So you have your next big project - to plan, to design, and/or to manage. What are your first thoughts in relation to?
Scope? Constraints? Risks? Stakeholders?
Would you agree if I suggested that sustainability could tie into any and all of those areas, no matter what industry you are in? Both as a driver (aka, requirement) and as an opportunity (cost savings, schedule optimization, environmental performance improvement)?
In my last article, I focused on the integration of environmental assessment, stakeholder engagement and other related requirements, into projects. I didn't hone in on the many reasons why integrating sustainability into your projects, so thought it worth a share of the factors that stand out the most.
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1. Project Failures
As project management processes mature, more and more data is becoming available to understand project failure - the rates of failure, the cost and schedule impacts, and the causes. Many studies are now available and can be used to improve our own work.
Upon reviewing a number of reports and stats, it became clear that project failure is very common, applicable to every sector, and with many common causation elements. On average,
Failure rates are on the order of 70-80%!
This is based on being over budget or delayed according to their baseline estimates and schedules. And it doesn't seem to be improving...what are we not learning from our mistakes? Let's review:
A study done by Goldman Sachs in 2008 is a bit dated, but the study showed, on average, for the 75% of projects that were over budget or delayed (by an average of 12 months),
73% Of delays were due to non-technical issues
Primarily political or stakeholder related
Unfortunately, more recent statistics have similarly been posted by other consulting groups, validating these numbers based on their direct experience, indicating:
The stats are still representative.
A survey performed in 2015 by Oil and Gas iQ indicated high failure rates, ranging from 70 to 80%, when compared to their baseline schedules and costs. In that survey, reasons listed for the "most common breakdowns in project teams which infer project creeps" included:
Communication Breakdowns / Miscommunication - 24%
Awaiting approval from stakeholders - 40%
Ernst & Young's report titled "Business Risks Facing Mining and Metals 2015–2016" indicated slightly better rates, with 69% of the projects facing cost overrun, and 50% of the projects reporting schedule delays. While better, this is still not a positive statistic, and three of the five root causes listed for these failures included:
Regulatory and policy-related challenges,
Unfavourable external environments.
I hope you would agree that we need to get better at a number of things:
- Identifying who our stakeholders are,
- Determining how influential they can be on our project success or failure,
- Determining, proactively, how we can address their concerns, and
- Manage their expectations throughout our projects' life-cycles.
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2. Environmental Assessment and Management Standards Requirements
Ask anyone who has been involved with environmental assessments or management systems of late, and they could likely go on and on about the many changes that have been occurring over the past couple of years, and is continuing to roll out.
Some of these changes have had a positive impact on the length of time it can take to go through the assessment process, however, the language around stakeholder engagement and involvement, environmental performance and continuous improvement, options or alternatives analyses, and lifecycle perspectives, have become much more distinct, as opposed to being a consideration, or a check-the-box exercise.
For instance, recommendations that were put forth for updates to ISO-14001 requirements, included:
- Strengthening attention to the concept of prevention of pollution: Avoiding, reducing, and controlling waste and pollution in order to reduce adverse environmental impacts.
- Strengthening attention to the concept of eco-efficiency: Implementing strategies for efficient use of resources, and for reducing waste and pollution.
- Strengthening attention to the concept of life cycle thinking: identifying and evaluating environmental aspects related to the life cycle of products and services.
Based on the Draft International Standard released earlier this year, pending final changes to the ISO-14001 are anticipated to include:
1. Requirements for better integration of the environmental management system and the strategic planning process, to take into account:
- external and internal issues and interactions relevant to the organization (context),
- associated risks and opportunities,
- needs and expectations of "interested parties", as well as to consider
- all outsourced processes.
2. Requirements for the organization‘s environmental policy to include:
- commitment to protecting the environment and improving environmental performance (as opposed to improving management processes),
- combined with use of performance data to validate progress towards goals set by the organization at a strategic level.
. Requirements for the organization, to pay more attention to the product life cycle when determining its key environmental aspects, extending its control and influence to the environmental impacts associated with product use and end-of-life treatment or disposal.
Changes such as these are continuing to appear - in 'optional' standards such as the ISO management series, in federal and provincial regulations, and in environmental assessment requirements.
Add to that the increasing level of awareness by external stakeholders and observers, precedent-setting legal wins on Aboriginal land ownership and rights, development of non-standardized approval processes by various Aboriginal organizations, and project approvals being denied or significantly delayed due to opposition by dis-satisfied stakeholders, and it is clear that the way we do things needs to change.
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3. Cost Impacts of Approval Delays
My final thought on the need for integration of sustainability into projects are the actual costs of delays in obtaining environmental assessment approvals and permits.
A recent study by SNL Metals and Mining showed that, on projects in the US, a large failure rate of projects is increasing costs to the point where nearly one third of the development's value is lost due to delays in environmental assessment approvals.
If the cost of the activities, studies and other requirements are added to address the concerns brought forward by opponents to the environmental approval, some projects have the potential to lose half of their value before they even go into operation.
Now this isn't to suggest projects in Canada have been impacted to the same degree, especially since the federal assessment processes have been updated and streamlined, but delays do cost additional resources all the same.
It costs money for additional studies requested at late stages of evaluation, it costs money for the additional time, and the rework required to incorporate new study results or to address stakeholder issues realized late in the evaluation stage. The value losses for production could also have a significant impact on the investment payback period, let alone any impact that may be caused by a change in market conditions throughout the delayed timeframe.
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All of these factors are leaning towards requirements of more early, transparent, and sought out input by stakeholders, efforts to address their concerns, avoidance and mitigation of short and long-term potential impacts, prevention of pollution, and incorporation of lifecycle perspectives in design and management decisions.
It's likely that many companies will initially view this as yet another thing they need to do, an extra cost - but my opinion is that this is perception. If developments are planned and developed right from the start, extra and unexpected costs can be avoided. If one can avoid impacts, and in doing so capture waste resources, and streamline activities across a lifecycle view of the development, ultimately total costs will be lower.
We need to be more proactive, inclusive and collaborative in our approaches to planning and managing large-scale projects, and we need to become much more flexible to deal with iterations of change that will continue in response to stakeholder demands.