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Community Benefits Agreements and the art of being a good neighbor

Part Two of our community engagement series examines the origins of the Community Benefits Agreement and how it led to federal requirements for Community Benefits Plans for some grant and loan recipients.

Community Benefits Agreements can help cement relationships between a company and the community. Picture shows a group of people sitting on folding chairs at an outdoor groundbreaking ceremony.
Photo credit: NARA. The appearance of U.S. Department of Defense (DoD) visual information does not imply or constitute DoD endorsement.

A few years ago, I attended a ribbon cutting event for the expansion of a plant that had been in the community for over 100 years. As a part of the ceremony, the company honored a family that had worked at that location for a combined 250 years. One family. 250 years. The depth of the relationship between the family and the company blew me away.

That moment stuck with me for two reasons: First, it shows how symbiotic the relationship between a company and a community can be, and how there can be mutual benefit. Second, it indicates that successful companies can be in a community for a long time. 

Communities have learned over the years that there are pluses and minuses to having corporate neighbors. This article, the second in our community engagement series, looks at the origins of Community Benefits Agreements (CBA) and how they led to the Community Benefits Plans, a requirement the federal government has integrated into many of its loans and grants.

Community Benefits Agreements 

To ensure a good relationship with a new corporate neighbor, a community may turn to a Community Benefits Agreement (CBA) to create a binding contract with the incoming company. CBAs were first developed in the late 1990s in Los Angeles to give community members a voice in developments that affected the place where they lived.

“Benefits can include commitments to hire directly from a community, contributions to economic trust funds, local workforce training guarantees and more,” according to the Department of Energy. Some CBAs include quality of life requirements like limits on truck traffic or truck idling, while others focus on improving neighborhoods or schools. The Sabin Center for Climate Change Law at Columbia Law School maintains a database of publicly available CBAs in the climate space. Since their first appearance in the 1990s, CBAs have become a best practice across the country when companies enter a new community.

How did we get here?

No, like literally, how did a company end up where it is? When a company is choosing to build its first facility or choosing to expand, it often runs a competitive site selection process to choose a location. Because investors and entrepreneurs choose locations based on factors like where there is low cost energy or where they get a tax break, there’s a good chance the company may choose a location it is unfamiliar with.

And when a company chooses a location, the community only has hearsay and the company’s existing reputation to build on. In many cases, the community may be excited but apprehensive: the prospect of good, high-paying jobs is attractive, but people worry about how the community will change.

Righting past wrongs

We know history is littered with examples of companies that have not done right by their communities. Looking at environmental impact alone, there are over 1,300 hazardous sites across the U.S. designated for cleanup on the EPA’s National Priorities List (aka “Superfund sites”). Add in the potential for unsafe working conditions or low wages, and you can understand why communities don’t always feel like they benefit when a new company comes to town.

The fact that this behavior has tended to happen in poor, often Black or brown neighborhoods also meant that the communities who didn’t have enough political or economic power to advocate for themselves bore the disproportionate brunt of these impacts. The environmental justice movement was born in the 1970s to right these wrongs and ensure affected communities could receive cleanup support and restitution.

It’s little wonder that many communities want to take a forward-looking approach these days on top of cleaning up the mistakes of the past. Communities want assurances about a company’s presence before anything happens. Some of these assurances may be informal – a company promising certain actions or behaviors at community forums. Some assurances may be tied to certain tax incentives or other funding: a common one is that a company only unlocks a certain tax credit after meeting specific employment minimums. (Agreements between public officials, the company, and possibly also the developer, are called development agreements. They sometimes take public comment, but do not typically include community representatives beyond local officials in negotiations.) 

Though many companies seek to avoid legally binding agreements, they still often draw from the CBA playbook to develop their social license to operate in a location. They do this because community buy-in has become critical to getting a facility built on time, ensuring regulatory and legal support for the project, and attracting skilled workers. The now infamous decade-long controversy over the proposed (and ultimately abandoned) Keystone XL pipeline is an XL-sized example of the type of community opposition that companies seek to avoid. All of this is to say: a CBA gives both the company and the community an opportunity to come to the table in advance, and discuss how to work together to the benefit of both parties.

Community Benefits and the Inflation Reduction Act

The Biden Administration chose to weave the concepts of community benefits and environmental justice into the Inflation Reduction Act and Bipartisan Infrastructure Law, two laws investing historic amounts in U.S. infrastructure and industry. They took CBAs, which had been developed by community organizers, and wrote the concept into a variety of grant and loan programs as “Community Benefits Plans” (CBP). Although CBPs do not have to have legally-binding elements (as many CBAs do), this requirement nonetheless forced the funding recipients to think about—and articulate—their community engagement as a condition of funding. By doing this, the Administration sought to ensure that any investment in a business or technology would also flow to the community where it would be housed.

A win-win

When everything goes according to plan, a Community Benefits Agreement can help companies and communities articulate their expectations of each other. For companies new to the process, it can feel like unnecessary extra work, but the results speak for themselves. A well-thought out plan to create a mutually beneficial relationship with the community, with time and resources dedicated to execution, can reap benefits for decades to come. In return for investment in the communities, companies receive community support and a smooth pathway to building out their local presence. Community Benefits Plans may be a requirement to receive certain federal funds, but community engagement is good idea even if that consideration doesn’t apply.

Stay tuned for our next installment in the series, about how companies can strengthen their license to operate in their communities. And check out Part One on Community Benefits Plans if you missed it.


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