19 March 2013 — Australia has a productivity problem.  As the Productivity Commission reports, it seems to have gone backwards since the 1990s. Businesses, predictably, have blamed it on Labor’s Fair Work Act, red tape and federal-state wrangling.

But then, productivity is not the responsibility of workers – it’s up to managers. Australia’s poor productivity performance is an indictment of its management culture.

Consultants say companies are still struggling with issues like streamlining decision making, delegating and setting down systems to generate ideas. There is poor understanding of technologies, they have processes that don’t match technologies, and there is a lack of alignment, poorly trained staff and poor metrics and KPIs that are too easy to reach and fail to capture the performance of the organisation and managers.

Managers have to start looking at the way they’re working and they could start by considering a shift into a green building.

The IPD Green Property Index shows that green office buildings outperform the total office property sector. The index showed an annual total return of 10.6 per cent for Green Star rated, and 9.9 per cent for NABERS rated, office assets for 2012. That compares to the total office property sector, comprised of rated and non-rated assets, reporting an annual return of 9.7 per cent.

Further research suggests that improved productivity might make it a more attractive investment proposition.

A study by the University of San Diego and the CB Richard Ellis Group, which surveyed 154 buildings under CBRE’s management, totalling more than 4.8 million square metres and housing 3000 tenants in 10 markets across the US, found that respondents reported an average of 2.88 fewer sick days in their green office. About 55 per cent of respondents indicated employee productivity had improved.

Add to that the study by Sustainability Victoria and the Kador Group of 500 Collins Street in Melbourne, which has a 5 Green Star rating for Office Design – the first tall commercial building refurbishment in Australia to be so certified.

The study found there was a 39 per cent reduction in average sick leave days per employee per month, from 0.46 days before the move to 0.28 after the move. This resulted in a 44 per cent reduction in the monthly average cost of sick leave. There was also a 9 per cent improvement in the average typing speed of secretaries, and a significant improvement in overall accuracy and a 7 per cent increase in lawyers’ billings ratio, despite a 12 per cent decline in the average monthly hours worked by the lawyers. This would indicate that despite working less hours after the move, more of the lawyers’ time was spent on billable work. That’s evidence of productivity improvement.

How does a green building achieve that? Scientific studies cited here tell us there’s a strong link between the quality of the indoor air and the incidence of allergy and asthma symptoms. This is significant given that one in 10 adults in Australia have asthma. Also, higher concentrations of carbon dioxide, which indicate a lower rate of ventilation, can cause fatigue, headaches and increased risk of Sick Building Syndrome.

We’ve all heard the arguments for having green buildings. They use less resources, there’s reduced running costs and outgoings and there’s the opportunity for buildings to become more self-sufficient through black water/grey water treatment and cogen/trigen systems. Also, green buildings are more likely to attract and retain the best staff.

In theory, the productivity argument might make green buildings a more attractive investment proposition for business. If these studies are right, that’s where the real benefit of green buildings would lie.

But according to Jones Lang Lasalle businesses still don’t get it. They have yet to make the connection between building design and productivity. Business knows there will be lower energy costs, they just can’t get their head around productivity.
“There is a lack of fundamental understanding of technology and processes surrounding sustainable practices and solutions, resulting in ‘green’ outcomes often being overlooked in refurbishment or new building development, or at times, investments being made into areas that  do not yield strong cost or productivity benefits,’’ Jones Lang Lasalle writes.

“Businesses are becoming aware of the financial implications of occupying poor performing buildings in regards to energy, water and waste but their understanding of improvement process is still developing. The need for the ‘decision makers’ in these companies to have a better understanding of the link between financial implications and productivity, and productivity and green buildings should not be discounted.

“Bridging this knowledge gap will greatly help in the future of sustainable design, particularly in the context of company opinion and policy towards sustainability. Optimising employee productivity is a complex science. It needs to be considered more broadly taking into account the organisational and management context, an individual employee’s job satisfaction and the social work environment.

“A full assessment needs to integrate these elements, and to also include the remuneration and reward systems, location and industry and economic contexts that make these co-dependencies even more intricate.”

Indeed, businesses might be drawn to green buildings for some really basic reasons, not necessarily that sophisticated. One study, again from the University of San Diego and CB Richard Ellis, found that firms lease green space simply because green buildings are usually higher-quality buildings, not necessarily because of cheaper costs. The study found that green buildings are more energy-efficient – with savings on electricity, gas, and water costs – when compared with their non-green counterparts. But it also found that the average total operating expenses of the green building group is higher than the non-green building group, albeit insignificantly. This suggests that Energy Star buildings may incur additional non–energy-related expenses.

Knight Frank puts it bluntly: “It is important to note…that it is often not necessarily cheaper to lease space within a ‘green’ building as although certain outgoings and running costs can be reduced, the other factors such as building grade, location and associated services often have a greater impact on cost than the reductions achieved.”

But what of the studies showing the links between productivity and green buildings? The truth is these studies are only a start. Some business might well shift to green buildings based on the evidence so far. But others will need more rigorous information.

As Richard de Dear, head of Architectural Design Science at the University of Sydney says, the impact of indoor environmental quality is exceedingly hard, if not impossible, to nail down simply because we have no universally accepted and valid measure of productivity itself. The findings of the studies cited here rely on self-reporting so they are subjective.

“If we spent our time producing ‘widgets’, then we would have no problem quantifying productivity and the environmental influences on it,’’ de Dear says. “But many of our most valuable human resources these days are knowledge workers (no widgets here!) and the quality of their work is often expressed in terms of creativity.

“So simplistic metrics like the number of widgets they produce are meaningless. At the end of the year the worker’s line manager probably conducts a performance review, and in that process the word ‘productivity’ will feature prominently, but in that context it refers to achievements across a whole year, so identifying what contribution the IEQ of their workplace had in enhancing or impeding their productivity is well nigh impossible.

“So, to summarise, field research with real workers in real office settings that isolates productivity benefits resulting from the physical environment is of questionable validity because objective performance or productivity metrics in office environments are dubious at best.”

de Dear says if there is research around, it is often not made available to researchers due to a reluctance of companies to release competitive or human resources information.

In other words, what’s missing here is some sort of empirical evidence showing businesses that if they spend X amount of money relocating to a green building, they’ll get X amount of productivity improvement. That’s the only way some will be able to justify the costs to their boards to invest in a green building.

More scientific research on this area might well see more business investment in green buildings. At the same time, there is some evidence suggesting there a link between a sustainable building and productivity. We just need to fill in the gaps.

Leon Gettler is a freelance business journalist, author and podcaster. He works for a range of publications and produces two podcasts for RMIT every week: Talking Business and Talking Technology. He has an acute interest in the environment, its impact on business and the response of businesses and governments.