“Systems do not change systems. People change systems." — Achim Steiner, UNDP Administrator
"One day, I hope that scientists and decision-makers will rediscover what ancient wisdom has always known, that our most valuable value is respect." ― Nassim Nicholas Taleb, The Black Swan: The Impact of the Highly Improbable
"We need a new kind of economic philosophy: I call it purpose-driven capitalism. 'Business of business' must serve society." — Joe Kaeser
"Is a company striving to be climate-neutral also a company that takes environmental, social, and governance issues seriously? A business that values employee engagement?" — Joe Kaeser, Chairman of Siemens Energy and Daimler Truck Supervisory Board
In the first articles of the series, I discussed how the use of Project Management (PM) methodology has provided numerous advantages to project managers and teams in the success of Renewable Energy (RE) projects. PM standards specifically cover areas such as project planning, risk management, quality management, and the training and motivation of employees.
Establishing an organizational culture that approves sustainable business decisions, encourages values-driven innovation, and recognizes the complexity of interconnected systems that do not fit neatly into traditional business models is of great importance. In this article, I will continue to address this in a more holistic manner within the context of ESG (Environmental-Social-Governance) and, irrespective of whether it is the public sector, private sector, or academia, tackle our main problem, which is the sustainability of "people" within the framework of sustainability.
Sustainable Project Management: An ESG Perspective
We are facing a series of global challenges: the climate crisis, the difficulties in transitioning from a linear to a circular economy and increasing inequality and political conflicts. In the context of Türkiye, there are examples such as the slow increase in the share of renewable resources in the total final energy consumption (TFEC), inadequate innovation in some sectors, infrastructure development needs, lack of affordability, insufficient policies and sanctions in some markets, ongoing support for fossil fuels, and more. With the record-breaking increase in carbon dioxide (CO2) concentration in the atmosphere [2], the need for structural change to achieve long-term climate goals is becoming increasingly evident.
Today, sustainability is not just a trend but also a business strategy and a societal necessity. While it is acknowledged that other factors may also be influential, there is no shortage of sources analyzing how companies implementing sustainability contribute significantly to successful outcomes [3]. In this context, I believe that the 'Sustainable Project Management Framework (SPMF)' I will discuss in detail below should be an essential part of this transformation.
ESG criteria are global standards that help investors measure companies' sustainability performance. ESG criteria have rapidly grown over the past twenty years, and according to the Wall Street Journal, ESG-related products were financed with a capital flow of $17.67 billion in 2019, representing a significant increase of 525%. In 2020 reports, ESG-based investments reached $17.1 trillion [4]. Global ESG assets are expected to exceed $53 trillion by 2025, representing more than a third of the projected total assets under management, which is $140.5 trillion [5].
This year, on July 31st, the European Commission adopted the European Sustainability Reporting Standards (ESRS) [6]. ESRS standardizes how companies within the European Union report their activities related to climate change and other ESG factors, and these standards will come into effect from January 1, 2024, supporting the trend in this area.
The Corporate Sustainability Reporting Directive (CSRD) will require all companies with a net turnover of 40 million euros, assets of 20 million euros, or 250 or more employees to publish a detailed report on how they address a range of sustainability issues starting from May 2024 [7]. CSRD is expected to apply to approximately 50,000 companies operating in the EU, but the actual number is likely to be much higher (According to the business program released on October 17, the Commission has proposed a 2-year delay in the adoption of ESRS for these businesses, with reporting requirements expected to begin in 2028 [8]).
My goal is not to advocate that all companies must complete their sustainability reports or defend sanctions against organizations that fail to do this well, nor is it to disregard the debates that underlie ESG reporting (ESG was initially defined by the United Nations in 2006, and it was later embraced by asset management companies, becoming more popular in the EU after the pandemic). The purpose of this article is to demonstrate that business models based on ESG factors play a significant role in the process of creating long-term value and that these standards are compatible with project management standards. Furthermore, by merging ESG and Project Management (PM) fields, the aim is to provide companies and organizations with a different perspective on this matter and help them better embrace it within their organizations (Those interested can explore the MSCI rating methodology and data collection analyses shared in the company examples below. To avoid further extending this article, I will not delve into the details).
There are more than 1,000 ESG data points that need to be reported [10]. In a December 2021 interview, one of the architects of CSRD stated that the directive's purpose is to "bring sustainability reporting to the same level as financial reporting" [11]. And of course, this implies that all reported data will need to be digitized, and this won't be an easy or cheap endeavor.
However, there is limited data shared regarding "governance" and "social" aspects. There are small and fragmented pieces of information about their importance placed on gender equality or the concept of "inclusion". Still, the number of women or gender-non-binary individuals they employ is not transparently presented in their reports.
Sustainability encompasses not only environmental factors but also social and governance factors. Environmental factors are often at the forefront, but the concept of sustainability covers a much broader spectrum. In the business world, organizations should consider not only profitability but also ethical and social responsibility.
In this article, I am writing to express the thoughts and feelings I have accumulated under the term "sustainable project management," rather than reducing it to just a new paradigm or an innovative trend highlighting the sustainability of projects. While environmental factors are of great importance, the areas I will emphasize more in this article are the "social" and "governance" pillars.
What factors play a role in poor project performance?
Some factors include a lack of detailed planning, absence of consistent processes and methodologies, inadequate management or consideration of all project stakeholders, budget overruns, and many other factors. However, if we examine it in more detail, the reasons for project failure can be categorized into the following three fundamental categories [12]:
People
Processes
Communication
What Is Sustainability in Project Management?
Sustainability in project management is fundamentally quite simple. It refers to projects that embrace processes that consider broader societal and environmental concerns as part of their strategies. The official definition of sustainable project management, as determined by Gilbert Silvius, is as follows:
"...the planning, monitoring, and control of project delivery and support processes, taking into account the environmental, economic, and social aspects of the project resources' life cycle."
Project management and sustainability complement each other in various components. When sustainability is integrated into the fundamental stages of project management, it can enhance project success. The enablers of sustainability consist of several factors, including organizational culture, knowledge transfer, management commitment, project managers' experience, and the elements of success achieved through the successful implementation of sustainability practices.
These broad sustainability principles help us understand that the concept of sustainability is not just an isolated phenomenon that businesses can pursue to fulfill some kind of ethical obligation; instead, the concept of sustainability encompasses a wide scope that underpins the fundamental ethos of good business practices. For instance, having a long-term and global orientation, not just consuming income and capital but also ensuring transparency and accountability, and adhering to personal values and ethics—all of these are part of sustainable business practices. Therefore, sustainability principles are naturally integrated with mature business strategy. Sustainable development is now embedded in mainstream business strategies; these businesses strive to make it the foundation and cornerstone of business decisions, annual reports, strategies, policies, and communication [13].
It has been observed that sustainable project management practices result in a range of project outcomes, such as easier access to capital markets, increased customer loyalty, supply chain improvements, capability development, reputation for organizations, positive employee morale, and retention of knowledge workers. Therefore, many companies like Zara, Toyota, and Nike have changed their production processes to embrace sustainability as a principle, thus enhancing their credibility in the consumer market [14].
I obtained the information provided above from an article written in 2010, deliberately not a new article. I used Nike as an example because it is a carbon-intensive manufacturer with climate-neutral goals. Now, let's take a look at Nike's ESG rating; it demonstrates that NIKE, INC. is in line with the maximum target of the Paris Agreement to keep the global average temperature below 1.5°C [15].
However, we observe that in 2022, the ESG score was downgraded to BBB. When closely examining these figures, MSCI ratings, which focus on critical issues in the textile, apparel, and luxury goods sector, found that Nike lags behind its peers in the industry in areas such as 'Corporate Governance,' 'Supply Chain Business Standards,' and 'Business Management' [15].
Based on the reporting requirements of the European Union's CSRD, leaders will need to address various issues, from greenhouse gas emissions to gender-based pay, not only in their own operations but also in the operations of their suppliers and business partners. As the compliance clock ticks, sustainability should become an integral part of operations as early as possible.
Human Resource Management: The Cornerstone of Sustainability
At the operational level, environmental sustainability focuses on waste reduction, pollution reduction, energy efficiency, emissions reduction, reducing the consumption of hazardous and harmful materials, and decreasing environmental accidents. [4]. On the other hand, sustainable project management is about minimizing the resources used by a project manager and team from the beginning to the end of a project. From a broader life cycle perspective, especially in the construction environment, project deliveries often consume significant resources and have the potential to negatively impact the environment [1]. Therefore, sustainability encompasses not only the planning, implementation, or closure phases but also resource management, the project's operational life (durability), reusability, and recycling possibilities.
Within the scope of ESG, there are various social standards specified, but all of these standards are fundamentally related to social, governance, and relationships. From the perspective of socially responsible investors, one of the key relationships for a company is its relationship with its employees.
In short, social criteria examine human-related factors such as human rights, child and forced labor, community well-being, stakeholder safety, and health. In particular, a company's views on gender equality and policies, the potential for employees to easily voice grievances, and the effective presence and implementation of in-house complaint mechanisms are crucial within this criterion. Companies should also have a diverse workforce with different talents and qualifications and adopt the principle of "the power of diversity" as an important aspect under the "social" criterion [1].
Empirical evidence indicates that resource conservation has become a significant factor in the context of sustainability [1]. In this context, the term "resources" includes human resources, which are an element of an organization's intellectual capital, and the efficiency of these resources must be preserved. In fact, sustainable project management implies that the project manager should also consider the organization's social capital, ensuring the capacity to maintain the productivity of the organization's employees over time, whether they are permanent or temporary. Organizations should not jeopardize their employees' productivity abilities due to physical or mental exhaustion, be it permanent or temporary [13].
The EU essentially states that all these "HR programs" are much broader than just HR; they now fall into the category of global citizenship responsibilities. Companies should approach and report these criteria in this way.
In particular, PMBOK [16] describes resource leveling as a process that provides a balanced workforce to support and facilitate resource usage. From a sustainability perspective, this can be seen as doing the same job with fewer resources. Human sustainability brings a holistic approach to corporate human capital practices, including diversity and inclusivity, well-being, employee safety, and fair compensation. According to this approach, human capital issues should be elevated to the C-level, and HR managers should work together with sustainability officers. Josh Bersin emphasizes the need for a systematic approach when it comes to improving employee well-being, even though there is good intention and significant resources allocated to this matter [17].
How can we establish a more systematic perspective then? In terms of standards, to be compatible with the Global Reporting Initiative (GRI), it needs to include the following three aspects:
Methods for determining significant issues for the organization.
A list of significant issues.
How significant issues are managed.
A research article investigating the impact of Sustainable Project Management (SPM) on sustainable project planning and success in a manufacturing company in Malaysia analyzed a total of 231 responses from project management professionals. The findings revealed that SPM has a significant impact on project success and project planning.
The results provide valuable insights into the project life cycle knowledge and demonstrate that sustainable project planning is a critical tool contributing to project success in manufacturing companies [19].
An example of this is the increasing awareness that having a diverse pool of employees in companies would be a significant criterion for selecting the most suitable person for the job and ensuring diversity in innovation. It will require the examination and control of whether not only the company but also all the companies in the supply chain are conducting the necessary policies and processes to protect human rights and dignity. In this context, large companies are expected to ensure that companies in their supply chain align with ESG factors, and otherwise, negative consequences such as terminating the supply relationship may occur.
In this context, when looking at the ESG data of some leading energy companies that already produce green energy, for example, the implicit temperature increase prediction of Jinko Solar Co, ranging from 2°C to 3.2°C, shows a misalignment with global climate targets, and it indicates that business-as-usual scenarios are continuing as usual [19].
Furthermore, we observe that the company lags in ESG risk scoring in areas such as 'human capital development,' 'water stress,' and 'sourcing.'
From a financial perspective, a study suggests that companies leading in sustainable, social, and good governance policies, and advocating for more responsible treatment of the planet and people as a business thesis, have a 25% higher stock value and a 75% success rate compared to less sustainable competitors [20]. In the business environment, the primary impact of sustainability is emphasized as being a catalyst for business growth and the potential to make a company or organization more transparent to both internal and external stakeholders, ultimately bringing it closer to increased profits, stock positions, and returns.
Another study, when asked about the presence of sustainability policies specific to Nigeria's economic, environmental, and social issues, revealed that despite general awareness of the importance of sustainability in project management, the company lacks a strong plan to implement sustainability in some areas. For instance, it was found that project management personnel had no awareness of specific policies related to sustainable practices, such as land use changes, land erosion, or biodiversity loss due to oil and gas extraction operations. It was also noted that they lacked policies on issues like unemployment, corruption, and energy consumption. As a result, this major oil and gas company in Nigeria showed sensitivity and awareness in some sustainability aspects (e.g., ethical governance, health and safety, water pollution) but fell short of demonstrating the desired levels of sustainability maturity in all areas and revealed the absence of officially stated procedures at the policy level [20].
In recent years, with the increased emphasis on ESG and due diligence reporting, some ESG companies like RCS Global, for example, have been raising awareness among local communities and field workers on these issues through data collection efforts and the implementation of "responsible resource" management practices.
In this way, I would like to conclude by emphasizing that the CSRS framework should not be seen merely as a concept specific to the private sector and manufacturers, but that ESG standards and the concept of sustainability offer benefits that go beyond what is anticipated and are highly integrated. In the upcoming sections of this series, I will explore how other organizations and even government institutions can embrace sustainability issues by implementing Project Management methods and how this topic is intricately connected with organizations and governance.
References
Sustainable Project Management: A Conceptualization-Oriented Review and a Framework Proposal for Future Studies Stefano Armenia, Rosa Maria Dangelico, Fabio Nonino and Alessandro Pompei, (2019).
2021 Yenilenebilir Enerji Küresel Durum Raporu Özeti, World Energy Council, 2021.
Project Success by Integrating Sustainability in Project Management, Tiron-Tudor Adriana, Dragu Ioana-Maria, (2012)
https://ec.europa.eu/commission/presscorner/detail/en/ip_23_4965
https://www.spglobal.com/esg/solutions/data-intelligence-esg-scores
EFRAG Podcast: Good practices in reporting the business model (2023)
Project Management Institute (PMI) 2020 Pulse of the Profession® Raporu https://www.pmi.org/learning/library/forging-future-focused-culture-11908)
Jose Magano, Gilbert Silvius, Claudia Sousa Silva, The contribution of project management to a more sustainable society: Exploring the perception of project managers (2020).
Artiach, T., Lee, D., Nelson, D. and Walker, J. The Determinants of Corporate Sustainability Performance. Accounting and Finance (2010).
The Project Management and A Guide to the Project Management Body of Knowledge (PMBOK Guide) (2021).
Sürdürülebilirlik İşgücünüzü de Kapsar, Josh Bersin, (2023)
Sustainable Project Management, Martin Pech (2022).
Impact of sustainable project management on project plan and project success of the manufacturing firm: Structural model assessment, Tay Chze Chow, Formal analysis, Investigation, Suhaiza Zailani, Methodology, Supervision, 2021).
Sustainability as a Key Critical Success Factor in Projects and Project Management Research, 2016, Uchenna Ohaeri
Better Mining Impact Report Reporting Year 2022 And OECD Step 5 Due Diligence Report, (2022).