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Published by the Cooperative Research Centre for Infrastructure and Engineering
Asset Management (CIEAM)Endorsed by the Australian Green
Infrastructure Council (AGIC)
Author: Dr Tony StapledonSeptember 2012
Why Infrastructure Sustainability is Good for your Business
Acknowledgements
The CRC for Infrastructure and Engineering Asset Management (CIEAM) would like to acknowledge the financial support from the Commonwealth Government’s Cooperative Research Centres Program and the contributions from our industry, government and university participants.
This project was undertaken by the following CIEAM research team:
Project Leader: Adjunct Professor David A Hood, FIEAust, CPEng, FIPENZ, FISEAM, MASCE
Key Researcher and Author: Dr Tony Stapledon
Support Research: Professor Arun Kumar, FISEAM, FIEAust, CPEng; Dr Gavin Shaw
This project was undertaken with guidance and advice from Professor Kerry Brown, Southern Cross University, and Professor Joseph Mathew, FIEAust, CPEng, FISEAM, MASME, MAAS, CEO, CIEAM.
The author would like to thank those who contributed to this research, in particular David Hood, Arun Kumar, Gavin Shaw, Susan Lambe and Mellini Sloan from CIEAM; Rick Walters and Antony Sprigg from AGIC; Caroline Snelling, Piroj Hira, Manjari Kariyawasam, Michael Player, Kathy Jones, Chris McArthur, Mark Rogers, Jane Scanlon, Kristen MacAskill and Andy Harland.
Confidentiality
In accordance with Australian Freedom of Information legislation, all information collected as part of this study will be retained for seven years in a safe and secure environment. Paper-based data will be stored in a locked filing cabinet, and electronic data will be encrypted. Both forms of data will be stored by Queensland University of Technology.
Disclaimer
Any person making relying on this research report or any information provided by CIEAM does so at their own risk. CIEAM will not be responsible for the results of any actions taken by third parties on the basis of the information in this research report, or other information provided, nor for any errors or omissions that may be contained in this research report or other information. CIEAM expressly disclaims any liability or responsibility to any person in respect of anything done or omitted to be done by any person in reliance on this research report or any information provided.
Enquiries
COMMUNICATION & MARKETING COORDINATOR CRC FOR INFRASTRUCTURE & ENGINEERING ASSET MANAGEMENTLEVEL 7, O BLOCK, QUT GARDENS POINT CAMPUS BRISBANE QLD 4001PHONE: +617 3138 1471FAX: +617 3138 4459EMAIL: ENQUIRIES@CIEAM.COMWEB: WWW.CIEAM.COM WWW.AGIC.NET.AU
ISBN:
978-0-9803102-3-8 (e-book)
978-0-9803102-4-5 (Print)
© CRC for Infrastructure and Engineering Asset Management 2012. This work is copyright. Except as provided by the Copyright Act 1968, no part of this publication may be reproduced by any process or transmitted in any form or by any means without the prior written permission of the publisher.
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Contents
Preamble 2
Endorsementofthisguideline... 3
Executivesummary 5
AboutCIEAM 6
Introduction 7
Structureofthisguideline 7
1.Infrastructuresustainability 9
Whatisinfrastructure? 9
Infrastructureandsustainability 9
Whyisinfrastructuresustainabilityimportant? 12
Whatdoesinfrastructuresustainabilitylooklike? 13
Measuringinfrastructuresustainabilityperformance 13
2.Thebenefitsofinfrastructuresustainability 17
Achievingsharedvalue 17
Abusinesscaseforinfrastructuresustainability 18
1)Imageandreputationalbenefits 19
2)Strongeremployeemotivation,retention,andrecruitment 22
3)Costefficiency/savings 23
4)Revenueincreasesfromnewsourcesofrevenueandimprovedmarketshare 24
5)Riskreductionandmanagement 28
6)Enhancedsociallicencetooperate 30
3.Barrierstoacceptanceofthebusinesscaseforinfrastructuresustainability 35
Infrastructureindustryculture 35
Lackofappreciationofvaluepathways 35
Accountingpractices 36
4.Sellingthebusinesscaseforinfrastructuresustainability 39
Demonstratethebusinesscase 39
Consideralternativeaccountingapproaches 40
Incorporateexperienceintothebusinesscase 40
Conclusion 41
Appendix:IndustryperceptionsofinfrastructuresustainabilitybenefitsfromtheCIEAMsurvey 42
References 52
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Preamble
“Therecanbenosustainabledevelopmentwithoutinfrastructuredeliveringsustainabilityoutcomes;makingsenseofsustainabilityinthecontextofkeyinfrastructureelementsisonetheprincipleobjectivesoftheAustralianGreenInfrastructureCouncil[AGIC].Theseobjectivesareamodernexpressionoftheambitiontoactresponsibly,fairly,effectively,efficiently,sensitively,andwithaviewtothelongterm.
AGIC,throughtheapplicationoftheInfrastructureSustainabilityRatingTool[IS],aimstoassistwiththedecisionmakingtowardsasustainablefutureintermsoftheprovisionofroads,railways,portsandairports,inwaterandwastewater,andinpowergeneration.Inotherwords,inalloftheelementswhichunderpinsocietyworld-wide.
Infrastructureneedstodeliveritsserviceoveritslifetime,efficientlyandreliably,anditneedstobeadaptableandresilienttochangeandshock.Thisimpliesassetswithalongusefullife,withminimumrelianceonnon-renewableresources,withmaximumbenefittosocietyandtheenvironmentandwhichcontributeto,ratherthanendanger,nationalprosperityinthelongterm.
Ratherthanbeingoneofmanycompetingobjectives,sustainabilityisanunderlyingphilosophywhichshouldguidedecision-makingthroughoutinfrastructureprojectstomeetthewiderobjectivesofdurabilityandperformance.Thisiswherethis“businesscase”forsustainabilityissoimportant.ForAGICandourstakeholders,articulatingthebusinesscaseforsustainabilityinthecontextofthedesign,deliveryandoperationofinfrastructureisapriority.TheGuidelineproducedbyCIEAMisacrucialandtimelypieceofworkwhichsetsthescene.Wehopethatitspublicationwilladvancethedebateandwillassiststakeholdersassociatedwiththeinfrastructuresupplychaintoidentifythetangibleandintangibledriversforsustainabledevelopment.”
David Singleton Chairman, Australian Green Infrastructure Council
Thecaseforembeddingsustainabilityasabusinessdriverforcommercialandresidentialbuildingsisnowwellestablished.AroundtheworldGreenBuildingsCouncilsandtheirlikeassociationshavetransformedthepropertyindustry.Buildingsthathaveachievedhigh“GreenStar”,BREEAM,orLEEDratingsarenowdemonstratingsubstantialsavingsinenergy,andwateruse,wasteandemissionsreductions,productivityincreasesandbiodiversityimprovements.
However,thebusinesscaseforinfrastructuresustainabilityislesswellunderstood,despiteinfrastructurebeingcriticalinsupportingeconomicsecurityandsocietalwellbeing.Fortoolongtheinfrastructureindustryhasfocussedontheeconomicimperativeastheoverwhelmingdriverforinfrastructureprojectplanning,deliveryandoperations.Theindustryhasconsideredsustainabilityprimarilyintermsofenvironmentallegislativerequirements,ratherthanaddressingthewiderrangeofsocial,environmentalandeconomicissuesthataresoimportanttoachievingfullvaluefrominfrastructureinvestment.Thisguidelinedemonstratesthatembeddingacultureofsustainabilitythroughouttheinfrastructuredeliveryandmanagementprocesswillnotonlyachievepublicgoodoutcomes,butwilladdbottomlinevaluetoyourproject,yourorganisation,andtosociety.
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The 2012 Construction Achievement Awards illustrated how sustainability, both of our Infrastructure Assets themselves, and in the performance outcomes required to ensure improved environmental, social and whole of life asset management and maintenance, have advanced.
Engineers are responding to the sustainability challenge, but greater awareness of the business case is needed to ensure appropriate decisions, and that funding is available to achieve desired outcomes, and also avoid an unfunded maintenance and restoration legacy for future generations.
Extended design life of major structures ranging up to 300 years, offers the cheapest life cycle outcomes. Good stewardship of our national infrastructure assets demands the implementation of sustainability features in design, construction and asset management programs.
The Westgate Bridge Strengthening project in Victoria graphically illustrates the need for sustainable ongoing asset management to minimise disruption and major unfunded liabilities in years to come.
This guideline will assist Asset Managers in putting the business case for seamless integration of sustainability into our major new infrastructure projects ensuring long term (“whole of life”) asset management delivers cost savings, and superior performance outcomes.
Martin Albrecht AC, Past Chairman and CEO of Thiess Contractors
There is no question that businesses today face increasing pressure to transform their organisations into more sustainable, viable entities.
With the introduction of regulatory instruments including carbon taxes and emission trading schemes, businesses face increasing governmental pressure to meet minimum standards of carbon abatement. Customers, suppliers, investors and other corporate stakeholders are similarly applying pressure on businesses to account for their social and environmental impact.
Many companies view sustainability as an onerous imposition that will increase the cost of business, yet companies can reduce costs and increase their competitiveness through implementing sustainability initiatives. This guide shows you how to.
Businesses can either be laggards in facing sustainability challenges, or they can proactively manage the inevitable change to create and gain greater business value, and increase competitiveness.
James Kirk, Executive Chairman, Mainpac
Although we have come a long way in a relatively short space of time with regard to sustainability, as a society, we are really only just starting to grasp the necessity of sustainable development and the application of sustainability principles as an integral part of managing assets in a whole-of-life approach. Infrastructure sustainability goes beyond the design of ‘green’ structures, to adopt a holistic approach to managing our major assets from concept, through design, construction and operation, to decommissioning and divestment. Infrastructure sustainability is about well maintained and operated assets that contribute to our economic and social — as well as environmental — sustainability as a community.
Emerging research shows that, above and beyond its societal benefits, integrated strategic asset management — focussing on the full gamut of sustainability considerations — can deliver tangible business improvements. These results go beyond the perceived ‘nice to have’ public good outcomes that result from implementing sustainable practices — such as reduced carbon emissions, water consumption reductions, decreased waste production, and protection of ecologically important habitats — to create real value for business. This guideline clearly demonstrates not only how the implementation of sustainability initiatives delivers bottom line results, but how to build a business case to embed sustainability as a key business driver.
Delivering on all aspects of sustainability as part of a strategic approach to infrastructure management is more than acting as a good corporate citizen. It gets back to achieving core business goals.
Prof Joseph Mathew FIEAust, CPEng, FISEAM, MASME, MAAS, CEO, CIEAM.
With society becoming more and more concerned that our activities are seriously damaging the earth’s ecosystems to a point where scientists are warning of possible economic collapse, it is imperative that impacts from our built environment do not further exacerbate the problems.
Thus, our built asset managers must include sustainability, in its broad triple bottom line sense, as a driving feature in all their decisions. In the delivery and operation of our infrastructure, and all engineering assets we must consider not only the immediate economic outcomes, but the impacts of these assets on our natural and social capital. This guideline will show you how to include sustainability as a value consideration in developing the business case for your infrastructure and engineering asset proposals, be they at the concept, design, construction, commissioning, operation or end of life phases.
Adj. Professor David A Hood FIEaust CPEng FIPENZ FISEAM MASCE National President, Engineers Australia
Endorsement of this guideline...
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The game has changed. Infrastructure sustainability will let us have it both ways: we can create value for society and contribute to improved environmental outcomes while still increasing total returns to those involved in the delivery and operation of infrastructure.
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Executive summarylicencetooperate);accesstonewmarkets;andstrengthenedreputation.Inshort,thesebenefitscontributetotheachievementofcompetitiveadvantageandalltranslateintogreatervaluetothoseinvolvedintheinfrastructuredeliverybusiness,aswellasaddingvaluetothepublicgood.
Therehavebeenanumberofstudiesof,orencompassing,thebusinesscaseforsustainabilityinthebuiltenvironment,rangingacrosstopicsincluding:organisations2-4;theconstructionandpropertydevelopmentindustries5;andbuildings6,7.However,whilemanyofthesestudiesarerelevanttocivilinfrastructure,aspecificbusinesscasehasnotbeenmadeforinfrastructuresustainability.
Inexaminingthebusinesscaseforinfrastructuresustainability,thisguidelineseekstoredressthisshortfall.Itexplainsthemeaningofinfrastructuresustainabilityandhowitcancontributetosharedpublicandbusinessvalue,andshowshoworganisationscantracktheirvaluepathwaystoimprovedshareholderreturnsandsodemonstratetheirownsustainabilitybusinesscase.
MiltonFriedmanfamouslywrotein1970that“thereisoneandonlyonesocialresponsibilityofbusiness…toincreaseitsprofitssolongasitstayswithintherulesofthegame”8.Theaimofthisguidelineistodemonstratethatthegamehaschanged.Infrastructuresustainabilitywillletushaveitbothways:wecancreatevalueforsocietyandcontributetoimprovedenvironmentaloutcomeswhilestillincreasingtotalreturnstothoseinvolvedinthedeliveryandoperationofinfrastructure.
WhileAustralia’scitiesstrugglewithincreasingcongestion,inadequatetransportsystems,andageingundergroundservices,manyofourregionalareasareeitherineconomicdecline,orareunderpressurefrompopulationinfluxduetotheresourcesboom—withconsequentskyrocketingpropertyvalues,poorservices,andsocialinequity.
Ontopoftheneedtorelieveurbancongestion,wealsoneedinvestmentinotheressentialinfrastructure.Weneednewresidentialareas;infrastructureforindigenouscommunities;anupgradeofourtelecommunicationsservices;increasedrenewableenergygeneration;potablewater;andtherailways,portsandroadsthatwillenableustobetterserviceourowncommunitiesandthecustomersclamouringforourminedresources.
Overridingallofthesedemandsforinfrastructureistheneedtopreparefortheimpactsofclimatechange.
However,wehavelimitedfinancialcapacitytofundallthis.Atthesametime,societyisincreasinglydemandingjustificationfortheuseofscarcenaturalresourcesandforthesocialandenvironmentalimpactsofmajorprojects.Itisthereforecriticalthatthoseofusinvolvedintheinfrastructureindustrymaximisevalueformoneyanddemonstratepositivesocialandenvironmentaloutcomes.ThisdualchallengeofstrikingabalancebetweenpublicandbusinessvalueistheessenceofinfrastructuresustainabilityandthefocusofthisindustryguidelinefromtheCooperativeResearchCentreforEngineeringandAssetManagement(CIEAM).
Few,ifany,businesses–whetherinthegovernmentorprivatesector—adoptsustainabilitysimplytoperformsocialgood.AsDavidSingleton,adirectorofengineeringconsultancyArup,andChairmanoftheAustralianGreenInfrastructureCouncil(AGIC),hassaid,“themainstreamdriverforsustainabilityisunlikelytocomefromanaltruisticclientbase–theresimplyisn’toneyet”1.Rather,businesseswilladoptsustainabilityforstrategicbenefit,orforwhathasbeenquaintlycalled‘enlightenedself-interest’.Thebenefitsclaimedforimplementingsustainabilityinbusinessinclude:lowercostsandincreasedprofits;reducedrisks;greatercommunityacceptance(social
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About CIEAMThisguidelinehasbeenpreparedfortheCooperativeResearchCentreforInfrastructureandEngineeringAssetManagement(CIEAM).Asaleadinginternationalresearchcentre,CIEAMisfocussedoninnovative,industry-directedresearchanddevelopment,education,andcommercialisationinanintegratedapproachtophysicalassetlifecyclemanagement.
CIEAMworkscloselywithindustrypartnerstodevelopinnovationsthatmeettheirneeds,andasaresult,contributestoimprovingtheengineeringassetmanagementindustrysector.TheCentre’sfocusisonreal-lifeassetmanagementproblemsfacedbyindustrytoday.
CIEAM’sresearchisbasedonindustry’sneedtoaddressanumberofchallenges:
� Ageingnationalengineeringinfrastructure;
� Under-investmentinassetmaintenance;
� Costofmaintenancemanagementandthetotalcostofengineeringassetownership;
� Aninnovativeintegratedassetmanagementregimeacrossallindustrysectors;and
� Addressingclimatechangeandsustainabilityissues.
InformationaboutCIEAMisavailableat:www.cieam.com
AspartoftheresearchforthisguidelineCIEAMconductedanonlinesurveytotestindustryperceptionsofthebusinesscaseforinfrastructuresustainabilityandwhethertheyaccordwiththeliteraturediscussedintheprecedingsectionsofthisguideline.Thesurveyalsoexaminedindustryperceptionsaboutwhichaspectsofgoodsustainabilityperformancedrivebusinessbenefits.ThesurveyanditsfindingsarediscussedgenerallyintheguidelineandindetailintheAppendix.
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IntroductionSustainabilityisahottopicintheinfrastructureindustry,withbusinessestryingtomanagetheirenvironmental,socialandgovernance(ESG)risk;clientsrequiringincreasinglysophisticatedresponsestosustainabilityrequirementsintendersanddemonstratedperformanceonsite;governmentsgenerallyescalatingsocialandenvironmentalcomplianceregimes;andcommunitiesdemandingasayinhowtheyareimpactedbyconstructionprojectsandoperatingassets.
Despitethis,thereisalackofunderstandingofwhatsustainabilitymeansininfrastructureandatendencyformanagementtoseeitasanimpositionthatwillincurcostsanddelaysanddamagetomarketposition.Manymanagersignoretheabundantevidencethatcorporatesocialresponsibilityandsustainabilityarevaluabletobusinessanddriversofmarketvalue.
Yettheinfrastructureindustrycontinuestocommitfundstospecialistsustainabilitystaffandconsultants,toreportingsustainabilityperformanceandtoundertakingawiderangeofsustainabilityinitiatives.Perhapsthisisbecauseoflingeringperceptionsthatsustainabilityisimportantforbuildingreputationandforhiringandkeepingtalentedemployees—andbecauseclientsareincreasinglydemandingevidenceofsustainabilityperformance.
Onereasonforalackofadoptionofsustainabilitypracticesisthatinfrastructureindustrymanagersfinditdifficulttolinkthelessimmediatedollaroutcomesofmanysustainabilityinitiativeswiththeirbusinessobjectives.Thisguidelineisdesignedtoovercomethisdifficulty.Itexplainshowoutstandingsustainabilityperformanceactsonthebusinessdriversofimprovedtotalshareholderreturnswhilealsocontributingtopublicgood.
Structureofthisguideline
Thisguidelineexplainshowintegratinginfrastructuresustainabilityintodecision-makingcanindeeddeliverthosebenefitstoanyorganisationinvolvedintheinfrastructurebusiness.
The first sectionexplainswhatinfrastructuresustainabilityactuallyis;whyitisimportant;andhowitismeasured,includingusingthegrowingrangeoftoolsdesignedtohelpbusinessesmeasure,benchmarkandpromotetheirsustainabilityperformance.
The second sectionlooksatthebenefitsthatareavailabletogovernment,institutionalandprivateclients,financiers,constructorsandoperatorsofinfrastructureassetsandshowshowthosebenefitstranslateinto‘sharedvalue’–simultaneouslyimprovingmarketvalueand‘publicgood’.Casestudiesareprovidedtoillustratethebenefitsinpractice.
The third sectiondiscussesbarrierstothetake-upofinfrastructuresustainabilityinbusinesscaseformulation,includingobstaclestoquantifyingsustainabilitybenefitsfor‘traditional’managerswhofailtoappreciatethecontributionofintangibleassetstopresentandfuturebusinessvalue.
The fourth and final sectionoftheguidelinesuggestsanapproachformanagerstofollowiftheywanttobuildthevalueoftheirbusinessforbothitsshareholdersandcommunitiesthroughsustainability.
TheresultsofCIEAM’son-linesurveyofindustryperceptionsofthevaluedriversofinfrastructuresustainabilityarereportedintheAppendix.
McKinsey & Company – Valuing social responsibility
“…manycompaniesarecreatingrealvaluethroughtheirenvironmental,social,andgovernanceactivities—throughincreasedsales,decreasedcosts,orreducedrisks—andsomehavedevelopedharddatatomeasureeventhelong-termandindirectvalueofenvironmental,social,andgovernanceprograms.It’snotsurprisingthatthebestofthemcreatefinancialvalueinwaysthemarketalreadyassesses—growth,returnoncapital,riskmanagement,andqualityofmanagement.”
Bonini,S.,Koller,T.M.&Mirvis,P.H.(2009)Valuingsocialresponsibilityprograms,McKinseyonFinance,Summer2009,Number32.
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Economic Infrastructure: Transport, Energy, Communication and Water
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1. Infrastructure sustainability
totalemployment.WithatotalvalueinAustraliaof$A58billionin2009-10,theconstructionaloneofmajorinfrastructureinvolvesasignificantcommitmentoffinancial,technicalandhumanresources12.Further,therateofinfrastructureinvestmentinAustraliahascontinuedtoincreasesince200812.Itisprojectedtogrowby128%inemergingmarketsand18%indevelopedmarketsinthedecadeto202015.Theindustryhasaresponsibilitytoefficientlyandeffectivelydeploythatinvestment.
Infrastructureandsustainability
Inabusinesssense,thedefinitionofsustainabilityremainsunclear.Itisoftenconsideredtobesynonymouswith‘environmental,socialandgovernance’(ESG)and‘corporatesocialresponsibility’(CSR).Allthesetermsimplythatbusinessesvoluntarilyintegratesocialandenvironmentalconcernsintotheiroperationsandtheirinteractionswithstakeholders.
Essentially,therearetwotermsincommonuseforsustainabilityintheinfrastructureindustry:‘sustainableinfrastructure’and‘infrastructuresustainability’.
Whatisinfrastructure?
Thecurrentdebatesabouttheadequacyorotherwiseofourroads,airports,railwaysystems,energyandwaterservices,andcommunicationsnetworkshighlightthecentralroleofinfrastructureinAustralia.Appropriateandwell-managedinfrastructureisakeydriverofproductivityandnationalwellbeing,withbusinessesandindividualsreliantonitsefficientandeffectiveperformance.
Indeed,ithasbeenclaimedthatthebuiltenvironment“isthefundamentalfoundationuponwhichasocietyexists,developsandsurvives”9.AnAustralianGovernmentreportseesinfrastructureas“anessentialinputtovirtuallyalleconomicactivities…andcontributesdirectlytopeople’swellbeing”10,whileCanada’sCRCResearch11definesinfrastructureas“thesetofstructuralelementsthatsupportsthedaytodayfunctionandinfluencesthedirectionofhumansociety”.
InAustralia,majoreconomicinfrastructureisclassifiedunderfoursectorsbytheBureauofInfrastructure,TransportandRegionalEconomics(BITRE):transport,energy,communicationandwater12.
Ineachofthesesectors,industryandgovernmentshareresponsibilityforplanning,financingandoperatingcivilinfrastructuresystems.Theydevelopnewandcomplexsystemsandrestoredegradedones.Theyexpand,repairandrefurbishsomethatareoperational—includingthosedamagedbyaccidentornaturaldisasters.Andtheydeconstruct,decommission,demolishoradaptthosethathavereachedtheendoftheirusefullives9.
Theindustryembracesdiverseassettypesandconsumeslargequantitiesofhuman,financialandmaterialresourcesforboththeirdeliveryanduse.Itsassetshavecomplexdeliveryandoperationsmethods,maycoverlargegeographicareasofdifferingtopographyandoccupation,andhavewideandvariedpotentialimpacts—thatmaycontinueandchangeoverdecades—onboththeenvironmentandstakeholdergroups13,14,9.
ThefinancialinvestmentinAustralianinfrastructureissignificantandthemajorinfrastructuresectorsarecrucialtonationalGDPandemploymentperformance,contributingjustunder10%toGDPand7.6%of
“Sustainable development is truly about achieving a balance between several objectives (environmental, economic, and social) over dynamic time and spatial horizons”.
Sahely,H.R.,Kennedy,C.A.&Adams,B.J.(2005)Developingsustainabilitycriteriaforurbaninfrastructuresystems,CanadianJournalofCivilEngineering,vol.32,no.1,pp.72-85.
Sustainableinfrastructureisconcernedwith:
’fit for purpose assets’, where fitness is a function of an asset’s capacity to be:
� Continually useful over its entire life;
� Resilient and adaptable to changing external circumstances;
� An integral and consistent part of the wider infrastructure ‘jigsaw’; and
� Fulfilling community expectations by helping to solve sustainability challenges16.
Infrastructure sustainability is about balancing triple bottom line trade-offs, and extends beyond just addressing ecological concerns. However, it is “not simply a matter of trading off positive impacts in one area against negative impacts in another. A successful development builds on the three pillars and achieves economic success, social benefit and high environmental quality together”.
TheRoyalAcademyofEngineering(2005)EngineeringforSustainableDevelopment:GuidingPrinciples,London.
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Thislastdotpointisoftenreframedtodefine‘sustainableinfrastructure’asthatinfrastructurethatassistsinchanginghumanbehaviourtomoresustainablelifestyles.
Infrastructuresustainabilityisthedesigning,delivery,operationandeventualdeconstructionoradaptationofinfrastructureassets“inwaysthatdonotdiminishthesocial,economicandecologicalprocessesrequiredtomaintainhumanequity,diversityandthefunctionalityofnaturalsystems”11.Whereassustainableinfrastructureisconcernedwiththestrategicbenefitofanasset,infrastructuresustainabilityinvolvestheimplementationofsustainabilityprinciplesintheprocurementandoperationofinfrastructure,irrespectiveofwhethertheinfrastructureitselfissustainable.Itisbasedontheverypragmaticprinciplethatallinfrastructurecandelivergreatersustainabilityoutcomesthroughbetterdesign,constructionandoperationandthiscancontributetothejourneytowardssustainabledevelopment.
Thisguidelineisfocussedonthebusinessbenefitsofinfrastructuresustainability.
TheAmericanSocietyofCivilEngineers(ASCE)17seessustainablewatersystemsas“...systemsdesignedandmanagedtofullycontributetotheobjectivesofsociety,nowandinthefuture,whilemaintainingtheirecological,environmentaland[engineering]integrity”.Thisdefinitioncanbeappliedequallytosustainableinfrastructureandtoinfrastructuresustainabilityingeneral.Bycontrast,arailwaybuiltspecificallytotransportfossilfuels(eg.coal)fromaminetoaportforexportmaybeseentobecontributingtoanunsustainablepractice(theburningoffossilfuelscontributingtogreenhousegasemissions),andwouldthusnotbeclassifiedassustainableinfrastructure.However,itcouldwellbedesigned,constructed,andoperatedinawaythatdeliverssustainabilityoutcomesandsotheseprocessesmaythereforequalifyasinfrastructuresustainability.
Infrastructuresustainabilitywillinvariablyinvolvetrade-offs.Thesemayincludeoperationalversuscapitalcosts,short-termversuslong-termplanning,andthefrequentneedforindividualpiecesofinfrastructuretofunctionasanintegratedpartofasystem14.Thechallengeforbusinessistomaintainprofitabilityandcontinuouslybuildvalueforshareholderswhilebestbalancingtheeconomic,environmentalandsocialneedsof,andimpactson,itsotherkeystakeholders.
Keystakeholdersofanypieceofinfrastructuremayincludeitsowners,employees,customers(orusers),impactedcommunities,regulatoryauthorities,andsuppliers.Importantly,futuregenerationsarealsokeystakeholdersbecauseoftheexpectedlongusefullifeofmuchinfrastructure.AstheUSA’sInstituteforSustainableInfrastructure18says,“Wearebuilding2050today”;inefficiencieslocked-innowmayhavelong-lastingandexpensiveconsequences,perhapsmagnifiedbytheassetbeingpartofawidersystem.
Queensland’s Department of Transport and Main Roads (TMR) has identified its key stakeholders as:
� Clients
� Partners
� Federal, state and local agencies
� The community
TMR(2012)SustainabilityinTransportandMainRoads
Sustainability in a business context has three dimensions: triple bottom line (TBL) performance19, key stakeholder relationships20,21, and financial, legal and ethical responsibilities22,23 (Figure 1).
Sustainabilityisoftenseentobeaboutthetriplebottomlineofeconomy,environment,andsociety.ButthetriplebottomlineispurelyawayofmeasuringperformanceandjustthefirstofthethreedimensionsinFigure1.
Thesecondinvolvesitsrelationalnature—itsfocusonthose‘primary’stakeholderswhobearriskthroughhavinginvestedsomethingofvalue,(forexample,theirowneffortsorfinancialcapital),intheorganisation.Thesestakeholdersareanorganisation’seyesandearstothedynamicbusinessenvironment;theydecideitsfuture,andtheydetermineitsreputation.
Thethirddimensionisresponsibilities,themostfundamentalbeingeconomic:Iforganisationsdonotmakeaprofittheywillnotsurvive,norbeabletocontributetothesustainabilityoftheircommunityortheenvironment.Theyalsohavelegislated(compliance)andethical(‘beyondcompliance’)responsibilities,thelatterbeingdiscretionarywithinbusinessimperativesbutincreasinglyexpectedbysociety.
Togetherthesedimensionsdefinebusinesssustainabilityas:the responsible management of the economic, environmental and social needs of, and impacts on, those stakeholders in a position to influence business success.
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Figure 1 The three dimensions of corporate sustainability
AdaptedfromStapledon,T.2004,OfficesasToolsforOrganisationalSustainability,PhDthesis,TheUniversityofSydney,Sydney
TBL PERFORMANCE
EconomicEnvironmental
Social
RELATIONSHIPS
ShareholdersEmployersCustomersSuppliers
CommunityFuturegenerations
RESPONSIBILITIES
EthicalLegal
Economic
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“The value of infrastructure to our nation cannot be underestimated. The effectiveness of current and future infrastructure in meeting economic, environmental and social needs is of critical national importance. When managed well, infrastructure can provide the efficiencies and opportunities needed to meet these needs”.
InfrastructureAustralia(2010)GettingthefundamentalsrightforAustralia’sinfrastructurepriorities:AnInfrastructureAustraliareporttotheCouncilofAustralianGovernments,AustralianGovernment:InfrastructureAustralia,Canberra.
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Whyisinfrastructuresustainabilityimportant?
outcomes.Forexample,theAustralianGovernment’sInfrastructureAustraliaincludesamongitssevenstrategicpriorities:developingcitiesandregions;reducinggreenhouseemissions;andimprovingsocialequityandqualityoflife25.TheVictorianTransportIntegrationAct201026isdesignedtocreateaparadigmshiftfroman“efficienttransportsystem”toan“integratedandsustainable”one,withobjectivesincludingsocialandeconomicinclusion,economicprosperity,environmentalsustainability,andsafety,healthandwellbeing.Theintroductionofcarbonpricingpolicieswillfurtherdrivechangeforsustainabilityintheinfrastructureindustry,whichisaheavyconsumerofdieselfuelsandmaterialswithhighembodiedenergy.
Thereareotherimportantpolitical,socialandeconomicreasonstoensurethatinfrastructureisdeliveredandmanagedtoachievesustainabilityoutcomes,including:
� Thehighlyvisiblenatureofshortfallsininfrastructureadequacyandperformance,togetherwithassociatedpoliticalramifications
� Evolvingneedsofsocietythroughbothdemographicchangesandtechnologicaldevelopment.
� Disruptionandinconveniencecausedtoindividualsandcommunitiesduringtheconstructionand,insomecases,operationandmaintenanceofmajorinfrastructureassets.
� Intensecompetitionforaccesstonatural,humanandfinancialresources
� Impactsofcoastalerosiononpropertyownersandthefinancesofaffectedcouncils.
� Risksofenvironmentaldamage,includingconsequentialdamagetobusinessreputation.
� Developingcommunityexpectationsoftheroleofbusinessinsociety,alongwithdemandsbythepublicformoretransparentperformanceoninfrastructureprojects.
� Evidencethatgoodurbandesignandinfrastructurecanimprovehealthoutcomes.
Givencurrentandplannedfutureinvestmentandtheimportanceofinfrastructuretoeconomic,socialandenvironmentalwellbeing,publicandprivateparticipantsintheindustryhaveparticularresponsibilitiestoensurethatinfrastructureisefficientandeffectiveinservingitspublicpurposeoveritslife.Further,thedesign,construction,operationandeventualdemolitionoradaptationofinfrastructuresignificantlyinfluencetherateofconsumptionofnaturalresourcesandhavemajorimpactsoncommunitiesandthenaturalenvironment.
Australia’sformerSecretarytotheTreasury,KenHenry,hassaidthatthepublicpolicygoalofinvestmentininfrastructure“shouldbethesustainableenhancementofwellbeing”.Henotedthat:
Sadly, there have been many failures for well over 100 years in Australia to develop policies to promote sustainable activity. This is strikingly evident in the dramatic loss of native species and biodiversity. This most significant example should motivate us not only to solve the complex and difficult problems associated with the intersection of public infrastructure policy and private endeavour, it should also motivate us to put in place policies and governance structures that are truly focussed on a sustainable future24.
AustraliangovernmentsarenowbecomingmotivatedasHenrysuggests,withthegradualintroductionofpoliciesaimedatachievinginfrastructuresustainability
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Whatdoesinfrastructuresustainabilitylooklike?
Oneofthechallengesforbusinesstointegratesustainabilityistoimagineanamorphousconceptthatisdifferentfrom‘traditional’businessthinking.Managersliketoseesustainabilityasadefined‘thing’whichcanbemanaged,andwhichhasaclearshapeandasinglesolution.Ratherthansomethingthatisclearlydefined,infrastructuresustainabilityistheoutcomeofasystematicwayofthinkingaboutaprojectoranassetthatidentifies,prioritises,andmanagesESGriskswithinthebusinessenvironment,beyondthetraditionaltripleprojectobjectivesoftime,costandquality.
Accordingly,itinvolvesagovernanceprocessthatensuresanassethasbeenconstructedorisbeingoperatedsothatitaddressesthespectrumofpertinentenvironmental,socialandgovernancerisks.Assuch,sustainabilityanditssubsetofESGissueswarrantmanagementattentionalongsideotherrisksincludingtax,legal,structuring,operationalanddemand.Traditionally,ESGriskshavebeenill-analysedinrelationtothefinancialrisktheypose.Thisisduelargelytothefactthatfinancialanalysisframeworkshavefailedtoquantifytheindividualsustainabilityriskfactorsinabusinesscase.
However,sustainabilityrisksarehighlyvariableacrossandwithinindustrysectors,projectsandassets.Australia’sAGIC40,theUK’sCEEQUAL41,andtheISI18intheUSAhavealldevelopedframeworksthatmanagerscanusetohelpthemidentifyandquantifytheparticularrisksandopportunitiestheyandtheirstakeholdersfaceinthesustainabilityspace.Itislikelythataprojectorassetmanagedforsustainabilitywillincorporateperformancecriteriaaroundthetypesofrisksidentifiedintheseframeworksandwill,forexample:
� Havemanagementobjectives,processesandpeopleinplacetoensurethatsustainabilityissuesaremanaged,measuredandreportedinatransparentway.
� Educateemployeesabouttheirroleinensuringsuccessfulsustainabilityoutcomes.
� Linkprojectsustainabilityobjectivestoindividualandteamperformancethroughkeyperformanceindicatorsandafocusoncontinuousimprovement.
� Factorsustainabilityconsiderationsintodecision-making.
� Factorclimatechangeimpactsintodecision-making.
� Uselifecycleandwholeoflifecostingtotestthelong-termvalueofdecisions.
� Selectmaterialsthatcomefromrenewablesourcesandlookforalternativestothosewithsignificantenvironmentalimpacts.
� Minimisewaste.
� Adoptmeasurestooptimiseenergyandwateruseefficiencyandeffectiveness.
� Preventdamageorrestorepastdamagetotheenvironment,includingfromspillsandsiltrun-off.
� Involvelocalcommunitiesaffectedbytheoperationsinordertobestmeettheirneedsandenhancetheirbenefits.
� Havethedevelopmentofstaffandthetransferofknowledgeaspriorities,sothattheexperiencegainedmovesbeyondindividualstofutureprojectsandtheinfrastructureindustrymoregenerally.
Measuringinfrastructuresustainabilityperformance
Manybusinessesmeasuretheirsustainabilityperformance,andadvertiseitpublicly,usinganumberoftools.RatingsystemssuchastheDowJonesSustainabilityIndexes27,theEuropeanFTSE4GoodIndexSeries28,andinternationalframeworkssuchastheGRI’sG329aregainingtractionwithinfrastructurecompaniesincludingfinanciers,constructorsanddesignconsultants.
However,thesehighlevelindicatorsarenotappropriatefordetailedproject/assetlevelperformanceassessment.Ininfrastructure,thepossiblerelevantsocialandenvironmentalvariablesaremany,andproject/assetspecific.Agreementislackingastowhattheyare,“howserioustheyare,
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andhowtheyshouldbeaddressed”30.Sustainabilityperformanceframeworksandratingtoolsaimtoaddressthisissue.
Privatecompaniesarealsoadoptingsustainabilityperformancetoolsandreportingtheirperformance.EngineeringconsultancyAruphasdevelopedSPeAR®,anintegrateddecision-makingtoolusedtosupportprojectdevelopmentandcommunicateoutcomes37.Energycompany,Origin,whichhassignificantrenewableenergyinvestments,hasawelldevelopedgovernanceframeworkandreportsagainsttheGRI38.
Thesetoolsareoftenbespokeforindividualorganisationsandforparticularsectorsoftheinfrastructureindustry.Thisistobeexpected:businessestailorperformancemeasurestotargetperceivedcriticalvariablesinareastheybelievetobecentraltotheirsuccess39.
However,theextentofbenefitsandcostsofbothsustainabilitygenerallyandindividualinitiativesvariesacrossindustries,businessunitsandprojects—notonlyacrosscompanies.Consequently,isolating‘criticalvariables’thatmayapplygenericallytocross-organisationandcross-assetinfrastructuresustainabilitygovernanceisachallenge,takenupbytheAustralianGreenInfrastructureCouncil(AGIC)withitsInfrastructureSustainability(IS)ratingscheme40.
Likeitsinternationalequivalents—theUK’sCEEQUAL41andEnvision18intheUSA—theAGICtoolservesadualpurposeasageneric,flexibleperformancemeasurementsystemanddecision-supportframework.Eachhasasetofmeaningfulindicators,arrangedundersectionsorthemes,designedtodrawonand/orcomplementdatacollectedinmainstreambusinesssystems.
Sustainability performance frameworks have underlying consistencies that distinguish them from other performance measurement systems common in business: “explicit focus on triple bottom line issues, their emphasis on the linkages between those issues, and their explicit focus on a long-term view of business performance”.
Searcy,C.(2011)Updatingcorporatesustainabilityperformancemeasurementsystems,MeasuringBusinessExcellence,vol.15,no.2,pp.44-56.
Ataproject/assetlevel,therearenumeroustoolsdesignedtohelpinterpretcomplexinformationaboutinfrastructuresustainabilityandwhichattempttobalancethethreedimensionsofsustainabilityperformance.
Forexample:aCanadianframeworkhasbeendevelopedforunifyingtheapproachtopublicinfrastructure31;theCityofClevelandintheUSAhasastrategicframeworktohelpmeasureprogressandprioritiseinitiatives32;theChicagoDepartmentofAviationhasreleaseditsSAMRatingSystem33;whileinAustraliaVicRoadsusesitsInvesttoolforassessingthesustainabilityaspectsofVictorianroadprojects34.
International,industryspecific,toolssuchastheHydropowerSustainabilityAssessmentProtocol35andtheWorldBankGroup’sIFCEHSGuidelines36onenvironment,healthandsafety,arebeingdevelopedandadopted.
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TheAustralianGreenInfrastructureCouncil(AGIC)isamemberbasedindustryassociationcommittedtothedeliveryofmoresustainableoutcomesfromthedesign,constructionandoperationofAustralia’sinfrastructure.Itsmembersarebothprivateandpublicorganisationsworkingininfrastructureengineering,environment,planning,law,finance,constructionandoperation.
AGIC’sIS(infrastructuresustainability)ratingschemehasbeenassembledthroughrigorousconsultationandtestingprocesseswithdiversegroupsofstakeholdersinboththeprivateandpublicsectors.Assuch,itrepresentsconsensusviewsofthekeyindicatorsofoperationalsuccessinsustainabilityperformance.
AGIC’s IS Rating SystemThe Australian Green Infrastructure Council (AGIC)
AGIC’sISRatingSystemhasfivethemes,eachwithanumberofcategories:
� Managementandgovernance;
� Usingresources;
� Emissions,pollutionandwaste;
� Ecology;and
� Peopleandplace.
Twofurtherthemes—economicperformanceandworkforce—areplannedforfuturedevelopment.
TheschemeisdesignedtoapplyacrossAustralia’sinfrastructureindustry—withthreeratingtypes:
� Design,awardedattheendofplanninganddesign;
� As-built,awardedatconstructioncompletion;and
� Operation,awardedafteratleast24monthsofoperationbasedonperformanceoftheoperatingasset.
Moreinformationisavailableatwww.agic.net.au/ISratingscheme1.htm
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Potential benefits to public good value range across a wide spectrum: economic, social and environmental.
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2. The benefits of infrastructure sustainability
Thismatrixisdynamic;theaimofbusinessesthatvaluesustainabilityistoprogresstheiractivitiestothequadrantofsharedvalue.
Initiativesthatfallinthetopleftquadrantmaybesociallyorenvironmentallybeneficial,butbecausetheyimposecostsorcompetitivepenaltiesonbusinesstheyaremorelikelytobeone-offorshort-lived,orundertakenbygovernmentsforpublicbenefit.Thoseinthebottomleftquadrantareunlikelytobeadoptedandperformanceheremayresultinwithdrawalofthesociallicencetooperate,asoccurredwithHeathrow’splannedthirdrunway.Thoseinthebottomrightarewheremanyprojectssittoday.Theyarepursuedonanunderstandingthattheextentofdamagetopublicgood(environmentalandsocietalvalue)isunderstoodandacceptedbybothmanagementandthepublic,perhapsthroughlegislatedapprovalprocesses.
Inthecontextofthisdiscussion,governmentsaswellaspubliclyandprivatelyownedbusinessesareconsciouslyorunconsciouslyseekingsharedvalue.However,theweightthateachorganisationattachestoaspectsofpublicandbusinessvaluewillvaryaccordingtoitsstakeholders,strategiesandculture.
Therelationshipbetweenbusinessandsustainabilityperformancecontinuestobecontroversialandunclear.
Ononehandistheviewthat“thereisoneandonlyonesocialresponsibilityofbusiness…toincreaseitsprofitssolongasitstayswithintherulesofthegame”8.Ontheotherhandistheviewthatabusiness’ssuccessismeasuredbyhowmuchvalueitcreatesforallitsstakeholders20,42,21.
Buttheseviewsarenotmutuallyexclusive:theymeetwherebeyond-complianceactivitiesundertakenbybusinessescanbeshowntocontributetocompetitiveadvantage,profitabilityandlongtermshareholdervalue.Thisisconsistentwiththeconceptof“sharedvalue”43andofferssolutionstotheproblemsHenryidentifiedat“theintersectionofpublicinfrastructurepolicyandprivateendeavour”24.
Achievingsharedvalue
Asuccessfulsustainabilityinitiative—onethatofferssharedvaluethroughvalueaddedtobothpublicgoodandbusinesscompetitiveness—mayberepresentedasbeinginthetoprighthandquadrantinthematrixinFigure2.
+
– +
QUADRANTOFSHAREDVALUE
BUSINESS VALUECostsavings,reputation,riskmanagement,
newrevenueetc.
“PUBLIC GOOD” VALUE
Social,environmentalandcommunity
economicoutcomes
Figure 2 Shared value from sustainability initiatives
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Abusinesscaseforinfrastructuresustainability
Abusinesscaseforinfrastructuresustainabilitythatrecognisessharedvaluerequires:
� Anappreciationofthenetbenefitsthatmayaccrue.
� Thevalueofthosebenefitstotheorganisation(bothmonetaryandnon-monetaryvalue)relatedtoanappreciationofhowtheyleverageintobusinessperformanceorshareholdervalue.
� Wherethosebenefitsoriginate,thatis,whatsustainabilityinitiativesarelikelytodeliverthem.
� Thedegreeofsustainabilityperformancethatwillmakethebenefitvaluable—thereisevidenceofdiminishingreturnsforhigherperformancebeyondacertainpoint44,45,3.
Potentialbenefitstopublicgoodvaluerangeacrossawidespectrum:economic(forexample,employment,localpurchasing,reduceddemandforelectricitygenerationthroughimprovedefficiency);social(forexample,Indigenousemploymentanddevelopment,equityofaccesstopublicandeconomicassets);andenvironmental(forexamplelowergreenhousegasemissions,reduceduseofnon-renewableresourcesandpotablewater,lesswaste,enhancedbiodiversity).
Someofthesebenefitshaveimpactsthatlieinmorethanoneoftheeconomic,socialandenvironmentalareasofpublicgoods.
Sustainabilityofferssixsourcesofbusinessvalue46-48thathavethepotentialtoenhanceshareholdervalue:
1. Positiveeffectsoncompanyimage,reputationandbrandstrength.
2. Positiveeffectsonemployeeengagement—motivation,retention,andrecruitment
3. Costefficiency/savings.
4. Newrevenuesources,increasedrevenuefromexistingsources,andimprovedmarketshareandpricingpower.
5. Riskreductionandmanagement.
6. Confirmationofafirm’s‘sociallicencetooperate’.
Shareholdervalue(totalshareholderreturns)isafunctionoftwothings:thefreecashflowavailablefordistributionandthevaluationmultiplethatthemarketplacesonthebusinessoverandaboveitsnettangibleassetvalue.Sustainability’sbusinessbenefitscanactonleversofvaluecreationandflowthroughtototalshareholderreturns(seeFigure3)byincreasingprofitsthroughmarginimprovementand/orrevenuegrowth,and/orvaryingthevaluationmultiplethroughinfluencingmarketperceptionsofriskandbrandstrength.
The concept of shared value “recognises that societal needs, not just conventional economic needs, define markets” and that “policies and operating practices that enhance the competitiveness of a company while simultaneously advancing the economic and social conditions” have the potential to expand the “total pool of economic and social value”.
Porter,M.E.&Kramer,M.R.(2011)Creatingsharedvalue:Howtoreinventcapitalism-andunleashawaveofinnovationandgrowth,HarvardBusinessReview,Jan-Feb2011,pp.62-77.
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1)Imageandreputationalbenefits
Reputationreflects“afirm’srelativestanding,internallywithemployeesandexternallywithotherstakeholders,initscompetitiveandinstitutionalenvironment”49.Socialresponsibility,acentraldriver
Figure 3 Value flows from infrastructure sustainability to Total Shareholder Returns
AdaptedfromBerns,M.,Townend,A.,Khayat,Z.,Balagopal,B.,Reeves,M.,Hopkins,M.&Kruschwitz,N.(2009)TheBusinessofSustainability,MITSloan,BCG,NorthHollywood
The six dimensions of corporate reputation:
� WorkplaceEnvironment:Perceptionsofhowwellthecompanyismanaged,howitistoworkfor,andthequalityofitsemployees.
� SocialResponsibility:Perceptionsofthecompanyasagoodcitizeninitsdealingswithcommunities,employees,andtheenvironment.
Fombrun,C.J.(2001)Reputations:Measurable,Valuable,andManageable,AmericanBanker,pp.14.A-14A.
ofsustainabilityperformance,isakeycomponentofastrongcorporatereputation.Alternatively,failingtodemonstratesocialresponsibilitycanbeasourceofreputationalrisk50-54.
� EmotionalAppeal:Howmuchthecompanyisliked,admired,andrespected.
� ProductsandServices:Perceptionsofthequality,innovation,value,andreliabilityofthecompany’sproductsandservices.
� FinancialPerformance:Perceptionsofthecompany’sprofitability,prospects,andrisk.
� VisionandLeadership:Howmuchthecompanydemonstratesaclearvisionandstrongleadership.
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Sustainability Impact
Improvedreputation
Employeeengagement
Costefficiency
NewmarketsIncreased
marketshare
Reducedrisk
Sociallicencetooperate
Pricingpower
Productivity
Costsavings
Newsourcesofrevenuee
Accesstocapital
BrandstrengthRiskpremium
Marginimprovement
Revenuegrowth
Increasedprofit
Marketvaluationmultiple
freecashflowTotal
shareholderreturn
Value creation levers
Workforcemanagement
Project/assetmanagement
Economicperformance
Efficient&effectiveresourceuse
Managementofemissions,pollution&waste
Managingecosystems&biodiversity
Communitymanagement
Important Extremely important
No. of respondents
0 10 20 30 40 50 60 70 80 90
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AMcKinseysurveyof1560CFOs,investmentprofessionals,andfinanceexecutivesfoundtheyagreed,byalargemargin,thatimprovedcorporatereputationandimageisthemostimportantwaysustainabilityprogramscreatevalue2.
Reputation, brand strength and shareholder value
Reputationandbrandstrengthbuiltoffsustainabilityimpactsshareholdervaluethroughanumberoffinanciallyvaluableobjectivesincludingpricingpower,levelofperceivedrisk,talentattractionandretention,andimprovedaccesstomarketsandmarketshare55-57,44,58,47,59.
How infrastructure businesses build reputation from sustainability
RespondentstoCIEAM’sbusinesscasesurveybelievethatsustainability-basedreputationisprimarilybuiltthroughgoodperformanceincommunityrelations,workforcemanagementandmanagementofemissions,pollutionandwaste(Figure4).
Infrastructurebusinessespursuingsustainabilitypromotetheirimage,reputationandbrandbycultivatingrelationshipswithkeystakeholdersthroughcommunityrelationsprograms;marketbriefings;websitesandsocialmedia;andface-to-faceinteractionswithcustomersandsuppliers.
Othercommonlyusedvehiclesinclude:promotingachievementofprojectawardslikethoseobtainablethroughAGIC’sISratingschemeandEngineersAustralia’sEngineeringExcellenceAwards;utilisationofratingsystemssuchastheISratingscheme,DowJonesSustainabilityIndexes27,andtheGlobalReportingInitiative’sG3.129;adoptinglabelsandstandards;activemembershipofforums;anddemonstrationofcomplianceto—orinstancesofexceeding—nationalandinternationalcodesandlegislation.
However,businessesthatmakeelevatedandunsubstantiatedclaimsabouttheirsustainabilitycredentialsmaysufferexposureanddamagetotheirreputationifscepticalstakeholdersconsiderthattheyareguiltyof‘greenwashing’andmisleadingadvertising47.
Reputation and market value
Research that compared groups of companies with similar levels of risk and return, but different average reputation scores, showed that a 60 per cent difference in reputation score was associated with a 7 per cent difference in market value. Another study, which examined reputation scores of companies rated by Fortune between 1983 and 1997, concluded that a one-point difference was associated with $500m in market value.
Fombrun,C.J.(2000)Thevaluetobefoundincorporatereputation:Thepublic’sviewofacompanynotonlyactsasareservoirofgoodwill,butalsobooststhebottomline,FinancialTimes4Dec2000.
Figure 4 Sources of reputational benefits from infrastructure sustainability
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Measuring reputational performance
Reputationisusuallymeasuredatamacro-levelthroughratingssuchasFortune’sannualMostAdmiredCompanies60andtheReputationInstitute’sGlobalRepTrak10061,despitequestionsoverthereliabilityofsuchratings,whichareoftenbasedonprivateinformation.
Ataproject/assetlevel,infrastructurebusinessestypicallyusequalitativeattitudinalsurveysofstakeholderstounderstandtheimpactoftheirsustainabilityinitiativesonreputation.Thesesurveystestthereactionofclients,theworkforce,theusersof
theassetandthoseimpactedbyitsconstructionand/oroperation.
Thesurveysmaybeconductedtomeasure:
� Theattitudesofclients,usersandcommunitiestotheconstructionand/oroperationoftheasset;
� Brandawareness—thedepthofrecognitionoftheorganisationamongstakeholders;
� Brandimage—whetherthebusinessisviewedfavourablybystakeholders;and
� Satisfactionratingtoteststakeholderperceptionsofthequalityofproductsandservices.
Stockland
Stocklandhasinplacestakeholderengagementplansforallstateoperationsandeveryprojecttoensureacoordinatedandstrategicapproach.
� “WeengageregularlywithalllevelsofgovernmentinWesternAustralia,NewSouthWales,VictoriaandtheAustralianCapitalTerritorydirectly,andthroughindustryassociations.
� Ourmanagementregularlymeetwithinstitutionalinvestorsandweprovideinvestorbriefingsonourstrategyandfinancialresults.
� Weregularlyseekfeedbackfromcustomersthroughsurveysandresearch,andweincorporatefeedbackintoourproductdesignandserviceofferings.
� OurmajorsupplierscompleteaCR&Squestionnaireandacomprehensivehealth,safetyandenvironmentquestionnaireaspartoftheirresponsetoourtenderrequests.
� Ourengagementwithcommunitiesincludescommunityandconsultationforums,one-to-onemeetingswithcommunitygroupsandlocalleaders,aswellassurveysandresearch.”
Stockland(2012)CorporateResponsibility&Sustainability2011,StocklandCorporationLimited,availableat:http://www.stockland.com.au/sustainability/2011/about-stockland.htm
Key Stakeholder Survey ALPURTB2project,NZ.
The7.5km,$360mmotorway,deliveredbytheNorthernGatewayAlliance(NGA),replacedtheexistingStateHighway1routenorthofAucklandthatcontainedwinding,narrowsectionsandwasnotdesignedtocarryheavytrafficvolumes.Theproject’skeystakeholdersurveywasdistributedannuallytoagroupof24keystakeholdersincludingmembersoftheCommunityReferenceGroup,AucklandRegionalCouncil,RodneyDistrictCouncil,DepartmentofLabourandDepartmentofConservation.The12surveyquestionsweredesignedtoteststakeholderperceptionsabouttheadequacyandtransparencyofprojectcommunications,thestrengthandlevelofrespectofstakeholder/NGArelations,compliancewithstatutoryapprovals,andtheNGA’sabilitytolistenandrespondtostakeholderconcerns.
Intheproject’sKeyPerformanceIndicators(tiedtoreward)performanceagainst“widercommunity”and“keystakeholders”constitutedatotalof12%ofthetotalperformanceframework.
AdaptedfromNorthernGatewayAlliance(2007)SustainabilityReport2007
Workforcemanagement
Project/assetmanagement
Economicperformance
Efficient&effectiveresourceuse
Managementofemissions,pollution&waste
Managingecosystems&biodiversity
Communitymanagement
Important Extremely important
No. of respondents
0 10 20 30 40 50 60 70 80 90
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2)Strongeremployeemotivation,retention,andrecruitment
Intoday’sbusinessenvironment,thecapabilities,commitmentandinter-personalskillsofemployeesareincreasinglyseenassourcesofcompetitiveadvantage.Theabilitytoattract,retainanddevelopemployeesisthereforeafundamentalbusinessobjective,andoneinwhichsustainabilityhasarole.Australianresearchhasfoundthat,increasingly,employeesareseekingtoworkforfirmsthat“expressandactivateacommitmenttothebroadercommunityandsociety”wheretheirwork“haswidermeaning”62.
Ithasalsobeenshownthatevenrelativelysmallamountsofinformationregardingcorporatesocialresponsibilityandthebusiness’senvironmentalfocuscanpositivelyaffectreputationandrecruitmentefforts63,54.
Employee engagement and shareholder value
Employeeengagement—thelevelofcommitmentofemployeestotheirfirms—isthemeasureofhowsuccessfulabusinessisinattractingandretainingemployees.Asakeydriverofproductivityitisalsoanimportantindicatorofbusinessperformance64.Productivity,inturn,createsvaluethroughleveragingintomarginimprovementandsoincreasedprofitability.Improvedemployeeengagementalsolowerscostsfromturnover.Employeeturnoverresultsinlossofvaluableemployeesandtheircorporate
memory,andintheoftenhiddencostsofrecruitment,includingtraining,induction,andreducedproductivityintheinitialmonthsofemployment65.
How infrastructure businesses enhance employee engagement through sustainability
ItisnotsurprisingthatrespondentstoCIEAM’sonlinesurveyhighlightedtheimportantrolethatgoodworkforcemanagementplaysinemployeeengagement(Figure5).Thisincludesmaintainingworkforcehealthandsafetyandwell-being;equity,includingequalopportunityandlocalemployment;buildingcapacitythroughtraininganddevelopment;andcapturingandsharingknowledgeaboutsustainability.Theyalsoidentifiedgoodcommunitymanagementperformanceandsoundproject/assetmanagementasbeingkeyfactors.Economicperformanceisratedleastimportant.
Inlinewiththesurveyresults,businessesthatwanttobuildemployeeengagementthroughsustainabilitypayparticularattentiontotheiremployees’health,well-being,workingconditions,anddevelopment66.Theyalsotakeactionstobuildapositivereputationforsocialandenvironmentalperformanceincommunityandemployeerelations,theirbusinessprocesses,andinthenatureandqualityoftheirproducts,recognisingthatthiswillprovideacompetitiveadvantageinattractingandsecuringapplicantsforpositions67.
Figure 5 Sources of employee engagement benefits from infrastructure sustainability
Workforcemanagement
Project/assetmanagement
Economicperformance
Efficient&effectiveresourceuse
Managementofemissions,pollution&waste
Managingecosystems&biodiversity
Communitymanagement
Important Extremely important
No. of respondents
0 10 20 30 40 50 60 70 80 90
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Measuring employee engagement
Employeeengagementisgenerallyrecognisedascriticaltoproductivity.Assuch,itisfrequentlyafocusofinfrastructurebusinesses’humanresourceprogramsandinternalsurveys.Thesurveysaretypicallyaimedtotestemployees’supportfororganisationalgoals,theirsenseofbelongingtothefirm,theirintentiontostaywiththeorganisationandtheircommitmenttoworkbeyondusualexpectations.Theyalsotrytofindoutwhatencouragesthesebehavioursandbenchmarkresultsagainstthosefromcomparablefirms.
Cost efficiency and shareholder value
Costefficiencydirectlyrelatestoincreasedprofitabilitythatinturntranslatestofreecashflowandsotoincreasedtotalshareholderreturns.
How infrastructure businesses reduce costs through sustainability
Itisperhapsself-evidentthatcostsavingswilleventuatefrommanagingwellandlookingforeconomicvaluetoreducecosts.ThisisreflectedintheperceptionsrevealedbyCIEAM’ssurvey,whichincludedgoodproject/assetmanagementasanimportantdriverofcostbenefits(Figure6).The‘soft’areasofmanagingecosystemsandbiodiversity,communitymanagement,andworkforcemanagementwereconsideredlessimportant.Thismaybebecausetheseareseentoinvolvecostexpenditurenotdirectlyrelatedtoconstructingoroperatinganinfrastructureasset.
TheCIEAMsurveyalsoidentifiedefficientandeffectiveresourceuseasakeydriverofcostsavings.Typicallythisisaresultofmoreefficientuseof—orimproved—equipmentandreconsiderationofthephysicaldesignofanassettoreducetherequiredresourceinputs.Todate,muchoftheindustry’sfocusduringbothconstructionandoperationhasbeenonenergyefficiency,wateruseandreuse,andwastereduction,particularlythroughmaterialsrecycling.Thisistheso-called‘win-win’approachthathasbeenshowntodeliversignificantsavings,even‘premiumprofits’fromrelativelyeasilymadechanges47,30,68,69.
Leighton Contractor’s most recent periodic employee survey (2010), Your Say, has identified the firm’s four principal drivers of strong employee engagement as:
1. Training and Career Development
2. Company Values
3. Strategy and Direction
4. Sustainability – Corporate and Social Responsibility
3)Costefficiency/savings
Tomanymanagers,costsavingisthesinglemostimportantandattractivecompetitiveopportunityfromsustainability.Committingtosustainabilityobjectivesfromprojectinceptionandensuringsustainabilityisintegratedthroughoutdesign,constructionandoperationprovidesthegreatestprospectforloweringprojectcosts.
Figure 6 Sources of cost benefits from infrastructure sustainability
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Theindustryisasignificantuserofdieselfuel,steel,concreteandbitumen,allofwhichareincreasingincost.Inaddition,becausetheyalsohavehighlevelsofembeddedenergy,efficiencyintheuseofthesematerialshastheaddedbenefitofreducingthecostsofcarbonemissions.
Beyondtheseeco-efficiencydriven‘lowhangingfruit’savingsfromsustainabilityinitiativesbecomehardertorealise,andmanagementisthenforcedtolooktothewholeproductlifecycleforfurthersavingsopportunities70,71.Thisisparticularlyimportantininfrastructure,giventhelongoperationallifeofmanyassets.However,theapplicationoflifecycleandwholeoflifecostingprinciplesiscomplicatedbysplitincentives(seefollowingsection)thatcommonlyexistin‘traditional’contractingmethods.Othercontractingforms—forexamplealliancingandsomepublic-privatepartnershipsthatincludeoperationoftheasset—offeralternativesthatdo(orshould)encourageconsiderationofassetlifecyclecosts.
Furthercommercialopportunitiesinthecapital-intensiveinfrastructureindustryincludebetteraccesstocapitalandreducedcostoffinance.Theseareavailablebecausesustainabilityoffersinvestorsandmanagersvaluableinsightsintothedynamicsofabusiness’soperatingenvironmentanditsspecificrisksandopportunities.Consequently,financiersarebeginningtorelatethecostofcapitaltoabusiness’ssustainabilityrating72,58.Thesameprincipleappliestoinsuranceandreinsurancecosts,whichareescalating,forexample,forassetsliabletoexposuretofloodsandcyclones.
Measuring cost efficiencies
Costefficienciesarecharacterisedbysavingsincapitalexpenditureandbylifecycleandwholeoflifecoststhattakeintoconsiderationcapitalexpenditureandalsofactorinfinancingcostsandcostsofownership,includingcostsofoperationandmaintenance,refurbishmentandultimatedecommissioninganddeconstruction.Theselonger-termsavingscanbeparticularlysignificantininfrastructureduetotheirrepetitivenatureandthelonglifeofmanyassets.
Whilesustainabilitygovernanceandeconomicssupporttheconceptsoflifecycleandwholeoflifecosting,thisisadifficultquestionforinfrastructurefortworeasons.
Firstly,infrastructureassetsarefrequentlyacquiredthroughtypicallyshort-term,competitivecontractualrelationships.Thisleadstosplitincentives:whilethedeveloper,contractorandoutsourcedoperatorareinterestedinreducingtheircapitalexpenditure,theeventualowner,whetherpublicorprivate,isconcernedwiththeongoingcostsofownershipandoperation.Theseconflictingagendascandrivethedesignprocessandthebuiltsolution,andhavethepotentialtoworkagainstefficiencyandsustainability–theoutcomesinbuildingsare“oftenappallinglyenergy-wastefulandunnecessarilycostlyonalifecyclebasis”73,andthisisundoubtedlyalsothecasewithinfrastructure.
Second,theshort-termnatureofprojectandcorporateperformanceexpectationsdiscouragesmanagersfromtakingalonger-termviewofcoststhatwouldincludelifecycleconsiderations.
4)Revenueincreasesfromnewsourcesofrevenueandimprovedmarketshare
Infrastructuresustainabilityoffersopportunitiestoincreaserevenuethroughimprovedmarketshare,newsourcesofrevenue,orenhancedpricingpower.Innovative‘green’andsociallyrespectedproducts,processesandmanagementallowfirmstopenetratenewsectors,enhancemarketshare,bringonnewproductlinesand,insomecases,commandpricepremiums74,58.Pricepremiumsarealsocloselyrelatedtoreputationandbrandstrength.
Therenewableenergyindustry,Calera’snewcementtechnology,andToronto’sDeepLakeWaterCoolingareallexamplesoftheopportunitiesthatexistforinfrastructurefirmstoidentifynewstreamsofrevenuebasedonsustainability.
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Brisbane Airport Corporation (BAC) water efficiency program, Qld
BrisbaneAirportisthethirdbusiestandthelargestcapitalcityairportbyareainAustralia.
In2004,withanannualwaterconsumptionof1,620MLperyear,BrisbaneAirportwasamongthetoptenwaterusersinQueensland.Atthetime,thiswasexacerbatedbytheworstdroughtinSouthEastQueenslandinover150years.Itwasevidentthatthecontinuationofexistingpracticeswouldresultinrapidandunsustainablegrowthinwaterconsumption.
ImplementationofaSustainableWaterManagementstrategyhasinvolvedfourrelatedstreamsofwork:greaterwateruseefficiencies,reductioninwastagethroughleaks,conversionfrompotabletorecycledwaterusewhereverpractical,andstakeholder/tenantengagementandeducationtoensurebehaviouralchangeawayfroma“waterwillalwaysbethere”mentality.
Between2004/05to2008/09,BACreducedpotablewaterconsumptionby78%,despitegrowthinpassengernumbersandincreasedcommercialandconstructionactivities.BAChassetalimitonfuturepotablewateruseequivalenttothe2006/07consumption,withprojecteddemandincreasestobeoffsetbygreaterefficienciesandsubstitutionwithotherwatertypes.Thecostsavingin2008/09was$2.3M,andtheprojectedannualsavingthereafterwas$2.4M.Non-monetarybenefitsincludestrengthenedreputationthroughwinninganInternationalWaterAssociationAwardandimprovedstakeholderrelations,andriskmitigationthroughweaningoffrelianceonpotablewater.
AdaptedfromBAC(2008),BeyondTokenism:SustainableUrbanWaterManagementinaHolisticFramework.ApplicationfortheIWASustainabilitySpecialistGroupPrizeforInnovationinthePracticalRealisationofSustainableUrbanWaterManagement,BrisbaneAirportCorporation,Brisbane.
“Disastrous year sends insurance premiums higher”
“Insurancepremiumsaresettojumpbydouble-digitpercentagepointsoverthenext18months,asinsurersdesperatelyseektorecouplostprofitsafterarecordyearofruinousandcostlynaturaldisasters…someindustrysourceshaveshownTheAustralianinsurancepoliciesthathaveincreasedincostby100percentsincelastJanuary’sfloods…Butinsurerscontendthatrateincreasesofthatmagnitudearestrictlylimitedtoareasexposedtothegreatestriskofdisasters.”
TheAustralian,21January2012
Whole of life cost savings — Equipment Energy Efficiency Program
Thereareapproximately2.28millionstreetlightinglampsinserviceinAustralia,witharound33%onmainroadsand67%onlocalroads.TheannualenergycostofpubliclightinginAustraliaexceeds$125million(andmorethan$250mincludingmaintenance).Streetlightingisthesinglelargestsourceofgreenhousegasemissionsfromlocalgovernment,typicallyaccountingfor30to60percentoftheirgreenhousegasemissions.AjointinitiativeofAustralian,StateandTerritoryandNewZealandGovernmentsproposedastrategytointroduceregulatorymeasurestophaseouttheuseofenergyinefficientHIDlighting,providecommunicationssupporttothesector,deliverreplacementprogramsineachEnergyDistributionBusinessArea,andaddressfinancialbarriers.
Theoverallbenefitsoftheprogramwouldincludeannualenergysavingsofbetween$35and$52mforpubliclightingcustomersandsavingsof400,000to635,000tonnesofgreenhousegasemissions.
AdaptedfromCommonwealthofAustralia(2011),StreetLightingStrategy:DraftStrategyPaperAvailableat:www.energyrating.gov.au
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New technology – new business
“Newtechnologiesprovidestart-upswiththeabilitytochallengeconventionalwisdom.Calera,aCaliforniastart-up,hasdevelopedtechnologytoextractcarbondioxidefromindustrialemissionsandbubbleitthroughseawatertomanufacturecement.Ifsuccessful,Calera’stechnologywillsolvetwoproblems:removingemissionsfrompowerplantsandotherpollutingenterprises,andminimizingemissionsduringcementproduction…Thecompanyistoyingwitharadicalbusinessmodel:Itwillgiveawaycementtocustomerswhilechargingpollutersafeeforremovingtheiremissions…
“Developinganewbusinessmodelrequiresexploringalternativestocurrentwaysofdoingbusinessaswellasunderstandinghowcompaniescanmeetcustomers’needsdifferently.Executivesmustlearntoquestionexistingmodelsandtoactentrepreneuriallytodevelopnewdeliverymechanisms.Ascompaniesbecomemoreadeptatthis,theexperiencewillleadthemtothefinalstageofsustainableinnovation,wheretheimpactofanewproductorprocessextendsbeyondasinglemarket.”
Nidumolu,Prahalad,andRangaswamiWhySustainabilityisNowtheKeyDriverofInnovation,HarvardBusinessReview,September2009
Toronto, Canada, Deep lake water cooling — New revenue streams from shared value
TheCityofTorontoenteredintoaprivate/publicpartnershiptointegrateadistrictcoolingsystem,fedfromLakeOntario,withitspotablewatersystem.Theprivatesectorsharedinthemunicipalinfrastructurecosts,andsharecapitalanddebtfinancingprovidedstart-upfunding.Thepartnershipentity,Enwave,receivesongoingrevenuebysellingthecoldnessofthewater(butnotthewateritself).Thesystemwillgeneratelong-termstable,utilityratereturnsandcashflowtoitsshareholders.
Thesystemhasreducedenergyconsumptionbyupto90%comparedwithconventionalchillersandisestimatedtosaveover45,000MWh/yearinelectricalproduction.Itusesonlywaterthatisdestinedtomeetthecity’sdomesticwaterneedsandsodoesnotpollutethelakewithaplumeofwasteheat,saves700millionlitresofwaterp.a.,andcomparedwithcoal-firedelectricity,reducesGHGemissionsbyanestimated79,000tonnesp.a..LifecyclebenefitsthesystemofferstoEnwave’scustomersincludereducedneedformajorcapitalinvestments,massivelyreducedriskofinterruptionanddowntime,reducedfacilitymanagementrequirementsandcostsavingsinspace,maintenanceandlabour.
AdaptedfromEnwaveServices,availableat:http://www.enwave.com/services.htmlandfromFCM(2004),DemonstratingtheEconomicBenefitsofIntegrated,GreenInfrastructure,FederationofCanadianMunicipalities,availableat:http://www.fcm.ca/Documents/tools/GMF/Demonstrating_the_Economic_Benefits_of_Integrated_Green_Infrastructure_Final_Report_EN.pdf
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Workforcemanagement
Project/assetmanagement
Economicperformance
Efficient&effectiveresourceuse
Managementofemissions,pollution&waste
Managingecosystems&biodiversity
Communitymanagement
Important Extremely important
No. of respondents
0 10 20 30 40 50 60 70 80 90
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Revenue increases and shareholder value
Efficientmanagementprovidestheopportunitytoconverttheincreasesofrevenuefromentryintonewmarketsandincreasedmarketshareintorevenuegrowthandimprovedprofitperformance,soenhancingshareholdervalue.
How infrastructure businesses increase revenue through sustainability
CIEAM’ssurveyrespondentsconsiderthatsoundeconomicperformanceisthemajordriverofincreasedrevenue(Figure7).Sustainabilityineconomicmanagementmayincludedemonstratingvalueformoneyofsustainabilityinitiativesanddesigningandoperatingtheassetforalongereconomiclifespan.Soundproject/assetmanagementandefficientandeffectiveresourceusearealsokeydrivers.Anumberofrespondentsconsideredthatenvironmental,communityandworkforcemanagementhadlittleoranunimportantdirectimpactonrevenuegeneration.
Toincreaserevenuethroughsustainabilityinitiatives,infrastructurebusinessesconcentrateonbuildingmarketsharebyimprovingcustomerloyaltyandreputationthroughdemonstrationofsocialandenvironmentalresponsibility.Theymayalsofindnewrevenuestreamsthroughofferingnewproductsandserviceswithintheirexistingmarketsordiversifyingintonewmarkets.
Newproductsandservicesbasedoninfrastructuresustainabilitymayprovideopportunitiesforadvantagesforearlyadoptersandsetupbarrierstoentryforcompetitors,particularlyiftheyarisefrominnovation.Forexample,someinnovativenewtechnologiesandproductsmaybeusedtoimprovecompetitivenessthroughconvertingwasteproductsintovalue,reducingthecostofcompliance,improvingprocessconsistency,orreducingdowntime75,30,68.
Measuring revenue increases
Organisationsplanningtobenchmarkrevenueperformanceagainstcompetitorsandtestthesuccessofspecificinitiativesuseanumberofmarketmetrics.Themostcommonmarketmetricsemployedtomeasuremarketrevenuepositionare:
� Marketsize—ascertainsthevalueoftheparticularmarketoveraperiod.
� Marketshare—thebusiness’srevenueasapercentageofthetotalmarketrevenue.
� Marketpenetration—thenumberofclientsasapercentageofthetotalnumberinthemarket,andusedtodeterminerevenueperclient.
Thesemeasuresmaybeusedincombinationwithspecificquantitativeandqualitativestudiestodeterminemarketingandbusinessdevelopmentstrategies.
Figure 7 Sources of revenue increases from infrastructure sustainability
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5)Riskreductionandmanagement
Riskmanagementisdesignedtoaddvaluethroughavoiding—ortakingadvantageof—uncertainevents.ISO31000:2009RiskManagementPrinciplesandGuidelinesdefinesriskasan“effectofuncertaintyonobjectives”.Increasingly,riskmanagementhascometoaddressnotjustnegativeeffectsbutpositiveones,oropportunitiesforachievingobjectives76.
Of the top 10 business risks identified by Ernst & Young in a survey of more than 70 industry executives, four are sustainability issues for the infrastructure industry:
1. Regulation and compliance
4. Managing talent
8. Radical greening
9. Social acceptance risk and corporate social responsibility
TheErnst&YoungBusinessRiskReport2010:Thetop10risksforbusiness
Akeycompetitiveadvantageprovidedbysustainabilityisthatitextendsriskmanagementbeyondcomplianceactivitiesoutsidethetypicalinfrastructureconsiderationsoftime,costandquality.Thisallowssystematic,earlyidentificationandaddressingofrisksintheoperatingenvironment.
Mostinfrastructurebusinessesconsider—tosomedegree—environmentalandcommunityrisks.Asustainabilityapproachtoriskmanagementmayalsoidentifylonger-termstrategicissuessuchasresourceshortages,fluctuationsinenergycosts,productliabilities,andpollutionandwastemanagement77,58aswellas“macroeconomic,political,socialanddemographicfactors”whichcanposesignificantoperatingrisks,particularlytoassetsinthetransport,energyandmininginfrastructuresectors78.
Allianz Group — Climate Change Risks
“Asglobalriskmanagers,wecareaboutclimatechangebecauseitdirectlyaffectsourbusiness…Climatechangeisoneofthegreatestchallengesfacingtheinsuranceindustry,whichiswhyfinancialorganisationslikeAllianzhavecommissionedsomeofthemostin-depthstudiesintoglobalwarming.
“Everyhailstorm,everyhurricane,everyfloodcausesdamagesinsurershavetopayfor.Inthepast30yearstherehasbeena15-foldincreaseinweather-relatedclaimsand40%ofalldamagesthatAllianznowpaysoutareduetonaturalcatastrophes.Between2010and2019,averagelossesfortheinsuranceindustrycouldgrowtoUS$41billionperannum.
“Butimportantly,climatechangeisnotonlyaboutmanagingrisks,itisalsoabouttappingmarketsofthefuture.Financialinstitutionsarekeyplayersingrowthmarketsrangingfromrenewableenergyandenergyefficiency,toeco-friendlyinvestmentsandtocarbontrading…
“Thesearejustafewexampleswhyclimatechangeisoneoftheissueswhichareofmostconcerntoourstakeholders,andoneofthemostimportanttrendsthatwehavetomanage.”
Allianz(2012)Whywecare,accessed30March2012https://www.allianz.com/en/about_allianz/sustainability/sustainability_old/climate_change_and_environment/index.html
Risk management and shareholder value
Bymanagingsustainabilityriskbusinessescaninfluencetime,costandqualityoutcomesthatcanleverageintomarginimprovement,profit,andconsequentlyshareholdervalue.
Opportunitiesidentifiedduringriskmanagementprocessesmaytranslateintorevenuegrowththroughimprovedmarketshareornewrevenuestreams.Marketrecognitionofcompetentriskmanagementmayreduceriskpremiumsandthecostoffinancethat,inturn,caninfluencethevaluationmultipleassignedbythemarket.
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Sustainability risks and investment
Investorsareincreasinglyrecognisingthattheymustprotectandmanagetheirinvestmentsforthelong-term.TheydothisthroughconsideringESGrisksintheirinvestmentdecision-makingprocessesandinthemanagementoftheirinvestmentportfolios.SuperfundsasinvestorsmustthereforemonitorhowtheirinvesteecompaniesmanagetheESGimpactsoftheiractivitiesandthereareawiderangeofESGissueswhichmayberelevanttoAustraliancompanies.
WhilstACSIrecognisesthatthereareindeedbarrierstoprogressonsustainabilityreporting,suchasresourceconstraintsandconfidentialityconcerns,wedonotbelievethatthesearesoundjustificationforexcludingtheconsiderationofsustainabilityrisksincorporatereporting.Webelievethatsustainabilityreportingisanindicatorofthequalityofacompany’sgovernance,andcompaniesthatprovidelittleornoreportingarecauseforseriousconcern.
Adaptedfrom:AustralianCouncilofSuperInvestors(2012)SustainabilityReportingPracticesoftheS&P/ASX200:AsatMarch2012,availableat:http://www.acsi.org.au/
Amorerobustbusinessriskassessmentframeworkwillprovidebettervalueprotectionopportunitiesforexistingshareholdervalue.Thatis,abusinessthatincludessustainabilityissuesinitsriskassessmentframeworkismorelikelytoprotectexistingshareholdervaluefromerosionovertime.
Ithasalsobeensuggestedthat,becausesustainabilityoffersinvestorsandmanagersvaluableinsightintothedynamicsoftheexternalbusinessenvironmentanditsspecificrisksandopportunities,itisusefulintheattractionoflong-termandlowercostcapital79,58.Aswellasfinancialbenefits,betterriskmanagementmayalsohavebenefitsthatreflectinstrengthenedreputationthroughavoidanceofsociallyunacceptablepractices.
How infrastructure businesses manage risk through sustainability
Riskmanagementbeginswithestablishingthecontextfollowedbyananalysistodeterminethenatureandseverityofriskandtheupsideofopportunities,typicallythroughuseofariskmatrixusingbothsubjectiveandquantitativefactors.
Riskmanagementininfrastructurehastraditionallyfocusedonissuesthatmayimpactthethreeobjectivesoftime,costandquality.Therangeofsuchissues,includingstakeholderactivism,legislativedelaysandenvironmentalmanagementfailures,isbroadandalignswithkeyaspectsofsustainability.Consequently,riskmanagersareabletousetoolssuchasinfrastructuresustainabilityratingschemestoensurethattheirprocessescaptureafullrangeofissues.Bydoingsotheyexpandtheboundariesoftypicalriskassessmentprocessestointegratefunctionality,sustainabilityandprojectexecutionrelatedissues.76
RespondentstoCIEAM’sbusinesscasesurveyconsideredthatthemostimportantsourcesofreducedriskfromsustainabilityaregoodperformanceinproject/assetmanagement(whichincludesattentiontosustainability-basedriskmanagementissuesincludingclimatechangeadaptation),communityandworkforcemanagement,andmanagementofemissions,pollutionandwaste(Figure8).
Measuring risk (including opportunities)
Theabilitytomeasureriskfromsustainabilityperformanceisextremelyimportanttofinancialstakeholders.Whileconstructorsandownerswantawaytodiagnoserisksotheycanmanageandreduceit,financiersandbuyers,particularlythoselikegovernmentsandsuperannuationandinsurancefundswithalongertermoutlook,wanttoknowtherisksofcapital—bethatdebtorequity.
Anobviousdifficultywithunderstandingtheoutcomesofagoodriskmanagementprocessisthatitisspecificallydesignedtoavoidadverseconsequences;assuchquantificationofwhatisactuallyavoidedisnotpossible.
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6)Enhancedsociallicencetooperate
Societygrantsbusinessownerslegitimacyandlimitedliability—anintangible‘sociallicencetooperate’—inexchangeforputtingtheircapitalatrisk,andreceivespublicbenefitsinreturn46,80.Originally,thepublicbenefitsofthislicence—includingjobs,taxes,andgoodsandservices—weresolelyeconomic.However,asexpectationsofcorporatebehaviourandcontributionbuild,increasinglythepublicbenefitsarebeingextendedtoembracesocialandenvironmentalperformance.Asaresult,confirmationofalicencetooperateisoftenarguedasabenefitofsustainability46,47.
Figure 8 Sources of risk management benefits from infrastructure sustainability
Maintainingtheintangiblesociallicencetooperateisparticularlyrelevanttobusinessesthatdependongovernmentconsentand/orthosethatrelyongoodstakeholderrelationships81.Boththesesituationsfrequentlyapplyintheinfrastructureindustry,wherethelicenceiscloselyassociatedwithbothreputationandrisk.AnillustrationoftheassociationbetweensociallicenceandriskisaffordedbythesituationaroundthethirdrunwayproposedforLondon’sHeathrowAirport.
Whileundernormalcircumstancesasociallicencetooperateisusuallyagivenwhentheprojectorassethasthenecessarygovernmentapprovals,itmustbemaintained.Anorganisationrisksdamagingorevenlosingitthroughpoorsocial,environmentaloreconomicperformance.
The principal advantage of using a sustainability framework such as AGIC’s IS rating system in risk assessment is that it “considers interlinked factors and facilitates identification of relationships between risks. This recognises that interconnected risks can create or exacerbate other risks”.
MacAskill,K.(2011)RiskManagementasaFrameworkforApplyingSustainabilityConceptsonInfrastructureProjects(Dissertation),UniversityofCambridge.
Workforcemanagement
Project/assetmanagement
Economicperformance
Efficient&effectiveresourceuse
Managementofemissions,pollution&waste
Managingecosystems&biodiversity
Communitymanagement
Important Extremely important
No. of respondents
0 10 20 30 40 50 60 70 80 90
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Risk management in Ausgrid’s network upgrade, King Street, Newtown, NSW
AusgridisaStateOwnedCorporationoftheNewSouthWalesGovernment.ThecompanyisdeliveringoneofAustralia’slargestinfrastructureprograms–an$8billionupgradeoftheelectricitynetworkincluding50newmajorsubstationsandhundredsofkilometresofnewelectricitycables.
TheprincipaldriversoftheupgradeprojectwereAusgrid’sdutyofcaretoprovideasafeandreliableelectricitynetworkinoneofSydney’sbusiestretailprecincts.Overits18monthslife,theprojectdirectlyimpacts130mostlysmallbusinesses.Theowners/operatorstakeanydisruptiontotheirbusinessextremelyseriouslyandoftenpersonallyasitmayhaveseverenegativefinancialconsequences.
Thepotentialrisksofpoorcommunity/businessrelationswereidentifiedinaprocurementplanpreparedattheprojectoutset;itwasclearthatintensecommunityliaisonwascriticaltoprojectsuccess.Ausgridappointedanexternalconsultanttoplananddeliverprojectcommunicationsandcommunityliaison.Anissues/riskanalysiswasconductedwhich,togetherwithasetofprotocolsandproceduresandastructuredmeasurementandreportingprocess,hasservedasamanagementframework.
Riskmanagementwasakeyrationalebehindthiscommunityliaisonprogram,leadingtoavoidedpotentialcoststhroughdelaysandadditionalnon-monetarybenefitsofbetterreputationandstrongersociallicencetooperate.Thesebenefitsareevidencedthroughalowerlevelofcomplaints,lesslocalmediaattentionandlackoflocalpoliticalinterestwhencomparedwithasimilarcompletedAusgridprojectthatdidnothavesuchaprograminplace.
FromAusgridandprojectconsultantinterviewsandAusgriddata(2012)
What does it look like when a company has a social licence?
Firstofall,there’slowandinfrequentconflictbetweenstakeholdersandthecompany.Thecompanyortheprojectisseenasaninextricableandvaluedcomponentofthesocialandeconomicfabricofthecommunity.Itsemployeesandmanagerswillbesociallywellacceptedinthecommunitybecausethey’repartofthecommunity.…Thesecompanieswilleasilybeabletoattractgoodtalent.Theywillhavefewornoproblemsinobtainingthenecessaryregulatorylicencesthattheyneed.Basically,theywillbetreatedasavaluedmemberofthecommunity.
Black,L.&Bice,S.(2012)Definingtheelusiveandessentialsociallicencetooperate,availableat:http://www.csrconnected.com.au/2011/08/defining-the-elusive-and-essential-social-licence-to-operate/
Social licence to operate and risk – Heathrow’s third runway
Heathrow’sprojectedthirdrunwayprovidesanexampleofinvestorsfactoringinfuturegrowthintotheirinvestmentmodel,butbeingunabletoachieveasociallicencefortheprojecttoproceedbecauseofastrongcampaignbycommunitiesthatwouldbeaffectedbytheincreasedairportactivity.
BBCNews12May,2012Heathrowrunwayplansscrappedbynewgovernment,availableat:http://news.bbc.co.uk/2/hi/uk_news/england/london/8678282.stm
Despiteearlierdecisions,ultimatelytheanticipatedlevelofgrowthmaybesuchthatgovernmentoverridessocialconcernsandapprovestheproject.
FT.com13June,2012CameronclearswayforHeathrowU-turn,availableat:http://www.ft.com/cms/s/0/5a0b7cd0-b578-11e1-b8d0-00144feabdc0.html#axzz1y1m14n72
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Social licence to operate has three components:
� Social legitimacy based on established norms… of the community that may be legal, social and cultural and both formal and informal in nature…
� Credibility … created by consistently providing true and clear information with any and all commitments made to the community …
� Trust (which) comes from shared experiences …
Boutilier,R.&Thomson,I.(2012)TheSocialLicensetoOperate,availableat:http://socialicense.com/index.html
Figure 9 Sources of social licence to operate benefits
“But remember that conduct – people’s conduct and societal conduct – is largely driven by societal norms, not by law. … So we should be earning our social licence through fitting in and adapting to the prevailing social norms and acceptable social norms and the legal requirements are simply a complementary element to that.”
Harvey,B.,GlobalPracticeLeader-CommunitiesandSocialPerformance,RioTinto(2011)http://www.skmconsulting.com/Knowledge-and-Insights/Achieve-Magazine/Issue4-2011/cover.aspx
Social licence to operate and shareholder value
Astrongsociallicencetooperateinfluencesperceptionsofriskpremiumsand,throughitscloserelationshipwithreputationandimage,italsoimpactsbrandstrength.Bothofthesefactorsdrivethemarket’svaluationmultipleandsocantranslateintoshareholdervalue.
How infrastructure businesses strengthen their social licence through sustainability
Byitsverynature,infrastructuresustainabilityisintimatelyrelatedtothestrengthofabusiness’ssociallicencetooperate.OutstandingperformanceagainstAGIC’sISratingscheme(orsimilar)providesthefirststepinmaintainingalicence.Thekeyperformanceindicatorsofratingsystemscrossthespectrumofeconomic,socialandenvironmentalissuesvaluedbystakeholders.Inparticular,goodcommunityandenvironmentalperformanceandsoundproject/assetmanagementareconsideredtobecentraltobusiness’ssociallicencetooperatebytherespondentstoCIEAM’ssurvey(Figure9).
Communicatingthatperformanceatoverallandstakeholder-specificlevelsthroughthewholerangeofavailablemarketingtacticsiscentraltobuildingandchangingstakeholderperceptionsandreinforcingthelicencetooperate.
Workforcemanagement
Project/assetmanagement
Economicperformance
Efficient&effectiveresourceuse
Managementofemissions,pollution&waste
Managingecosystems&biodiversity
Communitymanagement
Important Extremely important
No. of respondents
0 10 20 30 40 50 60 70 80 90
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The Visy Tumut Pulp Mill, NSW
Followingcommunityconcernsovertheleveloforganiceffluentdischargestowaterwaysandloggingofold-growthnativeforests,theplannedconstructionofapulpmillinnorthernTasmaniawashaltedandan“investmentstrike”innewmillsfollowed,evidencingwithdrawaloftheindustry’ssociallicencetooperate.In2001,VisyIndustriesopenedanewunbleachedkraftpulpandpapermillatTumut,NSW,regardedasashowcaseofinnovativeenvironmentalandsustainableenergy,waterandwastetechnologies.Thegoaheadtotheprojectwasonlygivenaftertheestablishmentofasociallicencetooperatethroughaprocessofpublicandcommunityengagementandcommitmenttomeetingorexceedingregulatorycomplianceand,insomecases,worldbestpractice.
AdaptedfromAusCID(2003)SustainabilityFrameworkfortheFutureofAustralia’sInfrastructure
Measuring social licence to operate
Aswithmostintangiblebusinessassets,thesociallicencetooperateisusuallymeasuredqualitatively,forexampleusingsurveysthatteststakeholderperceptionsofthebusiness.Thismaybemeasuredacrossfourlevelsofperformance82:
� Withheld/withdrawn—therejectionlevelindicatedbyshutdowns,blockades,boycottsandlegalchallenges
� Tolerance,wheretheremaybelingeringissuesandthreats,thepresenceofNGOsandwatchfulmonitoring
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� Support,wherethebusinessisconsideredagoodneighbourandthecommunityapprovesoftheprojectandthoseinvolved
� Co-ownership,wherethecommunitybecomesanadvocatefortheprojectandthebusiness.
Itisimportanttorecognisethatanorganisation’slicencetooperatemaybeprojectorassetspecific.Inotherwords,poorsocial,environmentalorgovernanceperformanceonaprojectorassetoperationmaydamagethereputationofthewholebusiness.
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The integration of sustainability into risk management, project objectives, and performance setting and reward structures may help businesses see sustainability as a value proposition rather than a value imposition.
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3. Barriers to acceptance of the business case for infrastructure sustainability
“sharesuchinformationastheircarbonfootprintandthespecificsoftheirmanufacturing[constructionoroperating]practices”,informationoftenconsideredtobecommerciallysensitive2.Thisisexacerbatedbybeliefsthatsupplierscannotmeetdemandforsustainableinputsortransparency,thattherewillbeaneedforreinventionofprocessesandequipment,andthatclientswillnotpayforimprovedsustainabilityperformance.
Theintegrationofsustainabilityintoriskmanagement,projectobjectives,andperformancesettingandrewardstructuresalignedwithbusinessstrategy(similartothewaysomealliancecontractsfunction)mayhelpbusinessesseesustainabilityasavaluepropositionratherthanavalueimposition.
Lackofappreciationofvaluepathways
Provingthatparticularsustainabilityinitiativestranslateintoenhancedmarketvalueisproblematical.Causallinksareindirectandill-definedandmayhaveambiguousdirection.Reputation,forexample,isacomplexconcept,thesumofanumberofactionsacrossitssixdimensions.Inaddition,whataddstomarketvalueinonefirmmaynotinanotherdependingonindividualcompanystrategy,cultureandoperationalmethods.
Further,sustainabilitydriversarehighlyunpredictableandsothenecessityofplanninginadynamicanduncertainbusinessenvironment“potentially[requires]companiestoadoptentirelynewconceptsandframeworks”2.Thelackofacommonlanguageofsustainability,evenwithinindividualinfrastructureindustrysectors,exacerbatesthisproblem.
Itisalsoevidentthatbenefitsfromsustainabilityactivitiesarenon-linearandreturnsmaydiminishastheintensityofsustainabilityactionsincrease,perhapsfollowinganinvertedu-shape44,45,3.Accordingly‘excessive’actions(azeroemissionsgoalhasbeencitedasanexample83)arelikelytobecostlyanddamagingtofinancialperformance.
Despitethesecomplications,themodeldiscussedinthisguidelineprovidesaguidetohowbusinessesmayapproachunderstandingtheirownpathwaystovalue.
Thequestionmustbeasked:iftherearesomanybenefits,whydon’tallmanagersbelievetheevidence?Thereasonsarerelatedtotheprevailingindustryculture—includingitshighlycompetitivenature,alackofappreciationofhowstakeholdervalueiscreated,andaccountingpractices.
Infrastructureindustryculture
Theindustrycultureholdsbackacceptanceofthesustainabilitybusinesscasebecauseitisshort-termresultsfocused,relieslargelyonconfrontationalcontractualrelationships,andishighlycompetitiveandfinanciallyintensive.
Firstly,giventhewidespreadviewthattheroleofbusinessistomaximiseprofits,andthenatureofthereportingcycle,itisnotsurprisingthatamajorityofmanagersarefocussedondeliveringshort-termprofits.However,whatissurprisingisreluctancetoembraceawiderperspectiveofriskgiventheindustry’shighlevelofpotentialimmediateandlonger-termsocialandenvironmentalimpactandtheincreasingscrutinythatprojectsandassetsfacefromstakeholdersandNGOs.Thisreluctanceignorestheenvironmentalandsocialriskswhichneedtobefactoredintomainstreamthinkingandthemountingevidencethatcreatingvalueforstakeholdersbeyondjustshareholdersisthekeytobuildingshort-termprofitsintolonger-termsuccess.
Similarly,governments,themajorfundersofpublicinfrastructureinAustralia,arealsooftenfocusedondeliveringshort-termoutcomes,intheircasedrivenbytheelectoralcycle,andsoarelessinclinedtotakethelong-termviewthatinfrastructuredemands.
Second,andasdiscussedearlier,thecultureoftheindustryisalsocharacterisedbytypicallyshort-term,confrontationalcontractualrelationshipsbetweenfinanciers,developers,consultants,contractors,andextendingtoownersandoperators,withsplitresponsibilitiesandleadingtosplitincentives.
Finally,theinfrastructureindustryiscompetitiveandfinanciallyintensive.Thereisaviewthatadoptingsustainabilitywillimposecostpenaltiesandcreatecompetitivedisadvantageswhereothersoperateatbusinessasusuallevels.Further,the‘transparency’requirementofsustainabilityrequirescompaniesto
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Accountingpractices
Themostfundamentalobstacletoquantifyingcostsandbenefitsofsustainabilityinitiativesisthenatureofaccountingpractices,whichcommonlyholdtheviewthatwhatcannotbeempiricallymeasuredis“typicallyviewedasunimportantorevennon-existent”84.Asaresult,ecologicalandsocialresources,andtheoften-intangiblebenefitsofintegratingsustainabilityintostrategyandoperations,arefrequentlyconsideredtohavenointrinsiceconomicvalueandtobeunimportanttobusinessperformance.
Eventhough—asthisguidelinedemonstrates—somenon-monetary(intangible)assetscanbeleveragedintocompetitiveadvantageandshareholdervalue,“inpractice,investorsandmanagersdon’tknowhowtoplayinaspacethatexpandstheframeworktoincludeotherthanstrictlyfinancialmetrics”85.
Manyoftheseintangibleassetsarevaluedbythemarketbutoverlookedbymanagement,meaningthat“managementispronetounder-manageorevenignorewhatmight…bethemostsignificantportionoftheircompany’s(market)valuation”86giventhat,intoday’sknowledgeeconomy,‘traditional’accountingassetsexplainonlyaboutonequarterofmarketvalue87.Calculatingtheeconomicvalueofsuchbenefitsusingtraditionalaccountingdiscountedcashflowmethodswillalmostinvariablycountagainstsustainabilityactionsthatresultinintangiblebenefits.
Giventhesefactors,quantifyingthebusinessbenefitsofinfrastructuresustainabilityrequiresbusinessestoadoptadifferentapproachtomeasuringshareholdervalue,encompassingbothoperationalandinvestmentperspectivessothatmanagementhasmeasuresthat“reflectthewayorganisationscreatevalueand…[are]sensitivetodifferencesinbusinessmodels”88.McKinsey&Companybelievethatitispossibletodirectlyvaluethefinancialbenefitsusingtraditionalbusinessmetricssuchascostefficiency,providedmanagersunderstandthepathto,anddriversof,value55.
Theapproachdiscussedinthisguidelineoffersawaytodothis.Itdemonstratesthatintangibleassetssuchasbrandstrength,thesociallicencetooperate,abilitytoattractandretainemployees,andriskpremiumsallinfluenceshareholdervalue.
Finally,manyorganisationslacktheknowledge,expertiseorwilltocollectandanalysedataonsocialandenvironmentalissuesandperformance—particularlycomplexsystem-wideones—andsoareunabletoadequatelytesttheirsustainabilitybusinesscaseortomeasurethecostsandbenefitsofaction.TheAGICISratingsystem,anditsrelatedinternationaltools,offerbusinessesaframeworkforsupplementingtheirexistingdatatobettertracktheirsustainabilityperformanceandsobetterunderstandhowsustainabilityinitiativescancontributetoshareholdervalue.
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The problem with current accounting practices: Seattle Public Utilities
In1889SeattlePublicUtilities(SPU)wasestablishedtoprovidewatertothecity.ItsubsequentlypurchasedtheforestedCedarRiverwatershedtoprovideandfilterthecommunity’swater.Althougharadicalandexpensiveideaatthetime,thishasproventobeasuccessfullong-terminvestment.Iftheforestdidnotfilterthecity’swatersupplyitislikelySPUwouldhavehadtoconstructthreeorfourfiltrationplantsatacosttodayof$200millionwithannualoperatingandmaintenancecostsof$3.6million.
Frombothaneconomicandecologicalstandpoint,however,afundamentaldilemmaisfacedbySPUandotherwatershed-filteredwaterutilities.UndertheUnitedStates’GovernmentalAccountingStandardsBoardaccountingstandards,thewatershed,whichprovidesandprotectsthepurityofthewatersupplyandisintuitivelytheutility’sgreatestasset,doesnotcountasaneconomicassetintheutility’sfinancialbooksbeyonditspriceofpurchase.
Simplyput,theaccountingrules,withtheirsolefocusonhistoricalcostaccountingandman-madeassets,donotprovideanaccurateormeaningfulpictureofSPU’sassets.Becauseaccountingruleshavebeendevelopedforbuiltcapital,whichdepreciates,theyarehistoricallycostbased,meaningthevalueofthewatershedistheoriginalamountpaidfortheland.Theserulesdonotpermitawaterutilitytoadequatelyaccountforitsgreatestasset:thewatersheditself.
Acoupleofinterestingironiesofcurrentaccountingpracticeareworthmentioning.First,ifawatershedbecomespolluted,cleanupcostsmustbeimmediatelyrecognizedasanexpenseandrecordedasaliabilityontheutility’sfinancialstatements,eventhoughthevalueofthewatershedisnotshownonthestatementsbeyondthe,typically,verylowhistoricalcostsofitspurchase.Second,ifanoldloggingroadinthewatershedneedstobedecommissionedtopreventsedimentandrunofffromenteringthereservoiranddegradingwaterquality,theutility’sassetswilltakeawrite-down.Theroadiscountedasanassetbecauseitwasoriginallyan‘improvement’tothewatershed,eventhough,inreality,itisaneconomicliability.
Adaptedfrom:Cosmanetal.(2012)HowWaterUtilitiesCanSpearheadNaturalCapitalAccounting,availableat:http://www.thesolutionsjournal.com/node/1018
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For infrastructure businesses to embrace sustainability, the initiatives they adopt must be seen to be valuable within the context of usual industry practice.
Strengthenedimage&reputation
Strengthenedemployeeengagement
Costsavings
Revenueincreases
Betterriskreductionandmanagement
Enhancedsociallicencetooperate
Definitely would
Probably would
99 respondents
0 10 20 30 40 50 60
Probably would not
Definitely would not
39
4. Selling the business case for infrastructure sustainability
Asurveyof1,560businessleadersfoundthat“almost70percentsaidthattheircompanydidnothaveastrongbusinesscaseforsustainability.Oftheserespondents,22percentclaimedthatthelackofabusinesscasepresentedtheircompanywithitsprimarybarriertopursuingsustainabilityinitiatives”2.Ifmanagersdonotunderstandthevaluetheystandtogainfrominfrastructuresustainabilitytheyareunlikelytochangethewaytheythinkaboutwhattheydo.
Costsavings,strengthenedreputation,andbetterriskmanagementwereconsideredbyrespondentstoCIEAM’sinfrastructuresustainabilitybusinesscasesurveyasbeingthebenefitsmostlikelytomotivateintegrationofsustainabilityintotheirbusinesses(seeFigure10).
Basedontheseperceptions,itmaybereasonabletofocusbusinesscasedevelopmentonthesethreeprimarymotivatingbenefits.However,asshownbythevalueflowsinFigure3,thefullrangeofbenefitsfrominfrastructuresustainabilitycaninfluencetheleversthathavefinancialimpactandactdirectlyorindirectlyonthetwodriversofshareholdervalue:profit,whichreleasesfreecashflow;andthevaluationmultiplethemarketplacesoverthebusiness’snettangibleassetvalue55.
Thissectionoutlinessomestepstohelpovercomethebarrierstomanagementacceptanceofthebusinesscaseforinfrastructuresustainabilitysothatyourorganisationcanshareinthebenefitssustainabilityoffers.
Demonstratethebusinesscase
Itisself-evidentthatforinfrastructurebusinessesandtheirmanagerstoembracesustainability,theinitiativestheyadoptmustbeseentobevaluablewithinthecontextofusualindustrypractice.Businessesaregenerallynotaltruistic;theymustseethatsustainabilitywillcontributetotheircontinuingprosperityanddevelopmentbeforemovingbeyondbusinessasusual.
... businesses have a responsibility to be prosperous and to make the world a better place. CFOs have traditionally focussed on the first part of that mandate. To get them interested in the second part, it’s important to show them the link between prosperity and sustainability.
KurtKuehn,CFOUPS,(2010)http://www.greenbiz.com/blog/2010/04/13/five-ways-convince-your-cfo-sustainability-pays
Figure 10 Motivating benefits for business integration of infrastructure sustainability
40
Consideralternativeaccountingapproaches
Managersininfrastructure,asinthemajorityofothersectors,haveaccountingpracticesthatconflateprofitandvalue.
AS4183:2007,theAustralianValueManagementstandard,definesvalueas“Anattributeofanentitydeterminedbytheentity’sperceivedusefulness,benefitsandimportance”—considerationsbeyondmonetarycostandsubjective,personal,andnoteasilymonetised.
Valueandprofitarenotthesame,althoughprofitisafactorindeterminingvalue.Valueisamorecomplexequationofmonetisedandnon-monetisedbenefits.ItiswhysomecompaniesrentexpensivespaceintheCBDratherthancheaperspaceinthesuburbs:theyseevalue—usefulnessandimportance—insuchthingsasaccesstotransport,betteramenitiesfortheirstaff,beingclosertotheirclients,andtheprestigeofaCBDaddress.
Thesethingsarenotreadilymonetisedbut,consciouslyorunconsciously,theybecomepartofthevalueequationfordecision-makers,theirshareholdersandotherkeystakeholders.Similarly,issuessuchasreputation,riskmanagement,environmentalmanagementandemployeeengagement,whileintangible,areallimportantinmakingdecisionsaboutinfrastructuresustainability.
Incorporateexperienceintothebusinesscase
Manybusinessesareinvestingsignificantfundsininfrastructuresustainabilityresourcesandinitiativesatbothorganisationalandproject/assetlevel.Theyfrequentlyreporttheirsustainabilityperformance—thepublicgoodvalue—internallyandpublicly.Yetoftentheydonotmeasurethebusinessbenefits(orcosts)ofthisinvestment.
Byminingthedataavailablefromtheirexperiences,organisationswouldbeabletogetamoreroundedsetofinputstobusinessandprojectplanning,aswellasbeingbetterinformedinvaluing,improvingandpromotingtheirprojectoutcomestostakeholders.
41
Conclusion
Thesameprinciplesofvaluepathwaysapplyequallytolistedandnon-listedbusinesses,togovernmentsandNGOs:allhave‘shareholders’,ownersoftheorganisation;and‘stakeholders’,thosewithaninvestmentintheorganisation—beitphysicaloremotional.Theessentialdifferencebetweenorganisationsistherelativeweightingtheyputonthecomponentsofsharedvalue—organisationalvalueandpublicgoodvalue—andthestrategiestheypursuetoachievethem.
TheguidelineprovidesanapproachforlinkingbenefitstotheAGICISratingsystem(oritsinternationalequivalents)sothatorganisationscanbetterunderstandhow,andwhich,infrastructuresustainabilityinitiativescontributetoimprovedshareholdervalue.
Finally,theguidelinediscussessomeofthebarriersthatdiscourageorganisationsfrompursuinginfrastructuresustainabilityandofferssomesuggestionstoovercomethem.
Wehopethatyoufindtheguidelineusefulinyourorganisationandthatithelpstoclarifyyourownbusinesscaseforinfrastructuresustainability.
Attheveryleast,allorganisationsseektoimprovetheirvalue(asinterpretedbytheirownersandstakeholders)whileavoidingenvironmentalandsocialharmthatmaydamagetheirvalue.Thisguidelineiswrittentosupportthoseorganisationsthatwantmorethanthis.Itisforthoseseekingopportunitiestoenhancetheirvaluethroughgoodenvironmental,socialandgovernanceperformance,butwhoareuncertainabouthowsuchperformancesupportsabusinesscase.
Theguidelineidentifiessixprimarybenefitsofsustainability:strengthenedimageandreputation;enhancedemployeeengagement;costsavings;improvedrevenuefrombothproductandserviceenhancementsornewrevenuesources;betterriskmanagement;andstrengthenedsociallicencetooperate.Thesebenefitsarebothtangibleandintangible,andarelikelytoaccruedifferentlytoeachorganisationaccordingtoitssituationandstrategy.
Theguidelinehasalsoexplainedthevaluepathwaysbywhichinfrastructuresustainabilityperformancecantranslatethosebenefits,eitherdirectlyorindirectly,intooneorbothofthedriversofshareholdervalue—increasedprofitandanenhancedvaluationmultipleappliedbythefinancialmarkets.
42
Appendix: Industry perceptions of infrastructure sustainability benefits from the CIEAM survey
� Managing ecosystems and biodiversity. AlignswiththeAGICISEcologytheme.
� Community management:includingmaintainingcommunitysafety,healthandwell-being,havingactivestakeholderparticipationindecision-making,andrespectingnaturalandculturalheritage.AlignswithPeopleandPlaceintheAGICIS.
� Workforce management:includingmaintainingthesafety,healthandwell-beingoftheworkforce,buildingcapacitythroughtraininganddevelopmentandthroughcapturingandsharingknowledgeaboutsustainability,andequity,includingequalopportunityandlocalemployment.AGICISdoesnotyethaveanequivalenttheme.
WhilethosethemeshavebeenmodifiedinthereleaseversionoftheISratingscheme,theiroverallkeyresultareasandthecategoriestheydescribe,arelargelythesame.Forthepurposesofthissurvey,thethemesasusedembracetherangeofinfrastructuresustainabilitytopicsmostlikelytobeencounteredbybusinesses.
Thesurveyfirstgathereddataontheownership,size,andindustryroleofrespondents’organisations.Itthenaskedforrespondentstonominatetheirfunctionalrole/positionintheirorganisation.Thesequestionsweredesignedtoinformtheresearcheraboutpotentialbiasesintherespondentgroupandtoallowfilteringoftheresponsesifrequired.
Respondentswerethenaskedtoidentifywhichofthesixsustainabilitybenefitswouldencouragetheirorganisationtopursuesustainabilityintheirinfrastructurebusinessand/orprojects.
Followingonfromthisweresevenquestionsthataskedrespondentstoratehowimportanttheyconsideredgoodperformanceineachofthethemestobetodeliveringeachofthesustainabilitybenefits,usingaLikertscalerangingfrom“hasnoimpactonthisbenefit”to“extremelyimportant”.Forthepurposesofreportingtheresults,thecentrevaluesinthescalehavebeenomitted.
AspartoftheresearchforthisguidelinetheCooperativeResearchCentreforInfrastructureandEngineeringAssetManagement(CIEAM)conductedanonlinesurveytotestindustryperceptionsofthebusinesscaseforinfrastructuresustainabilityandwhethertheyaccordwiththeliteraturediscussedintheprecedingsectionsofthisguideline.
Thesurveyalsoexaminedindustryperceptionsaboutwhichaspectsofgoodsustainabilityperformancedriveeachofthesixbenefits.Thissectiondiscussesthesurveyanditsfindings.
Surveystructure
Thesurveytestedthesixgenericbenefitsofsustainabilityagainstthethemesofthe(thendraft)AGICinfrastructuresustainabilityratingscheme:
� Project/asset management: includingdedicatedsustainabilitypolicy,structureandresources,themanagementsystemused,theuseofmulti-criteriadecisionsupport,approachtoprocurementandpurchasing,knowledgesharing,andprocessesformanagingclimatechangeadaptation.ThisthemealignswithAGICISratingscheme’sManagementandGovernancetheme.
� Economic performance: includingdemonstratingvalueformoneyofsustainabilityinitiatives,designingandoperatingtheassetforlongereconomiclife(forexampleusinglifecyclecostingandlifecycleanalysis),andcontributingtothestrengthofthelocaleconomy.AGICISdoesnotyethaveanequivalenttheme.
� Efficient and effective use of resources: includingtheuseofenergy,waterandconstructionmaterials,andreductionofcarbonemissions.AlignswiththeAGICISthemeofUsingResources.
� Management of emissions, pollution and waste: includingdischargestoland,airandwater,landdisturbanceandwastereductionandhandling.SimilartoAGICISEmissions,PollutionandWastetheme.
Government
Publiccompany
Privatecompanyorregisteredbusiness
Other
Government
Publiccompany
Privatecompanyorregisteredbusiness
Other
43
Surveyparticipants
Participantswereinvitedwithemailrequeststotheresearcher’slistofcontactsandtoCIEAMpartnerorganisationsandwithaninvitationplacedonAGIC’swebsitehomepage.Responseswerereceivedfrom99participants.
Organisationalprofile
Themajorityofrespondentswerefromprivatelyownedorganisations—companiesorregisteredbusinesses(seeFigure11).Therespondentswhonominated“other”identifiedtheirorganisationsasresearchersorNGOs.
Respondents’organisationswerereasonablyevenlydistributedacrosstherangeofsizesnominated(Figure12).
Therespondents’organisationscarriedoutarangeofrolesacrosstheinfrastructureindustrywiththelargestparticipationfromdesignandsustainabilityconsultants(Figure13).“Other”respondentsidentifiedtheirorganisationsasinvolvedinfinance,communityrelations,managementconsultancy,andsustainabilityassessment.
Figure 11 Respondents’ organisation ownership
Figure 12 Respondents’ organisation size
Figure 13 The industry roles of respondents’ organisations
Owner
Other
Policy/approvals/standardsauthority
Researcher
Operator/manager
Constructor
Sustainabilityconsultant
99 respondents (more than one role permitted)
0 5 10 15 20 25 30 35 40 45
Financier
Designconsultant
Strengthenedimage&reputation
Strengthenedemployeeengagement
Costsavings
Revenueincreases
Betterriskreductionandmanagement
Enhancedsociallicencetooperate
Definitely would
Probably would
0 10 20 30 40 50 60
Probably would not
Definitely would not
99 respondents
44
Respondents’functionalroles/positionswithintheirorganisations
Therangeoffunctionalroleswasbroad(Figure14)andhavebeencategorisedbytheresearcheraccordingtothefollowing:
� Executiveincludesthosewhoself-identifiedasVP,CEO,GM,MDorowner
� Sustainabilityincludesallrespondentswithsustainability,environmentorcommunityintheirtitles.(WhiletheselattertwogroupsarenotthesameassustainabilitytheyarerelatedwithinanESGcontext).
� Engineerincludesallthosewithengineerintheirtitle
Figure 14 Respondents’ functional roles/positions
Figure 15 Motivating benefits for pursuing sustainability in infrastructure
� Project Managerincludesprogrammanager
� Otherincludesbusinessanalysts,businessdevelopmentmanagers,andresearchers.
Thehighproportionofexecutivesisrelevantgiventhestrategicroleofbusinesscases.
Findings:Motivatingbenefitsforpursuingsustainabilityininfrastructurebusinesses
Reputation,costsavingsandriskmanagementwereconsideredbyrespondentsasbeingthebenefitsmostlikelytoencourageintegrationofsustainabilityintotheirbusinesses(seeFigure15).
Sustainability
Other
Assetmanager
Projectmanager
99 respondents
0 5 10 15 20 25 30 35 40
Executive
Engineer
45
Findings:Howinfrastructuresustainabilityperformanceimpactsbenefits
ThesurveyaskedrespondentstoratetheimportanceofgoodperformanceineachoftheAGICthemesindeliveringeachofthesixbenefitsofinfrastructuresustainability.
Figure 16 Impact of project/asset management on sustainability benefits
Project/asset management
AsshowninFigure16,ahighpercentageofsurveyrespondentsconsideredthattheprimarybenefitsofgoodsustainabilityperformanceinprojectorassetmanagementarecostsavingsandriskreductionandmanagement.Thisistobeexpected,asthese,alongwithtimeandquality,areamajorfocusofprojectmanagement
Respondentsalsoidentifiedthatgoodperformanceinthisareahasimportantimpactsacrossallbenefits.
Strongerimage&reputation
Strongeremployeeengagement
Costsavings
Increasedrevenue
Riskreduction&management
Enhancedsociallicencetooperate
Extremely important
Important
0 10 20 30 40 50 60
Slight impact, not important
Has no impact
88 respondents
46
Economic performance
Asmaybeexpected,goodeconomicperformancereflectsprimarilyincostandrevenuebenefitsandisalsoconsideredtobeimportantacrossallbenefits.Itwasseenasbeingalessimportantfactorinenhancingemployeeengagementandthesociallicencetooperate(Figure17).
Figure 17 Impact of economic performance on sustainability benefits
Figure 18 Impact of efficient and effective resource use on sustainability benefits
Efficient and effective use of resources
Respondentsidentifiedtheefficientandeffectiveuseofresourcesasimpactingallbenefits,andhavingparticularimportanceincostreduction,riskreductionandmanagementandtoalesserextent,influencingreputationandsociallicencetooperate.Itwasconsideredofleastimportanceinstrengtheningemployeeengagement(Figure18).
Strongerimage&reputation
Strongeremployeeengagement
Costsavings
Increasedrevenue
Riskreduction&management
Enhancedsociallicencetooperate
Extremely important
Important
0 10 20 30 40 50 60
Slight impact, not important
Has no impact
88 respondents
Strongerimage&reputation
Strongeremployeeengagement
Costsavings
Increasedrevenue
Riskreduction&management
Enhancedsociallicencetooperate
Extremely important
Important
0 10 20 30 40 50 60
Slight impact, not important
Has no impact
88 respondents
47
Figure 19 Impact of emissions management on sustainability benefits
Management of emissions, pollution and waste
Surveyrespondentsidentifiedthatgoodperformanceinmanagingemissions,pollutionandwastewasakeyriskmanagementissuewithbenefitsflowingtoreputationandimageandtothesociallicencetooperate.Itwasseenbyaconsiderablenumberofrespondentsashavingunimportantornoimpactonrevenueandemployeeengagement(Figure19).
Management of ecosystems and biodiversity
Goodperformanceinmanagingecosystemsandbiodiversitywasconsideredtobethemostimportantfactorinenhancingthesociallicencetooperate,whilealsobeingimportanttoreputation,riskreductionandemployeeengagement.Ithasverylowrecognitionasafactorindeliveringfinancialbenefitthroughcostsavingsandincreasedrevenue;itmaybethattheindustryperceivesecologicalmanagementtobeasourceofimposedcosts(Figure20).
Figure 20 Impact of ecosystems and biodiversity management on sustainability benefits
Strongerimage&reputation
Strongeremployeeengagement
Costsavings
Increasedrevenue
Riskreduction&management
Enhancedsociallicencetooperate
Extremely important
Important
0 10 20 30 40 50 60
Slight impact, not important
Has no impact
88 respondents
Strongerimage&reputation
Strongeremployeeengagement
Costsavings
Increasedrevenue
Riskreduction&management
Enhancedsociallicencetooperate
Extremely important
Important
0 10 20 30 40 50 60
Slight impact, not important
Has no impact
85 respondents
48
Figure 21 Impact of community management on sustainability benefits
Figure 22 Impact of workforce management on sustainability benefits
Community management
Asmaybeexpected,goodcommunitymanagementwasconsideredbysurveyrespondentstobemostimportantinareasrelatedtoexternalstakeholders:imageandreputationandsociallicencetooperate.Itisalsoseenasanimportantfactorinriskreductionandmanagementandemployeeengagement.However,itwasseentohavealowimpactrelationshiptocostsandrevenue(Figure21).
Workforce management
Figure22showsthatgoodperformanceinworkforcemanagementisprimarilyconsideredtoreflectinstrongerengagementwiththosemostaffected—thebusiness’semployees.Respondentsalsorecognisedtherolethatworkforcemanagementplaysinreducingriskandreinforcingreputation.Itwasconsideredtohavelowdirectimpactoncostsandrevenue.
Strongerimage&reputation
Strongeremployeeengagement
Costsavings
Increasedrevenue
Riskreduction&management
Enhancedsociallicencetooperate
Extremely important
Important
0 10 20 30 40 50 60
Slight impact, not important
Has no impact
85 respondents
Strongerimage&reputation
Strongeremployeeengagement
Costsavings
Increasedrevenue
Riskreduction&management
Enhancedsociallicencetooperate
Extremely important
Important
0 10 20 30 40 50 60
Slight impact, not important
Has no impact
85 respondents
49
Figure 23 Sources of reputational benefits from infrastructure sustainability
Findings:Sourcesofbusinessbenefitsfrominfrastructuresustainability
Strengthened business image and reputation
RespondentstoCIEAM’sbusinesscasesurveyconsideredthatreputationisstrengthenedbygoodperformanceacrossthespectrumofsustainabilitythemes.Goodperformanceincommunitymanagement,managementofemissions,pollutionandwaste,andworkforcemanagementwasseentobeparticularlyimportant.Conversely,thissuggeststhatpoorperformanceintheseareasisparticularlylikelytoleadtoreputationaldamage(Figure23).
Strengthened employee engagement — motivation, retention, and recruitment
RespondentstoCIEAM’sbusinesscasesurveysaidthatemployeeengagementisstrengthenedprimarilybygoodperformancewithinthethemesofworkforceandcommunitymanagement,whileeffectiveProject/Assetmanagementwasalsoconsideredanimportantfactor(Figure24).
Figure 24 Sources of employee engagement benefits from infrastructure sustainability
Extremely important Important Slight impact, not important Has no impact
Workforcemanagement
Project/assetmanagement
Economicperformance
Efficient&effectiveresourceuse
Managementofemissions,pollution&waste
Managingecosystems&biodiversity
Communitymanagement
0 10 20 30 40 50 60
No. of respondents
Extremely important Important Slight impact, not important Has no impact
Workforcemanagement
Project/assetmanagement
Economicperformance
Efficient&effectiveresourceuse
Managementofemissions,pollution&waste
Managingecosystems&biodiversity
Communitymanagement
0 10 20 30 40 50 60
No. of respondents
50
Figure 25 Sources of cost savings from infrastructure sustainability
Figure 26 Sources of increased revenues from infrastructure sustainability
Cost efficiency/savings
AsshowninFigure25,surveyrespondentsidentifiedthemainsourcesofcostsavingsfrominfrastructuresustainabilityasgoodperformanceinproject/assetmanagementandeconomicperformance.Theyalsohighlightedtheroleofefficientandeffectiveresourceuse.
Costsavingsattractedahighnegativeresponse—evidencedby“hassomeimpact,notimportant”and“noimpact”—inthe‘soft’areasofmanagingecosystemsandbiodiversity,communitymanagement,andworkforcemanagement.Thismaybebecausetheseareseentoinvolvecostexpenditurenotdirectlyrelatedtoconstructingoroperatinganinfrastructureasset.However,theyareallseentobeimportanttoreducingriskand/ortoenhancingthesociallicenceto
operate,suggestingthatanycostimpositionmaywellbeoutweighedbyriskconsiderationsindecidingtheextentofsustainabilityinitiatives.
New revenue sources including increased revenue from existing sources
Project/assetmanagement,economicperformanceandefficientandeffectiveresourceusewereconsideredtobethemainsourcesofnewrevenue,whiletheotherfourthemesweredeemedbyarelativelyhighnumberofrespondentstohaveunimportantornoimpact(Figure26).Aswithcostsavings,perhapsthisisbecausetheselatterthemesareconsideredbytherespondentstobecostimpositionsoninfrastructureassetconstructionandoperations.Inthecaseofemissions,pollutionand
No. of respondents
Extremely important Important Slight impact, not important Has no impact
Workforcemanagement
Project/assetmanagement
Economicperformance
Efficient&effectiveresourceuse
Managementofemissions,pollution&waste
Managingecosystems&biodiversity
Communitymanagement
0 10 20 30 40 50 60
Extremely important Important Slight impact, not important Has no impact
Workforcemanagement
Project/assetmanagement
Economicperformance
Efficient&effectiveresourceuse
Managementofemissions,pollution&waste
Managingecosystems&biodiversity
Communitymanagement
0 10 20 30 40 50 60
No. of respondents
51
Figure 27 Sources of risk management benefits
Figure 28 Sources of social licence to operate benefits from infrastructure sustainability
Confirmation of a business’s social licence to operate
Thesociallicencebenefits,whilederivingfromacrossthespectrumofinfrastructuresustainabilitythemes,wereconsideredtoarisefromgoodmanagementperformanceincommunity,emissions,pollutionandwaste,andecosystemsandbiodiversity(Figure28).Theseareareasofhighvisibilityinbothconstructionandoperationofinfrastructureassetsandsosusceptibletocommunityandactivistactionsthatmayimpactthesociallicence.Economicperformancewasconsideredtheleastimportantthemeinconfirmingthesociallicencetooperate.
wastemanagementatleast,thesurveyresultsappeartoconflictwiththeevidenceofbusinessesthathavecreatednewrevenuestreamsfrom,forexample,recyclingofwasteandreuseofmaterials.
Risk reduction and improved risk management
Asdiscussedearlier,riskreductionandmanagementwasidentifiedbysurveyrespondentsasoneofthemainmotivatingdriversofinfrastructuresustainability.Respondentsconsideredthatallthesustainabilitythemeswerefactorsinachievingthisbenefit(Figure27).Thissupportstheguideline’scontentionthatsustainabilityprovidesausefulextensiontotheusualriskmanagementconsiderationsininfrastructurebusinesses.
Extremely important Important Slight impact, not important Has no impact
Workforcemanagement
Project/assetmanagement
Economicperformance
Efficient&effectiveresourceuse
Managementofemissions,pollution&waste
Managingecosystems&biodiversity
Communitymanagement
0 10 20 30 40 50 60
No. of respondents
Extremely important Important Slight impact, not important Has no impact
Workforcemanagement
Project/assetmanagement
Economicperformance
Efficient&effectiveresourceuse
Managementofemissions,pollution&waste
Managingecosystems&biodiversity
Communitymanagement
0 10 20 30 40 50 60
No. of respondents
52
Conclusions
UsingtheprinciplesofFigure3Value flows from infrastructure sustainability to Total Shareholder Returns,andthefindingsoftheCIEAMon-linesurvey,itisnowpossibletosetouthowbusinessbenefitsderivedfromoutstandinginfrastructuresustainabilityperformancewithinparticularthemesactontheleversofimprovedtotalshareholderreturns(Table1).Thesebenefitsmayhavedirectorindirectfinancialimpact,andmayresultinimprovedshareholderreturnsthroughincreasedprofitoranenhancedvaluationmultipleappliedbythefinancialmarkets.
Table 1 Infrastructure sustainability benefits and financial impact on total shareholder returns
Business benefit Perceived primary source (infrastructure sustainability themes)
Financial impact Key driver of shareholder returnsDirect Indirect
Reputation&brand
Communitymanagement
Emissions,Pollution&Waste
Workforcemanagement
Marginimprovement Pricingpower,riskpremiums
Profit
Employeeengagement
Workforcemanagement
Communitymanagement
Emissions,pollutionandwaste
Marginimprovement Productivity Profit
Costsavings Project/assetmanagement
Economic
Efficientandeffectiveresourceuse
Marginimprovement Profit
Newrevenue Economic
Project/assetmanagement
Efficientandeffectiveresourceuse
Revenuegrowth Profit
Riskmanagement Allthemesimportant Marginimprovement Riskpremiums Valuationmultiple
Sociallicencetooperate
Communitymanagement
Emissions,Pollution&Waste
Ecosystemsandbiodiversity
Accesstoandcostofcapital
Riskpremiums
Brandstrength
Valuationmultiple
Thesurveyfindingsweregenerallyconsistentwiththegrowingbodyofliteratureonthebusinessbenefitsofsustainabilityandinfrastructuresustainabilityinparticular.
Therelativelysmallnumberofrespondentstothesurveysuggeststhatthefindingscannotbegeneralisedacrosstheinfrastructureindustry.Further,thehighpercentageofrespondentswithfunctionalrolesinsustainabilityislikelytohavebiasedtheresultstowardsfavourableperceptionsofthebusinessbenefits.However,thismayalsomeanthattherespondentsarewellawareofthefactorsthatareatplayininfrastructuresustainabilityandoftheissuesthatconcernbusiness’sstrategicdecisionmakers.
53
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