Page 95 - The Green Building Bottom Line The Real Cost of Sustainable Building

74 CHAPTER 2

The costs of culture building for Green, Inc. and the benefits derived by a stronger
retention rate among the management team result in costs over ten years of around
$1,058,000 and benefits over the same period of $790,000, for a loss over ten years of
$268,000 or $27,000 per year. It’s not a significant number in the scheme of things,
when one considers that Green, Inc.’s annual gross revenue is around $12 million.
Secondly, I think that in the interest of being very conservative, the benefits are prob-
ably understated and the costs (particularly lost opportunity of revenue) may be over-
stated. For example, in Chapter 1, the assumption was made that Green, Inc. would
benefit by doing two $15 million development projects in Years 6 through 10 of the
analysis. If just one of those projects each year increased in scope from $15 million to
$16 million, the $27,000 projected shortfall would be covered.
Having said all of that, the numbers for Green, Inc. bear out the fact that the culture-
building investments discussed in this chapter still make sense. If we take the dis-
counted cash flow analysis from Chapter 1 and update it with the figures we have been
discussing here, we find that despite a conservative analysis that probably overstates
costs and understates savings and income, Green, Inc. is still projecting a positive net
present value of its various soft investments of $336,000 and an internal return rate of
20.85 percent—still above the company’s targeted return of 15 percent. The updated
cash flow analysis can be seen in Figure 2.3.

Concluding Remarks

A conventional real estate development firm works in a linear fashion. A company ties
up a piece of land, and the development team creates a vision for what the project will
look like. A design team, comprised of architects and engineers, develops a plan for
how the project will look, while a financial team develops a plan for how the project
will be profitable. A construction team executes the plan, constructing the conceived
buildings, while a leasing or sales team works on filling the project with tenants and/or
owners. Finally, a management team steps in to maintain the project to desired stan-
dards. From envisioning to building to running to maintaining, the process is linear. A
conventional business functions similarly. A small cadre of leaders conceives of a
vision for the company. The vision is delegated to an upper management group that
develops a multi-year plan for building the vision. Middle management is charged
with executing the plan. And the day-to-day troops are tasked with maintaining the
organization.
By contrast, the green bottom line company is shaped through integrated design,
where envisioning, building, executing, and maintaining come together. The vision for
such a company is fundamentally about the values of its people and about community,
the community of people within the organization and the external community of
which this organization will be a steward. People within the green bottom line organ-
ization, guided by an empathic leadership team, collectively draw upon their values to
construct a culture that is the physical manifestation of the company’s vision—a cul-
ture comprised of governance structures, rituals, language, and history that enables the