Impact(sustainability)

Written by Vittorio Sguazzo

Abstract

As organizations strive to align with the Sustainable Development Goals (SDGs), project managers must find ways to ensure that their projects contribute to a more sustainable future. This article explores the techniques of impact assessment in sustainability projects and how project, program, and portfolio management methodologies can be adapted to prioritize sustainability.

One key aspect of assessing impact is the use of sustainable indicators. Indicators can provide valuable insights into the effectiveness of sustainability projects and help to track progress towards achieving SDGs .

However, the usage of sustainability into project management methodologies requires a significant shift in mindset and priorities. Project managers must consider the long-term impact of their projects, not just the immediate benefits and deliverables . At the portfolio level, organizations can identify areas where they can have the greatest impact and prioritize projects that contribute to their sustainability goals .

The challenge is to measure indicators in a way that impacts can be communicated clear and concise and what methodologies can be used to have a full picture of the impacts. Furthermore, it’s crucial to scale up these methodologies at a level organizations can standardize their process in assessing them. This requires a collaborative effort from all stakeholders involved in the project. Benefits can be significant, for the organizations and for the planet.

Big Idea

Since the publication of the Brundtland Report in 1987, there has been a constant interest in the development of indicators to measure and/or evaluate aspects of sustainable development. This growing interest received a major boost after the Earth Summit in 1992 where Agenda 21 specified the need to develop indicators of sustainable development for use at the national, regional, and global levels (United Nations, 1992). The United Nations Sustainable Development Goals (SDGs) provide a comprehensive framework for measuring progress towards sustainable development, and include a range of indicators for tracking progress on specific goals .

Sustainable development consists of three dimensions: the environmental, the social, and the economic areas. The field of project sustainability measurement and reporting is constantly evolving, as organizations seek to more accurately and comprehensively understand, measure and be informed about the impact of their sustainability projects. Latest developments in the state of the art for measuring the impact of sustainability projects using sustainable indicators are:

Integrated Reporting - Integrated reporting is a framework that seeks to provide a comprehensive view of an organization's value creation over time, by integrating financial and non-financial indicators of performance. By including sustainability indicators in their reporting, organizations can better communicate their impact on the environment and society, as well as their financial performance.

Social Return on Investment (SROI)- SROI is an approach for measuring the social, environmental, and economic value created by a project. It is based on identifying and valuing the outcomes that result from the project, and assessing the costs associated with achieving those outcomes. SROI can be a useful tool for demonstrating the long-term benefits of sustainability projects, as well as for understanding and prioritizing investments that will have the greatest impact.

Life Cycle Assessment (LCA) - LCA is a framework for quantifying the environmental impacts of a product, service, or process over its entire life cycle, from raw material extraction to disposal. LCA can help companies to identify areas where they can reduce their environmental impact, and prioritize sustainability improvements.

Sustainable Development Goals (SGDs)

The Sustainable Development Goals are a comprehensive and transformative framework for sustainable development. They provide a shared vision for a sustainable future and a roadmap for action. The SDGs are a set of 17 goals that were adopted by the United Nations (UN) in 2015. They are part of the 2030 Agenda for Sustainable Development, which is a global plan of action for people, the planet, and prosperity. The goals aim to end poverty, protect the planet, and ensure that all people enjoy peace and prosperity by 2030. The SDGs are an improvement on the Millennium Development Goals (MDGs), which were established in 2000, but only focused on developing countries. In contrast, the SDGs are universal and apply to all countries, regardless of their level of development .

Sustainable Development Goals

The SDGs are interconnected and interdependent, meaning that they are mutually reinforcing and should be achieved as a whole. They were developed through a consultative process that involved governments, civil society organizations, and the private sector. The process included consultations with over 8 million people from around the world, including marginalized communities and people living in poverty. The resulting goals are meant to be ambitious, transformative, and inclusive, and are guided by the principles of universality, leaving no one behind, and a focus on the most vulnerable.

The SDGs are meant to be achieved by all countries, and they require a comprehensive and integrated approach to development. Achieving the SDGs will require a concerted effort by all actors, including governments, civil society organizations, the private sector, and individuals. The SDGs provide a framework for action, but they are not legally binding. However, countries are expected to integrate the SDGs into their national development plans and to report on their progress towards achieving the goals.

The SDGs have been widely endorsed by governments, civil society organizations, and the private sector. They represent a shared vision for a sustainable future and provide a roadmap for action.

SGDs indicators

The SDGs have 232 indicators, which provide a framework for measuring progress towards achieving the goals. The indicators cover a range of issues, including poverty, health, education, gender equality, water and sanitation, energy, economic growth, climate change, and peace and justice. The SDG indicators are designed to be globally applicable, and they provide a standardized framework for monitoring progress towards the goals.

The SDG indicators are organized into three tiers depending on level of importance. Tier 1 indicators are considered the most important, as they are essential for monitoring progress towards the SDGs. Tier 2 and Tier 3 indicators are less critical, but they provide additional information that can help in understanding the progress towards the SDGs.

The SDGs also aim to address the challenge of climate change, which threatens the planet's ecosystems and human well-being. Energy consumption and carbon dioxide (CO2) emissions are key indicators that measure progress in addressing climate change.

CO2 emissions are a critical factor in global warming and climate change. One of the Tier 1 indicators related to climate change, for instance, is the total greenhouse gas emissions per capita. The SDGs aim to reduce greenhouse gas emissions and limit global warming to well below 2°C above pre-industrial levels. Reducing greenhouse gas emissions is essential to slow the pace of global warming and prevent the worst impacts of climate change.

Integrated Reporting

Integrated reporting is a framework to reporting on organizational performance that seeks to provide a more comprehensive view of an organization's value creation over time by integrating financial and non-financial indicators of performance. It shows that an organization's ability to create value is not only determined by its financial performance, but also by its impact on the environment, society and stakeholders.

One aspect of integrated reporting to always keep in mind is project management. Organizations often undertake sustainability projects to improve their social and environmental performance, but measuring the impact of these projects can be challenging. Despite many indicators for the sustainable goals are nowadays in usage, often it becomes difficult to implement projects in line with them. Integrated reporting can help organizations to better manage sustainability projects by providing an approach for tracking and reporting on progress towards sustainability goals.

Integrated Report example by ACCA

Integrated reporting enables organizations to communicate the links between their strategy, governance, and sustainability performance in a more holistic way, helping them to demonstrate their commitment to sustainability and long-term value creation, which is often forgotten in projects but it plays a crucial role when it comes to sustainability. It also provides stakeholders with a more complete picture of an organization's value creation, enabling them to have a clear view and take actions about their interactions with the organization.

The International Integrated Reporting Council (IIRC) has provided guidance on how to implement an integrated reporting approach. The IIRC Framework defines integrated reporting as "a concise communication about how an organization's strategy, governance, performance, and prospects lead to the creation of value over the short, medium, and long term." The framework includes six guiding principles for integrated reporting, which are:

1.Strategic focus and future orientation

2.Connectivity of information

3.Stakeholder engagement

4.Materiality

5.Conciseness

6.Reliability and completeness

In terms of project management, integrated reporting can help organizations to better track and report on progress towards sustainability goals by providing a structured approach to measuring and reporting on sustainability performance. This can include setting sustainability deliverables, tracking progress towards them, and reporting on the results of sustainability projects.

Social Return on Investment (SROI)

Social Return on Investment (SROI) is a methodology used to measure the social, environmental, and economic impact of a project. It seeks to quantify the social value generated by a project by measuring outcomes against resources invested.

In the context of sustainability projects program and portfolio management, SROI can be a useful tool for project managers to measure the impact of their projects and demonstrate the value created for society and the environment. This is particularly important given the growing interest in sustainable development goals (SDGs) and the need to demonstrate progress towards achieving them.

Project managers can use the SROI methodology to identify the most significant impacts of their projects and prioritize resources accordingly. For example, a sustainability project aimed at reducing greenhouse gas emissions could use SROI to measure the social, environmental, and economic benefits of different interventions, such as energy efficiency improvements, renewable energy installations, and behavior change programs, utilizing sustainable indicators as a basis for the reporting. By comparing the costs and benefits of each intervention, project managers can identify the most effective strategies for achieving their sustainability goals.

The Guide to Social Return on Investment provides an introduction to SROI and guidance on how to conduct an SROI analysis, including stakeholder engagement, impact mapping, and valuation methods.

The United Nations Development Programme's report on Social Return on Investment for Sustainable Development explores the use of SROI as a tool for measuring the social impact of sustainable development projects and provides case studies of SROI analysis in different contexts.

The SDG Impact Standards for Enterprises is a framework that provides guidance on how enterprises can measure and report on their impact towards the SDGs, including the use of SROI as a methodology for measuring social value.

Life Cycle Assessment (LCA)

Life Cycle Assessment (LCA) is a comprehensive methodology for assessing the environmental impacts of a product, process, or service throughout its life cycle, from the extraction of raw materials through to the final disposal or recycling of the product. LCA is a systematic approach that takes into account the environmental impacts associated with all stages of a product's life cycle, including the extraction of raw materials, processing, manufacturing, distribution, use, and end-of-life disposal or recycling. LCA is based on a standardized framework of principles and guidelines, such as those outlined in the ISO 14040 and ISO 14044 standards

Application

The goal of Integrated Reporting is to provide a more holistic view of an organization's performance and value creation over time. Here are some steps to consider when using Integrated Reporting:

1. Identify stakeholders: Identify the key stakeholders who will be interested in the report and what information they require.

2. Define materiality: Determine which issues are material to the organization's sustainability performance, and which metrics will be used to measure them.

3. Collect data: Gather data on the material issues identified in step 2. This may require collecting both financial and non-financial data from different parts of the organization.

4. Analyze data: Analyze the data to identify trends and opportunities for improvement.

5. Develop narrative: Develop a narrative that explains the organization's sustainability performance and how it creates value for stakeholders.

6. Integrate financial and non-financial information: Integrate financial and non-financial information into a single report that provides a comprehensive view of the organization's performance.

7. Review and verify: Review the report to ensure accuracy and completeness, and verify the data through independent audits or verification.

When deciding whether to use Integrated Reporting, it's important to consider size and complexity of the organization: Integrated Reporting is most applicable to larger organizations with complex sustainability issues that require a more comprehensive reporting approach. If stakeholders are demanding more comprehensive and integrated reporting, IR may be a suitable approach. If the organization has sustainability goals that are integrated with its overall strategy, IR can provide a more comprehensive view of progress toward those goals. IR may be a suitable approach to meet regulatory requirements as well.

The goal of SROI is to provide a comprehensive view of the impact of an organization's activities on stakeholders. Some steps to consider when using SROI:

1.Identify stakeholders: Identify the key stakeholders who will be affected by the project and what outcomes are important to them.

2.Define scope: Define the scope of the project and the timeframe over which the impact will be measured.

3.Map outcomes: Map the outcomes of the project to identify how they contribute to the achievement of the project's goals and to the well-being of stakeholders.

4.Value outcomes: Assign a monetary value to each outcome, based on how important it is to stakeholders and how difficult it is to achieve.

5.Calculate SROI: Calculate the ratio of social, environmental, and economic value created to the resources invested in the project.

6.Interpret results: Interpret the results of the SROI analysis, considering the strengths and limitations of the approach.

7.Communicate results: Communicate the results of the SROI analysis to stakeholders, highlighting the social, environmental, and economic value created by the project.

SROI is most applicable to projects with complex social, environmental, and economic impacts that require a comprehensive reporting approach.If stakeholders are demanding more comprehensive reporting on the social and environmental impact of projects, SROI may be a suitable approach. SROI requires a significant amount of data on the project's social, environmental, and economic impact. If this data is not available, SROI may not be a suitable approach.

LCA can also be applied following below steps:

1.Define the goal and scope of the assessment: This involves specifying the functional unit (i.e. the unit of measurement for the environmental impact) and the system boundaries (i.e. what processes or stages of the life cycle will be included in the assessment).

2.Collect and analyze data: Data is collected for each stage of the life cycle, including raw material extraction, manufacturing, use, and disposal. The data is then analyzed to calculate the environmental impact of each stage.

3.Interpret the results: The results of the LCA can be used to identify areas for improvement in the product or process, and to compare different options based on their environmental impact.

4.Communicate the results: The results of the LCA should be communicated clearly and transparently to stakeholders, including customers, investors, and regulatory bodies.

LCA can be applicable to a wide range of products and processes, including food, energy, transportation, and building materials. It can also be used at different stages of a product's life cycle, such as during the design phase or to assess the environmental impact of a product after it has been launched.

Limitation

One of the primary Integrated Reporting benefits is the improved stakeholder engagement . Sustainability reporting provides a platform for universities to communicate their sustainability goals and achievements to a wide range of stakeholders, including students, faculty, staff, and the wider community. This increased transparency can help to build trust and credibility, and can also foster a sense of ownership and responsibility among stakeholders. Another benefit of Integrated Reporting is improved sustainability performance. By tracking and reporting on sustainability data, universities can identify areas where they can improve their sustainability performance, and can set goals and targets to guide their efforts. Sustainability reporting can also help universities to identify emerging trends and issues, and to stay up-to-date with best practices and innovations in sustainable development.

Integrated Reporting including sustainable indicators is becoming increasingly common in Italian companies . While some companies may view sustainability reporting as a burden or a form of "greenwashing" many others see it as an opportunity to demonstrate their commitment to sustainability and to differentiate themselves from their competitors.

However, Integrated Reporting present important limitations. One of the major limitations is the lack of standardization and guidance for implementation, which can result in inconsistent reporting across organizations. Additionally, the focus on financial capital can lead to neglecting other forms of capital, such as social and natural capital. Finally, the challenge in measuring and quantifying non-financial factors, such as human rights and social impact, can limit the effectiveness of Integrated Reporting.

The study conducted by Tan et al. (2020) on the use of LCA showed that a green building in Singapore designed for being energy efficient had a significantly lower environmental impact compared to a conventional building. The environmental benefits of the green building included reduced energy use, reduced water consumption, and lower emissions of greenhouse gases. This study demonstrates the potential of LCA as a tool for evaluating the environmental impact of sustainability projects and programs, particularly in the construction and building industry.The LCA analysis provided valuable insights into the environmental impact of the building's construction and operation, and helped to inform future sustainable building design and construction decisions. Life Cycle Assessment is widely used for sustainability assessment, but it also has some limitations. Obtaining accurate data and information from supply chains can be challenging, leading to incomplete and inaccurate assessments. The social and economic impacts of products and processes are also difficult to capture in LCA. Furthermore, LCA only captures the direct environmental impacts of a product or process, and may not fully account for indirect impacts.

"Energy Efficiency and Renewable Energy Program" conducted by the State of Colorado in the United States used SROI methodology to assess the social and economic benefits of the investments made in energy efficiency and renewable energy projects. The SROI analysis showed that the program generated significant social and economic benefits, including reduced energy costs for consumers, increased economic activity, job creation, and improved health outcomes due to reduced air pollution. The program also had environmental benefits through reduced greenhouse gas emissions and increased use of renewable energy sources. SROI is a valuable tool for assessing the social and environmental impacts of projects, however like all the tools, it has its own limitations. One of the major limitations is the subjectivity in determining the values of social and environmental outcomes, which can lead to inconsistent and unreliable assessments. Additionally, the lack of standardization in methodology and metrics can limit comparability across different projects. Finally, capturing long-term impacts and outcomes can be difficult, which may result in incomplete assessments.

Annotated bibliography

1.Ahi, P., Searcy, C., & Kramar, R. (2021). Sustainability performance measurement and reporting: A systematic review. Journal of Cleaner Production, 295, 126389 This article is a systematic review of the literature on sustainability performance measurement and reporting. It examines the different frameworks and tools used by organizations to measure and report on their sustainability performance.

2.Kerzner, H. (2021). Project management: a systems approach to planning, scheduling, and controlling. John Wiley & Sons This book is a comprehensive guide to project management, with a focus on the systems approach. It covers the principles of project management, project planning, scheduling, and controlling, as well as project leadership and team building.

3.Buggenhout, J., Colpaert, P., & Vanhoucke, M. (2021). An optimization approach for portfolio selection in project management under sustainability constraints. Journal of Cleaner Production, 290, 125631 This article proposes an optimization approach for portfolio selection in project management under sustainability constraints. The authors develop a mathematical model to optimize project portfolios based on their economic, environmental, and social performance.

4.https://sdgs.un.org/goals This is a website that provides information about the Sustainable Development Goals (SDGs) adopted by the United Nations in 2015. It outlines the 17 SDGs and provides resources for individuals and organizations to contribute to their achievement.

5.United Nations Development Programme (UNDP). (2020). Sustainable Development Goals This report provides an overview of the Sustainable Development Goals (SDGs) and their importance for global development. It discusses the progress made towards achieving the SDGs, the challenges that remain, and the role of different stakeholders in advancing the SDGs.

6.United Nations (2017). Tier Classification for Global SDG Indicators This document provides a framework for classifying the indicators used to monitor progress towards the Sustainable Development Goals (SDGs). It classifies indicators into different tiers based on their methodological soundness, data availability, and global coverage.

7.The Guide to Social Return on Investment. Social Value UK (2021) This guide provides an overview of the Social Return on Investment (SROI) framework, a methodology for measuring and valuing social, environmental, and economic outcomes. It provides step-by-step guidance on how to conduct an SROI analysis.

8.Social Return on Investment for Sustainable Development: A Guide. United Nations Development Programme (2017) This guide provides an overview of the Social Return on Investment (SROI) framework and its application in the context of sustainable development. It provides practical guidance on how to conduct an SROI analysis and how to use the results to inform decision-making.

9.SDG Impact Standards for Enterprises. Sustainable Development Solutions Network. (2021) This document provides a set of standards for measuring and managing the social and environmental impact of business activities in relation to the Sustainable Development Goals (SDGs). It outlines the key principles and criteria for assessing impact, as well as the reporting requirements.

10.ISO 14040:2006. Environmental management – Life cycle assessment – Principles and framework. International Organization for Standardization This international standard provides a framework for conducting life cycle assessments (LCAs) of products, services, and processes. It outlines the principles, requirements, and guidelines for conducting a thorough and comprehensive LCA.

11.ISO 14044:2006. Environmental management – Life cycle assessment – Requirements and guidelines. International Organization for Standardization This international standard provides detailed requirements and guidelines for conducting life cycle assessments (LCAs) of products, services, and processes. It provides guidance on data quality, uncertainty analysis, and interpretation of results.

12.Adams and Simnett's (2011) article examines the challenges and benefits of sustainability reporting and performance management in universities. The authors suggest that universities face unique challenges in implementing sustainability reporting and performance management, but that there are also significant benefits to doing so.

13.Hartmann and Perego's (2014) study explores sustainability reporting practices in Italian companies, specifically focusing on the motivations for reporting and the types of information disclosed. The authors found that the companies they studied tended to report on environmental and social performance indicators, but that there was still room for improvement in terms of reporting on issues such as governance and economic performance.

14.Tan et al.'s (2020) article provides an exploratory review of life cycle assessments (LCAs) of green buildings. The authors examine the key components of LCAs, as well as the challenges associated with conducting LCAs of buildings. They also identify opportunities for future research in this area.

15.Hawkins et al.'s (2016) article applies the concept of social return on investment (SROI) to energy efficiency and renewable energy programs in Colorado. The authors use SROI to evaluate the social and environmental impacts of these programs and to compare the return on investment to traditional financial metrics. They argue that SROI can be a useful tool for decision-making in the context of sustainability initiatives.