Sustainable Construction (feat. Chris Peterson)


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SHOW NOTES


Eddie talks about wanting shingles, but we really wanted to focus on creating sustainable building programs that recycle non-renewable resources, focus on energy conservation, and create value for the owner! Chris Peterson is the Assistant Director of Anthesis Group and the Executive Director of Electric Utility Industry Sustainable Supply Chain Alliance. His goal is to see the construction industry to head towards sustainability while also pushing for quality delivered to the owner! How do we balance being good stewards of the world while also creating quality structures?


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Chris's LinkedIn

Anthesis' Website

Electric Utility Industry Sustainable Supply Chain Alliance' Website


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TRANSCRIPTION


Eddie:

So enter Chris Peterson.


Tyler:

Enter Him. Yeah.


Eddie:

With a very similar prospect when it comes to "why would we invest and try to do a better job of sustainably constructing our buildings?"

Tyler:

And one thing that sticks out to me with sustainability, I'm constantly looking at solar panels. I'm constantly looking at wind turbines and things along those lines when I think of sustainability, but it's much, much more than that. And Chris was able to kind of dissect and pull apart some of this stuff for us and help us understand what does sustainable building really look like.

Eddie:

Yeah. In a general sense, in the general sense, the more far-reaching, let's look at all of it.

Tyler:

And beyond that, why we should care. And, you're throwing through your redneck, you like your diesel engines, you likes smokes.

Eddie:

I like my big trucks.

Tyler:

You like your big trucks and all that stuff, brother. But at the same time, we do want to try to leave the place in a better, leave the planet in a better place than we found it. I think that's a reasonable thing to talk about.

Eddie:

Right. It's this a great goal. Efficiency in construction is a great goal. Trying to make sure that we are building responsibly is a great goal. So no, I mean, yeah. I've got a little bit redneck in me, guilty is charged. But at the same time, I try to be a logical redneck. I'm a thinking man's redneck.

Tyler:

Well, here's, I think the thing that Tesla's doing really well is they're making their trucks even faster. So I feel like the rednecks are like, "well, I mean, yeah, it's not as loud, but well..."

Eddie:

Well, I joke but I think that up against the real article, I probably am not one, but yeah. When it comes to the next generation of like Ford F150. I'm very intrigued.

Tyler:

Yeah, I'd trade mine in for that.

Eddie:

I think it's pretty cool that we're going to go to, I mean, we're on batteries y'all, this is cool.

Tyler:

Yeah, it is. It is cool. But it's more than that, back to the point because we can veer off-topic and start talking about the new F150 all we want, that's not what it's about today. We're not talking about cars. One of the things that stuck out to me was making sure that you're sourcing your materials in a responsible way. Where did they really come from? Did they come from a place where people are actually being enslaved to make that stuff, what is happening there? That was something that resonated with me. And, as a builder, I can't say that I think of that all the time. I can't say that I think about that all the time. And how often does it happen? I don't have metrics for that, but heck it's definitely worth looking into to make sure that I'm doing my due diligence with the stuff that I'm building with.

Eddie:

There's an ethics side to this. And really a morality side of this that we need to look hard at.

Tyler:

And so it's more than, we talk about climate change in this, or Chris talks about climate change a lot. So, whether you are a believer in climate change or whether you are not, regardless I think it's a good thing to talk about and understand because heck if you can help your neighbors out by just sourcing your stuff locally, heck that's a really, really good thing to do in my mind.

Eddie:

And we try to drive at things with Chris, where we are looking for kind of that return on investment. Return on that upfront cost, whether you "care" about sustainability or not. Why does this matter to you from a business aspect? So as a business person, why do I care? And this is important because this drives decision-making. And so just trying to get to the meat of the issue, Chris has done a great job, just laying things out for us and giving us a good wide reaching picture of where we're at, why we do what we do, why it matters.

Tyler: (07:52)

Well, guys, let's get into this conversation. Here is our conversation on sustainability with Chris Peterson. Hey Chris, thanks for joining us today, man. Why don't you tell us who you are and what you do?

Chris:

Yeah, no, thanks so much for having me. I really appreciate it. So I wear a couple of hats relevant to this conversation. So one is as an associate director with Anthesis group, which is the world's leading dedicated sustainability consulting company. And then I also act as the executive director of the electric utility industry, Sustainable Supply Chain Alliance. That's a group of 21 utility procurement groups and their suppliers that are really thinking about how do they enhance and promote sustainable supply chain practices, including in the construction space.

Eddie:

That acronym is just a little bit of a mouthful. Let's see, RESA.

Chris:

We go by the Alliance. You'll hear me talking about the Alliance a lot.

Eddie:

Yeah, I get that. I would shorten that up too.

Tyler:

Yeah. We were trying to pronounce it earlier today and we were making a fool of ourselves but it was fun. You could come up with all sorts of different ways to say it well.

Eddie:

Well so within sustainability and everything that you have come here to train us up on. When we're talking about green or sustainable buildings, what are we really talking about there?

Chris: (09:25)

Yeah, I think at its most basic fundamental level, it's about building better, right? It's about everything from using daylight to improve the feel and look of a space to stopping paying to heat the outside world. It's about thinking about how your project contributes to the community and the space that it's going into. Taking it to a higher level if we talk about sustainability, kind of the standard term, the three pillars, if you will, of it are really around people, profit, and planet. So really trying to think about how do you balance those.


Sometimes in the investor community, you'll hear the term ESG used, which stands for environment, social, and governance. And that's really used heavily within the investment community where profit is kind of taken as a given, within that. Both of those may sound a little bit like the kitchen sink to people but at the same time, it's really hard to argue any one of those isn't relevant for what we're trying to do as a society, right. And business is part of that society. And we are those kind of hive of individuals. And so thinking about how we engage on those different values, how we incorporate those into our thinking and our approaches is really critical for us.


And then in the construction space, there's a number of emerging standards or existing standards practices, et cetera. that really clearly define what is meant, what qualifies, as a green building. So whether that's the US green building council and their LEED as standard, or looking at something like the Institute for sustainable infrastructure, if you're more on that side of the space and their envision standard. Both of those are trying to define what those key elements are. And so for the envision standard, they look at quality of life, leadership, resource allocation, the natural world, and climate resilience. And then for LEED the categories they're looking at are energy efficiency of the building, water conservation, site selection, material selection, daylighting, and waste reduction. And then for each of those and across the sustainability spectrum we really think about seeing everything from just stay out of jail and basic compliance, right? So how do we meet the building codes, et cetera, around that? Through to really transformational design and approaches and buildings.

Eddie:

Why should we care about all that? Like why does that really matter?

Chris:

Yeah. I'll come to the environmental and social side of that in a minute, but often what I find resonates most with people when we talk about this is that you should care because your customers, your investors, your employees, and your friends and family care about this. [There's been a] number of studies that have come out pretty recently around the return on investment around green buildings and what that's really looking like over the last decade with some substantial numbers and deep studies across a number of different building types and comparing those to their peers in the market. And what they're finding through that is that there are significantly higher rental rates that are coming through that. But then even more critical than that, they're seeing these meaningful, higher occupancy rates in the 3-5% range for green buildings, even at those slightly higher rental and value rates within that. And particularly the occupancy rates are becoming a higher kind of variable, a more important variable if you will, in the current context of trying to understand what the return to office experience will be like in the post COVID world.


Further, we've seen this significant shift in the view of sustainability and its importance. And really what we've seen over the last year has been this tipping point in the space where now to not have a sustainability commitment, to not be thinking about your footprint from your buildings or facilities or your approach to that, is really starting to become the outlier. And that's a pretty significant shift from where we were previously. We've seen a resilient commitment to that through the pandemic, the economic crisis. We're seeing a continued kind of doubling down by the investment community around sustainability and the importance of sustainability to them from a risk perspective and from a value proposition perspective for them.


And so within buildings, that really means for buildings in the construction space, you're going to see your customers trying to understand how do we reflect the values of our organization. So whether that's a concern for the environment, contribution to the community, how are we incorporating that into our design, into our buildings, into our activities going forward? And you'll see more of these questions coming up. And I think that that's one of those critical roles that we can play within this space is being, the translators of that. Of the pressures that our customers are seeing within their organization to meet these expectations. And then what can we do on a technical approach to demonstrate value within that space.


On the environmental side what's really critical is that we're really objectively beyond the planet's ability to maintain current practices. Right. And it's kinda hard to believe when we look out at giant vistas or the ocean to think about us just taking too much from that. But the UN estimates that if we continue our current consumption patterns with the population growth around the world, we would need three planets of materials to support us by 2050. If we start looking at the decisive decade and the carbon side of things, this is really our last best chance to avoid the worst of climate change.


And within the sustainability space, we're seeing this kind of marginal thin little hope that maybe we can keep under this kind of 1.5 degrees Celsius scenario that's out there. So you may have heard that kind of terminology floating around. And that's really seen as the best we could hope for within that. And to give you a sense of what the kind of trade-offs between those would look like. If we manage to stay under a 1.5 degrees scenario, we're talking about estimates of around 700 million people around the world that are displaced from climate impacts. So whether that's hurricanes, rising ocean levels, whatever that may be. And looking at something like the permafrost up North, the size of Alaska, in a 1.5 degrees scenario kind of holding tight and staying frozen in a two degrees scenario, all of a sudden that jumps up and there are escalating impacts that we see within that. For us to get to a 1.5 degrees scenario, we need to reduce our total carbon footprint, all of our GHG emissions around the world by about half by 2030, it's pretty significant and completely by 2050. Not an easy undertaking by any stretch of the imagination, but something that we're kind of hanging on to is like, we might be able to kind of pull this off as we go forward.


At our current trajectory, we're on track to hit about a four degree increase by 2100, which would be pretty disastrous on all of the different models that are out there. And so while that feels like something that's outside of our industry, outside of our personal decisions outside of our organizational requirements, we're seeing all of those starting to cascade into how we define ourselves as an organization, how we define risk for ourselves. And especially when we're thinking about something like a building or infrastructure construction we're talking about something that's going to be in place past that 2050 timeline. So how are we starting to incorporate that thinking into it? How are we creating buildings that are meeting those expectations and will not be seen as these old dinosaurs that are inefficient, have single pane windows, are just meeting code, et cetera, as those expectations start to accelerate.


And then finally, we're also starting to experience those impacts today, right? We saw record hurricane season in the South. We saw the forest fires in the West, right? And these are all manifestations of things that a climate change community has been saying like, "this is coming, this is how we're going to start to see the impacts and start to experience those on a kind of day to day basis." On the construction side, we hold some responsibility within that space. We are responsible for about three quarters of total consumption of materials. When we think about just basic things like gravel and sand concrete, et cetera, there's an incredible amount of mass of materials that flow through our buildings. And so us thinking about how do we reduce those, how do we think about bringing in more recycled content, et cetera, are really critical decision points for us.


And then from a GHG carbon perspective, buildings are responsible for about 30% of our total carbon footprint in the US. So, as you hear the new administration coming in, as you hear NGOs, as you hear other people talking about, like, "what do we do to reduce our footprint by half?" They're starting to look at buildings, transportation, electric utilities are all top of the list. And some of the key areas that we're going to be looking to impact and kind of pivot to more efficient models as we go forward.


And then finally on the social side this past year has really shone a bright light on kind of both the desire and need to address the social aspects, which is a really encouraging piece of how do we bring that element into the ESG, people planet profit model. And that really includes everything from safety, diversity, your diverse spending, et cetera, within that environmental justice. Ensuring that there's no forced labor either in your own labor pool, right or even in the materials that you're sourcing, right. Where are you sourcing those from? How are you ensuring that it's not being sourced from areas that are using forced labor for forestry or for mining, et cetera, around that, and then ultimately back to the treatment of our own teams. Right. I think one thing that came through the pandemic last year is this real consideration around what is that going to mean for us and our individual employees and the people we're engaging with on a daily basis?

Tyler: (20:17)

I'm curious on the recycled content side versus the new content side, getting back into kind of the material aspect that you had mentioned. How much more savings would you say, I know for a lack of better terminology, how much are we actually saving by going back and recycling content versus just generating new? Because a lot of it from a mining standpoint would actually be coming from the machinery that we're using if I'm not mistaken, right? So would you still need to use machines to recycle this material so that you can reuse it? I'd wonder if you can kind of help me understand that a little bit better and where it's all coming from.

Chris:

Yeah, yeah, definitely. I think that one of the parts that's difficult in a sustainability space is when you talk about what a perfectly sustainable model looks like. It's kind of somebody singing in a field, not consuming anything or touching anything or doing anything. Right. And that's just not the way we operate as a society. So it's really about trade-offs and how do we best manage those trade-offs? And when we think about recycled content, it's not universally applicable, but as a default, it's really important that we are asking the question of, "is it better that we recycle this or not," right. Is there value in finding a new use for this material. And at times the answer can be no.


In certain circumstances from a material perspective, from a GHG perspective, a carbon impact on the world, recycling may take more energy than not. However, approaching it by default within that will really kind of lead to dead ends very quickly, right?


And as mentioned, we're really starting to hit this, or we will be on kind of this, consumption rate of the materials that we're purchasing. And we're going to start to see greater demand for those over time. And that will increase our material costs within that as well as the material availability. And so when we start to think about circular models is the language we use in the sustainability space of thinking about how do you source more effective materials, lower impact materials, et cetera, but then also how do you design systems, buildings, et cetera, so that you can extract those materials end of life, right? So that you're not in a spot 10 years, 20 years down the road that you're just throwing everything out because it's this mixed material that's there. It's taking that step back to say, okay, where we can recycle today, let's recycle where we can start to select so that this building is disassemblable. If that's a word, probably not. That's what we need to start thinking about are these kinds of new models for how we can do this effectively.

Tyler:

On that front too, I was talking to Mark from demolition news and we were talking about BIM and he was really excited not from the construction standpoint, but from the demolition standpoint of using a model to deconstruct the structure. And I think that ties in perfectly with what you're talking about here from recycling materials that are in a building and being able to use again, a virtual model, to pull all that stuff out and optimize your demolition team. So I don't know if you've seen that at all, but that was something that kind of blew my mind that I wasn't even thinking about for a use case for what we do every day.

Chris:

Yeah. The sophistication around this assembly investment recovery, that captures material's end of life is just accelerating exponentially. And it's really exciting to try to think about what does that look like, right. And we talk about the investments in the mining space versus investments in the demolition or recovery space are fundamentally higher on the mining space, but we know that that's a balance that is going to skew very quickly towards more of the demolition side, right? There's already discussions about, say on the electronics side of how much value is embedded in all of our waste electronics? How much gold is embedded within that, et cetera. And it's a substantially higher number of metric tons of material that needs to be processed from a traditional mine that would need to be processed from just mining existing kind of waste electronics for that. Right. But those models are in development, not yet fully kind of at scale yet. So I think those are some of the things that we started to see coming down the pipe within this.

Tyler: (24:57)

I think from even a human interest perspective, this is really important on the technology end. We hear often about how people are forced into labor, like you were talking about, to pull out materials that we use in our phones and our computers and sustainability is a lot more than just solar panels and wind turbines. Yeah, it involves that. But I think a lot of the time we think, "Hey, it's just that stuff, we're at LEED certifications" and like, those can be part of it. Yeah. But you're really going down to the nitty-gritty of it. So I want to kind of pull it back around, back into construction. So what is this look like when done well from a construction person?

Chris: (25:42)

Yeah. Yeah. And I think all of that ties together. Well, as you were saying, Tyler, right. And at Anthesis, we talk about performing sustainably versus sustainability performance. And I think I really liked that concept because it talks about how critical is that all this is integrated together, right. That it's not just, we're doing a LEED standard. We don't use plastic straws. It's really thinking about what is it that we are doing and how do we ensure that we're able to do that forever, in a sustainable way overall. And that includes us running our business, realizing the return on our investments, as well as being able to source materials, as well as not operating in a way that we're sourcing materials that include forced labor to cut costs within that, recognizing that would increase our risk. Right. I mean, how many customers will we have that would be happy to hear that like, "Oh, that's where you got your steel from," like that's an issue for us. Right.


So I think that's really encouraging. And the thought process and approach that we really try to take with that, in terms of when done well, I often say that the starting point is just to ask, can we do this better? Or why are we doing it this way? And often what's encouraging about that is that starts to peel back the layers of the onion in terms of "are we doing it just because that's the way we've always done it?" That's not a great answer in today's context. And then it starts to lead you down the path of if there's a better way to do it, who has done it better? Right. And really starting to look at the plethora of resources that are out there. And whether that's the US green building council, the Institute for sustainable infrastructure that I mentioned earlier, Google green buildings, green anything in your industry, you will find a whole bevy of resources that are available to help get you started down that path.


And those can really help you to challenge some of those preconceived perceptions around "this is the best way to do it." Right. And really start to question, is that the right way for us to do it, right? And are there opportunities for us to really start to move the needle in some of those material ways?


As you talked about, there are so many different aspects of sustainability that it can be really overwhelming. And so when we look at organizations that are doing this well, they're really taking a step back to think about what's the big picture in terms of impacts, where do they have opportunities to influence those? I'm really starting to set some clear priorities in terms of like here's where we have an opportunity to really make a difference and where we're going to apply our resources, our thinking, our energy to try to advance those with our customers and with the broader community.


And that can cover everything from taking a very simple two by two version of business value and thinking about how can sustainability contribute to your revenue or your brand is areas you want to improve upon and grow. Versus areas of cost and risk that you're looking to reduce. And really looking at those through the lens of sustainability, right? How much are we paying to haul away excess waste from our job sites? Are there opportunities that we can reduce that? Where are we sourcing our materials from? How much are we paying for transportation as part of. That can be sourcing locally, right? If we're working with a major customer, does it help them to tell a better story, something that they value in terms of their brand, by being able to say that they sourced 90% of the materials within 500 miles of the job site, right? Are there elements like that that can help us to generate this additional value and create that connectivity between the business and the commercial aspects and the sustainability value that we're trying to drive within this. You can then kind of expand from there to directly engaging with your customers to understand what are their priorities.


We've seen a dramatic increase in organizations that are setting very clear and ambitious sustainability goals and targets for themselves. So understanding what are their priorities are those driven by a desire to be net zero carbon by a certain date, are those driven by concerns around clean water, healthy communities, whatever that might be? And bringing that into some of our thinking within that. And then finally at the highest level within that would be like a comprehensive materiality assessment, the way we reference it in the sustainability space. And that's really putting everything on the table, right? You put together the list of what are the 100 issues that you might consider. You engage with as wide a group of stakeholders as you can, you do deep dives in terms of your own value propositions, market analysis, et cetera, to really come out with a clear quantitative direction of: here are the key areas that we can impact and influence and are really gonna place our bets upon.


And then finally for doing it well, it's really important that it's aligned with your customer interests, right? As mentioned, we're seeing all of this increase in interest around sustainability commitments, public commitments. Those are being driven by investor pressure, broader stakeholder interests, greater transparency through the supply chain. You see stories about, say like conflict minerals being sourced through forced labor through countries surrounding the Democratic Republic of Congo. And as a procurement professional, it's a logical question to ask, "Hey, where are the materials going into our building coming from?" And as a project manager, as a contractor, as a supplier, being able to answer that as a really important next step for us. So, thinking about your customer needs, their expectations, their growing interests within this and how you respond to that is really important.


And then finally from a building and construction perspective, when it's really done well, what you see here is you see kind of higher value buildings with improved occupancy that you are creating and meeting these market demands for this. You're seeing healthier spaces with improved airflow lighting, et cetera, around that. You're seeing buildings that are just more efficient, right? That they've insulated well, they are oriented well, they're really working with the environment rather than against it, which is kind of the historical model of building. So really thinking about how do you orient the building to capture as much daylight as possible to both kind of improve, say, like worker performance, the look and feel of a building and they are designed with really great installation so that you're not heating the outside world and paying an exorbitant heating bill. Right.


And then there are some simple solutions like you're putting a white roof on the building as opposed to a dark roof on the building when you're in Arizona. Right. And seeing pretty dramatic responses to that. But it's one of those logical pivots. That's just like, "Oh yeah. Like why did we paint it black? Because that's what we always did." Right. And now it's like, "Oh yeah, this saves us a significant amount of money and it doesn't have an impact on any other stakeholders within that." Finally is that, again, coming back to your customers, these buildings are providing this kind of statement for them. Right. Of what does... It's one thing to put out a press release of "we're committed to a lower carbon footprint" and then have a giant headquarters that's incredibly inefficient. Versus one that says we're committed to a sustainable product line, we're committed to contributing to addressing these global challenges, and our headquarters, our office footprint, whatever it may be represents that value and that's reflected in the community and their brand value. And then what we're seeing really critically is that attraction and retention of either their employees or their renters as they go forward.

Eddie: (34:11)

Long-term, as we make this investment in our buildings, what do we see? As far as just getting back from the process, right? So we build in a sustainable way. One of the attractions in that is definitely monetary. And so having that come back to us, what are you seeing there when you take the time, put the effort in and make the upfront investment, how does that play out when we've got this long building life cycle that now we're going to use this asset?

Chris:

Yeah. I think that there's a couple of pieces that come into it, right. As again, coming back to that two by two of revenue, brand, cost, and risk is really thinking about how does it contribute to each of those elements and who does it contribute to each of those elements for, right? As a contractor going through a bid process often those can be seen as the lowest upfront cost. And that quickly leads to just this kind of race to the bottom, from a sustainability perspective. Working with customers, talking about the trade-offs of that return on investment, that's been shown over and over and over again, to be positive over the lifespan of a building total cost of ownership, concepts, et cetera, really helps them to understand how do they incorporate these considerations. And that can be thinking about this broad stakeholder group, that desire for the lowest cost, right?


The kind of continual driver within procurement, but then with the procurement teams I'm working with and engaging with, I continually see them kind of re-evaluating that and saying, "well, how do we work with our ultimate customers internally to understand that total cost of ownership model within this." And how do we then incorporate that into our bid evaluations to really think about what is this going to look like for us over the long term? If we know we're owning this building for 10 years, maybe 20 years, maybe 30 years, right? How are we incorporating those projected costs into that decision-making as we go forward? So I think we're seeing more and more of that. And we're also seeing from the procurement side, a greater and greater desire to hear from suppliers that say like, "Hey, we know you asked for the building this way, but have you considered A, B, and C within that?" And often that's emerging as a differentiator in the marketplace as that ability to be able to answer these challenging questions that these procurement professionals are being challenged with within their own organizations.

Tyler:

Well, Chris, I want you to go ahead and break out your little egg timer here and put 60 seconds on the clock because I want to hit you with our megaphone questions. So if we if we gave you a megaphone, that the whole industry could hear in around 60 seconds, what would you say?

Chris: (37:07)

Yeah, no, I love the question. And I think the first thing I would do is just really encourage anybody in the utility space to reach out to the Alliance. We have a supplier affiliate membership program. That's a really good way to understand, what does successful practice look like out there? The second thing I'd say is really to tap into the breadth of resources that are available. So whether that's US green building council, the Institute for Sustainable Infrastructure, your own industry associations, there's a lot of work that's going on within this space that can really inspire your own activities within that.


And then finally just get started, right? There are so many things that you could do here that often that can become overwhelming and it can...people just kind of turtle and hope that it will all go away. It's not going to. So, if you're not at the stage of really taking a step back, evaluating your value proposition, considering your priorities, setting, clear targets and goals, then figure out what you can do and do it, and then build off of there. Right?


Thinking about something as simple as putting recycling bins in your office, right? I've seen this cascades through organizations where you put a recycling bin in the office, people start realizing how much less garbage they're throwing out. That translates to like, "Hey, can we put those at our job sites," right? How much can we recycle at our job sites? What can we do with those materials? How do we avoid those materials coming in, in the first place? Do we need as much packaging? And then as their value, it can be extracted out of those. And just those simple things like to keep challenging yourself and pushing yourself and doing what you can today to really build up a lot of momentum around sustainability and get you on the path you need to be on. Kind of meet these growing expectations.





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