Page 142 - The Green Building Bottom Line The Real Cost of Sustainable Building

GREEN IS THE COLOR OF MONEY 121

The image of green will help attract and retain key individuals within a company.
Is this important from a financial aspect? Yes. Let me rephrase that...yes! A com-
pany’s personnel cost outweighs the cost of property ownership and/or rental and
operational building costs. By “outweigh,” I mean personnel costs are usually signif-
icantly more than building costs, whether one owns or rents the properties in which
business is carried out. If I look at the general management and administrative costs
in our company, which are probably pretty typical for a large chunk of similar entities
throughout the country, our human resources costs represent about 70 percent of these
expenses, whereas building costs are between 5 and 10 percent. Being able to attract
and retain good talent more successfully than other companies is a clear savings to the
sustainable company, reducing churn rate, leveraging knowledge within the company
over a greater span of years, and enhancing general esprit de corps, which clearly has
a positive effect on productivity.

Longer-Term and More Intangible
Cost Reductions

REDUCING EXPOSURE TO REGULATORY CENSURE
AND LITIGATION
Longer-term, intangible cost reductions are often difficult to quantify since these line
items tend to involve the projection of future risks. How does one reasonably quan-
tify risks that we think will not happen, lawsuits we think we will likely avoid, pen-
alties from regulatory restrictions that have yet to be codified? I’m not an actuary, skilled
in risk appraisal work. Moreover, our company is a small, service-oriented business
working in an industry that is much less exposed, say, to litigation related to toxic
emissions—as a chemical company would be—or to regulatory issues such as carbon
trading—as a manufacturing or energy company might be. Still, these issues do get
factored into a company’s bottom line. A green company that is diligent and attentive
to its management of “sources and sinks” (where resources come from and how they
are disposed of) is less likely to risk the same level of exposure (financially, legally,
etc.) as a conventional company. These issues need to be considered, even if they
tend to be rather remote and contingent as far as our own company is concerned.
Bob Willard, in his book The Sustainability Advantage, calculates the evaluation of
risk exposure as follows: He assumes that 15 percent of a company’s gross revenue
accounts for a business’ general and administrative (G&A) costs, that 5 percent of
G&A costs are risk related, and that 5 percent of the amount delineated as risk ex-
penses could be eliminated by a company taking a proactive, sustainable orientation.
If we applied this formula to our fictionalized company, Green, Inc., we would realize
a cost savings of $4,500 annually, as seen in Table 4.4.
Willard’s rule-of-thumb calculation may be helpful when dealing with large, multi-
national companies (where the numbers start to look like international telephone
numbers), but with smaller companies such as our own company or Green, Inc., it’s