The Business of Sustainability

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The Business of Sustainability

Originally published on Austin Business Journal

How companies are leading the way through investments, recruitment and overall impact to the environment

Austin once served as an incubator for earth-aware businesses, becoming an early adopter of environmentally-friendly design and practice. Yet, we do the city a disservice when we lean on antiquated stereotypes. Today’s Austin is professionally diverse and thoroughly modern. Not surprisingly, sustainability practices have now moved front and center for millennial job seekers as they consider opportunities to grow, and profit–consciously.

Today, in the age of Tesla, Austin is well-poised to become a sustainability trend-setter on the national stage. The Austin Business Journal recently sat down with a panel of experts to discuss the myriad ways this once niche market has expanded to offer opportunity for all. Participants included Justin Rose, Managing Director & Partner, Boston Consulting; Ashleigh Powell, Director of Sustainability, Cushing Terrell; and Kyle Frazier, Head of Commercial Sales, Freedom Solar. Kathy Miller, Executive Director, Hill Country Conservancy served as moderator.

Kathy Miller: Justin, I’m starting with you because it seems like there has been a shift within industrial businesses. Can you talk a little bit about how sustainability came to the fore and why it became such an important part of your work?

Justin Rose: When I think about why it matters to BCG, there’s an aspiration to be a lever to help others achieve really ambitious goals and through that, changing the world and making an impact. More practically, we’re thinking about talent. We’re finding that if our company doesn’t have a very forward posture and engagement across the board, it’s really a difficult sell. This is what our best and brightest people want to work on these days.

At its core, I think there’s a realization that some action is just fundamentally necessary with the continued revelations from science. It’s really convinced all but the most diehard skeptics that there’s a real need to actually do something. It’s been quite interesting to watch the investing community in particular start to put their money where their mouth is. We did a study recently that showed that companies that we would term grayer–so oil and gas companies, chemical manufacturers, mining companies–are seeing a multiple decrease relative to the market versus companies that are “green.” That’s a powerful incentive for CEOs that have responsibilities–yes to their community–but also very directly to their shareholders.

Kathy Miller: Actually, that’s a perfect segue to the discussion of green energy. Kyle, can you tell us what role on-site solar panels can play in business owners’ sustainability initiatives? How are you partnering on the business side?

This is the group of panelist in the article with their bios.

Kyle Frazier: There was an article in Fast Company that really jumped out at me. It was published in February of 2019. The headline stated that most millennials would take a pay cut to work at an environmentally-responsible company. It said that nearly 40% of millennials had chosen a job because of company sustainability–that’s compared to 17% of boomers. That was shocking to me that there is actually an employee retention role. There was another article on Forbes.com called The Power of Purpose and Why It Matters Now. This one was published last year. They are projecting that 75% of the workforce in 2025 will be millennials. So 75% of the workforce is millennials, and they’re willing to work for 40% less. There’s a pretty clear path here to show that some of these investments in sustainability pay for themselves.

We all know the backdrop of the labor market, and how difficult it is to find good people and keep them. There’s a whole host of reasons for that–they’re not just COVID-specific. At the end of the day, it’s about getting the best, and we have seen that become a greater and greater percentage of what is drawing people to us. Whole Foods is one of our clients – we’ve done several projects for them. They have a certain demographic of employees. It’s the same with Subaru. If you drive a Subaru, you’re more likely to have solar on your roof. They are another client of ours who is doing it primarily for customer loyalty.

Kathy Miller: Awesome. Ashleigh, a lot of design firms have sustainability in their mission or value statements. Can you tell me a little bit about how Cushing Terrell’s approach to sustainability might be different from other design firms?

Ashleigh Powell: We really have an incredible depth of expertise, which spans across architectural and interior design, historic preservation, planning, and mechanical, electrical, and plumbing engineering. We’re a very experience-driven firm, and deeply committed to our design process that begins and ends with research. So I think through that approach–that collaborative, integrated approach – we’re really able to work with our clients to develop custom sustainability solutions. In the past few years, we’ve been moving away from the traditional model of pursuing individual building certification as the end goal. That is still very much a fundamental component driving a lot of things, but on a larger scale – as Kyle and Justin have just alluded to, companies are looking for ways to tackle more ambitious challenges, from decarbonizing material supply chains to building practices.

So I think what really differentiates Cushing Terrell is our multidisciplinary approach and bringing that sustainability perspective to the table early on. I’ve learned so much from our various disciplines, and I know our team members have as well. I think it’s really critical at this point in time, and with the types of challenges that we’re trying to solve, to have everybody at the table collaborating early under one roof and that is an incredible value that we provide.

Kathy Miller: Ashleigh, I’m gonna stick with you for a second because Cushing Terrell has an internal Green Advocacy Council, and I think that also aligns with some of the uniqueness of your company’s approach. Do you want to talk a little bit about that?

Ashleigh Powell: When I joined Cushing Terrell in 2006, the Green Advocacy Council (GAC) had just been formed. It was about a year old at the time, and was just an internal grassroots group, largely formed around the premise of “Hey, there’s this new thing called LEED–we should explore this.” For the first few years we were truly dedicated to educating our teams to align with the requirements of this program. We had maybe 30 to 40 projects that were LEED certified in those early years as a direct result of the efforts of the GAC.

Today, the group continues to be very active. It’s gone from being grassroots to really being a leading force within our firm, with a focus on research, advocacy, and education. Our firm has now developed expertise in embodied carbon, energy modeling analysis, and renewable energy services. We also have a post-occupancy research group, that spends time actively exploring lessons learned from our projects.

One of our proudest accomplishments is the development of our own internal Sustainable Design Initiative, which is a tool that all – Cushing Terrell team members can use on every single project. It aligns our design process and our practice with those sustainability areas that we are committed to, such as energy efficient design, healthy materials, embodied carbon analysis, post occupancy evaluation, etc. So we have this group that’s not only bringing knowledge and expertise, but also creating resources for our team.

Kathy Miller: So, Justin, I want to take that to you. How is BCG actually walking the talk? What are you doing internally to promote sustainability?

Justin Rose: In September 2020, we made a commitment as a firm globally, to be net zero by 2030 and climate positive thereafter. Now, if you know anything about consulting firms, you can imagine that the vast majority of our emissions are from traveling. Frankly, the pandemic has given us a crash course on achieving this via zoom and the use of various digital tools, but the reality is we’re going to be on flights and we’re going to go and see clients forever. So how can we promote and invest in things like sustainable aviation fuels? If you’re not familiar with sustainable aviation fuels, it’s a technology that actually leads to 80% fewer lifetime co2 emissions. It works as a drop-in replacement fuel for a jet just like any jet fuel you would fly with today.

So we are making big commitments to promote that, and to partner with airlines to roll that out. We’re already buying carbon credits from places that have very high standards. The carbon credit market today is a bit of a wild west. There’s a new plant in Iceland which actually takes co2 directly from the air and buries it deep into aquifers and in rock reservoirs over the course of a couple of years. More broadly than the specific commitments we’re making, it comes down to the fact that we have a seat at the table with many senior executives, so therefore, how do we play a role in connecting them and driving their agenda?

Kathy Miller: Kyle, your industry is more obviously connected to sustainability. What types of solar incentives are businesses taking advantage of here in Austin? Also, what is the Freedom Solar outlook on the future of sustainability efforts here?

Kyle Frazier: In general, there are four different financial drivers for a solar project in Austin. What’s driving solar nationwide is the tax credit. It was initially 30%, and then it stepped down to 26%. At the end of this year, it will step down to 22%, and from there it drops to 10% and stays for a while. So despite the pandemic, there were a lot of profits that were made over the last few years, so the tax credit is very valuable to a lot of business owners who have a lot of tax liability. So that’s one driver.

The second is, it’s a bull asset. So businesses look at that as an investment that they can appreciate, and it qualifies for accelerated depreciation so they can recover that value in the first year. So if you look at just those two things, half the cost of putting solar on your rooftop is paid for already. This is true of for-profit entities. We’ve done a lot of work with nonprofits, and it’s different. Unfortunately, they can’t participate in the tax stuff because they’re not taxed as entities. What Austin has done here locally is they have this third lever, which is the concept of performance incentives. So as your solar generates energy, they find value in that source of energy being the sun, and so they offer an incentive that covers essentially 20 to 25% of the cost of the project.

Then the fourth is the one that most of us commonly think of, which is energy savings–we’re generating our own energy. We’re not buying it from the utility company. So it’s more like passive income, in a way. I was a real estate broker for a long time before I got into solar, so I think about solar a lot like I do tenants–only these tenants, they sit on your roof. We stick our tenants up there and they sign a 25-year lease. They don’t complain, they pay their rent on time, and they lock in long-term.

Kathy Miller: Ashleigh, do you want to elaborate here a little bit? From your perspective, where have we come from, and where are we going in respect to sustainability?

Ashleigh Powell: As a firm, we’ve been engaged and committed to the decarbonization of the built environment since 2016. That year we signed on to the AIA+2030 commitment, which is a voluntary industry-wide movement that by 2030, architects and builders will ensure that all new buildings and major renovations will be carbon neutral. So, since that date, we’ve been benchmarking our projects against industry averages and tracking our progress towards meeting those incremental fossil fuel reduction targets.

We’ve also shifted towards trying to help our clients understand solar – which is essential to meeting the reduction targets. To cite an example, we have a pair of alternative energy experts internally – we call them our engineering dynamic duo. They are a father-son team. The father, one of our principal engineers – has 30 years of engineering experience with the firm. His son joined us in 2014 with new knowledge and depth of expertise. Together, they have been engaged in an incredible amount of work over the past couple of years, both nationally and internationally. They spoke last year at USGBC’s international green building conference, sharing their microgrid expertise. To accompany their presentation, we published a highly visual and approachable solar integration design guide intended to help our clients understand the potential impact of these design considerations.

Kathy Miller: What about you, Justin–what are some of the really innovative ways that the companies you work with are engaging in sustainability?

Justin Rose: The most innovative companies are finding ways to meet the commitments they’re making, but also building an advantage for themselves. Let me give you an example. I don’t know how many people have heard or read about soil-carbon sequestration, but the basic concept is that it has the potential to store carbon from the atmosphere directly in mostly agricultural soils. It’s viewed as one of the bigger potential levers we have to actually remove carbon from the air. Now for those of you that don’t know, it basically just works through photosynthesis, and the CO2 eventually makes its way down to the soil where it’s sequestered.

When you do this on a large scale, it requires different practices. So you have to do things like grow cover crops to maximize the potential. You can’t till the field because when you turn over the soil, that releases the carbon that was sequestered. You need to spray less chemicals, less nitrogen and less pesticides and herbicides on the field. So if the farmer does this, they have the potential to get a credit, which trades on a marketplace that – one day – might actually be more or as valuable as the crops that are producing today. So it’s a really powerful idea.

That’s a totally different mentality than treating a sustainability commitment as a boat anchor that’s just there to weigh you down – like something you have to do because someone is forcing you to do it. This is like saying, “let’s find a way to create an advantage and create an entirely new market.” So fundamentally, I would challenge every company to think about how they are going to create that advantage from sustainability, because I think that’s what’s going to differentiate the companies that are huge future winners from the ones that just muddle along.

Kathy Miller: Tell me about one of your more notable projects that you would like to highlight.

Kyle Frazier: I’ll mention a project we worked on that made an impact beyond the project itself. ABC Home and Commercial Services came to us with a project in Haiti– it was an orphanage that they started in a very remote part of the country, and they were trying to figure out how to give it electricity. It’s got an old generator on it, but we knew it would be an expensive job. They were interested in doing solar anyways on their different buildings in San Antonio, Houston and Austin. So I said, look, if you guys will make a commitment to do this here in Texas on your buildings, we’ll figure out how to go do this in Haiti, and we’ll pay for it. We’ll cover the cost.

So we think about that kind of conscious capitalism, but that’s a big deal where they’re able to make a decision here that they would have probably made anyways, and we’re able to tell that story about building a micro grid in Haiti–and the videos of the kids and the people there are incredible. That’s one we’re really proud of–it was a fun project to work on. Our people got to go to Haiti to build it, and we’re forever changed by that experience.

Ashleigh Powell: We are engaged in a multifamily housing project in Colorado that’s targeting netzero energy and significant carbon reductions. So here we have this perfect marriage of the most prominent sustainability drivers right now. We have an affordable housing crisis in this country, and we’re approaching an affordable housing community and overlaying significant environmental components to help provide a community for individuals that’s affordable and healthy, and it helps to elevate them in the community.

We’re in the very early stages of design, but it’s been an incredible experience for our team to really be engaged at a very deep level. We came in as a design team, following three years of community outreach and engagement, to identify their needs and collaborate with the town council to develop a vision for this project. So it’s an incredible honor for our team to be at the table now, helping realize that vision – and to be engaged in a project that’s representative of the type of sustainable, equitable, resilient, and regenerative design solutions that are critical moving forward.

Justin Rose: In the same philosophy of taking a problem and trying to build an advantage from it, we’re working with one of the world’s leading chemical manufacturers to think outside the box a little. You know, how do you think about recycling plastics and chemicals and entering that business, instead of just being a one-way producer that pushes this stuff out into the world? How do you actually close the loop and build a sustainable ecosystem around that?

Last year, I helped the world’s biggest ride-hailing company on their electrification strategy. So they’re committed to full electrification of all rides by 2030. So how do you think about the charging infrastructure and the requirements to support that? We worked on that. We’re helping a very big brand-name motorcycle manufacturer actually bring their first electric motorcycle to market and thinking about how to engage with customers and communicate the performance benefits and have the cool factor, frankly, of an electric motorcycle. It’s just super-energizing and powerful to get to help so many companies in so many different ways.

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