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
Each game-changing innovation builds on those that preceded it. In the 1950s, for example, the transistor ushered in the computer age making possible batch processing of large datasets allowing the automation of routine activities in government and large corporations. By the 1980s advances in computing power and networking of systems allowed widespread integration of functions across corporate enterprise leading to rapid economic globalization.
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
Civic leaders have a responsibility to manage the community in ways that produce positive outcomes for citizens. This includes making sure community attributes are aligned with requirements needed to maintain a healthy and sustainable economy. Among the factors long on the list of community offerings in support of industry and commerce are modern transportation and utility infrastructure, effective education and workforce training programs, lean and responsive government, reasonable taxes and regulation, and public health and safety.
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:
- Does the community have an up-to-date sustainability plan and comprehensive land-use plan?
- Does the community follow these plans in the decisions they make around community development?
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:
- Does the community have an up-to-date business retention and attraction strategy?
- Is there a formal well-funded and professionally-managed public/private partnership for managing the plan?
- Does the community work towards improving efficiency and lowering costs in programs they manage (e.g. red flags – community does not have in place or a plan to install LED street lights, traffic control systems, or streamline permitting process).
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:
- Does the community have a comprehensive parks and trail plan and are programs well-funded and professionally managed?
- Does the community have recycling, both residential and industrial, with a high rate of participation?
- Does the community offer a range of residential/workplace settings that support healthy lifestyles (e.g. – compact walkable urban centers, bicycle-friendly complete streets, public transit alternatives, safe walking routes to schools)?
The Future for Green Development
Collectively, green development measures can be found at the foundation of communities with a strong sense of place. Increasingly, corporations large and small recognize the value of aligning their facilities with these communities.
Don’t confuse “green sticker” and “ecolabel” practices with these location decisions. Many companies have adopted these standards as a way to promote their greening practices. And while consumers increasingly use these labels to measure the eco-friendliness of products, these in themselves are not measures of sustainable companies or green communities.
Location choice aligned with green development in contrast is more comprehensive than a simple branding strategy. The competitive organizations are more concerned about working in harmony with the communities in which they locate, allowing both to flex and adjust to changing needs.
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:
- Health care and consumer goods – Johnson & Johnson, Novozymes, Unilever, Procter & Gamble
- Retailers – Target, Walmart
- Agribusiness and food processors – General Mills, Cargill, Kellogg’s, Nestle, Hershey
- Diversified industry – Berkshire Hathaway, Johnson Controls, GE, Siemens
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.
About the Author:
Don Schjeldahl is founder of the Don Schjeldahl Group (www. DonSchjeldahlGroup.com), a consulting practice that assists corporate clients in developing location strategy and site selection for manufacturing and distribution facilities. Mr. Schjeldahl has 35 years of professional experience in the development and implementation of corporate location strategies and site selection for commercial and industrial clients across a broad spectrum of industries, 27 years with The Austin Company of Cleveland, Ohio. Schjeldahl has performed or directed more than 300 location strategy assignments working throughout North America, Mexico and Europe. www.DonSchjeldahlGroup.com / Don@DonSchjeldahlGroup.com / 828-772-9374
