Study Finds Employee Productivity Edge for Environmentally Savvy Companies0

Rachel Nuwer | Fri Sep 14 2012

Companies seeking to increase their employee productivity may consider adopting green practices. A new study found that businesses that abide by international environmental standards enjoy a 16 percent advantage in productivity compared to their plastic-tossing, AC-blasting counterparts.

“There’s this traditional view that investment in environmental management practices would be costs that the firm would incur with no benefit,” says study co-author Magali Delmas, an environmental economist at the University of California, Los Angeles.

But in recent years, she explains, researchers and green-minded businesses have challenged this notion by noting that reducing energy use or waste streams can also help cut costs. For some companies, smart environmental management can also reduce risks. Oil spills, for example, are costly to clean up and hurt a businesses’ reputation.

While analysts have tracked these benefits, few have quantified how green practices influence employee work, productivity and overall satisfaction. Delmas and co-investigator Sanja Pekovic set out to fill this gap and add to the mounting evidence that it “pays to be green,” Delmas says.

Measuring “greenness”

The researchers borrowed data from a French employer-employee survey that included around 10,600 employees at over 5,000 firms. The survey contained information about each firm’s environmental orientation, its level of employee training and degree of interpersonal contacts between employees in the company, and its costs and profits.

They measured a companies “greenness” based upon whether it conformed to organic labeling, fair trade certification or the International Organization for Standardization’s ISO 14001 for environmental management. To assess productivity, they took the logarithm of company revenue minus costs and divided that figure by the number of employees to yield the average value of production per employee.

They discovered that green firms outperformed the norm by one standard deviation, or 16 percent, on average. Part of this difference may stem from the environmental management training – ISO 14001 training includes interdepartmental collaboration and mingling, for example – but the higher performing companies also tended toward a larger trend of better management and company culture overall. “These companies have a cluster of good practices, like more training and better relationships among employees,” Delmas says. “These are companies that people want to work for.”

Committed employees

The environmentally conscientious sports clothing company Patagonia, for example, receives around 900 applications for every job opening they advertise. Businesses like Patagonia are able to select the best possible candidates who are committed to their point of view and enthusiastic about working for them, which creates a cycle of better practices leading to better employees and thus to higher productivity. The green principles fit in well with such businesses’ goals since “these are companies with managers who are looking forward to the future and planning on the longer term.” Though greenness rests in the realm of correlation rather than causation, Delmas thinks it is still a significant factor in bolstering employees’ commitment to their employer.

Whether other businesses could simply adopt green practices and expect to see a bump in productivity is “still an open question,” she says. Adopting an international standard should help, however, since its in-depth training on how an employee’s daily choices impact the company and the environment reflects positively on the business’ values and degree of caring. “An employee may feel more committed to the company and work more,” Delmas says.

Delmas says the cycle of benefits generated from adopting a green baseline could apply to businesses around the world. “I don’t think we’re looking at anything that is really so specific to the French,” she says.