Association for Public Policy Analysis & Management

This paper provides a novel assessment of actions building owners take for green certification. Existing literature suggests benefits to eco-labels in the form of market signaling, but does not indicate whom these signals are meant for. By better understanding how green certification is obtained, we aim to reveal why certification is sought, and how builders use eco-labels to signal different stakeholder groups.

In this paper, we assess how builders in various industries and sectors select green-particular building strategies towards Leadership in Energy and Environmental Design (LEED) certification. LEED certified buildings may be designed purely for altruism, for green market signal advantages, for cost-effectiveness, or simply "green washing." Accordingly, firms vary their strategies towards certification in order to engage and cater to various stakeholders, with changes in environmental outcomes across LEED buildings as a result. We characterize LEED credits by whether they improve efficiency (through cost-savings and/or through improved employee productivity) or strictly provide positive externalities to the environment. Using this, we identify a framework for discussing a breadth of green certification motivations, presented as a 2x2 matrix.

Findings indicate that approximately equal portions of certified buildings could be motivated by each of these four reasons. Variation in credit attainment patterns occur across building types and owner types, suggesting nuances underlying eco-label strategy. Differences in common credits and credit types attained in each sector reveal not only that the value of “green” varies by industry, but also that the underlying perception of costs and benefits of different investments is different for firms, government agencies, and non-profit organizations.

Results are consistent for buildings certified at each level of the LEED label, and roughly consistent for a variety of robustness checks. Hotels and homes tend to have above average attainment of green building strategies that promote efficiency, while government buildings, health care facilities, and schools tend to favor green buildings strategies that do not have this internal benefit. Factors influencing these differences may include procurement policies, building codes, discount rates attributed to efficiency returns, or the values driving green signaling behavior. Builders leverage eco-labels by selecting green strategies that appeal to their stakeholders.