1. Green Building Councils: Policy Instrument Or Fashion? Gunther Maier, WU Wien Sabine Sedlacek, MODUL University

2. Untertitel - hier einfügen Introduction  Greening the construction industry has become „big business“ recently  WGBC lists 60 organizations, 18 in Europe  20 established GBC  3 emerging GBC  23 prospective GBC  14 associated group  Three areas of activity: 1.information, promotion, awareness building 2.lobbying for standards and policies 3.develop, manage, operate a rating system FUßZEILE 17.10.09

3. Untertitel - hier einfügen Introduction  WGBC lists 9 rating systems  Examples: BREEAM, Green Star, CASBEE, LEED, DGNB  standard procedure:  project is registered for assessment  certified assessor evaluates based on standards  organization verifies assessment and awards certificate  GBCs are interesting from governance perspective  typically NGOs  perform a public function  financed by the addressee of their policy (membership, certification fee)

4. Untertitel - hier einfügen Introduction  Is this structure sustainable?  Do GBCs fulfill a function that is economically valuable?  What is this function? Do all GBCs fulfill it?  Structure: 2.Where is the problem for GBCs to solve? a)conventional view b)economic view 3.GBCs as element of economic governance 4.Empirical analysis 5.Conclusions

5. Untertitel - hier einfügen The problem to solve  Conventional view: “Vicious circle of blame” (Cadman, 2000, Keeping, 2000, Cadman, 2007, Hartenberger, 2008, Ratcliffe et al., 2009, Robinson, no year). Constructors Developers Investors Occupiers

6. Untertitel - hier einfügen The problem to solve  Basic argument:  potential demand exists, but market is too complex or actors are too dumb  information problem  One positive example will reveal the opportunity  Best GBC strategy: Promotion and awareness building  Problems with this argument:  no reference to characteristics of real estate market  why certification of individual buildings?  why should business finance GBC activities?

7. Untertitel - hier einfügen The problem to solve  Economic view: Prisoners‘ dilemma trap  quality uncertainty in all relations  potential buyer (e.g. investor) is uncertain about the quality he/she gets  supplier (e.g. developer) cannot proof the quality of the building  buyer is not willing to pay the full premium for higher quality  supplier has a strong incentive for cheating  although both market participants would benefit from higher quality, it is not produced and therefore not traded  trapped in a prisoners’ dilemma

8. Untertitel - hier einfügen The problem to solve  information and awareness or the market alone cannot solve this problem  in the prisoners’ dilemma trap no supplier actually cheats; the expectation of cheating is enough  prisoners’ dilemma in one of the relations is sufficient to block the whole circle

9. Untertitel - hier einfügen GBCs and economic governance  Governance may be provided by private actors  “governance and government should not be regarded as almost synonyms” (Dixit, 2009)  Prisoners’ dilemma trap creates a need for governance  Two possible approaches: 1.create a high enough penalty for cheating actors 2.establish a mechanism for more accurate and reliable information about the quality of a building

10. Untertitel - hier einfügen GBCs and economic governance  Second approach falls under “enforcement of contracts by third party institutions”.  “Third-party institutions provide governance by outsiders who are not direct parties to this class of transaction” (Dixit, 2009).  = certification of buildings  increases the share of sustainable buildings and reduces the probability of cheating  both effects increase the investor’s expected profit  investor is willing to pay more for such a building  higher incentive for construction of it

11. Untertitel - hier einfügen GBCs and economic governance  When GBCs reliably certify the quality of buildings, they help to resolve the prisoners’ dilemma trap  both actors benefit from this directly  other actors benefit indirectly through the side effect on the market  GBCs in this case provide a valuable service to the whole market  “honesty of these third parties is not automatic” (Dixit, 2009)  own interests of GBCs need to be compatible with governance function

12. Untertitel - hier einfügen GBCs and economic governance  valuable service is tied to certification  reputation and honesty of the organization  certification has to be selective to perform the function  certification has to be wide enough to allow for enough applications to develop the reputation

13. Untertitel - hier einfügen Empirical analysis  To what extent do GBCs fulfill these functions?  Web-based survey of GBCs from the WGBC directory  26 responses (some incomplete); 12 Europe (9 CEE countries), 6 Americas/Caribbean, 7 Asia Pacific, 3 Africa

14. Untertitel - hier einfügen empirical analysis Romania (Europe, CEE) Albania (Europe, CEE) Australia (Asia/Pacific) Bulgaria (Europe, CEE) Colombia (Americas/Caribbean) Czech Republic (Europe, CEE) Dominican Republic (Americas/Caribbean) Georgia (Europe, CEE) Hong Kong (Asia/Pacific) Israel (Asia/Pacific) Italy (Europe) Japan (Asia/Pacific) Mauritius (Africa) Mexico (Americas/Caribbean) Morocco (Africa) New Zealand (Asia/Pacific) Paraguay (Americas/Caribbean) Peru (Americas/Caribbean) Poland (Europe, CEE) Qatar (Asia/Pacific) South Africa (Africa) Turkey (Europe, CEE) United Emirates (Asia/Pacific) Croatia (Europe, CEE) France (Europe) Spain (Europe) Vietnam (Asia/Pacific)

15. Untertitel - hier einfügen empirical analysis

16. Untertitel - hier einfügen empirical analysis Membership statusActivities Established GBCs (n=5): - development and operation of rating tools (3) - certification of projects (3) - rating tool development (3) - to improve the certification system (3) - marketing (1) - research - conferences (1) - attract new members (1) - networking (1) - education courses (1) - advocacy Emerging GBCs (n=3): - adaptation of the certification system (3) - working with 'certification board' and 'materials board' (3) - communication with members, other councils and international resources (1) - PR (1) - sponsorship, membership, communication, fund raising (1) - website development/ideas (1) Prospective GBCs (n=5): - networking (1) - reminding board members to do any tasks required as per last meeting (1) - review documents sent by members (1) -review any tasks completed, before circulation (1) - communication (1) - develop the marketing materials, prepare the legal paper work and all the others milestones for our status (1) - administration, registration of members, getting sponsorship, committee meeting, event organization, research and development (1) - strategic planning - committee coordination (1) Associated Groups (n=6): - website development (1) - business plan development - email correspondence (1) - capacity building (1) - meetings with volunteers and potential members ( 1) - sustainable building competition development - engage participants (1) - training (1) 1 = information, awareness, 2 = lobbying and policy, 3 = certification activities

17. Untertitel - hier einfügen empirical analysis type 1type 2type 3 established GBC5; (45.5%; 55.6%)0; (0.0%)4; (36.4%; 44.4%) emerging GBC4; (66.7%)0; (0.0%)2; (33.3%) prospective GBC8; (88.9%; 100%)0; (0.0%) associated group6; (75%; 100%)0; (0.0%) only more advanced GBCs engage in certification activities; cause/effect? Chi-square prob.: 0.06

18. Untertitel - hier einfügen empirical analysis number of members  large spread  substantial numbers only in top categories  Australia, South Africa, Italy, New Zealand

19. Untertitel - hier einfügen empirical analysis Importance of nine factors for mid-term goals (1 = high)  marked differences  related to certification  adaptation of exist- ing system rather than developing own

20. Untertitel - hier einfügen empirical analysis  Summary of empirical evidence  too few cases for hypothesis testing  results indicate the importance of certification system  certification – organizational status - # of members  no information yet about dynamic aspects  anecdotal evidence from CEE countries supports these results

21. Untertitel - hier einfügen summary and conclusions  theoretical argument:  prisoners’ dilemma trap  GBCs need instruments to overcome this  certification  information & awareness building is not sufficient as a service to industry and the market  empirical evidence:  cannot (yet) proof the theoretical result  does not contradict it  certifying GBCs are organizationally more advanced and have larger numbers of members (and more resources)

22. Untertitel - hier einfügen summary and conclusions  Research question: are GBCs valuable governance institutions or a temporary fashion?  GBCs can fulfill a valuable function (certification)  Those who provide this service have a good chance to “stay in business”; those who do not are likely to fade away over time (lack of support from industry, lack of resources, lack of publicity)  a certification system is not a sufficient condition  reputation, design of certification system, market size, form of organization