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On the concept of sustainability – assessing the sustainability of large public infrastructure investment projects

On the concept of sustainability – assessing the sustainability of large public infrastructure... International Journal of Sustainable Engineering, 2014 Vol. 7, No. 1, 2–12, http://dx.doi.org/10.1080/19397038.2013.811557 On the concept of sustainability – assessing the sustainability of large public infrastructure investment projects a1 a b2 a3 Tore Haavaldsen , Ola Lædre *, Gro Holst Volden and Jardar Lohne Department of Civil and Transport Engineering, Norwegian University of Science and Technology, N-7491 Trondheim, Norway; SINTEF Technology and Society, Applied Economics, N-7465 Trondheim, Norway (Received 25 July 2012; final version received 8 May 2013) Assessing the sustainability of large public investment projects within the general framework of three-pillar thinking is a complex affair. Such ventures involve multiple actors – e.g. planners from various disciplines such as engineers, economists and social scientists, in addition to politicians, users and other people affected – each carrying with them particular agendas and priorities, and corresponding understandings of the concept of sustainability. In this paper, we propose to frame the concept of sustainability assessment within the context of investment projects, in order to enable communication between the multiple actors, to assess different impacts of an investment project against one another in a meaningful way and, ultimately, to enhance the commensurability of investment project alternatives. Our main idea is that there exist different levels according to which the assessment of sustainability ought to refer – operational, tactical and strategic – and that properly addressing these levels can permit the different actors to comprehend one another, and thereby allow for more clarity and positive action. Keywords: sustainable business models; sustainability; life-cycle assessment AMS Subject Classifications: framework; strategic; benefit; long-term; risk 1. Introduction The precision of which context we address is in fact crucial for understanding the point we are trying to make. The concept of sustainability (and the adjacent one of Engineers, planners from other disciplines, and politicians, sustainable development) is multifaceted, and is used in union representatives and environmentalists tend to under- different manners within different contexts. As Gomis et al. stand the concept of public project sustainability in widely (2011, 174) pointed out, ‘sustainable business’, ‘sustain- different manners and from different perspectives. Some able technology’, ‘sustainable agriculture’, ‘sustainable use the concept of sustainability in order to describe asphalt economics’, etc. are all buzzwords of the literature today. qualities (NAPA 2009), while others insist that road According to Adams, ‘[a]nalysts agree that one reason for construction for personal vehicle use is not sustainable at the widespread acceptance of the idea of sustainable all. Clearly, an emerging comprehension of the role of development is precisely [its] looseness. It can be used to engineers is that engineers have a major responsibility for, cover very divergent ideas [ .. . ]. The concept is holistic, and role in, the development of sustainable solutions attractive, elastic but imprecise’ (2006, 3). This differ- (Rahimifard and Clegg 2008). If the stakeholders do not entiated use has in fact, according to Marshall and Toffel, know the context of the discourse on sustainability, ‘nearly rendered the term sustainability meaningless’ confusion and misapprehension will prevail between them. (2005, 673). In this paper, we therefore propose to sort the semantic The ambition of this paper is precisely to carve out a landscape in order to permit these different actors to more firm understanding of how to assess sustainability comprehend one another, and thereby allow for more clarity within the context of large public investment projects. In and positive action. In fact, our analysis comes as a response doing this, we follow the OECD (1991, 5) that has introduced the concept of sustainability into the domain of to a pressing problem. First, it is not clear what one is to project management. According to their model, sustain- assess when one is asked to assess the sustainability of an ability is, together with efficiency, effectiveness, impact investment project, and, second, it seems equally unclear as and relevance, a criterion according to which investment to how it should best be assessed. Several research projects are to be assessed. This use of the concept of traditions assess sustainability, but there seems to exist project sustainability is then to be understood as more confusion concerning how to understand the concept itself. restraint than the considerable wider concept of ‘sustain- Something more tangible and robust is needed. In our able development’ as first defined in the Brundtland report opinion, both the difficulty of determining what principles of 1987. constitute the essence of the concept and the problem of *Corresponding author. Email: [email protected] q 2013 Taylor & Francis International Journal of Sustainable Engineering 3 putting into practice the principles agreed upon stem from would call such a venture sustainable, especially inherent characteristics of the concept itself, and provoke considering the tremendous social and economic impacts the need for analysis thereof. of the strife. The concept of sustainability therefore needs to be understood as a prescriptive rather than a purely descriptive concept. 2. Ambition of this paper and methodological Aiming at surpassing the limits imposed by pure restraints etymology, a common point of departure when discussing We examined how sustainability is addressed in ex ante the concept of sustainability within the context of large evaluations of large investment projects. To do this, we public investment projects is the definition provided by the carried out extensive literature search, analysed ex ante OECD (2002,36). According to OECD, the sustainability evaluation reports from 24 investment projects having of development projects is to be understood as: undergone scrutiny in the Norwegian Quality Assurance The continuation of benefits from a development (QA) regime and interviewed 14 planners. Our respondents intervention after major development assistance has been are employed in public agencies with responsibility for completed. The probability of continued long-term project execution, in ministries with responsibility for future benefits. The resilience to risk of the net benefits flows over time. users and in external QA consultancies. The results from these research projects inspired us to conduct this study. This definition enlists, in our opinion, the key elements With the concept of sustainability being elusive, pertaining to the assessment of sustainability also outside methodological approaches intended to assess sustain- the development context. Such a definition is, however, by ability are multiform and manifold. We do not have the no means self-explanatory and invites comments. ambition to explain all such approaches in this paper, but Four essential components of sustainability can be solely outline the ones that we found to be most pertinent found in the definition. First, we can see the emphasise on for assessing the sustainability of large public investment the need to secure long-term benefits, i.e. the project fulfils projects. The ambition of this paper can be resumed in the its aim over the intended time frame. Second, the concept following three points: of net benefits refers to the idea that wider (negative) impacts may overshadow the intended (positive) effects of (1) We illustrate how the understanding of sustain- the project or vice versa. However, it is by no means clear ability and the corresponding understanding of as to how to balance different impacts against each other. sustainability within the context of investment The willingness-to-pay principle is one alternative (as in projects ought to be sorted according to separate analytic levels. Cost – Benefit Analysis), but it is not politically neutral and (2) Equally, we illustrate how the identification of not always considered acceptable. Third, the emphasis on these analytic levels deepens the idea of three- resilience to risk highlights the need for robustness and pillar thinking. predictability of the effects that the project is intended to (3) Finally, we analyse how already existing analytic fulfil. We consider that the literature amply covers the first tools can serve to assess the sustainability of large three elements of the definition described in this manner, public investment projects if properly understood. without in any way underestimating the complexity involved in accomplishing them. Our aim is therefore not to present any fixed, ready-made Fourth, the insight that projects are built for a reason, procedure for sustainability assessment within the context i.e. the sustainability depends on the achievement of of investment projects; rather, we wish to clarify what one benefits, is not entirely unambiguous, in that it is not is to assess when assessing the sustainability of such always quite clear exactly what benefits the investment projects, and how existing methodological approaches can project is intended to obtain. Consequently, in order to contribute to such assessments. Sustainability assessment judge whether an investment project can be considered is complex, but a clarification of what to look for when sustainable ex ante, we need to decide what requirements assessing the sustainability of large investment projects and corresponding benefits it is intended to fulfil. ought to contribute to a more firm understanding. Passing from the acknowledgement of the key elements in the above definition, however, only takes us 3. Etymology and definitions of sustainability in a so far in our quest for the assessment of sustainability. In project context order to assess the sustainability of investment projects ex ante, methodological tools that can provide us with Generally speaking, what we judge to be sustainable concrete analytic elements according to which the project denotes the upholding of what we judge advantageous can be evaluated are needed. As exposed in the following over a long time. For instance, the kingdoms of France paragraphs, several such tools exist. Acknowledging in and Britain upheld almost continually a state of war for over 100 years in the high middle ages; hardly anyone what they differ is a key element to understanding in what 4 T. Haavaldsen et al. manner sustainability can be assessed within the context of an investment project should therefore refer to the same, investment projects. but since the final success of a project depends on the perspective under consideration, a reference to the perspective is required. The reason for this is that a 3.1 The term ‘sustainability’ – levels of analysis project can be deemed sustainable when considered in one An investment project is most often realised through a perspective and not necessarily in another. A complete project with given objectives (time, cost and quality). sustainability assessment of an investment project should Railways, opera houses, roads, Information and Com- consequently address all three levels before drawing the munications Technology (ICT) systems, etc. are thus final conclusion. constructed according to given requirements of time, cost When laying out “sustainable asphalt”, the specific and quality. However, the project is normally realised as goals can be constructing and maintaining a road in an part of a general process intended to achieve certain goals environmentally friendly way, for instance by reducing for a certain target group. This is the first understanding of pollution and even noise during the construction phase. the benefit from the definition. In other words, it is This may render the project sustainable in the operational important to realise that an investment project is carried perspective, but not necessarily in the tactical and the out in a particular context. A railway project is constructed strategic ones, where the latter refer to sustainable in order to transport commuters from A to B. This processes based on political deliberations, such as creating transport process is part of a more general societal process, the framework conditions for level-headed economic with purposes as transport efficiency and economic development. Consequently, the first of these concerns – development. They can be considered as higher-order the choice of asphalt solution – can be deemed sustainable benefits. To illustrate this point, we can consider the (or not) at an operational level. The second concern – the relationship between the project, the process and the choice of constructing a road in order that people in a societal process, as shown in Figure 1. region can communicate more easily – can be regarded to The deliverables and the effects of investment projects be sustainable (or not) at a tactical level. The third one – can thus be linked to different perspectives. The the ambition to create framework conditions for improved perspective can be operational (project outputs), tactical economic growth – can be considered to be sustainable (or (goals) or strategic (purposes). In our viewpoint, the same not) at a strategic level. logic may be applied to the assessment of sustainability Our point is that although it makes, in fact, perfect within the context of investment projects. When carrying sense to characterise different effects at all levels as out the assessment, we maintain that all effects pertaining sustainable or not, it is essential to avoid confusing these to sustainability should refer to the corresponding perspectives they belong to. Similarly, sustainability of levels when assessing sustainability within the context of Figure 1. Three sequential planning perspectives in a project based on cause – effect relationships. Step 1: assets are provided to enable project operations to produce contract deliverables. Step 2: the project’s deliverables contribute to the fulfilment of the project’s first- order (tactical) effects by satisfying the prioritised requirements based on selected prioritised needs of selected target groups. Step 3: fulfilment of the project’s first-order (tactical) objectives contributes to the fulfilment of the project’s second-order (strategic) effects based on policy response to the priorities of the larger society. International Journal of Sustainable Engineering 5 an investment project or when choosing between different In the development sector, wherefrom the origin of project alternatives. In fact, what can be described as investment project sustainability assessment is commonly sustainable at one level may not be sustainable at the next referred to, economic development and social develop- level. In other words, we need to acknowledge the ment are often the main ambitions of the project. If the difference between doing the projects more sustainable project is to be given a go ahead, environmental and choosing the more sustainable projects. sustainability needs also to be assured (OECD 1991). If The number of elements that may be addressed in the decision to invest is taken with a very narrow focus, for order to establish whether or not an investment project can instance on the economic impacts of the investment only, be judged to be sustainable can reach significant numbers significant social and environmental problems can (Norman and MacDonald 2004, 252). Without compre- accompany the investment project and may render the hending to what level of analysis these elements pertain to, project negative to the society as a whole. Such a project the risk of confusion impends. must accordingly be assessed as not sustainable. In our opinion, then, the main problem is not, as Within the context of public investment projects, this suggested by Marshall and Toffel (2005), that the concept insight proves to be particularly crucial, since the general of sustainability has become too broad, in that it includes goal of the public sector is not to generate profit but to too many views and opinions about desirable objectives assure the present and future well-being of the citizens. and recognised inconveniences. Rather, we maintain that the problem in understanding the multitude of these 3.3 Assessing economic sustainability elements is caused by a lack of sorting them according to whether they concern an operational level, a tactical level An assessment of economic sustainability concerns mainly or a strategic level. the profitability of the invested capital, cost efficiency, But what then to analyse when assessing the financing over time and flexibility. sustainability of large public investment projects? In our From a corporate perspective, the profitability of the viewpoint, the answer to this must be based on the invested capital can be measured by comparing costs and understanding of sustainability as conceptualised within income of the investment over its (intended) lifespan, in the perspective of three-pillar thinking. order to judge whether or not the profitability is (1) positive and (2) higher than that for alternative investments. From the perspective of a public investment project, the measure of economic sustainability alters. Public 3.2 Balancing the three pillars of sustainability investment projects – such as infrastructure projects or Despite the apparent imprecision concerning the compre- defence equipment procurements – are often characterised hension of the notion, a certain general agreement does by being public benefits, and organising payment by use is nonetheless seem to exist. As Adams pointed out, the ‘core often neither possible nor desirable. Therefore, financing of mainstream sustainability thinking has become the idea such an investment project often needs organising forced of three dimensions, environmental, social and economic financing via taxes. sustainability’ (2006, 2). Sustainability can be analysed Cost efficiency concerns to a large degree the choice of with different aspects in mind, but the three dimensions factor inputs and technology, in addition to project can be used to categorise the identified sustainability governance and management. A central concept permit- factors or elements (Flores et al. 2008). When we in the ting for comparison is that of life-cycle analysis, since following lines use the term ‘sustainability’, we therefore projects are characterised by differentiated cost/benefit acknowledge these three dimensions, and there exists a structures over time. Such an analysis permits displacing need for a balance between the three. A public of focus from solely investment costs to future infrastructure investment project will normally have both maintenance and operational costs. positive and negative impacts. For example, when political The Asian Development Bank (1997) outlined three decision-makers decide to start up a project with positive concerns that ought to characterise assessments of public economic and negative environmental impacts, they have sector investment projects: made a trade-off between these two kinds of impact. (1) financing from public budgets, Most large investment projects will comporte impacts (2) possibility for financial contributions from user for the surrounding society, and some of these impacts will groups, prove to be of a longer-lasting nature than others. This (3) long-term incentives for interested parties to keep applies for impacts within all the three sectors. The main up/continue the investment project. argument underlying sustainability assessment is that the project’s predictable impact on none of the systems ought In our opinion, adjacent factors such as the availability of to be disregarded, either the economic, social or manpower and other resources over an extended timeline environmental system surrounding the investment project. need equal consideration. Otherwise, the operational phase 6 T. Haavaldsen et al. of the investment project may be exposed to altered Generally speaking, a socially sustainable investment framework conditions, often resulting in increased demand project will contribute to what is considered as positive for resources. societal development, concerning both the society as a Lastly, flexibility needs consideration on the subject whole and the well-being of its citizens. In most societies, of economic sustainability. If the need for the investment covering basal needs such as clothing, food, safety, justice project changes, then the economic sustainability will and health will be considered as positive contributions. depend on the capacity to alter it or the cost of terminating it. Equally, most abstract goods, such as gender equality, democratic rights and individuals’ self-realisation, will often be considered to be of this nature. Questions of equality and equal distribution of goods 3.4 Assessing environmental sustainability and disadvantages are of particular interest within this Environmental impacts can be categorised in several ways, context. Dimensions of equality will typically be: for instance as irreversible or reversible. The first category refers to such impacts that cannot be reversed even if one . income, tries to do so, for example the use of critical resources, . health, extermination of species, irrevocable climate changes, . working conditions, etc., whereas the latter can be reversed. The differentiation . geographical distribution, between such impacts is rarely absolute, but will often . generational concerns, depend on the temporal frame chosen in the assessment. . minority group concerns, Nature’s healing capacity for emissions and other gender concerns. pollution is remarkable, but there are limitations to this Such concerns should be brought to the forefront of project ability. It is generally accepted that in case of doubt, a assessment. It is equally notable that the distinction principle of caution needs to be applied (as emphasised in between universal values and interest-group concerns is the so-called Rio Convention of 1992). not fixed in any manner. More generally speaking, there Another categorisation of environmental impacts is rarely exists any perfect consensus for the use of society’s based on geography. Environmental problems can be resources, a fact that renders the assessment of social local, regional, national and global. One common reason sustainability problematic. that such impacts are not addressed in a sufficient manner Such general considerations concerning the pillars of is the lack of private ownership. Coping with such sustainability are not, however, sufficient to fully under- problems therefore needs public intervention, via prohibi- stand the assessment of sustainability within the context of tions or prescriptions, taxes, quotas, etc. The global nature an investment project. In order to arrive at a reasonable of some environmental impacts (for instance, greenhouse understanding, the general understanding of three-pillar gas emissions) necessitates global corporation, rendering thinking needs to be coupled with a clear comprehension the determination of effective measures complex. of what exactly large investment projects are expected A third type of categorisation concerns the usability for to fulfil. humans. Economic literature distinguishes between phenomena with and without the use value. Such a use value can denote consumption of biological produce (e.g. foodstuff, construction materials, pharmaceuticals), rec- 3.6 Assessment of sustainability – some analytic tools reational use or more basically healthy surroundings. Not surprisingly, since sustainability denotes a complex Phenomena without the use value, such as outlined here, phenomenon, the methodological approaches utilised for will then include nature’s intrinsic value and the assessment vary. Table 1 lists some of the common tools for transmittance of this to future generations. the assessment of sustainability. The fact that there exist many such tools illustrates a general point. The different comprehensions of the term ‘sustainability’ correspond to a 3.5 Assessing social sustainability plethora of tools. The tools tend to vary with respect to what Social sustainability is generally considered as the most level of analysis (operational, tactical or strategic level) problematic of the sustainability assessment fields. As they base their analysis on and whether they include McKenzie commented, ‘[s]ocial sustainability is far more assessments of elements within one, two or all three pillars. difficult to quantify than economic growth or environ- If they include all three pillars, there is also a variation with mental impact and consequently it is the most neglected respect to whether and how different impacts are balanced. element of triple bottom line reporting’ (2004, 7). This In fact, what these tools assess tend to reflect the concept of general remark implies that there are similar challenges sustainability that permeates the evaluator. Here, we within the context of sustainability assessment of indicate that all these methodologies assess the criterion investment projects. that it is useful to assess; however, without a proper International Journal of Sustainable Engineering 7 Table 1. Short descriptions of some selected methods that are commonly used to assess the sustainability of projects. Short description of some analytic tools commonly used for a separate assessment of one of the three Analytic tool pillars of sustainability Authors’ comments Environmental EIA is a relatively standardised framework for Limited to the impacts Impact environmental analysis of reforms and of one pillar only: Assessment (EIA) initiatives, used for more than 40 years and environment. It may address obligatory for project evaluation within the the effects on operational, European Union. A thorough guidance exists, tactical and strategic levels and the EIA has even its own research journals contributing to further methodological advance. The ambition of the approach is to assure that environmental impacts of projects are taken care of Ecological Ecological footprint is the name of an approach Limited to the impacts footprint that elaborates an estimate of the level of of one pillar only: productive farmland and water that is needed in environment. It may be order to produce the resources we consume and applied within the context to absorb the emissions that result from consumption. of operational (design), tactical This approach is well suited for comparing projects and strategic levels across sectors; it does, however, solely measure limited aspects of the environmental impact Life Cycle LCA is a methodological tool used to measure the Limited to the impacts Assessment (LCA) overall environmental impact of projects, based on of one pillar only: a common unit of measurement that is not monetary. environment. It is usually Emphasis is laid on capturing all impacts throughout applied to guide decisions the lifespan of the project, ‘from cradle to grave’, within the context of including impacts stemming from the procurement of the operational level only: raw materials necessary, from the production and in the project’s design process distribution of manufactured goods, from the use phase and handling of the resulting waste. In this respect, it resembles the EIA, but is more standardised. Norris (2001) described the differences between the LCA and the LCC Life-Cycle LCC is a methodological approach to assess all costs Limited to the impacts Cost (LCC) over the whole lifespan of an investment project. of two pillars only: This approach is used for consequence analysis economy and environment. It of different design alternatives, either for limited is usually applied to components or for the whole project. Such analysis guide decisions within the is becoming increasingly widespread, for instance in the context of the operational construction industry, and proves especially important level only: in the in cases involving the cost-efficiency relationship project’s design process between the investment and the operations (Bjørberg, Larsen, and Øiseth 2007). The LCC can also be considered as a part of a wider economic analysis Financial Financial analysis is a methodological approach assessing Limited to the impacts analysis the possibility for financing the project (investment cost of (almost entirely) one and operations), with a corresponding financing strategy pillar only: economy. It and plan for how the annual costs are to be met. Such is usually applied to an analysis can be divided into several components, in that guide decisions made within a project can be partly financed directly by the users the context of strategic (e.g. toll roads), while the rest is financed by public and tactical levels only funds. The level of user contribution needs to be realistic, especially with attention to possible altered behaviour as a response to the levying of a toll. Equally, public funding is not entirely predictable, being based on budgets that are normally adopted on a yearly basis. Public – private partnership and other forms of organisation can alleviate the field 8 T. Haavaldsen et al. Table 1 – continued Short description of some analytic tools commonly used for a separate assessment of one of the three Analytic tool pillars of sustainability Authors’ comments Cost – Benefit CBA is a systematic process for calculating and comparing Impacts of all pillars Analysis (CBA) benefits and costs of a project, to examine whether the are in principle included benefits outweigh the costs, and thereby to determine and weighted against each whether it should be implemented. All benefits and costs are other. It is normally expressed in monetary terms (economic, environmental and applied within the context social impacts) and we can therefore address the ‘net of the tactical level benefit’ flows. Benefits are estimated according to a willingness-to-pay principle. All benefits and costs are adjusted for the time value of money and expressed in present values. See any textbook on CBA, e.g. Boardman et al. (2010) Scenario tools Scenario tools are conceptual tools enabling the understanding Often limited to the of possible development structures in complex systems for impacts of one pillar the assessment of economic impacts and future needs only, depending on application. relating to an investment project. Different approaches exist, It can be applied most of them being based on workshops and cross-sectorial to guide decisions made participation. Computer simulation tools and models equally within the context of exist that serve to simulate trends. The results form an strategic and tactical levels important input to reduce risk and uncertainty. Scenario only analysis is often used as a tool for strategic planning, not only in projects. See, for example, Fahey and Randall (1998) Technology Technology assessment is not a term that denotes Technology assessments are usually assessment an analytic tool, but rather a tradition of analysis not applied to guide being introduced by the establishment of the Office project decisions, but can of Technology Assessment in the USA in be used to guide the 1970s. The aim of the procedures is to introduce a policy formulation cross-sectorial and long-term analysis concerning the societal implications of introducing a new technology. Technologies under development form the main centre of interest (Banta 2009) Needs analyses Needs analyses are pertinent to the assessment of public Needs analyses may be investment projects. They can be categorised according used to map stakeholders’ interests to their purpose, such as normative, demand-oriented and priorities pertaining (economic analysis) or interest-group analyses. to the effects of Normative needs analyses are based on political consent the project on operational and expert assessment of reasonable levels of assistance. (design) and tactical levels. Demand-orientated analyses investigate the willingness It can also be to pay by user groups for the project, while interest- used to guide policy group analyses examine the parties’ understanding of formulation their own needs. Næss (2005) recommended combining different approaches in order to achieve a certain method triangulation assuring proper analysis Multi-criteria Multi-criteria decision analysis can prove pertinent to This analysis is highly decision analysis comparing different investment projects that are subjective and rarely conclusive not necessarily presented according to the same scale. as different effects on The Sustainability Impact Assessment is one of these, operational, tactical and strategic but several alternatives exist that quantify and weigh levels are usually hard results up against one another based on scores determined to compare and prioritise subjectively based on objective, quantifiable data, such as noise and travel length, as well as assumed subjective values, such as health and safety. See, for example, Concept Report No. 18 International Journal of Sustainable Engineering 9 Table 1 – continued Short description of some analytic tools commonly used for a separate assessment of one of the three Analytic tool pillars of sustainability Authors’ comments Stakeholder analysis Stakeholder analysis: most methodological approaches to This analysis is commonly sustainability assessment can involve stakeholder performed as one of participation, ranging from consultative rounds to several steps to secure active involvement in the analytic process and evaluation. projects’ relevance on operational As the comprehension of the importance of stakeholder and tactical levels. In some involvement increases, a range of tools and methodological cases, such analysis can approaches are developed in order to capture the opinions of have an impact on and involve interested parties. These tools range from policy formulation ICT-based communication, via personal interviews, to large-scale conferences and meetings. The aim of the analyses can equally range from mapping of points of views and needs, to active involvement in decision-making Corporate Social CSR and Corporate Governance are approaches from the private CSR and Corporate Governance Responsibility (CSR) sector developed in order to render visible the societal role of are not applicable to and Corporate enterprises. The relevance of such approaches to public projects as such, but Governance investment projects must in our opinion be considered as are usually applied for limited, but their ambition to illustrate alternative goals the formulation of business of an organisation rather than only profit make us note strategies and the profiling them. Some private organisations elaborate so-called of companies that are sustainability reports or environmental reports that are responsible for the operational attached to the annual accounts phase of projects only Note: The comments are made on the basis of the opinions of the authors only. Figure 2. No investment project is free from uncertainty and risk. Similar to sustainability, uncertainty takes on different meanings depending on the cause – effect level in consideration. The assumed effects at the different levels are associated with different risks generated by the environment outside of the control of the project as the Logical Framework Approach matrix illustrates. To secure the project from failing to fulfil its objectives, the risks have to be assessed systematically and flexibility should be built into the project design. This figure is freely based on sources written by Samset (2003, 2010). understanding of what they are assessing, one in relation to implementation phases (permitting for scaling the project another, some confusion seems to result. to the real demand) and termination or liquidation possibilities (Figure 2). 3.7 Uncertainty, risk and flexibility 4. Discussion Regardless of how sustainable the investment project will be over a time frame, altered framework conditions or Investment projects that prove sustainable at an oper- technological development can render the investment ational level can still be unsustainable at a tactical or project unfit for satisfying the initial needs. This is strategic level. By grasping this main idea, we can provide independent of whether the original user group needs to the vocabulary that prevents the construction of landmine remain unchanged. For example, a risk analysis in the factories with sustainable doorsills and stops car sellers form of a real option analysis ought therefore to form an from claiming that oversized 4 £ 4 luxury cars are integral part of ex ante sustainability assessment. Real sustainable because they have soft drink holders made options provide the flexibility to alter the project design from recycled plastic. As Clift commented (2003, 243), ‘It and/or the use of the project. Different kinds can be is of little interest to you that your killer uses envisaged: delaying implementation, successive “environmentally friendly” lead-free bullets’. 10 T. Haavaldsen et al. As we have argued, the concept of sustainability is not economic growth? Will the local businesses be threatened identical when comparing cases where experts assess by improved access to centralised institutions and is this what investment project alternative to select in order to fulfil effect on the local society acceptable to the greater the general policy of sustainability, and cases where experts society? Will the project require balancing of international examine how to render the chosen investment project as versus national concerns, or balancing of national against sustainable as possible. There is a considerable difference regional needs? between analysing whether sustainability is best assured by Correspondingly, tactical considerations need to be improving transport infrastructure or other investments included. They can include questions such as: where to lay (strategic level) by a high-speed railway or a major highway the road in order that the impact on environment rests (tactical level), and the assessment of which asphalt limited? Depending on the type of the investment project, qualities within one of the alternatives can be considered to tactical balancing acts will include weighing of local versus regional and national interests, and the needs of be sustainable (operational level). Obviously, this is not identified target groups versus that of the larger society. undermining the importance of any of these approaches. Finally, at an operational level, weighing needs to be They refer to different levels of the proposed hierarchy, and carried out equally, balancing concerns of economic, questions pertaining to sustainability must – consequently social and environmental nature. It is at an operational – be expected to differ accordingly (Figure 3). level that questions concerning the choice of sustainable Currently, there exists a general agreement in the asphalt arise. Generally speaking, depending on the type of literature that sustainability may be characterised as a the investment project, such operational balancing acts balancing act weighing economic, social and environ- will weigh durability and suitability against costs and mental concerns up against one another. Our discussion on emissions. the definition of sustainability enables a more tangible Different questions relate to the different levels of understanding of this balancing act, as we propose sustainability assessment. It is essential to bear in mind that balancing at the operational, tactical and strategic levels. the different levels correspond to different roles that At a strategic level, the choice of whether or not to express different interests. On the one hand, the questions construct a road includes questions such as: does the concerning the strategic level refer to strategies expressed society, in general, benefit from increased transport in valid policy documents issued by financing government capacity in the proposed local area? Are roads the best offices and agencies. On the other hand, at the tactical level, transport solution from an environmental perspective? the needs will typically be defined by local politicians and Will the construction of the road lead to the intended government offices (project owners), local interest groups and other local stakeholders. The operational level will typically be dominated by architects, consulting engineers and contractors. This does not imply that for instance architects playing a role at the operational level, do not have a say on the basic concerns on the other levels. Policy makers may have good reasons to insist on specific operational specifications (supporting specific product development programmes on which the strategic sustainability of the project is dependent). Correspondingly, practitioners will often be faced with the need to inform policy makers and strategists of, say, unwanted by-products of the production process that might undermine the sustainability of the whole investment project. The need for cooperation and coordination between policy makers, planners and practitioners will persist. 5. Conclusion In conclusion, it is well known that it is important to Figure 3. Assessment of sustainability must be based on all balance the economic, social and environmental impacts three pillars (the circles represent economy, environment and of an investment project to render it sustainable. We society) at all the following levels: project output level emphasise that assessments of sustainability in addition (contracted delivery – operational level), goal (target group should be discussed on three levels: operational, tactical level – tactical level) and purpose (greater societal level – strategic level). and strategic. International Journal of Sustainable Engineering 11 7. A wide array of definitions exists. In fact, their multiplicity Policy makers will often have differing ideas of what does not only illustrate how complex the concept of is most important to realise – and to avoid – in an sustainability is to define, but also the need for a commonly investment project. Correspondingly, the operators and the accepted definition. Hasna (2010) enlisted 67 definitions intended users of the investment project will also have from the plethora available (strangely omitting the differing ideas. As far as sustainability is concerned, a Organisation for Economic Co-operation and Development (OECD) definition, which constitutes the framework of our categorisation into economic, social and environmental work). Our preference for the definition of the OECD stems impacts makes sense. In addition, the involved parties will from the possibility to operationalise it into investment probably feel a need for discussing sustainability from the project sustainability assessment practice that we have not strategic (especially the policy makers), tactical found in other definitions. (especially the users) and operational perspectives 8. It is on the basis of this ambiguity that the alternative definition of the Norwegian Ministry of Finance seems to (especially the operators). The economic, social and have been forged, for which the sustainability of an environmental impacts can appear at the strategic, tactical investment project is defined as: ‘[t]he degree to which the and operational levels. Sustainability assessments need to investment contributes to the realisation of goals and be sorted out on what levels the different impacts appear, purposes after the project is realised and through the in order to avoid the comparison between apples and expected life cycle. A consideration of net benefit flows oranges. Apples are apples and economic impacts at the over time’ (our translation; Norwegian Ministry of Finance 2008, 5). As it can be seen, the main difference between the strategic level are economic impacts at the strategic level. two definitions is the replacement of the term ‘benefit’ with We have listed some of the common tools for those of ‘goals’ and ‘purposes’. The term ‘goal’ is sustainability assessment. The tools vary with respect to understood as the effects from the user’s point of view what levels they look at (operational, tactical and strategic). (Samset 2010, 23). The term ‘purpose’ indicates the long- term consequences of the project (ibid., p. 24). This At the same time, they vary with respect to whether they replacement has the advantage of highlighting that the consider impacts within one, two or all three pillars. If an benefits – according to which the sustainability of an assessment of sustainability is clear concerning what level investment project is to be assessed – have to be referred to and within which pillar each impact appears, this will different levels of analysis. improve the value of the assessment. It will be easier to 9. The insight that assessment of sustainability ought to take into consideration the given context of the assessment is, in weigh the impacts up against each other and compare them fact, not new. As Clift (2003, 241) commented, ‘[i]n before making the necessary trade-offs between the formulating and estimating the values of [sustainability negative and positive impacts. assessment] indicators, it is necessary to distinguish between application to “in house” activities and to complete supply chains’, or in other words, that having regard for sustainability means different things when used in different contexts. Clift did not, however, elaborate on Notes the theme, nor did he pursue this insight into the analysis of 1. Email: [email protected]. the project in its context. 2. Email: [email protected]. 10. For a discussion on the visual representations of 3. Email: [email protected]. sustainability, see Adams (2006). 4. Here, we use the term ‘large public investment projects’ to 11. The term ‘triple bottom line’ refers to the quantified describe projects that are subject to the Norwegian QA conceptualising of the balance between the three pillars, as regime, initiated by the Norwegian Ministry of Finance. introduced by John Elkington in 1994. Today, public investment projects with cost estimates 12. Similar categorisations of activities and their objectives surpassing NOK 750 million are evaluated in this external, into hierarchy levels can also be found in other literature two-gate QA scheme. More information on the Norwegian sources. OECD (2002) discussed the Logical Framework QA scheme can be found at http://www.concept.ntnu.no/ Approach with input, output, outcomes and impact. Within qa-scheme. the context of corporate business, Mintzberg (1994, 61) 5. The most quoted passage from this report, whose official elaborated strategies into a hierarchy, with the corporate author is the World Commission on Environment and strategy on top that is supported by business strategies, Development, defining sustainable development as devel- which again are supported by functional strategies. opment ‘that meets the needs of the present without compromising the ability of future generations to meet their own needs’ (1987, 16), illustrates this differentiation. The References definition encompasses very broad societal processes. It is difficult to translate these processes into single ventures, Adams, W. M. 2006. The Future of Sustainability: Re-thinking such as public investment projects. Environment and Development in the Twenty-first Century. 6. Two parts form the Latin verb sustinere, notably tenere, i.e. Revised 22nd of May. Report of the IUCN Renowned ‘to hold’, and sus, i.e. ‘up’. On the whole, we can see that Thinkers Meeting. Switzerland: The International Union for the two conceptions thus form an idea of upholding Conservation of Nature (IUCN). http://cmsdata.iucn.org/ something. Such a direct comprehension of the concept of downloads/iucn_future_of_sustanability.pdf sustainability proves problematic, since not only profit- Asian Development Bank. 1997. Guidelines for the Economic able/beneficial but also highly unprofitable and/or dama- Analysis of Projects. Manila, Philippines: Economics and ging processes can be maintained over very long time. Development Resource Center, Asian Development Bank. 12 T. Haavaldsen et al. Banta, D. 2009. “What is Technology Assessment?” Inter- Recommendations Concerning Needs Analysis in Large national Journal of Technology Assessment in Health Care25 Public Investment Projects]. Concept Report 5. Trondheim: (Suppl. 1): 7 – 9. doi:10.1017/S0266462309090333. Concept Research Programme. Bjørberg, S., A. Larsen, and H. Øiseth. 2007. Livssykluskostna- NAPA (National Asphalt Pavement Association). 2009. Black and der for Bygninger [Life cycle costs for buildings]. 3rd ed. Green: Sustainable Asphalt, Now and Tomorrow.Special Oslo: RIF – Organisasjonen for Ra ˚dgivende Ingeniører. Report 200. Maryland: National Asphalt Pavement Association. Boardman, A., D. Greenberg, A. Vining, and D. Weimer. 2010. http://www.hotmix.org/images/stories/sustainability_report_ Cost-Benefit Analysis: Concepts and Practice. 4th ed. 2009.pdf Englewood Cliffs, NJ: Prentice Hall. Norman, W., and C. MacDonald. 2004. “Getting to the Bottom of Clift, R. 2003. “Metrics for Supply Chain Sustainability.” Clean ‘Triple Bottom Line’.” Business Ethics Quarterly 14 (2): Technologies and Environmental Policy 5: 240 – 247. 243 – 262. doi:10.1007/510098-003-0220-0. Norris, G. A. 2001. “Integrating Life Cycle Cost Analysis and Fahey, L., and R. M. Randall. 1998. Learning from the Future: LCA.” International Journal of Life Cycle Assessment 6 (2): Competitive Foresight Scenarios. New York: John Wiley & 118 – 120. Sons. Norwegian Ministry of Finance. 2008. Felles begrepsapparat Flores, M., A. Canetta, A. Castrovinci, P. Pedrazzoli, and R. KS1 – Kvalitetssikring av konseptvalg, samt styringsunder- Longhi. 2008. “Towards an Integrated Framework for lag og kostnadsoverslag for valgt prosjektalternativ Sustainable Innovation.” International Journal of Sustain- [Common Terminology for QA1 – Quality Assurance of able Engineering 2 (4): 278 – 286. Choice of Concept, plus Management Basis and Cost Gomis, A. J. B., M. G. Parra, W. M. Hoffmann, and R. E. Estimate for the Selected Project Alternative]. Concept McNulty. 2011. “Rethinking the Concept of Sustainability.” Guide no. 3. Trondheim: Concept Research Programme. Business and Society Review 116 (2): 171 – 191. OECD. 1991. Principles for Evaluation of Development Hasna, A. M. 2010. “Sustainability Classifications in Assistance. Paris: Development Assistance Committee Engineering: Discipline and Approach.” International (DAC). Journal of Sustainable Engineering 3 (4): 258 – 276. OECD. 2002. Glossary of Key Terms in Evaluation and Results doi:10.1080/19397038.2010.500743. Based Management. Paris: OECD Development Assistance Marshall, J. D., and M. W. Toffel. 2005. “Framing the Elusive Committee (DAC). Concept of Sustainability: A Sustainability Hierarchy.” Rahimifard, S., and A. J. Clegg. 2008. “The Role of the Environmental Science and Technology 39 (3): 673 – 682. Engineering Community in Sustainable Development.” McKenzie, S. 2004. Social Sustainability: Towards Some International Journal of Sustainable Engineering 1 (1): 1 – 2. Definitions. Hawke Research Institute Working Papers Series Samset, K. 2003. Project Evaluation – Making Projects Succeed. No. 27. Magill: University of South Australia. Trondheim: Tapir Academic Press. Mintzberg, H. 1994. The Rise and Fall of Strategic Planning. Samset, K. 2010. Early Project Appraisal – Making the Initial London: Prentice Hall. Choices. London: Palgrave Macmillan. Næss, P. 2005. Bedre behovsanalyser – Erfaringer og World Commission on Environment and Development. 1987. anbefalinger om behovsanalyser i store offentlige invester- ingsprosjekter [Better Needs Analysis – Experiences and Our Common Future. Oxford: Oxford University Press. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png International Journal of Sustainable Engineering Taylor & Francis

On the concept of sustainability – assessing the sustainability of large public infrastructure investment projects

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1939-7046
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1939-7038
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10.1080/19397038.2013.811557
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International Journal of Sustainable Engineering, 2014 Vol. 7, No. 1, 2–12, http://dx.doi.org/10.1080/19397038.2013.811557 On the concept of sustainability – assessing the sustainability of large public infrastructure investment projects a1 a b2 a3 Tore Haavaldsen , Ola Lædre *, Gro Holst Volden and Jardar Lohne Department of Civil and Transport Engineering, Norwegian University of Science and Technology, N-7491 Trondheim, Norway; SINTEF Technology and Society, Applied Economics, N-7465 Trondheim, Norway (Received 25 July 2012; final version received 8 May 2013) Assessing the sustainability of large public investment projects within the general framework of three-pillar thinking is a complex affair. Such ventures involve multiple actors – e.g. planners from various disciplines such as engineers, economists and social scientists, in addition to politicians, users and other people affected – each carrying with them particular agendas and priorities, and corresponding understandings of the concept of sustainability. In this paper, we propose to frame the concept of sustainability assessment within the context of investment projects, in order to enable communication between the multiple actors, to assess different impacts of an investment project against one another in a meaningful way and, ultimately, to enhance the commensurability of investment project alternatives. Our main idea is that there exist different levels according to which the assessment of sustainability ought to refer – operational, tactical and strategic – and that properly addressing these levels can permit the different actors to comprehend one another, and thereby allow for more clarity and positive action. Keywords: sustainable business models; sustainability; life-cycle assessment AMS Subject Classifications: framework; strategic; benefit; long-term; risk 1. Introduction The precision of which context we address is in fact crucial for understanding the point we are trying to make. The concept of sustainability (and the adjacent one of Engineers, planners from other disciplines, and politicians, sustainable development) is multifaceted, and is used in union representatives and environmentalists tend to under- different manners within different contexts. As Gomis et al. stand the concept of public project sustainability in widely (2011, 174) pointed out, ‘sustainable business’, ‘sustain- different manners and from different perspectives. Some able technology’, ‘sustainable agriculture’, ‘sustainable use the concept of sustainability in order to describe asphalt economics’, etc. are all buzzwords of the literature today. qualities (NAPA 2009), while others insist that road According to Adams, ‘[a]nalysts agree that one reason for construction for personal vehicle use is not sustainable at the widespread acceptance of the idea of sustainable all. Clearly, an emerging comprehension of the role of development is precisely [its] looseness. It can be used to engineers is that engineers have a major responsibility for, cover very divergent ideas [ .. . ]. The concept is holistic, and role in, the development of sustainable solutions attractive, elastic but imprecise’ (2006, 3). This differ- (Rahimifard and Clegg 2008). If the stakeholders do not entiated use has in fact, according to Marshall and Toffel, know the context of the discourse on sustainability, ‘nearly rendered the term sustainability meaningless’ confusion and misapprehension will prevail between them. (2005, 673). In this paper, we therefore propose to sort the semantic The ambition of this paper is precisely to carve out a landscape in order to permit these different actors to more firm understanding of how to assess sustainability comprehend one another, and thereby allow for more clarity within the context of large public investment projects. In and positive action. In fact, our analysis comes as a response doing this, we follow the OECD (1991, 5) that has introduced the concept of sustainability into the domain of to a pressing problem. First, it is not clear what one is to project management. According to their model, sustain- assess when one is asked to assess the sustainability of an ability is, together with efficiency, effectiveness, impact investment project, and, second, it seems equally unclear as and relevance, a criterion according to which investment to how it should best be assessed. Several research projects are to be assessed. This use of the concept of traditions assess sustainability, but there seems to exist project sustainability is then to be understood as more confusion concerning how to understand the concept itself. restraint than the considerable wider concept of ‘sustain- Something more tangible and robust is needed. In our able development’ as first defined in the Brundtland report opinion, both the difficulty of determining what principles of 1987. constitute the essence of the concept and the problem of *Corresponding author. Email: [email protected] q 2013 Taylor & Francis International Journal of Sustainable Engineering 3 putting into practice the principles agreed upon stem from would call such a venture sustainable, especially inherent characteristics of the concept itself, and provoke considering the tremendous social and economic impacts the need for analysis thereof. of the strife. The concept of sustainability therefore needs to be understood as a prescriptive rather than a purely descriptive concept. 2. Ambition of this paper and methodological Aiming at surpassing the limits imposed by pure restraints etymology, a common point of departure when discussing We examined how sustainability is addressed in ex ante the concept of sustainability within the context of large evaluations of large investment projects. To do this, we public investment projects is the definition provided by the carried out extensive literature search, analysed ex ante OECD (2002,36). According to OECD, the sustainability evaluation reports from 24 investment projects having of development projects is to be understood as: undergone scrutiny in the Norwegian Quality Assurance The continuation of benefits from a development (QA) regime and interviewed 14 planners. Our respondents intervention after major development assistance has been are employed in public agencies with responsibility for completed. The probability of continued long-term project execution, in ministries with responsibility for future benefits. The resilience to risk of the net benefits flows over time. users and in external QA consultancies. The results from these research projects inspired us to conduct this study. This definition enlists, in our opinion, the key elements With the concept of sustainability being elusive, pertaining to the assessment of sustainability also outside methodological approaches intended to assess sustain- the development context. Such a definition is, however, by ability are multiform and manifold. We do not have the no means self-explanatory and invites comments. ambition to explain all such approaches in this paper, but Four essential components of sustainability can be solely outline the ones that we found to be most pertinent found in the definition. First, we can see the emphasise on for assessing the sustainability of large public investment the need to secure long-term benefits, i.e. the project fulfils projects. The ambition of this paper can be resumed in the its aim over the intended time frame. Second, the concept following three points: of net benefits refers to the idea that wider (negative) impacts may overshadow the intended (positive) effects of (1) We illustrate how the understanding of sustain- the project or vice versa. However, it is by no means clear ability and the corresponding understanding of as to how to balance different impacts against each other. sustainability within the context of investment The willingness-to-pay principle is one alternative (as in projects ought to be sorted according to separate analytic levels. Cost – Benefit Analysis), but it is not politically neutral and (2) Equally, we illustrate how the identification of not always considered acceptable. Third, the emphasis on these analytic levels deepens the idea of three- resilience to risk highlights the need for robustness and pillar thinking. predictability of the effects that the project is intended to (3) Finally, we analyse how already existing analytic fulfil. We consider that the literature amply covers the first tools can serve to assess the sustainability of large three elements of the definition described in this manner, public investment projects if properly understood. without in any way underestimating the complexity involved in accomplishing them. Our aim is therefore not to present any fixed, ready-made Fourth, the insight that projects are built for a reason, procedure for sustainability assessment within the context i.e. the sustainability depends on the achievement of of investment projects; rather, we wish to clarify what one benefits, is not entirely unambiguous, in that it is not is to assess when assessing the sustainability of such always quite clear exactly what benefits the investment projects, and how existing methodological approaches can project is intended to obtain. Consequently, in order to contribute to such assessments. Sustainability assessment judge whether an investment project can be considered is complex, but a clarification of what to look for when sustainable ex ante, we need to decide what requirements assessing the sustainability of large investment projects and corresponding benefits it is intended to fulfil. ought to contribute to a more firm understanding. Passing from the acknowledgement of the key elements in the above definition, however, only takes us 3. Etymology and definitions of sustainability in a so far in our quest for the assessment of sustainability. In project context order to assess the sustainability of investment projects ex ante, methodological tools that can provide us with Generally speaking, what we judge to be sustainable concrete analytic elements according to which the project denotes the upholding of what we judge advantageous can be evaluated are needed. As exposed in the following over a long time. For instance, the kingdoms of France paragraphs, several such tools exist. Acknowledging in and Britain upheld almost continually a state of war for over 100 years in the high middle ages; hardly anyone what they differ is a key element to understanding in what 4 T. Haavaldsen et al. manner sustainability can be assessed within the context of an investment project should therefore refer to the same, investment projects. but since the final success of a project depends on the perspective under consideration, a reference to the perspective is required. The reason for this is that a 3.1 The term ‘sustainability’ – levels of analysis project can be deemed sustainable when considered in one An investment project is most often realised through a perspective and not necessarily in another. A complete project with given objectives (time, cost and quality). sustainability assessment of an investment project should Railways, opera houses, roads, Information and Com- consequently address all three levels before drawing the munications Technology (ICT) systems, etc. are thus final conclusion. constructed according to given requirements of time, cost When laying out “sustainable asphalt”, the specific and quality. However, the project is normally realised as goals can be constructing and maintaining a road in an part of a general process intended to achieve certain goals environmentally friendly way, for instance by reducing for a certain target group. This is the first understanding of pollution and even noise during the construction phase. the benefit from the definition. In other words, it is This may render the project sustainable in the operational important to realise that an investment project is carried perspective, but not necessarily in the tactical and the out in a particular context. A railway project is constructed strategic ones, where the latter refer to sustainable in order to transport commuters from A to B. This processes based on political deliberations, such as creating transport process is part of a more general societal process, the framework conditions for level-headed economic with purposes as transport efficiency and economic development. Consequently, the first of these concerns – development. They can be considered as higher-order the choice of asphalt solution – can be deemed sustainable benefits. To illustrate this point, we can consider the (or not) at an operational level. The second concern – the relationship between the project, the process and the choice of constructing a road in order that people in a societal process, as shown in Figure 1. region can communicate more easily – can be regarded to The deliverables and the effects of investment projects be sustainable (or not) at a tactical level. The third one – can thus be linked to different perspectives. The the ambition to create framework conditions for improved perspective can be operational (project outputs), tactical economic growth – can be considered to be sustainable (or (goals) or strategic (purposes). In our viewpoint, the same not) at a strategic level. logic may be applied to the assessment of sustainability Our point is that although it makes, in fact, perfect within the context of investment projects. When carrying sense to characterise different effects at all levels as out the assessment, we maintain that all effects pertaining sustainable or not, it is essential to avoid confusing these to sustainability should refer to the corresponding perspectives they belong to. Similarly, sustainability of levels when assessing sustainability within the context of Figure 1. Three sequential planning perspectives in a project based on cause – effect relationships. Step 1: assets are provided to enable project operations to produce contract deliverables. Step 2: the project’s deliverables contribute to the fulfilment of the project’s first- order (tactical) effects by satisfying the prioritised requirements based on selected prioritised needs of selected target groups. Step 3: fulfilment of the project’s first-order (tactical) objectives contributes to the fulfilment of the project’s second-order (strategic) effects based on policy response to the priorities of the larger society. International Journal of Sustainable Engineering 5 an investment project or when choosing between different In the development sector, wherefrom the origin of project alternatives. In fact, what can be described as investment project sustainability assessment is commonly sustainable at one level may not be sustainable at the next referred to, economic development and social develop- level. In other words, we need to acknowledge the ment are often the main ambitions of the project. If the difference between doing the projects more sustainable project is to be given a go ahead, environmental and choosing the more sustainable projects. sustainability needs also to be assured (OECD 1991). If The number of elements that may be addressed in the decision to invest is taken with a very narrow focus, for order to establish whether or not an investment project can instance on the economic impacts of the investment only, be judged to be sustainable can reach significant numbers significant social and environmental problems can (Norman and MacDonald 2004, 252). Without compre- accompany the investment project and may render the hending to what level of analysis these elements pertain to, project negative to the society as a whole. Such a project the risk of confusion impends. must accordingly be assessed as not sustainable. In our opinion, then, the main problem is not, as Within the context of public investment projects, this suggested by Marshall and Toffel (2005), that the concept insight proves to be particularly crucial, since the general of sustainability has become too broad, in that it includes goal of the public sector is not to generate profit but to too many views and opinions about desirable objectives assure the present and future well-being of the citizens. and recognised inconveniences. Rather, we maintain that the problem in understanding the multitude of these 3.3 Assessing economic sustainability elements is caused by a lack of sorting them according to whether they concern an operational level, a tactical level An assessment of economic sustainability concerns mainly or a strategic level. the profitability of the invested capital, cost efficiency, But what then to analyse when assessing the financing over time and flexibility. sustainability of large public investment projects? In our From a corporate perspective, the profitability of the viewpoint, the answer to this must be based on the invested capital can be measured by comparing costs and understanding of sustainability as conceptualised within income of the investment over its (intended) lifespan, in the perspective of three-pillar thinking. order to judge whether or not the profitability is (1) positive and (2) higher than that for alternative investments. From the perspective of a public investment project, the measure of economic sustainability alters. Public 3.2 Balancing the three pillars of sustainability investment projects – such as infrastructure projects or Despite the apparent imprecision concerning the compre- defence equipment procurements – are often characterised hension of the notion, a certain general agreement does by being public benefits, and organising payment by use is nonetheless seem to exist. As Adams pointed out, the ‘core often neither possible nor desirable. Therefore, financing of mainstream sustainability thinking has become the idea such an investment project often needs organising forced of three dimensions, environmental, social and economic financing via taxes. sustainability’ (2006, 2). Sustainability can be analysed Cost efficiency concerns to a large degree the choice of with different aspects in mind, but the three dimensions factor inputs and technology, in addition to project can be used to categorise the identified sustainability governance and management. A central concept permit- factors or elements (Flores et al. 2008). When we in the ting for comparison is that of life-cycle analysis, since following lines use the term ‘sustainability’, we therefore projects are characterised by differentiated cost/benefit acknowledge these three dimensions, and there exists a structures over time. Such an analysis permits displacing need for a balance between the three. A public of focus from solely investment costs to future infrastructure investment project will normally have both maintenance and operational costs. positive and negative impacts. For example, when political The Asian Development Bank (1997) outlined three decision-makers decide to start up a project with positive concerns that ought to characterise assessments of public economic and negative environmental impacts, they have sector investment projects: made a trade-off between these two kinds of impact. (1) financing from public budgets, Most large investment projects will comporte impacts (2) possibility for financial contributions from user for the surrounding society, and some of these impacts will groups, prove to be of a longer-lasting nature than others. This (3) long-term incentives for interested parties to keep applies for impacts within all the three sectors. The main up/continue the investment project. argument underlying sustainability assessment is that the project’s predictable impact on none of the systems ought In our opinion, adjacent factors such as the availability of to be disregarded, either the economic, social or manpower and other resources over an extended timeline environmental system surrounding the investment project. need equal consideration. Otherwise, the operational phase 6 T. Haavaldsen et al. of the investment project may be exposed to altered Generally speaking, a socially sustainable investment framework conditions, often resulting in increased demand project will contribute to what is considered as positive for resources. societal development, concerning both the society as a Lastly, flexibility needs consideration on the subject whole and the well-being of its citizens. In most societies, of economic sustainability. If the need for the investment covering basal needs such as clothing, food, safety, justice project changes, then the economic sustainability will and health will be considered as positive contributions. depend on the capacity to alter it or the cost of terminating it. Equally, most abstract goods, such as gender equality, democratic rights and individuals’ self-realisation, will often be considered to be of this nature. Questions of equality and equal distribution of goods 3.4 Assessing environmental sustainability and disadvantages are of particular interest within this Environmental impacts can be categorised in several ways, context. Dimensions of equality will typically be: for instance as irreversible or reversible. The first category refers to such impacts that cannot be reversed even if one . income, tries to do so, for example the use of critical resources, . health, extermination of species, irrevocable climate changes, . working conditions, etc., whereas the latter can be reversed. The differentiation . geographical distribution, between such impacts is rarely absolute, but will often . generational concerns, depend on the temporal frame chosen in the assessment. . minority group concerns, Nature’s healing capacity for emissions and other gender concerns. pollution is remarkable, but there are limitations to this Such concerns should be brought to the forefront of project ability. It is generally accepted that in case of doubt, a assessment. It is equally notable that the distinction principle of caution needs to be applied (as emphasised in between universal values and interest-group concerns is the so-called Rio Convention of 1992). not fixed in any manner. More generally speaking, there Another categorisation of environmental impacts is rarely exists any perfect consensus for the use of society’s based on geography. Environmental problems can be resources, a fact that renders the assessment of social local, regional, national and global. One common reason sustainability problematic. that such impacts are not addressed in a sufficient manner Such general considerations concerning the pillars of is the lack of private ownership. Coping with such sustainability are not, however, sufficient to fully under- problems therefore needs public intervention, via prohibi- stand the assessment of sustainability within the context of tions or prescriptions, taxes, quotas, etc. The global nature an investment project. In order to arrive at a reasonable of some environmental impacts (for instance, greenhouse understanding, the general understanding of three-pillar gas emissions) necessitates global corporation, rendering thinking needs to be coupled with a clear comprehension the determination of effective measures complex. of what exactly large investment projects are expected A third type of categorisation concerns the usability for to fulfil. humans. Economic literature distinguishes between phenomena with and without the use value. Such a use value can denote consumption of biological produce (e.g. foodstuff, construction materials, pharmaceuticals), rec- 3.6 Assessment of sustainability – some analytic tools reational use or more basically healthy surroundings. Not surprisingly, since sustainability denotes a complex Phenomena without the use value, such as outlined here, phenomenon, the methodological approaches utilised for will then include nature’s intrinsic value and the assessment vary. Table 1 lists some of the common tools for transmittance of this to future generations. the assessment of sustainability. The fact that there exist many such tools illustrates a general point. The different comprehensions of the term ‘sustainability’ correspond to a 3.5 Assessing social sustainability plethora of tools. The tools tend to vary with respect to what Social sustainability is generally considered as the most level of analysis (operational, tactical or strategic level) problematic of the sustainability assessment fields. As they base their analysis on and whether they include McKenzie commented, ‘[s]ocial sustainability is far more assessments of elements within one, two or all three pillars. difficult to quantify than economic growth or environ- If they include all three pillars, there is also a variation with mental impact and consequently it is the most neglected respect to whether and how different impacts are balanced. element of triple bottom line reporting’ (2004, 7). This In fact, what these tools assess tend to reflect the concept of general remark implies that there are similar challenges sustainability that permeates the evaluator. Here, we within the context of sustainability assessment of indicate that all these methodologies assess the criterion investment projects. that it is useful to assess; however, without a proper International Journal of Sustainable Engineering 7 Table 1. Short descriptions of some selected methods that are commonly used to assess the sustainability of projects. Short description of some analytic tools commonly used for a separate assessment of one of the three Analytic tool pillars of sustainability Authors’ comments Environmental EIA is a relatively standardised framework for Limited to the impacts Impact environmental analysis of reforms and of one pillar only: Assessment (EIA) initiatives, used for more than 40 years and environment. It may address obligatory for project evaluation within the the effects on operational, European Union. A thorough guidance exists, tactical and strategic levels and the EIA has even its own research journals contributing to further methodological advance. The ambition of the approach is to assure that environmental impacts of projects are taken care of Ecological Ecological footprint is the name of an approach Limited to the impacts footprint that elaborates an estimate of the level of of one pillar only: productive farmland and water that is needed in environment. It may be order to produce the resources we consume and applied within the context to absorb the emissions that result from consumption. of operational (design), tactical This approach is well suited for comparing projects and strategic levels across sectors; it does, however, solely measure limited aspects of the environmental impact Life Cycle LCA is a methodological tool used to measure the Limited to the impacts Assessment (LCA) overall environmental impact of projects, based on of one pillar only: a common unit of measurement that is not monetary. environment. It is usually Emphasis is laid on capturing all impacts throughout applied to guide decisions the lifespan of the project, ‘from cradle to grave’, within the context of including impacts stemming from the procurement of the operational level only: raw materials necessary, from the production and in the project’s design process distribution of manufactured goods, from the use phase and handling of the resulting waste. In this respect, it resembles the EIA, but is more standardised. Norris (2001) described the differences between the LCA and the LCC Life-Cycle LCC is a methodological approach to assess all costs Limited to the impacts Cost (LCC) over the whole lifespan of an investment project. of two pillars only: This approach is used for consequence analysis economy and environment. It of different design alternatives, either for limited is usually applied to components or for the whole project. Such analysis guide decisions within the is becoming increasingly widespread, for instance in the context of the operational construction industry, and proves especially important level only: in the in cases involving the cost-efficiency relationship project’s design process between the investment and the operations (Bjørberg, Larsen, and Øiseth 2007). The LCC can also be considered as a part of a wider economic analysis Financial Financial analysis is a methodological approach assessing Limited to the impacts analysis the possibility for financing the project (investment cost of (almost entirely) one and operations), with a corresponding financing strategy pillar only: economy. It and plan for how the annual costs are to be met. Such is usually applied to an analysis can be divided into several components, in that guide decisions made within a project can be partly financed directly by the users the context of strategic (e.g. toll roads), while the rest is financed by public and tactical levels only funds. The level of user contribution needs to be realistic, especially with attention to possible altered behaviour as a response to the levying of a toll. Equally, public funding is not entirely predictable, being based on budgets that are normally adopted on a yearly basis. Public – private partnership and other forms of organisation can alleviate the field 8 T. Haavaldsen et al. Table 1 – continued Short description of some analytic tools commonly used for a separate assessment of one of the three Analytic tool pillars of sustainability Authors’ comments Cost – Benefit CBA is a systematic process for calculating and comparing Impacts of all pillars Analysis (CBA) benefits and costs of a project, to examine whether the are in principle included benefits outweigh the costs, and thereby to determine and weighted against each whether it should be implemented. All benefits and costs are other. It is normally expressed in monetary terms (economic, environmental and applied within the context social impacts) and we can therefore address the ‘net of the tactical level benefit’ flows. Benefits are estimated according to a willingness-to-pay principle. All benefits and costs are adjusted for the time value of money and expressed in present values. See any textbook on CBA, e.g. Boardman et al. (2010) Scenario tools Scenario tools are conceptual tools enabling the understanding Often limited to the of possible development structures in complex systems for impacts of one pillar the assessment of economic impacts and future needs only, depending on application. relating to an investment project. Different approaches exist, It can be applied most of them being based on workshops and cross-sectorial to guide decisions made participation. Computer simulation tools and models equally within the context of exist that serve to simulate trends. The results form an strategic and tactical levels important input to reduce risk and uncertainty. Scenario only analysis is often used as a tool for strategic planning, not only in projects. See, for example, Fahey and Randall (1998) Technology Technology assessment is not a term that denotes Technology assessments are usually assessment an analytic tool, but rather a tradition of analysis not applied to guide being introduced by the establishment of the Office project decisions, but can of Technology Assessment in the USA in be used to guide the 1970s. The aim of the procedures is to introduce a policy formulation cross-sectorial and long-term analysis concerning the societal implications of introducing a new technology. Technologies under development form the main centre of interest (Banta 2009) Needs analyses Needs analyses are pertinent to the assessment of public Needs analyses may be investment projects. They can be categorised according used to map stakeholders’ interests to their purpose, such as normative, demand-oriented and priorities pertaining (economic analysis) or interest-group analyses. to the effects of Normative needs analyses are based on political consent the project on operational and expert assessment of reasonable levels of assistance. (design) and tactical levels. Demand-orientated analyses investigate the willingness It can also be to pay by user groups for the project, while interest- used to guide policy group analyses examine the parties’ understanding of formulation their own needs. Næss (2005) recommended combining different approaches in order to achieve a certain method triangulation assuring proper analysis Multi-criteria Multi-criteria decision analysis can prove pertinent to This analysis is highly decision analysis comparing different investment projects that are subjective and rarely conclusive not necessarily presented according to the same scale. as different effects on The Sustainability Impact Assessment is one of these, operational, tactical and strategic but several alternatives exist that quantify and weigh levels are usually hard results up against one another based on scores determined to compare and prioritise subjectively based on objective, quantifiable data, such as noise and travel length, as well as assumed subjective values, such as health and safety. See, for example, Concept Report No. 18 International Journal of Sustainable Engineering 9 Table 1 – continued Short description of some analytic tools commonly used for a separate assessment of one of the three Analytic tool pillars of sustainability Authors’ comments Stakeholder analysis Stakeholder analysis: most methodological approaches to This analysis is commonly sustainability assessment can involve stakeholder performed as one of participation, ranging from consultative rounds to several steps to secure active involvement in the analytic process and evaluation. projects’ relevance on operational As the comprehension of the importance of stakeholder and tactical levels. In some involvement increases, a range of tools and methodological cases, such analysis can approaches are developed in order to capture the opinions of have an impact on and involve interested parties. These tools range from policy formulation ICT-based communication, via personal interviews, to large-scale conferences and meetings. The aim of the analyses can equally range from mapping of points of views and needs, to active involvement in decision-making Corporate Social CSR and Corporate Governance are approaches from the private CSR and Corporate Governance Responsibility (CSR) sector developed in order to render visible the societal role of are not applicable to and Corporate enterprises. The relevance of such approaches to public projects as such, but Governance investment projects must in our opinion be considered as are usually applied for limited, but their ambition to illustrate alternative goals the formulation of business of an organisation rather than only profit make us note strategies and the profiling them. Some private organisations elaborate so-called of companies that are sustainability reports or environmental reports that are responsible for the operational attached to the annual accounts phase of projects only Note: The comments are made on the basis of the opinions of the authors only. Figure 2. No investment project is free from uncertainty and risk. Similar to sustainability, uncertainty takes on different meanings depending on the cause – effect level in consideration. The assumed effects at the different levels are associated with different risks generated by the environment outside of the control of the project as the Logical Framework Approach matrix illustrates. To secure the project from failing to fulfil its objectives, the risks have to be assessed systematically and flexibility should be built into the project design. This figure is freely based on sources written by Samset (2003, 2010). understanding of what they are assessing, one in relation to implementation phases (permitting for scaling the project another, some confusion seems to result. to the real demand) and termination or liquidation possibilities (Figure 2). 3.7 Uncertainty, risk and flexibility 4. Discussion Regardless of how sustainable the investment project will be over a time frame, altered framework conditions or Investment projects that prove sustainable at an oper- technological development can render the investment ational level can still be unsustainable at a tactical or project unfit for satisfying the initial needs. This is strategic level. By grasping this main idea, we can provide independent of whether the original user group needs to the vocabulary that prevents the construction of landmine remain unchanged. For example, a risk analysis in the factories with sustainable doorsills and stops car sellers form of a real option analysis ought therefore to form an from claiming that oversized 4 £ 4 luxury cars are integral part of ex ante sustainability assessment. Real sustainable because they have soft drink holders made options provide the flexibility to alter the project design from recycled plastic. As Clift commented (2003, 243), ‘It and/or the use of the project. Different kinds can be is of little interest to you that your killer uses envisaged: delaying implementation, successive “environmentally friendly” lead-free bullets’. 10 T. Haavaldsen et al. As we have argued, the concept of sustainability is not economic growth? Will the local businesses be threatened identical when comparing cases where experts assess by improved access to centralised institutions and is this what investment project alternative to select in order to fulfil effect on the local society acceptable to the greater the general policy of sustainability, and cases where experts society? Will the project require balancing of international examine how to render the chosen investment project as versus national concerns, or balancing of national against sustainable as possible. There is a considerable difference regional needs? between analysing whether sustainability is best assured by Correspondingly, tactical considerations need to be improving transport infrastructure or other investments included. They can include questions such as: where to lay (strategic level) by a high-speed railway or a major highway the road in order that the impact on environment rests (tactical level), and the assessment of which asphalt limited? Depending on the type of the investment project, qualities within one of the alternatives can be considered to tactical balancing acts will include weighing of local versus regional and national interests, and the needs of be sustainable (operational level). Obviously, this is not identified target groups versus that of the larger society. undermining the importance of any of these approaches. Finally, at an operational level, weighing needs to be They refer to different levels of the proposed hierarchy, and carried out equally, balancing concerns of economic, questions pertaining to sustainability must – consequently social and environmental nature. It is at an operational – be expected to differ accordingly (Figure 3). level that questions concerning the choice of sustainable Currently, there exists a general agreement in the asphalt arise. Generally speaking, depending on the type of literature that sustainability may be characterised as a the investment project, such operational balancing acts balancing act weighing economic, social and environ- will weigh durability and suitability against costs and mental concerns up against one another. Our discussion on emissions. the definition of sustainability enables a more tangible Different questions relate to the different levels of understanding of this balancing act, as we propose sustainability assessment. It is essential to bear in mind that balancing at the operational, tactical and strategic levels. the different levels correspond to different roles that At a strategic level, the choice of whether or not to express different interests. On the one hand, the questions construct a road includes questions such as: does the concerning the strategic level refer to strategies expressed society, in general, benefit from increased transport in valid policy documents issued by financing government capacity in the proposed local area? Are roads the best offices and agencies. On the other hand, at the tactical level, transport solution from an environmental perspective? the needs will typically be defined by local politicians and Will the construction of the road lead to the intended government offices (project owners), local interest groups and other local stakeholders. The operational level will typically be dominated by architects, consulting engineers and contractors. This does not imply that for instance architects playing a role at the operational level, do not have a say on the basic concerns on the other levels. Policy makers may have good reasons to insist on specific operational specifications (supporting specific product development programmes on which the strategic sustainability of the project is dependent). Correspondingly, practitioners will often be faced with the need to inform policy makers and strategists of, say, unwanted by-products of the production process that might undermine the sustainability of the whole investment project. The need for cooperation and coordination between policy makers, planners and practitioners will persist. 5. Conclusion In conclusion, it is well known that it is important to Figure 3. Assessment of sustainability must be based on all balance the economic, social and environmental impacts three pillars (the circles represent economy, environment and of an investment project to render it sustainable. We society) at all the following levels: project output level emphasise that assessments of sustainability in addition (contracted delivery – operational level), goal (target group should be discussed on three levels: operational, tactical level – tactical level) and purpose (greater societal level – strategic level). and strategic. International Journal of Sustainable Engineering 11 7. A wide array of definitions exists. In fact, their multiplicity Policy makers will often have differing ideas of what does not only illustrate how complex the concept of is most important to realise – and to avoid – in an sustainability is to define, but also the need for a commonly investment project. Correspondingly, the operators and the accepted definition. Hasna (2010) enlisted 67 definitions intended users of the investment project will also have from the plethora available (strangely omitting the differing ideas. As far as sustainability is concerned, a Organisation for Economic Co-operation and Development (OECD) definition, which constitutes the framework of our categorisation into economic, social and environmental work). Our preference for the definition of the OECD stems impacts makes sense. In addition, the involved parties will from the possibility to operationalise it into investment probably feel a need for discussing sustainability from the project sustainability assessment practice that we have not strategic (especially the policy makers), tactical found in other definitions. (especially the users) and operational perspectives 8. It is on the basis of this ambiguity that the alternative definition of the Norwegian Ministry of Finance seems to (especially the operators). The economic, social and have been forged, for which the sustainability of an environmental impacts can appear at the strategic, tactical investment project is defined as: ‘[t]he degree to which the and operational levels. Sustainability assessments need to investment contributes to the realisation of goals and be sorted out on what levels the different impacts appear, purposes after the project is realised and through the in order to avoid the comparison between apples and expected life cycle. A consideration of net benefit flows oranges. Apples are apples and economic impacts at the over time’ (our translation; Norwegian Ministry of Finance 2008, 5). As it can be seen, the main difference between the strategic level are economic impacts at the strategic level. two definitions is the replacement of the term ‘benefit’ with We have listed some of the common tools for those of ‘goals’ and ‘purposes’. The term ‘goal’ is sustainability assessment. The tools vary with respect to understood as the effects from the user’s point of view what levels they look at (operational, tactical and strategic). (Samset 2010, 23). The term ‘purpose’ indicates the long- term consequences of the project (ibid., p. 24). This At the same time, they vary with respect to whether they replacement has the advantage of highlighting that the consider impacts within one, two or all three pillars. If an benefits – according to which the sustainability of an assessment of sustainability is clear concerning what level investment project is to be assessed – have to be referred to and within which pillar each impact appears, this will different levels of analysis. improve the value of the assessment. It will be easier to 9. The insight that assessment of sustainability ought to take into consideration the given context of the assessment is, in weigh the impacts up against each other and compare them fact, not new. As Clift (2003, 241) commented, ‘[i]n before making the necessary trade-offs between the formulating and estimating the values of [sustainability negative and positive impacts. assessment] indicators, it is necessary to distinguish between application to “in house” activities and to complete supply chains’, or in other words, that having regard for sustainability means different things when used in different contexts. Clift did not, however, elaborate on Notes the theme, nor did he pursue this insight into the analysis of 1. Email: [email protected]. the project in its context. 2. Email: [email protected]. 10. For a discussion on the visual representations of 3. Email: [email protected]. sustainability, see Adams (2006). 4. Here, we use the term ‘large public investment projects’ to 11. 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Journal

International Journal of Sustainable EngineeringTaylor & Francis

Published: Jan 2, 2014

Keywords: sustainable business models; sustainability; life-cycle assessment; framework; strategic; benefit; long-term; risk

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