Why Infrastructure Sustainability is Good for your …...consideration in developing the business...

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: [email protected]: 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.

http://[email protected]

http://www.cieam.com

http://www.agic.net.au

1

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

1

2

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.

3

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...

3

4

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.

4

5

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

6

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.

6

7

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.

7

8

Economic Infrastructure: Transport, Energy, Communication and Water

8

9

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.

10

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.

11

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

11

“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.

12

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

13

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,

14

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.

15

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

15

Potential benefits to public good value range across a wide spectrum: economic, social and environmental.

1616

17

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

18

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.

19

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.

19

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

20

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

21

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


Economicperformance




Communitymanagement


No. of respondents

0 10 20 30 40 50 60 70 80 90

22

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


Economicperformance




Communitymanagement


No. of respondents

0 10 20 30 40 50 60 70 80 90

23

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

24

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.

25

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

25

26

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

26

Workforcemanagement


Economicperformance




Communitymanagement


No. of respondents

0 10 20 30 40 50 60 70 80 90

27

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

28

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.

29

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.

30

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


Economicperformance




Communitymanagement


No. of respondents

0 10 20 30 40 50 60 70 80 90

31

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

31

32

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


Economicperformance




Communitymanagement


No. of respondents

0 10 20 30 40 50 60 70 80 90

33

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

33

� Support,wherethebusinessisconsideredagoodneighbourandthecommunityapprovesoftheprojectandthoseinvolved

� Co-ownership,wherethecommunitybecomesanadvocatefortheprojectandthebusiness.

Itisimportanttorecognisethatanorganisation’slicencetooperatemaybeprojectorassetspecific.Inotherwords,poorsocial,environmentalorgovernanceperformanceonaprojectorassetoperationmaydamagethereputationofthewholebusiness.

34

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.

34

35

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

36

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.

37

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

37

3838

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


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


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).



Costsavings

Increasedrevenue



Extremely important

Important

0 10 20 30 40 50 60


Has no impact

88 respondents



Costsavings

Increasedrevenue



Extremely important

Important

0 10 20 30 40 50 60


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



Costsavings

Increasedrevenue



Extremely important

Important

0 10 20 30 40 50 60


Has no impact

88 respondents



Costsavings

Increasedrevenue



Extremely important

Important

0 10 20 30 40 50 60


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.



Costsavings

Increasedrevenue



Extremely important

Important

0 10 20 30 40 50 60


Has no impact

85 respondents



Costsavings

Increasedrevenue



Extremely important

Important

0 10 20 30 40 50 60


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


Economicperformance




Communitymanagement

0 10 20 30 40 50 60

No. of respondents


Workforcemanagement


Economicperformance




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


Workforcemanagement


Economicperformance




Communitymanagement

0 10 20 30 40 50 60


Workforcemanagement


Economicperformance




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.


Workforcemanagement


Economicperformance




Communitymanagement

0 10 20 30 40 50 60

No. of respondents


Workforcemanagement


Economicperformance




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


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

References11 CRCResearch2012,Sustainable

Infrastructure,RoyalRoadsUniversity,availableat:http://crcresearch.org/sustainable-infrastructure/sustainable-infrastructure,accessed21March2012.

12 BITRE2011,Australianinfrastructureyearbook2011,AustralianGovernmentDepartmentofInfrastructureandTransport,Canberra.

13 Dasgupta,S.&Tam,E.K.L.2005,‘Indicatorsandframeworkforassessingsustainableinfrastructure’,CanadianJournalofCivilEngineering,vol.32,no.1,pp.30-44.

14 Sahely,H.R.,Kennedy,C.A.&Adams,B.J.2005,‘Developingsustainabilitycriteriaforurbaninfrastructuresystems’,CanadianJournalofCivilEngineering,vol.32,no.1,pp.72-85.

15 Betts,M.,Robinson,G.,Burton,C.,Cooper,A.,Godden,D.&Herbert,R.2010,GlobalConstruction2020,GlobalConstructionPerspectivesandOxfordEconomics,London.

16 SinclairKnightMertz2010,Workingtowardssustainableinfrastructure,availableat:http://www.skmconsulting.com/Knowledge-and-Insights/Achieve-Magazine/Issue3-2010/article2.aspx,accessed21March2012.

17 ASCE/UNESCO1998,SustainabilityCriteriaforWaterResourceSystems,TaskCommitteeonSustainabilityCriteria,WaterResourcesPlanningandManagementDivision,ASCEandtheWorkingGroupofUNESCO/IHPIVProjectM-4.3,Reston,Va.

18 ISI2012,Theenvision™SustainabilityRatingSystem,TheInstituteforSustainableInfrastructure,availableat:http://www.sustainableinfrastructure.org/index.cfm,accessed21March2012.

19 Elkington,J.1997,CannibalswithForks:TheTripleBottomLineof21stCenturyBusiness,CapstonePublishingLimited,Oxford.

20 Freeman,R.E.1984,StrategicManagement:AStakeholderApproach,Pitman,Boston.

21 Jamali,D.2008,‘AStakeholderApproachtoCorporateSocialResponsibility:AFreshPerspectiveintoTheoryandPractice’,JournalofBusinessEthics,vol.82,pp.213-231.

22 Carroll,A.B.1979,‘AThree-DimensionalConceptualModelofCorporatePerformance’,AcademyofManagementReview,vol.4,no.4,pp.497-505.

23 Carroll,A.B.1991,‘ThePyramidofCorporateSocialResponsibility:TowardtheMoralManagementofOrganizationalStakeholders’,BusinessHorizons,vol.34,no.4,pp.39-48.

24 Henry,K.2010,‘ToBuild,OrNotToBuild:InfrastructureChallengesintheYearsAheadandtheRoleofGovernments’,ConferenceontheEconomicsofInfrastructureinaGlobalisedWorld:Issues,LessonsandFutureChallenges.

25 InfrastructureAustralia2011,CommunicatingtheImperativeforAction:AreporttotheCouncilofAustralianGovernments,AustralianGovernment:InfrastructureAustralia,Canberra.

26 VictorianGovernment2011,TransportIntegrationAct,DepartmentofTransport,availableat:http://www.transport.vic.gov.au/Doi/Internet/Home.nsf/AllDocs/67C52B358437FE08CA257743001FB249?OpenDocument,accessed11Jul2011.

27 DJSI2011,DowJonesSustainabilityIndexesinCollaborationwithSAM,availableat:http://www.sustainability-index.com/,accessed13March2012.

28 FTSE2010,FTSE4GoodIndexSeries,FTSE,availableat:http://www.ftse.com/Indices/FTSE4Good_Index_Series/index.jsp,accessed22April20122012.

29 GlobalReportingInitiative2012,availableat:https://http://www.globalreporting.org/Pages/default.aspx,accessed23March2012.

30 Porter,M.E.&vanderLinde,C.1995,‘Greenandcompetitive:Endingthestalemate’,HarvardBusinessReview,vol.73,no.5,pp.120-133.

1 Singleton,D.,Sustainability:Ariskmanagementperspective,ARUP,availableat:http://www.arup.com/_assets/_download/download458.pdf,accessed30March2012.

2 Berns,M.,Townend,A.,Khayat,Z.,Balagopal,B.,Reeves,M.,Hopkins,M.&Kruschwitz,N.2009,TheBusinessofSustainability,MITSloan,BCG,NorthHollywood.

3 Steger,U.,Ionescu-Somers,A.&Salzmann,O.2007,‘Theeconomicfoundationsofcorporatesustainability’,CorporateGovernance,vol.7,no.2,pp.162-177.

4 Willard,B.2002,TheSustainabilityAdvantage:SevenBusinessCaseBenefitsofaTripleBottomLine,NewSocietyPublishers,GabriolaIsland.

5 Bryson,J.R.&Lombardi,R.2009,‘BalancingProductandProcessSustainabilityagainstBusinessProfitability:SustainabilityasaCompetitiveStrategyinthePropertyDevelopmentProcess’,BusinessStrategyandtheEnvironment,no.18,pp.97-107.

6 Katz,G.2003,TheCostsandFinancialBenefitsofGreenBuilding:AReporttoCalifornia’sSustainableBuildingTaskForce,CapitalE.

7 RICS2005,GreenValue:GreenBuildings,GrowingAssets,TheRoyalInstitutionofCharteredSurveyors.

8 Friedman,M.1970,‘TheSocialResponsibilityofBusinessistoIncreaseitsProfits’,NewYorkTimesMagazine,Sept13,pp.122-126.

9 Vanegas,J.A.2003,‘RoadMapandPrinciplesforBuiltEnvironmentSustainability’,EnvironmentalScience&Technology,vol.37,no.23,pp.5363-5372.

10 Perkins,F.,Nadarajah,C.&McInerney,L.2007,Australia’sinfrastructurepolicyandtheCOAGNationalReformAgenda,AustralianGovernment,TheTreasury,availableat:http://www.treasury.gov.au/documents/1221/HTML/docshell.asp?URL=02_NRA.asp,accessed11Jul2011.

54

31 NationalRoundTableforSustainableIinfrastructure2009,ModelFrameworkforAssessmentofState,Performance,andManagementofCanada’sCorePublicInfrastructure,NationalResearchCouncilCanada,availableat:http://www.nrc-cnrc.gc.ca/obj/irc/doc/pubs/nrcc51410.pdf,accessed12Sept2011.

32 EconomicTransformationsGroup2010,SustainableCleveland2019:ActionandResourcesGuide,CityofCleveland,Cleveland.

33 ChicagoDepartmentofAviation2011,SustainabilityProgressReport,availableat:http://ohare.com/PDF/Environment/2011sustainreport.pdf,accessed4June2012.

34 VicRoadsEnvironmentalSustainability2011,IntegratedVicRoadsEnvironmentalSustainabilityTool(INVEST),VicRoads,availableat:http://www.vicroads.vic.gov.au/Home/Moreinfoandservices/Environment/SustainabilityAndClimateChange.htm,accessed19Jul2011.

35 InternationalHydropowerAssociation2010,HydropowerSustainabilityAssessmentProtocol,InternationalHydropowerAssociation,London.

36 InternationalFinanceCorporation2012,Environmental,Health,andSafetyGuidelines,availableat:http://www.ifc.org/ifcext/sustainability.nsf/Content/EHSGuidelines,accessed1June2012.

37 Arup2011,SPeAR®(SustainableProjectAppraisalRoutine),Arup,availableat:http://www.arup.com/Projects/SPeAR.aspx,accessed19Jul2011.

38 Origin2011,Sustainability,OriginEnergy,availableat:http://www.originenergy.com.au/1730/Sustainability,accessed19Jul2011.

39 Aras,G.&Crowther,D.2009,‘Makingsustainabledevelopmentsustainable’,ManagementDecision,vol.47,no.6,pp.975-988.

40 AGIC2012,ISRatingTool,AustralianGreenInfrastructureCouncil,availableat:http://www.agic.net.au/ISratingscheme1.htm,accessed6March2012.

41 CEEQUAL2012,SustainabilityAssessmentandAwardsforCivilEngineering,Infrastructure,Landscaping&thePublicRealm,CraneEnvironmental,availableat:http://www.ceequal.com/,accessed24April2012.

42 Freeman,R.E.&McVea,J.2001,‘AStakeholderApproachtoStrategicManagement’,inM.A.Hitt,R.E.Freeman&J.S.Harrison(eds),TheBlackwellHandbookofStrategicManagement,BlackwellPublishersLtd,Oxford,pp.189-228.

43 Porter,M.E.&Kramer,M.R.2011,‘Creatingsharedvalue:Howtoreinventcapitalism-andunleashawaveofinnovationandgrowth‘,HarvardBusinessReview,no.Jan-Feb2011,pp.62-77.

44 Lankoski,L.2008,‘CorporateResponsibilityActivitiesandEconomicPerformance:aTheoryofWhyandHowTheyAreConnected’,BusinessStrategyandtheEnvironment,no.17,pp.536-547.

45 Schaltegger,S.&Wagner,M.2006,‘Managingandmeasuringthebusinesscaseforsustainability’,inS.Schaltegger&M.Wagner(eds),ManagingtheBusinessCaseforSustainability:TheIntegrationofSocial,EnvironmentalandEconomicPerformance,GreenleafPublishing,Sheffield,pp.1-27.

46 Bakan,J.&Burke,T.2005,‘CorporateSocialResponsibility’,TheEcologist,vol.35,no.2,pp.28-32.

47 Porter,M.E.&Kramer,M.R.2006,‘Strategy&Society:TheLinkBetweenCompetitiveAdvantageandCorporateSocialResponsibility’,HarvardBusinessReview,no.Dec2006.

48 Weber,M.2008,‘Thebusinesscaseforcorporatesocialresponsibility:Acompany-levelmeasurementapproachforCSR’,EuropeanManagementJournal,no.26,pp.247-261.

49 Bromley,D.2002,‘Comparingcorporatereputations:Leaguetables,quotients,benchmarks,orcasestudies?’,CorporateReputationReview,vol.5,no.1,pp.35-50.

50 deCastro,G.M.,Lopez,J.E.N.&Saez,P.L.2006,‘BusinessandSocialReputation:ExploringtheConceptandMainDimensionsofCorporateReputation’,JournalofBusinessEthics,vol.63,no.4,pp.361-361.

51 Fombrun,C.J.2000,‘Thevaluetobefoundincorporatereputation:Thepublic’sviewofacompanynotonlyactsasareservoirofgoodwill,butalsobooststhebottomline.‘,FinancialTimes,pp.02-02.

52 Fombrun,C.J.2001,‘Reputations:Measurable,Valuable,andManageable’,AmericanBanker,pp.14.A-14A.

53 Fombrun,C.J.2005,‘BuildingCorporateReputationThroughCSRInitiatives:EvolvingStandards’,CorporateReputationReview,vol.8,no.1,pp.7-11.

54 Turban,D.B.&Greening,D.W.1997,‘Corporatesocialperformanceandorganizationalattractivenesstoprospectiveemployees’,AcademyofManagementJournal,vol.40,no.3,pp.658-672.

55 Bonini,S.,Koller,T.M.&Mirvis,P.H.2009,‘Valuingsocialresponsibilityprograms’,McKinseyonFinance,Summer2009,Number32.

56 Carmeli,A.&Tishler,A.2005,‘PerceivedOrganizationalReputationandOrganizationalPerformance:AnEmpiricalInvestigationofIndustrialEnterprises’,CorporateReputationReview,vol.8,no.1,pp.13-30.

57 Fombrun,C.J.&Shanley,M.1990,‘What’sinaName?ReputationBuildingandCorporateStrategy’,AcademyofManagementJournal,vol.33,no.2,pp.233-233.

58 Mays,S.2003,CorporateSustainability-AnInvestorPerspective.TheMaysReport,AustralianGovernmentDepartmentofEnvironmentandHeritage,Canberra.

59 Srivastava,R.K.,McInish,T.H.,Wood,R.A.&Capraro,A.J.1997,‘TheValueofCorporateReputation:EvidencefromtheEquityMarkets’,CorporateReputationReview,vol.1,no.1,pp.61-68.

55

60 Fortune2012,World’sMostAdmiredCompanies,availableat:http://money.cnn.com/magazines/fortune/,accessed13March2012.

61 ReputationInstitute2012,TheGlobalRepTrak100:TheWorld’sMostReputableCompanies,availableat:http://www.reputationinstitute.com/global-reptrak-pulse,accessed13March2012.

62 Hull,D.&Read,V.2003,Simplythebest:WorkplacesinAustralia,acirrt,UniversityofSydney,Sydney.

63 Behrend,T.S.,Baker,B.A.&Thompson,L.F.2009,‘EffectsofPro-EnvironmentalRecruitingMessages:TheRoleofOrganizationalReputation’,JournalofBusinessandPsychology,vol.24,no.3,pp.341-350.

64 TowersWatson2009,EngagingandRetainingTopPerformers,TowersWatson,availableat:http://www.towerswatson.com/assets/pdf/738/EngagingandRetainingTopPerformers.pdfaccessed26March2012.

65 Birch,C.&Paul,D.2003,Lifeandwork:challengingeconomicman,UNSWPress,Sydney.

66 Dunphy,D.,Griffiths,A.&Benn,S.2003,OrganizationalChangeforCorporateSustainability:Aguideforleadersandchangeagentsofthefuture,Routledge,London.

67 Greening,D.W.&Turban,D.B.2000,‘Corporatesocialperformanceasacompetitiveadvantageinattractingaqualityworkforce’,BusinessandSociety,vol.39,no.3,pp.254-280.

68 Prakash,A.2000,Greeningthefirm:thepoliticsofcorporateenvironmentalism,UniversityPress,Cambridge.

69 Sprinkle,G.B.&Maines,L.A.2010,‘Thebenefitsandcostsofcorporatesocialresponsibility’,BusinessHorizons,vol.53,pp.445-453.

70 Newton,T.&Harte,G.1997,‘GreenBusiness:TechnicistKitsch?’,JournalofManagementStudies,vol.34,no.1,pp.75-98(24)<C:\AaMPhil\Sustainability\Newton&Harte(1997).pdf>.

71 Stead,J.G.&Stead,E.2000,‘Eco-enterprisestrategy:Standingforsustainability’,JournalofBusinessEthics,vol.24,no.4,pp.313-329.

72 Hart,S.L.1995,‘Anatural-resource-basedviewofthefirm’,TheAcademyofManagementReview,vol.20,no.4,pp.986-.

73 Pears,A.2000,‘Technologiesandprocessesforecologicalsustainability’,inD.Dunphy,J.Benveniste,A.Griffiths&P.Sutton(eds),Sustainability:thecorporatechallengeofthe21stcentury,Allen&Unwin,StLeonards,Australia,pp.167-190.

74 Dunphy,D.,Benveniste,J.,Griffiths,A.&Sutton,P.(eds)2000,Sustainability:thecorporatechallengeofthe21stcentury,Allen&Unwin,StLeonards,Australia.

75 Blair,A.&Hitchcock,D.2001,EnvironmentandBusiness,1stedn,Routledge,London.

76 MacAskill,K.2011,‘RiskManagementasaFrameworkforApplyingSustainabilityConceptsonInfrastructureProjects’(Dissertation),UniversityofCambridge.

77 Jennings,P.D.&Zandbergen,P.A.1995,‘Ecologicallysustainableorganizations:Aninstitutionalapproach’,TheAcademyofManagementReview,vol.20,no.4,pp.1015-<C:\AaMPhil\Sustainability\Jennings&Zandbergen(1995).pdf>.

78 TheActuarialProfession&InstituteofCivilEngineers2005,RiskAnalysisandManagementforProjects(RAMP)2ndedn,ThomasTelford.

79 Hart,S.L.&Milstein,M.B.1999,‘GlobalSustainabilityandtheCreativeDestructionofIndustries’,SloanManagementReview,no.Fall,pp.23-33.

80 Lantos,G.P.2001,‘Theboundariesofcorporatesocialresponsibility’,JournalofConsumerMarketing,vol.18,no.7,pp.595-630.

81 GBCA2006,TheDollarsandSenseofGreenBuildings:BuildingtheBusinessCaseforGreenBuildingsinAustralia,GreenBuildingCouncilAustralia,Sydney.

82 Boutilier,R.&Thomson,I.2012,TheSocialLicensetoOperate,availableat:http://socialicense.com/index.html,accessed26March2012.

83 Salzmann,O.,Ionescu-Somers,A.&Steger,U.2005,‘TheBusinessCaseforCorporateSustainability:LiteratureReviewandResearchOptions’,EuropeanManagementJournal,vol.23,no.1,pp.27-36.

84 Frankel,C.1998,InEarth’sCompany:Business,Environment,andtheChallengeofSustainability,NewSocietyPublishers,GabriolaIsland,Canada.

85 Emerson,J.2003,‘TheBlendedValueProposition:IntegratingSocialandFinancialReturns’,CaliforniaManagementReview,vol.45,no.4,pp.35-51.

86 Ballow,J.J.,Burgman,R.&Molnar,M.J.2004,‘Managingforshareholdervalue:intangibles,futurevalueandinvestmentdecisions’,TheJournalofBusinessStrategy,vol.25,no.3,p.26.

87 Daum,J.H.2002,IntangibleAssetsandValueCreation,JohnWiley&Sons.

88 Thomas,R.J.,Cheese,P.&Benton,J.M.2003,HumanCapitalDevelopment,AccentureInstituteforHighPerformanceBusiness.

56

Notes

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: [email protected]: WWW.CIEAM.COM WWW.AGIC.NET.AU

ISBN:

978-0-9803102-3-8 (e-book)

978-0-9803102-4-5 (Print)

http://[email protected]

http://www.cieam.com

http://www.agic.net.au

Why Infrastructure Sustainability is Good for your …...consideration in developing the business...

Documents

Transcript of Why Infrastructure Sustainability is Good for your …...consideration in developing the business...