Millennials have jumped on board the "green" bandwagon. They may not be environmentalists per se, but they are definitely raising their environmental standards. A report by Walden University found that 81 percent of adults worldwide prefer to purchase products or services from companies that demonstrate environmental responsibility. Manufacturers should take this as a wake-up call and start reevaluating their sustainability efforts.
More than just a cultural connection, manufacturers who restructure their processes and properties with sustainability in mind also stand to achieve significant savings. Many of these eco-minded changes involve operational shifts to reduce an organization’s environmental footprint, but others are best realized through changes in manufacturers’ facilities themselves.
Picking a Green Location
Facility location is often overlooked as something that impacts an organization’s environmental footprint, but it actually plays a key role. Facilities farther away from consumer markets incur higher transportation fees—taking a toll on both the environment and production expenses. It’s also important to note how goods are being transported. Trucking is usually the go-to transportation method for last-mile delivery. While it may be practical, it’s an expensive choice—especially for long-distance deliveries. In fact, trucks consume twelve times more energy than rail and end up costing thirteen times as much in fees. Needless to say, manufacturers looking to become more sustainable and reduce costs should consider relocating or altering their transportation hubs.
Truth is, not all manufacturers have the option to locate close to their target market. Their customers may span across states and even countries, so such a move would not make much financial or environmental sense. Instead, these organizations should try locating their facilities in transportation-advantaged areas. These types of locations allow manufacturers to construct intermodal strategies, which offer greater shipping flexibility and agility. Multiple shipping methods including truck, rail, air, and even maritime give organizations a leg up as they are able to streamline operations and reduce their environmental impact.
Although trading expediency for energy efficiency seems like a downfall, millennials are willing to wait. According to a recent study by West Monroe Partners, 82 percent of 18 to 25 year-old consumers would wait longer for sustainably delivered products, more than any other age demographic.
Benefits of Going Green
Relocation is important to consider, but manufacturers should also think about the facilities themselves and where they fall on the sustainability scale. A LEED-certifiable property gives organizations a sustainable credibility boost. Last November, the U.S. Green Building Council updated the LEED program, simplifying the certification process and including more accommodations for industrial real estate projects. These certifications are on their way to becoming the norm, as the amount of LEED certified buildings in industrial manufacturing jumped from 198 facilities in 2010 to almost 1,400 facilities in 2014.
Gaining millennial attention isn’t the only reason to go green. Many manufacturers have found that integrating sustainable practices is also good for business. Efforts to reduce energy use, cut waste and promote efficiency translate clearly into long-term benefits for manufacturers. A recent study by the U.S Green Building Council study found that LEED certified buildings average a 28 percent savings in energy costs compared to a baseline facility. When scaled for total energy consumption over time, the resources dedicated to developing green buildings represent a significant investment toward reducing an organization’s future footprint and costs. Further, cutting down on energy usage can also help mitigate the impact of energy price fluctuations on their operations.
Sustainable Business is the Way to Go
Developing a sustainable supply chain will only become more important for manufactures looking to increase millennial loyalty and positively influence their bottom line. Organizations closer to their target market can ship more efficiently while reducing their environmental impact and those near transportation hubs can take advantage of intermodal networks to deliver goods more sustainably. Gen Y customers may be unpredictable at times, but their commitment to the environment is clear. Accommodating the sustainability trend will not only help organizations attract and retain millennial customers, but it will also help them gain a competitive edge for decades to come.
John Lass is a Vice President of Development at industrial real estate firm CenterPoint Properties.