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Episode 42 – Climate Change Actions Emerge as a Site Location Factor

Site Selectors Guild
Episode 42 - Climate Change Actions Emerge as a Site Location Factor
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Rick Weddle (Site Selectors Guild): Welcome to “Site Selection Matters” where we take a close look at the art and science of site selection decision-making. I’m your host, Rick Weddle, president of the Site Selectors Guild. In each episode, we introduce you to leaders in the world of corporate site selection and economic development. We speak with members of the Site Selectors Guild, our economic development partners, and corporate decision-makers to provide you with deep insight into the best and next practices in our profession.

In this episode, we have as our guest, Didi Caldwell, principal with Global Location Strategies, one of the world’s leading site selection consultancies for manufacturing and industrial companies. Today Didi will talk with us about how community or state action to combat climate change is emerging as an increasingly important site location factor. Join me as we welcome Didi Caldwell to “Site Selection Matters.”

Didi, the interest in sustainability is clearly escalating. The new administration’s push for climate change programs, renewable energy jobs, plus the recent announcement by BlackRock chief, Laurence Fink, calling for companies to actually disclose plans on how they’ll support a net-zero economy all seem to reinforce this point. Take a minute, if you will, to help our listeners understand why this is important, specifically to site location, and what a net-zero economy actually means.

Didi Caldwell (Global Location Strategies): Thank you, Rick. It’s great to be here with you. We’ve seen an increasing interest from our clients in net-zero and other sustainability goals over the last, I would say decade. Net-zero essentially means achieving a balance between the greenhouse gases that we put into the atmosphere and those that are taken out so that we can achieve a net-zero emissions. It differs from gross zero, in that gross zero would mean that we’re trying to take out all carbon dioxide emissions, which is, I think most people would agree, is not achievable with today’s technology. But net-zero accounts for our ability to take out greenhouse gases out of the atmosphere through nature or through other technologies.

Rick: So that would mean we’re not making it worse, right? If you’re at net zero, it’s do no harm, kind of.

Didi: Exactly. And the widely accepted increase in temperature that we can achieve… We have to get to net-zero in order to achieve an overall warming of 2 degrees Celsius or less. That’s what the scientists are telling us, that we need to in order to avoid major environmental damage and beyond social and all kinds of other things that scientists are telling us that degrees Celsius is about where that threshold is. And in order to achieve that, we really need to get to net-zero and as quickly as possible.

Rick: You know, there’s a lot of details and a lot of substance to be understood and learned in this. But, you know, we’ve been talking about global warming and climate change for a long time now, some more intensely, some less intensely, but some of us actually remember back when Al Gore first raised the conscious level with the release of the movie, “Inconvenient Truth.” Why do you think it’s coming to the forefront now, after all these years?

Didi: Well, there’s a couple of reasons. I mean, one thing is that was sort of a call-to-action, but we really didn’t have the technologies, at least not at a price point where we could implement those technologies back when “Inconvenient Truth” came out. We’ve made a lot of progress since then. So, it’s a combination of the technology is getting to the point where they are economically feasible to implement them and also this interest from the investment community on focusing on these environmental goals. In the absence of regulation, particularly in the U.S. at the federal level on achieving these goals, the investment community has sort of taken it on themselves.

So, Larry Fink, who was the CEO of BlackRock, BlackRock controls almost $9 trillion in assets, or they manage $9 trillion in assets. So, when someone like him steps up and says, “We are going to be evaluating companies, not just on their profitability, but also on their ability to achieve net-zero and other sustainability goals,” then you better believe that those companies start to listen and start to think about how they’re gonna implement those in their own companies.

Rick: So, when it starts to really impact business over the longer time horizon, and specifically the energy business also because they are some of the larger movers and shakers in this changing environment, it kind of puts it front and center, doesn’t it?

Did: Yes. Absolutely. And I mean, one of the things I like to think about is that, you know, green is the new gold. And it used to be more difficult for investors to create climate aware portfolios and it was basically reserved for the institutional investors, but now, more than ever, there are ETFs and other investment tools that the everyday investor can use in order to get their money behind environmentally sustainable companies and processes. And so that’s made that focus even more sharp.

Rick: Didi, it strikes me that if companies now, because of these tools and their ability to focus on this and understand what’s good for business, if they’re now gonna be required to choose to adjust their business models to support this net-zero economy, that that also is likely to have an impact on where geographically they choose to invest in a new plant, a new equipment, or even people. Is this correct?

Didi: Yes. That’s absolutely right. I mean, there are… So LEED certification, which is the building Bible for environmental sustainability does have some criteria that are associated with site selection, but these are mainly focused on the building, but those things are still important. So, it’s things like a brownfield site is more environmentally-sustainable than a greenfield site. Obviously, if you go to a site that does not have wetlands or other sensitive environmental areas, that’s going to be better for the environment, but there are also things that processes so manufacturing companies can look at when they’re looking for an environmentally sustainable location. Things like having alternatives for water other than just taking fresh water out of the system. So, things like purple pipe where you take effluent from a wastewater treatment system and use it in your process. Waste collection that allows for recycling and reuse, because one of the things that we’re seeing, it’s not just about net-zero, it’s also about these broader environmental objectives.

I can give you a really good example of a client of ours that located one of the criteria that we used; I was looking at how were they able to be used their carbon dioxide? And so, they ultimately chose a site which had a carbon dioxide pipeline close to that so that they could put their carbon dioxide into that pipeline instead of emitting it to the atmosphere. And in discussions with them, we learned that their valuation, on their company, because they were able to do that, increased significantly because investors were very interested in investing in companies that had that capability. It made not just an impact on their site location decision, but on the valuation of their company itself.

Rick: That’s fascinating, Didi, what you’re really talking about, and that instance is a location that was actually almost “plumbed” for sustainability because of it had that CO2 pipeline, it made it a more cost-effective, I believe, for that company to locate nearby there, to access and not to have to carry that cost on their own books. I guess that’s what makes sense, right?

Didi: Absolutely. Yes. And we at GLS in the response to our companies wanting to achieve these goals, we have developed metrics that are around the environmental and social and profitability objectives of our companies. If you think of companies looking at their triple bottom line. So, it’s not just the bottom line of profit, but it’s also looking at the environmental and the social impacts that they have, and essentially people, profit, and planet. They’re looking at those three things. So, we have developed metrics along cost, quality, and brisk that will help them understand how each location fits into those three goals of people, planet, and profit.

Rick: People, profit, and…what was the other one?

Didi: Planet.

Rick: Planet. Okay.

Didi: So, planet is the environmental, people is the social impacts, and then, obviously, profit is the economic feasibility. So, we evaluate locations. We’re not just looking at, you know, what is the lowest cost, we’re also looking at, how does that location fit within their environmental and their social goals? Because, you know, companies make decisions based on essentially three factors. They would like to have the location that is the highest quality, the least cost, and the lowest risk. And over time, we have seen more and more of these environmental and social criteria filter into those three areas. So, I think communities need to be aware that this is a part of the metric. It’s not the only driver, but it is going to be something that companies factor in when they’re making their location decisions.

Rick: So, if you have metrics as you do and that gets into really granular detail, you’re gonna evaluate communities based on that. That also means then, I guess, fundamentally how well a community, a region, or a state is doing or what they are in the process of doing to combat climate change, that’ll come become a factor for companies in considering those new locations. It’ll be a differentiation factor.

Rick: Yes. Absolutely. And one of the biggest places where we see that there is a differentiation is in the energy generation mix and the ability for our companies who tend to be very large, very high demand electricity users, to what extent can they procure environmentally friendly renewable energy either from solar, wind, geothermal… I mean, there’s lots of different options, but even nuclear because it has a very low or negligible carbon impact. How can they cure that type of energy to help them meet those net-zero goals? Because even though if a company uses, you know, for every 1,000-megawatt hours that it uses, it’s not generating carbon based on that electricity, indirectly, it was contributing to carbon being emitted to the atmosphere if they are using energy that has been generated from either coal or natural gas. So, the companies that we work with are very interested in looking at how they can construct a portfolio of electricity and energy that will help them achieve their net-zero goals.

Rick: So, energy, because it’s so important to a production process is probably one of the obvious ones, but I expect there’s probably some less obvious actions that a community can take or begin to take that might differentiate them from others in getting ready for sustainability or being supportive of sustainability or combating climate change. Are there some examples, other examples you might have that are maybe less obvious or less well-known?

Didi: Sure. So, I mentioned the wastewater effluent, purple pipe coming from the wastewater treatment plant, that’s an area. Public transport. The ability for workers to get to a facility through public transport does help companies achieve their environmental goals, even just providing bike lanes is something that we take into consideration. Can workers use a bike to get to work? You know, certainly conservation areas, wetland banks. On the social side, if you are developing a park in an area that has neighborhoods around it, how are you ensuring that those communities will not be either disenfranchised or negatively impacted by the development that’s happening close by? Accounting for things like, you know, stormwater pretension so that companies can use green roofs. I mean, these are all… Another one is having very strong brownfield legislation that limits the liability on a company coming in and using a brownfield site so that they can feel comfortable moving forward and not take on risk, which obviously, they want to avoid associated with any past environmental conditions that may exist at that location.

Rick: Didi, in all the years I’ve been in the economic development business, one of the big factors we all talk about but probably don’t know how to measure very well as quality of life. But now that we’re talking about companies and sustainability and, you know… And quality life is important because people like to live in a place that’s a nice place to live, but here it looks like we have a tie, if you will, that links workers and talent to profitability. If it’s true that young, well-educated, highly-skilled workers might also be drawn to communities that are doing a good job in combating climate change. That seems to me to be a way to begin to measure that third party or equation, the people side of it, in terms of attractiveness to people and how quality of life and sustainability will relate together. That may be not fully measurable yet, but certainly, these areas that are gonna do a good job seem to be a more attractive to the young, talented workers. Do you agree with that?

Didi: Yes. I do agree with that. And people, just like companies, are making decisions about where they’re gonna set up residence based on a multitude of factors, you know, opportunity, the cost of living, the quality of life. But I do believe that people are drawn to both companies and locations that match their cultural and their moral attitudes. And to the extent, and I do believe that it’s true that younger talented, highly-educated, highly-skilled people are very in tune with what’s happening with the environment and understand that we do have an existential threat. And so, I think that, you know, it’s not just about I wanna move to your community or work for a company that has these environmental goals, it also reflects…you know, it’s kinda like holding up a mirror. It shows that, you know, I’m putting my money, and my efforts, and my time where my mouth is and it also, you know, when you think about the communities that are making strides in this area of becoming more sustainable, they tend to be very nice places to live because they have lots of green space, they have parks, they have outdoor recreation. And so that’s another thing that runs true.

So, it’s not just like…it’s not just a moral or a priority for them, it’s also, “Where can I really enjoy living?” And, you know, Rick, we’ve seen quite a paradigm shift where, you know, it used to be that…the assumption was that people would move to where the opportunities were. So, they would go…if a community was able to recruit a company and create jobs, then that would then attract people. And what we’re actually seeing now is that communities and companies have to think about…they need to shift their focus more towards the people. So, if you are able to attract the people to your community, then the companies are there going to follow. The corollary to that is if a company chooses a location that is attractive, that has an environmental…they’re very sustainable, that company is going to benefit as well.

Rick: Yeah. It seems like company and people, one hand washes the other. They really go together now in terms of what makes a community attractive to both as they true up and harmonize. That’s fascinating. And I think that’s something we’ll have lots of conversations with about over time. Finally, Didi, today, this has certainly been a strange, volatile, challenging, difficult, a whole host of words to describe this last year and now we’re in the early part of 2021, starting to look at, hopefully, the other side of some of these challenges. Can you look into your crystal ball and maybe share with our listeners, from your perspective, what do you see in the months ahead?

Didi: I often say that my crystal ball is broken, and that’s a really beady question. You know, I think it was Dickens that wrote in “A Tale of Two Cities,” “It was the best of times. It was the worst of times.” And in my lifetime, I don’t know what that phrase has ever been more meaningful than it is now. But I follow geopolitics and demographic trends and economic trends pretty closely because it impacts my prospects as a business owner or a site selection consultant, but it also impacts how the companies that I represent are gonna make decisions. And I heard someone describe the other day, is that, you know, geopolitical and economic change moves at glacial speed until the dam breaks. And when the dam breaks, change comes with great velocity and it spares nothing. And I feel like we are on the cusp of one of those such instances where there is going to be extremely rapid change. And the pandemic has accelerated those trends rather than slowing them down or negating them, it’s actually accelerated those trends.

So, my outlook for 2021 is not that different than it was for 2020. I think, you know, it’s still gonna be somewhat difficult for companies to get out in the field and make the decisions they need to make in order to move forward. Although we do see it happening, it’s just not happening necessarily with the same regularity as it happened before. We see a lot more announcements and expansions at existing facilities. But I do believe that once the developed world achieves something like herd immunity, which will hopefully be sometime in the, you know…by the third quarter of this year, that we’ll start to see a rapid acceleration of projects and announcements as companies and communities try to adjust as quickly as possible to this rapid era of change that we’re about to go through.

Rick: Well, that’s a very positive note, I think, to kind of wrap up and end on it. May end up being that the pandemic were the sirens that were warning us of the dam about to break and all the changes we’re going through. Didi, you’ve really given us a lot to think about today. What a great conversation, but that’s really all the time we have. So, let me pause and say thanks to you, Didi Caldwell, for talking with us today on this episode of “Site Selection Matters.”

Didi: Great. Thank you so much, Rick. It was great talking to you.

Rick: Thanks for listening to this episode of “Site Selection Matters” and a special thanks today to Didi Caldwell, principal with Global Location Strategies for helping us get inside and better understand just how actions to combat climate change are becoming more important as a site location factor, one informative discussion and one that certainly leaves us with a lot to think about. Again, I’m Rick Weddle, president of Site Selectors Guild. This podcast episode presents my views and the views of my guests and they do not necessarily represent the views or opinions of the Site Selectors Guild or its members. We hope you’ll subscribe to “Site Selection Matters” podcast on Apple podcast, Stitcher, Spotify, or wherever you listen to your podcasts. We look forward to bringing you some great discussions in the year ahead. Until next time, good day.