Project management and global sustainability
Sustainability is a critical business focus, and sustainable project management requires looking at projects in a whole new way. For too long, project managers have worked on their projects as if they were islands, unrelated to organizational strategy and governance and unrelated to the community at large. Putting project management in the correct strategic context helps project managers and teams make the right decisions for their projects, for their company, and for society at large.
Project managers need to be fiscally sustainable—they manage time and budget —as well as socially and environmentally sustainable—they manage resources. However, sustainability isn't just being “green,” and being aware of our impact on the environment. We also need to evaluate the risks related to labor practices, human rights, fair business dealings, and consumer issues. Learn how to integrate sustainability into your own project management practices and guide your company toward sustainability. One project manager CAN make a difference!
What is Sustainability?
Aspects of Sustainability
When an organization incorporates sustainability practices into its processes, it takes responsibility for the impact of its activities on customers, employees, shareholders, communities, and the environment through all aspects of operations.
Doing work sustainably isn't just about giving up your bottled water or thinking twice about using the copier. A sustainable focus recognizes the interdependence between companies and the broader society and encompasses the following aspects (with examples of each):
- Human Rights: discrimination of vulnerable groups, civil rights, and fundamental rights and principles at work
- Labor Practices: conditions of work, health and safety, and development and training
- The Environment: sustainable resource use, pollution prevention, and climate change mitigation
- Fair Operating Practices: anti-corruption, fair competition, and respect for property rights
- Consumer Issues: fair contractual practices, dispute resolution, and fair marketing
- Community Involvement and Engagement: employee training and skills development, wealth and income creation, and community involvement
At first blush, these issues sound like areas of concern far beyond a simple project. Throughout this paper, we will discuss how and when to evaluate some of these core issues as parts of sustainable project management.
Reasons for Sustainability
Corporations create social and societal impacts, both positive and negative, through the daily operations of their value chain. Corporations and the societies they operate in are already intertwined. Societies need corporations to give their people employment and infrastructure, and corporations need healthy societies to provide a capable workforce. While society looks, in many cases, to the corporate world rather than the government for the provision of employment and infrastructure (not to mention goods and services), it is only a healthy society that can create the kinds of productive workers that every corporation seeks to hire.
The mutual dependence of companies and society demonstrates that business decisions must follow the principle of shared value—choices must benefit both sides (Porter, 2006, p. 5). Stakeholders—shareholders, suppliers, customers, partners, regulators, activists, labor unions, employees, community members, and government—expect companies to be accountable not only for their own performance, but for the performance of their entire supply chain and for an evolving set of sustainability issues. However, sustainability isn't just a responsibility. It's an opportunity to harness human creativity and discover innovative ways to protect and enhance our shared environment, respect, and empower all people and build enduring wealth.
Much of the world has reached the stage where good laws are in place, but poor enforcement exists for those laws. Poor enforcement has its roots in corruption and weak institutions, and poor governance perpetuates poverty. Sustainability programs try to bridge the gap between which laws are in place and enforced, and basic fundamentals of good business practice, such as avoidance of exploitative practices and complete transparency. This translates to being able to assess risks more effectively and become more proactive in dealing with these risks. As a result, sustainability not only becomes a necessary value of organizations, but it is quickly becoming integrated into the business goals and objectives of organizations. In order for businesses to be successful in the future, they must consider social, environmental, and supply issues wherever they operate, and in many cases, wherever their suppliers and their customers operate.
It is no longer considered satisfactory to merely spin off a foundation, or invest in a simple green initiative. Companies are setting aggressive goals to grow business from “green” products and services. Governments are placing far more emphasis on the implications of their actions, either to the environment or to the integrated problems of their societies.
An overwhelming majority of corporate CEOs (93%) say that sustainability will be critical to the future success of their companies. Furthermore, CEOs believe that, within a decade, a tipping point could be reached that fully meshes sustainability with core business—its capabilities, processes, and systems, and throughout global supply chains and subsidiaries (Lacy, 2010, p. 16).
For businesses to become sustainable, they must be sensitive to the sustainability of the environment and society in which business is conducted. By acting in advance of mandates for change, such as government regulations or legislation, they avoid risks to their reputation and can gain strategic competitive advantage over their rivals. Also, it's worth noting that working on societal problems related to the business can help spark innovative thinking by exposing employees to new ideas and perspectives (Kanter, 2010). An organization's focus on sustainability results in improved corporate reputation, higher brand equity, better risk management, and increased access to capital, and is vital to attracting and retaining top talent.
What Does Project Management Have to do With Sustainability?
The temporary character of projects may seem to contradict the long-term orientation of sustainability. However, projects help firms realize long-term investment objectives. Projects and project management take place in an environment that is broader than that of the project itself. Understanding the framework in which the project takes place helps ensure that work is carried out in alignment with the goals of the enterprise and managed in accordance with the established practice methodologies of the organization. (PMI, 2008, p. 45)
Despite the ways projects have been managed in the past, project management does not happen in a vacuum. All projects take place within a strategic context, and there are both internal and external environmental factors that surround or influence a project's success. These factors may enhance or constrain project management options and may have a positive or negative influence on the outcome (Exhibit 1). In much the same way that a project manager must balance cost, schedule, and scope, there are tradeoffs that must be made between the economic, social, and environmental factors surrounding a project.
Responsibility for economic sustainability means moving beyond the simple ROI (return on investment) for the project and ensuring that it fits into the overall strategy of the firm. What are the key economic drivers for the organization? How does this project contribute to those drivers? How will this initiative, once deployed, contribute to the long-term fiscal viability of the organization?
Ensuring a project is socially sustainable involves reflecting on organizational culture, structure, and processes, existing human resource skills and personnel practices, both inside the firm and throughout the value chain.
Reaching toward environmental sustainability requires a mature evaluation of capital equipment and facilities requirements, use of resources, purchasing practices, contract management, and industry standards.
None of these are entirely new concepts. A Guide to the Project Management Body of Knowledge (PMBOK® Guide) suggests that we do an environmental analysis of factors around our projects to understand their business context (PMI, 2008, p. 44). Just as the project manager must understand the business benefits the project yields, he or she is also accountable for any long-term impacts of his or her projects.
As project managers, we focus on getting from an idea to an implemented project—getting to a steady state. We're not focused on longer-term issues like what happens to the product as it's being manufactured, used, and disposed of. Project managers need to take a broad view of their role and to evolve from “doing things right” to “doing the right things.” This implies taking responsibility for the results of the project, including the sustainability aspects of that result. The developed product or service does not go away once we hand it over. It has an impact on the world, a useful period of operation, and ultimate disposal.
Project Management is How Strategy is Executed Within Organizations
When we think about introducing sustainability into an organization, we tend to think of purely operational concerns —the amount of paper used by the copier, turning the lights off at night. But projects are how the company evolves, changes, and reaches strategic objectives. It's these actions that are most critical to the company's work, and where sustainability needs to get a toehold.
Direction from top management, especially in respect to policies aligned to corporate strategy, plays a significant role; however, sustainability is not simply the task of the senior executive. Project managers are instrumental in achieving strategic goals, because they hold the path to execution. In this way, they can play a pivotal role in sustainability. Being familiar with the details of day-to-day operations and execution, the project manager is in a position to perceive and analyze socially relevant issues and situations that may not be obvious to senior management. For example, the project manager knows from firsthand experience that norms and laws, culture, and traditions may render a project very different in execution and outcome from what it is in other countries, including his or her company's home country.
Common Goals of Sustainability and Project Management
Companies compete by constantly changing to meet market forces. These changes are primarily brought about through projects adopted by the organization.
Up until now, project management has been treated as if it's an island in the middle of the organization. In the same way that a project has a discrete beginning and end, it's as if a fortress has been built around it in terms of longer-term impacts. Project managers only evaluate risks that affect the project implementation itself, not the larger community or the reputation of the firm.
Businesses have never been insulated from social or political expectations. The difference now is the intensifying pressure and the growing complexity of the forces, the speed with which they change, and the ability of activists to mobilize public opinion (Bonini, 2006). The world of business is not just global, but is churning in a dynamic and turbulent environment. These seismic shifts in organizational thinking require project management to be more oriented on the business context of a project, not just myopically focused on the project itself.
Incorporating sustainability into project management helps us cope with the complexity of projects, reduces project crisis situations, project cancellations and interruptions, and the fluctuation of project personnel, creates a competitive advantage and economic benefits, and promotes sustainable project results (Gareis, Heumann, & Martinuzzi, 2010).
Former PMI President Gregory Balestrero noted, “Social responsibility is no longer the whim of an environmentally sensitive CEO. It has become a mandate for all organizations in every operation. Project managers must recognize and address this mandate now and into the future.” (Hunsberger, 2008)
Responsibilities of a Project Manager
The experienced project manager takes a systems view of his or her project, looking at all factors, inside and outside, over the entire life cycle of the project. Project managers are the ones who direct the consumption of resources in a project, and the ones who can instill a life cycle mentality into the project—from its inception to its ultimate disposal.
PMI's Code of Ethics and Professional Conduct states: “We make decisions and take actions based on the best interest of society, public safety, and the environment.” This aspirational statement demonstrates the importance of balancing sustainability with other project management priorities (PMI, undated).
PMI, as an organization, also follows the strategic principle: PMI shall take actions and make decisions in a socially and environmentally responsible way (PMI, 2009, p. 9).
Sustainability and Project Inception
Portfolio Management and Project Selection
Projects, within programs or portfolios, are a means of achieving organizational goals and objectives, often in the context of a strategic plan. One goal of portfolio management is to maximize the value of the portfolio by the careful examination of its components—the constituent programs, projects, and other related work. In this way, an organization's strategic plan becomes the primary factor guiding investments in projects (PMI, 2008, pp 40–41).
Project Portfolio Management is the bridge between project management and organizational imperatives such as sustainability. When managers use strategic objectives as the basis for determining which projects are selected and given priority, the end result is that only those projects that move them toward these long-term goals will be undertaken.
Inclusion of Sustainability Objectives Within the Project Charter
The Project Charter formally authorizes a project and documents the initial high-level requirements that satisfy the stakeholders’ needs and expectations. Integrating the principles of sustainability in the project charter will help define the result, objective, conditions, and success factors of the project. The content, intended result, and success criteria are based on a holistic view of the project, including sustainability perspectives as ‘economical, environmental and social’, ‘short term and long term,’ and ‘local and global’ (Silvius, Schipper, Planko, van den Brink, & Köhler, unpublished, p. 51).
Incorporating sustainability will change the evaluation of progress and alignment with strategic orientation. As project managers, we are accustomed to building or accepting a financial business case to justify a project; however, we also need to incorporate non-financial factors that substantiate the project's long-term economic, social, and environmental impacts. It is the project manager who should be a leader in translating the goals of the organization into a project outcome that effectively and efficiently meets the goals of the organization and the broad set of project stakeholders (Mochal, 2010).
Stakeholder Identification and Management
Stakeholders are persons or organizations (e.g., customers, sponsors, the performing organization, or the public), who are actively involved in the project or whose interests may be positively or negatively affected by the performance or completion of the project. (PMI, 2008, p. 53)
Project managers have traditionally had a narrow view of stakeholders, looking primarily at those within the organization who are most directly impacted by the activities of a project, such as team members, customers, and the sponsor.
However, a holistic view defines a stakeholder as anyone with power, legitimacy, and urgency over a project, and/or its longer-term impacts (Mitchell, 1997, p. 873). Stakeholders bear power and influence over the project, how it is formed, how problems are solved, and the end result of the project. Stakeholders who are located outside of the company, who represent community, social, or environmental interests, have very little direct power, so it is incumbent on the project manager to carefully identify the salient interests that should be incorporated into project stakeholders. It's critical to include these stakeholders, as “in the long run, those who do not use power in a manner which society considers responsible will tend to lose it” (Davis, 1973, p. 314).
Supporting the principles of sustainability—balancing social, environmental and economical interests, both short term and long term and both local and global—will increase the number of stakeholders of the project. Typical “sustainability stakeholders” may be environmental protection pressure groups, human rights groups, nongovernmental organizations, and so forth. In order to perform the project successfully, the project manager needs to acquire the buy-in of the stakeholders. This means the project manager must have conceptual and operational knowledge about the knowledge domains of the now extended stakeholders group (Silvius, no date). The project manager also benefits from this direct engagement, because he or she gains powerful expertise outside his or her traditional domain, which strengthens not just the project, but also his or her firm as a whole.
In including external stakeholders, project managers need to evaluate the following:
- Have all groups or individuals affected by the project been identified, and have the impacts on them been assessed?
- Are stakeholder meetings organized?
- Are there community forums, information brochures, and/or information websites?
- Do stakeholders have an effect during the project or during the life cycle of the eventual product or service? (Oehlmann, 2010)
An illustration of the principle of extended stakeholder engagement follows:
In this past year, in the wake of the Gulf accident, what has surprised you?
“Well, timelines have gotten longer. When I was an engineer back in the ’80s working for this company, when you moved into a new project you focused on the technical aspects — getting the permits involved, figuring out if you could actually drill in water this deep, could you produce in this type of environment. Those are all still big parts of the equation, but they're maybe half of the equation. The other half is about communities and stakeholders. What are the needs of communities where you want to work? What do they think and how involved are they? This is a shift from being a company where you basically looked at the world and said, “Trust me. I'm going to do it the right way.” Now we have stakeholders whose point of view is, “Show me and involve me. Make me part of this. I'm going to be part of these decisions going forward.” It changes everything. It changes the way we think as a company. It raises our performance. And it changes the timeline of these projects.
“When I look at an investment proposal now, it still covers the technical issues, of course. It certainly covers the financial issues. But fully half of that proposal deals with what I would call the nontechnical risk. The social performance, the sustainability issues: How have those been taken into account? What are the headline issues? How are we dealing with them? How will we mitigate the risk associated with those? What's the cost of tha, and how long does that take?”
- Marvin Odum, President of Shell Oil (Hopkins, 2011, ¶12-15).
Careful identification and management of stakeholders are critical to developing a sustainable project structure and culture, as all decisions flow from there. For example, the project manager develops requirements by defining and documenting stakeholders’ needs to meet the project objectives. The project's success is directly influenced by the care taken in capturing and managing project and product requirements. (PMI, 2008, p. 135) Inclusion of a wide range of stakeholders ensures a more complete picture.
Incorporating Sustainability Considerations into Project Management Practices
Human Resources Management: Appropriate Training and Oversight of Work Conditions
As project managers improve the competencies, team interaction, and the overall team environment to enhance project performance, they also need to look at the broader picture—to look beyond the artificial barriers of the project itself and evaluate human resource implications in the larger community and over the life cycle of the product that the project is creating.
Human resource elements already tend to get short attention from project managers, partially because most project teams are in a matrix environment, where team members do not report directly to the project manager. So the project manager primarily addresses human resource management via team building, recognition and rewards, and occasionally, professional development of team members.
However, a longer-term, sustainable focus requires the project manager to address these elements for project team members:
○ Work–life balance, training, personnel administration policies, meetings, and travel.
○ Equity, quality, and enhancement of the work environment, education, ethics, skill development, and social inclusion.
○ Sufficient income for team members to economically support themselves and their families, family services, health and safety, worker rights, respect, transparency, and honesty (Morgese, no date).
That's a lot to put on one project manager, and much of it is outside the project manager's direct control, but not outside of his or her influence. By being aware of these issues, he or she can raise them directly to line management, or address them as he or she is able to within the confines of the project.
However, his or her responsibility doesn't stop there. There are also human resource management issues for the broader stakeholder community. The organization can't claim to have a sustainability focus if vendors and suppliers do not uphold the same principles in raw material development that the purchasing organization follows.
Procurement Management: Sustainability Through the Value Chain Through Contract and Vendor Management
Project Procurement Management includes the contract management and change control processes required to develop and administer contracts or purchase orders issued by authorized project team members (PMI, 2008, p. 343).
Project managers are encouraged to evaluate the following when planning procurement activities:
○ Marketplace conditions;
○ Products, services, and results that are available in the marketplace;
○ Suppliers, including past performance or reputation;
○ Typical terms and conditions for products, services, and results or for the specific industry; and
○ Unique local requirements. (PMI, 2008, p. 350)
However, evaluation doesn't stop there. In 2009, Walmart's house brand division piloted seven existing products, asking suppliers to assess those products on four dimensions of sustainability: resource use, including non-renewables; impact on climate change; impact on ecosystems throughout the product's supply chain; and impact on human health (Goleman, 2009). That pilot has now been extended to more than 100,000 global suppliers, as a key step toward enhancing transparency in the supply chain. The goal is to eventually offer this data to customers to aid in purchasing decisions.
Project managers are advised that the complexity and level of detail of the procurement documents should be consistent with the value of, and risks associated with, the planned procurement (PMI, 2008, p. 357). Project managers are accustomed to factoring risk into procurement documents and using those documents to transfer risk to the seller, or otherwise manage risk. However, those risks have traditionally been limited to risks to the project itself, and its constraints of schedule, cost, and scope. If an organization is moving toward a sustainable, long-term view of its business, it makes sense that those values be reflected in procurement contracts as well, in areas such as bribery, child labor, and similar factors that could pose risk to the firm as a whole.
Operationally, organizations tend to look at waste reduction as a solitary activity. However, it's only when it's integrated into the organization, and throughout project management, that the organization begins to look at the entire supply and value chain—to reduce the amount purchased in order to reduce the amount wasted.
- Do supplier evaluations include sustainability criteria?
- Are obligations and appointments regarding sustainability encoded in contracts?
- How transparent is the entire supply chain, in terms of sustainability priorities?
Risk Management: Incorporating Reputation and Societal Risks into Risk Planning and Mitigation Strategies
As traditionally defined, risk is an uncertain event or condition that, if it occurs, has an effect on at least one project objective: scope, schedule, cost, or quality. (PMI, 2008, p. 305) However, if we are to look at not just the project implementation, but also its effect over its entire life cycle on the community and the organization at large, it is clear that we must examine risk more broadly.
Risks arising from environmental problems or social discontent surrounding a project can be extremely costly in terms of delays and stoppages, negative publicity, threats to operating license, and significant unforeseen expenditures. At the same time, reputational damage to a company can far exceed the immediate cost impacts of a single project.
In much the same way that other categories of risk management can't be prescriptive across industries, sustainability risks can vary significantly. Different core subjects and issues apply to different projects and industries. For example, extractive industries may have more environmental risks, whereas textile firms have more risks in terms of social sustainability. To evaluate what's at stake, companies must scan the whole value chain, looking, for example, at the way they source raw materials and make and sell their products.
In terms of addressing sustainability risk, companies move from blind spots, to awareness, to compliance, to transparency (Werbach, 2009, p. 94). Many firms are satisfied with just being compliant with laws or regulation, but compelling people to comply with rules is the lowest level of engagement. Compliance implies that a company is meeting base standards, not raising the bar for competitors, and certainly not improving the lives of stakeholders. There is a huge difference between avoiding the bad and driving toward the good.
Increasingly, a company's sources of long-term value are affected by a rising tide of expectations among stakeholders about the societal role of business. The public understandably has a right to expect business to discharge its functions honorably within the social framework and play a conscientious role that commends it to public trust. Moreover, in an economy where 70% to 80% of market value comes from hard-to-assess intangible assets such as brand equity, intellectual capital, and goodwill, organizations are especially vulnerable to anything that damages their reputations. The company that has not invested in building a positive reputation through sustainability is susceptible to being damaged when negative stories appear, because there is not a positive correlation in the consumer's mind to balance out the negative impacts of bad news.
The challenge is to find a way for companies to incorporate an awareness of sociopolitical issues more systematically into their core strategic decision-making processes. Companies must see the social and political dimensions not just as risks—areas for damage limitation—but also as opportunities. They should scan the horizon for emerging trends and integrate their responses across the organization, so that the resulting initiatives are coherent rather than piecemeal (Bonini, 2006). In this way, the risk management process informs portfolio management and the overall strategic plan.
Communication Management: Sustainability Responsibilities
Project Communications Management includes the processes required to ensure timely and appropriate generation, collection, distribution, storage, retrieval, and ultimate disposition of project information. Project managers spend the majority of their time communicating with team members and other project stakeholders. Effective communication creates a bridge between diverse stakeholders involved in a project, connecting various cultural and organizational backgrounds, different levels of expertise, and various perspectives and interests in the project execution or outcome (PMI, 2008, p. 273).
Communications, encompassing project reporting, presentation, records, and lessons learned, will ensure that the project stakeholders are informed about the sustainability aspects of the project.
Stakeholder management includes:
○ Actively managing the expectations of stakeholders to increase the likelihood of project acceptance by negotiating and influencing their desires to achieve and maintain the project goals.
○ Addressing concerns that have not become issues yet, usually related to the anticipation of future problems. These concerns need to be uncovered and discussed, and the risks need to be assessed
○ Clarifying and resolving issues that have been identified. The resolution may result in a change request or may be addressed outside of the project, for example, postponed for another project or phase or deferred to another organizational entity. (PMI, 2008, p. 291)
Project managers must consider the following:
○ How should the project communicate with the extended stakeholders—activist groups, Non Government Organizations (NGO), governmental agencies, or community members who will want to know about the project and its impacts?
○ How will information be received and processed from those extended stakeholders?
○ How can we ensure engagement at the appropriate level?
Business leaders must become involved in socio-political debates not only because their companies have so much to add, but also because they have a strategic interest in doing so. Social and political forces, after all, can alter an industry's strategic landscape fundamentally; they can torpedo the reputations of businesses that have been caught unaware and are seen as being culpable; and they can create valuable market opportunities by highlighting unmet social needs and new consumer preferences (Bonini, 2006).
How Can We Make Sustainability Sustainable?
For too long, project management has operated independently of its broader business context. Only focused on tactical execution, project managers evaluated their initiatives as if they had no life outside their defined beginning and end. This has limited the career development of project managers, as well as job satisfaction.
Similarly, companies also operated like islands. Ignoring negative externalities (costs borne by society at large for its actions), organizations relentlessly pursued shareholder value, at the expense of stakeholder interests.
Those days are over.
Project managers must align their projects with organizational strategy, and organizational strategy has changed to encompass the interests of the broader stakeholder community.
“If you don't do this work the right way on the front end, you actually never get a good project. It never works out in the long run. So you have to do this work up front. What I have to do as a company leader is push the education and the thinking of our project managers, our project developers, in that direction. If we can get our people thinking sufficiently from that point of view, not just working with stakeholders and listening to what they say but actually anticipating their needs, anticipating these “nontechnical” risks and opportunities and if we can get more people skilled in that way—then the more successful we'll be, the shorter these project timelines will be, the more trust in Shell there will be. And all of that will continue to improve over time. This change will be catalytic.”
- Marvin Odum, President of Shell Oil (Hopkins, 2011,¶19).
Game-changing questions for project managers:
- What could you do as a project manager to encourage long-term sustainability?
- What could you do if you got greater management buy-in or support from more colleagues?
- Whose support do you need to enlist?
- What could you build into your performance goals for this year? (Werbach, 2009, p. 89)
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© 2012, Jennifer Tharp
Published as a part of 2012 PMI Global Congress Proceedings – Marseille, France