How can project managers improve their ESG build-ins?

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  • Aug 04,23
Projects have a significant interface with the ESG (environmental, social and governance). Here, R Jayaraman explains five ways in which project managers can address the ESG concerns.
How can project managers improve their ESG build-ins?

The United Nations has been taking the lead in bringing a focus on ‘sustainable development’. Sustainable development was defined by the Brundtland Commission of the United Nations in 1987. This was followed by the Triple Bottom Line, which business writer John Elkington claims to have introduced in 1994. Related concepts include CSR (Corporate Social Responsibility), and, of late, the ESG (Environmental, Societal and Governance). All these are basically addressing the issues highlighted by the climate change phenomenon. Ever since the first acid rain fell in Canada in the early eighties, the world has been rocked by falling ice bergs, melting glaciers, receding coast lines in some places, and, increasing temperatures and heat waves. The carbon footprint has become a measure of the adverse impact that companies have on the environment. 

In 1987, the Malcolm Baldrige model for performance excellence introduced the concept of a ‘holistic, integrated’ enterprise which will address societal concerns as well as environmental concerns through corporate governance processes. The model postulated that systematic management practiced using eleven core values would make companies climate compliant. And, in the long run, become ‘sustainable enterprises’. Over the years, many Fortune 500 companies have used this model, and many in India, to drive initiatives to align with ‘minimise carbon footprint’. At the same time, become ‘excellent’ performers. The economic profit was to be considered in the context of social and environmental profits as well (the Triple Bottom Line), and the ‘trimurti’ will make organisations ‘sustainable’. 

It is well known that projects are the backbone of industrial activity, whether manufacturing or services. Project management is at the foundation of creating integrated assets which will function to create value in the form of goods and services. In India, the government is a major source of projects execution and funding. To give an idea of the expenditure, the GOI has allocated an average of 12 to 13 percent of the Union Budget Outlay on capital expenditure, which is essentially spent on projects (estimated by the author from the data in The Times of India). For the year 2020-2021, the actual expenditure on projects was Rs 657,180 crores, 18.7 percent of the total budget allocation. If we do a back of the envelope estimate, the spend on project by the GOI during the last five years would have been Rs 2,750,000 crores, a lot of money indeed. This is a phenomenal amount of spending, amounting to an average daily spend of Rs 1,500 crores in each year. 

All the assets created through this capital expenditure will lead to output which go on to contribute to the GDP. The impact of these projects is therefore critical to economic development and several other goals of the GOI. Whether manufacturing or services, both the sectors need to comply with sustainability requirements. The seventeen ‘Sustainability Development Goals’, formulated by the UN in 2015, will lead the world to a sustainable future. In fact, without sustainability, there is no future. 

Projects have a significant interface with the ESG’s. There are at least five ways in which project managers can address the ESG concerns. 

The first is use of resources. In view of the enormous uncertainty in project work, there is a consequent wastage. Projects in India use machines and manpower extensively. Also, resources like, sand, gravel, electric power, water, transport vehicles, are all used in varying quantities. In view of the inherent delays in project execution, wastage of resources is further affected. Resources conservation, using them with minimum waste, using them efficiently and effectively, is De Rigueur. How to do this? Adopting circular economy is a good starting point. In every project, consumption of resources is measured, but wastage is just treated as a consequence, and not measured. There should be a continuous monitoring of waste of all forms, feedback provided to project managers, and decisions made to reduce. Techniques like lean project management, 5S in projects, Critical Chain Project Management, maintaining a clean work site and taking care of the working crew of contractors and sub-contractors should all become matter-of-practice in all projects. At the moment, only a few of the recognised large EPC companies are in this race. 

Second, managing large projects in a ‘scientific way’. This includes using a PERT chart, a standard milestone monitoring software like Primavera, monitoring of daily milestones. Daily morning meetings at the site, weekly planning meetings with all contractors at the site. Using Senseis at contractors and suppliers’ sites to monitor progress of work is a best practice. Roaming inspectors is also a good practice. In recent times, video capture of work progress at site, remote monitoring of projects by members of top management, using films and sequence photographs to track progress of work, have been practised by some EPC’s. But more needs to be done. 

Third, ‘Green Practices’, which are environmentally friendly, must be used in all areas. For example, aluminium shuttering, replacing wood is a useful tool. Using electric vehicles for project internal movements is another. Waste water recovery, using water sparingly, using it efficiently are good too. Shift to IOT and IT base, and avoid paper. Plant trees in every project site at strategic locations. At present, this is completely ignored. While large gated high-rise communities are provided with swimming pools, libraries, playgrounds, hardly any attention is paid to planting trees. Use LED’s instead of tungsten or white tube lights. 

Four, pay attention to the ‘soft’ skills and ‘soft’ areas of project management. Especially in large projects, it is essential to knit teams. This is easier said than done. Typically, parge projects use contract labour, with whom relationships are at arms-length. The first known instance when this practice was broken was the refinery set up by Reliance Industries at Jamnagar, where, all 5,000 odd workers were fed on the site every day. I am not aware of any project site in India where workmen are provided food at site. This is a best practice, as it enables the workmen to concentrate on their work fully. Especially true for women workers, who also have additional duty of preparing food after their work is over for the day, which often extends till 6 or 7 in the evening. All large project work sites MUST provide for temporary canteens where food is provided free to all labour. If needed, government should come out with a law on this. 

Finally, every large project is a ‘temporary work group’. It will assemble when the work begins, and disband as soon as the project is handed over to the client. Such groups can perform well only if the team members work together under a ‘project vision’, and a tightly knit work rules and philosophy of work. Such rules include a Vision statement for the project, a clearcut definition of work packages, with each package or a combination headed by a dedicated project manager, a package contingency and a project contingency component to control the project cost over its duration, a set of ‘Daily Milestones’ prominently displayed in each package worksite, and a ‘Daily Morning’ meeting ending with a pledge to complete the project in time and under budget with the utmost regard to quality. This is the G in the ESG – the governance structure of the project. This governance mechanism will enable the project managers to work in tandem and accomplish the project goals while completely complying with the E and S parts of the ESG. This way of working will take projects in India to greater heights of achievements, and enable the companies following these norms to become ‘world class’. 

About the author:
R Jayaraman is the Head, Capstone Projects, at Bhavan's S P Jain Institute of Management & Research (SPJIMR). He has worked in several capacities, including Tata Steel, for over 30 years. He has authored over 60 papers in academic and techno economic journals in India and abroad. Jayaraman is a qualified and trained Malcolm Baldrige and EFQM Business Model Lead Assessor.

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