green buildings

New evidence that going green pays off

April 11, 2012: 10:02 AM ET

At PNC Bank, LEED-certified branches rake in more greenbacks, suggesting that, when it comes to the environment, consumers are willing to put their money where their mouth is.

FORTUNE -- Over and above what it does for Mother Earth, can investing in sustainability give businesses a dollars-and-cents competitive edge? Edward Conlon and Ante Glavas, two management professors at the Mendoza College of Business at Notre Dame, think so.

In a new study, "The Relationship Between Corporate Sustainability and Firm Financial Performance," the pair analyzed data from 562 branches of PNC Bank. The company has 93 LEED-certified branches, meaning the buildings meet the U.S. Green Building Council's standards for energy efficiency and other measures of greenness.

Those earth-friendly branches reported annual revenues averaging more than $3 million higher than their 469 non-LEED counterparts, which works out to $461,300 in extra sales per employee. Each LEED branch opened 458 more deposit accounts, and booked consumer loan balances averaging $994,900 higher, than the typical non-LEED PNC branch. At the same time, the yearly cost of utilities was $675.26 lower per employee at the green branches.

"The findings are significant, and they surprised me," says Conlon. The results are particularly striking when you consider that the researchers controlled for virtually every other variable -- including market demographics and the size and age of the buildings -- that could explain the disparity between the two types of branches.

Moreover, Conlon adds, "All PNC branches do the same things, offering the same products and using the same systems." The only substantial difference among them is LEED certification or the lack of it.

Why do the earth-friendly locations perform so much better? Conlon and Gravas believe one reason is that employees in the LEED branches are more satisfied and engaged, which apparently makes them more productive, and may improve customer service as well. "People are certainly proud to be working in LEED buildings," notes Gravas.

The biggest factor, however, is probably that PNC launched a marketing campaign in 2009 that trumpeted its LEED branches' greenness. When customers have a choice, it seems, they gravitate toward companies that do their bit to sustain the planet.

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