Report Review – The Business Case for Green Building

By: Angelina Howard, IBE Student Intern

The Business Case for Green Building: A Review of Cost and Benefits for Developers, Investors, and Occupants from the World Green Building Council is now available. The report provides detailed information and case studies on Design and Construction Costs, Asset Value, Operating Costs, Workplace Productivity and Health, and Risk Mitigation. The following is a brief summary of  some of the key topics in the report.

Design and Construction Cost

According to research, green buildings do not cost more than conventional buildings that are built to code. Program management, environment and cost strategies help make building green cost effective, and increased upfront costs in green buildings are often offset by a decrease in long-term life cycle cost. Based on findings from various research studies, actual design and construction cost premium of green buildings have been documented to range from -.4% to 12.5%.  These studies included buildings from the US, UK, Australia, Singapore, and Israel for projects completed in 2000-2012.

The Perception Gap, The Business Case for Green
Building © 2013, pg. 26

There is a major perception gap but when it comes to design and construction cost. 

Some people believe that building green increases design and construction cost by approximately 10-20% (with some estimates as high as 29%) compared to the cost of conventional code-compliant buildings. However, design teams are challenged to deliver green buildings with conventional budgets. Figure 1 illustrates this perception gap.

Asset Value

The Asset Value for green buildings is increasing. Green buildings have begun to attract tenants and command higher rents and sale prices and investors and occupants are becoming more knowledgeable regarding the environmental and social impacts of the built environment. A lot of this is due to a building’s asset value. A building’s asset value has different meanings for the various stakeholders. Figure 2 illustrates stakeholder perceptions that affect the value of the buildings.
Based on information gathered from studies conducted over the past decade, primarily on LEED certified office buildings in the US, green buildings tend to have higher asset values than conventional code-compliant buildings, which have led to higher sale prices. The benefits of this are higher rental/lease rates, lower operating expenses, higher occupancy rates, and lower yields. Sub-market price premiums were found to be in the range of 0-30% when comparing certified green buildings to non-certified green buildings. Evidence also shows that higher levels of LEED certification also achieve higher sales premiums.

Operating Cost

Documenting annual energy savings is fundamental to building green. It is estimated that energy savings from code-compliant buildings range from 25% – 30% in U.S. LEED certified buildings to 35% – 50% in New Zealand green buildings. See Figure 3 for energy savings of 2003 LEED certified buildings.
There are energy savings from green building retrofits, improved maintenance standards, and refurbishment. Energy savings for green building retrofits are not as high as those for new builds, but they are still substantial. As energy prices continue to grow, benefits of energy efficiency will become important, strengthening the business case for energy efficiency retrofits. When it comes to maintenance, there can be a significant decrease in maintenance requirements and replacements if sustainable building systems are used. With refurbishment, green buildings provide adaptability, insuring that the building will be a valuable asset presently and in the future.
Even with these best practices in energy efficient design, there are still challenges that can prevent a green building from performing as expected. However, these are most often resolved through building commissioning, leadership committed to green building management practices, effective and transparent communication of successes and lessons learned, and tenant awareness programs.

Workplace Productivity and Health

Productivity & Health Benefits,The Business Case for
Green Building  © 2013, pg. 67
According to the report, healthy work environments are a prominent agenda item for the building industry. Green buildings positively impact the employees working inside of them. Employees productivity and health are improved due to the healthy indoor environments that green buildings provide. Healthy indoor environments include high levels of natural daylighting, appropriate levels and types of artificial light, use of materials with minimal toxins, appropriate outdoor air ventilation, thermal comfort and open and inviting spaces that increase interaction and physical movement. The improved ventilation has helped reduce the cases of “Sick Building Syndrome.” Healthy indoor environments have also reduced stress in the workplace. A 1998 study, cited by Heerwagen, states that stress and frustration levels declined and patience increased when employees had views of nature through windows. Those with a window view are typically less stressed than those constantly viewing a screen or working in a viewless room.
Please check out the full report here and the Executive Summary here.

LEED v4 Materials

Samala Hartley, Sustainable Building Associate

There are three Materials and Resources credits that focus on the disclosure and optimization of materials used on a project. The intent of these credits is to encourage the use of products where manufacturers are forthright with all the material and chemical ingredients used and their practices to procure raw materials.

LEED v4, MRc4, “Building product disclosure and optimization – sourcing of raw materials” places preference on manufacturers who publicly report information about their raw material suppliers and on responsible harvesting and extraction. In the point system, these two ideas are not exclusive to one another.

In addition to specifically emphasizing the sourcing of raw materials, this credit also combines a variety of other v3 materials credits into one. The following credits from v3 show up within v4 MRc4:

  • MRc3 – Materials Reuse
  • MRc4 – Recycled Content
  • MRc5 – Regional Materials
  • MRc6 – Rapidly Renewable Materials
  • MRc6 – Certified Wood

Now, let’s dissect that credit title.

Building Product Disclosure & Optimization: Sourcing of Raw Materials


Building product: the permanently installed products of a building, separate from the installation costs.
Disclosure: exposing information about a manufacturer’s products and processes. The rationale behind this is that when companies start disclosing this information they are held accountable for their practices and will be incentivized to improve.  This will result in greater, and faster, positive change in the marketplace.
Optimization:  Optimizing informed and sustainable decision making.
Sourcing of raw materials: “Sourcing” not only refers to the location of raw material extraction/harvesting, but also the use of recycled content and even the use of salvaged materials.

What are the options?

Option 1: Raw material source and extraction reporting

This option requires the use of materials from manufacturers that publicly disclose information about their product’s raw material suppliers and their commitment to ecological and environmental responsibility.

1 point is earned by specifying 20 products that meet the requirement (from at least 5 different manufacturers).
  • Products from manufacturers who disclose their practices through a third party verified corporate sustainability report qualify as 1 full product.
  • Products from manufacturers who create their own, unverified, report qualify as ½ a product.

Option 2: Leadership extraction practices

This option is a compilation of all the MR credits from version 3. In combination you must show that at least 25% of the materials cost has some sustainable value, including:
  • Extended producer responsibility (50% of the product value can contribute)
  • Bio-based materials: Meet Sustainable Agriculture Network’s Sustainable Agriculture Standard (verifies sustainable harvesting)
  • Wood products: Meet FSC certified
  • Materials Reuse: salvaged, refurbished, & reused products
  • Recycled Content: sum of post-consumer plus ½ pre-consumer recycled content
Regional location of a material becomes a valuation factor that can add value based on the proximity of the source material. The distance has decreased from 500 miles in v3 to 100 miles from the project site in v4.
USGBC is taking a new approach to the materials credits by emphasizing the greater transparency of manufacturers. Thus the new credits award more points for this disclosure, and less for the material content.