are planned in advance, thus, improving resource recovery and minimizing waste disposal in landfills.
We study the role of vertical differentiation in the adoption of LEED (Leadership in Energy & Environmental Design), a multitier environmental building certification system. Our identification strategy relies on the timing of adoption and shows that builders seek to differentiate from each other by choosing a different certification level from previously certified buildings. A common concern in this framework is that mean-reverting behavior could be mistaken for differentiation. We develop a new method for establishing the importance of strategic interactions based on simulating from a model with independent choice and unobserved heterogeneity, and showing that such a model cannot generate the level of interaction that we observe. Finally, we estimate a model that incorporates both differentiation incentives and correlated market-level unobservables and use our estimates from this model to simulate the impact of reducing the number of LEED tiers from four to two. The simulations indicate that environmental investments depend on the location of the threshold between tiers.
This paper was accepted by Bruno Cassiman, business strategy.
Drawing on club theory, this study examines the challenges and opportunities facing a sustainability certification program, the Green Key scheme, in terms of its recruitment and retention of members within the Dutch tourism and hospitality industry. Extant literature on sustainability certification in this industry tends to focus narrowly on motivations and retention problems at the firm level, or else on drivers of or barriers to the adoption of sustainability certification schemes. The links between scheme design characteristics and scheme effectiveness and their implications for recruitment and retention thus have remained relatively unexamined. To address this gap, this study proposes a theoretical framework that highlights how different design features of sustainability certification schemes might inform the recruitment and retention challenges that scheme managers often face
The study aims to evaluate the correlation between building layer (BL) and service layer (SL) (i.e., shearing layer concept) in the (i) design of new buildings under the LEED-NCv3 rating scheme and (ii) renewal of existing buildings under the LEED-EBv3 rating scheme. To decrease the influence that green policy, which can change over several years, has on the Energy and Atmosphere category of LEED, LEED-certified projects were selected exclusively from the US over the course of a year. The total number of LEED certified projects analyzed was 594. These projects were nested into 32 groups (eight US states × two types of buildings × two LEED certification levels). In 19 of 32 groups, reciprocal negative correlations between BL and SL were observed. The following three design strategies, BL-emphasized, SL-emphasized, and random, were identified. It was concluded that LEED rating schemes should be enhanced by emphasizing long time expectancy BL design strategies.
This paper investigates the effect of eco-labeling on the occupancy rates of commercial offices in the United States. The occupancy rates of LEED and ENERGY STAR-labeled offices are compared to a sample of non-labeled offices. Using OLS and quantile regression analyses, a significant positive relationship is found between occupancy rate and the eco-label. Controlling for differences in age, height, building class, and quality, the results suggest that occupancy rates are approximately 8% higher in LEED-labeled offices and 3% higher in ENERGY STAR-labeled offices. However, for ENERGY STAR-labeled offices, effects are concentrated in certain market segments.
This study provides some comparison data on Energy Star and Leadership in Energy and Environmental Design (LEED) -certified buildings versus non-Energy Star or non-LEED-certified office property in the United States using the CoStar database. These results are promising for the benefits of investment in sustainable real estate, energy savings, and for the green movement now sweeping our society. The payoff from wise green investment is easy to justify even if it is based on purely profit motivations.
International growth in the built environment' s sustainability and energy efficiency initiatives command that the UK' s " green" commercial real estate sector be placed in an international context. We investigate the financial performance of London' s BREEAM rated office buildings over the 2000-2009 period. Specifically, this study is the first to report the effects of rental contract features and " green" building competition on certified premiums in the market. Results from this analysis have three implications. First, there is a positive impact of a building' s green characteristics on rental and sales transaction prices per net square meter in the order of 21 and 26 percent, respectively. However, these premiums could be moderated further with third party controls for building quality, a hedonic variable not widely disseminated in the UK. Secondly, rental contract features, i.e. lease term and rent free period, and market signals, i.e., days on market, have a moderating effect on returns to BREEAM certified rental prices, decreasing rental premiums by about five percentage points. Lastly, the expanding supply of BREEAM certified buildings, within a given micro-location, has a positive impact on rents and prices in general, but moderates the BREEAM premium further. Consequently, competition in " green" building markets decreases premiums in the rental and transaction markets by, three and one percentage points, respectively. Our analysis implies that future studies should incorporate third party building quality measures, rental contract features and competition measures in the empirical analysis of " green" commercial real estate. Financial support for this research has been provided by the European Center for Corporate Engagement (ECCE) and the Royal Institute for Chartered Surveyors (RICS). We are grateful to Thomas Saunders, Martin Townsend and Scott Steedman of BRE Global for assistance in collecting and interpreting BREEAM data used in this analysis. In addition, we are thankful for the comments and contributions of William Strange and Jaap Bos. Lastly, Valentin Voigt and Ignas Gostautas provided excellent research assistance.
Green building rating systems serve multiple functions: they define the attributes of green buildings, provide tools for environmental assessment and include specific interventions intended to promote market transformation. These goals are often complementary, but can also create tensions in the design and application of rating systems. Recent patterns and trends are considered for projects certified using LEED-NC and LEED-EBOM (new construction and existing buildings, respectively) rating systems. New data are presented on (1) patterns and trends in on-going market transformation (credit achievement, levels of certification and types, geographic distribution of project, etc.) and (2) the design and revision of the LEED rating system based on broad patterns of engagement and the achievement of individual credits. The data indicate strong regional and temporal variation in green building activity. The flexibility of LEED has allowed a diversity of credit achievement patterns. Information on these market-based patterns and trends can be used to balance the need for market engagement with the mission to raise standards over time. Patterns and trends for different locations can stimulate discussion of different markets and the most effective approaches for their transformation.
Research on climate change suggests that small improvements in the "sustainability" of buildings can have large effects on greenhouse gas emissions and on energy efficiency in the economy. This paper analyzes the economics of "green" building. First, we analyze a panel of office buildings "certified" by independent rating agencies, finding that large recent increases in the supply of green buildings and the unprecedented volatility in property markets have not significantly affected the relative returns to green buildings. Second, we analyze a large cross section of office buildings, demonstrating that economic premiums in rent and asset values are substantial. Third, we relate the economic premiums for green buildings to their sustainability, confirming that the attributes rated for both thermal efficiency and sustainability contribute to premiums in rents and asset values. Even among green buildings, increased energy efficiency is fully capitalized into rents and asset values.
The increased awareness of building energy consumption and sustainability has resulted in the development of various means of predicting performance and rating sustainability. The Building Research Establishment Environmental Assessment Method (BREEAM) and Leadership in Energy and Environmental Design (LEED) are the most commonly used Performance Rating Systems. To predict energy consumption and award relevant energy performance credits, these systems use computer-based Building Performance Simulation tools (BPS). Predictive inconsistencies between BPS tools have been acknowledged in various studies. The probability of achieving different ratings by using different BPS tools or rating systems raises questions concerning the ability to rate ‘sustainability’ in a consistent manner. To investigate this, a case-study based inter-model comparative analysis was implemented to examine the extent of the variation in the results produced by three of the most widely used BPS tools (Tas, EnergyPlus and IES), and assess their influence and impact on overall BREEAM and LEED scores. Results showed that different simulation tools resulted in different energy consumption figures, but had only a minor effect on BREEAM or LEED energy performance credit scores. Nonetheless, due to the differences between BREEAM and LEED assessment procedures, the case study building was awarded a considerably different rating level in each.
This study explores the development of communitarian regulation in the American chemical industry by focusing on the history and challenges facing Responsible Care, the leading example of regulation by an industry association on the environmental scene today.
Stakeholders who seek to reward or punish businesses for their environmental programs often cannot observe these organizations’ internal policies and operations. To address these informational problems, and signal their beyond-compliance environmental commitments, some businesses are participating in voluntary environmental programs (VEPs). This article examines whether business managers associate the brand value of VEPs – due to their differing program sponsors – with the perceived preferences of their critical stakeholders. Drawing on a novel data set of nearly 300 organizations, we assess business’ participation in 19 government- and industry-sponsored VEPs. We find that managers who recognize the importance of stakeholder influences on their business’ environmental practices are more likely to participate in a VEP but that pressures from different stakeholders are associated with variations in organizations’ participation in either government- or industry-sponsored VEPs.
This article analyzes investment trends for Leadership in Energy and Environmental Design- and Energy Star-certified buildings in the United States with a view towards deriving clues for expected future developments in the face of the current economic downturn. Empirical studies have found sales and rental price premiums of varying magnitudes, which is confirmed by a simple analysis of the post-2000 Class A office market segment. No significant difference is found for the average time to sale for eco-certified buildings. Furthermore, eco-certified buildings exhibit the growth rates typical of innovative products with particular spatial foci adopting the new product more rapidly than the rest of the country. The analysis of credit scores and certification level suggests that scores cluster around the lower boundaries of each certification level suggesting that the principle of least effort also applies to eco-certifications. Overall, the available data do not indicate a trend reversal due to the economic downturn and further growth of this market segment appears likely.
We study the role of vertical differentiation in the adoption of LEED (Leadership in Energy & Environmental Design), a multitier environmental building certification system. Our identification strategy relies on the timing of adoption and shows that builders seek to differentiate from each other by choosing a different certification level from previously certified buildings. A common concern in this framework is that mean-reverting behavior could be mistaken for differentiation. We develop a new method for establishing the importance of strategic interactions based on simulating from a model with independent choice and unobserved heterogeneity, and showing that such a model cannot generate the level of interaction that we observe. Finally, we estimate a model that incorporates both differentiation incentives and correlated market-level unobservables and use our estimates from this model to simulate the impact of reducing the number of LEED tiers from four to two. The simulations indicate that environmental investments depend on the location of the threshold between tiers.
This paper was accepted by Bruno Cassiman, business strategy.
The one-stop guide for choosing a green building rating system. Today, sustainability is a growing concern for the architects, designers, builders, and owners of commercial and residential buildings. Meeting the requirements of a rating system provides a metric to evaluate and set priorities. But the variety and complexity of methods available to assess the eco-friendliness of a building can seem overwhelming. Guide to Green Building Rating Systems informs readers about the rating system selection process. Comparing essential issues such as cost, ease of use, and building performance, this book offers solid guidance that will help readers find the rating system that best fits their needs. This easy-to-follow reference includes: An overview of the major national rating systems, including LEED®, Green Globes®, the National Green Building Standard, and ENERGY STAR®. An in-depth look at each rating system, including its evolution, objectives, point structure, levels of certification, benefits, and shortcomings. How the ratings systems work for different types of buildings-commercial, multi-family residential, and single-family residential construction. Illustrated case studies from different climate regions with project descriptions, cost data, and lessons learned by design teams, constructors, and owners. An overview of local, regional, and international rating systems. Guide to Green Building Rating Systems demystifies complex material, making this book an essential reference for building professionals engaged in, or wishing to pursue, sustainable building practices.
This study examines the effect of Leadership in Energy and Environmental Design (LEED) ratings and certification levels on Assessed (AV) and Market Values (MV), while controlling for a property's characteristics and its location. The overall dataset was developed by combining information from CoStar Group, U.S. Green Building Council (USGBC), and local Assessors/Treasurer. The results indicate that ENERGY STAR designation increases AV and MV substantially. The effect of LEED rating/level on both of these values (AV and MV) can be differentiated based on the level of geographic aggregation. LEED-Existing Building (EB) designation at the Gold level has a strong positive effect on AV, while LEED-EB at the Silver level has a similar effect on both AV and MV. This effect is absent among all LEED-EBs, when controlling only for MSAs. LEED-New Construction at the Gold level has a strong positive effect on MV, while LEED-Core & Shell at the Gold and Silver levels almost doubles that effect on AV, when controlling for MSAs.
The matter of environmental concern prioritization integrated into globally used green building rating systems is a fundamental issue since it determines how the performance of a structure or development is reflected. Certain nationally-developed certification systems are used globally without being subjected to adjustments with respect to local geographical, cultural, economic and social parameters. This may lead to a situation where the results of an evaluation may not reflect the reality of the region and/or the site of construction. The main objective of this paper is to examine and underline the problems regarding the issue of weighting environmental concerns in the Leadership in Energy and Environmental Design (LEED) certification system, which is a US-originated but globally used assessment tool. The methodology of this study consists of; (i) an analysis of the approach of LEED in the New Construction and Major Renovations scheme in version 3 (LEED NC, v.3) and the Building Design and Construction scheme in version 4 (LEED BD + C, v.4), (ii) case studies in which regional priority credits (RPCs) set by LEED for four countries (Canada, Turkey, China and Egypt) are criticized with respect to countries’ own local conditions, and, (iii) an analysis of the approaches of major environmental assessment tools, namely; BREEAM, SBTool, CASBEE and Green Star, in comparison to the approach in LEED, regarding the main issue of this paper. This work shows that, even in its latest version (v.4) LEED still displays some inadequacies and inconsistencies from the aspect of environmental concern prioritization and has not yet managed to incorporate a system which is more sensitive to this issue. This paper further outlines the differences and similarities between the approaches of the aforementioned major environmental assessment tools with respect to the issue of concern and the factors that should be integrated into future versions of LEED.
This paper investigates the relationship between operating expenses and rents of Energy Star and LEED certified buildings in the Central and Eastern United States. Several studies have shown that sustainable buildings command a rent premium compared to comparable conventional buildings. Lower operating expenses are expected to be a major source of the rent premium that sustainable buildings command. This is especially the case for buildings with triple-net leases, where tenants directly benefit from savings in operating costs. For a large dataset of U.S. office buildings this study finds significantly lower operating expenses in LEED certified buildings. However, savings in operating expenses only explain part of the rent premium. Additional factors must be at work. Surprisingly, we find significantly higher operating expenses in Energy Star rated buildings. Hence, intangible benefits appear to be the major source of rental premiums of Energy Star rated buildings.
This study explores the dynamic nature of premia for energy-efficient design in the market for office space. Stationary premia for Energy Star- and Leadership in Energy and Environmental Design (LEED)-certified property transactions are estimated at 16.4 and 10.6% respectively, on a price per square foot basis. We provide evidence to suggest that these premia should not be uniformly applied to all properties, but that adjustments should be made to account for individual property characteristics and changing market conditions. In particular, variance in the premia for Energy Star-labelled assets is consistent with expectations for the actual impact on operating expenses. Premia for LEED-certified properties are more responsive to the expected marketing benefits accrued by tenants. LEED premia are increasing with market acceptance during the sample period, rather than decreasing as the novelty effect expires. Investment in both categories of property with energy-efficient design is increasingly advantageous during periods when office market conditions have softened.
Leadership in Energy and Environmental Design (LEED) is the most widely recognised green building assessment system in the United States but is increasingly criticised for only rewarding incremental solutions towards sustainability. With differing perceptions of how green building is best achieved, here we focus on how geographical context and reuse of existing buildings are rewarded. The conceptual framework for our analysis draws upon a light green/deep green dichotomy in sustainability and architectural design. While a light green perspective achieves reduced energy consumption and pollution through technology and green gadgetry, a deep green approach focuses on local geographic conditions to work with natural climate systems through design informed by vernacular architecture, as well as the benefits of adaptive reuse. This study uses a descriptive case study analysis of LEED credit points earned in six certified buildings in Denver and Boulder, Colorado. Our analysis confirms that LEED rewards more light green approaches. There is limited motivation in pursuing sustainability through deep green methods, as recognition of them in LEED is quite minimal. We conclude that the balance against rewarding deep green design limits more transformative paradigm-shifting advances in sustainability. Recommendations for improvements to LEED are given, as well as a discussion on emerging local governance in regulating green building. This paper contributes to the emerging body of literature focusing on green building as a mechanism of urban sustainability, and draws up the geographic perspectives of scale, place, and the political and economic linkages between humans and the environment in cities.
Green building adoption is driven by both performance-based benefits and marketing based benefits. Performance based benefits are those that improve performance or lower operating costs of the building or of building users. Marketing benefits stem from the consumer response to green certification. This study illustrates the relative importance of the marketing based benefits that accrue to Leadership in Energy and Environmental Design (LEED) buildings due to green signaling mechanisms, specifically related to the certification itself are identified. Of course, all participants in the LEED certification scheme seek marketing benefits. But even among LEED participants, the interest in green signaling is pronounced. The green signaling mechanism that occurs at the certification thresholds shifts building patterns from just below to just above the threshold level, and motivates builders to cluster buildings just above each threshold. Results are consistent across subsamples, though non-profit organizations appear to build greener buildings and engage in more green signaling than for-profit entities. Using nonparametric regression discontinuity, signaling across different building types is observed. Marketing benefits due to LEED certification drives organizations to build "greener" buildings by upgrading buildings at the thresholds to reach certification levels.
Socially responsible activities help create business value, develop strategic resources, and insure against risks, but also cost money and distract management. These prior findings are mainly based on established corporations and may not extend to new ventures in which the liability of newness may suppress some positive effects and amplify some negative impacts of socially responsible activities. New ventures whose strategic decisions have a long-term orientation, however, are able to counteract their liability of newness and thereby generate net positive economic returns. We tested these relationships by surveying the chief executive officers and presidents and studying the signature Web sites of 149 new ventures.
Given the increasing interest in sustainability within the academy, government, and the private sector, it is important to know the extent to which steps currently being taken towards sustainability differ from place to place. Namely, this paper seeks to determine the existence of a spatial pattern in the implementation of the U.S. Green Building Council's (USGBC) Leadership in Energy and Environmental Design (LEED) standards. For example, is green energy used more often in one part of the country, or is water conservation practiced more heavily in one region? Variation among the implementation of various LEED certification categories and variation across space were both considered and found to be statistically significant. Variation among categories is more pronounced than variation among regions, especially when the most spatially specific subcategories are isolated and considered. Altogether, this study underscores the importance of place in the growing green building field, and underlines the need for more spatially sensitive certification standards.
This paper investigates the effect of eco-labeling on the occupancy rates of commercial offices in the US. The occupancy rates of LEED and Energy Star labeled offices are compared to a sample of non-labeled offices. Using OLS and quantile regression analyses, a significant positive relationship is found between occupancy rate and the eco-label. Controlling for differences in age, height, building class and quality, the results suggest that occupancy rates are approximately 8% higher in LEED labeled offices and 3% higher in Energy Star labeled offices. However, for Energy Star labeled offices effects are concentrated in certain market segments.
This paper treats programs in which firms voluntarily agree to meet environmental standards as “green clubs”: clubs, because they provide non-rival but excludable reputation benefits to participating firms; green, because they also generate environmental public goods. The model illuminates a central tension between the congestion externality familiar from conventional club theory and the free-riding externality familiar from the theory on private provision of public goods. We compare three common program sponsors—governments, industry, and environmental groups. We find that if monitoring of the club standard is perfect, a government constrained from regulating club size may prefer to leave sponsorship to industry if public-good benefits are sufficiently low, or to environmentalists if public-good benefits are sufficiently high. If monitoring is imperfect, an important question is whether consumers can infer that a club is too large for its standard to be credible. If they can, then the government may deliberately choose an imperfect monitoring mechanism as a way of regulating club size indirectly. If they cannot, then this reinforces the government’s preference for delegating sponsorship.Institutional subscribers to the NBER working paper series, and residents of developing countries may download this paper without additional charge at www.nber.org.
We examine the role of signaling and of intrinsic benefits in the adoption of the individual elements of the voluntary LEED (Leadership in Energy and Environmental Design) standards for green buildings. We use goodness-of-fit tests on data for all 442 LEED certified buildings and find that neither signaling nor pursuit of intrinsic benefits can independently explain the observed adoption pattern, but that a combination of the two factors can. We also find tentative evidence that the adoption decision is made sequentially: organizations first choose a level of certification (consistent with signaling), and then choose how many LEED elements to adopt given their chosen level of certification consistent with pursuing intrinsic benefits). We relate our findings to some open questions in the literature on diffusion of technology and draw implications for the design and the future development of similar voluntary standards and eco-labels.
This study investigates the price effects of environmental certification on commercial real estate assets. It is argued that there are likely to be three main drivers of price differences between certified and noncertified buildings. These are additional occupier benefits, lower holding costs for investors and a lower risk premium. Drawing upon the CoStar database of U.S. commercial real estate assets, hedonic regression analysis is used to measure the effect of certification on both rent and price. The results suggest that, compared to buildings in the same submarkets, eco-certified buildings have both a rental and sale price premium.
Can businesses voluntarily adopt progressive environmental policies? Most environmental regulations are based on the assumption that the pursuit of profit leads firms to pollute the environment, and therefore governments must impose mandatory regulations. However, new instruments such as voluntary programs are increasingly important. Drawing on the economic theory of club goods, this book offers a theoretical account of voluntary environmental programs by identifying the institutional features that influence conditions under which programs can be effective. By linking program efficacy to club design, it focuses attention on collective action challenges faced by green clubs. Several analytic techniques are used to investigate the adoption and efficacy of ISO 14001, the most widely recognized voluntary environmental program in the world. These analyses show that, while the value of ISO 14001's brand reputation varies across policy and economic contexts, on average ISO 14001 members pollute less and comply better with governmental regulations.
This book presents a theoretical treatment of externalities (i.e. uncompensated interdependencies), public goods, and club goods. The new edition updates and expands the discussion of externalities and their implications, coverage of asymmetric information, underlying game-theoretic formulations, and intuitive and graphical presentations. Aimed at well-prepared undergraduates and graduate students making a serious foray into this branch of economics, the analysis should also interest professional economists wishing to survey recent advances in the field. No other single source for the range of materials explored is currently available. Topics investigated include Nash equilibrium, Lindahl equilibria, club theory, preference-revelation mechanism, Pigouvian taxes, the commons, Coase Theorem, and static and repeated games. The authors use mathematical techniques only as much as necessary to pursue the economic argument. They develop key principles of public economics that are useful for subfields such as public choice, labor economics, economic growth, international economics, environmental and natural resource economics, and industrial organization.
Critics of SRI have said little about the integrity of corporate representations resulting in screening inclusion or exclusion. This is surprising given social and environmental accounting research that finds corporate posturing and deception in the absence of external verification, and a parallel body of literature describing corporate "greenwashing" and other forms of corporate disinformation. In this paper I argue that the problems and challenges of ensuring fair and accurate corporate social reporting mirror those accompanying corporate compliance with law. Similarities and points of convergence between social reporting and corporate compliance are discussed, along with proposals for reform.
This paper considers the relationship between energy-efficient design and the leasing/sales markets for commercial real estate.
An economic model is provided that considers lease rates and occupancy in simultaneous equilibrium. The behavior of both is
predicted to be influenced by efficient design attributes. Selling price is determined by both rents and occupancy; therefore
the impact of efficient design on commercial sales activity should be distributed through the leasing market. The model is
tested empirically using a national sample of sales and leasing data for class A office buildings. The evidence indicates
that “green” buildings achieve superior rents and sustain significantly higher occupancy. The improved performance in the
rental market is reflected in a significant premium for the selling price of Energy Star-labeled and LEED-certified properties.
KeywordsGreen design-Office-Leasing-Pricing
Built environment has a substantial impact on the economy, society, and the environment. Along with the increasing environmental consideration of the building impacts, the environmental assessment of buildings has gained substantial importance in the construction industry. In this study, an artificial neural network model is built to predict cost premium of LEED certified green buildings based on LEED categories. To verify the viability of the model, multiple regression analysis is used as a benchmarking model. After validating the prediction power of the neural network model, a global sensitivity analysis is utilized to provide a better understanding of possible relationships between input and output variables of the prediction model. Sustainable Sites and Energy & Atmosphere LEED categories were found to have the highest sensitivity in cost premium prediction. In this study, our goal was to reveal the significant relationships between LEED categories and the cost premium, and offer a decision model that can guide owners to estimate cost premiums based on sought LEED credits.
This paper examines participation in EPA's 33/50 program to assess the potential for voluntary environmental regulation to achieve improvements in environmental performance. The program's goal is to reduce the releases and transfers of 17 toxic chemicals by 50 percent between 1988 and 1995. The results indicate that the program has strong potential because large firms with the greatest toxic releases are most likely to participate. The results also identify a demand-based participation incentive, since participation rates are higher in industries with greater consumer contact. This suggests that public recognition is key to improving the success of voluntary environmental regulation.
This article examines the influence of patterns of emergence on the effectiveness of the Marine Stewardship Council (MSC)--a leading wild-capture fisheries certification program. Looking first at the origins and features of this program, direct effects are examined by describing the adoption of the scheme and the impacts of the fishery assessment process. In assessing broader consequences, the article examines patterns of adoption and certification effects that were not necessarily intended or anticipated. The article concludes that fisheries certification alone is unlikely to arrest the decline of fish stocks, and highlights the need for more research on the intersection of private and public efforts to address overfishing and environmental harm resulting from fishing.
For a long while, economists, like specialists in other fields, often took it for granted that groups of individuals with common interests tended to act to further those common interests, much as individuals might be expected to further their own interests. If a group of rational and self-interested individuals realized that they would gain from political action of a particular kind, they could be expected to engage in such action; if a group of workers would gain from collective bargaining, they could be expected to organize a trade union; if a group of firms in an industry would profit by colluding to achieve a monopoly price, they would tend to do so; if the middle class or any other class in a country had the power to dominate, that class would strive to control the government and run the country in its own interest. The idea that there was some tendency for groups to act in their common interests was often merely taken for granted, but in some cases it played a central conceptual role, as in some early American theories of labour unions, in the ‘group theory’ of the ‘pluralists’ in political science, in J.K. Galbraith’s concept of ‘countervailing power’, and in the Marxian theory of class conflict.
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