At chauffeur business Blacklane, sustainability has become an increasingly important priority. Since its 2011 launch, the Berlin-headquartered company – which now operates in 50 countries and has garnered a reputation as a high-end version of Uber – was focused on minimising empty return rides, a longstanding problem for chauffeurs. It took things up a notch in 2017 by offsetting carbon emissions and it is now electrifying its fleet: it wants 75% of its rides to be in electric vehicles (EVs) by 2025.
In February, Blacklane acquired a majority stake in Havn, an all-electric chauffeur service in London. “With Havn growing and the regulations in London, we saw there was huge potential of the business model,” says Sascha Meskendahl, Blacklane’s chief revenue officer. From 2021, only EVs are exempt from the city centre’s congestion charge which — while traditional vehicles are still cheaper to buy — strengthens the case for chauffeurs to invest in EVs as it means their operational costs go down, he says.
London’s sustainability commitments have also seen it install more EV charging stations than any other European city, according to mapping service HERE Technologies. “If you go to other markets, maybe Asian markets, it is more difficult to roll out something like [EVs] if you don’t have the infrastructure in place,” says Mr Meskendahl.
Blacklane is just one example of climate risk transforming not only corporate strategies, but also nudging investments towards certain locations.
Another is IAG. The first airline to commit to net zero emissions by 2050, IAG is investing $400m in sustainable aviation fuels (SAF) and has partnered with SAF specialist Velocys to build Europe’s first household waste-to-jet fuel plant in the UK.
Explaining the decision, IAG head of sustainability Jonathon Counsell highlights its decade-long relationship with Velocys, having a significant proportion of its operations in the UK, and the “good progress in terms of [UK] government support for first-of-a-kind SAF plants”. With the right policy in place, he expects the industry could build 14 plants across the UK, creating 6500 jobs, over the next decade.
The US Site Selectors Guild’s latest member survey found that sustainability is an increasingly important factor for nearly all industries. Advisors speaking with fDi attest to this, but stress it is not among the top considerations.
“Most decisions are still primarily being driven by sites and talent. However, we are seeing more projects have [sustainability] as a site selection factor,” says Wade Williams, vice president of global business development at REDI Cincinnati. The city regularly ranks among the US’s most sustainable metro areas and, he says, the city has more requests-for-information queries on the availability of renewable energy.
Internationally, the most visible example of climate risks affecting location choice is tech giants’ demand for clean power when they are establishing data centres. “In this sector, it is already leading to some countries winning certain projects and others losing out,” says Dieter Billen, principal at consultancy Roland Berger.
He knows of data centre projects in Vietnam and Africa where access to renewables was the deciding factor between two countries. In recent years, Google and Microsoft have both cited the availability of renewable power and governments’ sustainability commitments being factors in their choice to build data centres in Denmark and Sweden, respectively.
Site-specific features are also important. Didi Caldwell, founder at Global Location Strategies, says a client in the US decided to locate its multi-billion-dollar gas conversion operation on a site that had access to a carbon dioxide pipeline. While the financial gains from capturing and selling the gas would be minimal, she says: “It has a very positive impact on what emissions look like, and so the company’s valuation was positively impacted by the fact they were able to reduce their carbon footprint.”
She adds climate considerations in site selection are partly driven by investors, who increasingly are insisting that companies strive towards net-zero emissions.
Increased vulnerability to natural disasters is also a factor. This has always played a role in site selection, but it has taken on a new dimension with the increased severity and unpredictability of weather events.
“Here we are just starting to see the tip of the iceberg,” says Ms Caldwell. As these dangers become harder to quantify, some insurers are deeming more areas to be high risk. She describes a recent project where a client wanted to locate on a floodplain protected by a very high-quality levee.
“It was impossible or prohibitively expensive to get insurance for the investment so we had to scramble to find another site. It’s an example of the old rules not necessarily applying any more,” she adds.
While climate change is changing the site selection calculus, in most industries it does not outweigh traditional considerations such as talent and infrastructure. Global firms in particular, which need operations in many countries, often instead focus on maximising a site’s sustainability. One example is energy solutions multinational Schneider Electric (SE), which was recently ranked the world’s most sustainable company.
Climate considerations have long been a priority to SE, but its adoption of more sustainable business models has accelerated over the past five years. Via its Alphastruxure joint venture with Carlyle, for instance, SE manages clients’ entire energy infrastructure.
“We have been sustainable and circular for decades, but we now see it more as a service,” says Xavier Houot, SE’s sustainable supply chain and safety senior vice president. “Most customers still buy our gear; they tend to capex electrical distribution rather than lease. But we are pushing this hard and it is growing significantly.”
SE assesses the emissions impact of each decision and product to push for the lowest carbon option. But location decisions are mostly driven by business and market factors. Sites meet strict sustainability standards by ensuring their proximity to suppliers and distributors to minimise transport flows, and factories are LEED-certified (rated for their green credentials).
Before choosing to open a factory in Vietnam’s Saigon Hi-Tech Park in 2017, SE elevated the building to avoid flooding risks. “The way we approach things is through innovation,” says Mr Houot. “If the green material we need, or renewable electricity in that country is more expensive, we will seek ways to drive efficiency. Our people scratch their heads and invent good solutions.”
As global warming becomes more visible, the importance of sustainability in site selection is tipped to grow. But it could be held back by the 64% of business leaders who, according to a recent Standard Chartered poll, don’t believe that operating as a net-zero company stacks up economically. For all the buzz about corporate sustainability, it appears some executives are still to be convinced.
This article first appeared in the October/November print edition of fDi Intelligence. View a digital edition of the magazine here.