A UCLA-led study has found that companies that voluntarily adopt international "green" practices and standards have employees who are 16% more productive than the average.
Professor Magali Delmas, an environmental economist at UCLA's Institute of the Environment and Sustainability and the UCLA Anderson School of Management, and Sanja Pekovic from France's University Paris–Dauphine are the first to study how a firm's environmental commitment affects its productivity.
Their findings, forthcoming this week, will be published online in the Journal of Organizational Behavior.
"Adopting green practices isn't just good for the environment," Delmas says. "It's good for your employees and for your bottom line. Employees in such green firms are more motivated, receive more training, and benefit from better interpersonal relationships. The employees at green companies are therefore more productive than employees in more conventional firms."
For their study, "Environmental Standards and Labor Productivity: Understanding the Mechanisms That Sustain Sustainability," Delmas and Pekovic collected data from a survey of employees at 5,220 French companies, randomly selecting two employees from each company for a pool of more than 10,000 people. Companies that had voluntarily adopted international standards and eco-labels such as "fair trade" and "organic" or the International Organization for Standardization's ISO 14001 certification were identified as green.
The researchers determined each company's productivity by taking a logarithm of its value added (revenue minus costs), divided by the number of employees, which produced the average value of production per employee. They discovered a difference of one standard deviation, which corresponded to 16% higher-than-average labor productivity, in firms that voluntarily adopted environmental standards.
The employee surveys showed how much training employees received and how often they interacted with co-workers — which Delmas and Pekovic found also correlated with green companies.
"It's truly a big difference between firms that have adopted these practices and firms that haven't," Delmas says. "I expected a contrast, but not such a strong, robust jump in productivity."
Green certifications should be used by managers to increase productivity, by potential employees as a sign of a better work environment, and by investors as an indicator of good management practices, Delmas said. Previous research has already shown that sustainable business practices can result in cost-efficiencies, but Delmas and Pekovic are the first to explore the link to labor productivity.
"It's a counterpoint to people thinking that environmental practices are detrimental to the firm," Delmas said. "Green practices make a company more attractive because so many employees want to work for a company that is green, but we also argue in this paper that it's more than just wanting to work there — it's working more."
The findings reflect a change in attitudes, according to Delmas.
"When you talk now to M.B.A. students, there's a big change in the way they look at their future job," she said. "They don't want to work just to make money. They also want to make a difference. There's a little more social consciousness than there was before."