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Business Cases with Sustainability for Consulting Engineers (Part I)A rationale for engaging in corporate sustainability for the mutual benefit of shareholders and stakeholders alike.
Society is in a state of constant evolution, it always has. The economy changes as a result, and stimulates innovation. This innovation historically has been primarily related to technology. On the other hand, in recent years innovation has been driven also by social and environmental dynamics. This is an emerging and fast growing trend that is determining the fate of many sectors and companies, and has been unforgiving with those that have not had interest in change or the capability to do so. With global, planetary sustainability becoming more widely recognised, new business models are emerging, both for improving life within the organisation and to deliver value to clients.
In the past, businesses were primarily economic viability oriented. Sustainability was, and often still is, understood in its temporal and economic dimensions, only. The focus is on delivering and increasing value to shareholders by sustaining the economic output under certain conditions. Key factors for strategic success are identified by analysing external forces of the market and by positioning the organisation with resources that are available to the organisation. Hereby, businesses prioritise direct costs, and benefits that can be internalised. The use of resources is not accounted for if market regulations do not require the business to do so. Thus, many social and environmental resources are used which costs are imposed on third parties. The most prominent example of these so-called externalities is the use of the atmosphere for emitting green hose gases to a point where climate change poses a significant risk to businesses and society alike. Only gradually, the costs for using the atmosphere finds way into balance sheets of businesses with emissions trading schemes.
Now, businesses are required to become primarily socially oriented, delivering value to society and avoiding costs to society. Key factors for conducting such business goes beyond market forces and available resources by considering the relations to direct and indirect stakeholders. Aligning the core business with the satisfaction of social and environmental needs becomes priority. A precondition is to think, act and measure in three dimensions of sustainability considering social, economic and environmental aspects and corresponding indicators. Taking sustainability and stakeholders into account, financial and non-financial forms of value creation can be harmonised. One approach to such harmonisation is the exploration and skillful use of business cases with sustainability (BCwS) i. e. the connections between voluntary social and environmental (sustainability-oriented) activities and the core drivers for business cases. The challenge is to identify and integrate sustainability-oriented activities that are in harmony with the core business.
Sustainability management and business cases with sustainability (BCwS)
The benefits for a corporation that integrates sustainability can be understood along the lines of business cases with sustainability (BCwS). In general, business cases describe the consequences of economic decisions. Business cases are used to inform decision makers about financial and non-financial outcomes of possible activities. Specific to sustainability management, voluntary sustainability-oriented activities are understood as key for business success through the linkages between such activities and economic performance. Increasing economic performance is achieved by the positive influence of sustainability-oriented activities on core drivers for business cases that are costs and cost reduction, sales and profit margin, risk and risk reduction, reputation and brand value, attractiveness as an employer, as well as innovative capabilities. Sustainability-oriented activities with the aim to trigger core drivers of business cases need to be carefully planned and managed. Their influence on economic performance can have positive (profit increasing) and negative (profit decreasing) effects. Moreover, the influence of business case drivers may seem random and can be indirect through the involvement of distant stakeholders (such non-market stakeholders like civil society organisations, political initiatives etc.).
Infrastructure development involves a great number of stakeholders due to their central function to provide basic services for industry and households across different temporal scales (long-, medium-, short-term) and spatial scales (global, regional, local, client). Thus, planning and designing sustainable infrastructure has several benefits. Some of them are that policy makers or business developers benefit from long term viability through resilience, and lower cost through increased efficiency and stakeholder collaboration. Moreover, involvement in decision making, and reduced negative impacts on communities and the environment increases public confidence in projects. To integrate sustainability thinking into infrastructure development, decision makers must be well informed about sustainability. This is where the responsibility of consulting engineers starts: informing their clients about the challenges we face today and the intrinsic value of sustainable infrastructure. But what are the benefits for consulting engineers trying to convince their clients?
“The challenge is to satisfy the social and environmental needs of stakeholders while skillfully integrating social and environmental concerns into conventional management.”
To answer this question, sustainability for consulting engineers was investigated beyond project development considering corporate sustainability management. Sustainability management takes on responsibility towards the society at large while contributing to sustainability of the corporation (i. e. corporate sustainability). The challenge is to satisfy the social and environmental needs of stakeholders while skillfully integrating social and environmental concerns into conventional management. Institutional aspects focus on leaders and employees establishing and working in organisational structures, which support the integration of the three dimensions of sustainability. Functional aspects of sustainability management enable corporations to master the challenge by integrating the three dimensions of sustainability.
Approach taken to map BCwS for consulting engineers
More than a dozen interviews with top and middle management staff of three consulting engineering corporations were conducted with the aim to gain valuable insights about causality between core drivers and related challenges and opportunities. Moreover, three sustainability reports of three other widely recognised consulting engineering corporations were analysed with the aim to assess the full spectrum of sustainability-oriented themes and activities that reportedly trigger core drivers of business cases.
Altogether, 49 ways on how themes or sets of sustainability-oriented activities trigger core drivers of business cases were identified. It was reported, for example, that stakeholder dialogues and surveys, as part of stakeholder engagement, significantly contribute to reputation and brand value. Additionally, 49 ways were found that can be assumed to generate benefits due to their enabling characteristics. For example, sustainability integrated into ownership and remuneration potentially contributes to all core drivers, by enhancing motivation and commitment of managers and employees, to implement sustainability-oriented corporate activities effectively and efficiently.
That information was used to create a Causal Loop Diagram (CLD), considering the principles of System Thinking (ST), with the aim to make visible the causal links between the elements of the system. The signs at the arrowhead indicate either a positive relation (“+” for change leading in the same direction) or negative relation (“-” for change leading in the opposite direction). Moreover, circular relations in form of positive or negative feedback loops are discovered. Negative feedback loops (“B” for balancing loops) tend toward an equilibrium, thus balancing the forces in the system. Positive feedback loops (“R” for reinforcing loops) can be found when an intervention triggers changes that amplify the effect of that initial intervention, thus reinforcing it.
What have we learned
The CLD shows dynamics that describe possible outcomes of scenarios of (a) action and (b) inaction towards the (i) external promotion and (ii) internalisation of sustainability.
In a business as usual scenario, characterised by inaction, business performance is threatened due to digitalisation of engineering services and the decrease of public spending. Consequently, not only sales (i. e. projects awarded) and profit margin but also innovative capabilities as well as reputation and brand value are declining due to the reinforcing feedback loops (R1 – R4). Also, attractiveness as an employer is affected (through R5 and R6) leading to lower success rates of recruiting and keeping skilled employees in times of war for talents. Due to the interlinked nature of the core drivers the negative trend is passed on to other core drivers leading deteriorating outlook on business performance.
As mentioned above, sustainability evidently offers 49 themes or sets of voluntary social and environmental activities that can stimulate business performance along the core drivers for business cases. Ten themes alone can increase the attractiveness as an employer thus positively influencing the working environment to attract, motivate and retain a skilled workforce that is key for business success. These dynamics strengthen reinforcing loops that, from representing a vicious cycle in a business as usual scenario, turn into virtuous cycles. This change in dominance of the underlying drivers of change in the system offers a variety of additional opportunities, via increased innovation, reputation and economic performance. Overall, we find that integrating sustainability-thinking in organisational development offers many more opportunities to drive innovation and reputation that increases projects awarded on the one hand, while reducing risks and costs of doing business on the other. The continued erosion of competitiveness experienced historically and expected in the future, in a scenario of inaction, is countered by growing speed of change and innovation. The challenge for companies is, in practice, how to maintain a vibrant innovative business environment over time.
The journey has begun. It’s time to catch up!
A general recommendation for finding the dominant elements and feedback loops of your system is to practice staff (within) and stakeholder (outside) engagement, and risk management. This way material topics and corresponding activities can be identified and included in strategic planning and corporate accounting. Specifically, it is recommended focusing on critical assets for consulting engineers (i. e. people, their skills and knowledge, as well as their ability to collaborate) that create and shape fruitful relationships with current and potential clients.
Regarding other aspects, the information provided points to a direction in which you can find understanding about the benefits of voluntary sustainability-oriented activities. The CLD can support your efforts to model, convince others of, and skillfully use BCwS according to your exposure to sector drivers and issues.