Tuesday, January 09 2018
By Amanda Taylor, Senior Consultant and Director of Research, McCallum Sweeney Consulting
Corporate sustainability strategies have become common at companies large and small, establishing initiatives and targets for economic, environmental, and social performance of the company. Sustainability is about taking a long-term view when making corporate investments, which can be difficult in a competitive economic environment that rewards short-term gains. To meet sustainability targets, sustainability-driven companies take a systems approach, meaning all material inputs and outputs are elements in an ecosystem that are continually put back into service. Companies with sustainability strategies are driven not only by economic gains, but environmental and social principles. Sustainability-driven manufacturers will place importance on the selection of production locations that will align with and support their corporate performance targets. Companies will invest in locations where the community is a willing partner towards achieving sustainability targets. Communities that are prepared to be a partner are best poised to benefit from the sustainability movement.
Sustainability, as with all social movements, has gone through natural stages of maturation, from initial conception derived from grassroots activism, to the identification of a shared vision, and then formalization through public awareness and acceptance. The sustainability movement’s roots began with the environmental movement of the 1960s and 70s, when passage of substantial regulations such as the Clean Air Act, Solid Waste Disposal Act, Clean Water Act, and creation of the Environmental Protection Agency solidified public sentiment toward protecting human health and the environment. Sustainable development was formalized in 1987 when the Brundtland Commission Report defined it as “development that meets the needs of the present without compromising the ability of future generations to meet their own needs.” This definition is the bedrock of sustainability initiatives at the local, national, and international scale. It led to the creation of green development initiatives such as the U.S. Green Building Council’s Leadership in Energy and Environmental Design (LEED) green building rating system. It led to the adoption of city-level sustainability plans with goals like reducing water use, improving access to public transportation, and instituting solid waste recycling. It led to the establishment of international strategies, such as the United Nations’ 2030 Agenda for Sustainable Development, calling for action by all countries to “promote prosperity while protecting the planet.” As sustainability initiatives have grown, so too has the degree to which consumers demand products that minimize impact to the environment. Consumer demand has pushed companies to develop corporate sustainability strategies at companies in all industries and across the globe.
Companies care about sustainability in many cases because it is a necessity to remain competitive. Consumers are now demanding products that are made of responsibly sourced materials from companies that pay their employees living wages. In fact, brand reputation is one of three key drivers for companies to adopt sustainable procurement practices. The other two drivers are risk mitigation and compliance, according to the HEC/EcoVadis Sustainable Procurement Barometer, a survey of companies across industry sectors. In a competitive marketplace, companies must establish sustainable business practices if they are to retain trust from consumers.
Corporate sustainability strategies vary in depth and commitment, but most will be structured so that they can track progress towards achieving sustainability Key Performance Indicators (KPIs). Companies are also held accountable by third-party assessment organizations that perform annual audits of corporate sustainability performance. Companies are evaluated on a variety of factors that have financial implications such as product quality and safety, innovation, business ethics, supply chain management, and environmental management and product stewardship. All factors fall within the category of economic, environmental, or social, and all factors are designed to assess companies’ long-term value. For manufacturers, which have complex supply chains and production processes, assessments focus on efforts to better manage energy, solid waste, and water use.
Manufacturers that have corporate sustainability strategies will place significant emphasis on energy efficiency. Reducing energy usage can be implemented by constructing facilities to energy efficiency standards, such as the LEED rating system. Manufacturers may have the goal of supplying 100% of power to their production facilities from renewable sources. While many electricity providers include renewably-sourced power in the generation mix, few providers can assure the provision of 100% power from renewables from local generation alone, especially at the scale and reliability requirements of manufacturers. As an alternative, companies or utilities purchase Renewable Energy Credits (RECs) on the open market, ensuring that the manufacturers’ energy use is being offset by renewable energy even if it is generated elsewhere.
Waste is generated during the processing of raw materials and finished product manufacturing. Manufacturers with corporate sustainability goals will want to reduce the amount of disposed waste that is sent to the landfill or incinerated without energy recovery. Manufacturers can achieve this goal through better product design, the incineration of waste converted to energy, or selling material by-products to other manufacturers/end users who can use it as inputs into new production processes. The reuse of manufacturing by-products as raw materials for new processes is known as industrial symbiosis.
Industry is one of the largest consumers of water in the world. The use of water in the manufacturing process, as an input, as a cooling device, and for washing, is substantial and water quality is of eminent importance for many industries. Reducing the amount of water consumed in the manufacturing process and recycling water when possible, are key corporate sustainability initiatives. Similar to solid waste, industrial symbiosis is achievable with water in the manufacturing process. Treated industrial water can be used for material and equipment washing and process rinse water. Treated non-industrial water can be used for fire protection and landscaping. In many parts of the United States, there is a water shortage, so it is imperative for manufacturers in those regions to recycle water if they still want to locate close to raw materials and/or target markets located in those areas.
Communities (cities, counties, and metro areas) have an exciting opportunity to grow and attract manufacturers with corporate sustainability goals. Aligning local strategies with that of industry results in a symbiotic relationship that benefits the company, its employees, and the community at-large. There are a variety of local initiatives that can take place to improve sustainability efforts in a community. Regional, state-level, and utility-driven initiatives are also useful because they establish targets and provide recognition to municipal-level efforts. For example, the Tennessee Valley Authority (TVA) established the Valley Sustainable Communities program, offering communities in the TVA service territory the opportunity to obtain a designation for implementing policies and practices that link sustainability with economic development. Another notable program providing recognition of local efforts is The Beacon Program, a statewide program in California, that awards cities and counties working to reduce greenhouse gas emissions, save energy, and adopt policies and programs that promote sustainability.
Local strategies vary, but first and foremost it is important that communities have a sustainability plan. The establishment of goals and action items and a framework for undergoing strategic initiatives proves that the community’s vision for itself is in alignment with sustainability-driven companies. The process begins with the creation of an advisory committee made up of city/county technical staff and community, non-profit, and business leaders. Advisory committees are tasked with advising city/county councils on programs and initiatives to adopt that support sustainability goals. Elements of a sustainability plan may include building and energy efficiency, water management, solid waste management, transportation, and land use.
It is increasingly important for communities to also include resiliency planning within the framework of the sustainability plan as the frequency of extreme weather-related events increases. Disruptions due to failed infrastructure such as levees, power lines, and roadways, create significant risk exposure to manufacturers who rely on public infrastructure to operate. Strong resiliency plans include measures for technological advancements and more responsive land use planning to be better prepared for disruptive conditions. The U.S. Green Building Council now oversees a building resilient rating system similar to the LEED rating system, known as RELi. The focus of the RELi rating system is to create resilient buildings and communities with criteria such as adaptive design for extreme rain, sea rise, storm surge, and extreme weather events, and hazards. Resiliency planning demonstrates to companies that the community is prepared when disaster strikes, making both company and community better prepared to mitigate risks and maintain sustainable business operations.
Sustainability plans should also include specific strategies for economic development and business support. Companies that are focused on sustainability will likely want to locate in communities that have the same principles. Key opportunities for economic development strategies that support manufacturers with corporate sustainability goals may be the creation of incentives to companies for supporting city/county initiatives, or city/county investment in infrastructure that will help companies to meet their own goals. One example that is emerging is the development of green industrial parks, which varies in its intensity. Some communities market industrial parks as green if there are natural features such as wetland or stream features that are preserved within the park. Other communities may identify specific factors that must be attained by users in the park such as achieving LEED certification of buildings, taking water and energy efficiency measures, and diverting waste from landfills. These parks also typically take accessibility into consideration such as ensuring availability of public transportation for employees who work in the park, bicycle and pedestrian access, and walkable access to restaurants and commercial services.
While not as common, the most substantial steps toward development of industrial parks with sustainability in mind are eco-industrial parks (EIPs). EIPs follow concepts of industrial ecology, in which the users within the park work collaboratively to share waste streams, creating a closed loop or circular economy. One industry’s by-product, whether it be process water, waste-to-energy, or materials, has the potential to be another industry’s inputs. Identifying industrial users with symbiotic inputs and outputs is challenging, so having a community effort to define and attract symbiotic users has great potential to be attractive to companies with sustainability strategies. Plant Chicago is an example of a successful closed-loop production environment focused on food production. The former pork processing facility is now home to farming, baking, and brewing operations in a single building. The facility is owned and managed by a non-profit with considerable community support.
Sustainability in the Site Selection Process
Site selection consultants help companies identify locations that exhibit opportunities to support corporate sustainability goals and strategies, but there is not a centralized source of information available identifying local and regional sustainability efforts. Consultants must request sustainability information from communities through a request for information (RFI) process. To best identify symbiotic opportunities, it is important for companies to communicate with the consultant team which sustainability measures are most important to them, categorizing objectives as “must haves”, “nice to haves”, or “not of interest.” Examples of sustainability objectives may include: achieving LEED building certification, locating on an infill/brownfield site, access to public transportation, locally sourced raw materials, zero-waste-to-landfill, etc. If there is an objective that is required, the consultant will do their best to share with the community during the RFI process. Communities should treat RFI questions about sustainability as an opportunity to present not only what initiatives are currently underway, but what specific initiatives or programs could be established on the company’s behalf. Communities should be prepared to respond to broad requests for descriptions of sustainability efforts as well as questions about specific infrastructure.
The sustainability movement is here to stay. Consumers are demanding products that are responsibly sourced and manufactured by companies that are stewards of natural resources and the environment. Companies are driven by maintaining competitive footing and positive brand reputation. Long-term viability means creating a business strategy with sustainability in mind, including economic, environmental, and social initiatives. Communities seeking to attract companies with corporate sustainability goals can position themselves best by developing sustainability and resiliency plans themselves. The most successful efforts toward sustainability will be where corporate-community partnerships result in local industrial ecosystems functioning interdependently.
U.N. Sustainable Development Goals: http://www.un.org/sustainabledevelopment/sustainable-development-goals/
HEC/EcoVadis Procurement Barometer: http://www2.ecovadis.com/sustainable-procurement-barometer-2017
About the Author:
Amanda Taylor is Senior Consultant and Director of Research for McCallum Sweeney Consulting (MSC) based in Greenville, South Carolina. She has more than eleven years of experience in site selection and economic development. Ms. Taylor assists corporate clients with site selection, providing location analytics expertise and incentives negotiation services. She directs research activities at MSC, supporting both corporate and economic development projects with a research emphasis on workforce, taxes, incentives, and site readiness. Recent site selection clients include Lucid Motors, Aerojet Rocketdyne, Northrop Grumman, and Michelin. Prior to joining MSC, Ms. Taylor held project management and GIS analyst roles with the Savannah Economic Development Authority. She is a graduate of the University of Connecticut, and has a master’s degree is City and Regional Planning from Clemson University. She is an accredited LEED® Green Associate.
McCallum Sweeney Consulting provides site selection and incentives negotiation services to leading companies worldwide. MSC brings experience, commitment, integrity, and leading-edge technology to our clients in helping them make the best, and most informed, location decisions. Learn more about our process at www.mccallumsweeney.com.