A new study has found that companies that voluntarily adopt “green” practices have employees who are 16 percent more productive than the average.
“Adopting green practices isn’t just good for the environment,” said Magali Delmas, Ph.D., an environmental economist at University of California-Los Angeles.
“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.”
For the study, Delmas and Sanja Pekovic, Ph.D., from France’s University Paris-Dauphine 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 also showed how much training employees received and how often they interacted with co-workers, which the researchers 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 said. “I expected a contrast, but not such a strong, robust jump in productivity.”
“It’s a counterpoint to people thinking that environmental practices are detrimental to the firm,” she continued. “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 higher-productivity effect stems from employees’ appreciation for their workplace, Delmas said.
A factor boosting that appreciation are the requirements of the fair trade, organic and ISO 14001 international certifications, according to the researchers. For instance, the fair trade certification requires fair wages and treatment for employees; organic certification recognizes commitments such as working without pesticides and other chemicals; and ISO 14001 certification requires firms to set up an organizational structure to investigate the company’s environmental impact and how to reduce it.
The certifications, especially ISO 14001, include educating employees about a firm’s environmental commitment and require employees to work together across departments to reduce the company’s environmental impact. This education and training helps increase employees’ identification with their office, while interdepartmental cooperation increases employees’ engagement.
“It’s a virtuous circle,” Delmas said. “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.”
“I hope managers look at this and see the potential for their firms and employees,” she said. “Socially responsible investors say green practices are a proxy for good management. It’s also important for regulators to see that some voluntary practices can have beneficial effects.”
The findings were published online in the Journal of Organizational Behavior.