a systems and cybernetics approach to corporate

A SYSTEMS AND CYBERNETICS APPROACH TO CORPORATE SUSTAINABILITY IN CONSTRUCTION

Panagiotis D. Panagiotakopoulos

Submitted for the Degree of Doctor of Philosophy School of Built Environment Heriot-Watt University Edinburgh June 2005

This copy of the thesis has been supplied on condition that anyone who consults it is understood to recognise that the copyright rests with its author and that no quotation from the thesis and no information derived from it may be published without the prior written consent of the author or the University (as may be appropriate).

ABSTRACT Sustainability is a complex challenge that has to be met at all levels of society. The construction sector has a particular responsibility to do so, due to its significant sustainability impacts. The purpose of this thesis is to facilitate the effective transition to sustainability of construction sector companies. In order to address the complexity involved, a systems and cybernetics approach is adopted.

It is used to describe

sustainability and sustainable development as a goal and an adaptive process. At the corporate level, it is used to review a number of sustainability related concepts, methods and tools; the organisational levels for their effective implementation are then identified, using the cybernetic Viable System Model (VSM). The systems approach is also used to review a number of sustainability assessment tools for construction projects and appreciate their different properties. In order to aid the sustainability management of a specific Property Development Company (PDC), an organisational structure is designed based on the VSM. This is combined with sustainability and sustainable construction tools to form a complete management framework.

It is also used to identify the

intervention points where a PDC, or other type of organisation, can most effectively improve its sustainability performance.

Thus, this thesis offers an important step

towards the sustainability of the construction sector. .

DEDICATION This thesis is dedicated to my family: my parents Demetrios and Trisevgeni and my brother Chris. The thesis was possible not only because of their continuous support in all areas throughout my research, but, above all, because of the love and guidance they have given to me as a family through my whole life.

ACKNOWLEDGEMENTS There are a number of people I would like to thank for contributing to the completion of this thesis. First of all, my supervisor Professor Paul W. Jowitt for his support, guidance and patience throughout the course of the research, as well as for giving me the opportunity to work at SISTech. Paul has shared with me a great variety of information regarding sustainability from his wide experience that helped me identify and appreciate my topic. I also greatly appreciate the long and fruitful discussions on systems theory and sustainability, which I was honoured to have with Dr. Michael Decleris, the Honorary Vice President of the Council of State and President of the Chamber of Environment and Sustainability; his ideas and his extensive published work have been an inspiration for me and had an impact on the theoretical framework of my thesis. Regarding the case study I must acknowledge George Paschke and Elene Dawkins from Wren & Bell for our excellent collaboration and for assisting me with the data collection. Also, Derrick Turner from EDI for providing the required information and project data, which were necessary for the case study. Special thanks are also due to Hazel Dawson for her support and encouragement since the first day I arrived in Edinburgh. Finally, I want to thank Julia Paraskevopoulou for her love, support and patience throughout my difficult writing up year, as well as all my friends for the long conversations we had that helped me develop my thinking.

TABLE OF CONTENTS TABLE OF CONTENTS.................................................................................................i LIST OF TABLES .........................................................................................................vi LIST OF FIGURES ......................................................................................................vii Chapter 1 Introduction .................................................................................................1 1.1 The Skye Bridge: A case of non-sustainability.......................................................3 1.1.1 The route to Skye..............................................................................................3 1.1.2 Building the bridge...........................................................................................4 1.1.3 The problems....................................................................................................5 1.1.4 Complex issues .................................................................................................7 1.2 The research thesis ..................................................................................................9 1.3 References .............................................................................................................12 Chapter 2 Systems and Cybernetics ..........................................................................13 2.1 The Need for Systems Thinking ...........................................................................14 2.2 Systems Methodology...........................................................................................14 2.2.1 Evolution ........................................................................................................14 2.2.2 Principles .......................................................................................................17 2.3 Basic Terminology ................................................................................................20 2.3.1 What is a system .............................................................................................20 2.3.2 Systems description ........................................................................................21 2.4 Types of Systems ..................................................................................................22 2.4.1 Complex Adaptive Systems.............................................................................23 2.4.2 Human Systems ..............................................................................................28 2.5 Cybernetics............................................................................................................28 2.6 Systems Approaches to Management ...................................................................30 2.6.1 Management cybernetics and hard systems thinking.....................................33 2.7 The Viable System Model (VSM) ........................................................................35 2.7.1 VSM Description ............................................................................................36 2.7.2 VSM and variety.............................................................................................40 2.7.3 VSM applications ...........................................................................................41 2.7.4 VSM critique ..................................................................................................42 2.8 References .............................................................................................................44 i

Chapter 3 Sustainable Development .........................................................................47 3.1 Historic background..............................................................................................48 3.1.1 Economic science and capitalism ..................................................................48 3.1.2 Economic growth and the affluent society .....................................................50 3.1.3 Environmental crises and global change.......................................................51 3.1.4 The reaction to the environmental crises .......................................................53 3.1.5 The road to Sustainable Development ...........................................................55 3.1.6 The Earth Summit...........................................................................................56 3.1.7 After Rio .........................................................................................................57 3.2 Sustainability.........................................................................................................58 3.2.1 The environment.............................................................................................58 3.2.2 Man-made and natural systems interaction...................................................59 3.2.3 Definitions of Sustainability...........................................................................60 3.3 Sustainable Development......................................................................................60 3.3.1 Definition .......................................................................................................60 3.3.2 World strategy................................................................................................61 3.3.3 The ecosystem perspective .............................................................................62 3.3.4 The ecosystem analogy...................................................................................64 3.3.5 The economic perspective the meaning of Capital .....................................66 3.3.6 The human perspective...................................................................................69 3.4 The Sustainable Corporation.................................................................................71 3.4.1 Organisation of sustainable corporation concepts, methods and tools.........73 3.4.2 Triple Bottom Line .........................................................................................76 3.4.3 The Five Capitals Model................................................................................80 3.4.4 The Natural Step ............................................................................................82 3.4.5 Life Cycle Analysis.........................................................................................85 3.4.6 Sustainability Accounting ..............................................................................90 3.4.7 Ecological Footprint ......................................................................................94 3.4.8 Eco-efficiency.................................................................................................97 3.4.9 Accountability and Reporting ........................................................................99 3.5 Environmental Management Systems.................................................................104 3.5.1 ISO14001 .....................................................................................................104 3.5.2 The Eco-Management and Audit Scheme ....................................................109 3.5.3 The SIGMA Project ......................................................................................110 ii

3.5.4 EMS problems ..............................................................................................111 3.6 References ...........................................................................................................115 Chapter 4 Sustainable Construction .......................................................................120 4.1 The Built Environment........................................................................................121 4.1.1 Definitions ....................................................................................................121 4.1.2 General and UK characteristics ..................................................................122 4.2 The Construction Industry...................................................................................122 4.2.1 Definitions ....................................................................................................122 4.2.2 UK characteristics .......................................................................................123 4.3 Sustainability issues of the built environment and the construction industry.....124 4.3.1 Natural Resources Consumption .................................................................124 4.3.2 Environmental Burdens................................................................................128 4.3.3 Social and Economic Issues .........................................................................130 4.3.4 Urban Environment......................................................................................131 4.4 Sustainable Construction.....................................................................................132 4.4.1 Definitions and main concepts .....................................................................132 4.4.2 Construction Ecology...................................................................................135 4.4.3 The UK context.............................................................................................140 4.5 The Construction Project ....................................................................................143 4.5.1 The Construction Project as a system..........................................................143 4.5.2 Types of construction projects .....................................................................145 4.5.3 Types of procurement systems......................................................................145 4.5.4 Expressing the complexity of construction projects through Mind Mapping ...............................................................................................................................149 4.6 Sustainable construction assessment methods and tools.....................................153 4.6.1 Benchmarking Rethinking Construction ...................................................153 4.6.2 Life Cycle Analysis.......................................................................................156 4.6.3 ENVEST .......................................................................................................160 4.6.4 BREEAM ......................................................................................................161 4.6.5 CEEQUAL....................................................................................................163 4.6.6 SPeAR®........................................................................................................164 4.6.7 Sustainability Accounting ............................................................................165 4.6.8 Ecological Footprint ....................................................................................168 4.6.9 Other international tools..............................................................................169 iii

4.6.10 Critique ......................................................................................................171 4.7 References ...........................................................................................................175 Chapter 5 Case Study ...............................................................................................179 5.1 Property Development ........................................................................................180 5.1.1 Property Development .................................................................................180 5.1.2 The Property Developer...............................................................................181 5.1.3 Types of Property Developers......................................................................182 5.1.4 The Development Team................................................................................183 5.2 The Property Development Company.................................................................185 5.2.1 General Description.....................................................................................185 5.2.2 Mission Vision Goals .............................................................................185 5.2.3 Operation .....................................................................................................186 5.2.4 Structure and development process .............................................................187 5.2.5 Staff and Training Issues..............................................................................192 5.3 Triple Bottom Line Project .................................................................................192 5.3.1 Project Requirements and Initial Proposal .................................................193 5.3.2 Stage 1..........................................................................................................194 5.3.3 Stage 2..........................................................................................................197 5.3.4 Stage 3: Mind Maps .....................................................................................199 5.3.5 Stage 3: Data Gathering Mechanism...........................................................201 5.3.6 Stage 3: Reporting Mechanism ....................................................................204 5.3.7 Stage 4: Assessment at the Project Level.....................................................205 5.3.8 Stage 4: Assessment at the Process/Management Level ..............................208 5.3.9 Workshop and final assessment ...................................................................208 5.4 Critical Analysis of the Triple Bottom Line Project ...........................................209 5.4.1 Framework Tool...........................................................................................209 5.4.2 Policy ...........................................................................................................210 5.4.3 KPIs Monitoring Issues.............................................................................210 5.4.4 Assessment: Stage 3 .....................................................................................213 5.4.5 Assessment: Stage 4 .....................................................................................214 5.4.6 Reporting......................................................................................................216 5.4.7 Summary of TBL Project problems ..............................................................217 5.5 References ...........................................................................................................218

iv

Chapter 6 The Property Development Company as a Viable System..................219 6.1 The aims of this chapter ......................................................................................220 6.2 The appropriateness of the Viable System Model for the PDC..........................220 6.2 Description of the PDC using the Viable System Model....................................221 6.2.1 Mode of analysis ..........................................................................................221 6.2.2 Identification and Boundaries......................................................................222 6.2.3 Hierarchy .....................................................................................................223 6.2.4 PDC..............................................................................................................230 6.2.5 Development Portfolio .................................................................................234 6.2.6 Project ..........................................................................................................238 6.2.7 Property Portfolio ........................................................................................243 6.2.8 Property .......................................................................................................245 6.3 Managing Sustainability in the PDC...................................................................249 6.3.1 PDC..............................................................................................................251 6.3.2 Development Portfolio .................................................................................254 6.3.3 Project ..........................................................................................................256 6.3.4 Property Portfolio ........................................................................................259 6.3.5 Property .......................................................................................................261 6.3.6 Benefits of using the VSM to manage sustainability in the PDC .................263 6.4 Recommendations for effective implementation ................................................268 6.5 References ...........................................................................................................274 Chapter 7 Conclusions and recommendations .......................................................275 7.1 Conclusions .........................................................................................................276 7.2 Recommendations for future research ................................................................278 References ...................................................................................................................281 Appendix A Mind Maps .............................................................................................293 Appendix B Pilot Triple Bottom Line Report of the PDC ......................................296 Appendix C ..................................................................................................................309 Appendix D Acronyms of Chapters 5 & 6 ................................................................315

v

LIST OF TABLES Table 2.1 Systems Methodology Evolution and Main Contributors...............................15 Table 2.2 Evolution of Systemic Ideas ...........................................................................16 Table 2.3 Basic terminology ...........................................................................................21 Table 2.4 Properties of complex (SOHO) systems. ........................................................27 Table 2.5 Features of four social research approaches ...................................................31 Table 3.1 The Strategic Sustainable Development Model (SSDM) ...............................74 Table 3.2 An example analysis for the footprint of UK car travel per passenger-km ....96 Table 4.1 Energy use in the construction sector ...........................................................125 Table 4.2 Final energy consumption and carbon dioxide emissions by final user .......127 Table 4.3 Construction Industry KPIs...........................................................................154 Table 4.4 Environment and Respect for People KPIs...................................................154 Table 4.5 The SPeAR® sustainability sectors ..............................................................165 Table 4.6 Sustainability accounting statement for the Great Western Hospital ...........167 Table 5.1 Assessment areas...........................................................................................207 Table 5.2 Sustainability processes at the process/management level. ..........................208

vi

LIST OF FIGURES Figure 2.1 Key Distinctions between classical and systems sciences.............................18 Figure 2.2 The System ....................................................................................................21 Figure 2.3 Basic classification of systems ......................................................................23 Figure 2.4 A conceptual model of self-organising systems as dissipative structures .....25 Figure 2.5 Differences of complexity and complicatedness in a system's organisation .26 Figure 2.6 Grid of problem context and prelimiary classification of systems approaches .................................................................................................................................32 Figure 2.7 The VSM .......................................................................................................37 Figure 3.1 The systemic concept of the environment .....................................................59 Figure 3.2 General Principles of Sustainable Development as a cybernetic control system......................................................................................................................61 Figure 3.3 The Strategic Sustainable Development Model (SSDM)..............................74 Figure 3.4 Proposed mapping of SSDM levels onto the VSM .......................................76 Figure 3.5 The Triple Bottom Line Venn diagram ......................................................77 Figure 3.6 The six criteria for corporate sustainability ...................................................78 Figure 3.7 Location of the Triple Bottom Line in the VSM ...........................................79 Figure 3.8 Location of the Five Capitals Model in the VSM .........................................81 Figure 3.9 The funnel metaphor......................................................................................82 Figure 3.10 Location of The Natural Step in the VSM...................................................85 Figure 3.11 Example of a simple life cycle....................................................................86 Figure 3.12 The LCA framework and phases .................................................................87 Figure 3.13 Location of Life Cycle Analysis in the VSM ..............................................89 Figure 3.14 The three dimensions of Sustainability Accounting....................................91 Figure 3.15 Location of Sustainability Accounting in the VSM ....................................94 Figure 3.16 Location of the Ecological Footprint in the VSM .......................................97 Figure 3.17 Location of Eco-efficiency in the VSM.......................................................99 Figure 3.18 Location of Accountability and Reporting in the VSM.............................104 Figure 3.19 The Deming-PDCA cycle..........................................................................106 Figure 3.20 Location of ISO140001 EMS elements in the VSM .................................108 Figure 3.21 SIGMA Management Framework and ISO 14001 phases ........................111 Figure 4.1 Energy use in the construction sector (%) ...................................................126 Figure 4.2 Final energy consumption by final user (%)................................................127 Figure 4.3 Materials balance for the UK built environment .........................................129 vii

Figure 4.4 Temporal hierarchy of building components...............................................136 Figure 4.5 Main pathways of materials processing and storage in the system of earth and economy ................................................................................................................137 Figure 4.6 The adaptive cycle and the building life-cycle ............................................139 Figure 4.7 The Construction Project Life Cycle ...........................................................143 Figure 4.8 Five capitals Mind Map of the Skye Bridge................................................150 Figure 4.9 Five capitals Mind Map of Gateshead Millennium Bridge .........................151 Figure 4.10 Five capitals Mind Map of Egnatia Highway............................................152 Figure 4.11 Example of KPI chart and benchmark measurement ................................155 Figure 4.12 Example of radar chart showing benchmark performance for the Environment KPIs.................................................................................................156 Figure 4.13 The primary system with the functional output defined as services rather than products. ........................................................................................................159 Figure 4.14 Sustainability accounting plan of work .....................................................166 Figure 5.1 The structure of the PDC .............................................................................188 Figure 5.2 The development process of the PDC .........................................................189 Figure 5.3 The governance levels of the PDC ..............................................................190 Figure 5.4 TBL Project timeline ...................................................................................192 Figure 5.5 Mind Map showing the Policy and objective-targets-KPIs hierarchy of the whole company (contents are indicative)..............................................................200 Figure 5.6 Mind Map of Data Gathering Mechanism...................................................202 Figure 5.7 Data Gathering Mechanism showing indicative project KPIs.....................202 Figure 5.8 Example of KPI sub-set spreadsheet ...........................................................203 Figure 5.9 Triple Bottom Line reporting Mind Map. ...................................................205 Figure 5.10 Assessment spider-diagram ......................................................................207 Figure 6.2 A first approach to structuring the company hierarchy ...............................227 Figure 6.3 The model structure .....................................................................................228 Figure 6.4 System in Focus: PDC (Level 0) ................................................................231 Figure 6.5 System in Focus: Development Portfolio (Level 1) ...................................236 Figure 6.6 System in Focus: Project (Level 2).............................................................239 Figure 6.7 System in Focus: Property Portfolio (Level 1) ...........................................244 Figure 6.8 System in Focus: Property (Level 2) ..........................................................246 Figure 6.9 Sustainability at the PDC system in focus..................................................253 Figure 6.10 Sustainability at the Development Portfolio system in focus ...................255 Figure 6.11 Sustainability at the Project system in focus ............................................257 viii

Figure 6.12 Sustainability at the Property Portfolio system in focus...........................260 Figure 6.13 Sustainability at the Property system in focus..........................................262

ix

Chapter 1 Introduction

Speed bonnie boat, like a bird on the wing, Onward, the sailors cry Carry the lad that's born to be king Over the sea to Skye. Skye Boat Song Boulton and MacLeod, Songs of the North, London, 1884

The earth belongs unto the Lord And all that it contains. (Except the Western Isles alone And they are all MacBraynes) Scottish saying on the 22nd Psalm, relating to the virtual monopoly of the Western Isles Ferry service operated by David Mac Brayne (now Caledonian MacBrayne) ferry services.

Chapter 1: Introduction

Sustainable Development has become the new global value and the measure and challenge of our civilisation. It is a challenge that involves everyone and which, in the face of the global crises, needs to be urgently met. The sustainability of the built environment is central to this challenge and the construction sector is mainly responsible for facing up to it, at all levels. Corporations in general and construction sector companies in particular are major actors in meeting social needs within a capitalist society, i.e. in providing the necessary manmade infrastructure; they are thus intervening into the natural and social domains. Corporations are expected to do so in a socially and environmentally responsible manner. This thesis deals with these matters: What they are, how they are affecting man-made and natural systems, how corporations can adopt them and, most importantly, how their impacts are assessed. The complexity of the issues involved demand new ways of thinking, new methods and new tools. The need for sustainable (in a sense that will be outlined in subsequent chapters) projects, is more apparent when a project not only fails to meet the needs it was supposed to meet, but it creates more problems rendering the situation less sustainable or less desirable to the affected social groups. One understands and feels the impacts (negative or positive) of an action that has occurred much better than the probable impacts of an action that is in the planning stage. In view of this, and in an attempt to emphasize the great need for a different approach in dealing with the built environment, this first chapter begins (section 1.1) with a brief presentation of a highly controversial construction project, that of the Skye Bridge, highlighting some of the complex problems it has created. The complexity of such sustainability issues in construction projects is then discussed and they are related to the issues that this thesis is focusing on. Section 1.2 presents a birds eye view of this work.

2


1.1 The Skye Bridge: A case of non-sustainability 1.1.1 The route to Skye The Isle of Skye is the largest and most northerly island of the Inner Hebrides in Scotland. It is an island that has some of the most dramatic and challenging mountain terrain in Scotland, as well as a very rich cultural heritage of ancient monuments, castles, and memorials (Wikipedia contributors, 2005a). Traditionally, the most common and shortest route to the Isle of Skye was to cross the sound (around 500 meters) between the villages of Kyle of Lochalsh on the mainland and Kyleakin on the island's east coast. Ferries had operated in this crossing since the 1600s. In the late 19th century, the construction of rail and road connections to Kyle of Lochalsh brought forward the idea of building a bridge to the island, a task that was well within the technical capabilities of the era1 . However, the remoteness of the island, as well as its small population, could not justify (in the sense of national governmental policy) its high construction costs (Wikipedia contributors, 2005b). The increasing prosperity of the island and the summertime tourist traffic, aided by the substantial improvement of the road network both on the mainland and Skye, led to an increasing pressure on the ferry service. By the 1960s, traffic queuing for the ferries reached four hours at the height of the summer season, which resulted in reconsideration of the building of a bridge as a viable alternative. During the 1970s, traffic growth was monitored and several reports indicated that it would be difficult to sustain the ferry service by the 1990s and a bridge would be necessary (Ford, 1995). In other words, the bridge was presented as one (if not the only) alternative for meeting the socially acceptable objective of economic development 2 for the island. Apparently, and even if not explicitly spelled out, this was to be done without detriment to the physical environment and without unbearable pressure on the population. In 1986, a detailed feasibility study by the Road Authority considered three options for a fixed crossing: a tunnel, a 600m suspension bridge on the line of the ferry and a route 1

The Forth Bridge, built at that time, was more challenging in terms of the crossings length and water

depth. 2

The essence of development, as opposed to growth, will be discussed in chapter 3, in relation to

sustainable development.

3


to the west using the small islands of Eilean Ban and Eilean Dubh. The last option was recommended, as the cost-benefit evaluation concluded that this was the best solution and it was economically more viable than an upgraded ferry service. However, the total cost of the bridge was too high to be covered by the Highland Regional Council or the Scottish Office, and it was concluded that it would be at least 20 years before the bridge could be constructed by public funds (Ford et al., 1997).

1.1.2 Building the bridge In 1989, the Government consultation paper New Roads By New Means (Her Majesty's Government and Department of Transport, 1989) considered the private financing of road projects; it included the Skye bridge as a possible case for such a project. This paper eventually led to the enactment of the New Road and Street Works Act in 1991, which set the legislation that would allow private developers to design and build roads and recover the cost through tolls (Ford et al., 1997). This system of construction procurement is generally known as Design, Build, Finance and Operate (DBFO), and in particular a Private Finance Initiative (PFI), when the commissioning client is a public body (see paragraph 4.5.3). The Highland Regional Council decided that it was preferable to provide a fixed crossing immediately instead of waiting 20 years, even if this meant paying tolls, and asked the Scottish Office to take over the project as a trunk road. The Scottish Office launched a competition in 1989 to build a bridge to Skye, under the DBFO system by a private concessionaire. The rules of the competition were that (Ford et al., 1997, Ford, 1995): the developer could choose whichever bridge form he preferred and whatever route the developer should design and build the structure to the exact requirement of the Scottish Office the tolls should be no more than the charges on the existing ferry, but could be linked to inflation, the same concessions should be allowed for regular users, the concession would cease and the bridge would come under public ownership: (i) when the concessionaire company had recovered its costs, or 4


(ii) at the end of an agreed period, after which the concessionaire would bear the outstanding costs. The contract was finally awarded to the developer Skye Bridge Ltd. and their contractor, the Scottish/German construction consortium Miller Dywidag. Their proposal was for a single-span concrete arch supported by two piers resting on caissons in the water. Construction works begun in 1992 and the bridge was officially opened on October 16, 1995. Meanwhile, the government stopped the ferry service, leaving the bridge as the only year-round connection to the island. The Skye Bridge was the first PFI project in Scotland and the first PFI road project in UK.

1.1.3 The problems The Scottish Office Development Department has been severely criticised for the financial agreements it made with the developer of the Skye Bridge. The initial cost estimate for the bridge was around £24 million 1 , which was also the amount that the concessionaire would collect through tolls over the agreed period of 27 years. However, according to a 1998 report of the Commons Public Accounts Committee (1998), the true cost of the bridge borne by the public (including both toll and tax payers) was about £39 million. The extra £15 million that the Department paid were: £3 million on negotiating the PFI deal, including advisers fees, survey work, and staff costs and £12 million to, or on behalf of, the developer for constructing the approach roads to the bridge, and compensation for the cost of design changes and delay following a public inquiry. The public inquiry took place in 1992, just after the contracts had been signed, following public objections on the environmental and aesthetic aspects of the design proposed by the developer.

The detailed design was amended to satisfy the

environmental and aesthetic requirements, which were set by Scottish organisations such as the Royal Fine Art Commission, the Countryside Commission, the Nature 1

The economic figures presented here are expressed in constant 1991 prices discounted at 6% a year to

1991 base year.

5


Conservancy, the National Trust and the Scottish Natural Heritage. The costs of these design modification amounted to some £4 million and they included (Ford, 1995, Ford et al., 1997): lowering the embankments for the approach roads to preserve the natural silhouette of the islands, adding a deep chamfer on the bridges structure in order to create a shadow which would reduce its perceived massing against the landscape , planting of indigenous vegetation to recreate the existing landscape and blend the road into the countryside, construction of tunnels under the road, masonry walls, artificial holts and grooming pools to protect the local habitat of otters, which are a protected species. It is clear that the final cost would have been lower if the public had been brought into the decision-making process much earlier at least before the final design was approved and before it became officially the starting point of counting design changes. However, the main controversy regarding the Skye Bridge was over the high tolls the developer was charging to its users. Although tolls were originally cheaper from the ferry fares, they soon increased to what was said to be the highest bridge tolls in Europe 1 (Wikipedia contributors, 2005b). Again, a clear agreement on tolls and the financiers rights in raising them would have avoided undesirable social unrest. In 2002, a study conducted by Napier University (McQuaid and Greig, 2002) and funded by the Highland Council, examined the impacts of the Skye Bridge tolls on the islands economy. According to the report the Skye economy was depressed due to the tolls by the loss of around £4.67 million of income and 256 jobs each year. It concluded that even though the bridge had led to faster crossings, the tolls had considerably reduced any positive impact. Indeed, local businesses complained about the impact of the tolls on tourism and claimed that short-stay visitors and coach parties have been deterred from crossing the bridge (Ross, 2002). The importance of these impacts is 1

In 2004 a round-trip cost £11.40, fourteen times the round-trip price charged by the Forth Road Bridge

6


emphasised, if one considers the remoteness of the islands rural community and its, anyhow, bad economic situation. From the first day the bridge opened, public opposition to the tolls started to grow with several people refusing to pay the tolls. The opposition led by the local group Skye and Kyle Against Tolls (SKAT) and the veteran campaigner Robbie the Pict, involved mass protests and a non-payment campaign. Several people were arrested, convicted and even put to jail for refusing to pay the tolls (Wikipedia contributors, 2005b). Eventually, on December 21 2004 the tolls were abolished after the Scottish Executive bought the bridge from the developer for £27 million.

The total amount of tolls

collected by the developer was around £33 million. The 21 workers who collected the tolls lost their jobs. Total cost to the public: £39 million for initial cost, plus £33 million in tolls for 9 years, plus £27 million for buying out, which totals to £99 million (minus of course the benefit of the 9-year use, but plus the economic impacts in and out of the island) 1 .

1.1.4 Complex issues Construction projects are built in order to cover a specific need, such as facilitating transportation by connecting an island to the mainland as in the Skye Bridge case. The challenge of meeting such needs was traditionally considered a technical and technological (and of course financial) issue, where the roles of the engineer and the architect were paramount in providing the solutions in technical problems. This can be witnessed by the praising and admiration of engineers and architects, especially during the 19th century of the engineering miracles, such as the Suez Canal and the Forth Bridge in Scotland. During the second half of the 20th century though, the adverse impacts of human activities including those of the construction industry on the environment and society as a whole started to be realised. The growing need to understand and study the relation of human activities with the environment and society, broadened the scope from 1

This figure is not precise and is mentioned elsewhere as £93 million. The objective here is not an

economically precise analysis but a presentation of the types and the order of magnitude of the costs involved.

7


simply technical issues to more holistic and complex ones, and eventually led to the concept of sustainable development. The above short description of the Skye Bridge intends to reveal some of these complex issues that emerge in the development and operation of construction projects. The Skye Bridge succeeded in providing a fixed crossing within the given specifications. However, it failed to cover the need for which it was constructed, i.e. the economic development of the island. Moreover, it failed to meet the implied constraints regarding social acceptability and economic viability. From a social perspective, the cease of the ferry service and the distant location of the new bridge crossing resulted in the break of the traditional link between the communities of Kyle of Lochalsh on the mainland and Kyleakin on the island. From a financial perspective, the PFI contract that was supposed to provide a value-for-money deal was inadequately conceived and poorly negotiated at least from the publics point of view. It resulted in an economic burden not only on the local residents of Skye who were the main toll payers, but also on tax payers. These impacts led to continuing public discontent and opposition. The project also had a substantial impact on the environment. Regardless of whether it was positive or negative, the point is that it was not explicitly counted, either as a trade-off versus economic or social detriments, or as an additional cost which had to be born by some social groups mainly the local residents. In short and using the terminology adapted in this thesis, the Skye Bridge project was non-sustainable. Instead of constituting a solution to a specific problem, it created more problems without addressing the original one. The complex and interrelated factors involving social, economic and environmental issues were not studied in an ordered and balanced manner. There was no general framework for assessing the complex issues and for arriving at a viable or sustainable compromise regarding the aspirations, the constraints, and the achievements of the project. The Skye Bridge case has substantiated the need for new analytic tools which are the subject matter of this thesis. Hopefully, this work will contribute towards building more sustainable projects.

8


1.2 The research thesis The thesis of this research is that in order to fully understand, study and operationalise sustainable development in general and sustainable construction in particular, a systems approach is needed. This thesis is expressed with a reference to a company, but the same need will be necessary to study and operationalise sustainability at other levels, such as that of the construction industry and the built environment. Focusing on the company level, a systems approach is necessary to relate the company with its environment and to properly realise the issues and challenges it has to face in order to be sustainable. Due to the complexity of these issues, which involve the interaction of the companys environment, operations and management, a cybernetic approach is also considered necessary to study the function of the company and facilitate its transition to sustainability. In short, the objective of this thesis is to facilitate the effective transition to sustainability of construction sector companies, by using a systems and cybernetics approach. The target reader (or, to be more exact, the target user) of this work might be: Either a corporation (preferably a construction-related one) willing to manage and improve its sustainability performance Or a public authority wishing to assess the sustainability performance of construction-related, or property development, companies or corporations within its realm. The dissertation consists of seven chapters that can be grouped in two Parts: The first Part (chapters 2, 3 and 4) deals with the basic concepts and issues involved, as they have been developed and presented in the literature. The second Part (chapters 5 and 6) deals with a real case study, where the issues and concepts of the first Part are viewed, criticized and applied to a specific property development company.

Eventually, a new tool or approach is

formulated and proposed for enhancing the sustainability performance of corporations. Chapter 2 gives an introduction to the systems approach and presents its strengths in studying complex phenomena such as those of sustainability. It focuses on complex adaptive systems and on human systems both necessary components of sustainable development and presents some recent systems approaches to their study. Then, the focus is turned to the more specialised theory of cybernetics, which studies the 9


purposeful behaviour and control of systems, and in particular its application on the management of organisations. Finally, the cybernetic Viable System Model (VSM) is presented as a tool for organising sustainability concepts, methods and tools in the corporate context; this model is used in the second Part (chapter 6) for the development of the case study. Chapter 3 connects the systems approach with sustainability; a historic review of the evolution of the sustainability concepts is presented pointing out how the traditional analytic thought and its scientific descendant, the economic science, are responsible for todays global environmental and social crises and how systems thinking allowed the emergence of the sustainable development concept. The chapter also deals with the concept of sustainable corporation and it refers briefly (but with a critical view) to the various tools, methods and management systems that have been developed and used for assessing or improving the sustainability performance of corporations. Moreover, the VSM is used as a general organisational model, in order to organise and hierarchically structure a number of representative sustainability concepts, methods and tools for corporations.

Various existing environmental management systems are evaluated

through the VSM. Chapter 4 focuses on the built environment and the construction sector. The built environment covers the bulk of man-made systems within which humans live and are active and the construction is responsible for producing, maintaining and demolishing it. The role, operation and some general characteristics of the built environment and the construction industry are presented, as well as their sustainability impacts. Then, their relation to sustainability and sustainable development is examined, in other words the concept of sustainable construction. The construction project is broadly described as a system consisting of sub-systems which correspond to the different phases of its development, namely the design, construction, operation and end-of-life. Moreover, it includes the supply chain which provides the projects necessary material and energy inputs. Different types of construction projects are presented, categorized according to their purpose, ownership, size and especially their procurement route. Examples of construction projects are also given, which are presented by using the Mind Mapping technique. These show some of the sustainability issues and challenges involved in the development of construction projects. Finally, the available methods and tools for

10


assessing and reporting sustainability performance in construction are briefly presented and critically reviewed. Proceeding to the second Part of the dissertation, chapter 5 presents a specific Property Development Company (PDC), which is interested in improving its sustainability performance and in properly monitoring and reporting that performance. First, the general term property development is defined and some types of property developers (types of PDCs) are briefly presented. Then focusing on the specific PDC, its structure and operations are first described, followed by an analytical description of the development of a Triple Bottom Line assessment and reporting system. The experience gained from the development of this system is recorded and reviewed here in detail, in order to identify the problems and to propose a satisfactory and effective new approach. In chapter 6, the findings of the case study in chapter 5 are used to construct a Viable System Model of the specific PDC, which is expected to facilitate the effective management and transition of the PDC to sustainability. The formulation of this model, but especially the detailed outline of the procedure for doing it, is essentially one of the main contributions of the dissertation. Moreover, some general recommendations for the effective management of sustainability in property development companies are given, which are based on the findings of the VSM analysis. Hopefully, analogous applications to other companies would follow, based on the steps outlined in this work. The last chapter contains the main conclusions and the recommendations for future research.

11


1.3 References Davis, D M P & Parliament. House of Commons. Committee of Public Accounts (1998) 42nd report [session 1997-98]: the Skye Bridge, London, Stationery Office. Ford, C (1995) The Skye crossing. The ministerial opening of the Skye Crossing. Linking the Isle of Skye with mainland Scotland. Dunsmore Consultancy Limited. Ford, C, Johnston, G C, Douglas, H R, Henderson, J R & Valentine, W H (1997) Skye crossing - a design, build, finance and operate project. Civil Engineering, 120, 46-58. Her Majesty's Government & Department of Transport (1989) New roads by new means: bringing in private finance, HMSO. McQuaid, R & Greig, M (2002) An Economic Assessment of the Skye Bridge Tolls, Prepared for the Highland Council. Ross, J (2002) Skye to gain £5m if bridge tolls go, The Scotsman, 25 June 2002

Wikipedia contributors (2005a) Isle of Skye - Wikipedia: The Free Encyclopedia, http://en.wikipedia.org/wiki/Isle_of_Skye (accessed 27 April 2005) Wikipedia contributors (2005b) Skye Bridge - Wikipedia: The Free Encyclopedia, http://en.wikipedia.org/wiki/Skye_Bridge (accessed 27 April 2005)

12

Chapter 2 Systems and Cybernetics

It is clear that we must obtain knowledge of the primary causes, because it is when we think that we understand its primary cause that we claim to know each particular thing. Now there are four recognized kinds of cause. Of these we hold that one is the essence or essential nature of the thing []; another is the matter or substrate; the third is the source of motion; and the fourth is the cause which is opposite to this, namely the purpose or good; for this is the end of every generative or motive process.] Aristotle, Metaphysics, Book I, 983b

...we must stop acting as though nature was organised in the same way as university departments are. Ackoff, R L (1960)

Chapter 2: Systems and Cybernetics

2.1 The Need for Systems Thinking The classical scientific method was founded by Galileo (Dialogues 1625-29) and Descartes (Discourse on Method, 1637) and was completed by Newton (Principia, 1713), during the 17th and 18th centuries. It was mainly based on the analytic-deductive method, developed by Descartes, which aims to study complex phenomena, by dividing them into small parts and studying them separately, in order to gradually understand the whole. The analytic method became the philosophical basis of positive sciences which had great success in the production of knowledge and in the birth of the technological and industrial revolutions. By the end of the 19th century and during the 20th century, the classical sciences reached their limits in explaining the world. The theories of Einstein about relativity and those of quantum physics shook the philosophical and epistemological grounds of the classic method. Moreover, the complexity of the new phenomena under study (e.g. biological and social) could not be explained by the simple tools of physical sciences. Systems thinking or the Systems approach can be regarded as a major re-orientation or paradigm shift of the sciences which complements and transcends the analytic method. It studies complex phenomena, by using a different world-view which focuses on the whole rather than the parts. Moreover, it is an interdisciplinary science aiming to find common ideas and reintegrate the various scientific disciplines, which have been and still are continuously divided under the influence of centuries of analytic thought.

2.2 Systems Methodology 2.2.1 Evolution Below follows a brief history of the systems methodology as it evolved in the 20th century, based on Decleris (1986). Systems methodology is not the product of only one, but of many scientific and technological disciplines. Even though many associate it with the work of Ludwig von Bertalanffy in biology indeed he was the first to formulate the General Systems 14


Theory systemic thought started to develop since the beginning of the 20th century in various scientific domains dealing with complex problems. Table

!

..1 shows the evolution of systems methodology and its main representatives for each scientific field. Table 2.2 shows how facing more and more complex problems lead systems scientists to elaborate the systems methodology. Biology: Bertalanffy (1932) Linguistics: Saussure (1916) First Phase (19161940): Precursors

Psychology: Kohler (1929) Anthropology: Malinowsky (1926), Radcliffe-Brown (1935) Sociology: Talcott Parsons (1937)

Second Phase (19401945): Practical Orientation

Operations Research: Rowe, Blackett's Circus (1941), Rand (1946) Policy Science: Lasswell (1951) Mathematical Theory of Communication: Shannon (1948) Cybernetics: Wiener (1948), Ashby (1952) Network and Linear Systems Theory:

Third Phase (19451970): Formation Hard Systems

Guillemin (1957) General Systems Theory: Bertalanffy, Boulding(1956) Society for General Systems Research: (1954) Systems Analysis Systems Construction Systems Management Social Systems Construction: (Spatial Planning,

Fourth Phase (1970 ): Spreading Soft Systems

Transportation, Education) Human Systems National Systems Organisations- International Institutes

Adapted from (Decleris, 1986)

Table

!

..1 Systems Methodology Evolution and Main Contributors 15


Problem

Idea

First Phase (19161940)

Description of Complex Objects/Phenomena

Definition and Enouncement of Basic Systemic Ideas

Second Phase (19401945)

Coordination of Complex Actions

Compilation of Optimum Theoretical Model (Modelling/Optimisation)

Third Phase (19451970)

Information Transmission, Construction of Complex Artefacts

Information (Information and Control Systems)

Fourth Phase (19701992 )

Uncertainty and Change in Complex Systems Behaviour

Dynamic Systems, Information Processing Systems

Fifth Phase (1992 )

Global Change, Ecological Crisis

Sustainability


Table 2.2 Evolution of Systemic Ideas

The first phase of the precursors was mainly focused at the systems theory level, which departed from the traditional analytical and deductive method. During the second phase the methodology had a more practical and technological application due to the complex problems that arose with World War II. Efficiency and accuracy were the goals for the organisation of large scale human and technical systems. Operations Research was born during this phase from the development of military and weapons systems.

The connection of systems thinking with practical problems and their

demands, led to a methodology of which the completeness and pertinence were tested in practice. The highly developed systems-based technology boosted the development of new scientific fields which led to the third phase of refinement of the systems methodology. Cybernetics and the Mathematical Theory of Communication are the most characteristic new fields which had a great impact to science, especially by the discovery of the measurable concept of information. Electrical Engineering was the field where the methodology gets perfected and becomes hard and irreplaceable. The machines that were constructed got all the more complex by trying to simulate the human mind, thus closing the gap between man and machine. The scientists started to understand better 16


their own way of thinking and collective behaviour and gradually build models from linear systems to circuits to networks. Engineers, confident by their technical achievements, decided to apply the systems thinking to large scale human-machine systems (Systems Engineering). The method, backed by the use of mathematical models, was adopted by various other scientific fields (biology, ecology, psychology etc.) leading to the establishment of the Society for General Systems Research and the enouncement of the General Systems Theory. The fourth phase is characterized by the world spreading of the systems methodology and its application to solve complex social problems. The methodology was being taught in universities and it led to the establishment of international research institutes such as the International Institute for Applied Systems Analysis. Many scientific fields adopted the methodology, but principally during this period, it started to help solve problems arising in human systems and proved to be very effective in fields such as Systems Management, Spatial Planning, Urban Development, Education etc.

The

complexity of these problems is very high indeed due to the soft character of human systems in contrast with the hard technological systems of the previous phase. It can be argued that we are currently in the beginning of the fifth phase of systems methodology. This phase also deals with highly complex problems of human systems, but this time under the pressure of the Global Change and Ecological Crisis. The development of the sustainability science is the modern field of the systems methodology where its use is truly irreplaceable.

2.2.2 Principles Figure 2.1 shows the basic distinctions between classical and systems sciences which are briefly presented below based on Decleris (1986) and Banathy (2003). Systems methodology always regards its object of study as a unified and indivisible whole (the system). This stems from the fact that the whole has different properties than those of its parts, and therefore it is distinguished from them. In other words, the whole is more than the sum of its parts. The appearance of the different properties of the whole is called emergence, and it originates from the multiple and complex 17


interactions of the parts.

For this reason, systems methodology is particularly

appropriate in studying complex systems where emergent phenomena appear.

In

contrast, the classical method is based on analysis, which attempts to identify and study the smallest possible part, and on deduction, which attempts to explain the whole from the properties of its constituent parts.

Adapted from Banathy (2003)

Figure 2.1 Key Distinctions between classical and systems sciences

18


The classical method is deterministic and attempts to reveal cause and effect relationships that may provide an explanation for the various phenomena. Systems methodology considers the behaviour of systems, especially complex ones, as nondeterministic and restricts cause and effect explanations for small and simple systems (e.g. physical, mechanical). On the contrary, systems methodology is teleological, meaning that it attempts to understand the behaviour of complex systems by studying their purpose1 . Therefore the question that a systems scientist poses is what does a system do rather than what is a system. Systems methodology involves the construction of theoretical system models that describe the function and operation of the system under study.

These allow the

scientific simplification (abstraction) of the complex whole by retaining and presenting its characteristic properties, aided, when possible, by mathematical processing (measurements).

However, systems methodology is not concerned only with the

generation of scientific knowledge; the system model is built in order to optimise the system under study. The intervention of the systems scientist is a basic element of systems methodology, and the scientist is regarded as part of the system under study. Consequently, systems methodology represents a unification of theory and action. Finally, systems methodology is trans-disciplinary, i.e. it is appropriate for all scientific disciplines.

The continuous specialisation and splitting of the scientific

disciplines has increased the amount of available scientific information. However, much of this information has not become significant scientific knowledge, as scientists, confined in their disciples, cannot communicate with each other and because many specialised theories are so specialised that they are not meaningful.

Systems

methodology can be regarded as a movement for the unification of scientific disciplines, as it uses synthetic thought and provides a common language that allows the communication between scientific disciplines. In broad terms we can summarise systems methodology as having four steps to develop a systems model (Decleris, 1986, Banathy, 2003): 1. Identification of the system and setting of its boundaries. (Where is the system?)

1

This teleological orientation is not related to the old philosophical (or metaphysical) theories about the

purpose of beings.

19


2. Description of the role and function of the system in relation to its environment higher system. (What does the system do?) 3. Description of the internal structure of the system. (How is the system made up?) 4. Description of the successive system states; evolution of the system through time. (Where does the system go?)

2.3 Basic Terminology 2.3.1 What is a system According to Decleris (1986): A system is a semi-autonomous organized set consisted of interrelated parts, i.e. parts that have interdependent and interactive connections. Put more simply a system is: elements working together as a whole (ISSS, 2003), or a family of relationships among the members interacting as a whole (Banathy, 2003) These definitions show the high degree of abstraction of the system concept, which makes it appropriate to describe any type of system, be it a machine, an organism or a human organisation.

The organisation and order which is inherent in a system,

differentiates it from just random sets of elements, for example a bag of groceries (Decleris, 1986). Systems science accepts that the objective world is made out of interrelated systems and is dealing with their construction to solve specific problems. This happens first of all at the theoretical level.

The system is a theoretical model constructed by the

scientist and used to intervene in reality. This synthesis depends on the complexity of the problem and the goal of the scientist. If the problem is relatively simple, analysis of its parts might be enough to solve it. But if it is more complex, the systems scientist should design a system, taking into account only those parts of the problem that will help him achieve his goal. Thus, the systems scientist simplifies the complex problem

20


without losing the whole picture. How realistic this model is, will be tested in action (Decleris, 1986).

2.3.2 Systems description In order to describe a system one has to look at it in terms of its structure, its various functions and its evolution as seen in Figure 2.2 and Table 2.3. The definitions of some basic elements of the figure are given below, based on Decleris (1986).

Figure 2.2 The System

Structure

Function

Evolution

Components Connections Boundaries Environment Hierarchy Heterarchy

Input Output Conversion Feedback State Steady state Disturbance Stress Conflict

Trajectory Growth/ Development Morphogenesis Transformation Adaptation Complexity Entropy Crisis Catastrophe

Adapted from Decleris (1986)

Table 2.3 Basic terminology 21


Structure is the rather constant organisation of the system in space and time, i.e. the configuration of its elements and the plexus of its functions. Components or elements are the essential and constant parts of the system that can be identified to contribute to the behaviour of the whole. Connections are the interactive relationships connecting the elements of the system. Boundary is the real or abstract delineation between a system and its environment. The boundary limits are the limits of the systems control. The Environment of the system comprises the factors that influence the system and can be influenced by it, but are not under the control of the system. Very few systems are closed, meaning that their boundaries are sealed, and those that are closed tend to decay under the influence of the second law of thermodynamics. Most systems are more or less open influencing and being influenced by the environment. Control is the mechanism that preserves the structure/function of the system and ensures its outputs. Fundamental for the control is the feedback which is the function through which the system is informed about any divergences of its behaviour and corrects it. Steady state is the state of the system that remains the same or almost the same, despite of the changes in the environment (dynamic equilibrium). Growth or Development of a system refers to its size, i.e. the number of its elements and their differentiation, leading to the multiplication of its hierarchical levels and interconnections.

This morphogenesis process is ongoing, causing the multiple

transformations of the system state towards more organised complexity (discussed in a later section).

2.4 Types of Systems In systems theory there can be found many different classifications of systems. Figure 2.3 shows a basic classification of systems where the main distinction is made between hard and soft systems. Hard systems are those that can be described with precision and their behaviour can be fully controlled. This happens because they can be quantified. Hard systems are the technical and physical systems. In contrast, soft systems and in particular human systems have certain distinctive characteristics. First of all, they are highly complex, meaning that they have a big differentiation in their components as well as a multiplicity and variety of functions and controls. This makes them very 22


difficult to describe or model with accuracy. They are usually self-organised, dynamic and have multiple levels of hierarchical control.


Figure 2.3 Basic classification of systems

Next, two types of systems that are particularly relevant to the topic of sustainability, are presented in more detail: Complex Adaptive Systems and Human Systems.

2.4.1 Complex Adaptive Systems Complex systems thinking or Complexity Theory is a new scientific discipline which is based upon the developments of the past three decades in the fields of chaos theory, catastrophe theory, non-equilibrium thermodynamics and self-organisation. It studies the way new properties emerge in complex systems from the interaction with their environment. These systems are also called Complex Adaptive Systems (CAS). Central to the study of CAS is the phenomenon of self-organisation, which tries to explain how order can be crated out of chaos. Recent developments in thermodynamics (Schneider and Kay, 1994) classify open systems in those that are: (i) at equilibrium, (ii)

23


displaced from equilibrium and (iii) held away from equilibrium (Allen, 2002)1 . While common systems that are in equilibrium are fairly well understood, far-fromequilibrium models are just being developed. Schneider and Kay (1994) reinterpreted the well known second law of thermodynamics which states that closed systems will run down to equilibrium (increasing their entropy) by looking at the reverse situation: when a system is not allowed to. Open systems (such as ecosystems or human systems) in contrast to closed ones, exchange and process high quality energy or exergy with their environment, which tends to keeps them away from equilibrium. If this energy is increased, the system will be pushed further away from equilibrium. The restated second law of thermodynamics states that open systems resist this movement away from equilibrium. After a critical point which is called the catastrophe threshold, the open system will respond to the increasing inputs of energy and materials with the spontaneous emergence of new, reconfigured organised behaviour that uses the high quality energy to build organise and maintain new structures (Kay et al., 1999), (see Figure 2.4). The latter are called dissipative structures and were first introduced by Prigogine (Nicolis and Prigogine, 1977). By developing new structures the system succeeds in dissipating the excess energy and thus resisting to be pushed further away from equilibrium 2 . According to the theory of non-equilibrium thermodynamics these self-organisation processes develop in a way that captures increasing resources (exergy and materials); makes more effective use of resources; builds more structures and enhances survivability (Kay et al., 1999). However, there is in principle an upper limit to this organisational response, after which the system is overwhelmed and its behaviour leaves the domain of self-organisation and becomes chaotic. In other words there is a

1

The difference between equilibrium and the other states can be understood with the example of a ball in

a cup. When the ball is at equilibrium it rests at the bottom of the cup. If the cup is shaken so that the ball is moving around the cup from time to time, we have a non-equilibrium system, caused by temporal disturbance. If someone rotates the cup so that the ball is held on its walls, we have a far-from equilibrium system. In the latter case the ball is held away from equilibrium by the constant centrifugal force, so far-from-equilibrium systems need a constant input of energy or matter. The problem becomes more complicated if we imagine that some non-equilibrium or far-from-equilibrium systems behave as if the ball jumps from one cup to another (Allen, 2002). 2

Two simple examples of such structures in physics is the vortex that suddenly appears in a draining

bathtub, or the formation of tornadoes.

24


window of vitality, or a maximum and a minimum distance from equilibrium, within which self-organisation can occur.

Adapted from Kay et al. (1999)

Figure 2.4 A conceptual model of self-organising systems as dissipative structures

A very important characteristic of CAS is that they are hierarchical. The components of hierarchically organised systems can be called holons and have a double nature: they are at the same time a whole made of smaller parts and a part of some greater whole (Giampetro and Mayumi, 1997).

This nested network of holons is referred to as

holarchy. Unlike traditional hierarchies such as those in armies where upper levels impose their power on lower levels (top-down regulation), holarchies have reciprocal power relationships between levels (top-down and bottom up regulation). This is why Kay et al. (1999) refer to CAS as Self-Organising Holarchic Open (SOHO) Systems. According to Allen (2002), emergence is the creation of new organisation that arises through the development of new relationships of control and constraint. However, he notes that the key to appraising increasing organisation is to distinguish between complicated and complex systems. Their differences can be seen in Figure 2.5. As a system becomes more complicated in order to solve local problems, there is no increase in flux or organisation, but rather the adding of new parts that are the same 25


with old parts (Figure 2.5-a). Increasing complexity, though, results in the elaboration of organisation rather than the elaboration of just structure (Figure 2.5-b) 1 . In other words, complex systems are rich in organisation, while complicated systems are rich in detail.

Adapted from (Allen, 2002)

Figure 2.5 Differences of complexity and complicatedness in a system's organisation

The different parameters that describe a system at a certain point in time are called the systems state. A systems state can be represented as a point in a high dimensional space, called phase space, whose axes are its parameters and whose coordinates are their current values (Clayton and Radcliffe, 1996). An attractor is a point, a line or an area in the phase space where the systems state is attracted (e.g. a gravity well). In CAS an attractor is the set of behaviours which are coherent and organised within limits. When self-organisation occurs in a system, it shifts between attractors. The reorganisation that these shifts involve is not smooth and continuous but rather step-wise and happens in dramatic ways (Kay et al., 1999).

1

In the engineering context a complicated system is a large beam structure, while a complex system is the

urban transportation system.

26


The characteristics of CAS that were briefly presented above are intended to show a small part of the new developments that happen in the broader scientific field of complexity. Some of the most important characteristics of CAS or SOHO system were summarised by Kay (1999) and are presented in Table 2.4. These new concepts are not simply discoveries of yet another scientific discipline, but they should be better viewed as a new scientific paradigm, as they are applicable to all types of complex systems (biological, ecosystems, human) and they are based on different epistemological foundations. System

Properties

Non-linear

Behave as a whole, a system. Cannot be understood by simply decomposing into pieces which are added or multiplied together.

Hierarchical

Are holarchically nested. The system is nested within a system and is made up of systems. The control exercised by a holon of a specific level always involves a balance of internal or self-control and external, shared, reciprocating controls involving other holons in a mutual causal way that transcends the old selfishaltruistic polarizing designations. Such nestings cannot be understood by focusing on one hierarchical level (holon) alone. Understanding comes from multiple perspectives of different types and scale.

Internal causality

Non-Newtonian, not a mechanism, but rather is selforganizing. Characterized by: goals, positive and negative feedback, emergent properties and surprise.

Window of vitality

Must have enough complexity but not too much. There is a range within which self-organization can occur. Complex systems strive for optimum, not minimum or maximum. Equilibrium points may not exist for the system.

Dynamically stable? Multiple steady states

There is not necessarily a unique preferred system state in a given situation. Multiple attractors can be possible in a given situation and the current system state may be as much a function of historical accidents as anything else.

Catastrophic behaviour

The norm: Bifurcations: moments of unpredictable behaviour. Flips: sudden discontinuities, rapid change.

Chaotic behaviour

Our ability to forecast and predict is always limited, for example to between 5 and 10 days for weather forecasts, regardless of how sophisticated our computers are and how much information we have.

Adapted from (Kay et al., 1999)

Table 2.4 Properties of complex (SOHO) systems.

27


2.4.2 Human Systems Human systems are also Complex Adaptive Systems, thus they are self-organising and self-regulating, hierarchical and dynamic. However, according to Decleris (1986) they have certain distinct characteristics that make them unique compared to other living and soft systems. First of all, their complexity is mainly due to the high differentiation of their elements, and their functional networks and controls in terms of intensity, multiplicity, density and variety. This complexity renders them particularly difficult to represent in models, thus system models attempt to capture their structure and functions in approximation and abstraction. In Section 2.6 some of the many approaches to study human systems will be presented from the viewpoint of management. Very important is the purposeful behaviour of human systems. Action, which is a human characteristic, is based on decision in order to fulfil a particular purpose. The existence of purpose in human systems makes them different from other adaptive systems as, instead of passively adapting to the environment, they deliberately change it through their actions. Decisions are themselves based on values, which are used as criteria to choose a particular purpose and action. Values are constantly transformed inside human systems, as people are confronted with the decisions and values of other people. This value transformation is one of the most characteristic functions of human systems according to Decleris.

Moreover, human action constantly produces new

information which renders human systems non-deterministic and stochastic. Finally, the multiple controls of human systems are both centralised and decentralised, making them difficult to control or design. However, they usually contain a critical sub-system which can control the behaviour of the whole system (Decleris, 1986). The more developed this subsystem is, the more purposeful the behaviour of the system will be.

2.5 Cybernetics The term Cybernetics derives from the Greek word kybernetes or steersman, which according to Plato means the science of effective governance. It was revived and elaborated by the mathematician Norbert Wiener, who was inspired by the war time 28


efforts to develop mechanical control systems (such as servomechanisms and antiaircraft guns), as well as from the development of The Mathematical Theory of Communication by Shannon and Weaver (1949).

In 1948 Wieners book

Cybernetics, or the study of control and communication in the animal and the machine (Wiener, 1948), set out to develop a general theory of organisational and control relations in systems (Heylighen and Josslyn, 2001). Since then, Information Theory, Control Theory and Control Systems Engineering have developed into independent disciplines. Cybernetics, however, attempts to study the control and communication not only in engineered, artificial systems, but also in evolved, natural systems, such as organisms and societies, which are capable of setting their own goals rather than being controlled by their creators. It is an interdisciplinary science, which has expanded from the original focus on machines and animals to the study of life and mind and the explanation of their purposeful or goal-directed behaviour (Heylighen and Josslyn, 2001). This is essentially a revival of Platos ideas about control relations in society. In the 1950s, cybernetics was incorporated into the General System Theory (GST), framework founded at about the same time by Ludwig von Bertalanffy, though cybernetics was more specifically focused on goal-directed, functional systems with some form of control relation. Many modern sciences were crucially influenced by cybernetics: control theory, computer science, information theory, automata theory, artificial intelligence and artificial neural networks, cognitive science, computer modelling and simulation science, dynamical systems, and artificial life. Moreover, many of the concepts that are central to these fields, such as complexity, selforganisation, self-reproduction, autonomy, networks, connectionism and adaptation were first explored by cyberneticians during the 1940s and 1950s (Heylighen and Josslyn, 2001). The first cybernetic scientists in the post-war era attempted to explore the similarities of technological and biological systems. Thus, the emphasis was put on the engineering approach where the behaviour of the system is determined by the designer.

This

approach is called First-Order Cybernetics, which studies mechanical systems whose structure and behaviour is known to a high degree. In this case the theoretical model of the system is considered to be the same as the real system. Many of the pioneers in 29


cybernetics, however, started to study more the self-organising and autonomy phenomena in systems and the role of the observer. According to quantum physics, observer and observed cannot be separated, and the result of the observation will depend on their interaction. The observer was considered to be a cybernetic system himself which tries to construct a model of another cybernetic system.

This calls for a

cybernetics of cybernetics, i.e. a Second-Order Cybernetics (Heylighen and Josslyn, 2001). Cybernetics focuses on those properties of systems that are independent of their concrete material or components. This allows it to describe physically different types of systems such as electronic circuits, brains and organisations with the same concepts, and to look for isomorphisms between them. In order, though, to abstract a systems aspects or components while still preserving its essential structure and functions, one has to consider relations.

Such relational concepts used in cybernetics are order,

organisation, complexity, hierarchy, structure, information and control (Heylighen and Josslyn, 2001).

2.6 Systems Approaches to Management As we saw in section 2.2.1, during the 1970s and even before the systems approach started to be applied to human and social systems, and in particular to management problems. However, according to Jackson (2000) at this time and even during the 1980s, traditional systems thinking within the social and management sciences became subject to criticism, which eventually gave birth to new systems approaches, such as soft system thinking, organisational cybernetics and critical systems thinking. In order to study the contribution of systems thinking within the social and management sciences, Jackson (2000) proposes the study of the underlying social theory paradigm of each systems methodology. This can aid in the classification of systems methodologies and the understanding of their strengths and weaknesses. Thus, in his book Systems Approaches to Management (Jackson, 2000), Jackson classifies systems approaches into four types: functionalist, interpretive, emancipatory and post-modern. differences of these types of approaches can be seen in Table 2.5.

30

The


Features

Functionalist

Interpretive

Emancipatory

Post-modern

Basic goal

Demonstrate lawlike relations among objects

Display unified culture

Unmask domination

Reclaim conflict

Method

Nomothetic science

Hermeneutics, ethnography

Cultural and ideological critique

Deconstruction genealogy

Hope

Efficiency, effectiveness, survival and adaptation

Recovery of integrative values

Reformation of social order

Claim a space for lost voices

Organisation metaphor

Machine, organism, brain, flux and adaptation

Culture, political system

Psychic prison, instruments of domination

Carnival

Problems addressed

Inefficiency, disorder

Meaningless, illegitimacy

Domination, consent

Marginalisation, conflict, suppression

Narrative style

Scientific/ technical, strategic

Romantic, embracing

Therapeutic, directive

Ironic, ambivalent

Time identity

Modern

Pre-modern

Late modern

Post-modern

Organisational benefits

Control, expertise

Commitment, quality of work life

Participation, expanded knowledge

Diversity, creativity

Mood

Optimistic

Friendly

Suspicious

Playful

Social Fear

Disorder

Depersonalisation

Authority

Totalisation, normalisation

Adapted from (Jackson, 2000)

Table 2.5 Features of four social research approaches

Moreover, Jackson and Keys (1984) attempted to formulate a set of systems methodologies in order to discover the efficacy of particular approaches in various problem contexts. This resulted in the System of System Methodologies (SOSM) which used a two dimensional grid to classify the various systems approaches according to their assumptions about problem situations (Figure 2.6). The vertical dimension defines the nature of the systems in which the problems of concern are located, in terms of their complexity. The horizontal dimension defines the nature of the relationships between the participants who have an interest in the problem situation and its improvement in terms of the divergence in values and interests. In later versions of 31


the SOSM (Jackson, 2000) the vertical dimension was divided into simple and complex and the horizontal in unitary, pluralist and coercive, resulting in a six-celled matrix of problem contexts, as seen in Figure 2.6. With the use of this grid various systems approaches were classified by Jackson (2000).

Adapted from (Jackson, 2000)

Figure 2.6 Grid of problem context and prelimiary classification of systems approaches

Hard systems thinking (classical operational research, systems analysis, systems engineering) was set in simple-unitary contexts, as it takes as given that it is easy to establish objectives and for the system in concern and model it mathematically. Organisations as systems (socio-technical and contingency theories) and organisational cybernetics have complex-unitary contexts, as they use the analogy of the organism rather than the machine and view systems as complex (interrelated parts, open, evolving, probabilistic, with purposeful parts). On the other hand they are weak in resolving differences of value, opinion and conflict and are based upon pre-existing 32


unitary agreement among the participants about the goals to be pursued. All of the above approaches belong to the functionalist sociological paradigm, as seen in Table 2.5. The various soft system approaches were identified in simple-pluralist and complexpluralist contexts. Here approaches such as Checklands Soft System Methodology (SSM) (Checkland, 1999) and Ackoffs Interactive Planning (Ackoff, 1999) do not attempt to produce an objective model of the world, but rather to introduce subjectivity by expressing the different world views of the participants or stakeholders. The primary goal is organisational change and gaining commitment of participants to a particular course of action and emphasis is put on values, beliefs and philosophies (Jackson, 2000). In terms of the sociological paradigms, soft system approaches belong to the interpretive type. Finally, emancipatory system approaches, such as Critical Systems Heuristics (Ulrich, 1983), are concerned with who benefits from proposed changes or new systems designs or where there is coercion. In simple-coercive problem contexts the sources of power imbalance are relatively obvious, while in complex-coercive contexts coercion is embedded structurally in organisation and society, and the sources of power and domination are masked by the systems complexity (Jackson, 2000).

2.6.1 Management cybernetics and hard systems thinking Management cybernetics is a term introduced by Jackson (2000) to refer to the early attempts of cybernetics scientists to apply their insights to management. Accordingly, the management cybernetic approach has the classic input-transformation-output schema that is used to describe the basic operational activities of an enterprise. The goal is invariably determined outside the system; disturbances which tend to bring the system away from the goal are regulated in some way. This regulation is effected by management. Management cybernetics attempts to equip managers with a number of tools (in order to regulate operations), such as the black-box technique and feed-back, often supplemented by feed-forward information and external control.

However,

management cybernetic makes little use of the more complex, observer-dependent notion of variety (used extensively in organisational cybernetics).

33


In contrast with organisational cybernetics, management cybernetics uses the machine metaphor to describe organisations, hence they are subject to the same criticisms as hard systems (Jackson, 2000): a. First, the machine metaphor, implicitly suggested by the hard systems approach, requires clearly defined objectives.

In the vast majority of managerial

situations, however, the very definition of the objectives will constitute a major part of the problem faced, since involved parties are likely to see the problem from a different point of view. b. Hard systems fail to pay proper attention to the human component in socialtechnical systems. c. Even though hard systems thinkers recognize the complexity of many problems that are called upon to solve, they still believe that these problems are simple enough to be represented in mathematical models. According to Ackoff (1979), the prevalence of optimization, which is based only on those problem factors that are amenable to quantification, together with the mathematical manipulation for its own sake, make methods such as OR useless (also referred to as mathematical masturbation by Ackoff). d. The clearly defined objectives tend to hide the differences in opinion and interest and the resulting conflicts that may arise. This criticism is closely related to the engineering tradition that regards systems as governed by predictable laws and, by this, to the service they render to the scientific and technocratic elites. Keys (1987) and Jackson (1987) summarize the faults of hard systems thinking as arising from: its inability to deal with subjectivity (points a and b above), its difficulties in coming to terms with extreme complexity (point c above) and its innate conservatism (point d).

34


2.7 The Viable System Model (VSM) Stafford Beer attempted quite early (Beer, 1959) to base his work on different epistemological assumptions than those of traditional management science and hard systems.

Jackson (2000) considers Beers work representative of what he labels

organisational cybernetics which makes full use of the concept of variety and represents a genuinely new direction within the functionalist tradition. As we saw in Table 2.5, adopting the functionalist point of view means that systems appear as objective aspects of reality independent of the observers. The root metaphors of mechanism, organicism and formism hold sway within functionalism.

Likewise,

images of organizations appear as machine, organism, brain and flux and transformation metaphors are commonly employed. In his work The Heart of Enterprise (1979), Beer built his Viable System Model (VSM) in relation to the organization, from cybernetic first principles, enabling the cybernetic laws to be fully understood without their mechanical and biological manifestations. Also, Beer gave attention to the role of the observer, which in fact constitutes second-order cybernetics, capable of tackling relativistic organized complexity. (Jackson, 2000). (Here, it must be recalled that first-order cybernetics is appropriate to organize complexity by studying matter, energy and information). According to Beer (1981), the traditional company organization chart is totally unsatisfactory as a model of a real organization. In his book Brain of the Firm (Beer, 1972), he builds the VSM using as an example of any viable system, the workings of the human body and the nervous system. His logic is that in order to understand the principles of viability, we should use a known-to-be-viable system as an exemplar, such as the human body, controlled and organized by the nervous system perhaps the richest and most flexible viable system of all (Jackson, 2000). The result is a neuro-cybernetic model containing a five-level hierarchy. The model is general and can be applied to firms and organisations of any kind, ranging from oneperson enterprises (all functions performed by a single person), to large multi-level companies. Indeed, in his book Diagnosing the system for Organization (Beer, 1985), Beer presents the VSM in the form of a hand-book, or managers guide in order to aid application of the principles to particular enterprises (Jackson, 2000). 35


2.7.1 VSM Description The following simple description of the Viable System Model, based on Snowdon and Kawalek (2003), focuses on the general nature of its different functions and components.

More detailed descriptions will be given, where necessary, in the

following chapters. Beers VSM is concerned with the characteristics and behaviours essential in a system if that system is to survive in an environment (context) which is forever changing. The organization (system) in question has an arrangement or deal with its environment. This deal may exist and be sustained in the environment according to the value the environment perceives that the organization is providing. This deal must be continually revised as things change, both in the environment and the organization. Further, both the environment and the organization are generally complex systems, so the behaviour they exhibit will be emergent. Organisations (businesses, systems of government, other groupings) are concerned directly with fulfilling: the purpose of the organization (e.g. actual process manufacturing in a factory, preparation of meals in a restaurant, delivery of lectures in a university) the sustainability (viability) of the organization within its changing environment. These involve a variety of behaviours of the organism.

These behaviours may

concern the proper running of the organization itself (for example, processes of the personnel department, processes of control and management) and behaviours that concern the relation of the organization with its environment which comprises other organizations and systems processes

concerned

with

(for example, processes concerned with marketing and partnerships,

financial

arrangements,

ownerships,

shareholders, legislation, etc). The VSM is in other words, a process model. Beer identifies five interactive sub-systems whose proper operation will both fulfil the purpose of the organization and its viability within its changing environment. An overall diagram of the VSM is shown in Figure 2.7.

36


Adapted from Snowdon and Kawalek (2003). Figure 2.7 The VSM

The set of interacting systems (Systems 1 through 5) is what is called the system-infocus. For the system-in-focus it is obviously necessary to be clear as to its purpose. This purpose is fulfilled by the co-coordinated behaviour of Systems 1 and for this reason they are also called the primary activities of the system-in-focus. Systems 1 37


form the Operation of the system-in-focus. Each System 1 has its own operating environment, within the overall organisational environment. However, as the figure shows, these environments may overlap which means that Systems 1 may share common resources (e.g. same suppliers) and influence or be influenced by common environmental elements (e.g. same markets). Moreover, the double arrows show the (often complex) interactions of these environments with each other and with the overall environment 1 . Systems 2 to System 5 form the Management (also called the meta-system) of the system-in-focus. The behaviours of these systems are not concerned with the direct fulfilment of purpose, but with the enablement of that fulfilment. Systems S2, S3, S3* enable and ensure the operation according to the present understanding of the deal. Particularly, S3 is a control system whose concern is the proper implementation (by the Operation) of the understood purpose, S2 balances and smoothes the independent behaviours of the S1s (coordination), while S3* is an audit system supporting S3. System 4 (S4) has a reflective nature. It is not directly concerned with enabling the fulfilment of the present purpose, but instead with what is happening in the environment that may affect the deal and threaten the sustainability of the organization in the future. It requires knowledge not only of the present organization, but also of the potential multiple futures of the organization based on insights from the environment. Again, nothing is stationary. Beer describes the behaviour of S4 as being focused on a screen on which the various activities of the organisation are projected in other words the active model of the present organization. This projection is used to generate possible future models of the environment (Future Environment represented with a dashed line in Figure 2.7) and the organisation. S4 is itself part of these models, in other words, it foresees its changing future role. This function of S4 embodies the principle espoused in the Conant-Ashby Theorem that every regulator must contain a model of the system which is regulated (Conant and Ashby, 1970).

1

The single lines that connect the various elements of the diagram represent two way-communications

between them. They can also be regarded as pairs of monitoring and action.

38


S4 may be large and varied, and may perform processes such as marketing (trying to influence the environment), research and development (seeking new opportunities) or financial planning (planning for new resource arrangements). The future orientation of S4 (representing the future deals) may create conflict between itself and S3 which has a role to sustain the present deal. Resolution of this conflict is critical to the sustainability of any organization and it is one of the roles System 5 is called to play. System 5 ultimately determines the purpose of the systemin-focus, as well as the strategies and policies by which the purpose will be fulfilled (mainly though System 3). Its function is facilitated by the information passed to it from Systems 3 and 4. Finally, S5 represents the overall system-in-focus to the higher system of which it is part and ensures that the purpose and policies of the system-infocus are in accordance with the constraints imposed from the higher system. The VSM is a recursive structure which resembles the self-similar structure of fractals. This means that it is made out of sub-systems that all have the same basic functions (S1 through S5) at all levels of the organisation. Starting from a given system-in-focus, when we move at a lower organisational level, Systems 1 have the same structure as the system-in-focus. Accordingly, when we move at the next higher organisational level, the system-in-focus becomes a System 1 of the higher system. This uniformity in structure across levels implies that in order for a system to be viable, its sub-systems (primary activities) must also be viable. Espejo (1989a) argues that the VSM can be used in two modes of analysis, depending on the purpose of the analysis and the identity of the organisation under study. In the first mode, the diagnostic mode, it is accepted that there is an organisation, so that the study will be descriptive and any criteria of organisational effectiveness will be used with reference to the tacit and/or espoused identity. In this mode of study the analysts can make apparent mismatches between an actual structure and the effective structure as suggested by cybernetic principles. In the second mode, the design mode, studies are done with reference to one or more statements of identity as defined by relevant actors.

This mode is prescriptive and applies when the purpose (of the

analysis) is to design an effective organisational structure consistent with the agreed identity.

39


Although it helps to distinguish between the two modes, in some cases it might not be clear which mode the analysis is following, as the current organisational weaknesses can be related either to a hazy identity or a to a new, yet unexplored, opportunity.

2.7.2 VSM and variety The VSM in management includes the critical concept of variety and its applications in the control system of an organization. It must be recalled that variety is a measure of complexity of an organization. The notion of variety as a measure of the complexity of a system is a key concept to the VSM and is based on what is known as Ashbys Law of Requisite Variety (Ashby, 1956). Beer (1979) interpreted this Law as only variety can absorb variety, that is the regulatory system has to be capable of generating a variety equivalent to the variety of the system to be regulated. Beer in The Heart of Enterprise (1979) defined variety as: the number of states of whatever it is whose complexity we want to measure. For Beer a system is viable (sustainable) if it is capable of responding to environmental changes, even if those changes could not have been foreseen at the time the system was designed. In other words, the system has to achieve requisite variety. In terms of internal variety, this means that the regulatory systems S2 through S5 of the VSM must have a variety equivalent to the variety of the constituent Systems 1, notwithstanding the variety potential from the environment.

However, what is important for the

systems viability is the relative balance of variety between sub-systems rather than their absolute measurement (Snowdon and Kawalek, 2003). Regulation and stability in the context of change originating both from the environment and from the interaction a system has with the environment, are at the heart of viability. Thus, the VSM gives emphasis to Variety Engineering which has three requirements (Jackson, 2000): 1. The organization should have the best possible model of the environment relevant to its purpose.

40


2. The organizations structure and information flows should reflect the nature of that environment so that the organization should be responsive. 3. The variety balance achieved between organization and environment must be matched by the appropriate variety balance between managers and operations within the organization. In order to achieve the first kind of variety balance, that is between the organization and the environment, managers can use methods that reduce the external variety confronting them; these methods may be structural (e.g. creation of new divisions), operational (e.g. management by objectives), or making better planning by setting priorities. Also, they can use methods that increase their own variety.

These may be structural (e.g.

integrated teamwork), informational (e.g. management information systems) or augmentation by appointing experts and consultants (Jackson, 2000). In terms of the second kind of variety balance (managers and operations), Snowdon and Kawalek (2003) believe that Information and Communication Technology (ICT) Systems may play a role both in increasing variety in System 2 through System 5, as well as in reducing the variety of Systems 1. Beer points out that ignorance of these laws has led to the misuse of ITC Systems, so that the amplification and attenuation of variety have been applied wrongly. For example, the Management Information Systems swamp the manager with information; as a result, from the perspective of the manager the organization seems more complex and even more difficult to manage.

2.7.3 VSM applications Following its formulation, the VSM was applied to a big range of organisations. Beer himself implemented the VSM in several case studies the more ambitious of which was Project CYBERSYN, involving the regulation of the Chilean social economy under the Allende government (Beer, 1981). He also applied it in a nine year long consultation project of a major mutual life assurance company, which was going through a continuous organisational reform (Beer, 1989).

Drawing from this experience, he

argues that any viable system should be in a constant state of flux undergoing an evolutionary process and that the analyst or the consultants are making cybernetic interventions in this process that is happening anyway.

41


Espejo (1989b) used the model as a diagnostic tool in the case of a small manufacturing company. He focused on the practical use of the model in identifying issues about the companys effectiveness. He suggested that an organisation using good cybernetics is likely to effectively discover problem situations and to regulate relevant organisational tasks. Brocklesby and Cummings (1996) used the model as a diagnostic and design tool, in the analysis of a large telecommunications company going through extensive reorganisation and downsizing.

Their experience showed that the VSM is providing a common

systemic framework that can be very insightful for organisational analysis and for conceptualising organisational change. Lately, Snowdon and Kawalek (2003) applied the VSM in order to comprehend the complex interactions between an organization and its Information and Communication Technology (ICT) systems.

2.7.4 VSM critique Jackson (2000) summarizes the strengths and weaknesses of the VSM. First, the main strength of the VSM is its general applicability, as it focuses on the systems essential organisation rather than prescribing a particular structure for a system to be viable. As a result, it has been applied to a large number and variety of organisations (for example small and large firms, industries, local and national government). Second, it is able to deal with organisations exhibiting both vertical and horizontal interdependence among their parts.

Vertical interdependence (i.e. many

hierarchical levels) is dealt with the VSMs recursive structure, while horizontal interdependence (i.e. many Systems 1) is dealt with through the Management (Systems 2 through 5). Third, the VSM draws attention to the sources of command and control in the system which should be spread throughout its architecture, granting maximum autonomy to its parts.

This way the processes of self-organisation present in all

complex systems can be employed productively. Fourth, the model is a good starting point in designing information systems in organisations, since most information systems take for granted an outdated classical, hierarchical model. Fifth, in the VSM the organisation is represented as being able to proactively interact with its environment in 42


order to maintain it survival, rather than simply reacting to its changes. Sixth, VSM can be used effectively as a diagnostic tool in order to improve the performance of organisations. Finally, by providing maximum autonomy to a systems parts, the VSM can also help the realisation of human potentiality in enterprises. The main weaknesses of the VSM stem from its classification under the functionalist paradigm.

If VSM is considered from the viewpoints of the interpretive or

emancipatory paradigms, its limitations and weaknesses can be seen.

From the

interpretive viewpoint, the VSM is a partial representation of what organisations are, which misses their essential character: their component parts are human beings who can attribute meaning to their situation and therefore see in organisations whatever purposes they wish and make of organisations whatever they will. Additionally, the VSM is criticised for minimising the purposeful role of individuals in organisations. This could lead managers to overemphasizing organisational design and neglecting the possible different values, viewpoints and perceptions that may exist among the individuals. Even worse, from the emancipatory viewpoint the VSM is seen as having autocratic implications, as its insights could be used in order to increase the powers of some humans over others. However, Jackson (2000) argues that it does not inevitably serve autocratic purposes and Beer himself notes that safeguards can be built into the system to minimise this danger.

43


2.8 References Ackoff, R L (1979) The future of operational research is past. Journal of Operational Research Society, 30, 93. Ackoff, R L (1999) Recreating the Corporation: a Design of Organizations for the 21st Century, New York, Oxford University Press. Allen, T F H (2002) Applying the principles of ecological emergence. In Kibert, C J, Sendzimir, J & Guy, G B (Eds.) Construction ecology: nature as the basis for green buildings. London, Spon Press. Ashby, W R (1956) Introduction to cybernetics, London, Chapman & Hall. Banathy, B (2003) A Taste of Systemics, http://www.isss.org/taste.html Beer, S (1959) What has cybernetics to do with OR? ORQ, 10. Beer, S (1972) Brain of the firm: the managerial cybernetics of organization, London, Allen Lane. Beer, S (1979) The heart of enterprise, Chichester, Wiley. Beer, S (1981) Brain of the firm: the managerial cybernetics of organization: companion volume to the Heart of enterprise, Chichester, Wiley. Beer, S (1985) Diagnosing the system: for organizations, Chichester, Wiley. Beer, S (1989) The evolution of a management cybernetics process. In Espejo, R & Harnden, R (Eds.) The viable system model: interpretations and applications of Stafford Beer's VSM. Chichester, Wiley. Brocklesby, J & Cummings, S (1996) Designing a viable organization structure. Long Range Planning, 29, 49-57. Checkland, P B (1999) Systems Thinking, Systems Practice (new edition), Chichester, Wiley. Clayton, A M H & Radcliffe, N J (1996) Sustainability: a systems approach, London, Earthscan Publications. Conant, R & Ashby, W R (1970) Every good regulator of a system must be a model of that system. International Journal of Systems Science, 1, 89-97. Decleris, M (1986) Systemic Theory, Athens - Komotini, Sakkoulas.

44


Espejo, R (1989a) A cybernetic method to study organizations. In Espejo, R & Harnden, R (Eds.) The viable system model: interpretations and applications of Stafford Beer's VSM. Chichester, Wiley. Espejo, R (1989b) P.M. Manufacturers: the VSM as a diagnostic tool. In Espejo, R & Harnden, R (Eds.) The viable system model: interpretations and applications of Stafford Beer's VSM. Chichester, Wiley. Giampetro, M & Mayumi, K (1997) A dynamic model of socioeconomic systems based on hierarchy theory and its application on sustainability. Structural Change and Economic Dynamics, 8, 453-469. Heylighen, F & Josslyn, C (2001) Cybernetics and Second-Order Cybernetics. In Meyers, R A (Ed.) Encyclopedia of Physical Science & Technology. New York, Academic Press. ISSS (2003) International Society for the Systems Sciences Homepage, http://www.isss.org Jackson, M C (1987) New directions in management science. In Jackson, M C & Keys, P (Eds.) New directions in management science. Aldershot, Gower. Jackson, M C (2000) Systems approaches to management, New York; London, Kluwer Academic/Plenum. Jackson, M C & Keys, P (1984) Towards a system of system methodologies. Journal of the Operational Research Society, 35, 473-486. Kay, J J, Regier, H A, Boyle, M & Francis, G (1999) An ecosystem approach to sustainability: addressing the challenge of complexity. Futures, 31, 721-742. Keys, P (1987) Traditional Management Science and the emerging critique. In Jackson, M C & Keys, P (Eds.) New directions in management science. Aldershot, Gower. Nicolis, G & Prigogine, I (1977) Self-organisation in non-equilibrium systems, New York, Wiley Interscience. Schneider, E D & Kay, J J (1994) Life as a manifestation of the second law of thermodynamics. Mathematical Computer Modelling, 19, 25-48. Shannon, C E & Weaver, W (1949) The mathematical theory of communication, Urbana, [Ill.], University of Illinois Press 1949. Snowdon, B & Kawalek, P (2003) Active meta-process models: a conceptual exposition. Information and Software Technology, 45, 1021-1029. Ulrich, W (1983) Critical Heuristics of Social Planning, Bern, Haupt. 45


Wiener, N (1948) Cybernetics or control and communication in the animal and the machine, New York, The Technology Press John Wiley [1948].

46

Chapter 3 Sustainable Development Nature, all parent, ancient, and divine, O much-mechanic mother, art is thine; Heavenly, abundant, venerable queen, In every part of thy dominions seen. [] Pure ornament of all the powers divine, Finite and infinite alike you shine; To all things common and in all things known, Yet incommunicable and alone. [] Life-bearer, all-sustaining, various named, And for commanding grace and beauty famed. Justice, supreme in might, whose general sway The waters of the restless deep obey. Orphic Hymn to Nature Translated by Thomas Taylor (1792)

We do not inherit the earth from our ancestors; we borrow it from our children. Native American proverb

Chapter 3: Sustainable Development

3.1 Historic background In order to fully understand the meaning of sustainable development, one has to first look back at the reasons that demanded its existence.

The obvious ones are the

environmental crises and the global changes that took place mainly during the second half of the 20th century, resulting in the reaction of the world community and the establishment of sustainable development as a worldwide value in 1992. However, one should also go much further back in time, at the 17th and 18th centuries, to identify the underlying roots of these causes and trace them in the development of the economic thinking and the establishment of capitalism.

3.1.1 Economic science and capitalism As we saw in the previous chapter, during the 17th and 18th centuries, the classical scientific method was developed in the West, by Descartes, Galileo and Newton. In parallel, during the period from the mid to late 18th century, now called the Enlightenment, traditional ideas about society, sovereignty, religion and science were challenged, resulting in scepticism and scientific rationalism as the dominant paradigm (Kerr, 2001). The new developing ideas of the Enlightenment combined with the rapid advancements of the physical sciences and its technological applications, fuelled the emerging industrial revolution which gradually transformed the societies of many countries from agricultural to industrial. The increasing efficiency of the now industrialised production system resulted in the creation of more wealth and marked the transition of the economy from the mercantilist or merchant capitalism to capitalism. Certain key figures, such as Adam Smith and David Ricardo, attempted to explain the function of the newly formed production system and its relation to society, by constructing theories which were based on their contemporary physical sciences. They laid the foundations of economic science and their writings still influence modern economic thinking. Adam Smith (1723-1790) is considered the most influential figure in the history of economics. His best known work is the Wealth of Nations (Smith, 1776), within which he developed the following framework of ideas about the economic system: 48


1) the main economic driver are the self-interested actions of individuals, which guide them in creating wealth as if by an invisible hand (Smith, 1776). 2) Forces of competition within (a perfect) market will ensure the minimisation of prices and the efficient allocation of resources. 3) Overall production (the real measure of wealth according to Smith) can be increased by free trade and specialisation. Adam Smiths framework was essentially concerned about the efficiency of the market system and did not deal with issues of social equity or justice. David Ricardo (1772-1823) advanced the ideas of Smith and tried to formulate laws about supply and demand within the market, and especially between wages and the rent paid for the use of land. Value, according to Ricardo, is entirely anthropocentric, existing only in useful goods that can add to our gratification. It is determined by scarcity and, in the case of reproducible goods, by the quantity of labour. The latter is considered equal to other production means and resources; hence it has a price and can be bought and sold. His iron law of wages determines that wages will be kept at a minimum in the long run. Moreover, the population growth is self-regulated by the fluctuation of the available capital that can support it. The cold logic of Ricardos theories, paved the way to the ideas of Karl Marx (18181883) (Kerr, 2001). Smith and Ricardo were looking at the capitalist economy as a system that is in constant equilibrium, and tried to identify the processes which kept it there. Marx, however, maintained that the capitalist system is inherently unstable and in constant change. This change was manifested with the struggle of classes, in a form of continual dialectic 1 . Instead of looking at the ways the market and the capitalist system were efficient in producing wealth, Marx criticised them and focused on their social implications: increasing wealth and power at the hands of an elite; unemployment; pressure to keep wages low; cyclical crisis of the economic system and the inevitability of monopoly. Indeed, many of Marxs observations were proven right: instability and recession (Great Depression of the 1930s), monopoly (Standard Oil,

1

Dialectic was proposed by Plato as a theory of how ideas develop, having three parts: 1) thesis, 2)

antithesis and 3) synthesis.

49


Microsoft) and the increasing divide between the poor and the rich, can be witnessed even in modern capitalist systems. We could also regard Marxs observations as a study of the emergent properties of the market, such as todays future and derivative markets, which tend to amplify the social impacts (e.g. inequity) of capitalism. The above brief presentation of the foundations of economic science intends to demonstrate its influence from the physical sciences and their reductionist method (the attempt for example to determine the behaviour of impersonal individuals, resembles similar attempts in physics, to explain the behaviour of gas molecules).

Indeed

economics should not be regarded as a pure science, since it only borrowed the authority of physics reinforced with the aid of mathematics (Decleris, 2000). This fact is often forgotten today when referring to certain economic laws.

3.1.2 Economic growth and the affluent society Until the Great Depression of the 1930s the cyclical crises of the capitalist economy were considered by economists as a natural phenomenon. However, the communist systems of the time seemed to be unaffected by the crises of capitalism (Hobsbawm, 1996), and they demonstrated that man is not bound to any kind of economic determinism (Decleris, 2000). Indeed, after World War II, the laissez-faire politics of the pre-war era were abandoned and governments assumed more power to control the market and correct its errors (Kerr, 2001). During the same post-war period, the idea of development or economic growth was introduced as a model of progress (Rostow, 1959), apparently influenced by the modernist philosophy of continuing progress and the Golden Era of the 60s. Since the dawn of capitalism, the industrialised man or homo faber had continuously expanded his control over nature by building constantly more and increasingly efficient man-made systems, based on advances in science and technology. These increased the production of material wealth which after the war resulted in an explosive economic growth (Hobsbawm, 1996). Thus, the school of economic growth promised the delivery of the affluent society. Development gradually became a world-wide value and was much later proclaimed by the UN as the right of all peoples (U.N. General Assembly, 1986).

50


Before the Enlightenment progress was identified with the development of civilisation. Even though the philosophers of the Enlightenment abandoned the spiritual realm of the church, they still strove to maintain balance between spiritual and material values. Gradually, however, progress lost its integrated character and ended being identified as one-dimensional economic growth (Decleris, 2000).

The main principles of the

school of economic growth continue to exist today and are also based on reductionist thinking. These can be summarised as follows (Decleris, 2000): Man is the peak achievement of nature having the right to transform the lithosphere and biosphere into a man-made world that promises an abundance of material goods. There is no natural obstacle to this as the Earth can support an unlimited number of people. There are sufficient natural resources and in any case technology will discover new ones if the existing ones run out. There is no environmental crisis and the alleged dangers are scientific myths. All environmental problems will be dealt with successfully with the aid of technology Consequently, production and consumption can increase indefinitely and there is no good reason to restrict them.

3.1.3 Environmental crises and global change The cost of the worldwide economic development did not take long to be seen. Several environmental crises started to happen as the ecosystems were bearing the increasing impacts of the growing human systems. In the beginning, these crises were bounded to local or regional incidents, but soon it was realised that global crises also started to emerge. Some of the most representative environmental crises that happened the last fifty years are presented by Kerr (2001). During the 1950s and 1960s, the pollution incident in Minamata, Japan resulted in thousands of dead people. The dumping of chemical wastes in Love Canal (Niagara Falls, New York) resulted in the displacement of the local residents and the deterioration of their health. More recently, in 1984 the leakage of a chemical plant Bhopal, India resulted in 2,000 dead and 300,000 injured, while today it is estimated 51


that 50,000 people still suffer the effects of poisoning. A different kind of problem than toxic poisoning was the one created by the air-pollution of cities in the 1950s, known with the term smog. The London Smog of 1952 caused the death of about 12,000 people and resulted in the Clean Air Acts of 1956 and 1968. After the war nuclear power was seen as a great solution to the worlds growing demands. However, nuclear power has faced great public concerns mainly about the health risks posed by the operation of nuclear reactors, the transport of the radioactive fuels, the disposal of radioactive waste and the possible radioactive releases from an accident. Indeed the incidents at Three Mile Island (1979) and in particular Chernobyl (1986) had a big impact in public opinion, since the latter also raised concerns about transboundary pollution (the contamination spread across Europe). These concerns were added to the world-wide nightmare of nuclear weapons, which were and still are systematically tested with disastrous effects (e.g. Bikini and Muroroa atolls). The increasing use of fossil fuels, and especially oil, demanded their transportation over sea in large quantities. The oil and tanker accidents had disastrous impacts on the marine and coastal environments of various locations around the world. Particularly known are the spills of Exxon Valdez, Torrey Canon and Amoco Cadiz1 . Apart from the above environmental incidents, very important were the emerging global environmental

issues,

such

as

transboundary

pollution,

deforestation,

desertification, loss of biodiversity etc., since they required international agreement for their resolution.

However, three issues stand out as defining the sustainable

development agenda. First of all, the problem of acid rain, which appeared in the 1950s and 1960s mainly in Eastern Europe and southern Scandinavia. Acid rain is caused by the SO2 and NO2 emissions of coal-powered electricity generators and internal combustion engines, and its impacts include lethal effects on fish and freshwater vertebrates, mortality of higher plants, as well as damage to buildings. Second, the thinning of the ozone layer in the poles (called the ozone hole) which is caused by atmospheric pollution and in particular

1

However, the largest accidental releases of oil at sea spills have happened due to well blow-outs (e.g. in

Gulf of Mexico and the Persian Gulf).

52


CFCs. The ozone layer moderates the levels of UV-B radiation reaching the earths surface, the latter having negative effects on plants and humans. Finally, the climate change that is happening due to the greenhouse effect of certain anthropogenic gases in the atmosphere (mainly CO2), called greenhouse gases (GHGs). Even though the mechanisms of climate change are very complex, its existence is widely accepted. However it is difficult to predict its impacts and some scenarios include: sea level rise; extensive flooding of coastal plains and ocean atolls; increased desertification of subSaharan regions; increased intensity and frequency of extreme weather events; retreat of polar ice caps; disruption of deep ocean currents etc.

3.1.4 The reaction to the environmental crises The environmental crises since their early days triggered a reaction both from the public and academia. In 1962, the biologist Rachel Carson published her book Silent Spring which talked about the misuse of pesticides (DDT in particular) and their impact on the environment and human health. The book caused a wave of public disquiet and resulted in the rapid introduction of laws in the US to control the use of chemicals. Among other issues, the book focused on the relation of human society with the natural environment and introduced scepticism about the responsibilities of science in creating the above impacts (Kerr, 2001). As we saw in the previous chapter, the systems movement was being established at about the same period. During the 1960s systems scientists focused on integrated development as opposed to economic growth. They realised the inadequacy of the reductionist method that was used in traditional economic science (ironically calling it celestial mechanics) and questioned its authority (Decleris, 2000).

In 1966, the

systems economist Kenneth Boulding (co-founder with Bertalanffy of General Systems Theory) suggested that the earth should be regarded as a spaceship, or in other words a closed system with finite resources1 (Boulding, 1966). In contrast, he regarded the economy as an open system, which relies on flows of materials and is generating externalities such as pollution, and hence is entirely dependent on the suprasystem of the earth. Thus, he called for a transition from the cowboy economy of unrestrained growth to the spaceman economy. Boulding studied the inputs and

1

With the exception of solar energy as an input into the earth system

53


outputs of the economic system, in opposition to traditional economists who only focused on the relationships of its component parts (sellers, buyers, prices etc.). Additionally, he challenged the use of the Gross National Product (GNP) as an appropriate measure of prosperity, because it relies on the flows of the production system instead of its stock; this approach is inappropriate for a finite world. A few years later in 1970, the Club of Rome in conjunction with the Massachusetts Institute of Technology (MIT) System Dynamics Group, led by Jay Forrester, started a project to model to predict changes in five factors which can limit growth, namely: population, agricultural production, natural resources, industrial production and pollution. The findings of the research were published in 1972 under the title The Limits to Growth (Meadows et al., 1972) and can be summarised in 5 points: 1. At present rates of consumption, growth could not continue beyond 100 years, resulting in a sudden and uncontrollable decline in both population and industrial capacity; 2. It is possible to alter growth patterns in both population and industrial capacity; 3. Need to recognise quantitative restraints on worlds resources; 4. Global strategy to deal with inequities must encompass mans relationship with the environment; 5. Long-term planning required on an unprecedented scale.

Responsibility of

developed countries to slow growth in order to let less developed countries catch up. Upon publication, the model was severely criticised for oversimplification and for not taking into account advances in technology. However, even though the model had limits and even flaws (systems dynamics was just being developed and the available computational power was far smaller than today), one has to appreciate the message of the report which is that the planets resources are not infinite and we have to do something about it. The report became very popular and had a big impact on the formulation of the emerging environmental movement that lead to the Rio Conference. A final piece of literature that is of particular importance for sustainability, is the book Gaia by James Lovelock, published in 1979 (Lovelock, 1979).

Lovelock pushed

system theory to its limits and proposed that the whole earth is a living super-organism 54


(called Gaia1 ) having the ability to self-regulate and maintain itself in a state capable of supporting life. Lovelock based his theory on the increasing evidence of systems approaches that the earths systems (geological, climatic, living etc.), are richly interconnected. He also proposed that man is only a part of this organism and even if he makes the world unbearable for his own existence Gaia will continue to survive. 3.1.5 The road to Sustainable Development The environmental crises and the various reactions of ecologists and systems scientists during the 1960s and 1970s succeeded in pushing the environmental and natural resource issues up the political agenda in the West. The UN Stockholm International Conference on the Environment that was held in 1972 was the starting point of the new systemic approach to development (integrated development) that formally connected it with the environment. Thus, the duality of development and environmental protection arose, the latter being reinforced by the newly born Environmental Law (Decleris, 2000). One of the conferences outcomes was the Stockholm Declaration which agreed on the following set of principles: 1) the maintenance of the natural resources, 2) North-South co-operation and technology transfer for better management of environmental resources; and 3) maintenance of the assimilative capacity of the environment. It also resulted in the creation of the UN Environment Programme (UNEP). In the years after the Stockholm Conference, the environmental crisis continued and the North-South divide deepened, as the poor third-world countries struggled to reach the prosperity of the West only to destroy their own environment and sink into increasing debts. The situation was so critical that in 1983 the World Commission on Environment and Development (WCED) was established to re-examine the developmentenvironment issues and propose possible solutions. In 1987 the WCED published a report named Our Common Future (Brundtland and WCED, 1987) also widely known as the Brundtland Report 2 . The report called for an expanded role of the UN and UNEP, aided by the participation of communities and local, national and regional government.

It also explicitly called for a UN Programme for Sustainable

1

Gaia was the goddess of Earth in Greek mythology.

2

Named after the commissions chair, Gro Harlem Brundtland.

55


Development (Brundtland and WCED, 1987), which the UN General Assembly organised in 1992.

3.1.6 The Earth Summit In June 1992 the United Nations Conference on Environment and Development (UNCED) or the Earth Summit was held in Rio de Janeiro.

Its size was

unprecedented as it was attended by the representatives of 172 countries (108 of which represented by heads of state or government), while the parallel Non-Governmental Organisations (NGO) Forum was attended by about 2,400 NGO representatives and 17,000 people. The participating governments adopted three major agreements (United Nations, 1997): Agenda 21: a comprehensive programme of action for global action in all areas of sustainable development; The Rio Declaration on Environment and Development: a series of principles defining the rights and responsibilities of States; The Statement of Forest Principles: a set of principles to underlie the sustainable management of forests worldwide. Additionally, two legally binding Conventions aimed at preventing global climate change and the eradication of the diversity of biological species, were opened for signature at the Summit: The Framework Convention on Climate Change The Convention on Biological Diversity. The Rio Declaration proclaimed the principles of Sustainable Development (27 in total) and Agenda 21 laid down a systemic strategic plan for implementing those principles (it contains over two and a half thousand specific objectives and action in forty chapters). Even though the Rio Declaration explicitly revalidated the Stockholm declaration, there is an important difference between the systemic models of integrated development (Stockholm) and sustainable development (Rio). The Rio systemic model contains an increased number of parameters (called themes) and interconnections between them. Moreover, for the first time it was recognised that the environmental destruction was not only caused by the directly perceptible causes (such as pollution and natural 56


resources depletion), but from other factors as well which in the past were not associated with it (such as poverty, the consumerist model of living, inadequate information, deficient education, social exclusion and others) (Decleris, 2000). For its implementation, Agenda 21 addresses not only scientists and government, but recognises the contribution of ordinary people, and calls for the strengthening of major groups such as women, trade unions, farmers, children and young people, indigenous peoples and NGOs. Particularly famous became the recommendation to think globally and act locally, a very systemic idea indeed. Although it is recognised that Agenda 21 was weakened by compromise and negotiation, it was still the most comprehensive and, if implemented, effective programme of action ever sanctioned by the international community. Maurice Strong, the Conference Secretary-General, called the Summit a historic moment for humanity (United Nations, 1997).

3.1.7 After Rio Five years after the earth summit, the Rio +5 conference was organised in New York to assess the progress of Agenda 21. Its concluding report stated that there were not many tangible results. However, it confirmed the prevalence of the sustainable development principle and the determination of the people to implement it in the future. In 2002, the World Summit on Sustainable Development (Rio +10) was held in Johannesburg, were the Rio Principles were reaffirmed but an implementation gap of Agenda 21 was identified (Decleris, 2000). Hence a new programme was drawn for the Agendas further implementation that will promote the three components of sustainable development economic development, social development and environmental protection as interdependent and mutually reinforcing pillars (United Nations, 2002c). Moreover, in Johannesburg a new parameter of global change was recognised, namely Globalisation. Globalisation is actively promoted by the International Monetary Fund (IMF), the World Bank and the World Trade Organisation (WTO) and has received severe criticism and public reactions for being unsustainable. Indeed, the Johannesburg Declaration states that globalisation has increased the flows of investments and capitals around the world, though its costs and benefits are distributed unevenly, with 57


developing countries facing difficulties in meeting its challenge (United Nations, 2002b).

3.2 Sustainability As we saw in the previous paragraphs, the concept of sustainable development evolved as a response to the ruthless economic growth, which promised the delivery of the affluent society. In contrast, sustainable development is a process of reaching the final goal of sustainability (Robèrt et al., 2002). Thus, before focusing on sustainable development we first have to look on the meaning of sustainability.

In terms of

Aristotles four causes 1 , this constitutes a focus on the final cause or purpose of sustainable development.

3.2.1 The environment The first step in understanding sustainability is to try and identify the highest conceivable system in interest, which is the environment. Initially the biological and ecological sciences studied the environment and have identified it with physical surroundings, such as land form, flora and fauna, atmosphere etc. (Jeffrey, 1996) However, in the context of sustainability the environment is not simply a term for nature, but its meaning should be expanded: According to systems science, the environment is a mega-system comprising ecosystems and man-made systems which share complex relationships of dynamic interaction. (Decleris, 2000) This mega-system is the largest conceivable system containing the greatest conceivable complexity, and can be called Gaia (Lovelock, 1979) or ecosphere (Robèrt et al., 2002). A simple illustration of Gaia and its subsystems can be seen in Figure 3.1.

1

According to Aristotle, there are four causes (aitia in Greek): (i) the material cause, i.e. things, (ii) the

formal cause, i.e. the design, (iii) the efficient cause, i.e. the process and (iv) the final cause, i.e. the purpose.

58


3.2.2 Man-made and natural systems interaction Figure 3.1 depicts the modern relation between man-made and natural systems. Initially, though, humans as food gatherers and hunters were a part of ecosystems and subject to their control. Even though, after the discovery of agriculture, man-made systems increased their control over ecosystems, this control was subject to serious limitations (e.g. the transition of seasons) and eventually the power relationships of man-made systems and ecosystems stabilised, allowing their symbiosis. The industrial revolution changed this by introducing vast technological systems that gave the ability to man-made systems (and in extension to man) to control and alter ecosystems in an unprecedented level.

Additionally, even though man-made systems were initially

confined at a local level, some of them have already become global (communications, markets) and have the ability to affect the whole environment at a planetary level (Decleris, 2000). Thus, they are shown as detached from ecosystems in Figure 3.1.


Figure 3.1 The systemic concept of the environment

59


3.2.3 Definitions of Sustainability The meaning of sustainability is usually conceived of as survival which is widely used for living systems, and sometimes as long-term viability, health or integrity. As we shall see, however, in the next paragraphs, these are partial interpretations since they regard man mainly as a biological organism. A more appropriate term seems to be that of co-evolution. In the context of the aforementioned interaction of man (through his man-made systems) and ecosystems, Decleris (2000) provides the following definition of sustainability: Sustainability is the self-evident term for the dynamic equilibrium between man and nature and for the co-evolution of both within the Gaia mega-system.

3.3 Sustainable Development Having broadly defined the goal of sustainability, we now have to focus on the process to reach this outcome, i.e. sustainable development (Robèrt, 2000). Since sustainability is a dynamic relation, sustainable development is not a process to reach an end state but rather an ongoing process. The current global crises demand an urgent reverse of the unsustainable ways that humans live and develop.

Consequently, sustainable

development can currently also be seen as having the end-state of restoring the disturbed balance between man and nature. The next paragraphs present some basic approaches to and principles of sustainable development. In terms of Aristotles four causes we are now focusing on the efficient cause of sustainability.

3.3.1 Definition The most famous and quoted definition of sustainable development is the one given by Gro Harlem Brundtland in the WCED report of 1987 (Brundtland and WCED, 1987): Sustainable development is the development that meets the needs of the present without compromising the ability of future generations to meet their own needs.

60


However, the immense complexity of the issues involved require a high level abstraction for this definition in order to capture the essential characteristics of all the systems involved. Indeed the Brundtland definition has been criticised for being too vague (Beckerman, 1995) or for being simplistic (Decleris, 2000). The difficulty in developing precise definitions should not, however, inhibit the understanding or the process of sustainable development, especially when taking into account the dynamic character of sustainability. From a systemic point of view, the understanding of the meaning of sustainable development will also come from the various levels of practice and the continuous attempts to reach sustainability.

3.3.2 World strategy Agenda 21 is the worlds strategic plan for attaining sustainable development. As such it can be regarded as a cybernetic control system which regulates the relations between man-made systems and ecosystems, having as its goal that of sustainability, as defined above (see Figure 3.2). It uses the control mechanism of feed-forward, by which one foresees the future impacts of his actions and adapts them accordingly to the demands of the environment (Decleris, 2000).


Figure 3.2 General Principles of Sustainable Development as a cybernetic control system

61


At the Johannesburg summit of 2002, Agenda 21 was reaffirmed and was complemented by the Plan of Implementation. The areas where key commitments and targets were set on this plan are presented below (United Nations, 2002a): Poverty eradication Water and Sanitation Sustainable Production and Consumption Energy Renewable energy, Access to Energy, Energy Markets, Energy efficiency Chemicals Management of the natural resource base: Water, Ocean and fisheries, Atmosphere, Biodiversity, Forests Corporate responsibility: Actively

promote

corporate

responsibility

and

accountability,

including through the full development and effective implementation of intergovernmental agreements and measures, international initiatives and public-private partnerships, and appropriate national regulations. Health Sustainable development of small island developing States Sustainable development for Africa Means of implementation Institutional Framework for sustainable development

3.3.3 The ecosystem perspective Man-made systems may have been separated from ecosystems, but, they are entirely dependent on them in two ways (Decleris, 2000): a) to the extent they convert elements of the ecosystems into natural resources for mankind, and b) to the extent that man-made systems discharge into them the outputs of their operation (e.g. wastes, pollution etc.). 62


This relation is thus restricted by: a) the exhaustion of the finite resources, and b) the carrying capacity of ecosystems. The current environmental crisis is happening due to the extensive disturbance of ecosystems, which contrary to past global disturbances such as those caused by meteorite collisions is caused by human action (Decleris, 2000). In order to plan effectively for sustainable development we first have to look into the nature of ecosystems. Recent advances in ecology regard ecosystems as Complex Adaptive Systems (CAS) (see Chapter 2). The characteristics of CAS pose a serious challenge for decision makers and for the appropriate management of ecosystems. Their non-linearity and chaotic behaviour (see Table 2.4) means that it is very difficult, if not impossible, to predict their behaviour. This also makes it difficult to know the critical boundaries or thresholds of the ecosystems parameters, their i.e. carrying capacity. Thus it is important to adopt the Precautionary Principle, in order to avoid catastrophic collapses (Barkley, 2001). Equally, in order to effectively manage ecosystems, one needs to adopt an adaptive management approach. In contrast with conventional anticipatory management, which is based on the premise that it is possible to predict and anticipate the consequences of decisions (Kay, 2002), adaptive management is based on the principle that ecosystem functioning can never be totally understood (Peterson, 2002). It identifies uncertainties and establishes methodologies to test hypotheses concerning those uncertainties. It uses management not only as a means of altering a system, but also as a tool of learning about the system. The following are the important scientific and social processes of adaptive management (Peterson, 2002) : 1. Linkage of management to appropriate temporal and spatial scales; 2. Retention of a focus on statistical power and controls; 3. Use of computer models to build synthesis and an embodied ecological consensus;

63


4. Use of ecological consensus embodied in models to evaluate strategic alternatives 5. Communication of alternatives to political arenas for negotiation.

3.3.4 The ecosystem analogy Apart from informing about the functions and limits of ecosystems, ecological science has inspired the study and redesign of man-made systems especially industrial systems on the basis of ecological principles, in order that these systems to be sustainable.

The value of ecology has thus been recognised in a new way, as it

constantly reveals the effectiveness of the complex structures found in ecosystems. Below is a summary of some of the key characteristics that complex adaptive systems usually have in order to be sustainable: Co-existence: the ability to co-exist with other linked systems at higher or lower scales. In other words to respect the limiting factors of the environment in which it is embedded and contain its pressure on other linked systems. (Ravetz, 2000, Korhonen, 2001) Effectiveness: be effective in utilizing resources by throughput of energy or other resources (Ravetz, 2000). Ecosystems attain this by constant recycling of materials and cascading of energy. (Korhonen, 2001) Robustness: As the environment in which systems are embedded is usually very dynamic and in constant change, the system should be able to maintain its structure in a variety of external conditions. This is also termed homeostasis in natural systems or resilience. Adaptability: Apart from being resilient, a system will need to evolve and change its structure, and hence functions, to survive changes of its environment as it moves into different attractors. Internal variety and complexity are needed for both robustness and adaptability (Terenzi, 2002). At the industrial level, the ecosystem analogy has been developing since the early nineties under the name Industrial Ecology. Industrial ecology can be defined as:

64


the application of ecological theory to industrial systems or the ecological restructuring of industry (Kibert et al., 2002b). Very common in industrial ecology is the term industrial metabolism; it refers to the study of the flow of materials and energy from the natural environment, through the industrial system and back into the environment. Kay (2002) identified the following design principles for industrial ecology: 1. Interfacing: the interface between societal and natural ecosystems should reflect the limited ability of ecosystems to provide energy and absorb waste (i.e. their carrying capacity). 2. Mimicry or principle of bionics: the behaviour and structure of large-scale societal systems should be as similar as possible to those exhibited by natural systems. 3. Using appropriate biotechnology: whenever feasible the function of a component of a societal system should be carried out by a subsystem of the natural biosphere. 4. Non renewable resources are used only as capital expenditures to bring renewable sources on line. A very important point that should be stressed is the role of efficiency which is widely promoted and used as a principle of designing industrial systems (Kay, 2002). Efficiency is a measure of how productively the quantity of a flow (material or energy) is used. It is based on the first law of thermodynamics (conservation of energy) and it can be broadly defined as the ratio of output to input. Recent developments in ecology and complex systems, however, have started focusing on the second law of thermodynamics (see paragraph 2.4.1), and on effectiveness, which is a measure of how productively the quality of a flow is used. Focusing only on efficiency will lead to designs that use more exergy (high quality energy) and produce more waste than they need.1 It can also lead to sub-optimisation, i.e. making efficient individual processes

1

Consider the example of comparing an electric radiant heater versus a natural gas forced air furnace,

given by Kay (2002): while the efficiency (first law) of the electric heater is 100% (all of the electricity is converted to heat), its effectiveness (second law) is much lower than that of the furnace. This is because

65


and subsystems, based on the assumption that the higher level system will become efficient. This is essentially a reductionist approach, since it overlooks the connections between subsystems: while a part of a system is optimised in isolation, another part will be moved further apart from its optimum in order to accommodate the change (Kay, 2002). Consequently, the higher level system is not optimised. The ecosystem analogy has not been confined, though, only at the industry or interface level. Ecological analogies have also been used to describe the functioning of society as a whole, in order to learn the useful lessons from ecosystems. Jeffrey (1996) presents some of the analogies used in order to approach the issue of sustainability: survival, flexibility, adaptivity, diversity, learning, innovation, mutation and preservation. However, he notes that the analogy, although useful, should be used with much precaution since human societies have different characteristics than ecosystems, such as: the ability to manage their surroundings; their varied and complex agendas; and the diversity of utility measure adopted by individuals and communities. This difference is also stressed by Kay (2002) when referring to the mimicry principle of industrial ecology. Hence, even though the analogy may have useful descriptive properties, it should not be used as a basis for prescription. This would require widening the scope to include human societies and take into account their unique nature.

The human

perspective is discussed in paragraph 3.3.6. First, however, we have to focus on the economic perspective which is a particular part of the human perspective.

3.3.5 The economic perspective the meaning of Capital In section 3.1 we saw the development of sustainability as an antithesis to that of economic growth. Nevertheless, economic science is still dominant in shaping the development agenda, since the market has become the main force behind the development of man-made systems particularly production systems at least in free market countries. Economic science has started, though, to attempt to incorporate sustainability issues, mainly through the discipline of Ecological or Environmental Economics.

the quality of the electricity is wasted, as it could have been used to run a heat pump or other devices that in turn would have generated heat while doing other tasks as well.

66


Central to ecological economics is, again, the idea of capital. According to Ekins et al. (2003): [capital] is a stock that possesses the capacity to give rise to flows of goods and/ or services. Classical economics has considered three types of capital: land, labour, and man-made or artificial capital; under the pressure of environmental issues, neo-classical economics also attempted to widen the meaning of capital including energy and material inputs. Ecological economics, however, use the term Natural Capital. In the relevant literature, there are several definitions of natural capital, and very common is the functional approach which identifies the basic function of ecosystems which can are grouped in four categories(Chiesura and de Groot, 2003): Regulation functions: regulation of essential ecological processes and life support systems (bio-geochemical recycling, climate regulation, water purification, etc.) Production functions: harvesting from natural ecosystems of raw materials, food etc. Habitat functions: natural ecosystem provide refuge and reproduction-habitat to flora and fauna and contribute to the conservation of biodiversity Information functions: nature provides many possibilities for recreation and aesthetic enjoyment, cultural and historical information, artistic and spiritual inspiration, education and scientific research Ekins et al. (2003) identify natural (or ecological as they call it) capital also by the functions it performs for humans: 1. Source functions: provision of resources. 2. Sink functions: absorption of wastes generated from production and disposal of goods. 3. Basic life-support functions: such as those that produce climate and ecosystem stability. 4. Other human wealth and welfare functions: the capacity to maintain human health and generate human welfare in other ways. 67


Based on the concept of capital, Ecological Economics have identified two levels of sustainability (Chiesura and de Groot, 2003): Weak sustainability: in this case natural and man-made capitals are considered as substitutable, as long as the level of the total capital (man-made + natural) remains constant. The economy in this case can be sustainable even if it has depleted its resource of Natural Capital, provided that it has created enough man-made capital to compensate for its loss. Strong sustainability: in this case, natural capital and man-made capital are considered complementary in such a way that it is not sufficient to just be concerned with maintaining the aggregate level of capital. Natural Capital must be separately preserved, as part of it is non-substitutable. This non-substitutable part of the Natural Capital performs certain important and irreplaceable functions and it is called Critical Natural Capital. The degree of substitutability and the identification of Critical Natural Capital is a very controversial issue in ecological economics. The very idea of capital implies a human transformation and use, hence it is difficult to distinguish between natural and manmade capital (Jamieson, 1998). Moreover, the criticality of natural capital is very difficult to identify, as it is dependent on the large complexity of ecosystem functions (see previous paragraph), but also on the softer information functions (see above) that it performs for humans and which are likely to be highly subjective. As Funtowitz and Ravetz (1994) put it, criticality is an emergent property arising out of the interaction of ecological and human value systems. In order to incorporate the environmental dimension in economy theory, ecological economics attempts to valuate the ecosystem functions. However, Farber et al. (2002) note that the concept of value has a range of meanings in different disciplines. In economics, values are anthropocentric and tend to reflect the difference that something makes to human preferences. On the other hand the concept of value in ecology might have a more intrinsic nature, in the sense that ecosystems have a value in their own right in terms of the important sustainability functions they perform.

68


3.3.6 The human perspective The ecosystem perspective, as we saw, is very important in studying the natural-human interaction, as it informs about the nature of ecosystems which are the base upon which human systems evolve. The previous paragraph presented the economic attempt to expand its theories and include important environmental functions. However, both of these approaches are not sufficient in the study of sustainable development since the former does not (always) recognise the distinct characteristics of human systems and the latter is trapped in the reductionist paradigm which either regards human systems separately from ecosystems, or transforms the latter into mere commodities. As we saw in Chapter 2 man as a biological organism belongs to living systems. However, he is hierarchically higher from them due to his intelligence and moral personality, which are more complex emergent qualities (Decleris, 2000). Instead of being subject to simplistic laws, his rationality and creativity make him capable of realising his current situation (un-sustainability) and take actions to change it (sustainable development). This requires a shift from a short-term thinking (typical of the markets opportunistic rationale) to long-term thinking, which is closer to the timescale of ecosystems. Both the ecosystem and economic perspectives belong to the interface level, i.e. the level where the interaction of human and natural systems occurs, for example in production and industrial systems. This level is mainly governed by quantitative or hard parameters which fall under the scientific and technological domains. However, in the post-industrial society, this level is linked with higher, more complex human systems and networks (such as ethical or cultural systems) where decision and actions can dramatically affect the interface level (Decleris, 2000). These higher level systems, are governed by more qualitative or soft parameters, and, as we saw in Chapter 2, by values. Harremoes (2003) gives the following hierarchical list of norms that are ranked according on the importance of their influence: 1. Principles, ethics, moral tenets 2. Constitutions, laws, directives 3. Precedent, set by courts; 4. Procedures, administrative, technical; 69


5. Substantial norms, administrative technical; 6. Economics, taxes, prices; 7. Technical norms, written 8. Technical norm, implied public norm, implied; 9. Technical activities public social and individual behaviour Sustainable development is mainly about making an ethical shift (Jamieson, 1998), and focusing on qualitative rather than quantitative development. According to Harremoes (2003), this shift involves expanding the moral concerns from just anthropocentric to eco-centric, thus including the ecosystems and Gaia, as ethical considerations. However, Decleris (2000) argues that the environment should not be protected on the grounds that it has rights in itself, but rather because the interests of man and the environment are identical. In this light one should regard the first principle of the Rio Declaration which states that: Human beings are at the centre of concerns of sustainable development. Decleris (2000) criticises the Brundtland definition of sustainable development on focusing only on the interface level, as it refers to needs and hence resources. Nevertheless, it introduced the notions of intergenerational and intragenerational justice. Decleris notes that sustainability, which has become the new global value, is indeed the modern term in place of justice. That is justice towards: Nature Poor Peoples Future Generations

70


3.4 The Sustainable Corporation As we saw in the previous paragraphs, sustainable development is a challenge that society has to deal with at all levels. The role of business and industry in this challenge is paramount, especially in a free market economy, as they are directly and indirectly responsible for the interface level of human and natural systems. Chapter 30 of Agenda 21 (United Nations, 1992) focuses on the role of business and industry and sets objectives

to

promote

cleaner

production

and

responsible

entrepreneurship.

Additionally, the Johannesburg Declaration (United Nations, 2002b) states that: the private sector, including both large and small companies, has a duty to contribute to the evolution of equitable and sustainable communities and societies. and that there is the need for private sector corporations to enforce corporate accountability, which should take place within a transparent and stable regulatory environment. Corporations have generally reacted with different levels of commitment to the call of sustainable development. During the 1970s and 1980s, corporations particularly those in heavy polluting industries focused on environmental protection as they had to comply with the increasingly strict environmental legislation and standards contained in environmental permits and licenses for operation. After the WCED report in 1987, the climate started to change and during the 1990s corporations started to focus on ecoefficiency and resource productivity on a voluntary basis (Keijers, 2002). Tools such as Environmental Management Systems and approaches such as Industrial Ecology were developed, and environmental issues were treated proactively at the strategic management level. During the late 1990s, the focus turned on the broader concepts of sustainability performance and lately to the somewhat similar and vague concept of Corporate Social Responsibility (CSR). Hence, we can distinguish four different corporate strategies towards sustainable development (Schot et al., 1997):

71


The defensive strategy: this typically involves the typical compliance with regulation and minimum standards. The offensive strategy: this involves development of environmentally friendly products or following a policy that goes beyond compliance in order to gain competitive advantage. The eco-efficiency strategy: this tries to identify win-win solutions by reducing environmental impacts and costs The sustainability strategy: this focuses on new and emerging partnerships between business and stakeholders and adopting the new values of sustainable development. Apart from the defensive strategy, which has legislation as its main driver, all other strategies are voluntary in character. The drivers for adopting these more advanced strategies are in most cases related to business benefits also referred to as the business case such as: Improved operational efficiency

Preservation of licence to operate

Enhanced brand value and reputation

Promoting and increasing innovation

Customer attraction and retention

Improved access to capital

Enhanced human and intellectual risk

Building and sustaining shareholder value

Improved management of risk

Generating increased revenues

Attracting and retaining talented staff

Identification of new opportunities (The Sigma Project, 2003b)

The Sigma Project identifies other drivers which relate to the risks and threats of the growing pressures for corporate social responsibility, such as: New communication technologies that allow the fast spread of information regarding individual performance of organisations. The impact of corporate environmental and social behaviour on brand, reputation and shareholder value but also to operational efficiency, access to capital, license to operate, attractiveness to customers and employees. Increasing governmental interest and action at national and international levels (e.g. legislation, tax incentives, promotion of voluntary codes). 72


Increasing power and, hence, responsibility of multinational companies. Raising awareness that corporate responsibility should include the whole supply chain. Increasing influence of NGOs.

3.4.1 Organisation of sustainable corporation concepts, methods and tools In the past decade an increasing number of models, concepts and tools have been introduced by various bodies, to help organisations understand and improve their sustainability performance. However, this variety has created confusion regarding their characteristics, differences and linkages and has inhibited their effective application. Robèrt (2000) introduced a systems model, further elaborated by Robèrt et al. (2002), that attempts to integrate the various sustainable development concepts and tools. He first identifies the principles of planning within any system, and then applies them in the context of sustainable development. The resulting Strategic Sustainable Development Model (SSDM, named after the title of the paper by Robèrt et al.) is hierarchical and has five levels as described in Table 3.1 and Figure 3.3. Planning involves control thus it can be regarded as a cybernetic process. Consequently, the SSDM is essentially a cybernetic control system of human systems and in particular organisations (including corporations).

73


Planning in a system

Planning for Sustainability

1. Principles for the constitution of the system

The system is the ecosphere or Gaia governed

by

ecological

and

social

principles 2. Principles for a favourable outcome of planning Principles within the system.

that

define the

goal

of

sustainability.

3. Principles for the process to reach this outcome

Principles of sustainable development, such as the precautionary principle.

4. Actions, i.e. concrete measures that comply E.g. recycling or switching to renewable with the principles for the process to reach a

energy.

favourable outcome in the system 5. Tools to: (i) monitor and audit the relevance of actions (4) E.g. indicators of flows and key figures to with reference to principles for the process comply with sustainability principles (3) (ii) monitor the status of the system itself, and E.g. impacts,

or

reduced

impacts,

as

indicators

of

Ecotoxicity

a employment

consequence of strategically planned societal actions.

Table 3.1 The Strategic Sustainable Development Model (SSDM)

Adapted from Robèrt (2000) and Robèrt et al.(2002)

Figure 3.3 The Strategic Sustainable Development Model (SSDM) 74

and


In line with and in order to advance Robèrts work, this thesis uses the Viable System Model (VSM) as the basis to organise the sustainability concepts, methods and tools in the organisational context 1 . The reasons for using the VSM instead of the SSDM are that: 1) the VSM is built upon cybernetic principles which are generic and thus can be used for a clearer understanding of how the different tools are interrelated and how they could be combined. 2) the SSDM refers only to the highest systems and scales of society and ecosystems in order to formulate general principles of sustainability and sustainable development. This is an approach followed by this thesis as well (sections 3.2 and 3.3); however, apart from the general sustainability principles stemming from the highest systems, one should also take into account the unique environment, role and operations of every organisation (sub-system) within society.

The VSM takes into account the particular environment of every

organisation, as well as the relation with its higher systems (through S5). 3) the VSM has a richer structure than the SSDM; it takes into account not only the hierarchical levels for planning and management within any system (management levels S2-S5 in the VSM), but also the hierarchical levels of the organisational structure (recursive levels). Thus, the VSM can better facilitate the sustainability planning and management within large and complex organisations. 4) the VSM has been successfully tested to a variety of different organisational contexts (see paragraph 2.7.3). Figure 3.4 shows the relation of the two models, by mapping the SSDM levels onto the VSM structure. It must be noted that the VSM shown in Figure 3.4 is simple and generic; there are no recursive levels shown, nor any particular Systems 1, since both of these depend on the nature of each organisation. Nonetheless, it is sufficient to show the different aims and characteristics of the various concepts and tools, as well as their relations. Similar figures will be shown in the next paragraphs to show the proposed location of each of the presented concepts and tools inside the VSM.

1

The VSM is described in section 2.7.

75


The yellow elements correspond to the SSDM level, which are indicated by the numbers in parentheses.

Figure 3.4 Proposed mapping of SSDM levels onto the VSM

3.4.2 Triple Bottom Line The most popular concept of sustainable development in a business context is that of Triple Bottom Line (TBL).

The TBL was first proposed by the consultant and

campaigner John Elkington (1997), in order to show that organisations interested in sustainability should move away from the single financial bottom line, and improve the performance of their environmental and social bottom lines as well. This concept however, was already present in Agenda 21 (later also mentioned in the Johannesburg Plan of Implementation), where various proposed actions are advised to be economically viable, socially acceptable and environmentally sound Lately, the 5th Principle of the Johannesburg Declaration on Sustainable Development (United Nations, 2002b) refers to the similar concept of the three pillars of sustainable development: 76


we assume a collective responsibility to advance and strengthen the interdependent development

and

mutually

economic

reinforcing

development,

pillars social

of

sustainable

development

and

environmental protection at the local, national, regional and global levels. Nevertheless, the TBL is more relevant at the corporate and business level, and it is usually represented by a Venn diagram, as shown in Figure 3.5.

Sustainable

development is located in the middle, where the three bottom lines are balanced.

Figure 3.5 The Triple Bottom Line Venn diagram

Due to its simplicity, the TBL is very helpful as a conceptual tool and thus useful in raising awareness of sustainability issues in a corporation. However, its use beyond this simplistic level has certain limitations (Wilsdon, 1999): 1. It regards the three bottom lines as having an equal weight, while over the long-term environmental sustainability is pre-conditional to the other bottom lines. This is a complete lack of hierarchical and systemic thinking. 2. Similarly, it does not distinguish between individuals and society which have different qualities and can yield different forms of capital. This critique comes from the 5 Capitals model discussed in the next paragraph. 3. Most people wrongly assume that the financial bottom line simply means increased profitability, when this alone is incompatible with the other bottom lines.

Moreover, the financial bottom line includes much more than just 77


increased profitability, such as the local economy and relations with business partners Dyllick and Hockerts (2002) have extended the TBL concept and suggested six criteria of corporate sustainability based on each of the bottom lines, as described below and shown in Figure 3.6.

Adapted from Dyllick and Hockerts (2002)

Figure 3.6 The six criteria for corporate sustainability

From the business (or financial) bottom line perspective (upper corner in Figure 3.6) the two criteria which are concerned with increasing economic sustainability are: Eco-efficiency: the efficient use of natural capital (see also paragraph 3.4.8) Socio-efficiency: minimising negative impact (i.e. accidents per value added) or maximising positive social impacts (i.e. donations) in relation to the value added. From the natural (or environmental) bottom line perspective (lower left corner in Figure 3.6) the two criteria which are concerned with ecological sustainability are: Eco-effectiveness: as opposed to eco-efficiency, eco-effectiveness is a qualitative measure that searches for novel sustainable solutions instead of improving the efficiency of wrong ones Sufficiency: which affects the consumption patterns of society From the social bottom line perspective (lower right corner in Figure 3.6) the two criteria concerned with social sustainability are: 78


Socio-effectiveness: judging business conduct not on a relative scale (as in socioefficiency) but in relation to the absolute positive social impact a firm could reasonably have achieved. Ecological equity: inter- and intra-generational justice in relation to the use of natural capital Moreover, Dyllicj and Hockerts suggest a definition of corporate sustainability based on the Brundtland definition: meeting the needs of a firms direct and indirect stakeholders (such as shareholders, employees, clients, pressure groups, communities etc), without compromising its ability to meet the needs of future stakeholders as well.

In terms of the VSM, the TBL concept can be used to create an organisations sustainability policy; therefore it is located at the S5 level (Figure 3.7).

Figure 3.7 Location of the Triple Bottom Line in the VSM

79


3.4.3 The Five Capitals Model In paragraph 3.3.5 we referred to the Ecological Economics approach and the use of capital as a means of expressing sustainability.

Paul Ekins initially (1992)

disaggregated the capital stock in four types, but later the sustainability charity Forum for the Future (co-founded by Ekins) (Forum for the Future, 2005) elaborated this concept and introduced the Five Capitals Model (FCM) of sustainability. According to the model the economy and each and every company needs five capitals to function properly (The Sigma Project, 2003b, Wilsdon, 1999): Ecological or Natural capital: the natural resources (energy and material) and processes needed by organisation to produce their products and deliver their services. It includes sinks, resources and processes (see paragraph 3.3.5). Manufactured capital: comprises material goods (tools, machines, buildings, and other infrastructure) which contribute to the production process but do not become embodied in the outcome. Human capital: incorporates the health, skills, intellectual outputs, motivation and capacity for relationships of the individual, which can contribute to the creation of wealth and productive work. It is also about dignity, joy, passion, empathy and spirituality. For companies, human capital mainly refers to their staff, business partners and suppliers. Social or organisational capital: is any value added to the activities and economic outputs of an organisation by human relationships, partnerships and co-operation.

It includes, for example, networks, communication channels,

communities, businesses, trade unions and voluntary organisations, as well as cultural social norms, values and trust. Financial capital: reflects the productive power and value of the four other types of capital and covers those assets of an organisation that exist in a form of currency that can be owned or traded, including (but not limited to) shares, bonds and banknotes. The FCM advocates the model of sustainable capitalism (Wilsdon, 1999) geared around maintaining and, where possible, increasing the stocks of the above capitals, rather than depleting or degrading them. However, the FCM recognises that, in reality,

80


there exist only two sources of wealth, namely the natural capital and the human capital, and that all other forms of capital are derived from those two. The FCM is a more elaborate approach to sustainable development compared to the TBL, and can give a richer picture of the functions and sustainability aspects/impacts of organisations. It is subject, however, to the criticism of the economic perspective (see paragraph 3.3.5) of ecological economics, and mainly the use of capital as a main concept.

In term of ecosystems, the notion of capital introduces a utilitarian and

anthropocentric approach, while in terms of human/social systems the use of stocks and flows resembles hard systems approaches (see section 2.6), which are very limited in handling complexity and value multiplicity. Moreover, even though the model notes that only two forms of capital exist (natural and human) and should be enhanced, the lack of a systemic hierarchical order can make it possible for organisations to regard all capitals of equal importance. In terms of the VSM the FCM can be used to create an organisations sustainability policy, therefore it is located at the S5 level (Figure 3.8).

Figure 3.8 Location of the Five Capitals Model in the VSM

81


3.4.4 The Natural Step The Natural Step (TNS) was founded in 1989 by Karl-Henrik Robèrt, and has since developed as a framework to provide the general public, the scientific community, and decision makers in business and politics, with a mental model that aids in planning and evaluating activities from a sustainability perspective (Robèrt, 2000).

It has been

reportedly used in numerous corporations and municipalities in Sweden, from where it originates, as well as internationally (some major of which are IKEA and Interface Inc.) (Upham, 2000). The TNS has three main components (Robèrt, 2000). The first component is the funnel (see Figure 3.9) which is a metaphor for the continuous decline of the ecosphere to support our present day economies, and life itself, as humans exploit, manipulate and overburden the earths ecosystems. Those business and policy makers, who contribute to the narrowing of the funnels walls in relation to our health and prosperity, will see its walls as higher and higher costs for waste management, taxes, insurance and so on.

Adapted from Robèrt (2000)

Figure 3.9 The funnel metaphor

The second component is the four system conditions. These are basic conditions for the sustainability of the ecosphere/society system or, in other words for the opening of the funnel. These four system conditions are worded as follows (Robèrt et al., 2002): In the sustainable society, nature is not subject to systematically increasing: 1. concentrations of substances extracted from the earths crust, 2. concentrations of substances produced by society, 3. degradation by physical means, 82


and in that society 4. human needs are met worldwide.

The first condition covers the societal influence on the ecosphere due to accumulation of lithospheric material, and requires a balance to be sought between the societal material flows and the natural cycles of the ecosphere. The second principle requires that the flows of societally produced materials (new molecules and nuclides) must not be so large that they can neither be integrated within the ecosphere nor be deposited in the lithosphere. The third condition covers the societal influence on the ecosphere, due to manipulation and harvesting, which affects the ecospheres productivity and biodiversity. The final condition refers not only to the basic needs to sustain life but to all needs to maintain health, including emotional and social needs. TNS maintains that the violation of the above system conditions is causing the narrowing of the funnel. The final component of TNS is a strategy to avoid the walls of the funnel and reach its opening (see Figure 3.9).

It first involves investigating the upstream causes of

problems with regard to the system conditions. Then, in order to approach compliance with the four conditions, technically feasible stepping-stones or flexible platforms should be used that link short term with long term investments (e.g. producing not only an efficient car engine, but one having future potential to use alternative fuels). In the same direction of linking short and long term investments, TNS argues that the priority should be given to those flexible platforms that are also likely to yield a fast return on investment (low hanging fruits). Upham (2000) mentions some of the advantages and disadvantages of TNS. First of all, the concise, apparently simple and almost incontrovertible nature of the system conditions makes them consensual and hence good catalysts for social change. Moreover, the use of the basic science of thermodynamics reminds the general audience that humans are part of the natural processes and also aids in TNSs widespread acceptance.

The cyclic principle, which is used to identify generic processes of

anthropogenic impact, sets a comprehensive scope for sustainability assessment and helps the general audience to understand mitigating options. In addition, the system conditions have rate corollaries (e.g. balancing biological harvest and renewal rates) that 83


relate to material accounting and substance flow analysis, and may complement emissions and substance risk assessment in environmental management.

Very

important is also the precautious ethic of minimal environmental disturbance that TNS intends to express. Finally, the use of backcasting (i.e. conceiving a desirable end-state and planning how to achieve it) encourages the search for novel solutions. On the other hand, the main disadvantages of TNS relate to its simplicity. The system conditions and the cyclic principles are very high-level and can be very difficult to operationalise, while the proposed indicators are suitable only for basic screening. The system conditions can be viewed as very strict, end-point conditions of a simple ecological-economic model.

Moreover, the rule of rate balancing is practically

impossible to implement as no infrastructure or products could be built without breaching the rule of materials. There is no distinction between wastes, commodities and infrastructure and no specifications for specific levels of impact while there is a neglect of toxicity.

The use of basic science can give the wrong appearance of

objectivity to the model, when relationships to the systems conditions are not yet specified.

Finally, its implications are highly precautious in some respects while

inadequately precautious to others. As a sustainability guiding framework that claims to be scientifically defensible, TNS seems highly rhetorical. (Upham, 2000). Robèrt (2000) attempted to respond to some of the criticism of the TNS, by introducing the SSDM, described in paragraph 3.4.1. He located the four system conditions at level 2 of the SSDM (S5 in the VSM of Figure 3.10), where general principles of sustainability are situated, and the strategy at level 3 (S4 in the VSM). Thus, to a certain extent, it is expected that the TNS will not give specific guidance for operationalising sustainable development, as this should happen at lower levels (actions, tools). In conclusion, TNS is a systemic, albeit simple, approach to understanding sustainability a property that makes it valuable for educational purposes and for promoting culture change.

84


Figure 3.10 Location of The Natural Step in the VSM

3.4.5 Life Cycle Analysis This paragraph is based on the publication of Jensen and the European Environment Agency (1998). Life Cycle Analysis or Assessment (LCA) represents a group of concepts, tools, and techniques that attempt to evaluate some aspects and impacts usually environmental of a product system through all stages of its life cycle. It is also known as life cycle approach, cradle-to-grave analysis or Ecobalance.

The life cycle of a product

involves all the activities that happen during its making, transportation, use and disposal. An example of a simple life cycle is shown in Figure 3.11.

85


Adapted from Jensen and European Environment Agency (1998).

Figure 3.11 Example of a simple life cycle

LCA tools can be used both in the private and public sectors as decision support tools in order to facilitate the distinction between products, product systems or services, based on their environmental performance.

In the private sector LCA applications vary

greatly, depending to a large extent where a given company is situated in the product chain and on the key driver for the LCA study e.g. legislation or market competition. Some of the application areas include: Internal use in product development and improvement Internal strategic planning and policy decision support External use for marketing purposes In the public (government) sector applications of LCA include: Product-oriented policy (which includes eco-labelling schemes and green procurement policies) Deposit-refund schemes, including waste management policies Subsidies and taxation, and General (process-oriented) policies 86


An overview of the LCA framework, as well as the relation with its applications is shown in Figure 3.12.

Adapted from Jensen and European Environment Agency (1998).

Figure 3.12 The LCA framework and phases

LCA has four main phases: 1. Goal and scope definition: This is a critical phase where the purpose (goal) of the LCA study is defined, by stating the reasons for carrying it out, as well as its intended application and users of the results. Moreover, the scope of the study includes determining: - the functional unit, i.e. the performance characteristics by which comparisons will be made and data will be normalised, - the system boundaries, i.e. the processes, inputs and outputs to be taken into account. (e.g. geographical and life cycle boundaries) - the data requirements of the study. 2. Inventory analysis: This phase involves data collection and validation, refining of system boundaries, calculations, and relating the data to the specific system. 3. Impact assessment: This phase involves the definition of the impact categories to be considered, the classification and characterization of the inventory input output data and the valuation/weighting of the impact categories against each other. 87


4. Interpretation: This phase is in continuous interaction with the other phases of LCA. It involves the identification of the significant environmental issues, a qualitative evaluation of the studys data and processes and the studys conclusions and recommendations. The development and standardisation of LCA has mainly been directed towards a detailed LCA methodology. However, we can also distinguish two less detailed levels of LCA applications: 1. The simplest level is the Conceptual LCA or Life Cycle Thinking level. At this level assessments are based on a limited and usually qualitative inventory and they can indicate, for example, which components or materials have the largest environmental impacts and why. The results can be presented using qualitative statements or scoring systems.

However, it cannot be used for marketing

purposes as this would require more detailed LCA studies. 2. The simplified LCA aims in providing the same results as a detailed LCA, but with a significant reduction in expenses and time. First, it involves a screening assessment that identifies those parts of the system (life cycle) or of the elementary flows, which are important or have data gaps. Then, it focuses the work on these parts or elementary flows and, finally, it checks that this simplification does not significantly reduce the reliability of the overall result. These two levels along with the more detailed level can be regarded as a continuum with an increasing level of detail. However, irrespective of the detail level, the LCA is a holistic approach and an LCA study should refer to the whole life cycle and include all inputs and outputs.

Even though the LCA methodology has been developing for almost three decades, there are still some main issues that it faces, such as: the complexity of many of the methodologies and processes; the high cost and long time-scales; the necessity of making value judgments in the course of the work, judgments which are not always identified in the final report;

88


the lack of accepted international standards (with the exception of the ISO 14040 series); the continuing invisibility of much LCA work, compounded by the above factors. However, the most important issue is the lack of market demand for LCA and its consequent absence in the decision making processes of companies.

The relation of LCA with systems thinking is obvious and in certain cases it is explicitly mentioned, when referring, for example, to the system boundaries of the study. LCA apart from identifying the system under study (e.g. product or service) and studying its relations with the environment (inputs and outputs), is particularly focused on the systems evolution through time (see paragraph 2.2.2). The general LCA approach, or life cycle thinking, encourages the broadening of a companys focus and responsibilities, both in time and throughout its supply chain, and as such it is crucial for sustainable development. In terms of the VSM organisation of tools, the more abstract and conceptual form of LCA is situated at the strategic S4 level (Figure 3.13), as it is used to facilitate decision making, strategic planning and the development of new products or services. The more detailed LCA studies requires involvement of lower levels as well (S1, S2 and S3) in order to effectively manage and coordinate the necessary data collection processes. However, the outcome of LCA and its interpretation are useful at the S4 level.

Figure 3.13 Location of Life Cycle Analysis in the VSM 89


3.4.6 Sustainability Accounting Sustainability Accounting (SA) is a methodology that originates from the economic perspective of sustainable development as discussed in paragraph 3.3.5. Bent and Richardson (2003) define Sustainability Accounting as: the generation, analysis and use of monetarised environmental and socially related information, in order to improve corporate environmental, social and economic performance. As financial accounting intends to give investors a picture of a companys financial performance, SA intends to include social and environmental costs and benefits in prices, in order to provide the market with the right signals that will allow improved (i.e. more sensitive regarding environmental and social impacts) market-based decision making. According to Bent and Richardson (2003), SA has the following three dimensions in relation to the organisations impacts (also shown in Figure 3.14): 1. Timing of impact:

SA can show the state of a stock at a certain point in time or it can show the flow of goods and services arising from a stock over a period of time

2. Location of impact:

The impact can be situated inside (internal) or outside (external) the companys financial reporting boundaries.

3. Type of impact:

The impact can be environmental, social or economic

90


Adapted from (Bent and Richardson, 2003)

Figure 3.14 The three dimensions of Sustainability Accounting

Traditional financial accounting is focusing on the internal economic impacts (i.e. on the front half of the cube shown in Figure 3.14) of stocks (through the Balance Sheet) and flows (through the Profit and Loss account).

SA seeks to explore all three

dimensions by: 1. disaggregating the internal accounts to show costs and benefits relating to economic, social and environmental performance; and 2. extending the accounting boundary to consider the monetary value of external economic, social and environmental impacts. The internal flows can be disaggregated by restating the Profit and Loss account as: Economic Value Added Statement: showing the stakeholder groups that benefited from the organisations activities (i.e. financial flows). Environmental

Financial

Statement:

showing

the

total

environmental

expenditure and any associated financial savings achieved as a result of that expenditure. Social Value Added Statement: showing the costs and benefits of social policies and activities, i.e. the economic value to the organisation of its social stance, through ethical policies and practices. The extension of the Profit and Loss account to capture external flows (costs) involves the following steps: 91


1. Scoping the impacts: Identifying all significant environmental, social and economic impacts associated with the organisations activities, ideally using a stakeholder engagement approach. 2. Determining boundaries: Prioritising what impacts to account for and what impacts to consciously exclude. 3. Monetary valuation of impacts: There are many valuation methods, but the least controversial seems the use of avoidance and restoration values which is based on the calculation of the actual cost that would be incurred to the organisation to prevent or avoid its impacts. 4. Calculating Sustainable Profit: Deducting total external costs from financial profit to give an estimate of the sustainable profit level. Apart from the traditional financial stocks of an organisation (fixed assets, working capital, long-term liabilities), the internal stocks comprise its intangible assets which indicate the competencies and capabilities of the organisation (or the human and social capital in terms of the Five Capitals Model, described in paragraph 3.4.3). Currently, these stocks are valued by capital markets as the difference between book values and the market value of the company. The field of valuing intangible assets is new and other approaches are also developing such as Return on Assets, brand valuation and the Intangible Asset Monitor. Bent and Richardson (2003) state that they have not come across any organisation measuring its impacts on external stocks. Bent and Richardson (2003) also note that currently SA deals with economic, social, and environmental issues in isolation from one another, rather than as an integrated whole (system). Nevertheless, there have been some attempts to develop integrated performance indicators that explore the relationships across the triple bottom line (socio/economic or eco-financial). There are certain difficulties, however, that have to be overcome in order to attain the integration of all aspects of SA, as follows: Boundaries and responsibilities: How to draw the boundaries of an organisations responsibilities, especially when it is a part of a socio-economic system which only rewards certain sorts of behaviour (e.g. only profit making)? 92


Valuation methods: Can the same judgements be applied to environmental and social valuation methods? The avoidance and restoration costs may be different for a third party than to the organisation itself. Aggregation: the conversion of social and environmental impacts into monetary values facilitates the trade offs among different impacts, something that is not always compatible with sustainability (e.g. comparing £1 worth of climate change damage with £1 of reduced waste impact or £1 contribution to the local economy). Accounting for what you can see and count: the organisation may not be aware of its impacts, or not be able to count them. It is cases like these where one recognizes the strength of using a stakeholder engagement methodology to aid in the identification of impacts. Apart from the above difficulties (stemming to a large extent from the use of the economic perspective), Bent and Richardson (2003) believe that SA can play a significant role in engaging companies in improving their sustainability performance. The use of financial language makes it familiar to corporate decision-makers while it can provide opportunities for more sustainable behaviours. They note the increasing trends of internalising the externalities of corporate activities, and see the SA as an extension of conventional accounting systems. Finally, they believe that SA is about being imprecisely right which is better than being precisely wrong. In terms of the VSM, SA can be regarded as aiding the monitoring and controlling functions of system S3 based on the information supplied by Systems 1 (Figure 3.15). When SA focuses on internal impacts S3 considers the status of Systems 1 (Operation), and when SA focuses on external impacts they considers the status of the operating environments.

93


Figure 3.15 Location of Sustainability Accounting in the VSM

3.4.7 Ecological Footprint Ecological Footprinting (EF) is a concept that was introduced by Wackernagel et al. (1996) to measure the extent that human activities appropriate the carrying capacity of the planet. In contrast with the economic approach of valuating natural capital based on monetary values (as in Sustainability Accounting methods), EF uses land area as the common unit of human impact. Initially, the EF methodology was developed to measure the impacts of regions and, in particular, countries. The procedure of calculating the EF is as follows (Pearce, 2000): 1. Identify and measure (mainly through trade data) the components of consumption in a given region such as food, energy, transport, consumer goods and services. 2. For each item of consumption, estimate the area of land (bioproductive area) that would have to exist in order to generate the resources involved in that consumption. The bioproductive areas are split into four main categories (Best Foot Forward Ltd., 2002): Bioproductive land Bioproductive sea 94


Energy land (forested land required for the absorption of carbon emissions), and Built land (such as, buildings and roads) Apart from the above bioproductive areas, Biodiversity land is also estimated, which is the land that would need to be set aside to preserve biodiversity. 3. Add the land areas to determine the total footprint of the region. 4. Compare the footprint with actual size of the region generating the footprint. The footprint of a region can be also presented in a per capita basis, by dividing the calculated footprint with the areas population and its average productivity. Moreover, in order to facilitate the comparisons between countries with different bioproductive capabilities, the ecological footprint is presented in global hectares (gha). A global hectare is equivalent to one hectare of biologically productive space with world average productivity. The conversion of different land and sea types (with their differing productivities) into standardised global hectares is made by a set of equivalence factors. These factors are subject to change due to both improved data availability and variability in the bioproductivity of the planet over time.

Taking into account the current world

population, the global earth-share is calculated to about 2.18 gha per person (Best Foot Forward Ltd., 2002) . An EF analysis of London in 2000 (Best Foot Forward Ltd., 2002), showed that the ecological footprint of Londoners was 49 million global hectares (gha), which was 42 times its biocapacity and 293 times its geographical area. This is twice the size of the UK, and roughly the same size as Spain. The EF methodology has been recently further developed to calculate the impact, not only of large regions such as counties, but also of individual human activities, lifestyles, organisations, products, services and smaller regions (Simmons et al., 2000). This is called component-based methodology and was developed by Best Foot Forward Ltd.

It is based on pre-calculating the ecological footprint values (also called

conversion factors) for certain energy and material flows (components), using data appropriate for the region under consideration. This allows the calculation of the EF of 95


a particular activity (service, product etc.) by adding up the EF of the components necessary for its production. Table 3.2 shows an example of calculating the impact of car travel in the UK. First the necessary data on fuel consumption, manufacturing and maintenance energy, land take and distance travelled are sourced for the country in question (the UK in this example). Then, an average ecological footprint estimate is derived for a single passenger-km (or other appropriate unit, depending on the component). This can then be used to calculate the impact of vehicle use at the individual, organisational, or regional level as required. This is essentially a bottom-up approach to the calculation of the EF.

Component

Inputs

Petrol

0.094 l/km

Maintenance and

0.0423 l/km

manufacture

equivalent

Road Space (a)

2,581,747 ha

Car road shared (b)

86%

Car kms (c)

362,400,000,000

Car occupancy ( d )

1.6 persons

CO2 emissions

Built-upon land

Footprint

0.22 kg/km

0.000043 ha/car km (i)

0.10 kg/km

0.000019 ha/car km (ii) 2,581,747 ha

Calculation

(a*b)/c

(i+ii+iii)/d

Footprint

0.00000613 ha/car

0.000043

km (iii )

ha/passenger-km

Adapted from (Simmons et al., 2000).

Table 3.2 An example analysis for the footprint of UK car travel per passenger-km

The EF methodology has been subject to criticisms that include (Van den Bergh and Verbruggen, 1999): its high level of aggregation which implies substitutability between land uses, the representation of hypothetical rather than actual land use, not distinguishing between sustainable and unsustainable land uses, and 96


its implications against trade. Despite its deficiencies, the EF methodology can be a very useful tool in raising awareness about sustainability issues and giving a broad picture of the scale of human impacts on ecosystems. The use of land area as a measure relates directly to ecosystems and the carrying capacity of the planet and can be regarded as a step towards strong sustainability which attempts to avoid the pitfalls of the economic perspective.

In terms of the VSM, EF can be used to monitor the status of the operating environments by System 3.

Figure 3.16 Location of the Ecological Footprint in the VSM

3.4.8 Eco-efficiency Eco-efficiency is a concept that was introduced in 1991 by the World Business Council for Sustainable Development (WBCSD) (2000). It measures the efficiency with which natural resources are used to create services and is expressed by the ratio of the value of services to the environmental influence generated from their creation. In terms of material inputs the eco-efficiency indicator is EE = S/MI 97


where, EE is the measure of eco-efficiency, S is the value of service (or service units), and MI is the material input. A related indicator is material intensity per service unit (MIPS), which is the inverse of eco-efficiency (Bringezu, 2002): MIPS= MI/S The material inputs also include the usually upstream flows of resource extraction which are not used for further processing.

These flows are called ecological

rucksacks or hidden flows and comprise the primary material requirements that do not enter the product itself. The way to increase eco-efficiency and resource productivity (or to lower MIPS) is to either raise the value (S) of services for a fixed quantity of resources, or lower the material input (MI) for a given service. The eco-efficiency concept has gained much ground as a sustainability indicator and management concept, especially in the business context, since it is promoted as a way to gain parallel ecological and economic benefits. Improvements in eco-efficiency are usually achieved through improvements in productivity which makes good business sense, since it can help lower production costs. However, as Hukkinen (2003) notes, the concept is not new as it is rooted in neo-classical economics and is reminiscent of the management principles promoted by Henry Ford when he wanted to get the most out of the power, out of the material and out of the time, as well as the Principles of Scientific Management by Taylor in the 1920s. Moreover, apart from the criticism on efficiency on the grounds of thermodynamics, effectiveness and sub-optimisation (see paragraph 3.3.4), another issue arises from the rebound effect. The rebound effect happens when the gains from increasing ecoefficiency (less input per service unit) are used to increase production (more service units), which results in an increase of the overall natural resources consumption (more total inputs).

For example, the production of more fuel-efficient cars lowers the

transportation costs, people drive more and buy more cars, which results in the increase of net fuel use. Thus the gains from eco-efficiency are cancelled. This could be avoided if there were limits on the natural resources consumption, or possibly if the gains from eco-efficiency were invested in changing the system of production, instead of increasing its output.

98


Korhonen (2004) argues that eco-efficiency is not suitable as a general sustainability principle (as it is widely promoted, especially by the WBCSD) because of the above problems, as well as because it promotes substitutability between natural and human capital. Instead it should be used only as a useful practical instrument for action when applied with caution.

Thus, in terms of the VSM mapping, eco-efficiency and

efficiency in general can be used at the S3 level (instead of S4 or S5), to monitor the current operations of an organisation, by measuring how well it is performing according to the pre-defined system structure and objectives.

Figure 3.17 Location of Eco-efficiency in the VSM

3.4.9 Accountability and Reporting According to Gray (2001), a simple definition of accountability is the duty to provide an account of those actions for which one is held responsible. Gray argues that whilst some corporate responsibilities are clear (such as legal compliance), environmental and especially social responsibilities are more difficult to define and depend on the various points of view. For this reason, accountability should 99


be based on effective engagement with an organisations stakeholders 1 , in order to determine what is important or material to both them and the organisation (The Sigma Project, 2003b). Accountability for organisations consists of three elements, according to the SIGMA Guidelines (The Sigma Project, 2003b): 1. Transparency: the duty of an organisation to account to its stakeholders 2. Responsiveness: the need to respond to stakeholders 3. Compliance: the duty to comply with rules and regulations for statutory reasons, but also with any voluntary standards to which the organisation is voluntary committed. Gray (2001), following a systems approach, suggests that for each organisationstakeholder relationship there are different levels of information which are required in order to move towards full accountability. These are (starting from the simplest lower level): descriptive information about the relationship the accountability that society requires (through law and quasi-law); the accountability that the organisation wishes to express; and the accountability that the stakeholders themselves wish to see. Accountability standards have recently been developed by private organisations, such as the standard SA8000 by Social Accountability International and the AA1000 by AccountAbility. SA8000 focuses on labour issues in supply chains and covers issues of employment and working conditions. It involves compliance with national or other applicable law, a number of International Labour Organisation conventions relating to employment, the Declaration of Human Rights and the United Nations Convention on the Rights of the Child. AA1000 aims in improving accountability and performance by learning through stakeholder engagement.

1

Similar to Environmental Management

Stakeholders are those groups that affect and/or are affected by the organisation and its activities, and

may include owners, trustees, employees and trade unions, customers, business partners, suppliers, competitors, government and regulators, non governmental organisations (NGOs) and pressure groups.

100


Systems (see next section 3.5), AA1000 focuses on the processes of assessing overall performance and does not determine a minimum or good level of performance (The Sigma Project, 2003a). Part of the accountability and stakeholder engagement practices of an organisation is usually that of reporting its performance to its stakeholders on a regular basis. In the context of sustainable development, these reports are called triple bottom line (TBL, see paragraph 3.4.2) or sustainability reports. The idea is that for full accountability an organisation should produce, alongside its financial statements, a full set of social and environmental statements that are equally rigorous, detailed and reliable (Gray, 2002). A leader in the field of sustainability reporting is the Global Reporting Initiative (GRI) which develops and disseminates globally applicable sustainability reporting guidelines (Global Reporting Initiative, 2002). In the development of its Guidelines, GRI uses a multi-stakeholder process of open dialogue and collaboration. As with AA1000, the GRI does not determine necessary levels of performance, but focuses on the reporting process and content, providing a guide to the presentation of economic, social and environmental performance information. The GRI Guidelines can also assist in the overall stakeholder engagement process. The GRI Guidelines consist of five key reporting principles and practices (The Sigma Project, 2003a): 1. Underlying principles of reporting: these include a clear definition of the boundaries of the organisation reported on (e.g. site, reporting period) and the materiality principle (which is dependent on what is relevant to either to reporting organisations or to their external stakeholders). 2. Qualitative characteristics of reporting: these are relevance, reliability, clarity, comparability, timelines and verifiability. 3. Classification of Performance-Reporting elements: these are organised in three hierarchical levels namely categories (environmental, social, financial), aspects (e.g. greenhouse emissions) and indicators (e.g. tonnes of emissions).

101


4. Ratio indicators: the reporting organisations are encouraged to express information as ratios, apart from absolute values, in order to make the report easier to read. 5. Disclosure of reporting policies: reports should include a formal disclosure of all significant reporting and measurement policies. Gray (2001, 2002) recognises there has been a considerable progress in the field of corporate environmental management and reporting and, more recently, in the growing awareness of social and wider sustainability issues. However, he notes that, despite these developments, there are certain important considerations regarding the state of corporate sustainability reporting, as well as the emerging trends and conceptions around corporate sustainability in general. These considerations are presented below. Following the Earth Summit in 1992, corporations have maintained the case mainly through the World Business Council for Sustainable Development and the International Chamber of Commerce that business can deliver sustainability without the interference of governments or legislation and that this will be accomplished by voluntary initiatives and the self-regulation mechanisms of the market. Thus, according to this view, the natural environment and social justice are safe in the hands of business and such ideas are mere extension of good business practices. However, as Gray notes, if this is the case, then society has a right to see: 1. Very widespread adoption of environmental, social and sustainability reporting by all major companies; and 2. Such reporting to be of the highest standards. In regard of the first point, Gray argues that in spite of the growing number of (environmental) reporting companies and the inevitable euphoria this has created, the majority of companies world-wide do not report and they are thus free-riding on the work of leading reporting companies. Moreover, many companies including reporting ones oppose to the inclusion of environmental reporting as part of legislation1 .

1

This can be also witnessed by the relatively low adoption level of the EMAS regulation which, as

opposed to ISO 14001, requires the issue of an environmental statement.

102


Regarding the status of environmental reporting Gray notes that they lack completeness, since: Reports are not based on a full eco-balance that includes all environmental inputs, outputs and impacts (similar to Life Cycle Assessment ) Companies are cherry picking and considering the less important environmental areas or impacts to which they can show improvements. Reports are more based on eco-efficiency indicators instead of indicators showing total impact, such as ecological footprints (see paragraphs 3.4.7 and 3.4.8) The more recent and relatively more elusive social reporting is even more partial and selective than environmental reporting, despite the efforts of standards such as SA8000 and AA1000. The above issues show that regardless of the claims of corporations, sustainability reporting is not of the highest standard, and even though voluntary schemes are good if you can find volunteers, there are in fact very few of them. From a systemic point of view and as Gray also stresses even if individual corporations were indeed sustainable (in the sense of taking responsibility and controlling their impacts), this alone could not ensure the sustainability of the higher systems of society. This follows the same reductionist thinking that contributed to unsustainability in the first place and it would merely cause sub-optimisation (see paragraph 3.3.4). On the contrary, sustainability as we have seen (sections 3.2 and 3.3) relates to higher systems, and is primarily a matter of the government. What is more, the highest priority of corporations will inevitably be the financial bottom line and their profit-seeking goal rather than the environmental and social ones since this will ensure their survival inside the highly competitive environment of the market. As Gray notes, it is the governments responsibility to set the (sustainable) rules of the game within which corporations will seek their goals. In conclusion, the way to more sustainable corporations should pass through the adoption of the broader concept of accountability as presented above, rather than just sustainability reporting.

103


In terms of the VSM, accountability is located at the S4 level, where the company is interacting with its external stakeholders in order to plan for improvements (Figure 3.18).

Figure 3.18 Location of Accountability and Reporting in the VSM

3.5 Environmental Management Systems This section focuses on a very common tool in improving the sustainable performance of corporations, namely Environmental Management Systems (EMS). These are dealt separately and more extensively from the other sustainable corporation tools and methods presented in the previous section, because EMS are used in the analysis of the Case Study in Chapters 6 and 7.

3.5.1 ISO14001 Environmental Management Systems became established as a major tool for improving the environmental performance of corporations during the 1990s.

However, their

development can be traced back in the 1980s when two trends emerged: the need to manage the quality of organisations products and services, and the increasing implementation of international standards. The two trends merged with the creation of voluntary international standards for quality management, such as the BS 5750 of the 104


British Standards Institute (BSI) and later the ISO 9000 standards family of the International Standards Organisation (Kuhre, 1995). Following the Earth Summit of 1992, it was apparent that despite two decades of increasingly strict and broad environmental legislation, environmental crises had not been resolved. It was thus regarded necessary to complement the controlling and reactive nature of environmental legislation, with proactive tools that operated inside the strategic level of organisations. This new approach led to the development of voluntary EMS standards by many countries, such as the BS 7750 in the UK. In 1996 the International Standards Organisation released the ISO 14001 EMS standard, which was mainly based on the successful ISO 9000 quality management series, as well as on BS 7750 among others. ISO 14001 is one of the dominant EMS standards in the world today, with around 66,070 certificates issued in 113 countries and economies in 2003 (ISO, 2004). The aim of the ISO 14001 standard is to help organisations formulate management processes in order to minimise their negative environmental impacts and achieve continual improvement of their performance. Hence, a company that wishes to be certified with this standard must first commit itself in pollution prevention, regulatory compliance and continuous improvement of its products, activities and services (Ghisellini and Thurston, 2005). It is important to note, however, that the standard does not determine specific environmental performance requirements. The EMS that is used to achieve the above goals is based on the continuous improvement philosophy and the Deming Cycle management model. The Deming Cycle, shown in Figure 3.19, consists of four phases namely PLAN, DO, CHECK and ACT and it is also known as the PDCA cycle (Walton, 1986).

105


Figure 3.19The Deming-PDCA cycle

Consequently, in order for an EMS to be certified under the ISO 14001 standard, it must have in place the following elements (Ghisellini and Thurston, 2005): 1. An Environmental Policy, which should be appropriate to the organisations activities, products and services 2. A Planning process (PLAN), which identifies the environmental aspects and the legal requirements that are relevant to the company, and then implements environmental programmes that address the impacts found significant. 3. An Implementation and Operation system (DO), which includes: The companys structure of responsibility for the EMS elements Employees training and awareness programmes An effective communication system The establishment of the EMS documentation The identification of operational control procedures and emergency plans 4. A Checking and Corrective Action system (CHECK and ACT), which includes: Monitoring and measurement activities Non conformance analysis and corrective actions Management of the records Scheduling of internal and external audits of the EMS 5. A Management Review (CHECK and ACT), which checks and documents the adequacy and effectiveness of the EMS with a frequency established by the company itself. 106


The ISO 14001 standard is generic, meaning that it can be applied to (ISO, 2003): to any organization, large or small, whatever its product including whether its product is actually a service, in any sector of activity, and whether it is a business enterprise, a public administration, or a government department. In order to obtain the ISO 14001 certification for its EMS, a company must undergo a third-party assessment, which is carried out by independent auditors associated with accredited registrars. Following the first certification audit, other surveillance visits are performed, typically every six months, to verify that the company implements, checks and improves its EMS. If a company does not comply with the EMS requirements, the registrar can withdraw certification. After a period of three years, a company must undergo a new certification audit (Ghisellini and Thurston, 2005). The ISO 14001 EMS can be regarded as a control system within an organisation, with the goal to minimise its environmental impacts. It comprises of a simple feedback loop, namely the PDCA cycle. However, a closer examination of ISO 14001 shows that in fact it is made up of more than just one feedback loops or controls: At the lowest operational level, there is the continuous and frequent monitoring of environmental aspects and the respective corrective action, according to the preset objectives and targets of the environmental programmes. (DO-CHECKACT) At the strategic level the monitored data are used to plan new programmes. This cycle happens in larger periods than the first cycle. (DO-CHECK-ACT-PLAN) At the highest management level the monitored data and the EMS audits are used to improve the EMS itself and the companys environmental policy. (AUDIT(check)-ACT) Based on this control hierarchy, Figure 3.20 shows the proposed mapping of ISO14001 on the richer control structure of the VSM. As we see in Figure 3.20, S3 is responsible 107


for the implementation (DO) of the environmental programmes and the continuous monitoring of the relevant environmental data (CHECK). S3 uses these data: i) to improve the implementation of the environmental programmes (ACTdownwards), and ii) to inform S4 (ACT-upwards). S4 searches for the current and new Environmental Legislation and, using the information supplied by S3, plans for new environmental programmes (PLAN). Moreover, S4 informs S5 to change the companys environmental policy (ACT), in case this is required by the new legislation. Finally, S3* is responsible for the regular audits of the environmental programmes.

Figure 3.20 Location of ISO140001 EMS elements in the VSM

Santos-Reyes and Beard (2002) attempted a similar mapping on the VSM structure of the Operational Health and Safety (OH&S) management system standard BS8800 1 , which is also based on the PDCA cycle. Indeed, all management systems that use the PDCA cycle will have a similar mapping to that of the ISO14001 EMS shown in 1

This standard has been used to create the more recent OHSAS 18001 standard.

108


Figure 3.20. For this reason, the term Environmental Management System (EMS) is used in this thesis to describe all management systems based on the PDCA cycle, including the EMAS and SIGMA presented in the next paragraphs.

3.5.2 The Eco-Management and Audit Scheme In 1993 the European Council adopted the Eco-Management and Audit Scheme (EMAS) as a voluntary environmental management initiative, to be used in the countries of the European Union. Initially EMAS was limited in the certification of a specific operation site, such as an industrial plant, but in 2001 it was revised (EMAS II) to cover individual sites or whole organisations from all economic sectors. The aim of EMAS is to recognise and reward those organisations that go beyond minimum legal compliance and continuously improve their environmental performance. EMAS requires that participating organisations should have in place an environmental policy, which should be effectively communicated to the staff and the general public, and that they implement an EMS that meets the requirements of ISO 14001. Many organisations progress from ISO 14001 to EMAS and maintain certification and registration to both. The performance areas that should be examined, assessed and registered within the EMAS are (The Sigma Project, 2003a): Sea/Water: controlled and uncontrolled discharges to water or sewers Land : contamination of lands Air: controlled and uncontrolled emissions to atmosphere Protected areas: effects on specific parts of the environment and ecosystems Raw Materials and Natural Resources: use of land, water, fuels and energy, and other natural resources Waste Management: solid and other wastes, particularly hazardous wastes Noise & Odour Moreover, it is a requirement of the scheme that participating organisations regularly produce a public environmental statement that reports on their environmental 109


performance. This voluntary publication of environmental information, whose accuracy and reliability has been independently checked by an environmental verifier, intends to give EMAS and its participating organisations enhanced credibility and recognition. This is why EMAS is considered stronger than ISO 14001 and has consequently attracted a lower level of uptake.

3.5.3 The SIGMA Project The SIGMA Project (Sustainability Integrated Guidelines for Management) was launched in 1999 as a partnership between the British Standards Institution, Forum for the Future, AccountAbility and the UK Department of Trade and Industry. In 2003 the SIGMA Project issued the SIGMA Guidelines (The Sigma Project, 2003b), which intend to provide clear, practical advice to organisations to help them make a meaningful contribution to sustainable development. The SIGMA Guidelines consists of: The SIGMA Guiding Principles, which are based on the Five Capitals Model (see 3.4.3) with the addition of accountability as a core principle. The SIGMA Management Framework, which has a four-phase cycle to manage and embed sustainability issues within core organisational processes. The SIGMA Toolkit, which comprises a range of supporting tools, guides and case studies to support the implementation of the SIGMA Guidelines and to address specific sustainability challenges. The SIGMA Guidelines and in particular the Management Framework intends to integrate the various sustainable corporation tools and standards into some form of Sustainability Management System that encompass all aspects of sustainability. Some of the tools that are used include: ISO 14001 and ISO 9001 EMAS OHSAS 18001, and Social Accountability (SA8000) These are all based on continual improvement and the PDCA cycle. Therefore, in order to be compatible with these tools, the SIGMA Management Framework is also based on the PDCA cycle and has four phases. Figure 3.21 shows the phases of the SIGMA 110


Management Framework, as well as the relevant phases of ISO 14001. Similarly, SIGMA is generic, i.e. appropriate for any type of organisation. However, an important difference is that SIGMA, as opposed to ISO 14001, is not intended for certification purposes, but instead uses the process of assurance. Assurance is an evaluation method that uses a specified set of principles and standards to assess the quality of a reporting organisations subject matter (e.g. reports) and its underlying systems, processes and competencies that determine its performance.

Moreover, in order to exercise the

accountability principle, the SIGMA Management framework includes stakeholder engagement as a necessary part of each one of its phases, while this is not a requirement of ISO 14001.

Figure 3.21 SIGMA Management Framework and ISO 14001 phases

3.5.4 EMS problems This paragraph presents the problems related to the application of EMS (mainly ISO14001 and EMAS), according to the literature. It is noted that some of the problems presented here also apply to other management systems (such as the SIGMA Management Framework, presented in the previous paragraph, or the OHSAS 18001) which are not (or not only) environmentally focused, to the extent that they are generic in character and use the same continuous improvement philosophy of the PDCA cycle (as also noted at the end of paragraph 3.5.1).

111


The first step in implementing an EMS is to perform an initial review of the company in order to identify its environmental aspects. Zobel and Burman (2004) note the importance of this step, as it forms the basis for the environmental policy, environmental objectives and targets and environmental management programmes. They also identify some difficulties of the initial review and the problems it can create. First of all, the definition of an environmental aspect is not clear in ISO14001, leading to multiple interpretations and confusion, as for example in confusing an aspect with the activity connected to that aspect. In the same manner, it is not clear which aspects are direct or indirect, even though in EMAS II the meaning of these terms relates to the degree at which an organisation can control its activities. Another difficulty is the different ways of organising the environmental aspects. Zobel and Burman (2004) found that the two most common ways in organising the environmental aspects of a company are the process-oriented approach (e.g. impacts of administration, manufacturing and transportation) and a structure based on environmental areas (e.g. wastes, water, energy). They also note that the initial review should not be a oneoccasion process but, instead, companies should establish and maintain procedures of identifying new aspects. After identifying the environmental aspects of a company, these should be assessed in order to identify the significant ones on which objectives and targets will be set. The difficulty here is that in the absence of a universal measure for comparative assessment of different environmental impacts, a great deal of subjectivity is involved.

The

methods of evaluating the aspects usually involve taking into account certain documented criteria which are then weighted with the use of scores. Alternatively, the judgment of environmental professionals can be used.

A common problem, also

identified by Zobel and Burman (2004), is that many companies also use business criteria in this assessment, which can often exclude important environmental aspects. Moreover, Ghisellini and Thurston (2005) observed that often after the assessment process, the top-management changed the assessments in order to address the aspects the company was more willing to consider. The assessment of a companys performance in the identified significant aspects faces problems in three areas.

First, in ISO14001, the commitment to continual

improvement is intended to be applied to the EMS itself and not to the actual environmental performance (Ghisellini and Thurston, 2005). Hence, as Ammenberg 112


et al. (2002) also stress, most companies usually focus on indicators concerning the environmental management efforts, which could potentially lead to improved environmental performance of their operations. This means that companies may be certified to ISO14001 showing the effective implementation of the management tool, but their actual environmental impact could be increasing. Secondly, as Veleva et al. (2001) point out, the companys performance assessment should be based on both total and production adjusted performance indicators. Total performance indicators (such as Ecological Footprints, see paragraph 3.4.7), show the overall impact of the company in terms of inputs and outputs, while production adjusted indicators, or efficiency ratios (see paragraph 3.4.8 for eco-efficiency), are useful in making comparisons between companies or facilities. As Ammenberg et al. (2002) stress, companies have the flexibility, under ISO14001, to base their performance assessment only on production adjusted indicators, without measuring their overall impact. This means that they would be able to show continual improvement of their operational efficiency, while their total environmental impact is increased (see comment above). Finally, during the performance assessment, the various environmental aspects have to be aggregated to show the overall company performance. This can be done either by assessing the aspects directly connected to every individual function or process, or by adding up aspects and assess the aspects on the organisation level. Ammenberg et al. (2002) note the difficulty in comparing different kinds of impacts as well as comparing impacts and management efforts during the aggregation process.

Ghisellini and

Thurston (2005) suggests that especially during the initial review, a process-oriented approach should be followed and the aggregation of the impacts should be done in terms of inputs and outputs. Other problems also stem from the focus of ISO14001 on the continual improvement of the EMS rather than on the actual company performance. This can lead to extensive documentation procedures, and consequently divert the companys resources to an increasing bureaucratic system (Ghisellini and Thurston, 2005).

This can be a

significant internal barrier especially for small companies with limited time and personnel resources (Hillary, 2004).

113


Finally, in terms of planning Ghisellini and Thurston (2005) note that companies usually take a short-term or non-drastic approach when developing their environmental programmes, as they consist of ongoing objectives and targets dates within a year.

114


3.6 References Ammenberg, J, Hjelm, O & Quotes, P (2002) The Connection Between Environmental Management Systems and Continual Environmental Performance Improvements. Corporate Environmental Strategy, 9, 183-192. Barkley, R J (2001) Complex ecologic-economic dynamics and environmental policy. Ecological Economics, 37, 23-37. Beckerman, W (1995) Small is stupid: blowing the whistle on the greens, London, Duckworrth. Bent, D & Richardson, J (2003) The SIGMA Guidelines- Toolkit. Sustainability Accounting Guide, London, The SIGMA Project. Best Foot Forward Ltd. (2002) City Limits. A resource flow and ecological footprint analysis of Greater London, www.citylimitslondon.com Boulding, K (1966) The Economics of the Coming Spaceship Earth. In Jarrett, H (Ed.) Environmental quality in a growing economy. Baltimore, MD: Resources for the Future/Johns Hopkins University Press. Bringezu, S (2002) Construction ecology and metabolism. In Kibert, C J, Sendzimir, J & Guy, G B (Eds.) Construction ecology: nature as the basis for green buildings. London, Spon Press. Brundtland, G H & WCED (1987) Our common future, Oxford, Oxford University Press 1987. Chiesura, A & de Groot, R (2003) Critical natural capital: a socio cultural perspective. Ecological Economics, 44, 219-231. Decleris, M (2000) The law of sustainable development, General Principles, Brussels, European Commission. Dyllick, T & Hockerts, K (2002) Beyond the business case for corporate sustainability. Business Strategy and the Environment, 11, 130-141. Ekins, P (1992) A four-capital of wealth creation. In Ekins, P & Max-Neef, M (Eds.) Real-Life Economics. London/New York, Routledge. Ekins, P, Simon, S, Deutsch, L, Folke, C & R., D G (2003) A framework for the practical application of the concepts of critical natural capital and strong sustainability. Ecological Economics, 44, 165-185.

115


Elkington, J (1997) Cannibals with Forks: The Triple Bottom Line of 21st Century Business, Oxford, Capstone. Farber, S C, Costanza, R & Wilson, M (2002) Economic and ecological concepts for valuing ecosystem services. Ecological Economics, 41, 375-392. Forum for the Future (2005) http://www.forumforthefuture.org.uk/ Funtowitz, S O & Ravetz, J (1994) Emergent complex systems. Futures, 26, 568-582. Ghisellini, A & Thurston, D L (2005) Decision traps in ISO 14001 implementation process: case study results from Illinois certified companies. Journal of Cleaner Production, 13, 763-777. Global Reporting Initiative (2002) Sustainability reporting guidelines, www.globalreporting.org Gray, R (2001) Forbidden Fruit. Tomorrow: Global Sustainable Business, 11, 50-53. Gray, R (2002) Sustainability Reporting: Who's kidding whom? Chartered Accountants of New Zealand, 81, 66-70. Harremoes, P (2003) Ethical aspects of scientific incertitude in environmental analysis and decision making. Journal of Cleaner Production, 11, 705-712. Hillary, R (2004) Environmental management systems and the smaller enterprise. Journal of Cleaner Production, 12, 561-569. Hobsbawm, E (1996) Age of Extremes: The Short Twentieth Century 19141991, London, Abacus. Hukkinen, J (2003) From groundless universalism to grounded generalism: improving ecological economic indicators of human-environmental interaction. Ecological Economics, 44, 11-27. ISO (2003) ISO 9000 and ISO 14000 - In brief, http://www.iso.org/iso/en/iso900014000/index.html ISO (2004) The ISO Survey of ISO 9001:2000 and ISO 14001 Certificates 2003, Geneva, ISO Central Secretariat. Jamieson, D (1998) Sustainability and beyond. Ecological Economics, 24, 183-192. Jeffrey, P (1996) Evolutionary analogies and sustainability. Putting a human face on survival. Futures, 28, 173-187.

116


Jensen, A A & European Environment Agency (1998) Life cycle assessment (LCA): a guide to approaches, experiences and information sources, Copenhagen, Denmark, European Environment Agency. Kay, J J (2002) Complexity theory, exergy and industrial ecology. In Kibert, C J, Sendzimir, J & Guy, G B (Eds.) Construction ecology: nature as the basis for green buildings. London, Spon Press. Keijers, G (2002) The transition to the sustainable enterprise. Journal of Cleaner Production, 10, 349-359. Kerr, S A (2001) The sustainable development of small island communities. International Centre for Island Technology (ICIT) PhD Thesis. Orkney, Heriot-Watt University. Kibert, C J, Sendzimir, J & Guy, G B (2002) Defining an ecology of construction. In Kibert, C J, Sendzimir, J & Guy, G B (Eds.) Construction ecology: nature as the basis for green buildings. London, Spon Press. Korhonen, J (2001) Four ecosystem principles for an industrial ecosystem. Journal of Cleaner Production, 9, 253-259. Korhonen, J (2004) Industrial ecology in the strategic sustainable development model: strategic applications of industrial ecology. Journal of Cleaner Production, 12, 809823. Kuhre, W L (1995) ISO 14000 Certification - Environmental Management Systems - A practical guide for preparing effective environmental management systems, Prentice Hall. Lovelock, J (1979) Gaia: a new look at life on earth, Oxford (etc.), Oxford University Press. Meadows, D H, Meadows, D L, Randers, J r & Behrens, W W (1972) The limits to growth: A report for the Club of Rome's project on The Predicament of Mankind, New York, A Potomac Associates Book. Pearce, D (2000) Public Policy and Natural Resources Management. A framework for integrating concepts and methodologies for policy evaluation, Draft paper for DGXI, European Commission. Peterson, G (2002) Using ecological dynamics to move toward an adaptive architecture. In Kibert, C J, Sendzimir, J & Guy, G B (Eds.) Construction ecology: nature as the basis for green buildings. London, Spon Press. Ravetz, J (2000) Integrated assessment for sustainability appraisal in cities and regions. Environmental Impact Assessment Review, 20, 31-64.

117


Robèrt, K-H (2000) Tools and concepts for sustainable development, how do they relate to a general framework for sustainable development, and to each other? Journal of Cleaner Production, 8, 243-254. Robèrt, K-H, Schmidt-Bleek, B, Aloisi de Larderel, J, Basile, G, Jansen, J L, Kuehr, R, Price Thomas, P, Suzuki, M, Hawken, P & Wackernagel, M (2002) Strategic sustainable development -- selection, design and synergies of applied tools. Journal of Cleaner Production, 10, 197-214. Rostow, W W (1959) The Stages of Economic Growth. Economic History Review, 12, 1-16. Santos-Reyes, J & Beard, A N (2002) Assessing safety management systems. Journal of Loss Prevention in the process industries, 15, 77-95. Schot, E, Brand, E & Fischer, K (1997) The Greening of Industry for a Sustainable Future: Building an International Research Agenda, The Greening of Industry Network and The Netherlands Advisory Council for Research on Nature and Environment (RMNO). Simmons, C, Lewis, K & Barrett, J (2000) Two feet - two approaches: a componentbased model of ecological footprinting. Ecological Economics, 32, 375-380. Smith, A (1776) An inquiry into the Nature and Causes of the Wealth of Nations, London, Temple Press. Terenzi, G (2002) Global evolution of human systems: a prototype model. 47th Annual Conference of The International Society for the Systems Sciences. Iraklion, Crete, Greece. The Sigma Project (2003a) SIGMA guide to guidelines and standards relevant to sustainable development, http://www.projectsigma.com/ The Sigma Project (2003b) The SIGMA Guidelines. Putting sustainable development into practice- a guide for organisations, http://www.projectsigma.com/ U.N. General Assembly (1986) Declaration on the Right to Development. A/RES/41/128. United Nations (1992) Agenda 21, http://www.un.org/esa/sustdev/documents/agenda21/index.htm United Nations (1997) Earth Summit, http://www.un.org/geninfo/bp/enviro.html United Nations (2002a) Johannesburg 2002 summit: Key outcomes of the summit, http://www.johannesburgsummit.org/html/documents/summit_docs/2009_keyoutcomes _commitments.doc 118


United Nations (2002b) Johannesburg Declaration, http://www.un.org/esa/sustdev/documents/WSSD_POI_PD/English/POI_PD.htm United Nations (2002c) Johannesburg Plan of Implementation, http://www.un.org/esa/sustdev/documents/WSSD_POI_PD/English/POIToc.htm Upham, P (2000) An assessment of the Natural Step theory of sustainability. Journal of Cleaner Production, 8, 445-454. Van den Bergh, J & Verbruggen, H (1999) Spatial sustainability, trade and indicators: an evaluation of the 'ecological footprint'. Ecological Economics, 29, 61-72. Veleva, V, Bailey, J & Jurczyk, N (2001) Using Sustainable Production Indicators to Measure Progress in ISO 14001, EHS System and EPA Achievement Track. Corporate Environmental Strategy, 8, 326-338. Wackernagel, M, Rees, W E & Testemale, P (1996) Our ecological footprint: reducing human impact on the earth, Gabriola Island, B.C, New Society Publishers 1996. Walton, M (1986) The Deming management method, New York., Dodd Mead. Wilsdon, J (1999) The Capitals Model: A framework for sustainability, The Sigma Project. World Business Council for Sustainable Development (2000) Eco-efficiency: Creating more value with less impact, http://www.wbcsd.org/web/publications/eco_efficiency_creating_more_value.pdf Zobel, T & Burman, J O (2004) Factors of importance in identification and assessment of environmental aspects in an EMS context: experiences in Swedish organizations. Journal of Cleaner Production, 12, 13-27.

119

Chapter 4 Sustainable Construction

We shape our buildings, then our buildings shape us. Winston Churchill

Chapter 4: Sustainable Construction

4.1 The Built Environment 4.1.1 Definitions The term built environment is often used, in contrast to the natural environment, to describe the man-made infrastructure. Due to its complex nature, different definitions of the built environment can be found in the literature, depending on the particular analysis and approach used, as can be seen below. Pearce (2003) gives the following definition of the built environment: The Built Environment is the stock of all built infrastructure, dwellings and commercial, industrial and public buildings. It is the end-product of the construction industry and the outcome of the entire history of construction activity. The main purpose of the built environment, according to Kibert et al. (2002b), is: to separate 1 humans from natural systems by providing space for human functions protected from the elements and from physical danger. Those functions include housing and the necessary infrastructure for transport, communication, water supply and sanitation, energy, commercial and industrial activities to meet the needs of the growing population (International Council for Building Research, 1999). One of the most significant components of the built environment are buildings, in the sense that they are perhaps the most indicative embodiment of human culture (International Council for Building Research, 1999) and maybe the most complex manmade systems (Decleris, 1986). This character and complexity differentiates them as more than mere industrial products (International Council for Building Research, 1999).

1

In the sense of protection

121


4.1.2 General and UK characteristics Pearce (2003) has collected the following statistical data about the state of the built environment at an international and UK level: Built wealth residences, workplaces, public buildings and infrastructure has long accounted for the major part of manufactured wealth, from some 90% at the time of the Industrial Revolution to around 70% now. Dwellings account for about one-third of manufactured capital stock. Infrastructure and non-residential buildings accounts for nearly two-thirds of non-residential capital, while machinery and other assets for one-third. On a per capita basis, the UK generally lags behind other European countries in the provision of transport infrastructure; however, when the comparison is made by area the relative position of the UK is improved. Much of the built environment is long-lived, with the UK having longer replacement rates (133 years) than other comparable countries1 . This has implications for the structure of the industry (e.g. the demand for repair and maintenance) but also for the chances of securing energy efficient buildings and for housing conditions. The UK has one of the lowest proportions of European capital investment in new build and overall construction activity relative to total capital investment of all kinds.

4.2 The Construction Industry 4.2.1 Definitions Various organisations, researchers and stakeholders have put forward definitions of the construction industry or construction sector that depend on their individual points of view and goals. These can be broadly divided in narrow and broad definitions. According to Pearce (2003):

1

This crude replacement rate is calculated by measuring how long each dwelling would have to last if

each new unit replaced a unit of existing stock, and assuming no growth in demand. The same rate for France is 103 years, for USA 78 years and for Japan 28 years.

122


the narrow sector ()refers to on site assembly and repair of buildings and infrastructure, including site preparation, construction of buildings and civil engineering works, building installation (e.g. electrical wiring, plumbing), building completion (e.g. painting, plastering) and renting of construction or demolition equipment supplied with an operator. The true extent of the industry is broader, and includes the supply chain for construction materials, products and assemblies, and professional services such as management, architecture, engineering design and surveying and as noted above, land and facilities management. The Confederation of International Contractor's Association (CICA) defines the construction industry as contractors and the construction sector as all construction related activities/professions, including architects, engineers, material producers and facility managers. (UNEP-DTIE, 2003), while Bakens (2003) refers to the building and construction industry as: the professional firms and organisations (and their representative associations) contributing to the development, maintenance, management and demolition/deconstruction of buildings and other construction making up the built environment.

4.2.2 UK characteristics Below are some statistical data compiled by Pearce (2003) for the UK construction industry: In the UK the construction industry is very fragmented, in terms of the firms involved in its operation, with most companies specializing in different processes of the industrys operations. There are about 350,000 firms in the construction sector (based on the broad definition), half of which account for contractors and another quarter for sale of construction products. Other firms include manufacturers of construction products, mining and quarrying firms and professional services firms. The vast majority of these firms are small (7 employees or less).

123


On its narrow definition, the construction industry contributes around 5% of UK GDP, comparable with the health and education sectors, while on the broad definition the GDP contribution doubles to 10%. Annual housing output by contractors has been constant for the last decade, while private sector output has increased, albeit cyclically. These trends conceal various factors such as the Private Finance Initiatives and privatisation of utilities. In 2003, the contractors output was more or less equally divided between new work and repair and maintenance. New work has shown the faster growth in the last decade. The exact size of the DIY (Do-It-Yourself) sector is difficult to measure but estimates suggest it is worth approximately £5 billion per annum in terms of materials and products. Moreover, the size of the informal construction sector (black economy) is also uncertain, but may be around £10 billion. The labour force is a critical ingredient of the construction industry. Around 1.5 million people are employed by the narrow construction sector and probably closer to 3 million for the broadly defined industry. Employment in the narrow sector has been roughly constant over the past decade but with a 15% fall in the first half of the 1990s. Even though the construction sector forms a very important part of the industry in UK, the operations of a number of large companies extend well beyond the countrys boundaries, as part of the globalised economy.

4.3 Sustainability issues of the built environment and the construction industry 4.3.1 Natural Resources Consumption One of the most direct and important consequences of the built environment and the construction industry is the extensive consumption of natural resources. Construction activities are believed to consume around half of all resources humans take from nature (UNEP-DTIE, 2003). In terms of materials, the construction industry dominates overall materials flows in most countries. In the USA the construction industry, although representing only 8% of 124


GDP uses in excess of 40% of all extracted materials resources in creating buildings (Wernick and Ausubel, 1995). In the UK the construction industry extracts about 260 million tonnes of minerals every year, which represents over 90% of non-energy minerals extracted (Addis et al., 2001). The construction sector is also a major energy consumer. In OECD countries, the building and construction sector as broadly defined (including production and transport of building materials) consumes 25-40% of all energy used (as much as 50% in some countries) (UNEP-DTIE, 2003). The UK construction industry consumes 8 million tonnes of oil equivalent energy each year which is approximately 5% of UK final energy consumption, or some 30% of industrial energy consumption. 50% of this energy is consumed in mineral extraction and product manufacture (a big part of which is cement production) while a further 39% is accounted for by transport of materials, waste and products as shown in Table 4.1 and Figure 4.1 (Pearce, 2003).

Activity

Energy Consumed Mtoe*

Mineral extraction, product and material manufacture

3.93

Transport of products and materials

1.63

Construction and demolition site activity

0.43

Transport relating to construction and demolition site activity

0.87

Transport of secondary and recycled materials

0.83

Transport of wastes from product and material manufacture

0.01

Transport of construction and demolition waste

0.14

Total

7.84

*Millions tonnes of oil equivalent Source: Smith et. al after (Pearce, 2003)

Table 4.1 Energy use in the construction sector

125


Transport of products and materials 21% Construction and demolition site activity 11% Transport relating to construction and demolition site activity 11%

Mineral extraction, product and material manufacture 50%

Transport of secondary and recycled materials 5% Transport of construction and demolition waste 2%

Source: Smith et. al after (Pearce, 2003)

Figure 4.1 Energy use in the construction sector (%)

Energy consumption is much bigger for the operation of the built environment. The International Energy Agency estimated that, on average, one third of energy end-use in the developed world goes for heating cooling, lighting, appliances and general services on non-industrial (i.e. residential, commercial and public) buildings(UNEP-DTIE, 2003). In UK the energy use of all buildings accounts for just under half of final energy used as can be seen in Table 4.2 and Figure 4.2 (Pearce, 2003). The indirect energy consumption of buildings is estimated to reach around 50% of total energy production(CIB (International Council for Building Research), 1999).

126


Final Energy Use Carbon Emissions

Sector

PJ*

MtC**

Commercial and public buildings 880

21.2

Industrial buildings

282

5.6

Domestic Buildings

1960

39.2

Total Buildings

3122

66.0

Industrial Process

1231

27.7

Transport

2294

46.0

Agriculture

49

1.1

Total

6696

140.8

* Petajoule (joule * 1015), ** Million tonnes of carbon Source Sorrell after (Pearce, 2003)

Table 4.2 Final energy consumption and carbon dioxide emissions by final user

Commercial and public buildings 13.1%

Transport 34.3%

Industrial buildings 4.2%

Domestic Buildings 29.3% Agriculture 0.7%

Industrial Processes 18.4%

Source: Sorrell after (Pearce, 2003)

Figure 4.2 Final energy consumption by final user (%)

127


A natural resource which is also consumed for the production of the built environment is land. Natural habitats and rural land are continually converted into built environment in order to accommodate the infrastructure needs of the growing population. Much of the deforestation in developing countries is due to clearing for local building and harvesting timber for export. Compaction of land by building and infrastructure is often irreversible(UNEP-DTIE, 2003). Every year the UK construction industry converts 6000 hectares from rural to urban land use (Addis et al., 2001). Significant is also the indirect use of land for the production of building materials. Finally, water is consumed by the construction industry and during building use, even though it is usually difficult to estimate its precise quantities.

4.3.2 Environmental Burdens The major environmental impact of the construction industry is the production of large quantities of solid wastes. It is estimated that around 13% of all solid wastes deposited in landfills world-wide comprise construction and demolition waste with a 1:2 ratio (CIB (International Council for Building Research), 1999). The materials balance of the UK built environment is shown in Figure 4.3. The figure shows the significant raw material consumption of the built environment through the construction industry (295mt 1 ) which also results in the production of waste (90mt). Using the data of the figure we can calculate a crude conversion efficiency indicator of 75% (274/364). Thus, 25% of the inputs in the built environment sector reappear as waste (90/364) but the net waste figure is 12% due to recycling. According to Addis et al. (2001) the UK construction industry generates 70 mt of which 13mt are materials delivered to sites and then removed unused. The production of these wastes also results in the increase of energy use, through their transportation to landfill.

1

Million tonnes

128


Source: Smith et al. after (Pearce, 2003) Figure 4.3 Materials balance for the UK built environment The large energy consumption, mentioned above, results in the production of large quantities greenhouse gas (GHG) emissions. Compared to other industry sectors the GHG emission of the narrow construction industry is relatively small. However, the related cement producing industry is a major source of GHG through the burning of fossil fuels and breakdown of raw materials, reaching from 5% to over 7% of global anthropogenic CO2 emissions (UNEP-DTIE, 2003). The picture is completely different when we consider the built environment which accounts for some 40% of world GHG emissions, mainly through heating and cooling, and is the largest emitter of GHG in Europe. The same picture can be seen in Table 4.1 for the UK built environment, which accounts for almost half of the UKs GHG emissions. Pollution from construction activities is not always obvious and is usually limited to local and regional scales. During the construction phase it includes noise and air pollution such as dust from construction activities, as well as water pollution such as 129


storm water waste peak from construction sites. Other negative effects of construction activities are the loss of site topsoil, impacts on the local landscape and agricultural land, on historical sites of cultural significance, and loss or damage of natural habitats. Very important are the possible negative effects of the built environment on the health and comfort of its indoors users. It is estimated that people remain indoors 90% of their time, hence the quality of the indoor environment is important for their health (International Council for Building Research, 1999).

The quality of the indoor

environment is dependent on many parameters such as thermal comfort, air quality, lighting etc. A major recognised problem of indoor environments is the Sick Building Syndrome which results in health impacts on the building users and can cause the lowering of employee productivity in offices. Air quality is crucial for maintaining a healthy indoor environment and it often deteriorates from indoor contamination sources such as building materials (finishes, paints, carpets) and from user activities (cooking, cleaning, painting).

4.3.3 Social and Economic Issues The overall economic contributions of the construction sector are considerable (UNEPDTIE, 2003). Its worldwide market volume is US$ 3trillion and accounts for as much as 10% of world GDP. The construction sector is the largest industrial sector in Europe and in the US, and accounts for over 50% of national capital investment in most countries. The construction industry is in most countries the largest single employer and consequently its operations have a very important social impact. It provides around 7% of world employment with a workforce of about 111 million (UNEP-DTIE, 2003). In the UK, the narrow construction sector (see paragraph 4.2.1) employs 1.5 million people and the broad about 3 million people (Pearce, 2003). The construction industry is more labour intensive in poorer countries where a job in construction is a point of entry to the labour market for workers without education or skill. Safeguarding these employment opportunities is very important for countries with surplus labour, where premature mechanization of construction tasks should be weighed against the impact on unemployment (UNEP-DTIE, 2003).

130


Moreover, since the trend in the construction sector is to use casual labour and to subcontract, jobs are insecure and badly paid especially in developing countries (Wells, 2004). This situation also inhibits the creation of labour unions: in some countries trade union density is less than 1% in construction and there is an outright hostility from employers and their agents in unionisation. Also, there is discrimination in wages and working conditions between different groups, such as economic immigrants (the problem of economic immigrants is getting rather severe in some Mediterranean EU countries) or women (in South Asia women constitute up to half the construction workforce). The construction industry is notorious for its poor health and safety record. Construction accidents kill at least 55,000 workers a year worldwide, mostly in developing countries (UNEP-DTIE, 2003), which is between 20 to 40% of all occupational fatalities (Wells, 2004). In the UK, the construction industry has the highest level of total fatalities and non-fatal injuries of all industries (Pearce, 2003). Additionally, more people die from occupational diseases caused by the exposure to dangerous substances. Also in the UK, 600 workers die annually from asbestos-related ailments, 40% suffer muscular-skeletal problems and 30% have dermatitis from working with cement. Finally, a social as well as an environmental issue is that of corruption (UNEP-DTIE, 2003). In 2000, the construction industry was ranked1 the most willing to pay bribes to government officials in emerging economies (the arms industry being second). This may result in officials turning a blind eye to illegal discharges of wastes and pollution as well as in the construction of sub-standard buildings that can lead to high death tolls during collapses or natural disasters.

4.3.4 Urban Environment Cities and the urban environment are the most complex form of the built environment having unique sustainability issues. The main problem is continuous urban growth. According to the United Nations Centre for Human Settlements, three billion people, or half of the current world population, live in cities, and this figure is expected to rise to

1

By the anti-corruption NGO Transparency International

131


60% by 2030 (Cox et al., 2002). This kind of urban growth destroys agricultural land and in terms of farmland alone urbanization claims as much as 40,000km2 a year (UNEP-DTIE, 2003). As cities have a linear metabolism, their continuous growth disrupts the natural material and energy cycles, thus placing a huge pressure on resources and exceeding assimilative capacity (for example with respect to waste disposal) (Ravetz, 2000). This may also result in the alteration of the local climatic conditions, e.g. by the creation of heat islands in city centres. Urban growth also places pressure on existing infrastructure such as transportation (International Council for Building Research, 1999). For the developing world, where three quarters of the population live in urban areas in absolute poverty, the urban issues are the provision of basic sanitation systems, water supply, waste disposal and housing. In the developed world the same issues are the air quality, carbon emissions, community dialogue and reducing dependence on the car (Cox et al., 2002).

4.4 Sustainable Construction 4.4.1 Definitions and main concepts The implications of the built environment and the construction industry on sustainable development are generally recognised as very significant, as we have seen. The term Sustainable Construction is generally used to describe the application of sustainable development principles to the built environment and the construction industry. However, there is still a wide multiplicity of views and approaches on the principles and, consequently, on the appropriate actions that need to be taken in order to improve sustainability performance in the construction sector. In attempting to comprehend and hopefully improve the situation, one needs clear definitions; it is observed, however, that there is a general lack of consensus on the definition of Sustainable Construction (Bartlett, 2004). According to Kibert et al. (2002b), Sustainable Construction considers the life-cycle of the built environment as a seamless continuity, from design through to disposal

132


(disposal of wastes generated throughout the life-cycle and of the disassembled components). It can be defined as: the creation and maintenance of a healthy built environment using ecologically sound principles. The goals of sustainable construction are to maximize resource efficiency and minimize waste in the building assembly, operation, and disposal processes.

Sustainable

construction seeks to dovetail the construction industry into the global sustainable development movement by moving it onto a path where it adheres to principles that are able to provide a good quality of life for future generations. The

UNEP-DTIE

(2003)

introduces

the

term

Sustainable

Building

and

Construction (SBC) meaning, essentially a holistic multidisciplinary approach that is increasingly being advocated for buildings and infrastructure.

SBC refers to a

sustainable built environment encompassing the structures and infrastructure we build, the processes used to build them, and the many stakeholders involved. Here too, construction per se is considered to be only part of the sustainable building process. As already mentioned in Chapter 3, the time dimension is an intrinsic characteristic of sustainability. Clearly, any construction process has a definite time span, a beginning and an end, even if one takes this line of thought to the limit, when all materials used will return to nature in some form. Hill and Bowen (1997) focus on the time dimension of sustainable construction; they point out that if one defines as sustainable an activity which can continue forever, it is clear that a construction project defined over a specific time span cannot be characterised as sustainable. To compound the definition problem, the term sustainable construction is generally used to describe a process which starts well before construction per se (in the planning and design stages) and continues after the construction team have left the site. Hill and Bowen also present principles of sustainable construction grouped in four pillars, namely social, economic, biophysical and technical, with the addition of an over-arching processoriented set. The Agenda 21 on sustainable construction (1999), published by the International Council for Building Research (CIB), summarizes the key elements that can be found in various sustainable construction definitions, which are: 133


reducing the use of energy sources and depletion of mineral resources; conserving natural areas and bio-diversity; maintaining the quality of the built environment, and the management of healthy indoor environments. Essentially, these key elements identify key objectives of Sustainable Construction. In a more detailed and perhaps more practical level, the CIBs Agenda 21 also identifies some (extrinsic or intrinsic) topics or concerns that either constitute sub-objectives of the key objectives or indicate parallel areas of concern. Some of these topics are the following: quality and property value meeting user needs in the future, flexibility, adaptability prolonged service life use of local resources building process efficient land use water saving use of by-products distribution of relevant information to their decision making immaterial services urban development and mobility human resources local economy. Most of the above topics will be discussed further in following paragraphs and in connection with case studies. Clearly, the road to Sustainable Construction proceeds through many major and minor stops and intersections (e.g. the successive phases, the decision points), each of which has an impact on the overall performance; the significance of that impact on sustainability is not apparent at a glance and certainly not analogous to the presumed a priori significance of the intersection.

134


Bartlett (2004) also points out that early definitions of sustainable construction such as the one of Kibert above mainly concentrate on environmental issues and do not address social issues, such as poverty, underdevelopment and social equity, which have a softer nature. Moreover, even though some of the most recent publications address inequity at a global scale, the scope of other intragenerational issues is limited to the local scale of the users or the community. Consequently, she identifies the problem of simultaneously and effectively addressing sustainable construction issues at both the local and global scales. Additionally, Bartlett makes clear that what is basically needed is to understand how the built environment could contribute to the generic aims of sustainable development, rather than trying to apply sustainability principles to the built environment. She argues that it is not the built environment that is to be sustained but quality of life now and in the future. Her argument is in line with a basic systems approach axiom that every man-made system is supposed to contribute to the solution of a problem in short, to cover a need and that there might exist alternate systems or courses of action that could also solve the presumed problem. The reasoning reflects a move from a lower hierarchical level (built environment) to a higher one (quality of life), or in other words from the interface level of human and natural systems interaction to that of human values (see section 3.3.6).

4.4.2 Construction Ecology As we saw in the previous chapter, industrial ecology is a new discipline that emerged out of the need to study the way the industry could improve its environmental performance by learning lessons from natural systems. The complexity of the built environment and the construction industry, however, soon called for an independent approach within industrial ecology.

The new field of Construction Ecology was

established by the Rinker Eminent Scholar Workshop on Construction Ecology and Metabolism which took place at the University of Florida in 1999. In the workshop, leading architects, ecologists, industrial ecologists and material manufacturers employed the ecological metaphor to approach sustainable construction. Kibert et al. (2002b) define Construction Ecology as the development and maintenance of built environment: 135


i.

with a materials system that functions in a closed loop and is integrated with eco-industrial and natural systems,

ii. that depends solely on renewable energy sources and iii. that fosters preservation of natural system functions. The outcomes of applying these natural system analogues to construction would be a built environment: i.

that is readily deconstructable at the end of its useful life,

ii. whose components are decoupled from the building for easy replacement, iii. that is composed of products that are themselves designed for recycling, iv. whose bulk structural materials are recyclable, v. whose metabolism would be very slow due to its durability and adaptability, and vi. that promotes health for its human occupants. Brand (1994) used the model of temporal hierarchy found in ecosystems, and applied it to buildings and their components, as seen in Figure 4.4.

He suggests that the

management of a building through time would be facilitated by spatially decoupling components with different life cycles; for example, by making faster changing components more easily accessible. He also notes that slower changing components control faster ones.

Thicker lines correspond to longer lived components Adapted from Kibert et al. (2000)

Figure 4.4 Temporal hierarchy of building components.

136


Odum (2002) uses the concept of emergy 1 to study the processing of materials and energy in natural systems, and he applies that approach to buildings. For example, building materials and services can be classified according to their emergy content to indicate the design properties of a building in order to be sustainable. This may be achieved by matching the natural material and energy circulation flows of a particular area with that of the building. At a global scale, the building construction and material use is limited by the energy hierarchy and the global cycles of materials, as shown in Figure 4.5. Emergy can again be used to classify materials appropriate for reuse, reprocessing (recycling) or environmental recycle (disposal).

Adapted from Odum (2002)

Figure 4.5 Main pathways of materials processing and storage in the system of earth and economy

1

Emergy is the energy that was required and used to make a product or service, i.e. its embodied energy.

For example, one kg of cement has much higher emergy content compared to one kilo of wood, because more energy is consumed in the production of the former than the production of the second (fossil fuels as opposed to photosynthesis).

137


Kay (2002), on the other hand, focuses on the process and structure properties of systems and their flows of materials, energy and information.

He notes that the

challenge of construction ecology is not to build efficiently, but rather to construct a building system that is resilient and can adapt and evolve while fitting into the natural environment. This implies that buildings should no longer deal with the changing environment by being robust enough and impervious to change; they should rather mimic natural ecosystems and have the capacity to self-organise.

This would be

achieved by reshaping their internal configuration and their connection to the outside world in response to a changing situation (e.g. changes in the market for recyclable materials). Critical to this approach is the need to consider the hierarchy of the relative scales, for example from basic building units to the whole building, but also those of groups of buildings and connected natural ecosystems The application of biological thermodynamics and ecological emergence in buildings is attempted by Allen (2002). He regards the building as a living organism going through the phases of: genetics (design), growth and maturing (construction), living (operation) and death (deconstruction). The building is also regarded as a system that includes the people involved in it, apart from its physical structure. He then differentiates the nature of design and building process according to the limitations they can pose on buildings. The design pertains to rules which can be changed at will (e.g. last minute alterations in the design), while the building process to laws i.e. physical limitations which are fixed (e.g. the number of bricks laid in an hour by hand). Peterson (2002) uses Hollings adaptive cycle model of ecosystems (Holling, 1986) to describe the buildings life cycle. He also argues that since buildings are complex systems they will inevitably exhibit uncertainty; hence an adaptive management approach should be adopted in construction ecology which involves learning by the use of methodologies and hypotheses about the uncertainties of a situation.

138


Adapted from Gunderson and Holling (2002) and Peterson (2002)

Figure 4.6 The adaptive cycle and the building life-cycle

Some other important issues identified by construction ecologists are the need to focus on: the effectiveness of materials and energy rather than just efficiency, the increase of diversity and adaptability of functions and finally the integration of ecosystems thinking in all decision making. In conclusion, construction ecology is an approach that uses advances in the fields of ecology, biology, thermodynamics and complexity to explain phenomena in the built environment.

Apparently, the use of systems thinking is crucial for this cross-

disciplinary effort.

However, construction ecology has so far focused mainly on

material and energy aspects of buildings as it uses the behaviour of organisms and ecosystems as models but not so on their social or cultural aspect. Consequently, even though there are many lessons to be learnt from construction ecology, it needs to be supplemented with other approaches that take into account the unique nature of people and human systems in being able to affect their living environments.

139


4.4.3 The UK context This paragraph attempts to draw a picture of the state of sustainable construction in the UK, by examining the governmental and construction sector levels. In 1999, the UK government published the national strategy for sustainable development under the title A Better Quality of Life (Department of Environment Transport and the Regions, 1999a). This strategy set four broad policy aims: 1. maintaining high and stable levels of economic growth and employment 2. social progress that meets the needs of everyone 3. effective protection of the environment 4. prudent use of natural resources The next year, the more construction-specific strategy Building a Better Quality of Life (Department of Environment Transport and the Regions, 2000) was published, which suggested ten key areas in which construction organisations could take action: 1. reuse of existing built assets 2. design for minimisation of waste 3. aiming for lean construction 4. minimisation of energy in use 5. minimisation of energy in construction 6. pollution prevention 7. preserving and enhancing biodiversity 8. respecting people and their local environment 9. setting targets

Moreover, the government has begun to encourage more sustainable construction by introducing economic instruments that intend to influence the market (Addis et al., 2001), for example: the Landfill Tax, introduced in 1996, which encourages greater diversion of waste from landfill and has a great impact on the construction sector since it

140


produces a great amount of construction and demolition waste (see paragraph 4.3.2). the Climate Change Levy on business use of energy, introduced in 2001 the Aggregates Levy, introduced in 2002, which reflects the environmental costs of aggregates quarrying and encourages demand for and supply of alternative materials (e.g. recycled construction and demolition waste) One of the main mechanisms that the governmental policies on sustainable development and construction are implemented is through the planning system (Addis et al., 2001). The planning systems function is very important for sustainable construction, since it regulates and controls the development of land and provides the national and local context for construction projects. It operates at the local government level, where every local authority should have in place regional, local or unitary development plans. Each construction project is compared and judged against the requirements of these plans, in order to gain planning permission and be authorised to proceed with construction. Some of the issues that the planning system considers and that are central to sustainable construction include: ensuring that development takes place in the most suitable locations providing sites for extraction of construction materials encouraging the re-use of previously developed urban sites (brownfield land) instead of developing on green field land relating major travel-generating land uses (e.g. shopping centres) to the availability of public transport providing protection of landscapes and townscapes of special character and importance. Moreover, since the UK government is the single largest construction client (accounting for about 40% of all construction activity in the UK (Addis et al., 2001)), the Government Construction Clients Panel published in 2000 the Achieving Sustainability in Construction Procurement (Government Construction Clients Panel, 2000). This action plan set targets on each of the areas of the Building a Better Quality of Life strategy, and it has prompted individual departments, agencies and non-departmental public bodies to develop their own action plans. 141


Adetunji et al. (2003) attempted to give a snapshot of the trends of the UK construction sector, and of contractors in particular, in relation to sustainable construction. Their findings show that there were two main barriers in the implementation of sustainable construction: the culture and fragmented nature of the industry, as well as the rigid specifications and clients unwillingness to share the burden. On the other hand, the three main drivers for implementing sustainability were: government policies and regulation competitive advantage, and client procurement policies, especially those of the major construction client, the government (see above). Adetunji et al. also noted that the practical application of environmental aspects was well advanced while the social and economic aspects are elusive, possibly because of the long history of Environmental Management Systems and the environmental management background of those responsible for sustainable construction. Their final conclusion was that the level of strategic response to sustainability was proportionate to the level of a companys turnover.

Thus, the top construction companies (among

contractors) recognised the benefits of sustainability and drove the industry forward through supply chain management.

A similar study was commissioned by the Construction Research and Innovation Panel (CRISP) (David Bartholomew Associates, 2002) in order to review the state of sustainable construction practice and the research and innovation (R&I) needs.

It

included interviews with staff from construction firms, standard-setting bodies, professional institutions, research associations and funders. In terms of the sustainable construction practice, the interviewees thought that1 : there was a lot of talk about sustainability but very little action on the ground

1

The only exception to this pattern were the interviewees from the transport infrastructure sector. They

felt that they were well aware of sustainability issues and that they were taking effective action in current practice and professional education.

142


the main drivers were overwhelmingly legislation and business concerns market realities (the industrys customers, or intermediaries beliefs about them) were preventing designers, developers and contractors to produce more sustainable buildings

4.5 The Construction Project 4.5.1 The Construction Project as a system The Construction Project (CP) could be considered as a basic reference system in the study of the construction industry and the built environment. The CP can be regarded as a system that stands by itself since it has: an identifiable and distinct purpose which is usually related to a specific social need (higher system): its own budget and identifiable cost parameters, which can be prescribed (defined) in the context of a contract, allowing it to be assigned to a third party (contractors) for its realisation. a sensible (in the sense of scope and analysis) life-cycle. an identifiable and distinct impact on society, economy and the environment; in other words, it is a generator of impacts; On the basis of the above, a pier is not a project, whereas the bridge is; a pipe is not, the sewerage system is; the apartment is not, the building is. The dimension of time is very important in identifying the boundaries of the CP. As we saw in paragraph 4.4.1, the concept of Sustainable Construction demands considering the built environment and the processes used to build it, as a seamless continuity from design through to disposal. This means that the CP will have to include the processes of feasibility, design, construction and/or refurbishment, operation and maintenance and finally end-of-life/ disassembly (Figure 4.7).

Figure 4.7 The Construction Project Life Cycle 143


This is an extension of the traditional view of the CP which is limited to the construction process. If an analogy can be made to the manufacturing sector, the CP covers both the production process and the product. In the case of the construction sector though, the dynamic and diverse character of the construction process means that it very difficult if not impossible to precisely predict its outcome. According to Blockley and Godfrey (2000), this difficulty is due to the fact that the construction process is a social process and is therefore a soft system. In other words it affects and is being affected by a great variety of different actors, such as architects, contractors, owners, users, statutory bodies etc.

Moreover, in order to study the sustainability of a CP, one would have to consider its relation to its parallel or connected systems. For example, this means that the focus should not be limited to the construction site or, better, to the construction system , but it should also include the supply chain which is responsible for delivering the CPs inputs (e.g. material suppliers). Additionally, as we saw in paragraph 4.4.2, Construction Ecology is emphasising the need to study the hierarchical scales of the built environment (e.g. building element, building, group of buildings, city) and their relation to the natural environment. For example, the building may be seen either as a stand alone project, or as part (subsystem) of a larger scale project, involving other works and buildings (e.g. a development project). In the latter case, the system in focus changes from a building to a combination of construction works and buildings; hence, one should expect the emergence of properties and impacts that surpass the sum of the impacts of the individual works and buildings. In other words, the assessment of the sustainability performance of a complex large-scale project is not simply an addition process of partial impacts (the whole is more than the sum of its parts, see paragraph 2.2.2). Consequently, even though this section focuses only on the project level, the sustainability of a CP should also be related to higher (man-made) systems, such as the urban environment.

144


4.5.2 Types of construction projects Construction projects can be categorized by various characteristics or properties. Here, for the purposes of this research, it is considered sufficient to classify them by: purpose or function, ownership, size and procurement system, as explained below. By purpose or function: As we saw in section 4.1.1, these functions include housing; infrastructure for transportation, communication, water supply, sanitation and energy; commercial and industrial activities; as well as health (hospitals) and leisure (stadiums, theatres). It is also very common that some projects will have a mixed-use character. By ownership: The ownership of a construction project, in general, can vary from fully public to fully private. A strong trend has been developing over the last decades for mixed ownership, as is the case with PFI projects discussed later. By size: The size is usually measured in terms of cost, of output (e.g. served population, level of production, or revenue), or covering area in the case of buildings. By procurement route or procurement system: This is the projects organisational structure, which determines the contractual relationships between the parties involved or the principal actors, in a construction project: project owners (or clients), architectsdesigners, financers, contractors, operators. The procurement system of a project can greatly influence its performance in terms of cost, time and sustainability (Ngowi, 1998, Kibert et al., 2002a, Sustainable Development Task Force, 2003). As an example, the choice of the procurement system was a determining factor in the building of the highly disputed New Scottish Parliament in Holyrood, Edinburgh (Fraser, 2004). Some types of these systems are presented in the next paragraph 4.5.3.

4.5.3 Types of procurement systems The most commonly used procurement systems in UK are presented below based on Franks (1998): The traditional system The Designer-led construction works managed for a fee The Package Deal and Design and Build 145


The Design-Build-Finance-Operate (DBFO) Partnering The Private Finance Initiatives (PFI) In the traditional systems, which have evolved and developed over centuries and especially in the buildings sector the architect-designer is the leader of the construction process, as the clients (who know in general what they want) will initially seek someone who can express their needs in form of a design. Traditionally, the architect has come to be recognized as the independent designer of buildings and the manager of the construction process. In the case of larger projects, the tendering mechanism was gradually developed: bills of quantities were prepared as a common basis for tendering of different contractors. The quantity surveyor was established as an independent compiler of bills of quantities and an expert in building accounts and cost matters. There exist several variations of this traditional system.

In one variation, the

arrangement is briefly as follows: The client with the need for a building briefs the architect on his need, indicating possible constraints on cost, time, etc. The client also indicates the criteria for evaluating the possible alternatives. The architect prepares alternative drawings/proposals, so that the client may select one or more that he prefers, and the quantity surveyor estimates the cost of the alternatives. The client then chooses his preferred proposal and the architect proceeds to the design and specifications, often by consulting specialist engineers and negotiating with specialist contractors.

The

quantity surveyor prepares the bills of quantities based on the design. Tender drawings, bills of quantities and forms of tender are sent to interested contractors (either selected from a list or identified through a public call for tenders) so that they may submit tenders for the work. The contractors estimate the cost of the work and submit tenders, among which the client makes a choice. The client enters into a contract with the chosen contractor, who sets up his management system and places orders to subcontractors and those nominated by the architect. The contractor and sub-contractors carry out and complete the works. Another category of procurement systems falls under the heading designer-led construction works managed for a fee. This group includes the various management 146


fee and construction management systems.

In these systems, the management

contractor or construction manager offers to undertake the management of the works for a fee. His relationship to the client (owner of the project) is the same as with the architect or any other consultant.

The actual construction work is undertaken by

specialist contractors, acting as sub-contractors to the construction manager or, in some cases, entering into direct contract with the client. Each of the sub-contractors contracts to carry out and complete one or more of the work packages which make up the whole of works Package Deal is a family of procurement systems in which the contractor is responsible for the whole of the design and construction of the building.

As

responsibilities are not split between designer and builder, the client is not involved with separate parties in the event of a building failure; thus, the system offers singlepoint-responsibility. The client states his requirements and the contractor prepares the design and cost proposals to meet them.

Initially, the contractor produces only

sufficient, by way of design, proposals to demonstrate his "package' to the client. The design is being developed gradually and it is finalized when both parties have reached an agreement regarding specifications and price. These systems usually allow the client to procure buildings more quickly, which tends to result in cost savings. Design and Build is a more refined version of Package Deal which allows architects to become directors of construction firms rather than be salaried employees. In Design-Build-Finance-Operate (DBFO) systems a promoter designs, builds, finances and operates the project for the benefit of the client (also referred to as the purchaser or principal). The promoter provides accommodation and/or facilities, maintaining and renewing plant and equipment as and when necessary; a complete 'service'. This releases the client from accommodation problems and enables him to concentrate on his proper business. Private Finance Initiatives (PFI) is a particular type of the DBFO system and happens when the project is commissioned by a public client such as the government or a local authority. PFIs became popular during the nineties as part of a government policy of privatization which was designed to take services, which are not directly concerned with government, outside the public sector. Providing the client with a service which gives value for money is at the centre of PFI and DBFO systems generally. 147


Partnering is a contractual arrangement between two parties for either a specific length of time or for an indefinite period. The parties agree to work together, in a relationship of trust, to achieve specific primary objectives by maximizing the effectiveness of each participant's resources and expertise. It is not limited to a particular project. Partners can be the client, the deign team, principal contractors, specialist contractors (including sub-contractors) and leading suppliers.

Objectives might include improved quality

standards, reduced project delivery time or projects delivered within budget. Usually the client is the initiator of partnering agreements.

Partnering requires from the

companies to make changes in the way they do business in order to achieve common beliefs, values and norms, and top-level commitment is considered essential. In recent years the construction industry has started to move away from traditional tendering systems, due their inefficiencies in terms of time and cost and because of the need to include more long-term goals, such as sustainability, and new procurement systems have emerged (Ngowi, 1998, Sustainable Development Task Force, 2003). Partnering in particular, has been promoted both internationally and in UK (Egan et al., 1998), as a way to improve efficiency and sustainability performance.

However

according to the Sustainable Development Task Force (2003) it has had limited success because it relies on best endeavours and acts of faith from the project partners while disavowing any legal obligations. Moreover, national governments are usually the construction industrys largest clients and procurement routes such as PFI, have an important role in the sustainability outcome of public projects. PFI and Public Private Partnerships (PPP) in general are considered as an opportunity for the government to include sustainability objectives during project procurement (Addis et al., 2001). Nevertheless, the specification of these requirements is crucial (Lockie et al., 2003) and PFIs may not turn out to be the best deal for the public, as the Skye Bridge project has shown (see Chapter 1).

148


4.5.4 Expressing the complexity of construction projects through Mind Mapping An initial part of the work for this thesis involved attempts to express the various sustainability aspects of construction projects in such a way that allows the analyst capture the whole picture at a glance. The intention was to organise and represent the various pieces of information, related to these sustainability aspects in a way that captures all of them while, at the same time, showing their interrelations. The use of Mind Maps was considered appropriate (see Appendix A); they allow the representation of complex information in a hierarchical way that shows the whole picture without losing the detail. Moreover, Mind Maps can quickly and effectively show relations between different information elements, through the use of colours, images or symbols. This way the complexity of construction project sustainability can be exposed and realised at least in a qualitative way. Following are three examples of complex construction projects that were represented (described) with Mind Maps. The information that was used to draw these Mind Maps was found on the internet and it was organised according to the Five Capitals Model (see paragraph 3.4.3). The format of all three maps stems from the Five Capitals Model: five branches emanate from the centre of the map, corresponding to the five capitals, namely man-made, natural, social, human and financial. Each branch splits to more branches (the more branching out the wider the analysis); each new branch goes on to more branching (the longer the sequence of branching the deeper the analysis). These Mind Map representations proved to be quite effective as a preliminary step (actually, a basis), in the process of, first, understanding and, second, organising the different sustainability aspects and their complex interrelations. In fact, the use of Mind Maps is strongly suggested in similar cases. As explained in Appendix A, the depth and the extension of the analysis, through Mind Maps is totally at the discretion of the analyst, while the tool maintains its simplicity regardless of the dimensions of the analysis. The Skye Bridge case Figure 4.8, shows the Mind Map of the Skye Bridge that was presented in Chapter 1. The use of different colours helps in the association of elements from different aspects. For example, the use of blue colour fonts under the social branch, intends to show the 149


extensive connection of many of the social problems with the financial aspects of the project. A more extended version of Figure 4.8 can be found in Appendix A.

Figure 4.8 Five capitals Mind Map of the Skye Bridge

The Gateshead Millennium Bridge case Figure 4.9, shows a similar Mind Map of the Gateshead Millennium Bridge (Gateshead Council, 2005). The bridge is for cycling and pedestrian use and was opened in 2001. It is built over the River Tyne and links an artistic and cultural development area between Newcastle and Gateshead. The bridge opens for shipping to pass through, by using an innovative tilting mechanism which moves the whole bridge structure. The structure is based on two steel arches and when the bridge opens it reminds the movement of a giant eyelid. The bridge is considered as a success socially (it has enjoyed a wide public acceptance) and technologically (a design award has been awarded to its designers). A more extended version of Figure 4.9 can be found in Appendix A.

150


Figure 4.9 Five capitals Mind Map of Gateshead Millennium Bridge

The Egnatia Highway case Figure 4.10 shows the Mind Map for the Egnatia Highway (Egnatia Odos S.A., 2005) which is a major road project located in Northern Greece. When complete, Egnatia will stretch for 680 Km linking the eastern border of Greece (with Turkey), with the Ionian Sea to the west. It is a very complex project comprising a great number of bridges and tunnels that pass through a diverse terrain, including difficult mountainous regions. The project has a great economic and social importance for the country, since it will significantly enhance the transportation services of an area that accounts for 36% of Greeces population and for 33% of its Gross National Product (GNP).

The

environmental aspect of the project is significant, since it passes through 17 Natural Habitats that belong to the Natura 2000 network, 4 Wetlands that belong to the Ramsar convention and 70 Wildlife conservation areas. Moreover, the road passes through 250 historic sites and monuments. The construction as well as the use of the road will have significant impacts to these ecosystems and monuments.

Egnatia Odos S.A., the

company responsible for Egnatias completion, has taken

measures to improve its

environmental efficiency (such as constructing special wildlife passages, road fencing 151


and use of native flora for revegetation). Additionally, an observatory has been set up along the road, which aims to monitor the social and economic impact of the road to its adjacent areas, by collecting and processing relevant socio-economic data. A more extended version of Figure 4.9 can be found in Appendix A.

Figure 4.10 Five capitals Mind Map of Egnatia Highway

152


4.6 Sustainable construction assessment methods and tools In this section an attempt is made to show the current sustainable construction practice in the UK, by presenting some of the most widely used assessment tools and methods. Some similar international tools and methods are also presented followed by a general critical evaluation.

4.6.1 Benchmarking Rethinking Construction In 1998, Sir John Egans Construction Task Force published the report Rethinking Construction (Egan et al., 1998) (also known as the Egan report), which challenged the construction industry to measure and continually improve its performance. The Movement for Innovation (M4I) was formed following the Egan report to promote innovation to meet the targets set in the report by developing demonstration projects and helping in the exchange of knowledge among the construction sector. Along with the Construction Best Practice Programme (CBPP), the need to measure the performance of the construction sector and to implement benchmarking was identified. Benchmarking is a systematic process of measuring and comparing the performance of key business activities against others, and using the lessons from the best to make targeted improvements. The best performance achieved in practice is the benchmark (Constructing-Excellence, 2005). Benchmarking can be applied: inside a company to compare different operations (internal), against a specific competitor regarding a product, a service or a function of interest (competitive), or to make a comparison of functions and processes that are the same regardless of the industry or country (generic). In order to measure the performance of a process for benchmarking, Key Performance Indicators (KPI) are used. Initially, the CBPP issued 10 KPIs, shown in Table 4.3, which applied to the whole construction industry.

Different lists have also been

developed (as of 2004) for the special sectors of Construction Consultants, Mechanical 153


and Electrical Contractors and Construction Products Industry, as well as for the categories of Respect for People and the Environment also called Environmental Performance Indicators (EPI). The latter refer both to the product or the construction process. In Table 4.4 can be also seen the 2003 KPIs for the Respect for People and the Environment categories.

Construction Industry KPIs Client satisfaction Product Client satisfaction Service Defects Predictability Cost Predictability Time Profitability Productivity Safety Construction Cost Construction Time

Source: (Constructing-Excellence, 2005)

Table 4.3 Construction Industry KPIs

Environment KPIs Impact on the Environment Product/Construction Process

Respect for People KPIs Employee Satisfaction

Energy Use (Designed) Product

Staff Turnover

Energy Use Construction Process

Sickness Absence

Mains Water Use (Designed) Product

Safety

Mains Water Use Construction Process

Working Hours

Waste Construction Process

Qualifications & Skills

Commercial Vehicles Movements Construction Process

Training

Impact on Biodiversity Product/Construction Process

Pay

Area of Habitat Created/Retained Product

Investors in People

Whole Life Performance Product Source: (Constructing-Excellence, 2005)

Table 4.4 Environment and Respect for People KPIs 154


Companies can measure and benchmark their performance annually by referring to the charts provided by CBPP for each indicator, as shown in Figure 4.11. The benchmark curve of each indicator is updated every year based on related construction industry statistics. The benchmark of several indicators can be represented in a radar or spider diagram as shown in Figure 4.12.

1. The measure of performance of the company or project under consideration is plotted on the vertical axis. 2. The point where the benchmark curve intersects the performance line is found. 3. Reading down on the horizontal line is the benchmark for this indicator (e.g. 38%).

Figure 4.11 Example of KPI chart and benchmark measurement

155


Figure 4.12 Example of radar chart showing benchmark performance for the Environment KPIs

4.6.2 Life Cycle Analysis Research in the building sector has attempted to apply Life Cycle Analysis (LCA) methods (see paragraph 3.4.5) to buildings as discrete and separate entities, but has run into many difficulties (Kohler and Moffat, 2003). Kohler and Moffat (2003) identify the source of these difficulties, basically, on the complex nature of buildings: they are comprised of many different materials and separate products, each having its own lifetime and unique processes for production, repair and disposal. This variety poses enormous challenges in data collection and decision making on the design teams. Moreover, since buildings have a relatively long operation life, scenarios must be designed to predict possible future issues a process involving a lot of speculative assumptions. Kohler and Moffat also argue that the scope of LCA is continuously expanding from the level of the individual building to that of the built environment. This expansion in focus has the advantage of capturing the interrelationships and interactions among buildings, thus encouraging the creation of integrated systems approaches such as sustainable urban ecologies. 156


Kohler and Moffat present certain insights from the application of LCA in the building sector: The most environmentally friendly building is usually no building at all, if the needs can be covered by alterative ways. LCA emphasises the value of adaptive designs that continue to perform despite changes in building use and technology.

Small upfront investments in

convertibility and flexibility and expandability can greatly reduce the costs of using structures over time. Spaces and structures experienced by occupants as pleasing and life-enhancing are likely to survive in the long-term, despite losses in functionality and efficiency. LCA, in a systems holistic sense, is intended to encourage trade-offs between each phase of the life-cycle, rather than address each phase on its own. For example, increase in embodied energy (more substantial foundations, better insulations), is very effective in reducing operational impacts. Concrete always deserves special attention, since it usually represents the majority of the embodied energy. Its disadvantages can be compensated over a long lifetime (over 100 years). It is very important to include absolute and relative target values in LCA methods in order to facilitate decisions and choices over complex trade-offs. Kohler and Lutzkendorf (2002) argue that integrated LCA tools for buildings will constitute a considerably enlarged basis for design decisions covering all aspects of sustainability, not only environmental; they also identify some characteristics that these tools should have, such as: Be adapted for different life-cycle phases, actors and decision levels. Be adapted for different types of impacts and effects. Be embedded into the normal professional working environment, in terms of the different types of available data (geometric, constructive, user relevant, environmental etc.).

157


Be scaleable, in regard to the level of detail and the available data, by being able to incorporate the new data that become available as the project advances through its life-cycle. Similarly, Erlandsson and Borg (2003) attempt to develop a generic LCA methodology to be applied not only in buildings but also in other types of construction. According to them the problems in applying LCA to buildings and other constructions originate from the following issues: The functional output has to be regarded as a service rather than a product. The system behind the services (as well as the environmental context associated with it) is dynamic. The provided service has a defined service life, while utilised building facilities, building products, etc. have their own life cycles and service lives. Actions taken in the building sector also affect other sectors. In the ordinary design process, different aspects are put forward as performance requirements, while there is a need to improve the utilisation of LCA in practice in order to assess functions. They argue that such a generic LCA methodology should include both the physical construction and the use of it, i.e. operational services; hence, they introduce the notion of a primary system constituted by two subsystems, the physical construction and the operation, as seen in Figure 4.13. Their proposition is based on the fact that (1) most performance requirements and building services can be grouped in two categories corresponding to these two subsystems and (2) the main part of the environmental impacts associated with the physical construction is often known while the characteristics of future operation (and its expected impact) are usually assumed.

158


Adapted from (Erlandsson and Borg, 2003).

Figure 4.13 The primary system with the functional output defined as services rather than products.

Erlandsson and Borg also try to elaborate on the main abstraction levels applicable on buildings and other construction works and to define the highest level of complexity in order to apply a generic LCA methodology. They conclude that the building-controlled utility services level is the highest level, having as lower levels the building construction level, the building element level and the building materials level. They also introduce the sequential life-cycle thinking which, as opposed to linear life-cycle thinking of ordinary LCA analyses, regards the different life-cycle phases of the buildings (such as construction, operation, maintenance and demolition) separately in the life-cycle inventory analyses. They also identify two major LCA approaches: the bottom up approach which focuses on building materials selection etc. and the top-down approach that considers the building as a starting point for further improvements. In comparing different LCA 159


methodologies for buildings, they note that the majority are bottom-up based, while only ENVEST (described in the next paragraph) is top-down. Apart from the difficulties in its application, LCA methodology is very powerful in realising and assessing the sustainability impacts of buildings and other construction works and in supporting decision-making processes during design.

Most of the

assessment tools reviewed in the next paragraphs are based on some form of LCA.

4.6.3 ENVEST ENVEST is a software tool for estimating the life-cycle environmental impacts of a building; it serves as an input to decision-making processes during the early design stage (Addis et al., 2001) when designers contemplate and choose their building designs (height, number of storeys, window area, etc) and building elements (external wall, roof covering, etc).

This is a top-down process, as Erlandsson and Borg (2003) note,

meaning that the starting point is to choose the shape of the building and then gradually work down through the structure to the choice of materials, infill walls, etc. ENVEST identifies those elements with the most influence on the building's environmental impact, and shows the effects of selecting alternative materials. It also predicts the environmental impact of various strategies for heating, cooling and operating a building. In order to make its assessments, ENVEST uses ecopoints, based on a method for normalising various sustainability-related data. Construction activities generate a wide range of various sustainability impacts (e.g. global warming, water pollution, waste) that need to be assessed. However, it is difficult, even if at all possible, to make undisputable assessments about the relative importance of those impacts or to decide on their trade-offs, since this would require subjective judgment.

Moreover, each

environmental issue or impact is measured in its own unit, making comparisons even more cumbersome. To overcome these drawbacks, the data on different types of impacts are normalised into a common scale using the impact of a typical UK citizen as the norm (calculated by dividing the impacts of the UK by its population). Additionally, expert panels from across the industrys stakeholder groups were used to determine the relative importance of the issues, which showed a surprising degree of consensus. 160

This allowed the


weighting of the normalised impacts to provide the ecopoint score.

Thus, a UK

ecopoint score is a measure of the overall environmental impact of a particular product or process covering the following: Climate change

Ozone depletion

Human toxicity to air

Waste disposal

Acid deposition

Eutrophication

Minerals extraction

Fossil fuel depletion

Freight transport

Human toxicity to water

Water extraction

Ecotoxicity

Summer smog UK ecopoints are calculated by adding up the score for each issue (calculated by multiplying the normalised impact with its percentage weighting).

The annual

environmental impact caused by a typical UK citizen therefore creates 100 points. One UK ecopoint is equivalent to: 320 kWh

83m2 water

65 miles by articulated truck

Landfilling 1.3 tonnes of waste

Manufacturing ¾ tonnes of brick

300 miles of urban driving in a petrol

(250 bricks)

powered car

1.38 tonnes mineral extraction

540 tonne-kms by sea freight

4.6.4 BREEAM In 1990, the Building Research Establishment (BRE) in UK launched the BRE Environmental Assessment Method (BREEAM) for buildings (BRE, 2005). It is the first and most widely used method for evaluating environmental performance of buildings; there are about 600 office scheme buildings that have been assessed. BREEAM can be adjusted for different types of buildings and currently covers six types: offices, retail, industrial (industrial buildings, warehousing and non-food retail units), schools and 161


residential (this BREEAM version is called EcoHomes). There is also a version of BREEAM for: health sector buildings which is developed for health trusts and the NHS Estates (also called NEAT) and a bespoke version to cover buildings that do not correspond to any of the above types (e.g. leisure complexes, courts, laboratories, military bases, shared accommodation, or mixed-use). The BREEAM assessment can be carried out at three stages of a buildings life (Addis et al., 2001): 1. On a building that is already occupied and in use. 2. During the design stage for rehabilitation of an existing building or design of a new one when the design has been fixed typically during the detail design stage, after specifications have been finalised 3. Immediately after construction is complete, as a post-construction review to verify that the intentions planned during design have been carried out. It assesses the environmental performance of buildings, at any of the above three stages, in the following areas: management: overall management policy, commissioning site management and procedural issues energy use: operational energy and carbon dioxide (CO2) issues health and well-being: indoor and external issues affecting health and well-being pollution: air and water pollution issues transport: transport-related CO2 and location-related factors land use: greenfield and brownfield sites ecology: ecological value conservation and enhancement of the site materials: environmental implication of building materials, including life-cycle impacts 162


water: consumption and water efficiency. The buildings performance is assessed by accredited BREEAM Assessors; credits are awarded in each assessment area, by the use of checklists.

The credits are then

aggregated using a set of environmental weightings, thus producing a single overall score.

The building is rated on a scale of PASS, GOOD, VERY GOOD or

EXCELLENT, and a certificate is awarded that can be used for promotional purposes. BREEAM is intended to be used by clients, planners and developers to specify the performance of the buildings they require, as well as by property agents to promote the environmental performance of the building to potential clients.

Design teams are

encouraged to use the tool early in the design phase, in order to take into account the relevant aspects and improve the final environmental performance.

Operational

Managers can use it during the operation phase to measure performance and then develop action plans or report to the community.

4.6.5 CEEQUAL Since BREEAM is suitable only for buildings, the need to develop a similar tool for all types of engineering projects was perceived by the Institution of Civil Engineers (ICE). After three years of collaboration between ICE and a range of consultants, contractors, professional bodies and government agencies the Civil Engineering Environmental Quality and Awards Scheme (CEEQUAL) was launched in August 2003. CEEQUAL is based on a self-assessment, carried out by a trained CEEQUAL Assessor, who may be on the staff of or contracted in by the applicant. The assessment is validated by an external Verifier, appointed by CEEQUAL, who works to support the Assessor; the result and award recommendation is checked and ratified by the CEEQUAL organisation (CEEQUAL, 2005). The projects are assessed in the following areas (Hedges and Woodrow, 2004): Project Environmental Management

Energy

Land use

Use of Materials

Landscape

Waste Management

Ecology and Biodiversity

Transport 163


Archaeology and Cultural Heritage

Nuisance to neighbours

Water Issues

Community Relations

As in BREEAM, for each of the above areas there is a scoring spreadsheet with relevant questions that should be answered in order to gather points. However, in CEEQUAL, the relevant evidence for each question should be shown to the verifier to be assessed. The scores are aggregated using weighting criteria and an overall score is calculated. Finally, the project is rated on a four level rating scale of PASS, GOOD, VERY GOOD and EXCELLENT and the award is granted. Five types of awards are available from CEEQUAL (CEEQUAL, 2005): Whole Project Award, which can be applied for jointly by the client, designer and principal contractor(s) Client & Design Award Design Award, applied for by the principal designer(s) only Construction Process Award, which can be applied for by the principal contractor(s) Design & Build Award for Design & Build and other partnership contracts. Apart from the apparent similarities between BREEAM and CEEQUAL, their main difference is their scope of application. While BREEAM is applied only to buildings, CEEQUAL can be applied to any type of civil engineering project. It is possible, for example, that a large regeneration project will seek an overall CEEQUAL award and individual BREEAM awards for buildings within the development (Hedges and Woodrow, 2004).

4.6.6 SPeAR® SPeAR® is the acronym for the Sustainable Project Appraisal Routine tool developed by the engineering consulting company Arup (Arup, 2005). It is intended to be used as a management information tool and to aid in the decision making processes during design. The sustainability appraisal of SPeAR® is based on a set of sectors and indicators based on the relevant literature on sustainability. However, it is possible to include project 164


specific indicators and create a bespoke appraisal. The appraisal is based on the performance of each indicator against a scale of best and worst cases. Each indicator scenario is aggregated into the relevant sector and the average performance of each sector is then transferred onto the SPeAR® diagram. This four-quadrant model resembles a spider diagram which shows how far each sector is away from its optimum by the distance it has from the centre of the diagram. The sectors are grouped in four categories (quadrants) as can be seen in Table 4.5 (Addis et al., 2001). Environment

Natural Resources

Societal

Economic

Air Quality &

Minerals

Form and Space

Social Benefits/Costs

Microclimate

Water

Access

Transport

Land Use

Energy

Amenity

Employment/Skills

Water

Land Utilisation

Inclusion

Base

Ecology

Reuse

Competition Effects

Buildings

Viability

Transport

Table 4.5 The SPeAR® sustainability sectors

By including all the four quadrants, the tool intends to capture the linkages between economic, social, natural resources and environmental systems.

The sectors of

SPeAR® and the underlying indicators are not weighted, as this would assume that some sectors make a greater contribution to sustainability than do others. The appraisal can be repeated several times during the life time of the project, for example to set performance targets and then monitor how it is progressing. SPeAR® appraisals have been undertaken for urban regeneration schemes, development plans, manufacturing processes and products and it has also been used to support a strategy formulation process.

4.6.7 Sustainability Accounting The voluntary application of sustainability accounting (see paragraph 3.4.6) for construction industry companies has been described by Casella et al. (2002). They 165


present the case study of the Princess Margaret Hospital, a PFI project located in Swindon and developed by Carillion plc. (www.carillionplc.com/). Direct (internal) and indirect (external) accounts were formulated, representing the environmental and social costs and benefits, based on data from the inception through to the construction phase, as shown in Table 4.6.

Even though the project was a PFI initiative, the

intention was to develop the methodology to cover all types of project procurement during their whole life-cycle. In Figure 4.14 shows the proposed sustainability plan of work, assuming a traditional project cycle (traditional procurement route).

Adapted from (Casella et al., 2002)

Figure 4.14 Sustainability accounting plan of work

The case study showed that sustainability accounting can be a very powerful tool for internal management and external reporting.

However, it also revealed the same

methodology problems with the ones identified in paragraph 3.4.6, listed below: Responsibility boundaries: since sustainability accounting is voluntary, drawing the responsibility boundaries is up to the individual organisation, having a significant effect on the final estimations. Valuation methods: the study used avoidance and restoration values, which do not give any information about the relative priorities that stakeholders might attach to the impacts. 166


Environmental & Social Features ENVIRONMENT 1 Balancing pond

Costs (£)

Direct Savings (£)

Area around the site provides amenity value for hospital, staff and visitors

Local community; patients; hospital staff; visitors

46,800

384,388

Reductions in CO2, NOx, SOx which would otherwise be released to atmosphere

Improvements in the internal environment of the hospital

Local and Global community; hospital staff; patients and visitors

0

433,800

0

1,150,000

Reduced waste to landfill - reduced amount of leachates produced at landfill site Reduced waste to landfill should reduce the amount of leachates produced at a landfill site

Reduced waste to landfillreduction in demand for new built sites. Reduced transport requirementless traffic congestion, dust, and noise

Local, regional and national community

(Efficient use of resources)

Net direct savings (environment) SOCIAL 5 Health and safety

£1,786,368 95,700

Not available

50,900

Not available

Improved working environment; reduced accident risk, increased staff productivity; reduced employee turnover Local employment reduction in vandalism; enabling work experience

(Respect for staff)

6 Community involvement (Working with local communities) Net direct costs (social) TOTAL DIRECT SAVINGS

Stakeholders affected

Reduced runoff of sediment from site; enhancement of aquatic and bird life

(Efficient use of resources) 4 Recyclable flooring

Social

Not available

( Improving energy efficiency) 3 Plasterboard

Environmental

135,000

(Avoiding pollution)

2 Energy efficient design features

Indirect

£146,600 £1,639,788

These figures apply to the construction and concession period (27 years) Adapted from Casella et al.(2002)

Table 4.6 Sustainability accounting statement for the Great Western Hospital

167


Aggregation: the conversion of social and environmental impacts into monetary values makes possible the trade off between different impacts, something that is not always compatible with sustainability. A reductionist approach: the use of separate accounts hides the synergies and interrelations between economic, social and environmental issues. Accounting for what you can count: the accounts often include the items that can be easily converted to monetary values, while neglecting the more intangible social and environmental issues.

4.6.8 Ecological Footprint Nicholson et al. (2003) apply the ecological footprint analysis (see paragraph 3.4.7) in the environmental assessment of construction projects. They use the methodology developed by Best Foot Forward (2005) which takes into account the following components: energy, materials and waste, transport, food, water and built land. They suggest that these analyses can be carried out during the planning and design stages in order to facilitate decision making, and taking into account the impacts of the construction and/or operation phases. Similarly to LCA, the results of this analysis can be expressed by: 1. Presenting the ecological footprint by component, highlighting areas of high impact. 2. Annualising construction impacts over the asset life of the facility and adding that to the annual operation impacts, thus providing a benchmark of the impact of the service provided. This could be used to compare efficiencies of different processes or facilities. 3. Presenting construction impacts alongside operational impacts, to show their relevant significance. 4. Normalising the ecological footprint per customer, thus allowing the comparison of the ecological footprint of the provided services with the per capita average earth share. Nicholson et al. (2003) find that the ecological footprint analysis has certain advantages compared to other assessment tools, such as the M4I Sustainability Toolkit 168


(Constructing-Excellence, 2005) and Sustainability Profiles (Forum for the Future, 2003), such as: 1. the objective nature of the measurements, since all the conversion factors are based on biological principles rather than on weighted values. 2. the simplicity in calculating a single number answer (measured in gha) rather than being overloaded with indicators, as in traditional LCA tools; this makes it easier to identify and use the better environmental option. In terms of communicating the results, more important is the fact that the ecological footprint can show how the project impacts on the carrying capacity of the planet. The authors also note that the limitations of the analysis lie in problems of data availability and robustness (e.g. life-cycle data of construction materials), also common to other evaluation methodologies; they also point out the fact that it does not currently take into account the effects of toxic pollution.

4.6.9 Other international tools Assessment tools similar to the ones presented above have been and continue to be developed in many countries. The US Green Building Councils LEED® (Leadership in Energy and Environmental Design) was launched in March 2000 (Todd et al., 2001). It is a voluntary consensusbased US national standard for developing high-performance, sustainable buildings. It is applied to (U.S.-Green-Building-Council, 2005) new commercial construction and major renovation projects (LEED-NC), existing building operations (LEED-EB), commercial interiors projects (LEED-CI), core and shell projects (LEED-CS), homes (LEED-H) and neighbourhood development (LEED-ND).

169


LEED emphasizes state of the art strategies for sustainable site development, water savings, energy efficiency, materials selection and indoor environmental quality. LEED recognizes achievements and promotes expertise in green building through a comprehensive system offering project certification, professional accreditation, training and practical resources. The Norwegian Ecoprofile is an official, voluntary environmental classification method for buildings based on 80 performance parameters categorized in three areas: external environment, resources and indoor environment (Boonstra and Pettersen, 2003). The parameters cover not only the building process, but also maintenance, operation and use. A single index is presented for each of the three areas. The method can be used either for self-assessment or for public certification. In 1996 the Green Building Challenge (GBC) began as an international collaborative effort to develop a building environmental assessment tool that exposes and addresses controversial aspects of building performance and from which the participating countries can selectively draw ideas to either incorporate into or modify their own tools (Green-Building-Challenge, 2005). The three general goals for the Green Building Challenge process were: To advance the state-of-the-art in building environmental performance assessment methodologies. To maintain a watching brief on sustainability issues to ascertain their relevance to green building in general, and to the content and structuring of building environmental assessment methods in particular. Sponsor conferences that promote exchange between the building environmental research community and building practitioners and showcase the performance assessments of environmentally progressive buildings Moreover, a general objective of the GBC is to develop an internationally accepted generic framework that can be used to compare existing building environmental assessment methods and used by others to produce regionally based industry systems. The GBC2000 assessment framework is intended to be used in commercial, multi-unit residential and school buildings and includes the following criteria (Todd et al., 2001): 170


Resource consumption (energy, land, water materials) Loadings (greenhouse gases, ozone depleting substances, acidification, solid, waste, liquid effluent, impacts on site and adjacent properties) Indoor environmental quality Quality of service (flexibility, controllability, maintenance of performance, amenities) Economics (life cycle, capital, operating/maintenance) Pre-operations (construction, management transportation)

4.6.10 Critique The field of sustainable construction is very recent; therefore, it is of no surprise that, as the previous sections have shown, the methods and tools of sustainability assessment of buildings and constructions are still developing. However, sufficient experience in applying them is already available for shaping a constructive criticism about these tools; such criticism has already appeared in the relative literature, which stems both from their brief application and their theoretical underpinning. Below, some of the key criticisms are presented. According to Ball (2002), the constant appearance of new assessment schemes, at various hierarchical or geographical levels (national, regional, for industry, for projects, etc), moves a push away from the original ideas of holism and towards further fragmentation. As a result, the information that these schemes aim to provide is diluted, it can lead to confusion and could reduce the scope for comparisons between products or projects labelled by different schemes. Cole (1998) also identifies certain limitations of assessment methods and awards schemes such as BREEAM and LEEDS.

A potential danger is the tendency of

designers to use such assessment methods as design tools even though these were not designed as such.

This may potentially institutionalise a limited definition of

sustainable or environmentally responsible building practice: the designer might be primarily concerned with reaching a certain performance score when what is needed is innovation and exploration. This phenomenon is also linked to the voluntary character 171


of these tools, a policy which has as a main objective to stimulate market demand for more sustainable buildings. As a result, these tools have to serve two conflicting aims: 1) to be objective in order to truly contribute to the enhancement of sustainability, and 2) to be attractive to building owners who wish to show any positive effort. One of the problems is that award or eco-label schemes do not take into account the regional differences and their particular context, which is in effect contrary to the Agenda 21 principles of regionality, appreciation of local resources and community involvement (Ball, 2002).

Moving the argument a bit further, it may even be

inappropriate to make assessments for buildings or construction irrespective of their context. Erlandsson and Borg (2003) point out that: The use of a scoring system to benchmark different buildings, or the use of buildings, based on predefined and generic environmental performance requirements is not regarded as adequate, since the building and operation context then must be made independent of the actual context, which theoretically is impossible. This argument, however, is contrary to the wide trend of globalisation and unification of standards and materials. Standardisation of methodologies, protocols and criteria is clearly very useful in providing the base for comparison between different efforts and rationalising information. However, it can also restrict activity to one methodology and prevent creativity. Most importantly, though, it implies consensus in spite the fact that environmental (or sustainability) issues are not always consensual (Cole, 1998). Furthermore, the lack of regional considerations and adjustments can produce a disharmony with the environment at the local level (Ball, 2002). Additionally, the complexity of buildings suggests that they should be regarded as a process rather than a product (Erlandsson and Borg, 2003, Ball, 2002), which poses difficulties in giving them eco-labels or awards. This according to Ball (2002) is the reason why adaptive management systems, such as ISO14001 (see paragraph 3.5.1), are more appropriate than eco-labelling schemes, provided that they are active in reducing impact rather than just mechanistic control systems.

172


This complexity also poses difficulties in identifying the appropriate levels of analysis. The scope of most assessment tools is currently focused on the building level, not taking into account the higher levels of the built environment. As Kibert et al. (2002a) note, this can create inefficiencies of scale in the application of LCA; for example, in housing, the cumulative impacts of many structures are more important than those of the individual house (emergent impacts, see paragraph 4.5.1). In terms of scoring the performance, most tools use relative measures, in relation to the performance improvement of a building through time, or in relation to other buildings (benchmarking). Even though these measures may be very useful for management purposes and to track progress, sustainability requires identifying the absolute impacts of a building and relating it to the carrying capacity of the local and global ecosystems (Cole, 1998).1 The ecological footprint is an effort to establish such an absolute measure. Moreover, Cole (1998) notes that there is the need to differentiate between potential and actual performance. Potential performance relates to the anticipated performance that is offered by a buildings design and that will be eventually determined by occupant and building use patterns. Actual performance results during the operation phase. Cole argues that there is evidence that potential and actual performance differ significantly, and that actual performance is the most significant measure of success. Consequently, assessment methods that award points for management practices are in fact only assessing the intentions of the building owners. In order to better communicate the results of their assessments, most tools use some kind of aggregation based on weighting the relative significance of the involved criteria. However, the difficulty lies in finding the balance between using broad and generalising or more detailed criteria (Cole, 1998). The former can make the result understandable, but at the expense of making the overall process less transparent and without offering effective subsequent direction to the project. The latter, may render an assessment to complex in its execution, presentation and interpretation.

1

This also relates to the issue of efficiency or effectiveness being more important, as discussed in

paragraph 3.3.4.

173


Finally, most of the tools are mainly environmentally focused with limited (if at all) coverage of the social or economic issues. This is due to the softer character of social issues. Moreover, the tools tend to favour easy to measure quantitative indicators (e.g. energy consumption) rather than qualitative ones. The latter are usually evaluated on a feature-specific basis, where points are awarded for the presence or absence of desirable features (Cole, 1998) (e.g. community amenities).

174


4.7 References Addis, B, Talbot, R, Great Britain. Dept. of Trade and, I & Construction Industry Research and Information, A (2001) Sustainable construction procurement: a guide to delivering environmentally responsible projects, London, Ciria. Adetunji, I, Price, A, Fleming, P & Kemp, P (2003) Sustainability and the UK construction industry - a review. Proceeding of ICE, Engineering Sustainability, 156, 185-199. Allen, T F H (2002) Applying the principles of ecological emergence. In Kibert, C J, Sendzimir, J & Guy, G B (Eds.) Construction ecology: nature as the basis for green buildings. London, Spon Press. Arup (2005) SPeAR- Product Overview, http://www.arup.com Bakens, W (2003) Realizing the sector's potential for contributing to sustainable development. Industry and Environment, 26, 9-12. Ball, J (2002) Can ISO1400 and ecolabelling turn the construction industry green? Building and Environment, 37, 421-428. Bartlett, H (2004) Understanding Sustainable Development in Relation to the Built Environment. Best-Foot-Forward (2005) http://www.bestfootforward.com Blockley, D & Godfrey, P (2000) Doing it differently: systems for rethinking construction, London, Thomas Telford. Boonstra, C & Pettersen, T D (2003) Tools for environmental assessment of existing buildings. Industry and Environment, 26, 80-83. Brand, S (1994) How buildings learn: what happens after they're built, New York, Penguin. BRE (2005) BREEAM: BRE Environmental Assessment Method, http://products.bre.co.uk/breeam/index.html Casella, S, Carillion, P L C, Great Britain. Dept. of Trade and, I, Forum for the Future & Construction Industry Research and Information Association (2002) Sustainability accounting in the construction industry, London, Ciria. CEEQUAL (2005) CEEQUAL, http://www.ceequal.com

175


CIB (International Council for Building Research) (1999) Agenda 21 on sustainable construction, Rotterdam, Cib. Cole, R J (1998) Emerging trends in building environmental assessment methods. Building Research & Information, 26, 3-16. Constructing-Excellence (2005) KPI zone, http://www.constructingexcellence.org.uk/resourcecentre/kpizone/ Cox, J, Fell, D & Thurstain-Goodwin, M (2002) Red Man, Green Man. Performance Indicators for Urban Sustainability, Rics Foundation. David Bartholomew Associates (2002) Review of sustainability in construction: A report to CRISP, www.crisip-uk.org.uk Decleris, M (1986) Systemic Theory, Athens - Komotini, Sakkoulas. Department of Environment Transport and the Regions (1999) A Better Quality of Life: A strategy for sustainable development in the UK, London, DETR. Department of Environment Transport and the Regions (2000) Building a Better Quality of Life: A strategy for more sustainable construction, London, DETR. Egan, J S, Department of Environment Transport and the Regions & Construction Task Force (1998) Rethinking construction: the report of the Construction Task Force to the Deputy Prime Minister, John Prescott, on the scope for improving the quality and efficiency of UK construction, London, DETR. Egnatia Odos S.A. (2005) Egnatia Odos S.A., http://www.egnatia.gr Erlandsson, M & Borg, M (2003) Generic LCA-methodology applicable for buildings, constructions and operation services--today practice and development needs. Building and Environment, 38, 919-938. Forum for the Future (2003) The Sustainability Profile, http://www.forumdirectory.org.uk/aboutus/index2.html Franks, J (1998) Building procurement systems: a client's guide, Harlow, Longman. Fraser, R H L (2004) The Holyrood Inquiry. Edinburgh, Scottish Parliament. Gateshead Council (2005) Gateshead Millennium Bridge Official Site, http://www.gateshead.gov.uk/bridge/bridged.htm Government Construction Clients Panel (2000) Achieving Sustainability in Construction Procurement, London, Office of Government Commerce.

176


Green-Building-Challenge (2005) Green Building Challenge 2005, http://greenbuilding.ca/iisbe/gbc2k5/gbc2k5-start.htm Gunderson, L H & Holling, C S (2002) Panarchy: Understanding Transformations in Human and Natural Systems, Washington, DC, Island Press. Hedges, G & Woodrow, T (2004) An Introduction to CEEQUAL. Sustainability in the Built Environment IEMA North East Region Event. Newcastle upon Tyne. HILL, R C & BOWEN, P A (1997) Sustainable Construction: Principles and a Framework for Attainment. Construction Management and Economics, 15, 223-239. Holling, C S (1986) The resilience of terrestrial ecosystems: local surprise and global change. In Clark, W S & Munn, R E (Eds.) Sustainable Development of the Biosphere. Cambridge, Cambridge University Press. International Council for Building Research (1999) Agenda 21 on sustainable construction, Rotterdam, CIB. Kay, J J (2002) Complexity theory, exergy and industrial ecology. In Kibert, C J, Sendzimir, J & Guy, G B (Eds.) Construction ecology: nature as the basis for green buildings. London, Spon Press. Kibert, C J, Sendzimir, J & Guy, G B (2000) Construction ecology and metabolism: natural system analogues for a sustainable built environment. Construction Management and Economics, 18, 903-916. Kibert, C J, Sendzimir, J & Guy, G B (2002a) Construction ecology: nature as the basis for green buildings, London, Spon Press. Kibert, C J, Sendzimir, J & Guy, G B (2002b) Defining an ecology of construction. In Kibert, C J, Sendzimir, J & Guy, G B (Eds.) Construction ecology: nature as the basis for green buildings. London, Spon Press. Kohler, K & Lutzkendorf, T (2002) Integrated life-cycle analysis. Building Research & Information, 30, 338-348. Kohler, K & Moffat, S (2003) Life-Cycle analysis on the built environment. Industry and Environment, 26, 17-21. Lockie, S, Faithful, A & Gould (2003) Private finance initiative (PFI): the lost green ticket? Proceeding of ICE, Engineering Sustainability, 156, 11-12. Ngowi, A B (1998) Is construction procurement a key to sustainable development? Building Research & Information, 26, 340-350. 177


Nicholson, I R, Chambers, N & Green, P (2003) Ecological footprint analysis as a project assessment tool. Proceeding of ICE, Engineering Sustainability, 156, 139-145. Odum, H T (2002) Material circulation, energy hierarchy, and building construction. In Kibert, C J, Sendzimir, J & Guy, G B (Eds.) Construction ecology: nature as the basis for green buildings. London, Spon Press. Pearce, D (2003) The social and economic value of construction: The construction industry's contribution to Sustainable Development, London, nCRISP. Peterson, G (2002) Using ecological dynamics to move toward an adaptive architecture. In Kibert, C J, Sendzimir, J & Guy, G B (Eds.) Construction ecology: nature as the basis for green buildings. London, Spon Press. Ravetz, J (2000) Integrated assessment for sustainability appraisal in cities and regions. Environmental Impact Assessment Review, 20, 31-64. Sustainable Development Task Force (2003) Drivers for sustainable construction. Industry and Environment, 26, 22-25. Todd, J A, Crawley, D, Geissler, S & G., L (2001) Comparative assessment of environmental performance tools and the role of the Green Building Challenge. Building Research & Information, 29, 324-335. U.S.-Green-Building-Council (2005) LEED- Leadership in Energy & Environmental Design, http://www.usgbc.org/leed/leed_main.asp UNEP-DTIE (2003) Sustainable building and construction: facts and figures. Industry and Environment, 26, 5-8. Wells, J (2004) Social aspects of sustainable construction: an ILO perspective. Industry and Environment, 26, 72-75. Wernick, I K & Ausubel, J H (1995) National materials flows and the environment. Annual Review of Energy and the Environment, 20, 463-492.

178

Chapter 5 Case Study

If a man is proud of his wealth, he should not be praised until it is known how he employs it. Socrates

Chapter 5: Case Study

This chapter presents the case study of developing a Triple Bottom Line assessment and reporting project for a Property Development Company based in Edinburgh. First, an introduction is given about property development, followed by a description of the particular property developer.

The reporting project is then presented as it was

developed from June 2002 to October 2004, concluding with a critical analysis of its major components.

5.1 Property Development This section is based on the book Property Development by Millington (2000). 5.1.1 Property Development Property Development can be described, in its widest sense, as any activity that changes the state of land. Such a change is often evidenced in one of three ways, namely: i. by the erection of new buildings ii. by the demolition of existing buildings and their replacement with new buildings, and iii. through the improvement of existing buildings by improving their state of repair; the fixtures and fittings they contain; their design to make them more useful for modern needs; or by enlarging them to make them more useful in terms of size. The definition of the term development in planning legislation is more general. A typical definition is in Section 55 of the United Kingdom Town and Country Planning Act 1990, namely: Development means the carrying out of building, engineering, mining or other operations in, on over or under land, or the making of any material change in the use of any buildings or other land It is observed here that the definition does not refer to, or rely on, any value system. Although the term development has a positive connotation, implying an improvement of the existing state of affairs, in fact, this can not (and may not) be taken for granted any more, for at least two practical reasons: 180


1. Any improvement (and, thus, development) can be evaluated and assessed only with respect to a specific point of view (vantage point or worldview). Even if restricted only to economic aspects, every project is liable to having opposing forces, as the case study of the Skye Bridge (see Chapter 1) clearly showed. 2. The present unsustainable state of the world presses for new sustainabilityrelated legislation making it obligatory not only to examine economic, environmental and social impacts over the life cycle of a project (see Chapters 3 and 4), but, in addition, in conjunction with other projects (directly or indirectly connected for providing a service). Thus, the creation or alteration of a building cannot, by itself, be referred to as development. In view of the above reservations, one could also take issue with the meaning of the term property, in the sense that evolving sustainability-related legislation places restrictions on the property rights; one cannot use ones own property in ways that create negative impacts a rather ambiguous restriction which could work both in or against the interests of the property owner (as several court decisions have shown).

5.1.2 The Property Developer Those involved in a construction project can be separated in two categories: the developers and the professionals or consultants who assist and advise developers. The latter are the Development Team which will be discussed in a following section. The expression developer is described in The Glossary of Property Terms, as An entrepreneur who has an interest in a property, initiates its development and ensures that this is carried out (for occupation, investment or dealing) and from the outset accepts the ultimate responsibility for providing or procuring the funds needed to finance the whole project. The developer is in essence the person who forms the development concept, who initiates the project, and who remains responsible for financial aspects of the project even though his or her own money may, in the modern development sense, not be at risk. 181


5.1.3 Types of Property Developers Developers may fall into different categories with different development objectives, although they will all certainly have the common objective of wishing to complete successful projects. Some of these categories are: (i) Those who build for their own use. These developers have the prime objective to ensure the development is suited for their own needs. They may also consider the wider market by ensuring the design of the development will have good market appeal and value, if they wish to sell the property in the future. (ii) Those who build to let to others. These developers are influenced by the type of property that is demanded by the majority of those who rent property. In this case they might do 'demand-led development' which involves exhaustive market research to determine the unsatisfied demand of the market, or 'supply-led development' which involves building property with as wide an appeal as possible. It is noted again that the existence of demand does not by itself renders a project acceptable from a sustainability point of view. (iii) Those who build to sell for profit. In this case developers are trying to make the maximum possible capital profit by immediately selling the property. They might be influenced much more by short-term considerations like the current needs and purchasing ability of those who buy property investments or the end-user needs of identified market sectors. (iv) Those who build to create investments for sale to others.

This type of

developers let the development before selling to a long-term investor. Apart from the requirement of the potential losses, they will also have to ensure the design and quality of construction of the development, the type of tenants to which the property is let, and the terms on which the leases are agreed, are all likely to be acceptable to an investor. (v) Public bodies which develop to satisfy their own operational requirements and social needs. The main objective will be to fulfil these needs and profit may not be the main motive or even exist as such. However, they are likely to have to develop in a way which ensures costs are contained within an acceptable budget. (vi) Institutional developers. These are lending institutions that decided to become property developers themselves, after realising the large profits made from the funds they lent to developers. They carry out developments using their own funds at a low

182


opportunity cost, and in turn they receive both the development profit and the investment profit. (vii) Joint Developers. This refers to the type of development arrangement rather than the type of property developed. A typical joint venture development agreement is likely to be between the owner of the development site and the developer, the two agreeing to jointly fund the development and share the eventual profits in a pre-arranged manner. In all cases above, the developers aim is some form of benefit (in the short or the long run, measured in economic or other terms). As already explained, there exist some reservations regarding the meaning and the scope of this type of development. It is only through a systems approach that a sustainable meaning can be ascertained.

5.1.4 The Development Team In order to carry out a development project, a developer will usually need the special skills of consultants with which he will form the Development Team. The developer is obviously the most important member of the team; he is the one who defines the type, location and size, in financial and physical terms, of the scheme, decides on the consultants to be employed and makes the major decision throughout the project. Since the costs of consultants tend to be high, the tendency is to restrict them only to those that can add value to the particular type and size of each project The typical members of a development team and their role, especially in the context of buildings, are outlined below. One could distinguish between those members who are involved primarily in planning and design phases before construction, and those primarily involved during construction. The first group contains the architect, the surveyor and the site engineer; the second the contractors. The project manager is heavily involved throughout the whole life cycle. The architect: An extremely important member of the team; given the design brief and the objectives set out by the developer, the architect is responsible for the detailed design, ensuring that it complies with all planning and other regulations and that it satisfies the developers objectives.

183


The quantity surveyor: He provides detailed estimates of the costs for constructing the project (sub-contractors, labour and materials costs, etc.) generates "bills of quantities" and recommends the most suitable and cost- effective materials and type of contracts. During the construction phase, the quantity surveyor is expected to make estimates of and certify the cost of the completed work in order for the appropriate stage-payment to the contractor be arranged. The site engineer: He is consulted on the quality and other characteristics of the site. Other specialized engineering consultants, such as a structural engineer, may be engaged by developers depending on the type and size of the development or when it involves difficult construction or site characteristics. The building contractors:

They are the basic members of the team as they are

responsible for the actual construction of the development project in such a way that the requirements of the developer are satisfied while the whole construction process is completed on time and within the cost limits. Normally, they are coordinated by the project manager.

The contractual relationship between the contractors and the

developer is very important for the effective delivery of the project and is often referred to as the procurement route (see section 4.5.3). The project manager:

He is the most important member of the team after the

developer, responsible for the overall management of the team. His or her tasks are mainly to co-ordinate the development team and to avoid, whenever possible, or solve problems which might arise between the members of the team. Also, the PM ensures that the development is completed according to the plans, the contracts, the required quality of construction, by the agreed time and within the cost limits. For small schemes, the role of the project manager can be undertaken by the developer, the architect, or the quantity surveyor, but, as a rule, a specialist project manager is involved in as an early stage as possible. The conception, planning and completion of a project also requires other functions which are performed either by one of the above mentioned members of the development team or by specialistsdepending on the size and the significance of the project. These 184


other specialists, which might be members of the development team, may include: property valuers, property consultants, planning consultants, heating and ventilation consultants, lift (elevator) and hydraulic engineers, catering consultants, information technology consultants, interior design and furnishing consultants, landscape architects, marketing consultants and financial consultants.

5.2 The Property Development Company In the next paragraphs the Property Development Company is described 1 . The data used for the description were drawn from interviews by members of the companys staff, as well as from two company documents: The 2001 Company Business Plan The Project Management Procedures Manual 2 .

5.2.1 General Description As already noted, this case study concerns a property development company (referred to as PDC hereafter), or a property developer, based and operating in Edinburgh. It was incorporated in 1998 by the City of Edinburgh Council (CEC). It was formed primarily to develop land, mainly in council ownership to the west of Edinburgh, which was transferred to the company at market value in return for shares and loan stock. The company has grown steadily, developing land property either on its own or through joint ventures. In 2002 the company's assets were valued at £50 million, with around £20 million of debt funding. Turnover from rents, fees and sales were around £7.5 million.

5.2.2 Mission Vision Goals According to the company's 2001 Business Plan, its mission is

1

DISCLAIMER: The descriptions expressed in this section on the PDCs operations and objectives are

based on the authors own interpretations and may not reflect properly the PDCs views or intentions. 2

This was developed under consultation in 1999 in order to provide a framework for the effective control

of projects throughout their development.

185


to develop the property, economic and employment opportunities in Edinburgh and surrounding area through commercial, innovative and sustainable activities for the benefit of Edinburgh and its citizens. The future vision of the company according to the same Plan, is of "a successful and dynamic economic and property development company that will include strategic local area improvements, property development and investments working in partnership with CEC. It will continue to include investments in areas of greatest need within a local framework, together with the development of private sector commercial opportunities." The company's Goals and Objectives that were set out in 2001 were: To improve the quantity and quality of commercial, industrial, leisure and residential properties. To maximise the employment and community opportunities for the areas of greatest need in the city when developing the company's portfolio. To maximise and help deliver the development opportunities of the CEC's property portfolio, by working in partnership with CEC. To work with partners to deliver strategic regeneration initiatives. To be imaginative, innovative and deliver the highest quality in all projects whilst achieving social and commercial rates of return. It is noted that the above mission and vision varies from the definition in section 5.1 above; here, (1) the sustainability dimension is specifically mentioned in the mission, (2) the social dimension is mentioned in the vision (greatest need) and (3) a specific point of view is adopted, namely that of the CEC. Still, the environmental dimension is not specifically mentioned.

5.2.3 Operation PDC is operating in four main markets in the economic zone of Edinburgh: offices, 186


industrial, residential and area regeneration. The strategy of the company is: to build its investment base in order to provide itself with a reliable income, and secondly to provide an asset base against which borrowings can be taken when necessary for future developments. This combination is considered critical for providing stability against the development of market uncertainties, so that the company survives and meets its obligation to CEC. A significant proportion of PDCs work is carried out through joint venture companies in order to spread the risk, gain access to complementary skills, additional staff resource, property and sites that would not otherwise be obtainable, and access offmarket projects. Joint ventures with the CEC are important to the company in order to deal with smaller and mid range potential project and because of the financial and social benefits to CEC that can be achieved through the commercial benefit of the company. PDC promotes its corporate image and operations by, first of all, promoting its individual projects, each of which has included within its budget an appropriate element of marketing.

Also, the overall company presentation is promoted by providing

general material to support the company's projects (web site, company brochures). Additionally, the company is sponsoring festival and other events, and is organising corporate entertainment events, both of which are means of creating and retaining contacts and relationships with key influencers of the company's operating environment (e.g. existing partners, potential partners, bankers, government and the media).

5.2.4 Structure and development process PDCs structure is made of a Property and Development team, a Finance team and an Administration team. as shown in Figure 5.1. Each team has a Head of Department 187


who is responsible for day to day personnel matters, staff management, work allocation etc.

Figure 5.1 The structure of the PDC

Each of the PDCs projects is in many respects unique and has a different development process which is determined to a great extent from the procurement route followed. However, a generic flow chart of the development process that PDC follows may be seen in Figure 5.2, which is based on the Generic Design and Construction Process Protocol (GDCPP) (Kagioglou et al., 1999). It shows the stages of the development process, as well as the gates or decision nodes, where the various levels of the companys governance assess the state and authorise the continuation of each project. The levels of the PDC governance and their interaction can be seen in Figure 5.3. After the completion of the development process, the project is transferred to the Property Team (according to Figure 5.2), which is responsible for the management of the completed projects. However, in the case of the PDC there is one combined Property and Development Team. 188

Figure 5.2 The development process of the PDC


189


Figure 5.3 The governance levels of the PDC

The Board consists of the Chief Executive Director, the Company Secretary, and nine elected members of CEC.

It meets monthly and receives reports from its Chief

Executive, the Head of Property and Development, and the Financial Controller. It has two sub-committees: the Audit Committee and the Remuneration Committee. The Boards responsibilities are to: Set corporate objectives Assess, prioritise, rank and justify capital programmes as part of the annual business planning process and undertake a quarterly review of performance Approve in principle the projects identified in the annual plan and in the rolling quarterly forecasts Review the progress of the major projects (via the Executive Status Reports) Review the delivery of benefits on completed projects/phases 190


Review, authorise and/or approve acceptable Business Case 1 submissions and agree relevant authority levels. The Senior Management Team (SMT) consists of the Chief Executive, the Heads of Departments and the Financial Controller and meet on a monthly basis.

Their

responsibilities within the company's development process are to: Ensure the efficient use of the capital allocated by the Board Review progress of projects on by exception basis (via the Detailed Project Reports) Ensure the identified business benefits are delivered Authorise

phased/sequential

projects

within

relevant

prior

allocated

authorisation limits The responsibilities of the Heads of the Departments (HOD) are to: Provide reports required by the Board to undertake the quarterly review of performance Ensure the rigorous application of the development process Ensure that projects are managed by professional project managers Ensure Best Practice Management techniques are introduced and used where appropriate. The Project Manager is the single point of accountability for the delivery of the project and its associated benefits. The Project Manager is responsible for: ensuring compliance with the development process ensuring the successful execution of the project within the parameters and the restraints established by the authorised Business Case. His role continues until the project has been transferred to the Property Management Teams. 1

This is the formal report justifying the undertaking or continuance of a project. This defines the

financial and other benefits which a project will deliver.

191


The directors for Joint Venture (JV) projects are company officers. Those Joint Ventures, which are one-off projects, are reported to the main Board as wholly in-house projects. The more substantial joint ventures consisting of a number of projects or ownerships are subject to quarterly reports to the Board providing an audit trail. Each JV project has its own independent business plan which is monitored and managed appropriately and incorporated within the company's business plan.

5.2.5 Staff and Training Issues The company has around 20 full-time staff.

Each individual member of staff

participates in the personnel review with their Head of Department twice a year. This process aims at supporting and strengthening individual members of the firm and, where appropriate, draws lessons for wider application.

The Financial Controller is

responsible, along with the Senior Management Team, for wider personnel issues and for the implementation of the personnel policies, including their regular review. In addition to the review process, formal training is provided through continuous professional development courses, attendance at conferences and the obtaining of additional qualifications.

5.3 Triple Bottom Line Project This section presents the case study of this thesis, which is the development of a Triple Bottom Line management and reporting system (TBL Project) for the Property Development Company (presented in the previous section). The TBL Project started in June 2002 and ended in October 2004, and was split in four stages, as shown in Figure 5.4. The next paragraphs describe each stage of the TBL Project as it developed, followed by a critical analysis in section 5.4.

Figure 5.4 TBL Project timeline 192


The author of this thesis was introduced in the TBL Project from September 2003 (beginning of Stage 3 as shown in Figure 5.4), as a member of the Consulting Team. From then on, he was closely involved in the development of the TBL Project by proposing ideas, compiling data spreadsheets, drawing mind maps and diagrams, writing reports and facilitating the CTs meetings with the PDC. However, he was not in a position to take major decisions. Nevertheless, the authors involvement in the TBL Project and the experience he gained through it, were a source of investigation and analysis which aided in the development of this research thesis. The outcome of this investigation led him to the development of the Viable System Model presented in the next chapter as a possible way forward from the TBL Project.

5.3.1 Project Requirements and Initial Proposal In June 2002 the PDC sent tender invitations in order to get advice and assistance to formulate a sustainability programme titled: Sustainable Development and InvestmentThe Triple Bottom Line. The requirements for this programme, as outlined in the tender invitation, covered: Policy development: Identification of relevant values and presumptions incumbent on staff and management, including involvement and commitment from each individual.

Strategic objectives on all strands of corporate

responsibility. Indicators of Policy: Specifying the results necessary to demonstrate success at each corporate objective, together with quantifiable methods of measuring progress towards them. Prioritising which indicators will be of most benefit to their stakeholders. Reporting and Monitoring: Establishing the framework for dissemination of performance information. This takes into account the frequency of reports, the purpose (for action, support, awareness, and public profile), the audience, and the format. Internal targets should flow easily into producing an annual Triple Bottom Line report. Assessing the relevance of emerging tools e.g. SIGMA, GRI. Practical Implementation: Setting out a programme of achievable actions, and inserting sustainability questions at the correct point in the decision process. This will require the provision of assessment tools such as cost/benefit analysis. 193


The timetable for the TBL Project extended for a period of approximately 18 months; it required a pilot TBL report of the year 2002 produced in early 2003 and a TBL report of the year 2003 produced in early 2004. The person mainly responsible for the project and contact point of the company regarding the TBL Project was the Financial Controller. Later discussions revealed that he was one of the two main driving forces behind the project, due to his high environmental awareness from his previous employment. The other driving force came from an even higher level, namely the companys CEO. The initial proposal of the winning Consulting Team (CT) was to create a Sustainability Management System (SMS) for the PDC that would cover all their requirements for policy development, indicators, reporting and monitoring mechanisms and practical implementation. The TBL Project was divided into 5 stages to allow for progress review at the end of each stage, even though some stages could run concurrently. These stages followed the basic steps used in management systems, which are revolving around the concept of continual improvement.

5.3.2 Stage 1 The first Stage of the TBL Project started in November 2002 with the Initial Sustainability Review of the company. It involved meetings and one-to-one interviews with members of the staff, in order to understand the company's organisation, operation and underlying culture. The interviews were followed by a workshop in order to raise awareness of the staff, introduce the five capitals approach (see Chapter 3) and discuss KPI and monitoring issues. The underlying culture of the PDC during this stage was identified as being positive for sustainability issues, especially since the motivation for the TBL Project came from a senior level within the organisation (Financial Controller and CEO) and it appeared to reflect not only the opportunity to establish a market edge, but because it was the right thing to do. The objective of the CT was to translate this ethos into an auditable process of assessment against corporate objectives. It was made clear though, that the company

194


did not wish a mechanistic- procedural system of performance assessment and documentation, as was outlined in the CT's initial proposal. Rather they preferred: a framework that measures performance in order to improve the decision making processes of projects. This framework should not impose onerous demands and alter or restrict the existing company processes. The CT then suggested to develop a framework tool which would unite the existing decision making processes with the principles of the Triple Bottom Line/ Five Capitals and which could be based on the company's already developed Risk Management Policy and Corporate Risk Register. This framework tool was suggested that should have the following five major considerations: 1. Corporate Considerations A review of corporate governance rules and ethics of business, supported by a comprehensive stakeholder analysis. 2. Holistic Project Approval Process The proposed framework could lead to reduced time spent seeking Board approval for projects, by providing the Board with more confidence that all risks were being fully assessed in a consistent manner. 3. Supply Chain Management The CT found that the PDC was mainly using reputational factors and track record to select its project partners and suppliers, i.e. quality driven criteria. Moreover, the PDC was assuming that it satisfied or exceeded the expectations of their clients. However, in order to improve its sustainability performance, the company was advised to explicitly assess the quality of services they supply and is supplied to them through appropriate criteria; these should reflect all principles of sustainability, apart from the narrow financial dimension. This way it was expected that the key role of the company as a property developer would influence the rest of the supply chain in improving their sustainability performance, by imposing to them its standards and requirements. Moreover, the supply chain should provide the data that would be needed in the assessment of specific projects.

195


4. Assessment/KPIs/Reporting In order to assess and report on the sustainability performance of the company, a set of quantitative and qualitative indicators, referred to as Key Performance Indicators (KPI) was needed. Initial discussions with company officials showed that they preferred a flexible set that can be applied to different levels of project development and to different projects as well. The PDC wanted this KPI set or assessment tool to be custom made and designed to meet the company's special needs, rather than be based on existing assessment tools such as BREEAM or ENVEST (see Chapter 4). The CT suggested that the levels of application of this set were the following: corporate, initial project appraisal and supply chain levels. Regarding the assessment of different projects, the CT identified two approaches: 1. Use a standard set of indicators for the assessment of all the company's operations, possibly through some aggregation process of the individual project assessments 2. Use a different set of indicators for each of the company's projects. The first approach was eventually chosen due to its advantages of standardisation, simplicity and apparent objectivity of the process as it is context independent. A workshop was organised during which KPIs from various sources were presented to the staff in order to identify the ones relevant to and preferred by the PDC. These sources included the UK sustainable development strategy headline indicators (Department of Environment Transport and the Regions, 1999b) and the indicators set out in the Rethinking Construction report (Egan et al., 1998), as the CT thought that the KPI set should be consistent with national and industry indicator models. Indicator sets that were developed by specific construction/development companies, such as Carillion, and organisations, such as Communities Scotland,

196


were also considered. The CT compiled the KPIs in spreadsheets that would later be the basis of the assessment tool. 5. Project Timeline Measurement The timeline of each project was recommended to be monitored, while also noting important milestones and barriers to progress. This was to provide the company with a learning tool and enable them to benchmark performance both internally and externally. In conclusion, the following key issues were identified during the Initial Sustainability Review: There was no formal monitoring or benchmarking system in relation to sustainability issues Quantitative data on Social and Environmental performance was at best sketchy and at worst non existent Employee awareness of sustainability was ahead of market average but required progressing further Project performance was vastly influenced by the company's advisors and contractors. However, there was little structured requirement for triple bottom line performance and as such the company would struggle to demonstrate progress Despite the companys wish to be among the best this objective was more implicit than explicit They wished to stay clear of documented procedures but do more to ensure performance. This inconsistency caused the CT to ask for compromise in some areas in order to proceed with the TBL Project.

5.3.3 Stage 2 During the second stage of the project, which started in early 2003, the CT developed a Draft Sustainable Development Policy of the company. It included the company's mission and identified some of the operating areas where principles of sustainable development could be applied. It also stated the company's intention to report its 197


sustainability performance by setting targets and KPIs, and outlined some of the areas where targets would be set. A Supplier Questionnaire was also compiled that could be sent to all the suppliers of the company, in order to assess the environmental performance of their services. Among others, it included questions about the existence of an environmental policy and/or an environmental management system, and about their intention to undertake a life cycle analysis of their products. Finally, a detailed study on one of the PDCs construction projects was undertaken to test the appropriateness of the assessment tool and of the developing KPI set. The project was a mixed office and retail scheme and was at the time of the study partly operational. The study included site investigations and interviews with the project's design team. Even though the study proved useful, it underlined the dilemma in trying to assess a specific construction project and its context against a set of general (contextindependent) performance indicators for which it was unlikely that data would exist to support them. Moreover, the TBL project was in danger of becoming bogged down in trying to establish a system of TBL reporting that would not evolve into a data/time intensive reporting system.

198


5.3.4 Stage 3: Mind Maps After the completion of the construction project study, the CT was having difficulty in developing the assessment tool. The author of this thesis was then brought into the CT and he suggested the use of Mind Maps drawn with the Mind Manager software (see Appendix A), in order to capture the concepts around the assessment tool (Jowitt et al., 2005) (see Appendix C). This marks the beginning of Stage 3 which lasted from September 2003 until January 2004. At first, the author used the mind maps to show how the companys sustainability policy can be broken down to different company objectives and specific performance targets, in a hierarchical structure as shown in Figure 5.5. The objectives were divided into the three areas of the Triple Bottom Line, namely Environmental, Social and Financial, but were re-worded to fit into the Five Capitals Approach. The revised three areas were, hence, the Natural and Manufactured, the Human and Social and the Financial. This hierarchical structuring proved very useful, as it facilitated the access to the large number of KPIs, which were originally compiled in spreadsheets, and it helped the CT realise the different assessment levels involved. PDC officials liked the idea, as it made the whole process more graphic and simpler and hence easier to understand and communicate. It was decided then to base the whole framework tool on mind maps. The development of the tool was divided in two parts, the Data Gathering Mechanism and the Reporting Mechanism, which are presented in the next sections.

199

Figure 5.5 Mind Map showing the Policy and objectives-targets-KPIs hierarchy of the whole company (contents are indicative).


200


5.3.5 Stage 3: Data Gathering Mechanism. The Data Gathering Mechanism was intended to be a tool that would allow the Project Managers (or anyone else responsible) to enter the project KPI data into the Mind Manager software. In this way, the project assessment process could become easier and more interesting, compared to filling in answers in long spreadsheets, as they would be able to see graphically how all the KPIs fitted together. The mechanism would be used to assess each of the company's projects, by using a standard KPI set. This set was based on the set developed by the CT during Stage 2, on which adjustments were made to fit the company-wide hierarchy of policy and objectives. Moreover, the KPIs were split into three sub-sets namely: Design, Construction and Operation, to match the life cycle stages of each project1 , and then again split into the three areas of the Triple Bottom Line, as shown in Figure 5.6 and Figure 5.7. For example, if a project was in the Design phase at a certain reporting year, the Project Manager would use the Design sub-set to fill in the data. The next or in a subsequent year the same project could have moved to the construction phase and the PM would use the construction sub- set, and so on. This required that the sub-sets be compatible with each other, so that the progress of each project could be monitored throughout its development.

To attain this, while keeping the tool simple, the Construction and

Operation phases were presumed to be an outcome of the Design phase.

1

The Demolition or End-of-Life phase was also identified as a projects last (and important) phase.

However, the issues and related KPIs of this phase were incorporated in the Design sub-set, as considerations for the design team (e.g. design for disassembly).

201


Figure 5.6 Mind Map of Data Gathering Mechanism

Figure 5.7 Data Gathering Mechanism showing indicative project KPIs

A first attempt was, therefore, to copy the KPIs of the Construction and Operation subsets directly into the Design sub-set. This ensured that all the aspects of construction and operation were covered during the design. However, the wording of the KPIs had to be changed to reflect the difference in time. For example, the KPI for energy 202


consumption of a project during operation was the answer to the question: What is the energy consumption in KWh?. For the design phase, though, it had to be changed into: "What will be the energy consumption in KWh?. Even though the above question fits better with the Design phase in terms of time, it was obvious that its practical application was limited, as it is improbable that a designer would know the energy consumption in such detail before the project is well in operation. The same was true for a number of other KPIs. Nevertheless, it was decided to keep these KPIs as they were a means of prompting the designer to take into account aspects that would be important during Construction and Operation. As the KPI sets were being developed, the original idea of entering the data directly into the Mind Manager was gradually abandoned, due to technical difficulties. Instead, the sub-sets were again based on spreadsheets, but they were all linked together within the Project Mind Map. This way, the structure of the Triple Bottom Line of each Project could still be seen graphically. The spreadsheets contained 8 columns as shown in Figure 5.8. Each question could be answered either in the Quantity column (e.g. tonnes, KWh, m3), or in the Yes and No columns depending on the nature of the question. Additionally, a Comments column was created to capture any remarks on the answers or the questions themselves that could be used as a feedback on the tool.

Project Title:

Project Commencement Date

Project Manager:

Project Completion Date

Project Description:

Percentage of stage Completed

Number of Occupants in Operation:

Date of assessment:

Design Phase Natural & Manufactured Question

Quantity

Yes

No

Evaluation of Progress against expectations Better OK Worse

Is the construction site a brownfield development?

Figure 5.8 Example of KPI sub-set spreadsheet 203

Comments


An attempt to assess each answer directly was made, by including a question for the Project Manager of each construction project to state whether the answer was Better than expected, Worse than Expected or As Expected (OK). It was hoped that this way the progress against internal benchmarks could be monitored. The total number of spreadsheets was 9: three bottom line spreadsheets for each of the three life-cycle stages. Despite its difficulties, the Data Gathering Mechanism was tested in ten of PDCs projects. The projects were from all design, construction and operation stages. After a training workshop that presented the mechanism to the Project Managers, they were asked to fill in the relevant to their project spreadsheets, with the aid of the CT. As expected, only a few of the KPIs were eventually responded to. This was mainly due to the unwillingness of the PMs to spend much time in retrieving the appropriate data, as they felt the tool was, again, data intensive and time consuming. However, the low response could also be attributed to some of the mechanisms inherent problems, which are analysed in the following section 5.4. Nonetheless, the interviews along with the comments of the Project Managers on the tool provided valuable feedback on the mechanisms.

5.3.6 Stage 3: Reporting Mechanism The Reporting Mechanism was essentially a mind map of the Triple Bottom Line report, which is shown in Figure 5.9. The branches and sub-branches represented the chapters and sub-chapters of the report. Using the Notes field in Mind Manager, each branch can be filled with text, pictures and figures. The intention was to form a report template that would draw data from the Data Gathering Mechanism to generate text and figures. The Reporting Mechanism could then be used to communicate the company's sustainability performance, by converting the Mind Map into a document or a web page, utilizing the Mind Manager's export tool. Even though the idea behind the Mechanism was valid, the possibility for an automatic generation of the report was overestimated. Apart from the technical problems it posed, some basic issues behind its function had not yet been resolved even at a theoretical level (see following section 5.4). Such an issue was the aggregation of the different project assessments provided by the Data Gathering Mechanism. The problem of 204


assessing different projects with the use of the same context-independent KPI set became worse, by having to aggregate the assessment of projects that were at different life-cycle stages.

Figure 5.9 Triple Bottom Line reporting Mind Map.

5.3.7 Stage 4: Assessment at the Project Level Apart from the feedback, the Data Gathering Mechanism yielded very few data on which to base a sustainability assessment on. Nevertheless, the author identified that the data could be broadly categorised in those that were project specific, and those that were context independent and could, to a certain extent, be added-up and aggregated. The latter was the case, for example, with the KPI Is the development a brownfield site?.

Regardless of the nature of each project, the company could add-up and

state that 8 out of 10 projects were brownfield developments.

The above finding, combined with the need to make the assessment much simpler and less data intensive, resulted in the development of the final assessment tool. The tool was divided in two parts: the assessment at the project level described in this section and the assessment at the process and management level across all projects described in the following section. The development of this tool was essentially Stage 4 of the TBL project, which lasted from January until September 2004.

205


The CT decided to draw back from the previous bottom-up approach, which required an extensive set of context-independent data for each project that could then be conflated to provide an assessment of performance against some higher order performance criteria. This approach used various input data (KPIs) to estimate an output measure for example, asking for various information on energy consumption/m2, embodied energy etc., in order to make a high level statement about resource efficiency. Instead, a top-down alternative was proposed that asked about the performance of high level issues directly.

In other words, instead of relying on detailed KPIs, this

assessment summarised the sustainability issues for each bottom line in three broad categories or Assessment areas, as shown in Table 5.1. Each Project Manager was then asked to score the performance of his/her project in these areas, by a four point scale: 1 = Not Good, 2 = Fair, 3 = Good, or 0 = No Data if no data were available. For example, in terms of energy consumption the answer could be Fair, because there have been some relevant considerations in the initial design, or Good, because there are also energy data measurements which are better than best practice standards. The tool became output, instead of input based, being however less objective as it calls for the personal opinion of people personally involved in the project (see discussion on this below). However, the Project Managers were prompted to explicitly support their judgements by providing the evidence on which it was based. This way they were encouraged to improve their assessment measurements each year. If, for example, the first year the energy efficiency of a project was assessed based on a value judgement, the PM was prompted to state this. Next year he may wish to support his judgment by applying an assessment tool such as BREEAM. This way the tool could become as data intensive as the company itself wished. The use of the four point scale in effect quantifies indirectly the assessment judgments thus allowing mathematical processing. Moreover, since the criteria were high level and context independent, this quantification allowed the aggregation of the assessments across projects, by using the mean values of the indicators.

The

assessments for each project, as well as for the whole company, were represented in spider diagrams (Figure 5.10).

206


Natural & Manufactured Resource Use: Does the project make prudent use of natural resources (materials, water, and energy)? Waste Minimisation: Does the project facilitate the minimisation and appropriate treatment of its wastes to land, water or air? Land Use: Does the project promote efficient land use? Human & Social User Satisfaction: Does the project meet or exceed customer requirements? Employee Satisfaction: Does the project take account of and promote employee (PDC) satisfaction? Community Development: Does the project support the overall development of the community? Financial Value Added: How much has the project gained through the bringing together of the various resources used in delivery? Return on investment: The added value expressed as a percentage of the developers capital, taking into account the length of time the investment was utilised. Brand Strength: How much has the project enhanced the reputation of the company with customers and other stakeholders? Table 5.1 Assessment areas

Figure 5.10 Assessment spider-diagram 207


5.3.8 Stage 4: Assessment at the Process/Management Level The second part of the assessment attempted to identify whether certain management processes and standards, likely to enhance the sustainability performance of particular projects, were part of the companys operations. A list of such processes was compiled for each bottom line, and those that the PDC was implementing were identified, as shown in Table 5.2. Some of these processes were also identified as appropriate for formulating supply chain requirements and introducing them into the tender documents. Environmental Used currently Car-free schemes Home Zone Designs

Not used currently Sustainable Procurement policy

Social Used currently Health & Safety management systems Stakeholder engagement mechanisms

Not used currently Staff recruitment and Waste minimisation training requirements for policy for contractors contractors

Financial Used currently Change control procedures Project governance methodology Post Project Appraisals Business Continuity Plan Risk Management Policy

Green transport policies

Not used currently Quality Management Systems for contractors Source: PDC Triple Bottom Line Report (see Appendix B)

Table 5.2 Sustainability processes at the process/management level.

5.3.9 Workshop and final assessment A workshop was again held to introduce the tool to the PMs and try it in assessing a number of projects. During the assessment and discussion that followed, a number of issues emerged. The objectivity of the tool was questioned in regard to its self- assessment character. It was obvious that since there were not yet measuring mechanisms in place, the assessments would be subjective. The assessing exercise that followed highlighted this issue, especially when the PMs were asked to score their own projects and the scorings caused debates among them. This had an impact on the reporting process; it was felt 208


that it should not be based on value judgements, but rather on external benchmarks. Without external benchmarks or substantial evidence, the tool appeared to some as useful in raising awareness only. Nevertheless, as the Project Managers were taking ownership or control of the measuring process, they felt it should be improved. Hence, the tool proved useful in prompting action. The issue of assessing projects at different life-cycle stages was also discussed. It didn't seem right to assess and compare projects that are completed and in operation, and projects that are being designed. It was proposed that the assessments should be separated to reflect the big differences among the stages. Having familiarised themselves with the assessment process, the PDC assessed the performance of 29 of its projects. These assessments were aggregated by using mean values as mentioned before to provide a picture of the companys performance with the aid of spider-diagrams. Moreover, they were aggregated according to their type (Commercial or Residential) and to their life-cycle phase (Design/Construction and Operation) to get a richer picture. These showed that the company was performing well in the areas of land-use since most projects are brownfield developments and brand strength, but not so good in terms of resource use and waste minimisation. Finally, in October 2004, the PDC compiled an internal Pilot Triple Bottom Line Report (attached in Appendix B) which described the assessment process, presented the performance assessments and included targets for improvement.

5.4 Critical Analysis of the Triple Bottom Line Project In this section, a summary and critical analysis of the problems that emerged during the TBL Project is given, as viewed from the authors perspective and from the context of this thesis.

5.4.1 Framework Tool The Project Requirements, as initially set by the PDC, were very similar to the structure of common management systems, such as ISO14001, calling for the development of policy, planning, monitoring and internal/external reporting. These requirements were very general in character and could have, therefore, been the same for any type of 209


company wishing to tackle its sustainability issues.

Hence, the proposal of the

consulting team (CT) was to formulate a similar kind of management system, drawing from their experience in developing such systems in other companies. During the Initial Sustainability Review, the company realised that such a conventional management system would not be appropriate for their operations. They felt it would be too demanding in documentation procedures and that it would significantly alter the existing operating processes, and in particular the decision making of project development. This perception must have been based on the fact that the development process is much more complex compared to the operation of companies from other sectors, where conventional management systems have proved to be useful. Consequently, the aim of the TBL Project was changed into developing a framework tool that would provide the appropriate sustainability information to facilitate the existing decision making processes. In the next paragraphs the basic components of this framework tool, as they were developed throughout the TBL Project, are criticised.

5.4.2 Policy The PDCs policy was initially modified by changing the companys mission and vision to incorporate sustainability issues. The sustainability areas (Triple Bottom Line) where the company would try to improve its performance where also mentioned while, later, possible objectives and targets were added for each bottom line. The use of Mind Maps made it possible to show how the objectives and targets could be linked in a hierarchical manner that allowed their easy communication across and outside the company. However, the objectives could not be effectively linked to the companys operations, i.e. its projects, mainly due to problems in aggregating the performance of the projects, as will be discussed in the next sections.

5.4.3 KPIs Monitoring Issues The framework tool was focused on compiling the appropriate indicators or KPIs that would show how the company is performing in terms of sustainability (in other words, assess its sustainability performance). The Data Gathering Mechanism was originally the spreadsheet that contained the KPI sets and was intended to provide indicator 210


measurements, assessments, and comments for feedback, all in the same application. Since the measurement and assessment parts of the mechanism encountered problems of different nature, they are discussed separately. The first problem in terms of monitoring was the broad application of the KPI set. It was a standard set for all the companys projects and as such it missed the particular context and purpose of each project. As a result, many of the indicators were irrelevant to some projects but applicable to others. Moreover, it covered all three phases of project development, namely design, construction and operation, with three different KPI sub-sets. The importance of the design phase in determining the performance of the projects whole life-cycle was recognised and therefore the design sub-set also included indicators which traditionally are related to the construction and operation phases. However, this transfer was rather crude in that the indicators were simply copied from the latter phases and reworded, in order to fit in the design phase. This resulted in asking for detailed information which is very difficult to estimate before the project is in construction or operation (an example being waste production). Nevertheless, this type of information is increasingly becoming available through computer modelling methods or life-cycle analysis tools. Since such models and tools are not currently used, the KPIs for the design phase should change in character and show whether there are provisions that could ensure better sustainability performance at later phases. For a company that just started to improve its sustainability performance, the use of such modelling tools could be an appropriate policy objective. Apart from the measurement content of each indicator, the monitoring process that could ensure the availability of data proved to be very important, especially regarding the construction and operation phases. Most of the indicators in the KPI set depend on monitoring processes that need to be effectively implemented and controlled. During the construction phase, it is the suppliers and contractors who have to do the monitoring (for example of waste streams and pollution incidents) and supply the data to the PDC. However, they are not obliged to do so, unless this is included as a requirement in their contract with the company possibly with implications on the projects cost. Contractual relationships are therefore very important in establishing monitoring processes in the construction phase. 211


The same holds for the operation phase, albeit more indirectly. In order to set up monitoring processes during the operation phase of a building, the tenants have to be involved.

The companys power to engage the tenants in monitoring procedures

depends first of all on the ownership of the building. If the company is letting the building, then monitoring procedures could be part of the lease contract possibly with implications on the marketing and attractiveness of the building to prospective tenants.1 If the company has sold the building, then there is no way it can make the new owners engage in monitoring procedures, except by persuading them, perhaps through the prospect of potential cost savings. Ownership status and contractual relationships are therefore very important in establishing monitoring processes in the operation phase. The two points above highlight the fact that the sustainability performance of any project and by extension of the company is vastly influenced by: the supply chain and contractors during the construction phase and the tenants or the users of the buildings during the operation phase. The PDC, by directly controlling the design phase, can put the basis and determine the sustainability of the whole project, but ensuring performance of the above parties is also crucial.

Contractual relationships are again very important, especially during

construction, and this is why construction procurement is often regarded as a key phase in the development process but also in sustainability assessment. In the beginning of the TBL Project, supplier issues were identified as important and a Supplier Questionnaire was compiled that would help the company choose its suppliers using sustainability criteria. The feedback given after the application of the Data Gathering Mechanism, suggested that several KPIs should in fact be included in the Supplier Questionnaire and that a similar questionnaire should be compiled for the selection of tenants or users of the buildings. Indeed, selecting suppliers, contractors and tenants is one of the main functions of the company, in other words, the functions which can influence the sustainability performance of projects. 1

These

The implications could be either positive, for example if the tenants realise any cost saving potentials, or

negative, if they regard the monitoring procedures as an unnecessary burden.

212


questionnaires, however, were not developed any further as the TBL project was focused on assessment and reporting issues.

5.4.4 Assessment: Stage 3 The Data Gathering Mechanism was the first attempt to provide an assessment method for the company. It was input and bottom-up based, meaning that the assessment of the company was expected to emerge through the data provided by the detailed KPIs of each project. At the project level, an effort was made to assess each indicator separately, by asking how it was measuring against expectations (see section 5.3.5). However, it was not clear according to whose expectations they were supposed to be assessed; the PDCs, the clients or the stakeholders? This form of assessment could perhaps be helpful in defining whether the initial design estimations on sustainability performance were being fulfilled during the construction and operation phases. This, though, would relate to the problems of measuring performance as discussed in the previous section. At the company level, the assessment faced three kinds of problems. The first was balancing the three bottom lines.

Initially, it was hoped that the companys

sustainability performance could be measured and assessed by aggregating its performance for each of the financial, environmental and social bottom lines. The problem here of determining the relevant importance of the three bottom lines and deciding on trade-off issues is well documented in the relevant literature. The second problem, as mentioned before, was the strong context and purpose dependence of the projects. This made it very difficult to aggregate indicators across projects, as they seemed to have different degrees of importance for different projects. For example, the community impact of a nursery would be greater than that of an office building, by definition of its purpose. Consequently, regarding all projects of equal importance and then aggregating their performance to come up with the overall companys performance was ill-conceived. This suggests that each project would need to be assessed independently, taking into account their unique context and purpose. This effectively means that the relative importance of the three bottom lines will depend on the projects context and purpose. 213


On the other hand, there are certain indicators that could be aggregated across projects, irrespective of their context. Such a set of indicators is for example the environmental footprint of projects. The environmental footprint is based on measuring the resources that a project is consuming and the waste it is generating; in other words its inputs and outputs. These inputs and outputs could be aggregated across the companys projects, to show how the companys operations as a whole have contributed in resource depletion and waste generation. This however would be just a metric that cannot directly be used for assessing the performance of the company, as this will again depend on the nature of each project. For example, if the company is developing big projects it will have a big environmental footprint, but this does not mean that the projects themselves are not sustainable. In other words, there should be a distinction of measuring the inputs and outputs of projects and their respective effectiveness (see paragraph 4.4.2). The third problem of the companys performance assessment was that it had to be measured by aggregating the performance of projects that were in different phases. The problem in this case is that projects that are in early stages have a stronger degree of influence over the whole life of the project (as in the case of the design phase) but also a bigger degree of flexibility. This means that a project in design can potentially be more sustainable compared to one which is already in operation, keeping all other parameters the same. Since the development process is very complex and it is influenced by many actors and parameters, determining its outcome can be very risky.

Consequently,

assessments seem to be meaningful only for projects that are in the same phase. As a summary, during Stage 3 the assessment had problems that were related to: 1. the relative importance of the bottom lines, 2. the context and purpose of each project and 3. the phase of each project.

5.4.5 Assessment: Stage 4 The second assessment tool, which was developed during Stage 4, tried to avoid the monitoring problems that were presented in paragraph 5.4.4, by relying on the expert 214


knowledge and subjective judgment of the Project Managers, rather than the objective but sometimes irrelevant measurements of KPIs; it was in a way a top-down rather than a bottom-up approach.

The assessments occurred inside the company at the

Project Management level and did not involve the lower levels of supply chain, construction process and building operation, situated outside the company. The main problem of the second assessment attempt was that it relied on value judgments and hence it was considered too subjective.

This could lead to the

assessments being biased, especially as the PMs had to assess their own projects (paragraph 5.3.7). Additionally, its credibility was questioned, since even though PMs are experts in their projects, but not in sustainability issues.

This problem was

addressed, by asking the Project Managers to state their sources of evidence. This way they are also prompted to continually improve their monitoring processes and accordingly their evidence. In other words, gradually move towards more objective assessments. Even though the monitoring and assessment problems were dealt with at the project level, the aggregation of the overall companys performance was not effectively addressed. The problem was that the assessments did not distinguish between the phases of the projects, which relate to the problems of the first assessment discussed in paragraph 5.4.4. Equally, the assessment of the companys overall performance by adding up the scores of the individual projects would, in effect, again miss the individual context and purpose of each project. This was acknowledged and, even though these aggregations were done, the individual project assessments were mainly regarded separately. Another attempt made in the second assessment tool was to identify whether certain management processes, such as a Waste Minimisation Policy, existed in each project; clearly, that could improve its sustainability performance.

Since most of these

processes are under the responsibility of suppliers and contractors, the company can ensure their implementation by including them as requirements in contracts. Summing up, the 2nd assessment attempt seems to have been more suitable for a company that has just started dealing with sustainability issues. This is because the assessment procedure was fairly easy and it managed to raise the awareness of project 215


managers about sustainability issues, irrespective of its questioned validity. Nonetheless, it is clear that if assessments are to become more objective through monitoring, the basic problems that were encountered during the first attempt will have to be resolved.

5.4.6 Reporting The TBL project started as a development of a tool that would cover most aspects of sustainability management, along the lines of conventional managements systems. However, the need to formulate a tool that would facilitate external sustainability reporting was initially given the most emphasis, often neglecting other aspects of management, such as control and planning. In order to report the companys sustainability performance to its stakeholders, there should first be a monitoring mechanism in place to provide the necessary performance data to be reported. The second assessment attempt avoided these mechanisms by relying on the subjective judgments of the PMs. Indeed, this proved useful in terms of internal awareness and communication, but more objective assessments will eventually be needed in order to report externally. Moreover, performance assessment can be used both for external and internal reporting. Internal reporting is linked with internal management and control, so as to review the performance of the company and plan for possible corrective actions.

External

reporting, on the other hand, is used to inform the stakeholders of the company about its sustainability performance and improve its public image. During its development, the internal or external character of the reporting tool was not clear. As a result some of the indicators that were used and could be useful in terms of management would not be appropriate for external reporting. It seems that some kind of selection should be in place in order to identify the indicators appropriate for external or internal reporting.

216


5.4.7 Summary of TBL Project problems Below is a summary list of the main problems that emerged during the TBL project. General Operational Problems: Not altering the existing operation processes The complexity and uniqueness of the development process of each project. The influence of the supply chain and tenants on a projects sustainability performance. The different purpose of internal and external reporting. KPIs- Monitoring Problems: The context and purpose dependence of projects irrelevant indicators. The difficulty in estimating the outcome of the design phase. The engagement of the supply chain and tenants in monitoring procedures. Assessment- Aggregation Problems: Determining the relative importance of the three bottom lines. The context and purpose dependence of projects. The different phases of project development. The subjectivity of assessments in the absence of monitoring procedures. The aggregation of the performance of a portfolio of projects into a common company performance indicator.

217


5.5 References Department of Environment Transport and the Regions (1999) Quality of life counts: indicators for a strategy for sustainable development for the United Kingdom: a baseline assessment, London, DETR. Egan, J S, Department of Environment Transport and the Regions & Construction Task Force (1998) Rethinking construction: the report of the Construction Task Force to the Deputy Prime Minister, John Prescott, on the scope for improving the quality and efficiency of UK construction, London, DETR. Jowitt, P W, Panagiotakopoulos, P D, Paschke, G & Turner, D (2005) A Triple Bottom Line Reporting Framework for Property Development Portfolios. In Oliver, L, Millar, K, Grimski, D, Ferber, U & Nathanail, C P (Eds.) CABERNET 2005: The International Conference on Managing Urban Land. Belfast, Northern Ireland, UK, Land Quality Press, Nottingham. Kagioglou, M, Cooper, R & Ghassan, A (1999) The Process Protocol: Improving the Front End of the Design and Construction Process for the UK Industry. Harmony & Profit, CIB Working Commission W92, Procurement Systems Seminar. Chiang Mai, Thailand. Millington, A F (2000) Property Development, London, Estates Gazette.

218

Chapter 6 The Property Development Company as a Viable System

Never let the future disturb you. You will meet it, if you have to, with the same weapons of reason which today arm you against the present. Marcus Aurelius Antoninus

Chapter 6: The Property Development Company as a Viable System

6.1 The aims of this chapter The previous chapter presented the case study of the TBL Project, in which the author of this thesis was actively involved, and concluded with his summary of the problems that emerged during its development. The experience gained and the lesson learned from this project, turned the focus of this research to finding new ways to improve the sustainability management of corporations and in particular construction sector companies, such as the PDC. A systems approach was initially used in a broad manner, but more specific and appropriate systems methodologies and models were also investigated. The Viable System Model (see section 2.7) was then identified as an appropriate model that could be used to describe the PDC and identify possible areas for improvement in its sustainability efforts. This chapter starts by presenting a theoretical VSM description of the PDC (section 6.3), which is based on the authors experiences from the TBL Project, as well as from additional data given to him by the PDC. This model is then synthesised with the research presented in chapters 3 and 4 on sustainability and sustainable construction (section 6.4), in order to show how these issues can be better managed by using the VSM. Even though this model has not been applied to the PDC, its development has resulted in a number of findings which the author believes can prove useful to this type of companies. These are presented in section 6.5, in the form of recommendations for property development companies.

6.2 The appropriateness of the Viable System Model for the PDC The application of sustainability principles in the construction industry comprises changes in the context within which a construction company operates. This means that behaviours (processes) concerning the relation of the organization with its environment will also have to change, requiring internal changes for its proper running. A new deal will have to be reached, as the company aims towards the objective of sustainability. In order to manage effectively, or in the words of Conant and Ashby (1970) act as a regulator of, a developing company moving towards sustainability, an appropriate model of the company is needed. 220


The use of the VSM seems to be an appropriate choice. There are several reasons for this: First, an extensive experience has been gained from various management applications of this model throughout the past 20 years or so (see paragraph 2.7.3). Second, as we saw in Chapter 3, the very concept of sustainability is a moving target that requires the continuous adaptation of every organization aiming to it. One of the VSMs merits is exactly its ability to account for an ever changing environment. Third, its recursive structures seem to be able to simulate in a rather satisfactory manner the hierarchies that exist in the construction industry and in particular the complex relations of the PDC with its various projects. To the authors knowledge, however, no application of the VSM has been reported yet in managing the sustainability of construction industry companies or in steering an organization though a course of improving social and environmental performance.

6.2 Description of the PDC using the Viable System Model In this section the VSM logic is applied to describe the Property Development Company (PDC). First, the mode of the analysis is defined, the PDC is identified as a system and its boundaries are set. Then, the external and internal hierarchies of the PDC are identified and the structure of the PDC is described by analysing its constituent systemsin-focus.

6.2.1 Mode of analysis In paragraph 2.7.1 it was mentioned that the VSM can be used in two modes of analysis, the diagnostic mode and the design mode, depending on the purpose of the analysis and the identity of the organisation under study. In the case of the PDC, the model is used in both modes.

Following the diagnostic mode, the present structure of the

organisation is described based on interviews and data provided by members of the companys staff, (see section 5.2). Following the design mode, the model is adjusted to fit with the new sustainable identity of the company. This mode is based on the 221


experience and data gathered from the TBL Project, presented in sections 5.3 and 5.4, as well as from the relevant sustainability literature presented in Chapters 3 and 4. The aim of this mode is to propose a company structure that is more effective than the existing one in dealing with sustainability. In other words, the model that is presented in the following sections is a synthesis of actual and proposed structures.

6.2.2 Identification and Boundaries The first step in studying the company as a system VSM or other is to identify it and set its boundaries. In order to do so its purpose has to be identified or defined. As described in section 5.2, the company under study here is a property developer based and operating in Edinburgh and its purpose is (as described in the companys mission statement): to develop the property, economic and employment opportunities in Edinburgh and surrounding area through commercial, innovative and sustainable activities for the benefit of Edinburgh and its citizens. In order to further study the company, however, it is useful to refer to the VSM concepts of technological and primary activities. According to Espejo (1989a), technological activities are those activities that are necessary to produce the transformations (material, energy or other) named by the organisations identity.

For example, the construction process is a technological

activity of the PDC, since it is a necessary transformation for the development of the companys projects. Following the description of the Construction Project as a system that was presented in paragraph 4.5.1 the technological activities that are identified for this analysis are: the feasibility and design processes, the construction process, the supply chain, the building maintenance, the building operation, and the demolition or end-of-life. 222


These processes also cover the general definition of development, as it was defined in paragraph 5.1.1: the carrying out of building, engineering, mining or other operations in, on, over or under land, or the making of any material change in the use of any building or other land The boundaries of an organisation, however, are determined by its primary activities. These are the technological activities that are under the organisations control (and thus part of its Operation as Systems 1). In the case of the PDC, the primary activities and, in extension, its boundaries are the management and funding of development projects and the management and funding of properties (either developed by the company or as part of its investments). As it will be explained in the next paragraphs, the extent of the companys control over the technological activities varies depending on contracts and agreements with architects, suppliers, contractors and clients. However, in order to cover all possible cases, all but the supply chain and demolition1 are presumed to be the primary activities of the PDC.

6.2.3 Hierarchy After setting its boundaries, the relation of the company to higher systems, as well as its internal structure (lower systems) need to be defined; in other words, the hierarchy that the company belongs to and it is made of. The VSM requires that this hierarchy i.e. the way to distinguish hierarchical levels is determined by the primary activities of each level 2 . This hierarchy can be seen in Figure 6.1.

1

The reason for excluding the demolition as a primary activity is that demolition works usually take

place before the construction of a new project or as part of maintenance works. Hence, they can be regarded as part of construction and maintenance activities. The importance of the demolition phase in a projects sustainability is not neglected though. The issues of this phase are included as considerations for the feasibility and design system (see paragraph 5.3.5 and 6.2.6 below). 2

This stems from the fact that according to the VSM primary activities should be given maximum

autonomy.

223


Higher Systems: The PDC is owned by the City Council which is its only shareholder. This means that the operation of the company can be regarded as one of the Councils primary activities 1 . The company is also related with other systems of higher hierarchical position which can exercise control over it, such as the Local Government and other Statutory Bodies. However, these do not directly benefit from the company i.e. the company is not part of their primary activities and they will be consequently regarded as part of the companys environment. Lower Systems: The PDC is also related to lower hierarchical systems that need to be identified. According to Espejo (1989a), the following rule applies when defining the primary activities and hence the hierarchical levels of an organisation: Partitioning of primary activities should aim at achieving a balanced distribution of complexity along each of the lines in which complexity unfolds.

1

The Primary activities of the Council do not coincide with the primary activities of the company;

refuse collection and housing are other possible activities of the council. In the case study here, as a rule, the term primary activities refers to the model of the PDC.

224

Figure 6.1 Model Hierarchy


225


In the VSM, complexity is expressed as variety which, as Brocklesby and Cummings (1996) note, partly originates from the primary activities operating environments. Hence, the above rule should be followed in order to increase the autonomy of the primary activities and reduce the variety that senior management levels will need to handle. In this analysis, the variety or complexity that the PDC is facing has been related to five factors, namely: time, project purpose, project context, control boundaries and technological activities. The above factors will be referred to as organising criteria: their relative degree of variety can determine the way primary activities are selected and hence the way the hierarchical structure of the PDC is built. Accordingly, criteria with a higher degree of variety should be used to distinguish primary activities at a higher hierarchical level than those with a lower degree of variety. Consequently, in order to build the model of the PDC, the organising criteria should first be ordered according to their variety. A first and simplistic approach in the analysis could be to regard the sum of the companys projects as its primary activities, as shown in Figure 6.2. Hence, the first two levels of the model would be the company level (level 0) and the project level (level 1).

Along the same line of thought, since each project goes through identifiable

(roughly three) life-cycle phases (feasibility and design; construction; operation), the next level would be the project phase level. Using the concept of organising criteria, the company hierarchy of this approach implies that the criteria of project context and project purpose are used at the project level, while at the project phase level (level 2) the criterion of time is used. This was to a certain extent the approach that was followed during the TBL reporting project.

226


Figure 6.2 A first approach to structuring the company hierarchy

As can be seen in Figure 6.1, a different approach has been chosen and is proposed in this analysis. First of all, the organising criteria of time and control boundaries have been used to distinguish projects that are in the development phase from those in the operation phase, by creating a Development Portfolio and a Property Portfolio respectively (situated at Level 1). This has been done because the initial design and construction phases have similar time scales, ranging from a few months to a few years, while the operation phase usually extends to a few decades. Moreover, the PDC has a higher degree of involvement and control in the design and construction phases than in the operation phase. Thus, the creation of two different portfolios reflects the need for two different control systems1 within the company. At the next level (Level 2), the criteria of project context and project purpose are used to distinguish the different projects of the Development Portfolio and the different properties of the Property Portfolio. This level forms essentially the control boundary of the company. The last level (Level 3) of the proposed model includes the technological activities that are necessary for the materialisation of every project and property of the company. The organising criteria in this level are time, control boundaries and technological activities.

In the Development Portfolio, the Feasibility/Design process and the

Construction process are distinguished, because they usually take place in different times (time criterion), but also because the PDC has a greater level of control over the 1

It must be noted that these portfolios are proposed structures. Currently the company has only one

Property and Development Portfolio.

227


former (control boundaries criterion). In the Property Portfolio, the control boundaries are different for the maintenance and building operation processes. Additionally, the time criterion is used to distinguish the irregular nature of maintenance compared to the continuous building operation. In the following paragraphs the model of the PDC is described by analysing its constituent systems-in-focus or primary activities, which were discussed above. The analysis follows the model structure shown in Figure 6.3 and Table 6.1 below. These will be repeated in the next paragraphs in order to show where each system-in-focus sits in the model structure.

For each system-in-focus, the respective Environment,

Operation and Management and their elements are defined. It should again be noted that the Systems 1 to 5 that are presented for every system-in-focus, are proposed structures and dont actually exist in the company. The functions of these systems could be executed by various parts (officials, teams) of the current PDC structure, which was presented in paragraph 5.2.4. Thus, after describing the function of each system (15), the most appropriate part or combination of parts of the PDC that should fulfil this function is also proposed, based on their current duties.

Ec ologic al, soc ial, pol itic al , legis lative and financial contex t of E dinburgh

PDC

St akeholders S 5: Board/CEO

Com pet itors

Per form anc e Re view Stra tegic Decision Ma king Set Co rpo ra te Policy a nd Ob jectives

Future Envi ronment (?)

S4: Board/CEO/ Consu ltants

Market

Busin ess Plan ning M arke ting Pub lic Relat io ns

Corporat e Soci al Respons ibilit y Sus tainabili ty

S3: S MT S 3*

Cap ital allo catio n

A udit Com mitt ee

S2

Edinburgh

Int ernal Reporting & Cont rol

Deve lopment Portfolio

S1 Develo pment Areas

S5: Board/CEO

Dev elo pm en t Por tf ol io

HOD

Develop ment Policy Perfor mance Revie ws Author is ations

Handover phase A dmi nis tration A ccounting IT infrast ruc ture S taff and Traini ng Iss ues

S1

Buil t Envi ronm ent Pro p er ty Por tf ol io

HOD

Future Environment (?)

S4: Board/CEO/ Consultants

Real estate development opportunities New legisl at ion Sustainable Construc tion

Comp any vision for pr opert yd evelopm ents

S3: SMT/HOD Capital a loc ation Author isations Past pro je cts exper ience

S3*

S2

Ec ol ogic al , s ocial, politic al, legisl at ive and financial c ont ex t of proj ec t

Project

Spora dic Progr ess Reviews

S5: Board/ S MT/HOD Pro jects Purp ose

S1 Location and context of Proje ct A

Project Manager A

P roj ect A

Dec isio n Ma king ( Option s, Des ig ns)

Future Environment (?) Life-Cyc le model of Project

S4: Devel opment Team F easibility Stud ies (O ption s) Desig n (M ode lin g)

Acc ounting Project Data Bases Location and context of Project B (C,D)

S1 P roj ect B (C,D )

S3: P roject M anager

Project Manager B (C,D)

Con trol Allocate Resou rces Pro cu re men t

S3* St ak eholders Mark et End-Users Funding Partners

Loc ations Contract ors

Authorit y Planners St at utory bodies

Cont ract s & Des igns S1 F easi bilit y an d De sig n

Sit e Inves tigations

Dev elo pm en t T eam

Mast er Sc hedule Work Break down St ruc ture Change Control

S1

Co nst ru cti on

E dinburgh

S2

Moni toring and Res ources

Audits

Con tr ac tor s

Sup ply Cha in

Property Portfolio

Ene rgy M ater ials Wat er

S5: Board/CEO Rental/ Sales Policy Oper ation Polic y Author isation s


S4: HOD/ Consultants Sales/ Lettings Portfolio Ma rketing

Rent al/ sale market t rends Prospective Buyers/ Tenants

S3: SMT/ HOD

Capital allocation Past projects e xp erience Proper ty Control

S3*

S2

Le gi sla ti ve, fina nci al , so cia l an d po liti cal co nte xt o f bu il di ng

S1 Loc ati on and contex t of Property A

Loc at ion and context of Property B (C,D)

Property Manager A

Property A

Accounting Properti es Data Bases S1 Property B (C,D)

Property Manager B (C,D)

Property S 5: O wners/ User s Pro pe rt y Pur po se Op er at ing Policy

Fu tu re E nviro nm ent

Le ga l/Sta tu tor y L iabil it y

(?)

S 4: FM s/ Owners/ Users

Ma intenance Contrac tors & S uppl y Chain

M ain ten an ce Pro cu re me nt

Loc al poli cies for upgrading/ ref urbishm ent B uilding Regulat ions S 3: F Ms/ Own ers/ Users

S 3*

F acilitie s M a na ge me nt

S2

Contrac ts S1 Co m m un it y

F ac ilit ies M an a ge rs /Us er s

Bu il di ng Op e ra tio n

Accounti ng In f ra st ru c tu r e

Qualit y Moni toring

M ai nt en an ce Su pp ly Ch ai n Ene rg y M ate ria ls Wa ter

Figure 6.3 The model structure

228

Mai ntenance S ch edul e

S1 Co n tr ac to r s/ Us er s

Table 6.1 The model structure


229


6.2.4 PDC The PDC system-in-focus is situated at Level 0 of the company and it is shown in Figure 6.4. ENVIRONMENT The environment can be described as the ecological, social, political, legislative and financial context of Edinburgh, within which the construction industry in general and the PDC in particular are operating. The companys stakeholders and competitors are situated here. Future environment: This represents the possible future issues of the environment that may affect the viability and purpose of the PDC. It includes future economic and market developments, politics, as well as possible shifts in societal attitudes towards corporations and the construction industry in general (e.g. demand for corporate sustainability and sustainable construction). Operation Environments: The operating environments of the company are the Development Areas in Edinburgh where the companys projects are located, as well as the Built Environment which is property of the company. The overlapping area represents the transition of the projects from development areas to completed built environment 1 .

1

This is the case for new built projects. For refurbishments, the transition is from built environment to

development area and again to built environment. The distinction is made here mainly on the basis of the project phase (time criterion).

230


Eco lo gi ca l, soc ia l, po l it ic al , l eg i sla tiv e an d fin an ci al con te xt of Edi nb urg h

P DC

Stake ho ld ers S5: Boa rd/CEO

Com peti tors

Pe rf or m anc eR evi ew St r at egi cD eci sion M ak ing Se t Co r por ate P ol icy and O bje cti ves

Future Env iro nme nt (?)

S4: Boa rd/CEO/ Cons ulta nts

Ma rke t

Bu sin ess Pl anni ng M ar ket ing Pu bli c Rel at io ns

Co rp ora te So ci al Re spo ns ib il it y Sus ta i nab il i ty

S3: SMT S3* C apit al all ocat ion

Aud it Comm it tee

Hierarchy System in Focus VSM Component

Level 0 PDC

Level 1 Development Portfolio

Level 2 Project

Property Portfolio

Level 2 Property

S2

Edin burgh

Intern al Repo rti ng & Co ntro l

Developm ent Portfol io

S1 Dev elopm entAre as

D evel op m ent P or tf o li o

Buil t Env ironment P ro per t y P or tf o li o

S5: Boa rd/CEO

HOD Han do ve rp ha se Admi n istrati on Acco un tin g IT i nfras tru cture Staff a nd Tran i i ng Iss ue s

S1 HOD

De velop me nt Pol icy Pe rf or man ceR evi ews Au thor i sati ons

Future Environment (?) Rea l esta te de vel o pmen t op po rtun i ti es

S4: Board/CEO/ Consulta nts C omp any visi onf or pr oper t yde velo pme nts

New le gi sl ation Sustai na bl e Con structio n

S3: SMT/HO D

C apit al al locat i on Au thor i sati ons Pa st pr oject s exper ien ce

S3*

S2

Ecol o gci al , s oci al , po l it ic al , l eg isl a ti ve a nd fin an ci al c on te xt of pro je ct

System 1

Develo pment Portfolio HOD

Project A Project Manager A

System 1

Property Portfolio HOD

Project B, C Project Manager B, C

Construction Contractors

Edinburg h Stakeho lders

Edinburgh Develo pment Areas

Edi nburg h Built Enviro nment

Property B, C PM B, C

Property A PM A

Edinburg h Lo cation and context o f property Building Operation Facilities Managers/Us ers

S1

Lo catio n an d co ntext of Pro je ct A

Acco unting, ad min istratio n, IT

Acco unting Pro ject data bases

Master Sched ule Wo rk Breakdo wn Structu re Change Cont rol

Acco unting Pro pert y data bases

Li fe-Cycl e mo de l of Proe j ct

System 3* System 4

System 5

SMT Capital allocation

Audit committee

SMT/H OD Capit al allocation, authorisations Sporad ic p ro gress rev iews

Loc atio n and co ntex t of Pro je ct B (C,D)

S1 Projec t B (C,D)

S3: Projec tMa na ger

Projec t Ma nager B (C,D)

SMT/H OD Cap ital allocation Pro pert y Control

Fund i ng Partne rs Lo ca ti on s Con tra ctors

Autho rit y Pla nn ers Statutory bo di es

Boa rd/CEO/Co nsulta nts Visio n for property develop ment s

Development Tea m Feasibilit y stud ies (o ptio ns) Design (mo deling)

HOD/Consultants Sales/ Lettings Portfo lio M arket ing

FMs/Owners/Users Maintenance Pro cu rement

Boa rd/CEO Performance review, Decis io n making, Po licy - Objectiv es

Boa rd/CEO Develo pment Po licy, Perfo rmance reviews, Aut horisations

Board/SMT/HOD Projects p urp ose, decis io n mak in g (o pt io ns, des ig ns

Board/ CEO Rental/ Sales Policy Operation Policy Autho risations

Owners/Users Pro perty Purpose Op erating Policy Legal/Statutory Liabilit y

D eve lo pm ent Te am

S1

Co nt r act or s

Su ppl y Ch ain En erg y M at eri al s Wat er

S 5: B oa r d/ C EO R enta l/ Sa les Pol icy

S 4: H O D / Co ns ul ta nt s Sal es/ Let t ings Por t fol io M ar k e ti ng

S 3: SM T / H O D C apit al al locat io n Pa st pr oject se xper ience Pr ope rt yC ont ro l

S3 *

Loca t ion and co nt ext of P r ope r ty A

S2

Le g i s la ti ve , fi n an c i al , s oc i a l a n d po l i tic a l c o n te xt o f bu i l d in g

P r op er t y M an ag er A

P r op er t y A

Property

A cco u nt i ng P r op er t ie s D at a B as es S1 P r op er t y B ( C ,D )

P r op er t y M a nag er B ( C ,D )

S5 :Owners /Us ers P ro per t y Pur p ose

Futu re Env ir onm ent

O per a ti ng P oli cy Le gal /S t at uto r yL ia bil i ty

(?)

S4: FMs / Ow ne rs/ Us ers

Ma i nten a nc e Co ntra ctors & Sup pl y Ch ai n

M ai nt ena nce P r ocur e me nt

L oc al po li ci es for u pg rad in g / re fu rb ish me n t Bu il di ng Re gu la tio ns

S3 :FMs/ Owne rs/ Us ers

S3 *

S2

Co ntrac ts

C om m u ni t y

In f r ast r uc t ur e

F aci li t i es M an age r s/ Us er s

Bu il d in g O pe r at io n

Ac counting Ma intenance Sc he dule

Qu al i ty Mo ni tori ng S1 M ai nt e nan ce

E ner gy M at er i als Wa te r

Figure 6.4 System in Focus: PDC (Level 0)

Fa cil it i es M ana gem e nt

S1

S upp l y Ch ai n

231

Ma ster Sche d ue l Work Brea kdo wn Stru cture Cha ng e Con tro l

O per ati on Pol icy Au thor i sati ons

L oca t ion and co nt ext of P r ope rt y B ( C ,D )

Board/CEO/Consulta nts Plan ning Marketing, PR

S2

Mo ni to rin g an d Res ou rc es

S1 Fe asi bi li ty an dD esi gn

P ro spe ct iv e B uye rs /T ena nt s

S1

Qualit y mon ito ring

Con tra cts & Desi g ns Aud it s

Sit e Inv esti ga ti on s

C onst r uc ti on

Property Portfoli o

Acco unting Maintenance Sched ule FMs/Owners/Users Facilit ies Man agement

C ont ro l A l ocat eR esou r c e s P ro c u r em ent

S3* Sta ke ho ld ers Ma rk et End -Us ers

Maintenance Contractors/Users

Fu t ur e E n vi r onm en t ( ?)

Project Manager Contro l Reso urce allo catio n Pro curement Au dits Sit e invest igations

S4: Dev elopme nt Te am Fea sibi li ty S tud ies ( Op ti ons) De sign ( M odel in g)

Accou ntin g Pro je ct Data Base s

R ent a l/ s al e m ar ke t t r end s

System 3

P ro ject s Pu rp ose D ecis ion M aki ng (O pt io ns, D esig ns)

Future Env ironment (?)

Projec t Ma na ger A

Projec t A

Ed in bu rg h

System 2

Pro ject S5: Boa rd/ SMT/HOD

Sp ora dic Pr ogr ess Re view s

Edinburg h Lo catio n and co ntext o f project Feasibility & Design Development Tea m

Environment

Level 1

C on tr a ct or s/ U ser s


OPERATION System 1 Development Portfolio: This includes all the projects that are currently in the phases of feasibility, design and construction. It comprises all the functions the company is performing during the development of projects. The environment of this operating system is the sum of the Development Areas that the company has a deal with. System 1 Property Portfolio: This includes the completed projects that are in the operation phase, as well as the properties acquired and managed by the company as part of its investment activities. It comprises all the functions the company is performing in order to handle and operate its properties (various kinds of buildings and/or land the company owns). The environment of this operating system is the Built Environment that the company has a deal with. The arrow connecting the two System 1 components in Figure 6.4 shows the responsibility or management transfer of the completed projects from the Development Portfolio to the Property Portfolio. Both operating Systems 1 have their local control systems (local Management), namely the Head of the Department (HOD) 1 . In the case of the particular PDC though, these two positions are held by the same person (Head of Property and Development). Nevertheless, we still regard them as separate systems, due to their significant functional differences. These two control systems absorb part of the local variety arising from the development and operation processes, respectively. However, since the controlling abilities of these local controllers are rather limited, some variety is passed higher up to Systems 2 through 5. MANAGEMENT System 2: This system is coordinating the development and property functions through the information that receives from the relevant HODs. It includes the 1

In the description of VSM in Figure 2.7, Systems 1 include both Operation and Management parts.

Here, the Management parts are named differently in order to distinguish their role. In the relevant literature, System 1 refers sometimes to Operation and sometimes to both Operation and Management.

232


companys accounting and administration chores, as well as Information Technology (IT) infrastructure applications including database and filing. Moreover, it is responsible for any staff issues including training. Its role is very important in ensuring the effective management transfer of completed projects from the Development Portfolio to the Property Portfolio, at the end of the Handover phase. In other words it has a vital role in the handover phase of a project, as it transfers the information about each project (stored in drawings, data bases etc.) to those responsible for operating the building. This system feeds information to System 3 in order to enable the control of operating Systems 1 from a higher level. System 3*: This system carries out a periodic performance audit of the development and property portfolios. The audit is done in a direct way, i.e. bypassing the HODs, in order to inform System 3 for any unreported problems. Such functions are performed within the company by the Audit Committee of the Board. System 3: In the PDC, the Senior Management Team (SMT) is performing a general coordination and control of the project development and property operation functions. It performs, for example, capital allocation and any other regulatory measure needed in order to facilitate the smoother running of Systems 1, according to pre-defined data for each project (such as design, finances, procurement etc.). System 3 operates the running machine of the company according to pre-set standards. However, adaptations and minor changes are made continuously; these changes are rather unavoidable as there is an active interaction of System 3 (i) with the HODs, who try to manage the operations in a changing environment, and (ii) with System 2. System 4: In the PDC, functions such as business planning, marketing, public relations etc. are performed by System 4, which is responsible for the reflection and future vision of the whole company. However, S4 has a satisfactory knowledge of the present state of affairs since it receives information from the SMT. System 4 combines the information of the external and internal environment in order (i) to assess their implications to the companys viability and purpose and to (ii) develop and propose possible adjustments. The Board and the CEO perform some of these functions, occasionally aided by appropriate consultants, such as the Consulting Team of the TBL Project (see Chapter 5). The latter will help the company handle 233


(match) any new variety arising from the overall and future environment; an example of expected new variety would be the public expectations for more sustainable performance, to which the PDC might react, by e.g. installing an Environmental Management System. System 4 will also feed information about the overall and future environment to System 5. System 5: In the PDC model, the Board and the CEO perform the functions of System 5, which are: the overall performance review, a higher order (strategic) decision making and the definition of the Companys general policy and objectives. As mentioned before, System 5 is crucial for the viability of the PDC, since it has to balance the variety arising from Operation (through S3) with that from the future vision of the company (through S4). System 5 is also responsible for representing the company at the next higher level, the City Council. This occurs in any case, as the majority of the Board members are also members of the council.

6.2.5 Development Portfolio The Development Portfolio system-in-focus is situated at Level 1 of the company hierarchy and is shown in Figure 6.5. This system-in-focus is actually a System 1of the PDC at Level 0, shown in Figure 6.4. As we move to this greater level of detail the structural pattern of the VSM remains unchanged (recursive structure), but the nature and function of the environment and Systems 1 through 5 changes. ENVIRONMENT The environment of the Development Portfolio is embedded in the overall environment of the PDC, as noted earlier. It becomes, however, more specific because it represents the context of the development process undertaken by the Company. It represents the legislative, financial, social and political context existing in Edinburgh that interacts with all the projects that the particular Company has in progress (all projects that are in any phase from feasibility to handover).

234


Future environment: This represents all the future issues that are related to development processes in Edinburgh: for example real estate development opportunities, anticipated new legislation regarding development projects, sustainability issues related to the developmental phases of construction projects etc. Operation environments: This refers to the development areas where the companys projects are located, also including the supply chain of each project. It is worth mentioning that the sum of these operating environments is identical to the Development areas in Edinburgh shown in the previous Figure 6.4; as the System in focus changes to a lower level of hierarchy, the environment also changes focus. The environment of each project represents its context which includes its location, partners, funding, contractors etc.

In Figure 6.5 these environments are not

normally overlapping with each other, since every project usually has a very unique context. OPERATION Systems 1: These are all the projects that are in the feasibility, design or construction phase. Each project also has its own management system represented by the Project Manager even though other company levels are also involved. The total of these systems expresses essentially (or define) the control boundaries of the company, since the company is not directly designing or building the projects, but rather funding and managing them.

235


Ec ol o gi c al , so ci a l, p o li tic a l, l eg i sl a ti v e a n d fin a n ci a l c on tex t of Ed in b ur gh

PDC

Stak e ho l d ers S5 : Boa rd/CEO Performan ce Re vie w Stra te gi c De ci si on Ma ki ng Set Co rp o ra te Po li cy an d Obj ec ti ve s

Co mp e tit o rs

Future Env ironme nt (?)

S4 : Boa rd/CEO/ Cons ultants Busi ne ss Pla nn ing Ma rk etin g Publ i c Re l ation s

M ark et Co rp ora te So c ia l Re sp o n si bi l it y Su sta in a b il i ty

S3 : SMT S3 *

Cap it al a l loc atio n

Au di t Co m mi ttee

S2

Edin bur gh

In te rn al Re p orti n g & Co n tro l

De velopme nt Portfolio

S1 De v elopm ent Are a s

Dev elopme nt Portfoli o

S5: Boa rd/CEO

HO D

D eve lop m ent Po li cy Pe r fo r ma nce R ev iew s Au t hor i sat io ns

Ha n do v er p h as e Ad mi n is tra ti o n Ac co un ti ng IT in fra stru ctu re


Level 0

Level 1

Level 2

Level 1

Property Portfoli o

HO D

Futu re Env ironm e nt (?)

S4 : Boar d/CEO/ Consultants

Re al es tate d ev el op me n t o pp ortu ni tie s

C om p any vi si on f or pr o per t y deve lo pm en ts

Ne w le gi sl a ti o n Su stai n ab le Co ns tru c ti o n

S3 : SMT/HOD C api t al al l ocat io n A ut hor i sat io ns P ast p r oje ct s expe ri en ce

S3 *

S2

Ec ol o gi ca l , s oc i al , p o li tic al , le g is l ati ve an d fin a nc i al co n te x t o f pro je c t

Project S5 : Boar d/ SMT/HO D Proe j cts Purpo se Deci si on Ma kin g (Optio ns, Desi gn s)

S por a dic P ro gr ess R evi ew s

PDC

Development Portfolio

Project

Property Portfolio

Property

S1 Lo ca tio n a n d co n te xt of Proj e ct A

Futu r e Env ir onm ent (?)

Projec t M ana ge r A

Pr ojec t A

L if e -Cyc l e m od e l o f Pro je ct

S4 : De ve lopm e ntTe a m Feas ib il it y Stud ie s (Op tion s) Desi gn (Mo de li ng)

Acc ou n ti n g

Environment

Edinburgh Stake holders

Edinburgh Development Areas

System 1

Proje ct A Project Manager A

Edinburgh Location and context of project Feasibility & Design Development Team

Edinburgh Built Environment

Development Portfolio HOD

System 1


Proje ct B, C Proje ct Manager B, C



System 2

Level 2

Sta f a n d Tra in i ng Iss u es

S1

Built Environm ent

Property A PM A

Edinburgh Location and context of property Building Operation Facilities Managers/Users Maintenance Contractors/Use rs

Accounting, administration, IT

Accounting Project data ba ses

Master Sche dule Work Brea kdown Structure Cha nge Control

Accounting Property data bases

Accounting Maintenanc e Sche dule

SMT Capital a llocation

SMT/HOD Capita l a llocation, authorisations

Proje ct Manager Control Resource a llocation Procureme nt Audits Site investigations

SMT/HOD Capital a llocation Property Control

FMs/Owners/Users Facilities M anagement

Proj e ct Da ta Bas es

Lo ca tio n a n d co n te xt of Proj e ct B (C,D)

S1 Pr ojec t B (C ,D )

Proje c t Ma nage r B (C,D)

S3 : Projec t Ma nage r Con tro l All oca te Re sou rces Procu re men t

S3 * Stak e ho l de rs M ark et En d-Us e rs Fu nd i ng Pa rtn e rs

L oc a ti o ns Co n tra c to rs

Au th o rit y Pl an n ers Statu tory b od i es

S2

Co ntra cts & M on i to ri ng an d De si g ns Re so u rce s Au di ts S1 Feas ib ili ty and Des ig n

Deve lopment Te am M as ter Sc he du l e

Si te In ve sti ga tio n s

Work Bre ak do wn Struc tur e Ch an g e Co ntro l

S1

Construction

Contrac to rs

Supply Cha in Energ y Ma te rial s Wa te r Ed i n bu rg h

Property Portfolio S5 :Boar d/CEO R ent al / S al es Pol i cy O per a ti on Po li cy A ut hor i sat ion s

Future Env ironm ent (?)

S4 : HOD/ Cons ulta nts S al es/ Le t ti ngs

Re nta l/ sa le ma rke t tre nd s

P or tf ol io M a rk eti ng

Pros p ecti ve Bu ye rs/Te n an ts S3 :SMT/ HOD

System 3 System 3*

Audit committee

Sporadic progress reviews

C api ta l al lo cat io n P ast p r oje cts ex per i ence P ro per t y Con t ro l

S3 *

S2

Leg islative, financial, social and political context of building

S1 Lo ca tio n a nd co nte xt of Prop e rty A

Qua lity mo nitoring

System 4

Board/CEO/Consultants Pla nning Marketing, PR

Board/CEO/Consultants Vision for property developments

Development Team Feasibility studies (options) Design (mode ling)

HOD/Consultants Sa le s/ Lettings Portfolio Marketing

FMs/Owners/Users Maintenanc e Proc urement

System 5

Board/CEO Performance review, Dec ision making, Polic y - Obje ctives

Board/CEO Develop ment Po lic y, Perfor mance revie ws, Authorisa tions

Board/SMT/HOD Projects purpose , decision making (options, designs

Board/CEO Rental/ Sales Policy Operation Polic y Author isations

Owners/Use rs Property Purpo se Operating Polic y Lega l/Statuto ry Liability

Lo ca tio n a nd co n te xt of Prop e rty B (C,D)

Prope rty Ma nager A

Property A

Ac counting Prope rties Da ta Ba se s S1 Property B (C,D)

Prope rty Ma nage r B (C,D)

Property S5 : O wne rs /Us e rs Prop erty Purp ose

Future Env ironm e nt

Op era ti ng Po li c y Le ga l /Sta tu to ry Li a bi li ty

(?)

S4 : FM s/ O wne rs /

M ai n te n an c e C on tra c to rs & Su p p ly Ch a in

Us e rs Ma in ten an ce Proc ure me nt

L o ca l po l i ci e s fo r u p gr ad i ng / re fu rb is h me n t Bu i ld i n g R eg u l a ti o n s S3 : FMs / O wne rs / Us e rs Faci l it i es Ma na ge me nt

S3 *

S2

Co n tra c ts S1 Community

Supply Cha in Ene rgy Ma teri al s Water

Figure 6.5 System in Focus: Development Portfolio (Level 1) 236

Facilitie s Ma na ge rs /Us ers

Buildin g Opera tio n

Ac c ounting Infra s tructure

Q ua l i ty M on i to ri ng

Ma in tena nc e

M ain te na nc e Sc he dule

S1 Contra ctors/ Us ers


The projects are not interacting with each other (unless they are parts of a bigger project), hence there are no arrows connecting Systems 1. If two or more projects are parts of a broader project, Figure 6.5 would only show the broader project; the projectparts would appear in a lower level diagram. MANAGEMENT System 2: This coordinates all the projects of the Company which are in the development and/or the construction phase. This involves Accounting procedures and Project Data Bases. System 3*: This includes any sporadic progress reviews and site investigation reports needed for the control of the on going projects. System 3: Through the SMT and HOD, System 3 performs a higher level coordination of the development portfolio such as capital allocation for the projects in progress. The information stored as experience from past projects is used and disseminated to all levels of design and construction. System 4: This is used to foresee the future opportunities and changes of the context of the development process in general. It will handle issues such as the introduction and adaptation of the company development processes to new design and construction standards, e.g. the new Edinburgh Standards for Sustainable Buildings (The Edinburgh Sustainable Development Partnership, 2003). System 5: This is responsible for reviewing the performance of all the projects and for giving the appropriate authorizations for them to proceed. It also formulates the companys policy for the development process of all projects.

237


6.2.6 Project The Project system-in-focus is situated at Level 2 of the company hierarchy under the Development Portfolio, and is shown in Figure 6.6. It shows how the VSM can be applied to represent the development process of every company project and covers the phases from Feasibility to Construction. ENVIRONMENT The overall environment is the ecological, social, political, legislative and financial context of the particular project. Future environment: It comprises the information produced during the feasibility and design phases, and is continuously adapted as the project develops.

This

information is stored in drawings, specifications, etc. and can be regarded as a model that represents all the life-cycle phases of the project. For example, it usually refers to the (future) operation phase of the completed building and all the aspects that will be affecting it (such as orientation, building operation etc.), but also to the construction phase (e.g. construction methods, environmental impacts during construction etc.). More about the future environment will be discussed below, at the description of System 4, which is responsible for the feasibility and design phases. Operation Environments: These will be discussed below with their respective System 1.

238


Level 0 PDC PDC

Ec ol og i ca l, so ci a l, p ol it i c al , l e gi sl ati ve a nd fin a nc ia l co nte xt of Ed in b urg h

Level 1

Stak eh o ld ers S5 : Board/CEO

Co mp eti tors

P er fo r m ance Re vie w S tr at e gic D ec isi on M ak in g S et C o rp or at e Po li cy an d O bj ect i ves

Futu re Environme nt (?)

S4 : Boar d/CEO/ Consultants

Ma rke t

B usi ne ss Pl ann in g M a rke t ing P ubl ic R el at i ons

Co rpo rate Soc ia l Re sp on s ib il it y Su sta in ab i li ty


Level 0

Level 1

Level 2

Level 1

Level 2

PDC


Project

Property Portfolio

Property

C api t al a l oca ti on

Au di t Co mm it tee

S2

Edinbu rgh

Inte rna l Re p orti ng & Co ntro l

D eve lo pm ent P or t f ol io

Development Portfolio S5 :Boa rd/C EO

HOD

D evel opm e nt P oli cy Pe r for m an ce Rev iew s Au th or isa ti ons

Ha nd ov e rp h as e Ad mi ni stra tio n Ac co un tin g IT in fras tru ctu re Staff an d Trai n in g Is su es

S1

Built Envir onm ent P r ope r ty P or t f ol io

HOD

Future Environm ent (?)


System 1


System 1

Property Portfolio HOD Accounting, administration, IT







Accounting Project data bases

Master Schedule Work Breakdown Structure Change Control

Property A PM A


Edinburgh Location and context of property Building Operation Facilities Managers/Users


Re al e sta te de ve l opm en t op po rtun it i es

C om pany vi si on fo r pr ope r ty de v e lop m ent s

Ne wl eg is la tio n Sus ta i na bl e Co nstru ctio n

Edinburgh Stakeholders

S3: SMT/HO D C api ta l al loca ti on A ut hor isa ti ons P ast p roj ec ts expe ri en ce

S3*

S2

Project Project

Ec ol og ic al , so ci al , po l it i ca l, le g is la tiv e a nd fin a nc ia l c on text of p roj ec t

Sp or adi c P ro gr ess R evi ew s

S5 :Boa rd/ SM T/HO D P ro je ct s Pu rp ose

S1

Lo ca ti on an d co nte xt of Proj ec t A

D eci si on M aki ng ( O pt ion s, D esi gn s)

Futu re Env ironm ent (?)

Proje ct Ma na ger A

Proje c t A

L if e -Cyc le m od e l of Proj e ct

S4: Dev e lo pme ntTe am Fe asi bi li ty S tu die s( O pt i ons) D esi gn ( M ode li ng)

Acco u ntin g Proj ec t Data Ba se s

Lo ca tio n an d co nte xt of Proj ec t B (C,D)

S1 Proje c t B (C,D )

S3 :Proje ct Ma nage r

Proje ct Ma na ger B (C,D)

C ont r ol A l oca te R eso ur ces P r ocur em e nt

S3 * Stak eh ol d ers Ma rke t En d-Use rs Fun di ng Partn ers

Maintenance Contractors/Users Accounting Maintenance Schedule

Level 2

Devel opm ent Po rtfo li o

S1 De ve lopm e nt Are as

Environment

System 2

S3 :SMT S3 *

Lo ca ti on s Co ntrac tors

Property Portfolio

Auth ori ty Pla n ne rs Statu to ry bo d ie s

S2

Co ntrac ts & Mo ni tori n g a nd De si gn s Re so urc es Au di ts S1 Fe asi bi l it y an d D esi gn

D eve lo pm en t Te am

Ma ste r Sch ed ul e

Si te Inv es tig ati on s

Work Brea kd own Struc tu re Ch an ge Co ntrol

S1

C on st r uct i on

C o nt r act o r s

Su pp l yC h ai n En er gy M at er i als Wa ter

Ed in b u rgh

P roperty P ortfoli o S5: Board/C EO R ent al/ Sal es Po li cy O per at ion P ol icy Au tho r isat i ons

System 3 System 3*


Audit committee

SMT/HOD Capital allocation, authorisations Sporadic progress reviews

Project Manager Control Resource allocation Procurement Audits Site investigations

SMT/HOD Capital allocation Property Control

FMs/Owners/Users Facilities Management


S4: HOD/ Cons ulta nts S ales / Let t ing s

Re ntal / s al e ma rke t tren ds

P or tf ol io M ar ket ing

Pros pec tive Buy ers/Ten an ts S3: SM T/ HOD C api tal all ocat i on Pa st pr oj ect se xper ie nce Pr o per ty C ont r ol

S3*

Quality monitoring

System 4

Board/CEO/Consultants Planning Marketing, PR


Development Team Feasibility studies (options) Design (modeling)

HOD/Consultants Sales/ Lettings Portfolio Marketing

FMs/Owners/Users Maintenance Procurement

System 5

Board/CEO Performance review, Decision making, Policy - Objectives

Board/CEO Development Policy, Performance reviews, Authorisations

Board/SMT/HOD Projects purpose, decision making (options, designs

Board/CEO Rental/ Sales Policy Operation Policy Authorisations

Owners/Users Property Purpose Operating Policy Legal/Statutory Liability

S2

Lo cati on and co nte xt of Prop erty B (C,D)

Prope rty Ma na ge r A

Prope rty A

Ac counting Prope rtie s Da ta Ba s es S1 Prope rty B (C,D)

Prope rty Ma na ge r B (C,D)

Property Legislative, financial, social and political context of building

S1 Lo cati on and co nte xt of Prop erty A

Pr ope rty S5 :Ow ner s/Us e rs Prope rty Purp os e Ope ratin g Pol icy Le ga l/ Sta tutory Li ab il it y


S4 :FMs / Ow ners /

M ai n ten a nc e Co ntra cto rs & Su pp l y Ch a in

Us e rs Ma in te na nce Proc urem ent

L o ca l p o li c ie s fo r u p gra d in g / re fu rbi s hm e nt Bu il d i ng Re g ul a tio n s

S3 : FMs / Owne rs / Us e rs Fa ci li tie s Man age men t

S3 *

Com munity

Ene rg y Ma te ria ls Wa ter

239

Fa cilities Ma na ge rs/Users

Build ing Opera tion

Ac c ounting Infra structur e

Supply Chain

Figure 6.6 System in Focus: Project (Level 2)

S2

Co n trac ts S1

Qu a li ty M on i to ri ng

Ma in tenance

M ainte nanc e Sc hedule

S1 Contrac tors / Use rs


OPERATION System 1 Feasibility and Design: This system is responsible for producing the necessary information for the feasibility studies and designs that will be used to create the life-cycle model of the project (as described in the Future Environment paragraph above). To this end, it continuously interacts with the projects overall environment, taking into account issues relevant to the project. For example, when performing the feasibility studies, the Feasibility and Design system has to investigate several building locations, possible contractors and funding sources, stakeholder opinions etc., in order to formulate alternative options for the project. After the selection of an option, some parts of the environment (e.g. location, funding) are determined and fixed. However, the interaction with some others parts of the environment (e.g. planning negotiations, end-user requirements, contractors) is still active, in order for the system to produce the more detailed designs. The Feasibility and Design system could also be considered as taking place at the System 4 level, since it interacts with the overall and future environment of the project. However, the feasibility studies and the development of the designs are performed by a Development Team which needs to be coordinated and properly managed. Therefore, the Feasibility and Design system appears as a System 1, having its own management system (Development Team) and being subject to the control of the Project Manager, as well as a System 4. They are both coloured orange in Figure 6.6, to show that they are essentially the same system. System 1 Construction: This uses materials and energy provided through the supply chain, along with labour and machinery, in order to build on the construction site. The contractors are responsible for the management of the construction process which mainly involves: following the project designs provided by System 3, and building within the cost and time limits, according to the specifications provided by Systems 2 and 3. The supply chain is responsible for providing the construction process with the necessary materials and energy for the building activities. From the perspective of the PDC, this system involves the materials and energy suppliers; in other words, it only 240


involves the transportation of the suppliers products to the construction site, according to the design specifications and orders provided by the contractors. MANAGEMENT System 2: System 2 is responsible for the coordination and planning functions of the project. The planning functions are covered by the Master Schedule 1 , the Work Breakdown Structure 2 and the relevant accounting procedures. The coordination function is covered by the Change Control 3 process. Additionally, this system can be facilitated by project data bases and filing systems that record the history of the project, such as meeting minutes and architectural designs. System 3*: System 3* performs the audits that are necessary to ensure that the project is developing as planned and according to the given specifications. This involves site investigations of the construction process on behalf of the PDC, as well as audits of the design process by the project manager. System 3: The Project Manager (PM) is the single point of accountability to senior management for the project. He/she is responsible for the overall control of the project and his/her duty is to ensure that the development process is being followed as planned and within the parameters of the Business Case (authorised by System 5). He/she is continuously monitoring all Systems 1 by receiving reports from the respective Managers. The PM is also responsible for setting up the contracts with all the contractors, suppliers and partners, as well as for allocating the necessary resources (payments etc.). Should any deviations from the original designs and plans be decided by a higher system (mainly System 4), the PM is responsible for informing the System 1 Management Team (development team and contractors) about the changes and inquiring them for possibly resulting financial claims. Then, with the aid of System 2 (through the Master Schedule and the Change Control process), the PM proceeds to re-organise the development process.

1

This is the overall timetable of work activities, covering all phases from Feasibility to project handover.

2

This is the structured, hierarchical breakdown of all element and activities within a project.

3

This is the formal process through which changes to the business case parameters are introduced and

approved.

241


System 4: The Feasibility and Design function, as explained above, has a dual character: the nature of the function belongs to System 4, while its management belongs to System 1. Indeed, the Development Team, which is responsible for the Feasibility and Design phases, performs a reflective activity: it has to gather information from the environment and, with this information, build a model of the whole project. Looking in detail at these two activities, one observes that, during the feasibility stage, the team considers the options for fulfilling the aims of the project, e.g. by looking at potential development sites and alternative procurement routes. It then passes this information in the form of designs, studies, and reports, to System 5 (the Board) to help it decide which option is the best. Next, the development team develops the preferred option into more detailed form, by continually drawing information from the environment (e.g. end-user requirements and planning constraints) and refining the model of the completed building. At the same time, it has to develop the structure of Systems 1 to 3, i.e. formulate or prescribe the construction phase. This involves considering the most appropriate construction methods (System 1) and contractors (System 1 Management) for the particular project. It also involves developing the Master Schedule and Work Breakdown Structure (System 2). In summary, System 4 has to develop the projects structure and the model of the projects outcome, that is, the finished building. System 5: System 5 determines the purpose of the project, i.e. the needs it is going to cover and the ways by which these will be fulfilled. It does so by making decisions on the options given to it by the Development Team (System 4). If any major issues arise during the construction phase, e.g. considerable cost excesses, the Project Manager (System 3) should communicate this to System 5, which will decide on the appropriate courses of action, again relying on inputs from the development team (System 4). The role of System 5 is performed by every senior level of management (Board, SMT, and HOD) depending on the severity of the issues that have to be tackled.

242


6.2.7 Property Portfolio The Property Portfolio system-in-focus is situated at level 1 of the company hierarchy. It carries out the necessary functions related to the operation of all the companys properties (as shown in Figure 6.7). Properties include those owned by the company (unsold or rented) and those no longer owned by the company (sold).

With the

exception of the undeveloped land also owned by the company, the Property Portfolio can be regarded as the aggregation of the companys products (i.e. built environment). ENVIRONMENT This represents the legislative, financial, social and political context existing in Edinburgh that interacts with all the projects that the particular Company operates. Future environment: This represents all the future issues related to the built environment operated by the Company: for example rental/sales trends, prospective buyers and tenants etc. Operation environment: These are the locations and contexts of the properties (buildings) that the company operates in Edinburgh. OPERATION Systems 1: These are all the individual properties the company is operating and managing.

It includes the properties the company is renting, as well as the

properties the company intends to sell. Some of these properties originate from the Development Portfolio in the form of completed projects, while others are acquisitions which are part of the investment activities of the company. The different properties do not interact with each other, hence there are no arrows connecting Systems 1. MANAGEMENT System 2: System 2 involves the accounting procedures of the property portfolio as well as any property data bases. System 3*: System 3* is responsible for occasionally monitoring the property to ensure its operational performance 243


Eco lo gi ca l, so ci al , po l it i cal , le gi sl ati ve a n d fin an ci al co nte xt of Edi nb urg h

PDC

Stak eh ol de rs S5: Boa rd/CEO

Co mp etit o rs

Pe r for m an ce Re vie w St r at egi c De cisi on M aki ng Se t C or por at e Po li cy and O bj ect ive s

Futu re Env ironme nt (?)

S4 : Boa rd/C EO / Cons ulta nts

Ma rke t


Level 0

Level 1

Level 2

Level 1

Level 2

PDC


Project

Property Portfolio

Property

S3: SMT S3*

C api ta l al loca ti on

S2

Edinburgh

Inte rna l Rep orti ng & Con tro l

Devel opm ent P ortfol io

S1 De ve lopme nt Are as

D evel o pm en t P or t fo l io

System 1


System 1










Property A PM A



S5: Boa rd/CEO

D evel opm ent P oli cy Pe r for m ance R evie ws Au tho ri sat io ns

Ha nd ov er ph as e Ad min is trati on

P r ope r ty P or t fo l io


HOD

Acc ou nti ng IT i nfra struc tu re Staff an d Trai ni ng Issu es

S1

Buil t Env ironm ent


System 2

Sus tai na bi li ty

Aud it Co mmi tte e


Environment

B usin ess P a l n nin g M ar ket i ng P ubl ic R ela ti ons

Co rp o ra te Soc ia l Re spo ns i bi li ty

HOD


S4: Boa rd/CEO / Consultants

Rea l e state de ve lo pme nt op po rtuni tie s

C omp any visi on fo r pr ope rt yd evel opm ent s

New l egi sl ati on Susta in ab le Con structi on

S3: SMT/HOD Ca pit al al lo cati on Au tho ri sat ions Pa st pr oje cts expe ri ence

S3*

S2

P roject S5: Boa rd/ SMT/HOD Pr o ject sP ur pose

S1 Lo cati on a nd co ntex t of Proe j ct A

D ecis ion M aki ng ( O pt ions , D esig ns)


Proje ct M anager A

Proje ct A

L if e-Cy cl e mod el of Proj ec t

S4: Dev elopm ent Te am Fe asib il it y St udi es (O p tio ns) D esig n (M o del ing)

Acco un ti n g Proj ect Data Bas es

Lo cati on a nd co ntex t of Proj ect B (C,D)

S1 Proje ct B (C,D)

S3: Proje ct Mana ge r

Proje ct Ma nager B (C,D)

C ont r ol A l ocat e Re sour ces P ro cur em ent

S3* Stake ho l de rs Ma rke t End -Use rs


Eco lo gi ca l, so ci al , p ol it i cal , le gi sl ativ e a nd fin an ci al con tex t o f p ro j ec t

Sp ora di c Pr ogr es s Re view s

Fun di ng Partne rs Lo ca tio ns Con tracto rs

Autho rit y Pla nn ers Statutory bo di e s

Co ntracts & De sig ns

S2

Mo ni torin g a nd Res ou rce s

Aud it s S1 Fe asi bi li t y an d De sig n

Sit e Inv esti ga tio ns

D ev elo pm en t Te am

Ma ster Sche d ul e Wo rk Brea kdo wn Stru cture Cha ng e Con trol

S1

Co ns tr uc t ion

C ont r act o r s

S upp ly C hai n E ner gy M at er ia ls Wa ter

Ed in b urg h

Prop erty P ortfol io S5:Boa rd/CEO

System 3 System 3* System 4


SMT/HOD Capital allocation, authorisations

Audit committee Board/CEO/Consultants Planning Marketing, PR

Sporadic progress reviews Board/CEO/Consultants Vision for property developments

Project Manager Control Resource allocation Procurement Audits Site investigations Development Team Feasibility studies (options) Design (modeling)



Future Environme nt (?)

S4: HOD/ Consulta nts Sa les/ L ett in gs Po rt fo li oM ar ket ing

Ren ta l/ sal e ma rk et tren ds Pro sp ecti ve Buye rs/T e nan ts

S3: SMT/ HO D

C apit al al lo cati on Pa st pr oje cts exper i ence Pr o per ty Co ntr ol

S3*

Quality monitoring HOD/Consultants Sales/ Lettings Portfolio Marketing

R ent al/ Sal esP oli cy O per at ion P oli cy Au tho ri sat ions


S2

L e g is l a tiv e , fi n an c i a l , s o ci a l a n d p o l i tic a l c on te x t

S1 Lo cati on an d co ntex t of Prope rty A

Lo cati on an d co ntex t of Prope rty B (C,D)

Property Ma na ger A

Property A

Prope rty

o f b u il d i n g

Acc ounting Properties Data Bas es S1 Property B (C,D)

Property Ma nager B (C,D)

S5 :Owne rs /U se rs P ro pe rt y P ur pos e O pe ra t ing Pol ic y

Futu r e Environme nt

Le gal / St at ut or y Li ab il it y

(?)

S4 : FMs / O wners / Us er s

M ai nte na n ce Con trac tors & Sup p ly C ha i n

M a int en an ce Pr o cur em e nt

L oc al po l ic i es fo r u pg ra di ng / refu rbi sh me n t Bu il d in g Re g ul ati on s

S3 : FMs / O wners / Us er s

S3 *

Fa ci li ti es M a nag em en t

System 5






I nf r as t ru ct u r e

S up pl y C hai n En er gy M at er i al s Wa te r

Figure 6.7 System in Focus: Property Portfolio (Level 1) 244

S2

Co ntra cts S1 C om m un it y

Fa ci li t i es M an ag er s/ U se rs

Bu i ld i ng O pe r at io n

Qu al i ty Mo n i tori n g

M ai nt e na nce

Ac countin g Ma intena nc e Sc he dule

S1 C on t r act o rs / U ser s


System 3: The Head of Department (HOD) of the Property Portfolio and the Senior Management Team (SMT) are responsible for System 3, which controls all the companys assets through the authority to allocate the appropriate resources and the responsibility to make sure that the property operation policy is implemented. System 4: The marketing and sales/renting functions of the company mainly occur in System 4. The HOD and appropriate consultants, such as marketing companies or real estate agents, will search the market to find and attract prospective buyers/tenants. System 5: The Board and the CEO again are responsible for formulating the Property Operation and Sales Policy, as well as for giving any authorisations for major property sales.

6.2.8 Property The Property 1 system-in-focus shows the basic functions that happen in every building. The company may have different degrees of involvement in the property, depending on its type and ownership, as it will be explained in the next sections and shown in Figure 6.8. ENVIRONMENT This represents the legislative, financial, social and political context existing in Edinburgh that interacts with the particular property. Operation environments: As we saw in Chapter 4, a building is a very complex system having many different kinds of interactions with its environment and on different scales, ranging from local (neighbourhood) to global (climate change). However, we could generally identify the supply chain, which is responsible for supplying the necessary inputs (material, energy and water) for the operation and maintenance of the building, the local community which interacts with the building as part of the neighborhood and the infrastructure which enables the transportation of people, as well as the flow of inputs and outputs. 1

In this analysis the term property doesnt simply refer to a piece of real estate, but mainly to the

process of managing a real estate.

245


Eco lo gi ca l, so ci al , po l it ic al , leg i sl ativ e a nd fin an ci al con tex t o f Edi nb urg h

P DC

Stake ho l ders S5: Boa rd/CEO

Co mpe ti tors

P er for m an ce Rev iew S tr at egi c Dec isi on M akin g S et C or por at e Pol i c y a nd O bj ect ives

Futu re Environm ent (?)


Level 0

Level 1

Level 2


Ma rke t

Bu sin ess Pl anni ng M ar ket ing Pu bli c Re lat o i ns

Co rp ora te Soci al Re spo ns ib il i ty Susta i nab il i ty

S3: SMT C api ta l all oca ti on

Aud it Co mmi t e e

PDC


Project

Property Portfolio

Property





System 1






Property A PM A


S2

Edin burgh

Inte rn al Rep orti ng & Co n tro l

Devel opment P ortfol io

S1 De ve lo pme nt Area s


S5: Boa rd/CEO

HOD

D evelo pm ent P oli cy Pe rf or m ance Re view s Au tho ri sat ions

Ha nd ove rp ha se Adm in is tra tio n Acc ou ntin g IT i nfras tructu re Staff a nd Trai ni ng Is su es

S1

Buil t Env ironme nt

System 1

System 2

Level 2

S3*


Environment

Level 1

Pr o per t y P or tf o li o

HOD


S4: Boa rd/CEO/ Consultants

Rea l es ta te de ve lo pmen t op po rtu ni ti es New le gi sl atio n Susta ina bl e Con structi on

C omp any visi on for pr oper t yd evelo pm ents

S3: SMT/HOD

Ca pit al al loc ati on Au thor i sati ons Pa st pr ojec ts exper i ence

S3*

S2




Accounting Maintenance Schedule


SMT/HOD Capital allocation, authorisations




P roject S5: Boa rd/ SMT/HOD

S1

Pr o ject s P urp ose D ecisi on M aki ng ( Opt i ons, D esig ns)


Projec t Ma nager A

Projec t A

L if e-Cyc le mod el o f Proj ec t

S4: Dev elopme nt Tea m Fe asib il it yS tu die s( O pt ion s) D esig n (M ode li ng)

Acco unti ng Proe j ct Data Base s

Lo cati on an d co ntex t of Proe j ct B (C,D)

S1 Projec t B (C,D)

S3: Proje ct Manager

Projec t Ma na ge r B (C,D)

C ont ro l Al l ocat eR eso ur ces Pr o c u r em ent

S3* Stake ho ld ers Ma rk et End -Users



Ecol o gi cal , s oc ia l, po l it ic al , l eg is la tive an d fin an ci al con te xt o f pro j ect


Lo cati on an d co ntex t of Pro je ct A

Fu nd i ng Partne rs Lo ca ti on s Con tra cto rs

Autho rit y Pla nn ers Statutory b odi e s

S2

Con tracts & Mo ni torin g a nd Des ig ns Re sou rce s Aud it s S1 Fe asi bi li t y an d De sig n

Sit e Inv esti ga tion s

D evel op m ent Te am

Ma ster Sche d ul e Work Brea kdo wn Stru cture Cha ng e Con trol

S1

Co nst r uc ti on

Con tr ac t or s

Su pp ly C hai n En er gy M at er ial s Wat er

Ed in b urg h

Property Portfolio S 5: B oa r d/ C EO Re nta l/ Sa les Pol icy


System 5

Audit committee

Sporadic progress reviews

O per ati on Pol icy Au thor i sati ons Fu t ur e E n vi r on m en t ( ?)

S 4: H OD / C on su lt an t s Sa les/ L ett in gs Po rt fo li oM ar ket ing

R ent a l/ s al e m a rke t t r en ds P ro sp ect iv e B uye r s/T en ant s

S 3: SM T / HO D Ca pit al al locat io n Pa st pr oject se xper ienc e Pr ope rt yC ont r ol

S 3*

Quality monitoring











S2

Le g i s la ti v e, fi n a n ci a l , s o ci a l a n d p o li ti ca l c on te x t o f bu i l d i ng

S1 Loc at io n and co nt ex t of P r ope r ty A

Lo cat i on an d co nt ext of P r ope r ty B ( C ,D )

P r op er t y M a nag er A

P r op er t y A

A cco u nt i ng P r op er t ie s D at a B as es S1 P r op er t y B ( C ,D )

P r op er t y M a na ger B ( C ,D )

Proper ty S5 :Owner s/Us ers Pr o per t y Pur p ose O per a ti ng P ol icy

Futu re Env ironm ent

Le gal /S t at ut or y Li abi li ty

(?)

S4 :FMs / Ow ne rs / Us ers

Ma i nte na nc e Co n tra cto rs & Sup pl y Ch a in

M ai nt ena nce P r ocu re m ent

L oc al po l ic ie s for u pg rad i ng / re furb i shm en t Bu il di n g Re gu l ati on s

S3 : FMs / Ow ne rs / Us ers

S3 *

Bu il d in g O pe r at io n

Qu al i ty Mo n it o rin g

M ai nt e nan ce En er gy M at er i als Wa ter

246

S2

Co ntra cts

I nf r ast r u ct ur e

Su pp l yC h ai n

Figure 6.8 System in Focus: Property (Level 2)

Fa cil it i es M an age me nt

S1 C om m uni t y

Fa ci li t i es M an ag er s/ U ser s

Ac count in g Ma intenanc e Sc he dule

S1 C on t ra ct or s / U ser s


Future environment: This represents all the future issues related to the building (for example anticipated new building regulations), as well as the maintenance contractors and supply chain during the maintenance procurement phase. OPERATION System 1 Building Operation: This is the sum of the building operations that facilitate the fulfilment of the buildings purpose: for example heating, water supply, ventilation, lighting and electricity etc. These are managed by the users of the building and/or the facilities managers, depending on the agreement for each building. System 1 Maintenance: Periodically the maintenance system is employed for the necessary maintenance of the building.

This is managed by the maintenance

contractors or the users, depending on the extent of the repairs and maintenance works. MANAGEMENT System 2: This involves the accounting procedures of the property, as well as the maintenance schedule. System 3*: This is responsible for occasionally monitoring the standards of the building operation and the quality of the maintenance operations. System 3: This does the overall control of the property in terms of ensuring that the agreed operation policy is followed by the users and/or the facilities managers. Moreover, it is responsible for entering into contract with the appropriate contractors to carry out maintenance and building services operations and making sure they comply with the contract terms.

This System may be operated by

Facilities Managers, owners or users, depending again on the types of contracts between the owner and the users and/or facilities managers. System 4: In this system, the operator of the property (Facilities Managers/ Users/ Owners) has to search the environment to find appropriate contractors for the maintenance and building operations. Additionally, it has to be kept informed, through appropriate mechanisms, about any new relevant policies regarding the 247


operation of the building (such as the city councils building regulations) and prompt System 3 for any necessary actions.

For example, a new regulation

demanding higher energy efficiency of buildings in Edinburgh should become known to System 4, so that System 4 can look for the relevant contractors (to appoint to System 1) that could fit new double glazed windows and prompt System 3 to enter into contract with them. System 5: This is responsible for determining the purpose and operating policy of the property. Moreover, System 5 is liable to any legal or statutory bodies for the operation of the property. Usually, the users are responsible for these functions, since they are the main beneficiaries of the buildings services. However, the owner might impose certain limitations to the propertys purpose and operation, depending on the contract between them. There are three combinations of ownership that determine the actors of the Property system-in-focus, in relation to the PDC: 1. If the PDC sells the property under study, the owner and the user are the same. The PDC in this case has no control over the property. 2. If the PDC rents the property to a tenant, the roles of the User (tenant) and the Owner (PDC), as described above, depend on the lease contract. The Property Manager acts as a representative of the PDC (Owner) in this case. 3. If the PDC owns a property that is intending to rent or sell, but has not yet done so, the PDC is responsible for all the Management functions of the property (Systems 2-5 above) until a tenant or buyer is found.

248


6.3 Managing Sustainability in the PDC The Viable System Model presented in the previous section is based on the particular nature and operations of the PDC, as well as on the insights gained from the TBL Project. The intention is to propose an organisational structure for the PDC that could be more effective in managing sustainability. At this point, an important remark must be made regarding the nature and use of the proposed model. The model is not intended to be, or form the basis of, a standardised (albeit sophisticated) Sustainability Management System. Such an approach would fall into the same pitfalls of various existing Environmental Management Systems (EMS), which intend to harmonise the functions of companies to a pre-determined management structure. Instead, the proposed model follows the basic systems methodology (see paragraph 2.2.2) which: 1. identifies the system (PDC in this case) and its boundaries, 2. explores its role (purpose) in relation to its environment , and 3. then focuses on its internal function. Standardisation of function implies a start from the third step.

It must be noted,

however, that existing EMSs intend to provide only a broad management (control) structure, which should then be elaborated to suit every individual company. The literature review, however, shows (see paragraph 3.5.4) that this structure is prone to create problems of ineffective management, such as among others centralisation and bureaucracy. The author of this thesis believes that this is due to the simplistic structure of EMSs. The same belief is held by Santos-Reyes and Beard (2002) who criticise similar management system structures 1 as being systematic approaches rather than systemic approaches. As an alternative to these systems, they also propose a VSM

1

Their focus is among others on the occupational health and safety (OH&S) system which is based on

ISO14001.

249


structure to manage fire safety in organisations (calling it a Fire Safety Management System - FSMS), which could be expanded for the management of general safety, health and environmental issues. The VSM approach of Santos-Reyes and Beard moves parallel to the approach of this thesis; however, there are two main differences: 1.

Even though the FSMS consists of Systems 1 which are equivalent to an organisations various activities, the Management part of the VSM (systems S2 to S5) is focused only on fire safety functions. This approach could create a (Fire Safety) Management structure on top or parallel to the organisations other management structures. The approach of this thesis is to first study the normal Operation and Management of an organisation as a VSM, and based on this structure propose improvements to handle sustainability issues.

2.

The possible expansion of the FSMS to cover safety, health and environmental issues could create three Management VSM parts corresponding to each of these issues. If we can make an analogy to the TBL project, this is analogous to creating three VSM models to manage each one of the three bottom lines (environmental, social and financial). Again, the approach of this thesis is to first study the Operation and Management of the company as a VSM, and then attempt to integrate these issues within the company structure (even by proposing alterations to the company structure, as is the case in the PDC model).

The following paragraphs describe how sustainability issues could be managed by the PDCs proposed VSM structure. In order to do so, some of the various sustainability methods, tools and standards that were presented in Chapters 3 and 4, are positioned onto the PDC model.

This is aided by the general organisation of sustainable

corporation concepts, methods and tools that was presented in section 3.4.

The

description is made for every system-in-focus, following the order of the previous section and the hierarchy shown in Figure 6.1.

250


6.3.1 PDC The sustainability of the PDC is primarily determined by System 5 of this system-infocus (shown in Figure 6.9). It is the highest system in the company hierarchy, which determines the sustainability policies and commitments of the whole company. The ethical shift required for sustainability is mainly the responsibility of this system, which should include sustainability considerations in its strategic decision-making processes. The company can express its sustainability commitments by using the concepts of Triple Bottom Line, the Five Capitals Model or the four system conditions of The Natural Step (TNS) (see section 3.4). System 4 is responsible for building the strategy (sustainable development) of reaching the sustainability goal determined by System 5. In order to do so, it requires: 1. An appropriate model of the whole organisation (possibly the VSM presented in section 6.2), which will determine its external social and environmental responsibility boundaries. The quality and boundary of this model is crucial for determining the sustainability of the PDC, and their development can be aided by stakeholder engagement mechanisms. 2. Principles for sustainable development/planning, such as the precautionary principle or the principles of The Natural Step strategy component (see paragraph 3.4.4).

Another principle is accountability (see paragraph 3.4.9)

which is also includes external reporting to stakeholders. These can be aided by the adoption of specific guidelines and standards such as the Global Reporting Initiative Guidelines and AA1000. Moreover, System 4 has to search for the development of new sustainability standards, principles and models and, if necessary, notify System 5 to update the companys policy. System 3 at this level, with the aid of System 3*, has to make sure that the sustainability (and other) policies, as well as the sustainable development plans, are implemented by the two main activities of the PDC: property and development. Moreover, it receives and processes the internal reports prepared by the Head of

251


Departments (HOD), which contain the various performance data (KPIs) from lower levels. These are then passed to S4 for further processing and external reporting. The effective implementation of the companys sustainability policies and plans is dependent not only on the high level management systems, but also on the behaviour, work and ethics of all the companys staff.

System 2 is responsible for raising

awareness on sustainability issues among the staff and for providing them with the necessary training. The accounting department of the PDC, which is situated at System 2 at all levels of the organisation, is responsible for implementing Sustainability Accounting, if this tool is chosen, or more generally to keep record of the companys performance regarding sustainability.

252


Eco lo gi ca l, soc ia l, po l it ic al , l eg i sla tiv e an d fin an ci al con te xt of Edi nb urg h

P DC

Stake ho ld ers

S5: Boa rd/CEO

Com peti tors

Pe rf or m anc eR evi ew St r at egi cD eci sion M ak ing Se t Co r por ate P ol icy and O bje cti ves



Ma rke t

Bu sin ess Pl anni ng M ar ket ing Pu bli c Rel at io ns

Co rp ora te So ci al Re spo ns ib il it y Sus ta i nab il i ty

S3: SMT S3*

C apit al all ocat ion

Aud it Comm it tee


Level 0

Level 1

Level 2

Level 2

S2

Edin burgh

Intern al Repo rti ng & Co ntro l

Developm ent Portfol io

S1 Dev elopm entAre as


S5: Boa rd/CEO

HOD Han do ve rp ha se Admi n istrati on Acco un tin g

PDC


Project

Property Portfolio

Property

IT i nfras tru cture Staff a nd Tran i i ng Iss ue s

S1

Buil t Env ironment Po r per t y P or ft o li o

HOD

De velop me nt Pol icy Pe rf or man ceR evi ews Au thor i sati ons


S4: Board/CEO/ Consulta nts

Rea l esta te de vel o pmen t op po rtun i ti es New le gi sl ation Sustai na bl e Con structio n

C omp any visi onf or pr oper t yde velo pme nts

S3: SMT/HO D

System 1

Develo pment Portfolio HOD


System 1




Edinburg h Stakeho lders

Edinburg h Develo pment Areas

Edi nburg h Built Enviro nment


Property A PM A

Edinburg h Lo cation and context o f property Building Operation Facilities Managers/Us ers

System 3 System 3*

S2

Ecol o gci al , s oci al , po l it ic al , l eg isl a ti ve a nd fin an ci al c on te xt of pro je ct

Pro ject S5: Boa rd/ SMT/HOD

Acco unting, ad min istratio n, IT

Acco unting Pro ject data bases


SMT/H OD Capital allocation, authorisations

Audit committee

Sporad ic p ro gress rev iews

Master Sched ule Wo rk Breakdo wn Structu re Change Cont rol

Acco unting Pro pert y data bases

P ro ject s Pu rp ose

S1 Lo catio n an d co ntext of Pro je ct A

SMT/H OD Cap ital allocation Pro pert y Control

Li fe-Cycl e mo de l of Proe j ct

S1 Projec t B (C,D)

S3: Projec tMa na ger

Projec t Ma nager B (C,D)

Fund i ng Partne rs Lo ca ti on s Con tra ctors

Autho rit y Pla nn ers Statutory bo di es

System 4

Boa rd/CEO/Co nsulta nts Visio n for property develop ment s

Development Tea m Feasibilit y stud ies (o ptio ns) Design (mo deling)

HOD/Consultants Sales/ Lettings Portfo lio M arket ing

FMs/Owners/Users Maintenance Pro cu rement

System 5

Boa rd/CEO Performance review, Decis io n making, Po licy - Objectiv es

Boa rd/CEO Develo pment Po licy, Perfo rmance reviews, Aut horisations

Board/SMT/HOD Projects p urp ose, decis io n mak in g (o pt io ns, des ig ns

Board/ CEO Rental/ Sales Policy Op eration Policy Autho risations

Owners/Users Pro perty Purpose Op erating Policy Legal/Statutory Liabilit y

D eve lo pm ent Te am

Ma ster Sche d ue l Work Brea kdo wn Stru cture Cha ng e Con tro l

S1

Co nt r act or s

Su ppl y Ch ain En erg y M at eri al s Wat er

S5:Boa rd/CEO R enta l/ Sa les Pol icy O per ati on Pol icy Au thor i sati ons

Sal es/ Let t ings Por t fol io M ar k e ti ng

S3: SMT/ HOD C apit al al locat io n Pa st pr oject se xper ience Pr ope rt yC ont ro l

S3 *

Loca tion and co ntext of Prope rty A

L oca tion and co ntext of Prope rty B (C,D)

S2

Le g i sl a ti ve , fi n an c i al , s oc i a l a n d po l i tic a l c o n te xt o f bu i l d in g

Property Manager A

Property A

Accounting Propertie s Data Bas es S1 Property B (C,D)


Property S5 :Owners /Us ers Pro perty Purp ose Opera ti ng Poil cy Le gal /Statuto ryL ia bli i ty

Futu re Env ir onm ent (?)

S4: FMs / Ow ne rs/ Us ers Mai ntena nce Procure m e nt

Ma i nten a nc e Co ntra ctors & Sup pl y Ch ai n L oc al po li ci es for u pg rad in g / re fu rb ish me n t Bu il di ng Re gu la tio ns

S3 :FMs/ Owne rs/ Us ers Fa cil it i es Mana geme nt

S3 *

Energy Materi asl Wa te r

Figure 6.9 Sustainability at the PDC system in focus

S2

Co ntrac ts S1 Community

In frastruc ture

Supply Chain

253

S2

Mo ni to rin g an d Res ou rc es

S1 Fe asi bi li ty an dD esi gn

S4:HOD/ Cons ulta nts

Renta l/ s al e marke t trend s Pro spe ctiv e Buye rs /T ena nts

S1

Board/CEO/Consulta nts Plan ning Marketing, PR

Con tra cts & Desi g ns Aud it s

Sit e Inv esti ga ti on s

C onst r uc ti on

Property Portfoli o

Acco unting Maintenance Sched ule

Qualit y mon ito ring

C ont ro l A l ocat eR esou r c e s P ro c u r em ent

S3* Sta ke ho ld ers Ma rk et End -Us ers

Maintenance Co ntractors/Users

FMs/Owners/Users Facilit ies Man agement

S4: Dev elopme nt Te am Fea sibi li ty S tud ies ( Op ti ons) De sign ( M odel in g)

Accou ntin g Pro je ct Data Base s

Loc atio n and co ntex t of Pro je ct B (C,D)


Project Manager Contro l Reso urce allo catio n Pro curement Au dits Sit e invest igations

D ecis ion M aki ng (O pt io ns, D esig ns)


Projec t Ma na ger A

Projec t A

Ed in bu rg h

System 2

C apit al al locat i on Au thor i sati ons Pa st pr oject s exper ien ce

S3*


Edinburg h Lo catio n and co ntext o f project Feasibility & Design Development Tea m

Environment

Level 1

Buil din g Ope ratio n

Qu al i ty Mo ni tori n g

Mainte nance

Facili ties Manage rs/Us ers Ac counting Ma intenance Sc he dule

S1 Contra ctors/ Users


6.3.2 Development Portfolio The companys sustainability policy becomes more specific at the Development Portfolio system-in-focus (shown in Figure 6.10). System 5 at this level adopts more specific sustainable construction policies and goals, appropriate for the development of construction projects, which will contribute to the general sustainability policy of the company. A goal, for example, could be to achieve best practice in all company projects, according to construction industry benchmarks. System 4 has to search for the development of new sustainable construction standards, methods and tools that will allow the achievement of the goals set by System 5. These will then be introduced into the PDC sustainable construction policy, as well as to the development process of each project. The implementation in every project of these policies, methods and tools is organised and ensured by System 3, aided by the audit function of System 3*. Moreover, S3 receives reports from the project managers containing the sustainability performance data (KPIs) 1 of every project, which are then compiled and communicated to higher systems.

However, the differences in the

development process, context and purpose of the various projects may impede the data collection function of S3. System 2 is then responsible to harmonise the monitoring procedures and data bases of the various projects to facilitate the function of S3.

1

These would be the Design and Construction KPI sub-sets developed during the TBL Project, presented

in Chapter 5.

254


Ec ol o gi c al , so ci a l, p o li tic a l, l eg i sl a ti v e a n d fin a n ci a l c on tex t of Ed in b ur gh

PDC

Stak e ho l d ers S5 : Boa rd/CEO Performan ce Re vie w Stra te gi c De ci si on Ma ki ng Set Co rp o ra te Po li cy an d Obj ec ti ve s

Co mp e tit o rs


S4 : Boa rd/CEO/ Cons ultants Busi ne ss Pla nn ing Ma rk etin g Publ i c Re l ation s

M ark et Co rp ora te So c ia l Re sp o n si bi l it y Su sta in a b il i ty

S3 : SMT S3 *

Cap it al a l loc atio n

Au di t Co m mi ttee

S2

Edin bur gh

In te rn al Re p orti n g & Co n tro l

De velopme nt Portfolio

S1 De v elopm ent Are a s

Dev elopme nt Portfoli o

S5: Boa rd/CEO Deve lop ment Po li cy Pe rfo rm a nce Rev iews Au thori satio ns

HO D Ha n do v er p h as e Ad mi n is tra ti o n Ac co un ti ng IT in fra stru ctu re Sta f a n d Tra in i ng Iss u es

S1

Built Environm ent Property Portfoli o

HO D

Futu re Env ironm e nt (?)

Su stai n ab le Co ns tru c ti o n


Level 0 PDC Edinburgh Stakeho ld ers

System 1

Development Po rtfolio HOD

System 1


System 3 System 3*

Level 2

Level 1

S3 :SMT/HOD Capi tal al l ocatio n Authori satio ns Past p roe j cts expe rien ce

S3 *

S2

Ec ol o gi ca l , s oc i al , p o li tic al , le g is l ati ve an d fin a nc i al co n te x t o f pro je c t

Project

Spora dci Pro gress Revi ews

Level 2

S1 Lo ca tio n a n d co n te xt of Proj e ct A

S5 :Boar d/ SM T/HO D Proe j cts Purp ose Deci si on Ma ki ng (Optio ns, Desi gn s)

Futu r e Env ir onm ent (?)

Projec t M ana ge r A

Pr ojec t A

L if e -Cyc l e m od e l o f Pro je ct

S4 :De ve lopm e ntTe a m Feas ib il it y Stu de i s (Op tion s) Desi gn (Mo de li ng)

Acc ou n ti n g

Environment

System 2

Level 1

S4 :Boar d/CEO/ Consultants Comp any vi si on for pro perty deve lo pmen ts

Re al es tate d ev el op me n t o pp ortu ni tie s Ne w le gi sl a tio n

Development Portfolio Edinburgh Develo pment Areas

Project

Property Portfolio Edinburgh Built Enviro nment

Project A Project Mana ger A

Edinburgh Lo cation and context of project Feasibility & Design Development Team

Project B, C Project Mana ger B, C

Constructio n Contractors


Property A PM A

Property

(C ,D )

Proje c t Ma nage r B (C,D)

Acco unting Pro ject d ata b ases

Master Schedu le Work Breakd own Structure Change Co ntro l

Account ing Pro perty data bases

Acco unting Maintenan ce Schedule

SMT/HOD Capit al allocatio n, authorisations

Project Mana ger Control Reso urce allo cat io n Pro curement Au dits Sit e investigat io ns

SMT/HOD Capital allocatio n Pro perty Co ntro l

FMs/Owners/Users Facilit ies Management

S3 : Projec t Ma nage r Con tro l All oca te Re sou rces Procu re men t

S3 * Stak e ho l de rs M ark et En d-Us e rs Fu nd i ng Pa rtn e rs

L oc a ti o ns Co n tra c to rs

Au th o rit y Pl an n ers Statu tory b od i es

S2

Co ntra cts & M on i to ri ng an d De si g ns Re so u rce s Au di ts S1 Feas ib ili ty and Des ig n

Deve lopment Te am M as ter Sc he du l e

Si te In ve sti ga tio n s

Work Bre ak do wn Struc tur e Ch an g e Co ntro l

S1

Construction

Contractors

Supply Cha in Energ y Ma te rial s Wa te r Ed i n bu rg h

Maintenance Co ntractors/Users

SMT Capital allocatio n

Sporad ic pro gress reviews

S1 Pr ojec t B

Edinburgh Lo cation and cont ext o f property Building Operation Facilities Managers/Users

Account ing , administration, IT

Audit committee

Proj e ct Da ta Bas es

Lo ca tio n a n d co n te xt of Proj e ct B (C,D)

Property Portfolio S5 : Boar d/CEO Rental / Sal es Pol i cy Opera ti on Po li cy Authori sation s


S4 :HOD/ Cons ulta nts Sal es/ Le tti ngs Portf ol io Ma rk eti ng

Re nta l/ sa le ma rke t tre nd s Pros p ecti ve Bu ye rs/Te n an ts

S3 : SMT/ HOD Capi ta l al lo catio n Past p roe j cts ex peri ence Pro perty Con tro l

S3 *

S2

Leg islative, financial, social and political context of building

S1 Lo ca tio n a nd co nte xt of Prop e rty A

Lo ca tio n a nd co n te xt of Prop e rty B (C,D)

Quality mon ito ring

Prope rty Ma nager A

Property A

Ac counting Prope rties Da ta Ba se s S1 Property B (C,D)

Prope rty Ma nage r B (C,D)

Property S5 : O wne rs /Us e rs Prop erty Purp ose

Future Env ironm e nt

Op era ti ng Po li c y Le ga l /Sta tu to ry Li a bi li ty

(?)

S4 : FM s/ O wne rs /

M ai n te n an c e C on tra c to rs & Su p p ly Ch a in

Us e rs Ma in ten an ce Proc ure me nt

L o ca l po l i ci e s fo r u p gr ad i ng / re fu rb is h me n t

System 4

Boa rd/CEO/Consultants Plan ning Mark eting, PR

Boa rd/CEO/Consultants Visio n for prop erty develop ments

Development Team Feasibilit y studies (option s) Design (modeling)

HOD/Consultants Sales/ Letting s Portfolio Marketing

FMs/Owners/Users Maintenan ce Procurement

System 5

Board/CEO Perfo rmance rev iew, Decisio n mak in g, Po licy - Objectives

Boa rd/CEO Develo pment Policy, Perfo rmance reviews, Aut horisations

Boa rd/SMT/H OD Pro jects purpose, d ecisio n mak ing (o ptio ns, design s

Boa rd/CEO Rental/ Sales Po licy Op eratio n Po licy Au thorisations

Owners/Users Pro perty Pu rpo se Operating Po licy Legal/Statutory Liability

Bu i ld i n g R eg u l a ti o n s S3 : FMs / O wne rs / Us e rs Faci l it i es Ma na ge me nt

S3 *

S2

Co n tra c ts S1 Community

Facilitie s Ma na ge rs /Us ers

Buildin g Opera tio n

Ac c ounting Infra s tructure

Supply Cha in

Q ua l i ty M on i to ri ng

Ma in tena nc e

M ain te na nc e Sc he dule

S1 Contra ctors/ Us ers

Ene rgy Ma teri al s Water

Figure 6.10 Sustainability at the Development Portfolio system in focus 255


6.3.3 Project As we saw in Chapter 4, the sustainability of a construction project is determined by the decisions taken at early phases of its development, namely the feasibility and design, which fall under the responsibility of System 5 (see Figure 6.11). Decision making should be based on sustainable construction principles and the relevant policies administered by the Development Portfolio. The generation of alternative options for the project is performed by System 4, the Development Team (also a System 1), and are communicated to System 5, which chooses among them and sets the sustainability goals and standards of the project. System 4 essentially builds the Life-Cycle model of the project, which gets increasingly detailed and definite as System 5 chooses among the alternative options. In building the Life-Cycle model of the project, System 4 is aided by: 1. the various sustainable construction tools that are used during the development process, such as LCA, BREEAM, SPeAR, ENVEST, according to the guides of the Development Portfolio. 2. the engagement with the projects stakeholders, which will help identify and assess the various sustainability impacts of the project, as well as the boundaries of the projects model.

The coordination and control of the Development Team is performed by System 3, i.e. the Project Manager. After the project designs are finalised, the Project Manager, with the aid of System 4, searches and appoints appropriate contractors to construct the project. The selection is based on pre-defined sustainability criteria that the contractors should fulfil (sustainable procurement), such as operating under an ISO14001 or other EMS.

256


Ecol og ic al , so ci al , po li tic a,l l egi sl ativ e an d fin an ci al c ontex t of Edi nbu rgh

P DC

Sta ke hol de rs

S5: Boa rd/CEO

Comp eti to rs

Pe rf or m ance Rev iew St r ate gic D ecisi on Ma king Se t Co rpo ra te Pol ic yan d O bjec ti ves

Futur e Environme nt (?)

S4: Board/CEO/ Consulta nts

Ma rk et

Bu sine ssP lan ning M ar ket ing Pu bli c Rel at ions

Corpo rate Soci al Resp on si bli i ty Susta ina bi li ty

S3: SMT S3*

C apit al al lo cati on

Audi t Comm it tee

S2

Edinburgh

Interna l Rep ortin g &Co ntrol

Devel opment P ortfolio

S1


Level 0

Level 1

Level 2

Level 1

Level 2

Dev elopme nt Area s

D evel opm e nt Po r tf ol i o

Pr o per t y Po r tf ol i o

PDC


Project

Property Portfolio

Property

S 5: Bo ar d /C E O D evelop ment P oli cy Pe rf or manc eR eview s Au thor is a t i ons

HOD Han do ver ph ase Admi ni stratio n Acco unti ng IT i nfrastructu re Sta f an d Tra in in g Issu es

S1

Buil t Environme nt

HOD

Fu t ur e E nvi r o nm en t ( ?)

S 4: Bo ar d /C E O/ C on su lt an t s Co mpa nyvi sion for pr oper ty devel opm ents

R eal est at e de vel opm ent op por t un it ie s N ew le gis lat i on S ust ai nab le C ons tr uc ti on

S 3: SM T /H O D Ca pit al all ocati on Aut hor isat io ns Past p roj ect sexper ie nce

S 3*

S2

Ecol og ica l, so cia l, po li tica l, le gi sla tive a nd fin an cia l co ntext of proj ec t

Proj ect S5: Board/ SMT/HOD

Sp orad ic Pr ogr ess Re view s S1

Environment

Edinburg h Stak eholders

Edinburgh Develo pment Areas

Edinburg h Built Environ ment

Project A Project Mana ger A

Edinburgh Lo catio n and co ntext of project Feasibi lity & Design Develo pment Team

System 1

Develo pment Portfo lio HOD

System 1

Property Po rtfolio HOD


Construction Contracto rs


Property A PM A

Edinburgh Lo cation and context of property Building Opera tion Facilities Managers/Us ers

Loc at ion and co nt ext of P ro je ct A

Pr oj ect sP ur pose De cisi onM aki ng (O pt ion s, De signs )


P r oj ect M an ag er A

Proje c tA

Li fe-Cycl e mod el o f Pro je ct

S4: De ve lo pm ent Team Fe asibi li ty St udi es( O pti ons) D esign ( M odel ing)

A ccou nt in g P ro je ct D at a Ba ses L oca ti on a nd co nte xt of Pr o jec t B ( C ,D )

S1

Proje c tB (C,D)

P r oj ect M an ag er B ( C ,D )

S3: Project Manager C ontr ol Al lo c a te R esour ces Pr ocur em en t

S3* Sta ke hol de rs Ma rk et End-Use rs Fund in g Partne rs Lo cati ons Con tra ctors

Maintenance Contracto rs/Users

Autho rity Pla nne rs Sta tu tory bo di es

S2

Con tra cts & Mon it o ring a nd Desi g ns Reso urce s Audi ts S1 Fea sib il it y an dD esi gn

Sit e Inve stig ati ons

D evel opm ent Te am

Ma ste r Sche dul e Wo rk Break down Stru cture Cha ng e Con tro l

S1

Co nst r uct io n

C on t ra cto r s

Su ppl y Cha in En erg y M at eri al s

System 2

Acco unting, admin ist ratio n, IT

Acco unting Project dat a bases

Master Sched ule Work Breakdo wn Structure Change Control

Acco unting Pro perty data bases

Project Mana ger Control Resource allo catio n Pro curement Aud its Sit e invest igations

SMT/HOD Capital allocation Pro pert y Control

Acco unting Maintenance Schedule

Wat er

Edi nb urg h

Property Portfolio S 5: B oar d / CE O Re ntal / Sal esP oli c y O perat i onP olicy Aut hor isat ion s

Fu t ur e En vi r on m en t ( ?)

S 4: HO D / C on su lt an ts Sal es/ Let ti ngs Por t fol io Mar ket ing

R ent al / sa le m ar ke t tr e nds


System 5

SMT Capital allocation Audit committee

SMT/HOD Cap ital allo cation, au thorisatio ns Sporadic progress reviews


P ro spe cti ve B uyer s/ Te nan ts S 3: SM T / H OD Ca pit al all ocati on Past p roj ects exper ience Pr oper t yCo ntr ol

S3 *

S2

Le g is l a ti v e , fi na n c ia l , so c i al a nd p o li ti ca l co n te x t o f bu i ld i n g

S1

Quality monitoring

Loca ti on a nd con te xt of P ro per t y A

Board/ CEO/Consultants Vision fo r pro perty develop ments

Develo pment Team Feasibilit y stu dies (opt ions) Design (mo deling)

HOD/Consultants Sales/ Lettings Portfo lio Mark et ing


Board/ CEO Performance rev iew, Decisio n making, Po licy - Objectiv es

Board/CEO Develop ment Policy, Performance rev iews, Aut ho risat io ns

Board/SMT/HOD Pro jects p urpo se, decision mak ing (o pt io ns, design s

Board/CEO Rental/ Sales Po licy Operation Policy Autho risatio ns

Owners/Users Propert y Purp ose Operating Policy Legal/Stat uto ry Liability

P rope rty

A cco unt i n g

L oca ti on a nd con te xt of P ro per t y B ( C, D )

Board/CEO/Consultants Plan ning Marketing, PR

P r ope r ty M an ag er A

Pr o pe r ty A

Pr o pe r ti es D at a Ba ses S1 P ro pe r ty B ( C, D )

Pr o pe r ty M an age r B ( C ,D )

S5: Owners /Us ers P ro per t yP ur pose

Future Environm ent

O per at i ng Pol icy Le gal /S ta tu tor y Li abi li ty

(?)

S4: FMs/ Owners / Us ers

Ma in ten an ce Co ntrac tors & Su pp ly Chai n

M ai nte nan ce Pr ocur em e nt

Lo ca l p ol i cie s for up gra di n g/ re furb is hme nt Bui ld i ng Re gu la tio ns

S3: FM s/ Owners / Us ers

S3*

S2

Co ntracts S1 C om m un i ty

I nf r ast r uc tu r e

Su pp ly C hai n En er gy M at er ia ls Wat er

Figure 6.11 Sustainability at the Project system in focus 257

Fa cil it i esM a nage me nt

Bu il di ng O per a ti on

Qu al it y Mo ni tori ng

M ai nt en ance

Fa cil i t ies M an age r s/U se r s

Ac counting Ma in tena nc e Schedule

S1 C ont r ac to r s/ U ser s


After the procurement and the start of construction works on site, System 3 has to ensure the effective implementation of the projects sustainable construction policy and building processes (including sustainability monitoring) by the various contractors. Moreover, it has to gather and process the necessary sustainability performance data (KPIs) requested by the Development Portfolio for internal and external reporting purposes. In these tasks it is aided by: the regular reports from the contractors, which include the necessary performance data (KPIs), System 3* which performs regular site investigations to audit the operating processes and the condition of the construction site, System 2. System 2 is responsible for the coordination of all the contractors of the construction project.

Consequently, it may implement partnering or supply chain management

methods in order to facilitate the communication between the project manager, the contractors and the development team. It also has to make sure that all these systems and especially the contractors perform the necessary monitoring procedures and maintain data bases according to the PDCs standards. Such procedures could be for example Sustainability Accounting processes. The contractors (Systems 1) themselves are responsible for the construction process and thus for the direct sustainability impact of the PDC. They have to gather the necessary sustainability data from the supply chain on behalf of the PDC, which in terms of the environment relate to measuring all material, energy and water flows. These will allow, for example, the calculation of the projects ecological footprint. Moreover, they have to facilitate any external audits, that might be necessary for the assessment and consequent award of an eco-label scheme such as BREEAM, or any other standard that the PDC and its project has been committed to.

258


6.3.4 Property Portfolio Analogously to the Development Portfolio, System 5 of the Property Portfolio (see Figure 6.12) determines the Sustainability Operation Policy of the companys properties. However, the degree of the PDC control over properties is limited compared to that over projects under the Development Portfolio, and is determined by the sell/rental status of the property (see paragraph 6.2.6). Nevertheless, since System 5 is responsible for decision making on sales and rentals, it may introduce sustainability (apart from financial) criteria when choosing the prospective buyers/tenants. These criteria may include the existence of sustainability policies on behalf of the buyer/tenants, or the introduction of sustainability monitoring processes in the contracts, that will facilitate the reporting processes of PDC. System 4 has to search for any new sustainability standards, methods and tools, as well as for prospective buyers/tenants, and communicate all these options to System 5 for decision-making.

System 3 then has to make sure the standards and tools are

implemented by all properties, and additionally to compile the internal reports from the property managers that contain the property performance data (KPIs). System 2 again establishes harmonised monitoring procedure and data bases for all properties.

259


Eco lo gi ca l, s oci al , po l it i cal , le gi sl ati ve a n d fin an ci al co nte xt of Edi nb urg h

P DC

Stak eh ol de rs S5: Boa rd/CEO

Co mp etit o rs

Pe r for m an ce Re vie w St r at egi c De cisi on M aki ng Se t C or por at e Po li cy and O bj ect ive s

Futu re Env ironme nt (?)

S4 : Boa rd/C EO / Cons ulta nts

Ma rke t

B usin ess P lan nin g M ar ket i ng P ubl ic R ela ti ons

Co rp o ra te Soc ia l Re spo ns i bi li ty Sus tai na bi li ty

S3: SMT S3*


Level 0

Level 1

Level 2

Level 2

Aud it Co mmi tte e

S2

Edinburgh

Inte rna l Rep orti ng & Con tro l

Devel opm ent P ortfol io

S1 De ve lopme nt Are as

D evel o pm en t P or t fo l io

S5: Boa rd/CEO

D evel opm ent P oli cy Pe r for m ance R evie ws Au tho ri sat io ns

HOD Ha nd ov er ph as e Ad min is trati on

PDC


Project

Property Portfolio

Property

Acc ou nti ng IT i nfra struc ture Staff an d Trai ni ng Issu es

S1

Buil t Env ironme nt P r ope r ty P or t fo l o i

HOD




System 1



System 1






Property A PM A


S4: Boa rd/CEO / Consultants

Rea l e state de ve lo pme nt op po rtuni tie s

C omp any visi on fo r pr ope rt yd evel opm ent s

New l egi sl ati on Susta in ab le Con structi on


Environment

Level 1

C api ta l al loca ti on

S3: SMT/HOD Ca pit al al lo cati on Au tho ri sat ions Pa st pr oje cts expe ri ence

S3*

S2

Eco lo gi ca l, so ci al , p ol it i cal , le gi sl ativ e a nd fin an ci al con tex t o f p ro j ec t

S5: Boa rd/ SMT/HOD Pr o ject sP ur pose

S1

Accounting, administration, IT SMT Capital allocation

System 3 System 3*

Audit committee

Accounting Project data bases SMT/HOD Capital allocation, authorisations Sporadic progress reviews



L if e-Cy cl e mod el of Proj ec t

S4: Dev elopm ent Te am Fe asib il it y St udi es (O p tio ns) D esig n (M o del ing)

Acco un ti n g Proj ect Data Bas es

Lo cati on a nd co ntex t of Proj ect B (C,D)

S1 Proje ct B (C,D)

S3: Proje ct Mana ge r

Proje ct Ma na ge r B (C,D)

C ont r ol A l ocat e Re sour ces P ro cur em ent

S3* Stake ho l de rs Ma rke t End -Use rs


D ecis ion M aki ng ( O pt ions , D esig ns)


Proje ct Ma na ge r A

Proje ct A

Fun di ng Partne rs

System 2

P roject

Sp ora di c Pr ogr es s Re view s

Lo cati on a nd co ntex t of Proe j ct A

Co ntracts & De sig ns

Autho rit y Pla nn ers Statutory bo di e s

S2

Mo ni torin g a nd Res ou rce s

Aud it s S1 Fe asi bi li t y an d De sig n

Lo ca tio ns Con tracto rs

Sit e Inv esti ga tio ns

Dev elo pm en t Te am

Ma ster Sche d ul e Wo rk Brea kdo wn Stru cture Cha ng e Con trol

S1

Co ns tr uc t ion

Con t ra ct or s

S upp ly C hai n E ner gy M at er ia ls Wa ter

Ed in b urg h

Prop erty P ortfol io S5: Boa rd/CEO R ent al/ Sal esP oli cy O per at ion P oli cy Au tho ri sat ions



FMs/Owners/Users Facilities Management Quality monitoring

System 4






System 5







S4: HOD/ Consulta nts Sa les/ L ett in gs Po rt fo li oM ar ket ing

Ren ta l/ sal e ma rk et tren ds Pro sp ecti ve Buye rs/T e nan ts

S3: SMT/ HO D

C apit al al lo cati on Pa st pr oje cts exper i ence Pr o per ty Co ntr ol

S3*

S2

L e g is l a tiv e , fi n an c i a l, s o ci a l a n d p o l i tic a l c on te x t

S1 Lo cati on an d co ntex t of Prope rty A

Lo cati on an d co ntex t of Prope rty B (C,D)

Property Ma na ger A

Property A

S1 Property B (C,D)


Prope rty

o f b u il d i n g

Acc ounting Properties Data Bas es

S5 :Owne rs /U se rs Pro pe rty Purpos e Ope ra ting Pol i cy Le gal /Statutory Li ab il it y

Futu r e Environme nt (?)

S4 :FMs / O wners / Us er s Ma inten an ce Pro cureme nt

M ai nte na n ce Con trac tors & Sup p ly C ha i n L oc al po l ic i es fo r u pg ra di ng / refu rbi sh me n t Bu il d in g Re g ul ati on s

S3 : FMs / O wners / Us er s Fa ci li ti es Ma nag emen t

S3 *

Supply Chain En ergy Materi al s Wa te r

Figure 6.12 Sustainability at the Property Portfolio system in focus 260

S2

Co ntra cts S1 Comm unity

Infras tru cture

Fa cili ties M anagers/Use rs

Build ing Ope ratio n

Qu al i ty Mo n ti ori n g

Mainte na nce

Ac countin g Ma intena nc e Sc he dule

S1 Contractors / Users


6.3.5 Property System 5 of the Property (see Figure 6.13) comprises the sustainability policies of the owners or users, depending on whether the building is sold or leased.

PDC can

influence System 5 policies if it rents the property and is still the owner or if it has chosen a buyer (at the System 5 of the higher level Property Portfolio) with sustainability policies. System 4 is responsible for searching and choosing appropriate facilities managers (if they are not already chosen) and contractors to facilitate the operation and maintenance processes (Systems 1) of the building, based on sustainability criteria (sustainable procurement), such as the existence of an EMS. System 3 makes sure that users, facilities managers and contractors will implement the sustainability policies determined by System 5. It also compiles the internal reports given by the facilities managers, user and contractors that contain sustainability performance data (KPIs). The harmonisation of monitoring procedures is ensured by System 2 which may also use Sustainability Accounting. Facilities managers and users (System 1) must facilitate any external audits required for eco-labelling and award schemes. They also have to gather the necessary sustainability data according to the monitoring procedures of System 2. In terms of environmental issues, these will include material, energy and water flows that will allow the calculation of the ecological footprint of the building. The same monitoring procedures will have to be followed by the contractors during maintenance. It must be noted, that the above proposed functions are highly dependent on the selling and rental contracts that determine the functional relationships within each property.

261


Eco lo gi ca l, so ci al , po l it ic al , leg i sl ativ e a nd fin an ci al con tex t o f Edi nb urg h

P DC

Stake ho l ders S5: Boa rd/CEO

Co mpe ti tors

P er for m an ce Rev iew S tr at egi c Dec isi on M akin g S et C or por at e Pol i c y a nd O bj ect ives

Futu re Environm ent (?)


Level 0

Level 1

Level 2

Level 1

Level 2

PDC


Project

Property Portfolio

Property

Susta i nab il i ty

S3: SMT S3*

C api ta l all oca ti on


System 1


System 1









Property A PM A






S2

Edin burgh

Inte rn al Rep orti ng & Co n tro l

Devel opment P ortfol io

S1 De ve lo pme nt Area s


S5: Boa rd/CEO

HOD Ha nd ove rp h ase Adm in is tra tio n Acc ou ntin g IT i nfras tructu re Staff a nd Trai ni ng Is sue s

S1

Buil t Env ironme nt


System 2

Bu sin ess Pl anni ng M ar ket ing Pu bli c Re lat io ns

Co rp ora te Soci al Re spo ns ib il i ty

Aud it Co mmi t e e


Environment


Ma rke t

Pr o per t y P or tf o li o

HOD

D evelo pm ent P oli cy Pe rf or m ance Re view s Au tho ri sat ions


S4: Boa rd/CEO/ Consultants

Rea l es ta te de ve lo pmen t op po rtu ni ti es New le gi sl atio n Susta ina bl e Con structi on

C omp any visi on for pr oper t yd evelo pm ents

S3: SMT/HOD Ca pit al al loc ati on Au thor i sati ons Pa st pr ojec ts exper i ence

S3*

S2

Ecol o gi cal , s oc ia l, po l it ic al , l eg is la tive an d fin an ci al con te xt o f pro j ect

P roject S5: Boa rd/ SMT/HOD


Pr o ject s P urp ose

S1 Lo cati on an d co ntex t of Pro je ct A

D ecisi on M aki ng ( Opt i ons, D esig ns)


Projec t Ma nager A

Projec t A

L if e-Cyc le mod el o f Proj ec t

S4: Dev elopme nt Tea m

Fe asib il it yS tu die s( O pt ion s) D esig n (M ode li ng)

Acco unti ng Proe j ct Data Base s

Lo cati on an d co ntex t of Proe j ct B (C,D)

S1 Projec t B (C,D)

S3: Proje ct Manager

Projec t Ma na ge r B (C,D)

C ont ro l Al l ocat eR eso ur ces Pr o c u r em ent

S3* Stake ho ld ers Ma rk et End -Users


Fu nd i ng Partne rs Lo ca ti on s Con tra cto rs

Autho rit y Pla nn ers Statutory b odi e s

Accounting Maintenance Schedule

S2

Con tracts & Mo ni torin g a nd Des ig ns Re sou rce s Aud it s S1 Fe asi bi li t y an d De sig n

Sit e Inv esti ga tion s

D evel op m ent Te am

Ma ster Sche d ul e Work Brea kdo wn Stru cture Cha ng e Con trol

S1

Co nst r uc ti on

Con tr ac t or s

Su pp ly C hai n En er gy M at er ial s Wat er

Ed in b urg h

Property Portfolio S5: Boa rd/CEO

System 3 System 3*

SMT Capital allocation Audit committee

SMT/HOD Capital allocation, authorisations Sporadic progress reviews


Re nta l/ Sa les Pol icy O per ati on Pol icy Au thor i sati ons


S4: HOD/ Consultants Sa les/ L ett in gs

Renta l/ s al e ma rke t tren ds Pro sp ectiv e Buye rs/T en ants

Po rt fo li oM ar ket ing

S3: SMT/ HOD

Ca pit al al locat io n Pa st pr oject se xper ienc e Pr ope rt yC ont r ol

S3*

Quality monitoring

System 4






System 5






S2

Le g i s la ti v e, fi n a n ci a l , s o ci a l a n d p o li ti ca l c on te x t o f bu i l d i ng

S1 Loc atio n and co ntex t of Prope rty A

Lo cati on an d co ntext of Prope rty B (C,D)

Property Ma nager A

Property A

Accounting Propertie s Data Bas es S1 Property B (C,D)

Property Ma na ger B (C,D)

Proper ty S5 :Owner s/Us ers Pro perty Purp ose Opera ti ng Pol icy Le gal /Statutory Li abi li ty

Futu re Env ironm ent (?)

S4 :FMs / Ow ne rs / Us ers Mai ntena nce Procu re ment

Ma i nte na nc e Co n tra cto rs & Sup pl y Ch a in L oc al po l ic ie s for u pg rad i ng / re furb i shm en t Bu il di n g Re gu l ati on s

S3 : FMs / Ow ne rs / Us ers Fa cil it i es Man age m e nt

S3 *

SupplyChain En ergy Materi asl Wa ter

Figure 6.13 Sustainability at the Property system in focus

262

S2

Co ntra cts S1 Comm unity

Infrastructure

Buil din g Ope ratio n

Qu al i ty Mo n ti o rin g

Mainte nance

Fa cili ties Managers/Users Ac count in g Ma intenanc e Sc he dule

S1 Contra ctors / Users


6.3.6 Benefits of using the VSM to manage sustainability in the PDC As can be seen in paragraph 5.4.7, some of the problems that emerged during the TBL Project are common with the problems from the application of Environmental Management Systems (EMS), described in paragraph 3.5.4. This could be expected as the project was initially conceived in terms of such management systems (see paragraph 5.3.1). Table 6.2 and Table 6.3 show the relation among the problems that emerged during the TBL Project, the similar problems that EMS exhibit according to the literature review and the solutions that can be found by applying the VSM presented above. These are discussed in more detailed below. In terms of the General-Operational Problems of the TBL Project, the PDC did not wish to alter the existing operation and decision-making processes of project development by applying a management system, such as an EMS. Indeed, the literature shows that the standardised nature of EMS promotes centralisation and bureaucracy. Such a system is difficult to maintain in a company such as the PDC, whose operations (projects and properties) are very complex 1 , and influenced by their particular context and purpose. The VSM, instead, is a process model that focuses on the viability of the company in a changing environment; hence, its structure is primarily dependent on the particular company under study, and even though it exhibits homeomorphism throughout its recursive structure, it is not a standardised one size fits all system. Moreover, VSM uses the concept of variety and variety engineering (see paragraph 2.7.2) to effectively control the differences of the companys projects.

Thus, it

promotes decentralisation and autonomy in project management.

1

Meaning that they are dynamic, diverse, non-predictable, influenced by a variety of different actors etc.

(see Chapter 4).

263

Table 6.2 Comparison of TBL Project problems, EMS problems and VSM solutions. (Part I)


264


The influence of the supply chain in a companys sustainability performance is not covered by EMS, however it is crucial for determining a projects and in extension the PDCs performance.

For this reason, the VSM presented above identifies the

construction process as a System 1 and describes its relations to both the contractors and the supply chain, even though this process is situated outside the companys boundaries (see Figure 6.1). The contractors, as managers of the construction process (System 1 Management), are linked to the continuous control of Systems 2,3 and 3* and they are even chosen beforehand (S3) according to sustainability criteria set by System 5 (sustainable procurement). Finally, the VSM clearly distinguishes between internal and external reporting, another issue that emerged during the TBL Project. Internal reporting is an essential function which spans throughout the whole organisation of the PDC, while external reporting is a less frequent function which occurs only at the highest level of the company (S4 of the PDC system in focus). In terms of KPI and Monitoring Problems, the main difficulty in the TBL Project was the context and purpose dependence of the companys projects.

This rendered

impractical the organisation of KPIs only in terms of their subject (environmental areas approach in EMS), since some of the indicators were irrelevant to different projects. Even though the VSM does not propose specific performance indicators, it relates their development with the role of every system in the company structure. The VSM regards the projects as independent Systems 1 (process-oriented approach in EMS), because of the differences (variety) in their operating environment (context) and purpose, and points towards the development of unique sets of performance indicators for each project to match these differences. Moreover, the importance of the feasibility/design phase and the development team in determining the sustainability of the whole project, as well as its special reflective and modelling function, is recognised by the VSM, hence it is positioned at System 4 although it has many characteristics which define it as a System 1 (see Figure 6.6). This means that it is not possible to develop ordinary detailed operational indicators for the feasibility/design phase, but rather ones based on higher level principles which take into account the future and far reaching impacts of design decisions. 265


Consequently, the development team of System 4 is closely related to System 5, which provides the sustainability principles of the project, and is aided by special design and modelling tools. Finally, the engagement of the supply chain and tenants in monitoring procedures is covered by the inclusion of these procedures in contracts during the procurement phase (S3), while their effective implementation is controlled by System 2. In terms of the Assessment and Aggregation Problems of the TBL Project (see Table 6.3), the difficulty in determining the relative importance of the three bottom lines is present even in the simpler context of environmental management, where different environmental impacts have to be compared. According to the VSM, the performance (viability) of every system should be assessed in relation to its environment and its purpose. Hence, the balancing of the three bottom lines will depend on the environment of the projects, as perceived by their Systems 4, and the sustainability principles and policies determined by their higher systems in focus (development and property portfolios) and represented by their Systems 5. This is a continuous dynamic process which can be facilitated by the engagement of stakeholders, in order to provide a better picture of the changing environment, and the continuous research for new policy standards. Analogously with the problems of developing KPIs, the context and purpose dependence of projects renders it difficult to assess their individual performance, compare them and aggregate them at the organisation level.

Various companies

applying an EMS usually attempt to assess the performance of their operations at the organisation level directly. As we saw above, the VSM bases the assessments of every system according to their particular purpose and environment, hence each project should be mainly assessed independently. However, a limited performance comparison and aggregation could possibly take place if indicators such as Ecological Footprints were used, which aim to measure the net impact of a project to the environment in terms of inputs and outputs. If such measures were used, aggregating the overall company performance to a single indicator could show, for example, the overall footprint of the PDC in a year.

266

Table 6.3 Comparison of TBL Project problems, EMS problems and VSM solutions. (Part II)


267


Similar, to the context and purpose dependence, the time dependence of projects means that the company has projects that are in different phases of development.

This

difference is reflected in the VSM, first, by creating the two separate Development and Property portfolios at the second hierarchical level and, second, by considering the Feasibility/Design and Construction processes as separate Systems 1 at the lowest hierarchical level.

Consequently, all these systems should also be assessed

independently and always in reference to the purpose determined by the higher system they belong to. Finally, even though the VSM does not provide a solution for the subjectivity of the assessments in the absence of monitoring procedures, it does provide a structure that would facilitate the effective implementation of such mechanisms in the future. The PDC is currently relatively small in terms of the number of different projects and properties it is managing. This can be seen in the model by the fact that the same organisational units within the company might operate at various levels within the VSM structure. Nevertheless, the company is growing, and its development and property portfolio1 has an increasing number of projects. According to the VSM logic these new projects will put pressure on existing management, as they will increase the variety the company will have to handle. Consequently, the VSM model, as presented in the first part of this chapter, could also be used on its own, irrespective of sustainability issues, to propose a more effective organisational structure for the PDC.

6.4 Recommendations for effective implementation This paragraph presents some general recommendations for the effective management of sustainability in property development companies; these recommendations are drawn from the VSM analysis of the previous section of this chapter. The aim here is to use a simplified descriptive language, so that the findings of this research might be more readily accessible to companies not familiar with the complex and demanding VSM nomenclature. However, various parts of the following description will be linked with the VSM structure; these links will be marked in underlined italics in parentheses.

1

Currently there is one Development and Property Portfolio in the PDC

268


In order to effectively manage sustainability in a property development company, one has to first identify the exact nature of its operations (S1). As we saw in the previous section, the operations of a PDC may be broadly described as the management and funding of development projects and the management and funding of properties. However, it is possible for such a company to develop projects and operate properties that have very different contexts and characteristics (the Environment within which it functions). Moreover, the responsibility and control boundaries of the company also vary for each project and property; they are usually dependent among others on market conditions, client demands, procurement routes and lease contracts. In the case of development projects, this means that the product or output of these companies which is the finished building or the built environment in the case of larger projects is usually co-produced by a number of different organisations or actors (architects, contractors, suppliers etc.). It is, thus, very difficult to predict and standardise the operations and the outputs of these diversified companies. The above characteristic makes a PDC more complex compared to other companies with more specific operations (e.g. a contractor). Next, the purpose (S5) of such a company needs to be identified. This is usually expressed in the mission statements or similar documents, such as the future vision of the company. For a strictly commercial company, this will typically be confined to the maximisation of profits for the companys shareholders.

However, and given the

expressed interest (or obligation) for sustainable behaviour, the purpose of the PDC presented in the Case Study (Chapter 5) is also to improve the property, economic and employment opportunities of Edinburgh through its operations. This is certainly related to the ownership (Higher System) of the particular company which in our case study happens to be the city council. The particular purpose of such a company is very important from a sustainability point of view, because this is the point where the relation (or the adherence) of the company to sustainability comes into question. It is determined by the highest organisational levels and it can have the biggest influence on the corporate behaviour of the company which in our case is expressed as its transition to sustainability. The concepts of the Triple Bottom Line, the Five Capitals and The Natural Step system conditions can be used here as a guide in developing sustainable policies and commitments.

269


The structure (Internal Hierarchy) of a property development company may vary according to its size or the environment within which it is operating. As noted above, its operations (projects and properties) will have variable characteristics and, consequently, variable management needs. This is more the case if the company is willing to consider its sustainability aspects, which will add more concerns to project management (environmental, social) on top of the traditional financial and market ones. For this reason, it is necessary for the projects and properties to be managed with a high degree of autonomy by a local management centre (S1-Management). In the PDC of the Case Study, this is happening with the Project Managers fulfilling the local management role. Additionally, improving sustainability performance implies adopting a whole life-cycle responsibility of a companys products; this means that a PDC will have to give more emphasis on the operation phase of its properties, apart from the traditional focus on design and construction. In the case of the Case Study PDC, this points towards the creation of a separate property portfolio 1 to handle the operational issues of the companys properties. Even though this decentralised management structure may prove appropriate for managing each individual project and property effectively, it will, however, require additional control mechanisms (S2-S5), which will ensure that the overall company maintains its viability. The latter can be regarded as the fitness-for-purpose of the company, as well as its ability to adapt to the changing conditions of its environment (e.g. new markets, stricter legislation, sustainability requirements). Alternatively, the qualitative metaphor of system health, as proposed by Elms (1997), can also be used. A systems or an organisations health is attributed to five criteria: Discrimination: clarity and focus of the companys purpose Consistency: consistence of elements with company purpose and with each other Completeness: existence of all necessary company elements Balance: company elements should have equal importance with regards to its purpose Cohesion: existence of links between organisational elements that form a structural pattern 1

it is currently a joint development and property portfolio

270


Accordingly, the property development company will have to ensure its consistency and balance, by having a system in place (S3) that ensures that all the projects and properties: implement the companys policies and objectives are allocated with a balanced share of the companys resources An essential part of this system will be the internal reporting and monitoring mechanisms (S2-S3) that will be based on key performance indicators (KPIs) appropriate for assessing the companys performance in accomplishing its objectives. Internal reporting and monitoring mechanisms allow the linking of the various projects and properties with the overall company, thus making it coherent and consistent.

For a property development company, the KPIs will mainly relate to financial issues, which are traditionally the responsibility of accounting departments. The sustainability dimension, however, requires that a company monitors performance of broader sustainability indicators that also cover issues of environmental and social performance. These will mainly relate and be specific for every individual project and property, because, as we saw above, projects and properties are context and purpose dependent. The compilation of the KPIs will have to happen at different levels within the company, starting from the project level and moving to the portfolio and the overall company levels, by the corresponding control mechanism (e.g. project manager at the project level). Even though it is possible to use indicators, such as Ecological Footprints, that can be aggregated to show the performance at the overall company, these will have to be used with caution, especially in the comparison of different projects or properties.

In any case, it is necessary to establish a common monitoring process (S2) and to maintain a company wide data base (S2) for the storage of KPIs. This data base will be particularly useful in the handover phase of projects, during which a completed project passes from the construction/development phase to the operation phase; in other words, it is transferred from the development portfolio to the property portfolio.

271


The performance data bases can also be used to investigate the progress of a building on sustainability issues over its life time. However, the problem in this case is that even though property developers have a strong influence on the early and important phases of feasibility and design, this is not the case for the construction and operation phases, since these are influenced by suppliers, contractors, tenants, owners etc. Consequently, a property development company will have to engage its partners (contractors, suppliers) and customers (buyers, tenants) in its monitoring and reporting mechanisms that will allow it to collect performance data for the assessment of its sustainability performance.

This may be achieved by the inclusion of these mechanisms as

requirements in procurement or lease contracts.

As we saw above it is very difficult to prescribe the outcome and even more the sustainable outcome of a construction project. There are, however, certain policies and measures that such a company can follow to mitigate risk.

First of all, the

sustainability considerations of a project should be introduced at the very early stages of feasibility in order to formulate specific aims and objectives. During the design phase a life-cycle thinking approach should be adopted that extents the traditional focus of development on construction issues.

A number of sustainability design and

assessment tools are increasingly becoming available to help the development team, such as ENVEST, BREEAM or SPeAR.

A property developer can affect the

sustainability of a project during the construction phase, only indirectly, by adopting specific sustainability requirements during the procurement phase, such as dealing only with contractors that employ an Environmental Management System or similar standards.

During the operation phase the influence of the developer on the

sustainability performance of the building is even more indirect and will depend on the lease contract. As above, a possible intervention point is to include sustainability requirements in the procurement of maintenance contractors, facilities managers and even in the selection of tenants.

Apart from the above internal controlling mechanisms, a property development company will need to have in place an organisational body (member of staff, consulting team) that will continually scan the environment for new developments, opportunities and threats regarding sustainability and sustainable construction (S4). These are new and rapidly developing fields, which continuously introduce new principles, methods, 272


practices, regulations and performance requirements.

It is imperative that these

developments are communicated to all levels of the company in order to update the overall sustainability policies and practices.

This will ensure the viability and

adaptation of the organisation in its changing and demanding environment.

Similarly, in order to exercise social accountability, the same organisational body (S4) should examine the views of the various stakeholders on the companys performance. At the overall company level, part of accountability practices will be the frequent publication of sustainability reports that are based on the internal monitoring and reporting mechanisms discussed above. At the individual project level, this will include stakeholder engagement mechanisms at the early phases of project development, in order to identify the important sustainability issues and impacts that are important to the projects stakeholders.

All the above recommendations intend to help a property development company become viable or healthy in a society that increasingly demands the transition of companies to sustainability.

273


6.5 References Brocklesby, J & Cummings, S (1996) Designing a viable organization structure. Long Range Planning, 29, 49-57. Conant, R & Ashby, W R (1970) Every good regulator of a system must be a model of that system. International Journal of Systems Science, 1, 89-97. Elms, D (1996) Five criteria for system health. Personal communication to P.W. Jowitt. Espejo, R (1989) A cybernetic method to study organizations. In Espejo, R & Harnden, R (Eds.) The viable system model: interpretations and applications of Stafford Beer's VSM. Chichester, Wiley. Santos-Reyes, J & Beard, A N (2002) Assessing safety management systems. Journal of Loss Prevention in the process industries, 15, 77-95. The Edinburgh Sustainable Development Partnership (2003) Edinburgh Standards, http://www.esdp.org.uk/edinburgh-standards.htm

274

Chapter 7 Conclusions and recommendations

We shall not cease from exploration And the end of all our exploring Will be to arrive where we started And know the place for the first time. T.S. Eliot Little Gidding V, Four Quartets (1942)

Chapter 7: Conclusions and recommendations for future research

7.1 Conclusions The thesis of this research, as stated in paragraph 1.2 and restated here, was an assertion under investigation: The thesis of this research is that in order to fully understand, study and operationalise sustainable development in general and sustainable construction in particular, a systems approach is needed. The following list of conclusions and findings aims to demonstrate this assertion and provide a summary of the contributions of this research.

Sustainability and sustainable development Using a systems approach, sustainability can be regarded as the dynamic equilibrium and co-evolution of man and nature and sustainable development as a purposeful process to reach this goal. This process should permeate all human systems and be properly controlled.

At the corporate system level, sustainable development is an adaptive process, which has to be addressed at the highest management levels that determine a companys purpose.

There is a multitude of sustainability concepts, methods and tools that aim to help organisations and in particular corporations to manage and control their transition to sustainability. This has created confusion and disorientation among them in regard to the different purpose of these concepts, methods and tools and how they can be better implemented. In view of this, this thesis: using the systems approach, it has reviewed a number of such concepts, methods and tools in order for a company to understand their different purposes and appreciate their respective strengths and weaknesses using the cybernetic Viable Systems Model (VSM), it has identified the organisational levels within a company, at which they can be most effectively applied. 276


Sustainable Construction Similar to the previous point, there is a multitude of sustainability assessment methods and tools for construction projects. A number of these have been reviewed using a systems approach, in order to identify their different purpose as well as their respective strengths and weaknesses.

The Mind Mapping technique combined with the Five Capitals Model of sustainability was used to capture the sustainability aspects of a number of construction projects. These Mind Map representations proved to be quite effective in the process of, first, understanding and, second, organising the different sustainability aspects and their complex interrelations.

Their use is strongly

recommended in similar cases.

Application of the Viable System Model in property development companies A property development company (PDC) has to simultaneously manage the development process of a number of different construction projects.

The

development process is highly complex and its complexity may increase if the company decides to manage its sustainability aspects. In order to manage this complexity, a new organisational structure has been designed for the PDC under study.

This structure is based on the VSM and promotes the autonomic

management of projects, which are connected in a coherent and consistent manner.

Using the VSM concept of variety, the complexity that such a company faces has been attributed to the following organising (variety generating) criteria: Time (i.e. different phases of project development) Project purpose Project context Control boundaries Technological

activities

transformations)

277

(i.e.

material,

energy

or

other


The operation phase of a construction project is usually many times larger than its design and construction phases. Following the VSM logic (time criterion), this has led to the design of two separate management structures (portfolios) within the PDC under study: one responsible for the construction projects that are in the design and/or construction phases and one for those that are in the operation phase. These two structures are linked with processes and structures (e.g. data bases, monitoring mechanisms) that aid the overall coherence of the company.

The VSM has been used to describe the varying levels of control that a PDC may have over the construction projects under development (design and construction phases), and over its properties (operation phase). It has also been used to describe the relationships between the different parties involved during the development and operation of construction projects such as design teams, contractors, supply chains, regulators, stakeholders and tenants. This way intervention points were identified, where a PDC can take action to improve its sustainability performance (e.g. the drawing of procurement and lease contracts).

The developed VSM structure was used as a basis on which the various company wide sustainability tools, as well as the construction project sustainability assessment tools (see points above) were combined, in order to form a complete sustainability management framework appropriate for the PDC under study.

7.2 Recommendations for future research The work presented is about improving sustainability performance of large development companies. A procedure has been outlined for effecting this improvement, through a modelling process for the existence and functioning of the company. This research is claimed to be an positive step in the direction of clarifying the meanings of sustainability and sustainable construction, by using a systems approach. A model, however, cannot be simply viewed as true or false, but it is rather more or less useful for the purpose it is constructed in this case, the sustainability transition of the PDC. This is especially true in the fields of sustainability where even the meanings of the employed terms are not of universal acceptance. And yet, decisions must be (and are) taken every day, in the name of sustainability and for the purpose of improving it. 278


Based on these understandings, this work has attempted to apply the cybernetic VSM in the study of the PDC. In order to improve the model, in the sense of making it more reflective of reality (full reflection is not possible, especially in management) and, more importantly, facilitate its implementation, one would have to consider: on one hand the continuous development and expansion of the sustainability and sustainable construction fields i.e. to understand the dynamic framework within which the company is expected to function and, on the other, the environment and operations of the specific PDC as it is affected by the structure realizing of course that the very structure needs to be dynamic and evolving as a response to the changing and evolving framework.

In view of these, the following recommendations for future research are proposed: 1. Regarding the framework, improving and refining: a. the coordination of the various sustainability concepts, tools and methods within the VSM structure (section 3.4), and b. the study of new and emerging ones. This will help clarify their unique contribution and maximise their effectiveness when applied in the corporate context. 2. Similarly, the context of the PDC needs to be better studied, for example by focusing on the specific requirements and specifications of the relevant legislation and planning systems. 3. Regarding the specific case study, the VSM model could be refined by a more extensive analysis of the PDC structure and their operation. 4. Even though the assessment and aggregation issues within the PDC have been criticised, there is still a need to develop appropriate indicator sets and to establish monitoring and assessment mechanisms.

These may follow the

recommendations of this work, but could also be based on the new and emerging tools and indicators (see point 1 above). 5. The application of the VSM analysis in the real world may prove to be problematic, if its theoretical limits are not taken into account, since the VSM follows the functionalist paradigm. In order to make an effective intervention in 279


the PDC, the VSM needs to be complemented by softer approaches, such as the Soft Systems Thinking, which take into account the possibility of value multiplicity and conflict within organisations. 6. Yet, the most important recommendation for future work, in any research of this nature, is to actually apply the suggested procedure for a longer period and monitor the responses of: i. the working parts, ii. the whole (the company) iii. the hierarchically superior collective body.

The true evaluation, of course, concerns sustainability performance environmental, social and economic.

But this is really a long term phenomenon, not readily

comprehended or assessed for several reasons, one of which is the lack of proper tools. It is hoped that this research responds in a way to that need.

280

References

References

Ackoff, R L (1979) The future of operational research is past. Journal of Operational Research Society, 30, 93. Ackoff, R L (1999) Recreating the Corporation: a Design of Organizations for the 21st Century, New York, Oxford University Press. Addis, B, Talbot, R, Great Britain. Dept. of Trade and, I & Construction Industry Research and Information, A (2001) Sustainable construction procurement: a guide to delivering environmentally responsible projects, London, Ciria. Adetunji, I, Price, A, Fleming, P & Kemp, P (2003) Sustainability and the UK construction industry - a review. Proceeding of ICE, Engineering Sustainability, 156, 185-199. Allen, T F H (2002) Applying the principles of ecological emergence. In Kibert, C J, Sendzimir, J & Guy, G B (Eds.) Construction ecology: nature as the basis for green buildings. London, Spon Press. Ammenberg, J, Hjelm, O & Quotes, P (2002) The Connection Between Environmental Management Systems and Continual Environmental Performance Improvements. Corporate Environmental Strategy, 9, 183-192. Arup (2005) SPeAR- Product Overview, http://www.arup.com Ashby, W R (1956) Introduction to cybernetics, London, Chapman & Hall. Bakens, W (2003) Realizing the sector's potential for contributing to sustainable development. Industry and Environment, 26, 9-12. Ball, J (2002) Can ISO1400 and ecolabelling turn the construction industry green? Building and Environment, 37, 421-428. Banathy, B (2003) A Taste of Systemics, http://www.isss.org/taste.html Barkley, R J (2001) Complex ecologic-economic dynamics and environmental policy. Ecological Economics, 37, 23-37. Bartlett, H (2004) Understanding Sustainable Development in Relation to the Built Environment. Beckerman, W (1995) Small is stupid: blowing the whistle on the greens, London, Duckworrth. Beer, S (1959) What has cybernetics to do with OR? ORQ, 10. Beer, S (1972) Brain of the firm: the managerial cybernetics of organization, London, Allen Lane. 282

References

Beer, S (1979) The heart of enterprise, Chichester, Wiley. Beer, S (1981) Brain of the firm: the managerial cybernetics of organization: companion volume to the Heart of enterprise, Chichester, Wiley. Beer, S (1985) Diagnosing the system: for organizations, Chichester, Wiley. Beer, S (1989) The evolution of a management cybernetics process. In Espejo, R & Harnden, R (Eds.) The viable system model: interpretations and applications of Stafford Beer's VSM. Chichester, Wiley. Bent, D & Richardson, J (2003) The SIGMA Guidelines- Toolkit. Sustainability Accounting Guide, London, The SIGMA Project. Best-Foot-Forward (2005) http://www.bestfootforward.com Best Foot Forward Ltd. (2002) City Limits. A resource flow and ecological footprint analysis of Greater London, www.citylimitslondon.com Blockley, D & Godfrey, P (2000) Doing it differently: systems for rethinking construction, London, Thomas Telford. Boonstra, C & Pettersen, T D (2003) Tools for environmental assessment of existing buildings. Industry and Environment, 26, 80-83. Boulding, K (1966) The Economics of the Coming Spaceship Earth. In Jarrett, H (Ed.) Environmental quality in a growing economy. Baltimore, MD: Resources for the Future/Johns Hopkins University Press. Brand, S (1994) How buildings learn: what happens after they're built, New York, Penguin. BRE (2005) BREEAM: BRE Environmental http://products.bre.co.uk/breeam/index.html

Assessment

Method,

Bringezu, S (2002) Construction ecology and metabolism. In Kibert, C J, Sendzimir, J & Guy, G B (Eds.) Construction ecology: nature as the basis for green buildings. London, Spon Press. Brocklesby, J & Cummings, S (1996) Designing a viable organization structure. Long Range Planning, 29, 49-57. Brundtland, G H & WCED (1987) Our common future, Oxford, Oxford University Press 1987. Buzan, T & Buzan, B (2000) The Mind Map Book. Millennium Edition, London, BBC.

283

References

Casella, S, Carillion, P L C, Great Britain. Dept. of Trade and, I, Forum for the Future & Construction Industry Research and Information Association (2002) Sustainability accounting in the construction industry, London, Ciria. CEEQUAL (2005) CEEQUAL, http://www.ceequal.com Checkland, P B (1999) Systems Thinking, Systems Practice (new edition), Chichester, Wiley. Chiesura, A & de Groot, R (2003) Critical natural capital: a socio cultural perspective. Ecological Economics, 44, 219-231. Clayton, A M H & Radcliffe, N J (1996) Sustainability: a systems approach, London, Earthscan Publications. Cole, R J (1998) Emerging trends in building environmental assessment methods. Building Research & Information, 26, 3-16. Conant, R & Ashby, W R (1970) Every good regulator of a system must be a model of that system. International Journal of Systems Science, 1, 89-97. Constructing-Excellence (2005) KPI zone, http://www.constructingexcellence.org.uk/resourcecentre/kpizone/ Cox, J, Fell, D & Thurstain-Goodwin, M (2002) Red Man, Green Man. Performance Indicators for Urban Sustainability, Rics Foundation. David Bartholomew Associates (2002) Review of sustainability in construction: A report to CRISP, www.crisip-uk.org.uk Davis, D M P & Parliament. House of Commons. Committee of Public Accounts (1998) 42nd report [session 1997-98]: the Skye Bridge, London, Stationery Office. Decleris, M (1986) Systemic Theory, Athens - Komotini, Sakkoulas. Decleris, M (1996) The Twelve Tablets of the Environment: A Handbook of Sustainable Development, Athens-Komotini, Sakkoulas. Decleris, M (2000) The law of sustainable development, General Principles, Brussels, European Commission. Department of Environment Transport and the Regions (1999a) A Better Quality of Life: A strategy for sustainable development in the UK, London, DETR. Department of Environment Transport and the Regions (1999b) Quality of life counts: indicators for a strategy for sustainable development for the United Kingdom: a baseline assessment, London, DETR. 284

References

Department of Environment Transport and the Regions (2000) Building a Better Quality of Life: A strategy for more sustainable construction, London, DETR. Dyllick, T & Hockerts, K (2002) Beyond the business case for corporate sustainability. Business Strategy and the Environment, 11, 130-141. Egan, J S, Department of Environment Transport and the Regions & Construction Task Force (1998) Rethinking construction: the report of the Construction Task Force to the Deputy Prime Minister, John Prescott, on the scope for improving the quality and efficiency of UK construction, London, DETR. Egnatia Odos S.A. (2005) Egnatia Odos S.A., http://www.egnatia.gr Ekins, P (1992) A four-capital of wealth creation. In Ekins, P & Max-Neef, M (Eds.) Real-Life Economics. London/New York, Routledge. Ekins, P, Simon, S, Deutsch, L, Folke, C & R., D G (2003) A framework for the practical application of the concepts of critical natural capital and strong sustainability. Ecological Economics, 44, 165-185. Elkington, J (1997) Cannibals with Forks: The Triple Bottom Line of 21st Century Business, Oxford, Capstone. Elms, D G (1997) System health approach for risk management and design. In Shiraishi, Shinozuka & Wen (Eds.) Structural Safety and Reliability: Proc. ICOSSAR 97. Kyoto, Japan, Balkema. Erlandsson, M & Borg, M (2003) Generic LCA-methodology applicable for buildings, constructions and operation services--today practice and development needs. Building and Environment, 38, 919-938. Espejo, R (1989a) A cybernetic method to study organizations. In Espejo, R & Harnden, R (Eds.) The viable system model: interpretations and applications of Stafford Beer's VSM. Chichester, Wiley. Espejo, R (1989b) P.M. Manufacturers: the VSM as a diagnostic tool. In Espejo, R & Harnden, R (Eds.) The viable system model: interpretations and applications of Stafford Beer's VSM. Chichester, Wiley. Espejo, R & Harnden, R (1989) The viable system model: interpretations and applications of Stafford Beer's VSM, Chichester, Wiley. Farber, S C, Costanza, R & Wilson, M (2002) Economic and ecological concepts for valuing ecosystem services. Ecological Economics, 41, 375-392. Ford, C (1995) The Skye crossing. The ministerial opening of the Skye Crossing. Linking the Isle of Skye with mainland Scotland. Dunsmore Consultancy Limited. 285

References

Ford, C, Johnston, G C, Douglas, H R, Henderson, J R & Valentine, W H (1997) Skye crossing - a design, build, finance and operate project. Civil Engineering, 120, 46-58. Forum for the Future (2003) The Sustainability Profile, http://www.forumdirectory.org.uk/aboutus/index2.html Forum for the Future (2005) http://www.forumforthefuture.org.uk/ Franks, J (1998) Building procurement systems: a client's guide, Harlow, Longman. Fraser, R H L (2004) The Holyrood Inquiry. Edinburgh, Scottish Parliament. Funtowitz, S O & Ravetz, J (1994) Emergent complex systems. Futures, 26, 568-582. Gateshead Council (2005) Gateshead Millennium Bridge Official Site, http://www.gateshead.gov.uk/bridge/bridged.htm Ghisellini, A & Thurston, D L (2005) Decision traps in ISO 14001 implementation process: case study results from Illinois certified companies. Journal of Cleaner Production, 13, 763-777. Giampetro, M & Mayumi, K (1997) A dynamic model of socioeconomic systems based on hierarchy theory and its application on sustainability. Structural Change and Economic Dynamics, 8, 453-469. Global Reporting Initiative (2002) Sustainability reporting guidelines, www.globalreporting.org Government Construction Clients Panel (2000) Achieving Sustainability in Construction Procurement, London, Office of Government Commerce. Gray, R (2001) Forbidden Fruit. Tomorrow: Global Sustainable Business, 11, 50-53. Gray, R (2002) Sustainability Reporting: Who's kidding whom? Chartered Accountants of New Zealand, 81, 66-70. Green-Building-Challenge (2005) Green Building http://greenbuilding.ca/iisbe/gbc2k5/gbc2k5-start.htm

Challenge

2005,

Gunderson, L H & Holling, C S (2002) Panarchy: Understanding Transformations in Human and Natural Systems, Washington, DC, Island Press. Harremoes, P (2003) Ethical aspects of scientific incertitude in environmental analysis and decision making. Journal of Cleaner Production, 11, 705-712. Hedges, G & Woodrow, T (2004) An Introduction to CEEQUAL. Sustainability in the Built Environment 286

References

IEMA North East Region Event. Newcastle upon Tyne. Her Majesty's Government & Department of Transport (1989) New roads by new means: bringing in private finance, HMSO. Heylighen, F & Josslyn, C (2001) Cybernetics and Second-Order Cybernetics. In Meyers, R A (Ed.) Encyclopedia of Physical Science & Technology. New York, Academic Press. HILL, R C & BOWEN, P A (1997) Sustainable Construction: Principles and a Framework for Attainment. Construction Management and Economics, 15, 223-239. Hillary, R (2004) Environmental management systems and the smaller enterprise. Journal of Cleaner Production, 12, 561-569. Hobsbawm, E (1996) Age of Extremes: The Short Twentieth Century 19141991, London, Abacus. Holling, C S (1986) The resilience of terrestrial ecosystems: local surprise and global change. In Clark, W S & Munn, R E (Eds.) Sustainable Development of the Biosphere. Cambridge, Cambridge University Press. Hukkinen, J (2003) From groundless universalism to grounded generalism: improving ecological economic indicators of human-environmental interaction. Ecological Economics, 44, 11-27. International Council for Building Research (1999) Agenda 21 on sustainable construction, Rotterdam, CIB. ISO (2003) ISO 9000 and ISO 14000 - In brief, http://www.iso.org/iso/en/iso900014000/index.html ISO (2004) The ISO Survey of ISO 9001:2000 and ISO 14001 Certificates 2003, Geneva, ISO Central Secretariat. ISSS (2003) International Society for the Systems Sciences Homepage, http://www.isss.org Jackson, M C (1987) New directions in management science. In Jackson, M C & Keys, P (Eds.) New directions in management science. Aldershot, Gower. Jackson, M C (2000) Systems approaches to management, New York; London, Kluwer Academic/Plenum. Jackson, M C & Keys, P (1984) Towards a system of system methodologies. Journal of the Operational Research Society, 35, 473-486. Jamieson, D (1998) Sustainability and beyond. Ecological Economics, 24, 183-192. 287

References

Jeffrey, P (1996) Evolutionary analogies and sustainability. Putting a human face on survival. Futures, 28, 173-187. Jensen, A A & European Environment Agency (1998) Life cycle assessment (LCA): a guide to approaches, experiences and information sources, Copenhagen, Denmark, European Environment Agency. Jowitt, P W, Panagiotakopoulos, P D, Paschke, G & Turner, D (2005) A Triple Bottom Line Reporting Framework for Property Development Portfolios. In Oliver, L, Millar, K, Grimski, D, Ferber, U & Nathanail, C P (Eds.) CABERNET 2005: The International Conference on Managing Urban Land. Belfast, Northern Ireland, UK, Land Quality Press, Nottingham. Kagioglou, M, Cooper, R & Ghassan, A (1999) The Process Protocol: Improving the Front End of the Design and Construction Process for the UK Industry. Harmony & Profit, CIB Working Commission W92, Procurement Systems Seminar. Chiang Mai, Thailand. Kay, J J (2002) Complexity theory, exergy and industrial ecology. In Kibert, C J, Sendzimir, J & Guy, G B (Eds.) Construction ecology: nature as the basis for green buildings. London, Spon Press. Kay, J J, Regier, H A, Boyle, M & Francis, G (1999) An ecosystem approach to sustainability: addressing the challenge of complexity. Futures, 31, 721-742. Keijers, G (2002) The transition to the sustainable enterprise. Journal of Cleaner Production, 10, 349-359. Kerr, S A (2001) The sustainable development of small island communities. International Centre for Island Technology (ICIT) PhD Thesis. Orkney, Heriot-Watt University. Keys, P (1987) Traditional Management Science and the emerging critique. In Jackson, M C & Keys, P (Eds.) New directions in management science. Aldershot, Gower. Kibert, C J, Sendzimir, J & Guy, G B (2000) Construction ecology and metabolism: natural system analogues for a sustainable built environment. Construction Management and Economics, 18, 903-916. Kibert, C J, Sendzimir, J & Guy, G B (2002a) Construction ecology: nature as the basis for green buildings, London, Spon Press. Kibert, C J, Sendzimir, J & Guy, G B (2002b) Defining an ecology of construction. In Kibert, C J, Sendzimir, J & Guy, G B (Eds.) Construction ecology: nature as the basis for green buildings. London, Spon Press.

288

References

Kohler, K & Lutzkendorf, T (2002) Integrated life-cycle analysis. Building Research & Information, 30, 338-348. Kohler, K & Moffat, S (2003) Life-Cycle analysis on the built environment. Industry and Environment, 26, 17-21. Korhonen, J (2001) Four ecosystem principles for an industrial ecosystem. Journal of Cleaner Production, 9, 253-259. Korhonen, J (2004) Industrial ecology in the strategic sustainable development model: strategic applications of industrial ecology. Journal of Cleaner Production, 12, 809823. Kuhre, W L (1995) ISO 14000 Certification - Environmental Management Systems - A practical guide for preparing effective environmental management systems, Prentice Hall. Lockie, S, Faithful, A & Gould (2003) Private finance initiative (PFI): the lost green ticket? Proceeding of ICE, Engineering Sustainability, 156, 11-12. Lovelock, J (1979) Gaia: a new look at life on earth, Oxford (etc.), Oxford University Press. McQuaid, R & Greig, M (2002) An Economic Assessment of the Skye Bridge Tolls, Prepared for the Highland Council. Meadows, D H, Meadows, D L, Randers, J r & Behrens, W W (1972) The limits to growth: A report for the Club of Rome's project on The Predicament of Mankind, New York, A Potomac Associates Book. Millen, Schriefer, Lehder & Dray (1997) Mind Maps and Causal Models: Using Graphical Representations of Field Research Data. CHI 97-Human Factors in Computing Systems. Atlanta, USA. Millington, A F (2000) Property Development, London, Estates Gazette. Ngowi, A B (1998) Is construction procurement a key to sustainable development? Building Research & Information, 26, 340-350. Nicholson, I R, Chambers, N & Green, P (2003) Ecological footprint analysis as a project assessment tool. Proceeding of ICE, Engineering Sustainability, 156, 139-145. Nicolis, G & Prigogine, I (1977) Self-organisation in non-equilibrium systems, New York, Wiley Interscience. Odum, H T (2002) Material circulation, energy hierarchy, and building construction. In Kibert, C J, Sendzimir, J & Guy, G B (Eds.) Construction ecology: nature as the basis for green buildings. London, Spon Press. 289

References

Pearce, D (2000) Public Policy and Natural Resources Management. A framework for integrating concepts and methodologies for policy evaluation, Draft paper for DGXI, European Commission. Pearce, D (2003) The social and economic value of construction: The construction industry's contribution to Sustainable Development, London, nCRISP. Peterson, G (2002) Using ecological dynamics to move toward an adaptive architecture. In Kibert, C J, Sendzimir, J & Guy, G B (Eds.) Construction ecology: nature as the basis for green buildings. London, Spon Press. Ravetz, J (2000) Integrated assessment for sustainability appraisal in cities and regions. Environmental Impact Assessment Review, 20, 31-64. Robèrt, K-H (2000) Tools and concepts for sustainable development, how do they relate to a general framework for sustainable development, and to each other? Journal of Cleaner Production, 8, 243-254. Robèrt, K-H, Schmidt-Bleek, B, Aloisi de Larderel, J, Basile, G, Jansen, J L, Kuehr, R, Price Thomas, P, Suzuki, M, Hawken, P & Wackernagel, M (2002) Strategic sustainable development -- selection, design and synergies of applied tools. Journal of Cleaner Production, 10, 197-214. Ross, J (2002) Skye to gain £5m if bridge tolls go, The Scotsman, 25 June 2002 Rostow, W W (1959) The Stages of Economic Growth. Economic History Review, 12, 1-16. Santos-Reyes, J & Beard, A N (2002) Assessing safety management systems. Journal of Loss Prevention in the process industries, 15, 77-95. Schneider, E D & Kay, J J (1994) Life as a manifestation of the second law of thermodynamics. Mathematical Computer Modelling, 19, 25-48. Schot, E, Brand, E & Fischer, K (1997) The Greening of Industry for a Sustainable Future: Building an International Research Agenda, The Greening of Industry Network and The Netherlands Advisory Council for Research on Nature and Environment (RMNO). Shannon, C E & Weaver, W (1949) The mathematical theory of communication, Urbana, [Ill.], University of Illinois Press 1949. Simmons, C, Lewis, K & Barrett, J (2000) Two feet - two approaches: a componentbased model of ecological footprinting. Ecological Economics, 32, 375-380. Smith, A (1776) An inquiry into the Nature and Causes of the Wealth of Nations, London, Temple Press. 290

References

Snowdon, B & Kawalek, P (2003) Active meta-process models: a conceptual exposition. Information and Software Technology, 45, 1021-1029. Sustainable Development Task Force (2003) Drivers for sustainable construction. Industry and Environment, 26, 22-25. Terenzi, G (2002) Global evolution of human systems: a prototype model. 47th Annual Conference of The International Society for the Systems Sciences. Iraklion, Crete, Greece. The Edinburgh Sustainable Development Partnership (2003) Edinburgh Standards, http://www.esdp.org.uk/edinburgh-standards.htm The Sigma Project (2003a) SIGMA guide to guidelines and standards relevant to sustainable development, http://www.projectsigma.com/ The Sigma Project (2003b) The SIGMA Guidelines. Putting sustainable development into practice- a guide for organisations, http://www.projectsigma.com/ Todd, J A, Crawley, D, Geissler, S & G., L (2001) Comparative assessment of environmental performance tools and the role of the Green Building Challenge. Building Research & Information, 29, 324-335. Turner, J R & Muller, R (2003) On the nature of the project as a temporary organization. International Journal of Project Management, 21, 1-8. U.N. General Assembly (1986) Declaration on the Right to Development. A/RES/41/128. U.S. Green Building Council (2005) LEED- Leadership in Energy & Environmental Design, http://www.usgbc.org/leed/leed_main.asp Ulrich, W (1983) Critical Heuristics of Social Planning, Bern, Haupt. UNEP-DTIE (2003) Sustainable building and construction: facts and figures. Industry and Environment, 26, 5-8. United Nations (1992) Agenda 21 http://www.un.org/esa/sustdev/documents/agenda21/index.htm United Nations (1997) Earth Summit, http://www.un.org/geninfo/bp/enviro.html United Nations (2002a) Johannesburg 2002 summit: Key outcomes of the summit, http://www.johannesburgsummit.org/html/documents/summit_docs/2009_keyoutcomes _commitments.doc United Nations (2002b) Johannesburg Declaration, http://www.un.org/esa/sustdev/documents/WSSD_POI_PD/English/POI_PD.htm 291

References

United Nations (2002c) Johannesburg Plan of Implementation, http://www.un.org/esa/sustdev/documents/WSSD_POI_PD/English/POIToc.htm Upham, P (2000) An assessment of the Natural Step theory of sustainability. Journal of Cleaner Production, 8, 445-454. Van den Bergh, J & Verbruggen, H (1999) Spatial sustainability, trade and indicators: an evaluation of the 'ecological footprint'. Ecological Economics, 29, 61-72. Veleva, V, Bailey, J & Jurczyk, N (2001) Using Sustainable Production Indicators to Measure Progress in ISO 14001, EHS System and EPA Achievement Track. Corporate Environmental Strategy, 8, 326-338. Wackernagel, M, Rees, W E & Testemale, P (1996) Our ecological footprint: reducing human impact on the earth, Gabriola Island, B.C, New Society Publishers 1996. Walton, M (1986) The Deming management method, New York., Dodd Mead. Wells, J (2004) Social aspects of sustainable construction: an ILO perspective. Industry and Environment, 26, 72-75. Wernick, I K & Ausubel, J H (1995) National materials flows and the environment. Annual Review of Energy and the Environment, 20, 463-492. Wiener, N (1948) Cybernetics or control and communication in the animal and the machine, New York, The Technology Press John Wiley [1948]. Wikipedia contributors (2005a) Isle of Skye - Wikipedia: The Free Encyclopedia, http://en.wikipedia.org/wiki/Isle_of_Skye (accessed 27 April 2005) Wikipedia contributors (2005b) Skye Bridge - Wikipedia: The Free Encyclopedia, http://en.wikipedia.org/wiki/Skye_Bridge (accessed 27 April 2005) Wilsdon, J (1999) The Capitals Model: A framework for sustainability, The Sigma Project. World Business Council for Sustainable Development (2000) Eco-efficiency: Creating more value with less impact, http://www.wbcsd.org/web/publications/eco_efficiency_creating_more_value.pdf Zobel, T & Burman, J O (2004) Factors of importance in identification and assessment of environmental aspects in an EMS context: experiences in Swedish organizations. Journal of Cleaner Production, 12, 13-27.

292

Appendix A Mind Maps

A Mind Map (Buzan and Buzan, 2000) is a way to graphically organise ideas and thoughts which was developed by Tony Buzan in the late 1960s.

It is useful in

brainstorming and developing ideas, as well as in organising large amounts of complex data in a way that both the details and the overall view can be seen. A Mind Map is made of a central idea or concept out of which extend several branches. These represent the main ideas or parts of the central idea in the form of keywords. Each branch is further divided in sub-branches, sub-sub branches and so on, giving a radiant and hierarchical structure to the map.

By extending its branches in two

dimensions, the Mind Map is much more efficient in capturing (note taking) and generating (brainstorming) information as opposed to conventional lists (formatted with bullets, indenting etc.). A Mind Map is an expression of what Buzan calls Radiant Thinking. Apart from their structure, Mind Maps are more efficient by using both sides (hemispheres) of the brain: the left which is predominantly logical and the right which is predominantly artistic49 . Conventional learning is mainly focused on the left/logical part of the brain, by using linearity, analysis, sequences, words, lists etc. Mind Maps, on the other hand, make use of both parts of the brain by incorporating colours and images, apart from words, which are the focus of the right part. The intention is to use emphasis and associations between branches in order to help the quick assimilation of information. Moreover, the creativity involved in drawing a Mind Map is good for aiding the creativity and generation of ideas during brainstorming. Mind Maps have been widely used since Buzan invented them, in various applications. Their radiant structure, however, makes them particularly suitable in quickly representing hierarchical structures of systems and processes, as suggested by Blockley and Godfrey (2000). This way they can be regarded as a first step in capturing a systems structure before moving to more formal systemic diagrams, such as flow or system dynamic diagrams (Millen et al., 1997). Moreover, by using colour or other associations it is possible to represent linkages between different branches/sub-systems.

49

This partitioning of brain functions is not strict, in the sense that despite their dominant focus, both

parts are basically skilled in all brain functions.

294

When Buzan developed mind-mapping he was focusing on hand drawings using coloured pens and paper. Today however, computers have made possible to easily draw complex Mind Maps using specialised software,

such as Mind Manager

(www.mindjet.com). Mind Manager has been used to generate all the Mind Maps used in the thesis. The next three pages show the extended Mind Map diagrams that were mentioned in paragraph 4.5.4. References Blockley, D & Godfrey, P (2000) Doing it differently: systems for rethinking construction, London, Thomas Telford. Buzan, T & Buzan, B (2000) The Mind Map Book. Millennium Edition, London, BBC. Millen, Schriefer, Lehder & Dray (1997) Mind Maps and Causal Models: Using Graphical Representations of Field Research Data. CHI 97-Human Factors in Computing Systems. Atlanta, USA.

295

Appendix B Pilot Triple Bottom Line Report of the PDC

Following is the Pilot Triple Bottom Line Report of the PDC that was compiled in October 2004. A similar more official external report is due to be published in 2005.

(PILOT) TRIPLE BOTTOM LINE REPORT

About the EDI Group EDI was incorporated in 1988, originally to develop land in the South Gyle area of Edinburgh, including what is now known as Edinburgh Park. This land was in the ownership of the City, and invested in the Company at market value in return for shares and loan stock. The Company has grown steadily since then, developing land and property either on its own or through joint ventures. It has undertaken both large and small development schemes and purchased several investment properties, requiring either remedial action or in anticipation of future development. Over the last eight years the Company has increased its net asset value from £9 million to over £30 million. Gross rental has, in similar vein, risen from £500,000 to over £4 million. In addition to this financial success the Company has established an excellent reputation for the innovative nature and high quality of its developments, winning a number of awards from organisations as varied as the Saltire Society, the Royal Fine Art Commission Trust and most recently the British Construction Industry. Working in a small team, with access to the best of the property network in the form of architects and consultants, agents and project managers, EDI has formed partnerships with developers, landowners, local authorities and other public sector bodies, and is involved across the property spectrum.

The Sustainable Development Agenda and the Triple Bottom Line Sustainable development has been promoted worldwide over the last fifteen years by governments and NGOs. It is seen as a method of protecting the fragile global environment, while dealing with issues of inequality such as poverty, economic development, and quality of life. The most quoted definition of sustainable development is caring for the needs of todays generation without jeopardising the ability of future generations to care for their own needs. Growing awareness of the diminution of natural resources over the latter part of the 20th century has led to a creative re-assessment of what business success means, and how it can be measured. Wealth creation is traditionally a strictly financial calculation, but even within that limited criteria a longer-term view of profitability and value growth may call for investment, and possibly losses, in the short to medium term. Similarly, when considering the wider interests of the community at large, individual businesses are starting to re-balance financial returns with other social and environmental objectives as their contribution to society. This is particularly true when supported or driven by shareholder and customer pressure. The interesting point about this shift is that it creates a new front of competition, and the market creates its own efficiency through benchmarking each companys performance against similar operations. For example, energy efficiency measures were always a cost-saving technique for businesses, but are now higher up the cost-benefit chain because they are seen as preserving natural resources. Social responsibility, employee involvement and charitable contributions can allow access to restricted investment funds. This movement toward a full assessment of performance is in its very early stages, and yet is making rapid progress. The EDI Group is pleased to contribute this first report on our own performance, but we appreciate we have a long way to go and many questions have arisen in this process which have still to be answered. We look forward to playing our part in promoting the sustainable agenda on the wider stage.

Triple Bottom Line

Five Capitals

Nine KPIs

Traditional financial reports often refer to the bottom line, usually distributable profit, the key measure of company performance. The style of reporting we are aiming for reflects each of the three factors of Sustainable Development in a form of triple bottom line. This can be split into five Capitals, or alternative concepts of value. For each of the Five Capitals, strategic KPIs have been developed. TRIPLE BOTTOM LINE

FIVE CAPITALS

RELATED KPIs

Natural

Resource Use Waste Management Land Use Customer Satisfaction Employee Satisfaction Community Development Value Added Return on Investment Brand Strength

Environmental Manufactured Human Social Society Economic

Financial

ENVIRONMENTAL FACTORS Natural Capital represents the stock of environmentally provided assets and falls into two categories: Resources, some of which are renewable (trees, vegetation, wildlife, water), some non-renewable (fossil fuels, minerals) Services, such as climate regulation/air conditioning or waste processing cycles. Manufactured Capital comprises the entire fabricated infrastructure that is already in existence (tools, machines, roads, and buildings). It does not include the goods and services produced. Key Performance Indicators: Resource Use: Does the project make prudent use of natural resources (materials, water, and energy)? Waste Management: Does the project facilitate the minimisation and appropriate treatment of its wastes to land, water or air? Land Use: Does the project promote efficient land use? The thinking behind this selection of assessment categories is that they relate to use of resources in construction, in use and in the environmental capital embedded with the site.

SOCIAL FACTORS Human Capital consists of the health, knowledge, skills, motivation and spiritual ease of people. It is all the things that enable people to feel good about themselves, each other, and to participate in society and contribute productively towards its well-being (wealth). Society Capital is all the different cooperative systems and organisational frameworks people use to live and work together, such as families, communities, governments, businesses, schools, trade unions, voluntary groups. Although theses involve different types of relationships and organisations, they are all structures or institutions that add value to human capital. Key Performance Indicators Customer Satisfaction: Does the project meet or exceed customer requirements? Employee Satisfaction: Does the project take account of and promote employee (EDI) satisfaction? Community Development: Does the project support the overall development of the community? The choices of these three assessment headings relate to the contribution the project makes to satisfying the needs of the Client, EDI staff and the wider community. ECONOMIC FACTORS Financial Capital has, strictly speaking, no intrinsic value; whether in shares bonds or banknotes. Its value is purely representative of natural, human social or manufactured capital. Financial capital is nevertheless very important as it reflects the productive power of other types of capital, and enables them to be owned or traded. Key Performance Indicators Added Value: How much has the project gained through the bringing together of the various resources used in delivery? Return on investment: The added value expressed as a percentage of the developers capital, taking into account the length of time the investment was tied up in production. Brand Strength: How much has the project enhanced the reputation of the company with customers and other stakeholders? For example, through such things as aesthetic impact; creative respect for design standards; efficient, professional delivery; or any other unique feature.

The Data Gathering Tool Using Mind Mapping had the advantage of making the whole process much more graphic and accessible. For example this has allowed the assessment of each project to be captured and then exported automatically into a skeleton Triple Bottom Line Report that summarises performance both at individual Project and Company levels.

Prototype Schem aticof ofReporting ReportingM Mechanism echanism(3) Generation of Report with Mind Manager Software

Aggregationof Projects to assess EDIs Performance

Life -cycle Stage

Links to KPI Spreadsheets

Data collected fromeach project

In gathering detailed performance data from each project, it became clear that although the overall approach was valid, it had become overly procedural and data intensive. This approach used various input data to estimate an output measure. For example, asking for information on CO2 emissions, energy consumption/sq m, and embodied energy, to make some high level statement about resource efficiency. As a consequence too much of the data required was either not readily available or was not always relevant to particular project contexts. The solution was to draw back from the requirement of an extensive set of (context-free) data for each project that could then be conflated to provide an assessment of performance against some higher order performance criteria. An alternative approach was devised that asked about the high level issues directly; In terms of current best practice in terms of Sustainable Development, how does this particular project rate on this KPI? The required responses were drawn form a simple four point scale: 1 = NOT GOOD 2 = ADEQUATE 3 = GOOD and 0 = where there is No Data. For example, in terms of waste management, or resource efficiency in construction, the assessment process doesnt necessarily require detailed figures about materials wastage, waste separation, or sources of timber. What it does require is that the Project Manager can verify and substantiate the assessment, providing evidence to support the response, showing that EDI has the systems in place to ensure that its objectives have been met, and allow auditing by independent assessors.

The Tron Square Nursery A canny deal and cunning design has turned a derelict Old Town site into a beautifully light and airy nursery.(from the Scotsman Magazine, Sep 2002) In this example EDIs unique position and ability to broker some exchange of space between various sites owned by the Council, was used to release the existing nursery site on the Cowgate for a residential development, relocating the nursery into a new and imaginative design by developing a derelict brownfield site in the Old Town.

The new location/design challenged some design guidelines both codified (Toddler Dash Distances) and policy (the usual planning permission wisdom in a UNESCO world heritage site - at the rear of a High Street tenement/close).

The project was the subject of some local objections, though taking into account a larger stakeholder envelope; it contributed to the Three Pillars of Sustainable Development (Social, Environmental and Economic) in a positive and ingenious way. Prof. Paul Jowitt

Overall EDI Triple Bottom Line The Graph below is an example of the type used to illustrate and summarise performance over 29 development projects, in various stages.

Average Development

Resource Use 3.00

Brand Strength

Waste Management

2.04

2.56 2.00

1.85 1.00 2.59 2.00

Return on Investment

Land Use 0.00

2.22

2.15

Value Added

Customer Satisfaction 1.96 2.15

Community Development

Employee Satisfaction

From this we can see that the efficient use of land is a clear strength, and although performance on the handling of other resources could be improved, it is broadly in line with the sector. On the commercial side, the company consistently creates products that enhance the companys reputation within its various networks. Return on investment is competitive, as might be expected, but there is recognition that the company has the ability to create value out of difficult situations, by bringing diverse contributions together productively. On the social side, the company achieves overall pass marks on customer satisfaction, and slightly less on employee satisfaction. Community development is strong on the wider community implications, but is pulled back by the impact of local objections to schemes.

EDI Overall Assessment compared to Internal Perception It is also realised that internal perception of EDIs overall performance is a useful benchmark when considering future potential improvements. A collective view was obtained during a workshop with a number of key EDI staff, and as a comparison this was also plotted on the diagram below.

Average Development - EDI Internal Perception Resource Use 3.00 Brand Strength 2.00

Waste Management

1.00 Return on Investment

Land Use 0.00

Average Development EDI Internal Perception

Value Added


Customer Satisfaction


This demonstrates that EDI perceives itself broadly as the average of individual projects would suggest, with one or two notable variances. Both resource use and waste management score lower than average, perhaps indicating that the relatively good performance across the projects is driven by external factors in the industry amongst consultants and contractors, rather than being driven by EDI themselves. In addition, the internal perception that EDI has a major focus on community development and customer satisfaction, is not totally supported by the results on specific projects, indicating that some greater effort needs to be made to carry the focus through to delivery.

The Way Forward 1) Performance Targets Over the period 2004-5, EDI will focus on improving performance in resource use and waste management, and in following through on the delivery of higher standards of customer satisfaction and community involvement. This will be achieved in part by the actions described in 4 & 5 below. 2) Qualitative to quantitative - the technical data gathered as part of this initial assessment of performance, while not presented as such, forms an important part of the basis of the report. It will be important to build on these figures and increase their availability through the supply chain, in order to set more concrete targets over the coming years. 3) Appropriate incorporation of acquired investments the assessment process excludes those properties acquired by EDI for management as investments, as some of the Key Performance Indicators as applied to these properties would not have been indicators of EDIs performance. The next annual Triple Bottom Line Report will incorporate these activities. 4) Supply chain influence - the criteria that EDI currently uses to select its project partners and suppliers are based on reputational factors and track record in other words, quality driven. EDI is in a very positive position to achieve and fulfil its own objectives by influencing its supply chain to deliver the wider issues that reflect EDIs implicit ethos and culture, and make a positive impact on EDIs Triple Bottom Line performance. It was clear from the interviews conducted with EDI staff that its expectations of the supply chain were largely implicit (EDI will only tolerate high standards and quality of supplier service) but there was no explicit EDI framework or procedure established to assess, monitor and underpin the quality of service provided.

5) Process improvement - In addition to the project related assessment it was felt that an overall improvement approach should be developed to implement processes associated with sustainable development. Examples of such processes are given below, both those that are in use and those which are not. Each of these areas is implicit in the delivery of sustainability in the projects but is required to be more explicit in day-to-day operational requirements. The next annual Triple Bottom Line Report will incorporate performance on implementing these processes.

Environmental Used currently Car-free schemes Home Zone Designs Not used currently Sustainable procurement policy Waste minimisation policy for contractors Green transport policies

Social Used currently

Economic Used currently

Health & Safety management systems

Change control procedures

Stakeholder engagement mechanisms

Project governance methodology

Not used currently Staff recruitment and training requirements for contractors

Post Project Appraisals Business Continuity Plan Risk Management Policy Not used currently Quality Management Systems for contractors

Comment from our Consultants It was clear from the initial meetings and interviews that there was a clear underlying ethos that reflected EDIs ownership, its origins and its staff. The project motivation came from a senior level within the organisation and appeared to reflect not simply an opportunity to establish a market edge but to benchmark its performance against implicit values and because it was the right thing to do irrespective of market benefit. The TBL reporting mechanism to assess EDIs sustainability performance was developed using a sustainability policy, drafted and agreed by the EDI Senior Management, as a starting point for the company. From this the first objectives were identified and corresponding targets and KPIs developed. Some indicators relate directly to energy/resource consumption in construction, throughout the project lifetime and during its eventual decommissioning. Some relate to wider impacts such as travel and waste generation. Others reflect broader social/community, environmental and economic impacts. In defining the types of indicators that EDI could adopt. A Preliminary Review examined a number of sustainability indicator sets, including some developed within the construction sector. These included: UK Strategy Toward Sustainability Indicators; The Scottish Parliaments Perspective and Strategy; Sustainable Construction Indicators; Rethinking Construction (Egan); Communities Scotland indicators of environmental sustainability; A number of project / company specific sustainability reporting/assessment systems were also referenced, including: Carillion plc Land Securities plc Construction Industry Research and Information Association (CIRIA) The Global Reporting Initiative (GRI) The SIGMA Project (BSI, AccountAbility and Forum For the Future) Assessment sheets were used for the Data Gathering Tool, each containing a list of qualitative and quantitative questions (relating to the KPIs). Each question sought an evaluation from the respondents as to whether the KPI was moving in the right direction by asking them if the KPI measure was Acceptable, Better than expected or Worse than expected. Clearly the areas where EDI perform well, relate to the use or re-use of land together with a clear and well defined brand, largely related to quality of design and regeneration achievement. Areas where EDI can improve include the reduction of resource use, waste and the use of natural resources. However, it should be noted that this is a factor common to most in the development and construction sectors. In our view the results presented in this report reflects accurately the performance on sustainable development for The EDI Group, and will be of value both in communicating this performance to a wider audience, and in highlighting areas where further progress can be made.

Professor Paul Jowitt (SISTech Ltd) George U. Paschke (Wren & Bell)

Appendix C Following is the paper that was presented at the CABERNET 2005 Conference titled: A Triple Bottom Line Reporting Framework for Property Development Portfolios

Theme 1: Integrated Urban Land Management

A Triple Bottom Line Reporting Framework for Property Development Portfolios Professor Paul W Jowitt Scottish Institute of Sustainable Technology, Heriot Watt University, Edinburgh, EH14 4AS, UK. [email protected] Panagiotis Panagiotakopoulos Heriot Watt University George Paschke Wren and Bell Consulting Engineers Derrick Turner The EDI Group Introduction The external perception and internal behaviour of property development companies has often been one of opportunistic site acquisition and development, informed by trends in the property market and geared to long term profit growth and a return on capital. Property developers have not been seen as conscious agents for environmental improvement, prudent use of natural resources and inclusive social progress. This is now changing in response to a combination of regulatory pressures, a greater awareness of the Corporate Social Responsibility and Sustainable Development agendas, and recognition that there are broader measures of success and reputation than the annual profit and loss account. Growing awareness of the diminution of natural th resources over the latter part of the 20 century has led to a creative re-assessment of what business success means, and how it can be measured. Wealth creation is traditionally a strictly financial calculation, but even within that limited criterion a longer-term view of profitability and value growth may call for investment, and possibly losses, in the short to medium term. Similarly, when considering the wider interests of the community at large, individual businesses are starting to re-balance financial returns with other social and environmental objectives as their contribution to society. This is particularly true when supported or driven by shareholder and customer pressure. This paper describes an approach developed for a Property Development Company to develop a Triple Bottom Line reporting framework for its property portfolio. Although assessment methodologies are available to benchmark the environmental performance of both new and existing buildings (e.g. BREEAM), and engineering projects (e.g. CEEQUAL), such approaches are usually more focussed on measures of best practice in environmental design and management, and less on their social performance.

They are also much more closely associated with the design and construction process, in which Environmental Management Systems (and the availability of detailed data to support them) are more common than is often the case in the property development business. Over time there will be convergence as the supply and delivery chains become better connected. As a step in this direction, innovative frameworks for assessing the performance of property companies within a broad spectrum of sustainable development criteria need to be developed and which can have proper regard for the very specific context of individual projects. This paper describes the development of such a framework, based on a Triple Bottom Line/Five Capitals reporting methodology, and resulting in nine KPIs that can be applied to any project with no loss of local context. The methodology is essentially one where the evidence to justify the assessments needs to be capable of audit. It is outcome/output focussed rather than input focussed. A supplementary assessment of the developers internal underpinning business protocols and systems is also part of the overall assessment framework, and which serves to indicate those areas where improvements at the project level can be made. Sustainability Frameworks Since sustainability is still a very new and complex issue, there is not yet an agreed definition, model or frame work to conceptualise and implement it. When referring to sustainability, organisations usually mean balancing the Financial, Environmental and Social aspects of their activities, in other words their Triple Bottom Line (1). Even though this approach is very simple it is widely used to realise the organisations sustainability aspects and to easily raise awareness. A more elaborate framework is the 5 Capitals Model (2). This model identifies five sources of capital: the natural, manufactured, human, social and financial capitals.

CABERNET 2005 The International Conference on Managing Urban Land 1


Natural Capital represents the stock of environmentally provided assets and falls into two categories: i) Resources, some of which are renewable (trees, vegetation, wildlife, water), some non-renewable (fossil fuels, minerals) ii) Services, such as climate regulation/air conditioning or waste processing cycles. Manufactured Capital comprises the entire fabricated infrastructure that is already in existence (tools, machines, roads, and buildings). It does not include the goods and services produced. Human Capital consists of the health, knowledge, skills, motivation and spiritual ease of people. It is all the things that enable people to feel good about themselves, each other, and to participate in society and contribute productively towards its well-being (wealth). Social Capital is all the different cooperative systems and organisational frameworks people use to live and work together, such as families, communities, governments, businesses, schools, trade unions, voluntary groups. Although theses involve different types of relationships and organisations, they are all structures or institutions that add value to human capital. Financial Capital has, strictly speaking, no intrinsic value; whether in shares bonds or banknotes. Its value is purely representative of natural, human social or manufactured capital. Financial capital is nevertheless very important as it reflects the productive power of other types of capital, and enables them to be owned or traded. Sustainability in the Construction Industry The construction industry has recently started to face the challenge of improving its performance in terms of sustainable development. The impactsboth negative and positiveof its operations and of its product, the built environment, on all the above dimensions of sustainability are indeed very significant. Assessing the sustainability performance at the project level is very important in realising the impacts and possible improvements that the industry can make. As an example the case studies of two similar construction projects are presented: the Skye Bridge and the Gateshead Millennium Bridge over the Tyne. The case studies were performed by representing the various sustainability aspects of each project in terms of the 5

Capitals on a Mind Map, as shown in Figure 1, which allows the various aspects of the construction project and their interconnections to be visualised. The Gateshead Bridge is widely recognised as a successful project. It has won several awards for its design which incorporated environmental aspects (waste traps, energy efficient tilting mechanism), it was socially acceptable and enhanced the human capital (inspiring, aesthetically pleasant). The Skye Bridge in contrast has been a very contentious project especially in terms of its financial, aesthetic and social aspects. It was one of the first PFI projects in Scotland and financial arrangements were severely criticised. The tolls were considered to be extremely high, especially for the local community, leading to an active anti-toll campaign (SKAT). Just recently, the Scottish Executive bought ought the PFI franchisee and cancelled the toll charges. On the other hand, its design and construction did make efforts to minimise environmental impact in an area of particular sensitivity, for example by the construction of special tunnels to protect the otters living in the area and certain measures taken to minimise the environmental impacts during the construction phase. These two examples show the great number and complexity of the issues involved in assessing sustainability in construction. Sustainability Reporting in Property Development The above frameworks and approaches are very useful in conceptualising and understanding the meaning of sustainability in the construction sector. However, sustainable construction needs to be addressed and implemented by all those involved in the operation of the construction industry and Property Developers can play a significant role in this effort. Their operations usually results in significant sustainability impacts, but on the other this can be viewed as an opportunity for those wishing to take responsibility and improve their sustainability performance. One common way of achieving this is to assess the performance of their portfolios according to sustainability criteria, and reporting it to their stakeholders. The remainder of this paper presents the development of such an assessment and reporting framework for a major property developer company (PDC) operating in Edinburgh. Its portfolio includes offices, residential, industrial and area regeneration projects. From the beginning of this project the PDC showed that it had a clear underlying sustainability ethos that reflected its



FIGURE 1: Mind Map showing the 5 Capitals involved in the Skye Bridge

ownership, its origins and its staff. This was also evident from the companys stated mission: to develop the property, economic and employment opportunities in Edinburgh and surrounding area through commercial, innovative and sustainable activities for the benefit of Edinburgh and its citizens. Moreover, the initiative and motivation of the project came from a senior level within the organisation and appeared to reflect not simply an opportunity to establish a market edge, but to benchmark its performance against implicit values and because it was the right thing to do irrespective of market benefit.

Project Assessment KPIs In order to assess its portfolio, the PDC wanted to have a custom made framework relevant to its operations instead of applying an existing assessment tool such as BREEAM. Initially the development of this framework was based on detailed KPIs from various literature sources that would provide an objective performance assessment for each of the companys projects. These KPIs were organised using the Triple Bottom Line/ 5 Capitals frameworks and were represented in Mind Maps to help the companys staff understand how they relate to the general assessment framework, as shown in Figure 2.



b)

Waste Minimisation: Does the project facilitate the minimisation and appropriate treatment of its wastes to land, water or air?

c)

Land Use: Does the project promote efficient land use?

The thinking behind this selection of assessment KPIs is that they relate to use of resources in construction, in use and in the environmental capital embedded within the site. In terms of the Human & Social capitals the KPIs were:

FIGURE 2: Mind Map showing indicative project KPIs

This bottom-up approach, however, encountered various problems in its implementation. First of all, the data required for the detailed KPIs were not available or were held by the supply chain of each project. Second, the use of common detailed indicators resulted in the loss of the particular context of each project (e.g. project location and type), making it difficult to make useful comparisons. Finally, the detailed KPIs had to be compiled in long spreadsheets making the overall assessment process difficult and time intensive. The solution to these problems was to use a top-down approach that drew back from requiring detailed data. Instead of being input driven (e.g. asking for various information on CO2 emissions; energy consumption/m2; embodied energy etc. to make some high level statement about resource efficiency), it was output driven, i.e. asking for high level issues directly (e.g. in terms of current best practice, how does this particular project rate against this headline criterion?). This new approach used nine high level KPIs, three for each bottom line, as shown in Table 1. In terms of the Natural & Manufactured capitals the KPIs were: a)

Resource Use: Does the project make prudent use of natural resources (materials, water, and energy)?

a)

Customer Satisfaction: Does the project meet or exceed customer requirements?

b)

Employees/Job: Does the project take account of and promote employee (PDC) satisfaction?

c)

Community Development: Does the project support the overall development of the community?

The choices of these three assessment headings relate to the contribution the project makes to satisfying the needs of the Client, PDC staff and the wider community. In terms of the Financial capital the KPIs were: a)

Added Value: How much has the project gained through the bringing together of the various resources used in delivery?

b)

Return on investment: The added value expressed as a percentage of the developers capital, taking into account the length of time the investment was utilised.

c)

Brand Strength: How much has the project enhanced the reputation of the company with customers and other stakeholders? (For example through such things as aesthetic impact; creative respect for design standards; efficient, professional delivery; or any other unique feature.)

TABLE 1: High Level KPIs Natural & Manufactured

Human & Social

Financial

Resource Use

User Satisfaction

Value Added

Waste Minimisation


Return on investment

Land Use


Brand Strength



Project Assessment Methodology

In summary the Project Assessment Methodology has a number of advantages:

The PDCs portfolio was assessed by asking the Project Managers to score the performance of their projects according to each one of the above KPIs. A four point scale was used were: 1= 2= 3= 0=

1. 2. 3. 4. 5.

NOT GOOD, FAIR, GOOD, and NO DATA AVAILABLE

6.

For example, in terms of energy consumption the answer could be Fair, because there have been some relevant considerations in the initial design, or Good, because there are also energy data measurements which are better than best practice standards. However, the Project Managers were prompted to explicitly support their judgements by providing the evidence on which each assessment was based. This way they were encouraged to improve their assessment measurements each year. If for example the first year the energy efficiency of a project was assessed based on a value judgement, the PM was prompted to state this and next year he may wish to support his judgment by applying an assessment tool such as BREEAM. In this way the framework could become as data intensive as the company itself wished. The results of the assessments were compiled for each project and presented in spider diagrams, as shown in Figure 3, which allowed an instant performance overview and identification of strong/weak points. Similar diagrams were compiled for the aggregated performance of different types of development (e.g. industrial, residential) to identify other critical trends.

It ensures the context of the project is taken into account; It doesnt require performance data on what might be regarded as irrelevant performance indicators; It allows the project manager to exercise judgement; It focuses on outputs, not inputs. It is more akin to a high-level audit process and not a bottom up tick-box procedure. There is a corollary: the judgements have to be substantiated by evidence.

Assessment at the Process/ Management Level A second assessment was developed to identify whether certain management processes and standards likely to enhance the sustainability performance of particular projects, were part of the companys operations. A list of such processes was compiled for each bottom line, and those that the PDC was implementing were identified, as shown in Table 2. Some of these processes were also identified as appropriate for formulating supply chain requirements and introducing them into the tender documents.

TABLE 2: Sustainability processes at the process/management level Natural & Manufactured

Human & Social

Used currently Car-free schemes Home Zone Designs

Used currently Health & Safety management systems

Not used currently Sustainable Procurement policy Waste minimisation policy for contractors Green transport policies

Stakeholder engagement mechanisms Not used currently Staff recruitment and training requirements for contractors

Financial Used currently Change control procedures Project governance methodology Post Project Appraisals Business Continuity Plan Risk Management Policy Not used currently Quality Management Systems for contractors

F IGURE 3: Project assessment spider-diagram Conclusions CABERNET 2005 The International Conference on Managing Urban Land 5


This paper describes a Triple Bottom Line assessment methodology developed for property development portfolios. The method is output focussed and flexible enough to allow the local context of particular projects with a varied portfolio to be accommodated. The assessment technique focuses on 9 high level KPIs. The Developers underpinning business processes also form part of the overall assessment. The process does not rely on prescriptive sets of project data but instead allows the assessors to exercise judgement in the selection of the appropriate evidence to underpin assessment KPIs. These judgements must be evidence based. It is anticipated that over time, the developers supply chain will become part of the process and that such evidence will become more routinely available. The Triple Bottom Line Assessment has proved useful to the developer both externally (eg providing the basis for a section on sustainability in the annual report) and internally, stimulating discussion among staff and highlighting areas for improvement.

References (1) ELKINGTON J. Cannibals With Forks: The Triple Bottom Line of 21st Century Business. New Society Publishing (1998) (2) EKINS P et al. A framework for the practical application of the concepts of critical natural capital and strong sustainability. Ecological Economics (2003) 44 (165-185)


Appendix D

Acronyms of Chapters 5 & 6

CEC: City of Edinburgh Council CEO: Chief Executive Officer CT: Consulting Team EMAS: Eco Management and Audit Scheme EMS: Environmental Management System FCM: Five Capitals Model FMs: Facilities Managers FSMS: Fire Safety Management System GRI: Global Reporting Initiative HOD: Head of Department IT: Information Technology KPIs: Key Performance Indicators LCA: Life Cycle Analysis PDC: Property Development Company PM: Project Manager S1 (2,3,4,5): System 1 (2,3,4,5) SIGMA: Sustainability Integrated Guidelines for Management SMT: Senior Management Team TBL: Triple Bottom Line TNS: The Natural Step VSM: Viable System Model

316