With more than 2,900 branches, 5 million customers, and $300 billion in assets, PNC is one of the largest banks in the U.S. Energy efficiency and sustainability more broadly are important parts of the company’s corporate culture, embodied in its bank branches, such as the net-zero branch it opened in Florida early last year.
Business owners typically view such investments in sustainability strictly through the prism of tangible—if not immediate—energy cost savings. For example, working with the U.S. DOE and other partners, PNC estimated the new branch would use 49% less energy than a comparable prototype, saving nearly $10,000 in energy costs per year with a short, six-year simple payback.
However, what eludes nearly every estimate are the just as real but seldom quantified benefits to those workplaces that incorporate energy efficiency into their building designs and renovations. In other words, PNC’s energy-efficient bank branches generate far more value than just energy savings. Rocky Mountain Institute calls those benefits deep retrofit value (DRV), and a recent study from the University of Notre Dame and helps assign measurable value to the more abstract productivity gains generated through the deep retrofit process.
The study compares PNC’s “regular” and LEED-certified bank branches, examining 494 facilities in the United States. The sample contained 52 LEED-certified and 442 non-LEED-certified branches, all with similar annual revenue streams and market demographics, and excluded facilities less than three years old. These controls provide a comparison between facilities located in similar business contexts where discrepancies in performance cannot be easily explained by other factors such as reputation or customer market base. Along with the appreciable cost savings that accompany a LEED certification (certified branches spent $675 less per employee on utility bills), the study found that “certification makes a significant difference on revenue generating aspects of the business” and that these savings go “above and beyond cost measures.”
The effects of these changes on PNC’s business were significant. In contrast to non-LEED certified facilities, each LEED certified branches opened more consumer deposit accounts annually (458), had ~$3 million more in consumer deposit balances, initiated 25.5 more consumer loans, and held almost $1 million more in loans. According to the report, these results were statistically significant even after controlling for all the major variables used to track influence on revenue, such as market demographics, size of facility, personnel demographics, age of facility, and advertising spent annually per facility. Thus energy-efficiency measures normally quantified in terms of kilowatt-hours conserved and energy costs saved generated other indirect value that also accrued to PNC’s bottom line
Although the study did not attempt to tease out exactly what factors improved the performance of LEED-certified buildings, it’d be reasonable to infer that the bank branch employees became more engaged and productive (including with branch customers), the branch customers themselves enjoyed banking there more (including with a bank that aligns with their own personal views on environmental sustainability), or both. Other studies on corporate social responsibility (CSR) support this idea.
Either way, the value of an energy efficient building is a bit like an iceberg where, “conventional practice only considers the energy cost savings—or what’s above the surface,” according to RMI associate Doug Miller. “However, by only considering the easily visible we miss an opportunity to capture the bulk of an energy efficient building’s business value and as a result have less investment in efficient buildings than would otherwise occur if this value was formally considered in the decision-making process.”
This study presents another proof point of compelling evidence showing that the financial benefits of environmentally sustainable business practices extend well beyond the immediate energy savings. PNC likely invests in energy-efficiency measures at its branches primarily for the energy cost savings, but studies like the Notre Dame one show that PNC and other corporations can also take deep retrofit value all the way to the bank.
This article also appeared on Greenbiz as part of RMI’s monthly Institutional Acupuncture column.