CHAPTER 3
Standards and Guidelines

Although sustainable development is becoming part of the dialogue in organizations, it is not yet formally regulated by governments. Nongovernmental organizations (NGOs) have emerged as strong influencers in developing standards and guidelines for measuring and managing sustainability performance. The United Nations (UN) and the International Finance Corporation (IFC), for example, provide guidance for corporations and governments on operating standards, performance metrics, and operating principles for sustainability. Many of these guidelines, including the UN's Sustainable Development Goals and the IFC's Performance Principles, are considered effective in helping corporations and governments address global issues including poverty, human rights abuses, and changing climate, through their business plans and operational practices. By developing practices that adhere to guidelines for sustainable development, organizations can improve the sustainability performance of their projects and operations.

Depending on the level of commitment your organization or project has in becoming a high performer in sustainability, you may have a number of standards and guidelines that your project is looking to follow, or perhaps no decisions have been made about which standards or guidelines to follow. This chapter provides an overview of some of the main standards and guidelines that can help the team integrate sustainability into project planning and development.

In this chapter, we provide an overview of many of the popular sustainability standards and guidelines that are used by many organizations today. We start with international standards and guidelines and then present industry specific ones. And finally, we discuss the role the investment community plays in monitoring and supporting the integration of sustainability by offering specific benchmarks and indices based on the sustainability performance for project financing and publicly traded companies and investment instruments like green bonds.

Projects are not typically required to follow specific standards and guidelines, but the structure and direction included in the guidelines can provide a number of advantages to the project, including:

  1. Generating a comprehensive list of various issues the project might face as it is developed
  2. Improving the reputation of the project owner
  3. Participating in an industry association that has an obligation to follow a particular guideline in order to be a member
  4. Meeting the requirements of a financing company that might require projects be developed to a certain standard
  5. Building support with local communities and stakeholders who will appreciate that the project is being built using a recognized standard

3.1 Getting Started 

If your organization has not yet identified any standard or guideline that the project is going to follow, then you are essentially starting from scratch, which provides you with the opportunity to select standards and guidelines that best fit your project.

The first step is to identify if your organization has other operations or projects and review the standards and guidelines that are used for other projects, which you might be able to find in your organization's annual Sustainability Report, if one is produced. You can also look for any corporate policy statements or commitments in the areas of social, environment, and governance or whether the organization has publicly stated support for any international standards, like the Paris Agreement, for example. This type of information will help you decide which guidelines should be applied to the project and, in turn, support the organization's overall commitment to sustainability.

Most importantly, a sustainability standard or guideline should add tangible benefit to project development. It should help the project team consider sustainability issues during project design and execution, and lead to better solutions. Standards and guidelines should help the team identify innovative solutions to standard project dilemmas by asking questions that are not typically posed during the traditional project planning processes. If a particular standard does not have the potential to create value for the project, then it should not be applied. Consider each standard and guideline carefully for its applicability, potential effectiveness, and usefulness.

3.2 International Standards and Guidelines

There are number of international sustainability standards that have been developed for governments and corporations over the last 30 years. Although these standards are not enforceable by law, they can give the project team an understanding of what is now expected for major projects by governments and local communities, and what types of issues may need to be addressed during project development.

United Nations Sustainable Development Goals (SDGs)

The United Nations Sustainable Development Goals (SDGs) are a set of 17 sustainability goals (see Figure 3.1) that are intended to inspire global action in the areas of People, Planet, Prosperity, Peace, and Partnerships. The UN intends that these 17 goals – built upon the Millennium Development Goals (MDGs) – will be achieved by 2030. The UN is not presenting new concepts with the SDGs. Rather, they are reorganizing existing concepts from the MDGs into manageable sizes so that countries and organizations can see things with new perspectives and in a way that feels achievable.

The UN approaches sustainable development from the viewpoint that the eradication of global poverty is an indispensable requirement for sustainable development. All 17 goals (see Table 3.1) address poverty reduction, either directly or indirectly.

What is also useful about the SDGs is that the 17 goals are integrated, which aligns with the strategy of integrating sustainability into project delivery. Applying the SDGs to a traditional major project motivates innovation and encourages integration of sustainability into project design and development.

These goals are applicable to major projects and can broaden the potential for projects to help meet the SDGs. The project team can review and develop their own understanding of the 17 goals, and select which ones fit their project and the region where they are working. Some of the goals that have clear applicability to the development of a major project include:

Diagram depicting 17 United Nations Sustainable Development Goals with their corresponding icons.

Figure 3.1 United Nations Sustainable Development Goals.

Source: “Getting Started with the Sustainable Development Goals: A Guide for Stakeholders,” Sustainable Development Solutions Network, © 2014; reproduced with permission of the United Nations.

Table 3.1 UN Sustainable Development Goals.1

Goal Title Description
1 End Poverty End poverty in all its forms everywhere
2 Zero Hunger End hunger, achieve food security and improved nutrition and promote sustainable agriculture
3 Good Health and Well-Being Ensure healthy lives and promote well-being for all at all ages
4 Quality Education Ensure inclusive and equitable quality education and promote lifelong learning opportunities for all
5 Gender Equality Achieve gender equality and empower all women and girls
6 Clean Water and Sanitation Ensure availability and sustainable management of water and sanitation for all
7 Affordable and Clean Energy Ensure access to affordable, reliable, sustainable and modern energy for all
8 Decent Work and Economic Growth Promote sustained, inclusive and sustainable economic growth, full and productive employment and decent work for all
9 Industry, Innovation and Infrastructure Build resilient infrastructure, promote inclusive and sustainable industrialization and foster innovation
10 Reduced Inequalities Reduce inequality within and among countries
11 Sustainable Cities and Communities Make cities and human settlements inclusive, safe, resilient and sustainable
12 Responsible Consumption and Production Ensure sustainable consumption and production patterns
13 Climate Protection Take urgent action to combat climate change and its impacts
14 Life Below Water Conserve and sustainably use the oceans, seas and marine resources for sustainable development
15 Life on Land Protect, restore and promote sustainable use of terrestrial ecosystems, sustainably manage forests, combat desertification, and halt and reverse land degradation and halt biodiversity loss
16 Peace, Justice, and Strong Institutions Promote peaceful and inclusive societies for sustainable development, provide access to justice for all and build effective, accountable and inclusive institutions at all levels
17 Partnerships for the Goals Strengthen the means of implementation and revitalize the Global Partnership for Sustainable Development
  • Goal 8: Decent Work and Economic Growth
  • Goal 9: Industry, Innovation and Infrastructure
  • Goal 11: Sustainable Cities and Communities
  • Goal 12: Responsible Consumption and Production

Organizations are not obligated to apply the SDGs even if their home country or host country is a signatory. However, the SDGs provide civil society and government with the tools to demand higher and demonstrable commitment to sustainability from projects and organizations and demand accountability for their performance. From a practical perspective, organizations can access the SDGs tools to help them identify their goals and build strategies to integrate sustainability into major projects in the areas of sustainable development.

UN Global Compact

The UN Global Compact (Global Compact) is a corporate sustainability initiative. It is a call to arms for companies to align their operational strategies with the universal principles on human rights, labor, environment, and anti-corruption. With over 9500 member companies, the Global Compact represents nearly every industry sector and size of company from developing and developed countries. The Global Compact helps companies meet their commitments to support society by operating responsibly, whether they are embarking on their sustainability journey or are already recognized champions of sustainability.

A project that is being developed by a signatory organization must align to the Global Compact's 10 Principles (see Table 3.2). This can be done by first conducting a baseline analysis of your existing strategies, policies, and procedures, and then cross-referencing them with the 10 Principles, seeking to identify the gaps in your system. Next, develop plans to align them with the 10 principles while maintaining alignment with project and organizational goals.

Sustainability begins with the organization's value system and approach to project development and operations. The Global Compact's philosophy for achieving a high level of performance in corporate sustainable development is that in order to meet fundamental responsibilities in the areas of human rights, labor, environment, and anti-corruption, a business must take a principles-based approach to its strategy. With the objectives on people and planet, the Global Compact believes that an organization, and therefore its projects, are then set up for long-term success.

Table 3.2 UN Global Compact Ten Principles.2

Theme Principles
Human Rights:
  1. Businesses should support and respect the protection of internationally proclaimed human rights, and
  2. Make sure that they are not complicit in human rights abuses.
Labour
  1. Businesses should uphold the freedom of association and the effective recognition of the right to collective bargaining,
  2. The elimination of all forms of forced and compulsory labour,
  3. The effective abolition of child labour, and
  4. The elimination of discrimination in respect of employment and occupation.
Environment
  1. Businesses should support a precautionary approach to environmental challenges,
  2. Undertake initiatives to promote greater environmental responsibility, and
  3. Encourage the development and diffusion of environmentally friendly technologies.
Anti-corruption
  1. Businesses should work against corruption in all its forms, including extortion and bribery.

The Global Compact's Ten Principles are derived from the Universal Declaration of Human Rights, the International Labour Organization's Declaration on Fundamental Principles and Rights at Work, the Rio Declaration on Environment and Development, and the United Nations Convention Against Corruption.

The Global Compact provides a set of five elements that they expect organizations to strive toward to help meet sustainability goals, including:

  • Principled business
  • Strengthening society
  • Leadership commitment
  • Reporting Progress
  • Local action

These five elements are reflected in many of the tools and processes provided in this book, from setting project sustainability goals, to engaging with local communities, to support local economic development.

International Finance Corporation (IFC) Performance Standards

The International Finance Corporation (IFC), the private arm of the World Bank, takes the viewpoint that sustainability is “critical to a company's business success, its customers, surrounding communities, broader stakeholders, and the environment.”3 The IFC has supporting policy statements and guidelines for carrying out this philosophy within its organization, with its investors and advising companies.

The Policy on Environmental and Social Sustainability is applied to all investment and advisory clients of the IFC whose major projects go through an initial credit review process. The policy helps to ensure that IFC clients identify and address their specific responsibilities for managing their environmental and social risk.

Supporting the policy is the Sustainability Framework, which consists of eight performance standards:4

  1. Assessment and Management of Environmental and Social Risks and Impacts
  2. Labor and Working Conditions
  3. Resource Efficiency and Pollution Prevention
  4. Community Health, Safety and Security
  5. Land Acquisition and Involuntary Resettlement
  6. Biodiversity Conservation and Sustainable Management of Living Natural Resources
  7. Indigenous Peoples
  8. Cultural Heritage

The IFC has designed and implemented these standards to which they hold their clients, investors, and advisor companies accountable in order to support their viewpoint that sustainability is critical to business success.

As part of the application for IFC investment, a proposed project site would undergo an environmental and social due diligence by the IFC, which is integrated into their overall due diligence of the project, which includes a financial and risk review. IFC weighs the costs and benefits of the proposed project and records its rationale and project-specific conditions for the proposed activity. These are then provided to IFC management for approval.

If already a client of the IFC, the organization is responsible for identifying and taking responsibility for managing its own environmental and social risk as defined by the IFC Environmental and Social Performance Standards. The project would also be subject to an audit to ensure compliance with the Performance Standards.

The World Bank Group Environmental, Health, and Safety Guidelines

The World Bank Group Environmental, Health, and Safety Guidelines are technical reference documents containing examples of Good International Industry Practice (GIIP), as described in the IFC Performance Standards. They contain the performance levels and measures that are normally considered acceptable for Projects in Non-Designated Countries, and achievable in new projects by existing technologies. Two sets of guidelines are used: General Environmental, Health, and Safety Guidelines, and Industry Sector Guidelines.

General Environmental, Health, and Safety Guidelines contain information on environmental, health, and safety issues that may be applicable to all industry sectors and all major projects. They are divided into these sections: Environmental, Occupational Health and Safety, Community Health and Safety, Construction, and Decommissioning. They should be used together with the relevant Industry Sector Guideline(s).

Industry Sector Guidelines contain information on industry-specific impacts and performance indicators, plus a general description of industry activities. They are grouped as follows: Agribusiness/Food, Production, Forestry, Chemicals, General Manufacturing, Infrastructure, Mining, Oil and Gas, and, Power. Most major projects will fall under at least one of these Sector Guidelines.

Global Reporting Initiative (GRI)

The Global Reporting Initiative (GRI) is an international organization, considered to have pioneered sustainability reporting since 1997. They are currently the most commonly used set of sustainability reporting standards across almost all industries. GRI takes the viewpoint that through reporting, an organization can better understand and communicate their impact on sustainability issues, including human rights, governance, and climate change. Although GRI is focused on reporting, the concepts they present are useful to consider when project planning.

The most recent version of the guidelines is the 2016 GRI Standards. Organized into modules, the structure ensures that there is crossover and mutual support between the modules. It includes three universal standards that all organizations producing a sustainability report must use. There are three series of standards that focus on specific areas of sustainable development: environmental, economic, and social. From these standards, a project team can select the topic-related standards that are relevant to their project.

Typically, oversight of the GRI is at the organization's leadership level and applied to all projects and operations or facilities. Project teams would track progress through a set of measurable sustainability indicators as agreed upon by the organization, and then feed this data to corporate for inclusion into the annual sustainability report.

GRI offers a common language for organizations and stakeholders with which to communicate and understand the economic, environmental, and social impacts their projects and operations. Its value lies in that it is a useful tool for benchmarking and comparing your sustainability impacts within an organization, and with similar organizations by industry or region. This opportunity for global comparability and quality of information then enables improvements in project strategy and collaboration.

A key part of the GRI process is the up-front materiality phase where a project reviews, through internal and external stakeholder engagement (whenever possible), its project execution plans and identifies their social and environmental impacts. The result of the materiality process is a list of issues that are relevant to the organization and to stakeholders, especially the local community. The use of the GRI materiality assessment is discussed in more detail in Chapter 4.

Carbon Disclosure Project (CDP)

The Carbon Disclosure Project (CDP)5 is a nonprofit organization that operates a system for companies and governments worldwide to measure and disclose their greenhouse gas (GHG) emissions and environmental footprint. It is the largest collection of self-reported environmental data globally. Much like the GRI, CDP approaches its work from the belief that a strong awareness about sustainability is achieved through measurement and disclosure, which is essential for effectively managing GHG emissions and climate risks. Its approach is to partner with companies and governments to measure their footprint in order to reduce it. CDP provides support and guidance, making it easy for organizations to participate. The collected data is analyzed and assessed, providing member companies with current data with which to make informed decisions.

An organization can volunteer or be requested (by a regulator, investor or customer) to participate in annual CDP reporting. The CDP started with a focus on carbon reporting but has added two other focus areas for water and forest footprints. This is out of consideration that addressing water security and deforestation are critical business risks and keys to sustainable development.

CDP currently requests information on climate risks and low carbon opportunities from more than 650 signatories. CDP takes the data submitted by participants and members and conducts a detailed analysis on potential environmental impacts and opportunities. Institutional investors use the data and insights to make better-informed investment decisions.

CDP offers three streams of participation:

  1. Investor membership means access to information and data pertinent to financial decision-making.
  2. Supply chain members strive to manage risks and opportunities in their supply chain, and through CDP they can access the tools to capture vital data on climate change, deforestation, and water security within their supply chains.
  3. Reporter services membership means open access to tools for data analysis, support, and insights into what gaps and opportunities mean in your report.

Table 3.3 ISO standards applicable to integrating sustainability into a major project.

ISO number Title Description/applicability
ISO 14001 Environmental Management Systems Intended for use by an organization seeking to manage its environmental responsibilities in a systematic manner that contributes to the environmental pillar of sustainability.
ISO 26000 Guidance on Social Responsibility Intended to assist organizations in contributing to sustainable development by promoting a common understanding in the field of social responsibility. It is currently a guidance document and cannot be audited or certified.
ISO 37101 Sustainable Development in Communities When used, this standard helps communities set their sustainability objectives and define their sustainable development strategy at a local level.
ISO 20400 Sustainable Procurement For identifying a standard of practice for sustainable procurement so that the (local) economy, environment, and society benefit from the organization's purchasing practices.
ISO 50001 Energy Management Systems Helps organizations establish an energy management system in order to establish and implement efficient energy-use practices.
ISO 37001 Anti-Bribery Management Systems Bribery is one of the world's most challenging issues and reduces quality of life, increases poverty, and erodes public trust. This ISO standard helps organizations fight bribery and promote an ethical business culture.

The International Organization for Standardization (ISO)

The International Organization for Standardization (ISO) is an independent, non-governmental organization that develops and publishes international standards of performance in a wide variety of areas including the popular quality, health and safety, and environment standards. At the time of publication, ISO has over 22,000 published standards and related documents that cover almost every conceivable sector from technology to food safety, agriculture to healthcare.

The two primary objectives of the ISO Standards are to 1) improve global safety, and 2) improve efficiency. Although there is no ISO standard specifically for sustainability, per se, ISO has developed a variety of standards that support many of the key elements of sustainable development.

An organization that commits to ISO performance in any area means they have declared that the project or operation or facility (or product) in question meets specific requirements and is assured by a third-party ISO auditor. Upon approval, certification is awarded by an independent body in the form of written assurance.

A few key standards most relevant to integrating sustainability into your project are listed in Table 3.3. This is not a limiting list and it can be expanded significantly, depending on your project. We strongly recommend reviewing the ISO website or contacting the standards body representing ISO in your home country or the country in which you are developing a major project.

3.3 Industry Guidelines

Sustainability is now a generally accepted concept that the general public is well aware of and expects from the performance of their governments and the business community. Support for sustainability initiatives is not limited to non-governmental organizations. Industry associations are also collaborating and engaging with stakeholders to create sustainable development guidance for organizations working in their industry. Their goal is to help organizations improve their sustainability performance in order to earn the support of the local community and improve public perception of the industry sector, which can help all of the organizations obtain regulatory approvals and project financing. Following are a few examples of industry associations dedicated to making their sector a more sustainable one.

Extractives Sector

The extractives sector, which includes the oil and gas, mining and metals, and aggregate sectors, faces some of the biggest challenges in developing projects, managing environmental impacts, and working with local communities. As a result, these sectors have developed a number of guidelines and materials that can provide support for projects in the extractive sector and in other sectors. Some of the well-known programs are described in the following sections.

International Council on Mining and Metals (ICMM)

The International Council on Mining and Metals (ICMM) is an international organization that brings together almost 30 mining and metals companies from over 30 regions that are all dedicated to achieving and maintaining a safe, fair, and sustainable mining and metals industry. Their collaborations provide guidance and research to mining and metals companies on how to strengthen social and environmental performance. Through their efforts, ICMM members believe they can serve as a catalyst for changing the mining sector's contribution to society by helping eliminate poverty and improve quality of life for local communities. The ICMM's publications, research papers, and webinars are available to anyone.

ICMM member companies commit to a set of 10 principles6 and eight supporting position statements through which the industry as a collective will contribute to global sustainable development. Members must also practice sustainability reporting annually in accordance with GRI Guidelines, and must obtain annual third-party assurance as a demonstration of transparency.

Voluntary Principles on Security and Human Rights

The Voluntary Principles Initiative is a collaboration between governments, multinational extractive sector companies, and NGOs that has developed the Voluntary Principles on Security and Human Rights, which is a very specific guideline designed for the mining and energy sectors. The goal is to help ensure that the human rights of employees and local communities are respected while managing projects, operations, and facilities. It provides members with support and guidance on how to conduct a comprehensive human rights risk assessment, maintain the safety and security of their sites and surrounding communities, and operate within a framework that ensures human rights are respected.

Companies, governments, and NGOs who participate in the Voluntary Principles commit to implementing the guidelines. The principles can provide support for major projects that are being developed in regions considered to be a security risk or where human rights for local stakeholders has been identified as an issue.

Initiative for Responsible Mining Association

Initiative for Responsible Mining Association (IRMA) is a voluntary certification for social and environmental performance at mine sites. The system uses an internationally recognized standard that has been developed in consultation with a wide range of stakeholders. The standard defines good practices for what responsible mining should look like at the industrial scale, and provides a list of expectations that independent auditors use as the benchmark for responsible mines.

The standard includes the following four elements:

  1. Business integrity
  2. Planning for positive legacies
  3. Social responsibility
  4. Environmental responsibility

International Petroleum Industry Environmental Conservation Association

The International Petroleum Industry Environmental Conservation Association (IPIECA) is a nonprofit association that develops and promotes good practice and knowledge to help the oil and gas sector to improve its environmental and social performance. Membership consists of corporations, associations, and sector industries that supply or service oil and gas companies. Their areas of focus are:

  1. Climate and energy
  2. Environment
  3. Social
  4. Reporting

IPIECA has formed several strategic partnerships in order to promote sustainability and better support their members for integrating sustainability into projects and operations, including partnerships with the United Nations Development Programme (UNDP) and the International Finance Corporation (IFC). IPIECA developed the SDGs Atlas, a shared understanding of the implications of the UN SDGs for the oil and gas industry and how the industry can most effectively contribute. The SDGs Atlas guides organizations working in the oil and gas industry to effectively support the achievement of the SDGs by 2030.

Hydropower

International Hydropower Association

The International Hydropower Association (IHA) is a nonprofit organization of over 100 members who are committed to advancing sustainable hydropower. They are the official management body for the Hydropower Sustainability Assessment Protocol, which was developed to support training and hydropower project assessments. The protocol provides a framework for assessing hydropower projects against a comprehensive range of social, environmental, technical, and economic criteria.

IHA also produces a variety of publications on the role of hydropower in the world, as well as tracking and assessing new trends and developments in the hydropower sector. Their Hydropower Sustainability Guidelines, of which there are 26, provide guidance on the processes and outcomes relating to good sustainability practices in the planning, operation, and implementation of hydropower projects.

Infrastructure

Infrastructure projects create facilities that support and influence our daily lives. Designing and constructing sustainable infrastructure projects means creating them in ways that maximize the public benefit and do not negatively impact the social, economic, and environmental aspects of the local communities. There is a significant amount of support for sustainable infrastructure, and organizations that provide guidance and resources for making infrastructure more sustainable. Several of the larger organizations are listed below and there are also a number of country and regional level organizations that project teams can use, depending on the location of their project.

International Institute for Sustainable Development

The International Institute for Sustainable Development (IISD) is an independent think tank that has developed a number of information and guidance documents for range of industry sectors, including the infrastructure sector. The IISD recognizes that the development of infrastructure requires consideration of the impacts of the project on people and the planet. Sustainable infrastructure projects are projects that incorporate considerations for carbon and environmental footprints, fostering positive relationships local communities, stewardship of local ecosystems, and the financial viability of projects.

The approach that IISD uses for sustainable infrastructure is influenced by view that roads, buildings, energy and water infrastructure must be sustainable if society is going to meet the goals set out in the Paris Climate Agreement and the United Nations SDGs. IISD created the Sustainable Asset Valuation (SAVi) tool to enable better decision making, mitigate risks, generate returns, and optimize value for money across the lifecycle of an asset.

Institute for Sustainable Infrastructure (ISI)

Institute for Sustainable Infrastructure (ISI) is a collection of organizations and individual professionals involved in the planning, design, construction, and maintenance of infrastructure. This nonprofit organization develops and maintains a sustainability rating system for all civil infrastructure through their main offering, Envision.

Envision is a resource for professionals involved in planning, designing, building, and maintaining civil infrastructure that helps practitioners meet the challenge of sustainable infrastructure. It is a framework and decision-making guide with industrywide sustainability metrics for all kinds of infrastructure projects. Envision helps users assess and measure the extent to which their project contributes to conditions of sustainability across the full range of social, economic, and environmental indicators.

3.4 Discipline Guidelines

Sustainability guidelines have also been developed by a number of technical or functional disciplines that address how sustainability can have an impact on the work of professionals in those disciplines. A number of international associations have developed sustainability guidance as well as numerous regional or country-specific guidelines that can be used by discipline professions to integrate sustainability into their work. We discuss a number of the main technical disciplines below, but we encourage you to look for local resources that can be used to support your department or apply to the region where the project is located.

Engineering

The engineering profession supports society's objective for human and technological progress by the designing, inventing, building, and testing of structures, systems, machines, and materials. The engineering profession is now more conscious and involved in sustainability efforts, such as addressing climate change and social impacts.

Much of the world's infrastructure and facilities have been in place for many years with designs based on existing climate patterns. Now that we are feeling the effects of a changing climate, engineers need to revisit these standard designs to improve safety and protection for the employees and public who use them. Engineers must now be involved in addressing the impacts of the changing climate on infrastructure design, project development, and operations because it affects public safety and public interest. Engineers also have the opportunity to solve problems of a social nature, such as poverty or food security, by incorporating sustainability into decision making during project design.

A few of the associations that can be reviewed when developing major projects include;

  • Engineers Against Poverty
  • Engineers without Borders
  • World Federation of Engineering Organizations (WFEO)

Each engineering department can review sustainability guidance that is available for their work and we discuss the integration of sustainability into project design and decision making in Chapter 10.

Architecture

The architecture profession has the unique advantage of overseeing the design and construction of buildings while focusing on the structure's potential impact on the local social and natural environments – for example, incorporating systems to capture and recycle rainfall and utilizing the sun's energy with solar panels. The main goal for architects when integrating sustainability into their project designs is to create projects that have minimal harm to the local environment, while being visually appealing and fulfilling the structure's purpose. Many national or regional architecture associations have now addressed sustainable architecture by providing their members and the public with tools and resources on how to “build green.”

Construction

The construction industry has a significant role to play in ensuring that projects are developed sustainably. Planning a construction project to minimize water and energy usage, protect natural areas, and provide training and skills development to local people all contribute to sustainable development.

Construction associations are typically regional in focus. One example of an association that is addressing sustainability is the Canadian Construction Association (CCA). The CCA recognizes the importance of sustainability and encourages its 20,000 members to undertake initiatives that enable them to operate in an economically, socially, and environmentally sustainable manner. In 2016, the CCA commissioned “Corporate Social Responsibility in the Canadian Construction Sector: A Practical Guide to Corporate Social Responsibility (CSR)”7 to help members understand the opportunities and benefits of CSR so the sector can actively contribute to improving the social, economic, and environmental health of Canadian communities.

The construction team can find additional resources from local construction associations, and we describe the tools and processes that can be used for integrating sustainability into construction in Chapter 12.

Procurement and Supply Chain Management

The procurement and supply chain management profession can make significant impact on a nation's economy and help provide critical advantages for local businesses. By understanding that a project is part of a larger system, they can contribute to significant progress on social and environmental issues.

What a project buys, from whom, and how it uses the goods and services once purchased can have a significant influence on everything from performance and employee well-being to environmental impact, to positive relations with local communities. For this reason, the procurement and supply chain function of a project plays a key role in integrating sustainability. Procurement generally makes up a substantial part of the project budget and can have a significant influence on the overall sustainability of the project.

As listed above, ISO 20400, Sustainable Procurement, is a useful resource for projects wanting to integrate sustainability into their procurement processes. You will also find that various sectors and industries address sustainable procurement and have developed policy statements, guidelines, or tools to their memberships. We discuss integrating sustainability into procurement processes in more detail in Chapter 11.

3.5 Responsible Project Financing

Financial institutions and global finance organizations and lenders have recognized that environmental, social, and governance (ESG) factors are a significant risk for major projects. This has led to major projects being required to adopt standards for ESG management prior to being approved for project finance. Financial institutions, including banks, pension funds, and institutional investors, typically perform extensive due diligence on a project's ESG risk potential before lending money. It is becoming more common for these institutions to require regular third-party assurance as a condition for financing, to ensure that ESG commitments are being met and that project risks are being managed proactively.

A strong sustainability program is essential to addressing the concerns of financial institutions and demonstrating that the project is managing the ESG risks. It is very possible that a strong sustainability program will reduce the cost of borrowing money and improve overall project profitability due to having a lower risk profile and a larger potential pool of lenders. This is true for both industrial and government projects where financing could come from project-specific bonds, green bonds, or financing strategies like public-private partnerships. Sustainability teams should ensure that their programs and systems will meet the requirements of the responsible investing protocols to ensure that there are no issues with future project financing.

The international banking and investment community is structured to provide project advisory and financing services. Their primary goal is to protect their investments by having stringent screening programs to identify project and operational risks of their investments. Banks are active players in a broad range of sectors, including extractives, energy, forestry, telecom, industrial, infrastructure, petrochemical, and transportation projects. They have developed in-depth expertise in ESG risk assessments for a broad range of these and other industries, which are now regularly integrated into the financial risk assessment for potential investments.

Principles for Responsible Investment

Supported by the United Nations, the Principles for Responsible Investment (PRI) is an independent organization that studies the investment implications of ESG factors. Signatories of the PRI can access these studies and utilize PRI findings by factoring them into their investment and ownership decisions. PRI signatories are typically asset owners such as pension funds, investment management companies, and financial service providers.

Equator Principles

The Equator Principles (EPs) is a risk management framework that has been adopted by financial institutions to identify, assess, and manage the environmental and social risks in major projects. The EPs apply globally and to all industry sectors. Membership consists of almost 100 financial institutions, known as Equator Principles Financial Institutions (EPFIs), in over 30 countries. EPFIs commit to implementing the EPs in their internal environmental and social policies, procedures, and standards for financing major projects. They are also committed not to provide project financing or corporate loans to projects where the client is unable to or refuses to comply with the EPs.

The EPs requires members to adhere to 10 principles:8

  • Principle 1: Review and Categorization
  • Principle 2: Environmental and Social Assessment
  • Principle 3: Applicable Environmental and Social Standards
  • Principle 4: Environmental and Social Management System and Equator Principles Action Plan
  • Principle 5: Stakeholder Engagement
  • Principle 6: Grievance Mechanism
  • Principle 7: Independent Review
  • Principle 8: Covenants
  • Principle 9: Independent Monitoring and Reporting
  • Principle 10: Reporting and Transparency

FIRST for Sustainability

A finance institution's level of exposure to environmental and social risks is directly related to their clients' projects and operations, including how their clients manage their environmental and social risks. Considering these risks in the transaction review process helps financial institutions to reduce their overall exposure to such risks. FIRST for Sustainability serves to engage, inform, and educate financial institutions about the benefits of environmental and social risk management. FIRST (“Financial Institutions: Resources, Solutions and Tools”) provides guidance on how to implement an Environmental and Social Management system (ESMS), and execute social and environmental due diligence. FIRST for Sustainability is part of the services provided by the International Finance Corporation (IFC).

Global Sustainable Investment Alliance

Global Sustainable Investment Alliance (GSIA) is a global collaboration of membership-based sustainable investment organizations whose mission is to maximize the visibility and impact of sustainable investment organizations at a global level. One of GSIA's primary goals is to integrate sustainability into financial systems and the investment chain. It is an investment approach that considers environmental, social, and governance (ESG) factors in portfolio selection and management.

3.6 Sustainable and Responsible Investing

Nowadays there are investment companies that focus solely on sustainability investment. And most financial institutions now offer investment products that consider a company's ESG performance. Investment research firms such as MSCI and RobecoSAM provide sustainability-focused indices, portfolio risk and performance analytics, and governance tools to institutional investors and hedge funds. Their offerings typically include in-house asset management, sustainability indices, corporate sustainability assessments, and customized portfolio benchmarking solutions.

The globally recognized Dow Jones Sustainability Index (DJSI) series, launched in 1999, is a set of indices that evaluates the sustainability performance of thousands of publicly traded companies. The DJSI is an analysis of company economic, environmental, and social performance data. It assesses issues such as transparency and corporate governance, strategies to mitigate climate change, risk management, and supply chain and labor practices. Companies that do not operate in a sustainable and ethical manner according to the DJSI are rejected from the list.

Project organizations should be aware of the sustainability requirements and responsible investing groups to understand how project sustainability can impact project financing, and the organization's stock price if the owner is a publicly traded company. For a smaller, private organization developing a project, it is prudent to be aware of sustainability expectations for larger organizations that may seek to acquire the project once it has been developed. Also, if the owner wants to sell the project after commissioning, then meeting the sustainability requirements of potential buyers can help to raise the value of the project.

3.7 Managing Standards and Guidelines

This chapter has provided an overview of the many available standards and guidelines that a project might need to follow or at least understand. The challenge is to capture the information from these documents that can be used as you develop the project. The information can be summarised in a simple tracking table or action log, as shown in Table 3.4.

The tracking table should include any standards or guidelines that the organization is a signatory to, has agreed to meet, or is required to meet for project approvals or financing. For example, if the organization is required to meet the Equator Principles in order to obtain project financing, then the 10 Equator Principles should all be given a specific management action to ensure that the required work has been completed and documented, and is available when required to meet project financing requirements.

Table 3.4 Sample standards and guidelines management tracking table.

Selected Guideline Principal/Element Issue/Opportunity Management
SDG Decent work and economic growth Develop Economic Development Plan with local community Include in Community Agreement
SDG Industry, Innovation, and Infrastructure Incorporate innovation into procurement Develop performance-based procurement strategy
UN Global Compact Elimination of employment discrimination Track direct and contractor employment data Include in contracts;
track in social monitoring program
UN Global Compact Work against corruption Ensure transparency in procurement process Procurement plan
Equator Principles Environmental and social assessment Ensure full assessment is completed Complete impact assessment
Equator Principles Stakeholder engagement Document engagement to demonstrate compliance Engagement tracking system

3.8 Summary

Starting from international standards and guidelines for sustainability that span all sectors and industries, to those that are industry specific for major project development, you should now have a good overview of the existing support that projects can utilize to integrate sustainability. There are a large number of standards and guidelines; the ones presented in this chapter are just a few of the most popular ones. It is up to the project team to decide which are the most appropriate and will be most useful for their major project.

Application of these standards and guidelines for the development of major projects will be different from application for operating facilities, so consult with the issuing standards organization if required. They are usually ready and willing to assist their members or clients with interpretation and implementation of their standards and guidelines. Also consider consulting with industry peers for their experience and knowledge. Public expectations for sustainability performance by organizations is still evolving and so are the standards and guidelines, which is a good reason to stay connected with a sustainability network for your industry or technical discipline.

An understanding of the many standards and guidelines available and how they can support project development is important for the development of the project. Incorporating standards and guidelines into project planning and delivery can:

  • Help to establish project sustainability goals and objectives (Chapter 6)
  • Support the development of project key performance indicators (KPIs)
  • Identify requirements that need to be included in the Commitment Action Log (Chapter 8)
  • Provide guidance for project departments that are developing the Project Execution Plan (PEP) (Chapter 6)
  • Support an understanding of what is important for the project (Chapter 4)

Endnotes

  1. 1   The Sustainable Development Solutions Network (SDSN), “Getting Started with the Sustainable Development Goals: A Guide for Stakeholders,” December 2014, accessed at https://sdg.guide/.
  2. 2   UN Global Compact, “Guide to Corporate Sustainability: Shaping a Sustainable Future” 2014, accessed September 20, 2018, at https://www.unglobalcompact.org/docs/publications/UN_Global_Compact_Guide_to_Corporate_Sustainability.pdf.
  3. 3   “IFC Sustainability Policies and Standards,” accessed September 3, 2018, at https://www.ifc.org/wps/wcm/connect/Topics_Ext_Content/IFC_External_Corporate_Site/Sustainability-At-IFC.
  4. 4   International Finance Corporation, “IFC Performance Standards on Environmental and Social Sustainability,” January 2012.
  5. 5   “The Carbon Disclosure Project,” accessed September 4, 2018, at https://www.cdp.net/en.
  6. 6   International Council on Mining & Metals, “Sustainable Development Framework: ICMM Principles”, revised 2015.
  7. 7   Canadian Construction Association, “Corporate Social Responsibility in the Canadian Construction Sector: A Practical Guide to CSR,” 2017, accessed October 21, 2018, at http://www.cca-acc.com/documents/corporate-social-responsibility/.
  8. 8   Equator Principle, “Equator Principles III,” 2013, accessed October 25, 2018, at https://equator-principles.com/best-practice-resources/.
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