If you watched Apple’s 2023 update on its road to net zero by 2030, Mother, you know that global brands are pioneering new double-speak to justify their insatiable AI pursuits.
This week, product manager and clean energy business analyst Dustin Cote (creator of the super-smart, twice-a-month Substack Sustainable Advantages) helps us understand why big brands are so eager to build seemingly token efforts — like solar-powered campuses — when real solutions are right in front of them.
Apple’s sustainability premium
Consumer brands run on perception. Apple is the most valuable brand in the world because it has a rabidly loyal customer base that buys anything they are selling. This is in no small part due to their run at an environmentally friendly image. At their Apple Watch event last year, they built up the story of Mother Nature in a video focused data on their offices, data centers, and stores with a commitment from suppliers who will start making their devices in a fashion that is carbon neutral presumably by leveraging China’s accelerating clean energy deployment. Apple doesn’t have much to do with China deploying wind and solar at record rates, but it can take advantage of it coming to pass thanks to an opportunistic strategy that began with building a corporate campus ten years ago that was intentionally obviously environmentally conscious. They know this is important to their customers, so they made a showpiece. Apple couldn’t decarbonize its devices effectively on its own, but it could claim progress while it waited for its suppliers to get on board. Now it expects suppliers to be ready for their 2030 carbon-neutral plan and can claim victory if it happens or shirk responsibility to suppliers if it doesn’t.
According to Loopnet, office space in Cupertino, CA is currently for sale for $40-$50 per sqft. The Apple HQ campus cost around $5B to build and houses almost 3M sqft. That’s around $1600 per sqft to build. Generating their own electricity and reduced maintenance burden saves some operating expenses, but the direct payback period can’t be any better than 25 years. That’s a lot of time, but thanks to Apple’s famously integrated organizational structure, business functions can make big bets as long as the whole company bottom line benefits. McKinsey points out that customers will pay a premium for products that have positive environmental association. Apple’s customers already are price insensitive, so raising prices to accelerate that payback period is a no-brainer.
Building a box for employees to type on keyboards would’ve gotten the job done in a cost effective manner. But building a lighthouse of environmental sustainability for employees to type on keyboards bought the goodwill of loyal customers to raise prices with the promise of mitigating future environmental impact.
Leadership and leverage
Disneyland Paris has a gigantic solar canopy covering its parking lot that covers 11,200 parking spaces and generates around 36 GWh per year. I know this because it’s everywhere on their website and has been for more than three years. Disney is ensuring park patrons know that it is committed to 2030 environmental goals that include sourcing 100% of the company’s electricity from carbon-free sources. This is an invisible change to Disney customers, so the best way to ensure they get credit is to do something grand. Disney makes a living on brand and grand events, so other companies should pay attention. Paying for a premium solar installation that consumers can feel the benefits of, is a marketing expense. However, it only works with companies like Disney or Apple who have deep pockets and a hardcore brand following.
For companies that are not beneficiaries of enormous marketing budgets, the calculation is a bit different. RTI International is a non-profit in North Carolina’s Research Triangle Park that uses scientific research to support causes in many areas including improving the environment, genetics, and agriculture. They are known as a highly ethical research institute that gets much of its funding from the government. They also recently made the choice to install solar panels on top of a parking garage.
Sustainability Manager at RTI, John Nichols, told me on a tour of the campus that the bifacial panels on top of a parking structure ran about $5/watt versus the around $1/watt it would cost to put them out in a field or just under $2/watt for a rooftop (RTI is also doing this elsewhere on campus). That’s expensive! The project itself cost around $1.3M, $700k of which will not be recovered over the lifetime of the panels. He helped push the project forward anyway and I found out a reason for spending the extra cash was about leading. Solar panels off in a field in a far-flung corner of campus are not visible to employees or visitors. Now employees drive to the previously abandoned top floor of the parking deck to walk under the Tron-like lighting that filters through the panels and get a sense of pride that the values set forth by the company leadership come to life here. Even if the heavy lifting of clean power generation is done elsewhere, this token gesture makes it feel true.
Making employees feel the company has its money where its mouth is has an intrinsic benefit, but for a nonprofit, the impact on visitors is also paramount. RTI is a local leader in the Research Triangle Park and now it has a clean energy beacon that can show visiting leaders from Netapp, IBM, Cisco, and others giving them a clear picture of progress. This also paves the way for businesses to band together and put further pressure on the local utility, Duke Energy, to clean up the grid or begin losing significant business as the companies in the area choose to invest in generating their own power using the plentiful land on their sprawling corporate campuses.
Finally, for the folks who drive to work every day but live somewhere, like an apartment, that makes charging an EV difficult, RTI now has an opportunity to expand their number of charging stations in a way that is well aligned with when their solar generates power. Workplace charging is one of the best examples of a grid-positive electricity load shift from night to day and can prevent the need to build additional transmission by locally consuming solar. That sort of leadership is a differentiating benefit to the type of population attracted to working at a science-based nonprofit organization, and I believe RTI is targeting a future recruiting benefit here. Leaders will tell you that hiring is the hardest part of building a company. An extra $700k that can attract more talent is a great investment.
In the end, it’s not likely we’ll see solar panel canopies popping up on strip mall parking lots. I do expect to see more marketing spend on showy solar panel installations for companies who want to build a greener brand. It’s hard to show off the rooftops and fields with solar panels doing the bulk of the effort. A complementary, if expensive, highly visible installation enables a company to get brand credit where it is due.
Dustin Cote writes Sustainable Advantages on Substack where he analyzes the business of the clean energy transition. Previously, he worked as a Product Manager in B2B SaaS solutions at Cockroach Labs and Confluent. Dustin leans on his formal training in physics and geosciences — and practical experience in enterprise strategy and data analysis — to help others understand where money is being made in moving off of fossil fuels.