Wednesday, January 13 2016
By Don Schjeldahl, Principal at DSG Advisors
Every generation or so since the dawn of the industrial age, game-changing ideas and technologies have transformed both the way corporations operate and society itself. Introduction of the electric grid, rail networks, public sanitation and education are among the innovations that reshaped America in the early years of the 20th century. Then, as now, with each innovation, corporate location decisions were altered, at least by adept organizations, to reflect a new reality.
The business world is on the verge of adopting another corporate best practice – green development, a concept that lean and malleable corporate operations do better in communities that manage themselves to region-wide and site-specific considerations in mind. And like previous advances, green development is beginning to dictate best locations for corporate investment. This article offers corporate executives an outline of green development factors to consider in future investment decisions.
Path to Green Development as a Location Consideration
Globalization is manifest through the integration of systems, both internal and external, that are delivered through modern computing platforms. These platforms foster the widespread adoption of responsive and flexible organizational structures built on ideas like Total Quality Management (TQM). TQM permits corporations to operate in a climate of continuous improvement with virtually limitless boundaries. Just-in-time (JIT) manufacturing and it’s later lean manufacturing incarnation, both aspects of TQM, deliver high-quality products and services to customers at lower costs.
With these systems in place, corporations are better able to respond to daily challenges of a global economy propagated by the interdependence of markets, competitors, technologies, and regulators. Companies that anticipate and manage challenge and opportunity effectively are more likely to achieve competitive advantage and long-term sustainability of local operations. Consequently, as corporations manage against a risky and constantly morphing business landscape, corporate facilities and the communities in which they operate must work in harmony for both to succeed.
Success is never a guarantee. Cities both large and small who now suffer the lingering effects of corporate downsizing dot the landscape with new candidates always in que. High unemployment, loss of wealth, social strife and economic stagnation often accompany corporate downsizing and plant closure. These are outcomes to be avoided if possible.
Two scenarios for why companies leave come to mind: 1) Companies fail because of flawed strategy, and, 2) Companies fail or move because communities are unable to meet company needs.
Not much can be done about the first; there is little hope for poorly-managed companies. Corporate decision makers and progressive community leaders, on the other hand, now recognize that the role of “community” is increasingly important in defining the success of corporate operations. Community attributes – economic, social, and environmental – are ingredients in the success or failure of corporate facilities.
When the community attributes needed to support a corporate mission are poorly developed, or missing altogether, the corporation is stressed and local operations are vulnerable to disruption. But if a community is up to the task of meeting corporate needs, lean and adaptable corporations will see greater utilization of resources over time and will be more likely to defer the impulse to downsize or relocate facilities.
Why Green Development Matters
Not surprisingly, communities that emphasize green development’s long-range sustainability over short-term gain (also known as smart growth) in conjunction with standard community offerings are in a better position to serve the needs of competitive corporations.
The reason green communities are better locations for corporate investment stems from the growing emphasis corporate executives place on factors that support a modern adaptable organization – the ability to attract and retain talented people, access to state-of-the-art workforce training, and predictable and reasonable operating costs. There are a range of green development best practices that correlate with these corporate needs. These include:
Land Use - Communities realize significant benefits from avoiding urban sprawl. For instance, the cost to develop and maintain infrastructure and support community services like police and fire are reduced. Citizens are also better able to access services with shorter commuting to shopping and medical facilities. Green communities place an emphasis on supporting existing development and avoiding neighborhood decline thus protecting wealth. Redevelopment of urban areas also stimulates economic activity (both locally and regionally). By preserving open space and farmland, natural beauty is maintained adding to a stronger sense of wellbeing. Many communities with a green development focus come late to the game, meaning that current land use patterns may not reflect best practices. In order to assess a community’s trajectory on land use, add the following to the evaluation checklist:
Government and Leadership - A well run community directs resources toward maintaining and expanding the tax base. This typically means there is coordination between government and private sectors that results in a prioritization of activities. When government policies and private sector efforts are aligned with community needs wasteful spending is usually minimized. In order to assess a community’s standing on government and leadership, add the following to the evaluation checklist:
Healthy and Clean Environment – Communities that are built in harmony with the environment in a way that encourages outdoor activity are home to healthier and more productive citizens as compared to other locations. Employers located in green development communities can expect lower health care costs, less turnover, and higher productivity from its employees. In order to assess a community’s environmental standing, add the following to the evaluation checklist:
The Future for Green Development
We should expect in the coming years a growing corporate emphasis on green development as the world moves toward building a low-carbon economy. The corporations listed below are but a few of the those that have publically committed themselves to these principles:
An aspect of a low-carbon economy will be large amounts of public as well as private-sector funding flowing into sustainable infrastructure and utilities. These investments are more likely to see higher rates of return in green development communities as the local focus is already moving in that direction. Corporate location decision makers are advised to think carefully about green development when evaluating communities for new or expanding operations.
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