Permitting delays aren’t new, but some proposed regulatory changes may make the process tougher.
High Contrast
Permitting delays aren’t new, but some proposed regulatory changes may make the process tougher.
Additionally, new manufacturing incentives will intensify the already tough battle for talent.
Industrial companies have many opportunities to mitigate challenges associated with growth.
Manufacturers are jumping on the opportunity to take advantage of federal tax credits—but they may need to consider just how much they’re willing to invest, given that some environmental compliance rules are on track to become more stringent.
Along with tightening environmental regulation and associated permitting requirements, companies face additional upfront costs, including for equipment upgrades and installation, facility assessments by environmental engineers and consultants, emissions monitoring, data management systems and employee training.
Manufacturers will need to allocate significant resources to navigate this new environment and must invest in the appropriate technology to remain competitive. There are also significant implications on the labor front; manufacturers already have a tough time recruiting and retaining workers, and new manufacturing incentives will intensify the battle for talent.
Permitting delays are not new for manufacturers, but some proposed regulatory changes are set to make the process tougher. Take, for instance, potential changes to the Environmental Protection Agency’s air quality standard rules. These would reduce the acceptable level of particulate matter, and businesses would need to prove they will not contribute to exceeding that limit. This will likely be a particularly daunting task for the manufacturing sector, and a report from the National Association of Manufacturers found that California would be most exposed to this rule update, followed by Michigan and Illinois. As we await the EPA's decision, the manufacturing sector is on edge, anticipating a paradigm shift in the regulatory landscape.
This shift may pose a particular challenge for new manufacturing projects, especially considering the recent growth in this space. U.S. construction spending continues to climb, with a 16.5% year-over-year increase from August 2022 to August 2023, according to the U.S. Census Bureau. However, nonresidential construction starts were down through the first seven months of 2023, compared to the same time frame in 2022, according to Dodge Construction Network. This decline is attributable to two main factors: a shortage of specialty labor to design and create “hyperclean spaces” that differ from typical construction projects, and ever-tightening environmental standards for land development, air quality emissions and geotechnical assessments.
Companies seeking to take advantage of tax credits can tackle the challenge of mitigating potential permitting delays by using sustainable building design principles and incorporating energy-efficient technologies into the design.
Several projects have been delayed due to failure to meet environmental requirements; such delays could place manufacturers at a competitive disadvantage. A large automotive company, for instance, recently paused preconstruction clearing on a $2 billion electric vehicle plant in South Carolina due to environmental permitting delays. South Carolina also has about half the number of available workers needed for the number of current job openings, according to U.S. Chamber of Commerce data—already not nearly enough people to do the work, even before a new plant is built.
Throughout the process of expanding manufacturing operations or constructing a new facility, industrial companies have many opportunities to mitigate challenges associated with that growth. We explore a few of these below.
On a more general level, companies seeking to take advantage of tax credits and not be undone by their stringent environmental requirements can tackle the challenge of mitigating potential permitting delays by using sustainable building design principles, incorporating energy-efficient technologies into the design and installing advanced air pollution control technologies. Additionally, being transparent with stakeholders about any concerns related to the project can be invaluable in the long term.
Significant investment loss is on the line for manufacturers that do not invest in addressing environmental requirements. And though manufacturers may face additional upfront costs, attention to sustainability will save in the long term.
RSM's 2024 guide details the multifaceted ecosystem of ESG and sustainability. It provides an in-depth analysis to foster responsible business practices consisting of strategies, technologies, processes and data.