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To LEED or Not to LEED


Fatima Mansoor Pal, Mahmoud Radwan & Miha Alam

Green Buildings are an emergent phenomenon that can lead to environmental sustainability and improved human health indoors through a use of sustainable materials, construction practices, and building design. In tandem with this building technique, certifications have also developed in order to create a systemic and formal approach to building green buildings. LEED certification is the most internationally acknowledged certification method in use today, with 4 categories of certification (Standard, Silver, Gold, and Platinum) associated with a set of targets. However, research shows that LEED-certified buildings are falling short of many of the goals they intend to achieve.

LEED Certification provides tangible benefits such as tax reductions, higher lease-rates, higher building prices, and better marketability for buildings. Furthermore, with the component focusing on human health indoors, LEED buildings also improve the health and well-being of occupants. While LEED accrues benefits to various stakeholders in varying capacities, there is research showing that LEED-certified buildings may be performing poorly in terms of energy-efficiency (compared to non-certified counterparts), and furthermore it isn’t meeting its indoor health goals due to use of harmful chemicals in construction.

This paper seeks to expound upon the benefits of achieving LEED certification, discuss the failures of LEED certification, assess any alternative methods of building green, and offer recommendations for changes and improvements in LEED certification. The paper uses these answers as a guide to answer the overall question: is certification a necessary condition for being classified as a green building?

Certification is not a necessary condition for being classified as a green building because there are alternative means of incorporating green building practices into any building without taking the additional step to achieve certification. However, the importance of certification cannot be discounted entirely as certification paves the way for achieving greater benefits, serves a signal to consumers, improves marketability of buildings, and provides a more formal method for approaching green building.

Why Should Industries Invest in LEED Certification?

LEED Certification, which is an acronym for Leadership in Energy and Environmental Design, is an initiative released by United States Green Building Council (USGBC) in 2000 that assesses buildings from perspectives of both construction and design itself, by evaluating the energy efficiency of the building, water usage, air quality and choice of building materials as well as environmental factors such as access to public transportation and responsible land use.

“LEED buildings are not only good for the planet, they are also good for a company’s bottom line and the health of its employees,” says Marisa Long, Communications Director for the USGBC, since Green buildings create a healthier indoor environment for occupants through better indoor air quality, less harmful products, and more natural daylight. They also reduce waste, conserve energy, decrease water consumption, and drive innovation. All of this can positively affect your bottom line and boost productivity.

LEED certified buildings also generate a better public image amongst people. Companies rank direct costs and qualities of purchases as the most important factor in decision making, meanwhile increased positive public image and benefits to the consumer are considered major factors contributing to undertaking green building techniques (Isaksson and Linderoth, 2018).  Builders are encouraged to achieve green certification because it leads to increased marketability (Matisoff, Noonan, & Mazzolini, 2014). Since there exists asymmetric information about green buildings between buyers and sellers, sellers can struggle to gain appropriate profits on better-performing buildings; having certification (like LEED) can serve as a signal to buyers about the ‘quality’ of buildings (Matisoff, Noonan, & Mazzolini, 2014). However, there is a limit to this green signaling:

“Governments tend not to signal at the gold or platinum levels. For profit firms tend to signal at all levels. College campuses tend to signal at gold and platinum levels. Commercial buildings tend to signal at silver and platinum levels (but not gold). Health care buildings are less likely to signal at silver and platinum levels. Hotels and resorts tend to signal at the platinum level exclusively. Parks and stadiums tend to signal at the gold level, and restaurants tend to signal at all levels” (Matisoff & Mazzolini, 2014).

What this means is that, for example, government agencies are not justified in receiving Gold or Platinum LEED certification as it doesn’t serve as a signal; in fact in makes use of taxpayer funding which may leave a negative impression on taxpayers (Matisoff & Mazzolini, 2014).

Beyond public image, LEED certification can carry significant tangible incentives. For example, the USGBC states, “LEED buildings have faster lease-up rates and may qualify for a host of incentives like tax rebates and zoning allowances. Not to mention they retain higher property values,” attracting more commercial construction companies to the field. For residential construction companies, LEED certification can help homes sell faster and for a higher price (Burger, 2018). Also, today’s tenants understand the benefits that LEED-certified spaces have to offer. Lease rates for green buildings are typically 20 percent above average. In addition, many municipalities already offer tax credits. Some other municipalities that charge fees for permit review or other permitting processes have begun offering reductions or waivers for developers following green building standards. Lastly sometimes municipalities also give building permits within shorter period of time, which in turn saves a lot of money for the developer (USGBC, 2014).

Moreover, LEED certified buildings can save money since green buildings use less water and energy. LEED-certified buildings have been proven to use 25% less energy and a 19% reduction in aggregate operational costs in comparison to non-certified buildings (Jersen, 2017). According to the case study, (Reinhardt & Uludere, 2008) it showed that on average green buildings green buildings were found to operate on 30% less energy than conventional buildings. Besides the Solaire project mentioned in the same case study showed applying green building technologies in their building had an average from 4 to 7 years payback period.

LEED certificates sometimes could be integrated with CSR of some big corporates. It stands to reason, as most companies concerned with environmental design are more than likely to be attentive to their social impact and broader ethical business practices as well. But are companies currently seeing LEED certification as part of their overall CSR policy and approach, or are CSR initiatives and reporting seen as supporting LEED goals? A third possibility is of course that CSR and LEED are still considered by most to be completely separate areas of concern altogether. 

Challenges Faced by Small Businesses in Obtaining LEED Certification

Obtaining a LEED certification sends a strong message to the consumers and the wider community, as it demonstrates commitment to environmental sustainability. As such, small businesses that demonstrate commitment to green technology gain considerable positive attention in the eyes of the public: 84% of consumers consider a company’s environmental and social commitments “very important” when determining which companies they’d prefer to see doing business in their community, and which ones they will personally patronize (Cone, 2015). Furthermore, LEED-certified construction projects can be a boon to a local economy, since LEED practices utilize local labor and materials. But for many small businesses it is hard to get certified considering the big list of requirements needed to obtain the certifications.

Many developers are concerned that adopting green features into their buildings will involve high upfront costs. Compared to conventional buildings, green building projects are often perceived as having higher initial design and construction costs. According to Green Building Market Report South East Asia 2014 (Mahendriyani, 2016), apart from the high costs of building materials, it is found that high cost of construction is also a major obstacle for implementing green buildings across most green buildings’ markets.

However, there are some solutions in order to overcome challenges faced by small business to obtain their green buildings certifications. Considering finances, businesses must understand that increased upfront costs will result in a higher property value down the line. In many cases, green buildings are a wise investment when executed properly. Hence, Governments should enhance the ideas of green banks which can afford loans for green projects within the industrial municipalities, offering very low or negligible interest rates. This will boost many companies which are aspiring to implement green projects. Additionally, ensuring environmental, economic and social factors, in addition to consulting with legitimate experts who strongly value the green aspect of building, one can successfully overcome green building challenges. “State-formed green banks are creating new ways to finance renewable energy and energy efficiency projects that previously have gone underserved.” said Alex Kragie, a program director at the Coalition for Green Capital (Larsen, 2017). As of 2017, several Green Banks in the United States have been established by enabling legislation at the state and local level, with several more under development. Based on the early successes of these leading clean energy finance institutions, there are a number of other jurisdictions in the United States exploring the formation of a Green Bank as well as several international development efforts underway. Examples of existing Green Banks in the United States include: Connecticut Green Bank, NY Green Bank and California Lending for Energy and Environmental Needs (NREL, 2018).

Is LEED Certification Really Desirable?

While LEED certification is touted as promoting environmental and human health, it is questionable as to whether it is really doing what it aims to do. Firstly, the point system in LEED is such that it allows builders to take advantage of it to earn some points without making any changes that offer real environmental benefit (LEED Exposed). Commercial builders exploit the system by adding the easiest and cheapest features (such as bike racks, educational displays etc.) which are not adding much to the building in terms of energy-efficiency (LEED Exposed). Similarly, Residential builders also use the cheapest and easiest methods to gain points, such as not building a fireplace, not poisoning bugs, and airing out the building 48 hours before allowing occupation (LEED Exposed). It’s basically a system that compels builders and developers to mark off a check on the checklist instead of focus on what’s really best for the building given the environment (Brook, 2008).

Secondly, it is questionable whether LEED certified buildings are truly energy-efficient. While some data shows that “green-buildings” reduce energy consumption (Carpenter, 2009), other studies show that this data is misleading. Carpenter asserts that “a 2002 Natural Resources Canada survey of commercial and institutional buildings found that buildings built before 1920 used only seven per cent more energy than buildings constructed in the 1990s.” (2009). Gifford asserts that data presented in support of the claim that LEED certified buildings are more energy-efficient than their regular counterparts, is skewed such that it consists of a small sample size, which is additionally subject to self-selection bias. One study showed that “despite having the highest number of buildings in the country certified under LEED, Washington D.C. buildings are actually less energy efficient than the national average.” (“LEED Certification Fails”, 2014).  A major reason for this discrepancy between aims and outcomes is due to the fact that LEED certified buildings are not required to prove their energy-efficiency to retain said certification (LEED Exposed). Further, there is no enforcement mechanism such as spot-checking or checkups after a building opens to make sure that the buildings are operating in an energy-efficient way (Brook, 2008). In order to receive EPA’s Energy Star seal, buildings must prove their energy efficiency (based on a year’s utility bills); some buildings that have LEED certification fail to achieve EPA’s seal (LEED Exposed). Furthermore, a study by Oberlin College found that there is “no evidence that LEED-certification has collectively lowered either site or source energy for office buildings” (qtd. in LEED Exposed). Buildings are technically and physically complex, therefore a great deal of monitoring, accountability and control in aspects of design, construction, and maintenance is required to ensure that they perform in the environmentally-friendly way that they aim for; this accountability and control is absent in both the construction industry as well as in LEED’s certifying system (Vyas and Gentilcore, 2010).

            Thirdly, a further criticism branching from the previous one is that many buildings use LEED certification merely for marketing. This means that even designers have little interest in environmental protection and use certification as a means of projecting a building in a more consumer-friendly manner. Vyas and Gentilcore found that many planners and designers do not do any detailed research upon the actual outcomes of LEED certification (2010). An interview with an architect showed this attitude towards certification: “No, I'm an architect, not a statistician. I don't need to know if the information is correct or not--if it is published, I can use it.” (Vyas and Gentilcore, 2010). Furthermore, Gifford argues that designers will often go for ‘visual’ aspects of green buildings so as to improve their image in the eyes of the consumer. It was found that saving electricity is actually more effective than making electricity in terms of energy-efficiency, but architects would usually go for solar panel installation (often not installed in a proper manner) as opposed to switching to LED lighting, as the solar panels are more visible to the public (Gifford, n.d.). Another problem that can occur is when contractors and builders make use of environmentally inefficient means to construct buildings, but still receive LEED certification for the final product. Due to budget constraints, and an overall drive to reduce costs, managers have the incentive to buy materials from cheaper locations. Purchasing materials from abroad is usually cheaper and hence is a strategy applied by all managerial levels to meet their goals (Isaksson and Linderoth, 2018). But this usually means that transportation costs are involved, which increases CO2 emissions, and there is no guarantee that externally produced material was produced in an environmentally friendly manner (Isaksson and Linderoth, 2018). All these issues contradict the concept of green construction.

 Fourthly, though LEED certification aims at improving human health, studies show that buildings that are LEED certified are failing to achieve this target. Most of LEED’s targets are aimed at improving energy-efficiency, with very little emphasis on human health even though it is a goal of LEED (Wargo, 2010). Indoor air pollution is the result of chemical and toxic substances used within a building, and also during construction (LEED certified buildings have also made use of toxic chemical substances and harmful building materials) and is responsible for the many cases of asthma developing in the public in North America (Wargo, 2010). Since LEED has no conditions for monitoring the health effects after occupancy, many LEED certified buildings get away with undermining human health indoors.

Finally, LEED certification costs are largely borne by taxpayers, as most governments in the US require LEED certification on government funded projects (LEED Exposed). Some estimates state that fees to USGBC and LEED consultants adds about $150,000 to the price of buildings, and this excludes the construction costs that need to be met to fulfill other LEED requirements (LEED Exposed). “In 2012 alone, the USGBC collected $28 million in certification fees and $6 million in registration fees from taxpayers, corporations, and homeowners.” (LEED Exposed). Furthermore, the tax rebates earned by LEED certified buildings are also paid for by taxpayers. This is arguably unfair, especially if LEED certified buildings do not offer significant differences in energy efficiency compared to regular buildings.

Is Certification the Only Way to Go Green? Are There Any Alternatives?

In Portland USA, LEED certification for public buildings is a necessity, with 557 LEED certified buildings sprouting in Portland over the period of ten years (Andrews 2015). However, it is being observed that LEED certified buildings hold little value in reducing energy consumption, as occupants are free to use energy as they please and the LEED mechanism doesn’t counter this (Andrews, 2015). Designers in Portland are looking for new ways to improve the idea of green building, such that occupants’ health and neighborhood vitality can be taken into account (Andrews, 2015). Furthermore, the energy consumption requirement appropriated by USGBC is rather troubling; according to USGBC, LEED certified buildings should use less energy than 60% of comparable buildings, implying that it can use more energy than 40% of comparable buildings in order to retain its LEED rating (Gifford, n.d.).

An architecture professor at University of Michigan -- Professor Kelbaugh -- is a massive critic of the LEED certification system. He believes that the university should spend $100,000 on photovoltaics or better windows or insulation instead of on LEED. Professor Kelbaugh is designing an alternative standard known as the American Institute of Architect’s 2030 Challenge (Brook, 2008). This program’s goal is to reduce the carbon footprint of buildings into half by 2030. Buildings and structures have to become carbon-free or carbon-neutral (Brook, 2008). Professor Kelbaugh says that this standard program is simpler, free and actually focuses on operating in an energy efficient way (Brook, 2008). Under his recommendation, University of Michigan is going to add photovoltaic cells to the roof during the next two decades, which will take the school off the power grid by 2030 (Brook, 2008), taking them away from coal energy. There is also the case for using different types of certification instead of LEED. The GreenRoads certification checks more boxes in environmental building practices, but due to lack of data, it is unsure if this is decidedly better than LEED (Johnson).

Alternatively, there are cases where people chose to construct in an environmentally friendly manner, forgoing the certification (mostly due to heavy costs). The city of Moab in Utah, known for its success in environmental projects, constructed a Library using green elements such as geothermal heating, recycled fiber carpet, energy-efficient light fixtures etc. (Kuzyk, 2006). The system is so efficient that it is projected to “pay for itself in seven years” (Kuzyk, 2006). In another example, an environmentalist began greening an optometry office using simple measures such as reducing paper waste, using eco-friendly cleaning materials, LED lighting, using recycled furniture, dual pane windows etc. (Dunleavy). He also used the office to increase awareness about going green in buildings (Dunleavy).

 

Analysis, Recommendation and Conclusion

            It can be said that certification is not a necessary condition for classifying buildings as green buildings; this is because of two reasons: there exist alternative modes of institutionalizing green building techniques so that a building meets the goals of environmental and human health betterment, and because it has been shown that LEED certified buildings are often failing in their aims. However, this doesn’t mean that we can discount the importance of LEED and other certification methods altogether. As established, certification serves as a signal to the public at large that any given business or building is committed to environmental sustainability. In light of recent climate change activity and overall attention to the environment, this signal is important as an informational source for the public so that they can recognize which companies are acting environmentally responsibly. Furthermore, certification also generates benefits for companies in the forms of financial gains, utility bill cuts, tax rebates, and healthier workforce etc. If the certification process can be improved so that LEED certified buildings achieve the aims they set out to do, it can accrue benefits to society at large.

In order to improve, changes need to be made to the certification process of LEED.

 “The most realistic approach would be to first award a tentative green building rating that would be subject to redaction based on actual energy use, and only issue a final rating if the utility bills show the building really is energy efficient. Of course the ratings should count measured energy use as the main criteria, not a minor portion. Rated buildings should mount award plaques with removable screws, because each year the building’s energy bills would have to be reviewed. Buildings that did not continue to perform would lose their ratings, and those that performed well could continue to have something to be proud of.” (Gifford, n.d.).

 Better governance and better regulation and more frequent energy auditing would be necessary, as proposed above.  More frequent checks on energy-efficiency would force LEED-certified buildings to adhere to the standards expected of them. Furthermore, it is suggested that changes be made in the checklist such that it no longer awards for changes that leave menial impacts on the environment. This will ensure that energy-efficiency is embedded into the system of LEED certification more stringently. One criticism of the proposed change is that, given that LEED certification continues to be expensive, the prospect of losing certification in any given year could deter companies from investing in the certification in the first place because they would fear the loss of investment. Perhaps a means of countering this would be to have a mechanism such that if a company loses its certification in a given year, it has a period of time (for example 3 years) in which it can make changes in its energy use in building and re-acquire the certification free of cost. It is also understood that yearly checks could be difficult and cumbersome to achieve, however, it is a necessary requirement for ensuring that LEED lives up to its aim of reducing energy consumption.

Another point of improvement lies in the cost of LEED certification, which is a deterrent due to its being expensive. It is understandable that USGBC and other contractors and designers would not have an incentive to dramatically reduce the cost of procedure, however if LEED certification continues to be exorbitantly expensive, it will deter small businesses.  It is proposed instead that the price of LEED certification should be categorized. The pricing should be more cognizant of affordability of all users including small business owners and residential owners. Alternatively, Green Banks can also give more lenient loans to small businesses in particular so that they can invest in LEED certification. Banks are more inclined to hand out loans to big businesses, knowing that they can pay back loans with interest; however, in order to move towards environmental sustainability, this attitude needs to change in order to favor environmental sustainability the ultimate goal.

 It is also worth noting that small businesses and residential owners should implement green building features in their buildings even if they are unable to get LEED certification; while certification has its own sets of benefits, small businesses and residential owners should also value environmental sustainability. Perhaps a combination of government incentives and increased knowledge could influence them to build green even if they cannot achieve certification. To this end, partnering with other small businesses may also prove to be beneficial as not only would it generate some additional capital, but also would generate internal accountability that could push the companies to choose more green materials and techniques in the construction phase (Isaksson and Linderoth, 2018).

In order to improve the human health component of LEED, it is suggested that “the federal government should create incentives for companies to research and create new chemicals that meet the health, safety, and environmental standards described above. Funding for “green chemistry” initiatives should be significantly increased and focused on benign substitutes for the most widely used and well-recognized toxic substance” (Wargo, 2010).

Tenants play a huge role in providing incentives for building green buildings, however there are mixed findings. On one hand, tenants are willing to pay higher rental rates for green buildings, which gives incentive to the builders to aim for LEED certification; however, on the other hand, the tenants end up contributing to rebound effects due to lack of knowledge on energy efficiency (Sundbom, 2011). A study conducted in 2017 examined the effect of green building certification on potential tenants’ willingness to rent (Zhao, 2017). In this, the participants were asked to compare their preference for green-certified over non-certified buildings. The results indicate that green building certifications increased the tenant’s willingness to rent space in a building, but a higher grade of certification did not necessarily lead to higher willingness to rent (Zhao, 2017). This deters estate developers and building owners from trying to obtain higher certification and limits obtaining green certification to just CSR strategies (Zhao, 2017). That being said, we also need to note that study also reveals that the general public is not that familiar with the concept of green building. The majority of the participants will only pay more for green building over the standard buildings when they know the environmental impacts of them (Zhao, 2017). While LEED certified building focus on water and energy conservation, rebound effects from living in a green building need to be considered as well (Zhao, 2017).  One of the biggest criticisms against green buildings is the fact that they don’t account for rebound effects which makes it less energy efficient (Sundbom, 2011). Energy savings are only affected by the behavior of the user. The certification of the building doesn’t influence the tenants to change their energy consumption behaviors or behave in an energy efficient way (Sundbom, 2011). The main reason for this is the tenant’s lack of knowledge about the green certification prior to the contractual agreement. Keeping that in mind, the governments need to implement policies that create incentives for tenants to not only live in buildings with higher grade of certification but also behave in any energy-efficient way (Sundbom, 2011). Increased knowledge on the part of the consumers is a key element in achieving this goal (Sundbom, 2011). As discussed many times in class, it might even be useful to provide tenants with their neighbor’s utility bills for comparison, thereby encouraging them to save on energy (Sundbom, 2011). These strategies only work under the assumption that tenants want to reduce their own costs and are willing to reduce energy consumption if they can get lower utility bills (Sundbom, 2011). This opens the question of whether tenants who are willing to pay higher utility bills, would be willing to change their consumption patterns (Sundbom, 2011).

One final point to consider is the concept of green-washing. Many times, consumers as well as builders are fooled into thinking that just because they have installed an energy-saving component in a building, they are automatically environmentally sustainable. As discussed throughout this paper, this is not always the case. Blinding by green-washing is an important phenomenon to address in order to create real changes in the move towards environmental sustainability. Perhaps increased knowledge can decrease the blinding effect of green-washing. However, as is the case with many fads, it might be difficult to generate any lasting changes in people’s attitudes if they continue to consider commitment to environmental sustainability as a fleeting trend. Perhaps research from Sociology experts on the concept of fads and fast trends could be useful in determining the appropriate strategy to shift peoples’ attitudes towards environmental sustainability to a lasting commitment.

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