UCLA Study: Green Sustainability Practices Improve Business Productivity

Want to improve the productivity of your business? According to a new UCLA study, companies that 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.

“Adopting green practices isn’t just good for the environment,” Delmas said. “It’s good for your employees and it’s good 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.”

The study 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 percent 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 a virtuous circle,” Delmas said — the opposite of a vicious cycle. “You attract the best people, and because you’re open-minded, then you adopt green standards, and then you attract even better people, and this continues to feed itself. Companies that adopt these policies tend to be better. It could be they were better to start with, but there are mechanisms built into these policies that mean they continue to get better.”

The study - Environmental Standards and Labor Productivity: Understanding the Mechanisms That Sustain Sustainability – was published online last month in the Journal of Organizational Behavior.

Source: UCLA Newsroom