Project Management in the Era of ESG: Realizing Benefits and Overcoming Challenges
Environmental, social, and governance (ESG) issues have gained increasing importance in the world of business and investing, with the aim of encouraging companies to act responsibly. ESG refers to a set of criteria that are used to assess a company’s impact on society, the environment, and its corporate governance practices. This should help decision-makers decide when they need to take environmental issues, social issues, and corporate governance issues into account.
Nowadays, it is important for organizations to consider how to do business by integrating ethical and sustainable practices into business strategies. It is a challenge where ESG can provide a valuable contribution and help in promoting responsible business practices. Moreover, these practices should not only be beneficial for society and the environment but also for the long-term success and sustainability of businesses.
By having ESG as a global concern, this topic was recognized and discussed during the Global Project Profession Forum, which was held in Seville, Spain, on September 21–22, 2023. This event was organized by the IPMA and brought together project management professionals and organizations worldwide to discuss and exchange knowledge, ideas, inspirations, and experiences on emerging trends, innovation, diversity, and best practices in project management.
The panel discussion on the topic of “Project management and ESG”, which was held on the first day of the forum, gathered many interested participants who raised a lot of important issues with their active participation and questions, while experienced speakers provided their insights and helped clarify some of them. Mr. Jose E. Reyes, IPMA VP Marketing and Awards, who moderated the panel, introduced the speakers: Mr. Wolfgang Glitscher, lecturer in project management at the Technische Universität Berlin, Ms. Maria Luisa Munoz, engineer from GRI Towers Sevilla, and Mr. Cornelius Matthes, Chief Executive Officer from Dii Desert Energy, Dubai.
As Mr. Glitscher stated at the beginning of his presentation entitled Re-Thinking Project Management Circular Economy, the number of people in the world increased, and they all needed resources. Therefore, it is mandatory to change people’s behavior to conserve resources, where PMs are the creators of the future. The circular economy and remanufacturing require an extension of project management and present the extended triangle of constraints in project management, with social responsibility, environmental soundness, and economic viability. Furthermore, the art of project management for ESG refers to two perspectives:
- What is delivered is related to the sustainability of the delivered results.
- How the project is managed is related to the sustainability of the processes in the project.
We are delivering project results today into closed structures, which means taking the resources, making a product of them, and then having waste after these products are used. Mr. Glitscher stated that nowadays, the processes are still predominantly linear, with a small percentage of circular ones.
It means that 7.2% of the world’s economy will be circular in 2023, which is not a lot, but it’s important. It is still a linear value chain, but people’s behavior needs to change, through the influence of marketing and companies on people’s minds, in order to recycle as much as possible. That is why the CCCS concept is important in project management and for all of us, where C stands for Client, C for Cooperation, C for Creativity, but at the end, S stands for Superclient, which is the Earth.
Mr. Glitscher pointed out that project management needs a rethink. It means that project management has to be designed for the future, which includes a modification of matrix organization, where a project manager needs to implement operating knowledge, knowledge about possible developments, and knowledge about realization, but by having in mind decisions related to the resources, society, and environment. The main question that arose was how we could manage projects for the next 7 generations. When the project results are in the decline phase of the life cycle, it needs to be considered how to potentially recover them and use them even further.
If we want to conduct the Next 7G realization approach, we need to run the business, reinvent the business, and transform the business. According to Mr. Glitscher, the requirements for managing projects for the next 7 generations are:
- We need metabolic thinking, which means taking care of the materials used. For example, if people have a problem with microplastics in the body, we need to think about what we use and metabolize.
- We need to consider that it is a human. The human body is a work of nature and has the ability to regenerate. Therefore, we need to think about resources in that way, too.
Issues like climate change and social inequality continue to gain international attention. But it is not enough. Some proactive efforts must be implemented. The fact is that companies that seriously engage in ESG are better positioned to operate in a global marketplace. When focusing on ESG and addressing environmental and social challenges, it fosters innovation through discovering new opportunities and innovative solutions that can drive growth and adaptability. A very valuable contribution to this topic was made by Ms. Maria Luisa Munoz, who is an engineer at GRI Towers Sevilla, a part of one of the main Spanish industrial groups ACEK, one of the world’s leading steel processing companies.
During the presentation entitled Wind energy tower manufacturing process and challenges, Ms. Munoz discussed several manufacturing challenges related to the production of wind energy towers. First, it is of great importance to reduce weight and dimensions by using new materials, modeling, and simulations. Then, secondly, to improve and deploy new processes by using sensors, developing prototypes, and using the power of digitalization and new technologies. As the third, she stated the challenge of moving towards a factory digital twin by using big data techniques, machine learning, and other possibilities.
The companies should be aware of the many advantages gained through ESG practices, which can help identify and mitigate risks with an impact on the company’s long-term performance. Moreover, companies dedicated to the implementation of ESG practices often enjoy a better reputation and stronger brand value. Consumers, employees, and investors are increasingly looking to engage with and support businesses that align with their values. When considering capital as a limited resource, companies that prioritize ESG may find it easier to access capital. Many investors, including institutional investors, are integrating ESG factors into their decision-making processes. Therefore, companies with strong ESG performance can tap into a broader pool of capital.
Mr. Cornelius Matthes, Chief Executive Officer, from Dii Desert Energy, Dubai, agreed with Ms. Munoz that wind towers are of great importance in the transition to the manufacturing of energy in the future. Dii Desert Energy operates as an international industry market enabler for green electrons and molecules (e.g., hydrogen), connecting people and countries to accelerate the energy transition in MENA (Middle East and Northern Africa) and become an exporter to the world energy markets. Mr. Matthes provided an insight into the wealth of the Arab deserts, where about 5% of the vast MENA deserts alone would, in theory, be more than sufficient to power the world’s 150.000 TWH of energy consumption. Also, he stated that the MENA deserts are still almost fully fossil-based, but they are a potential supplier of the lowest-cost green energy for their 500 million inhabitants and the world.
Mr. Matthes pointed out that emission-free technologies in the MENA region have become competitive much quicker than even the greatest optimist would have ever expected. Rapid wind, solar, and electrolyser cost declines make renewables more attractive than fossils or nuclear. Also, the MENA gas infrastructure is ideally positioned for a fast exchange and export of green hydrogen. Moreover, various hydrogen projects have recently been announced in the MENA region, with the majority focusing on green hydrogen. He concluded that immense socio-economic benefits can be harnessed from green power and a clean hydrogen/e-fuel economy for the region:
- Economic development and diversification;
- Job creation with increased qualifications;
- Fostered innovation activities;
- Zero emission.
All the speakers agreed that the governance part of the ESG is complex and challenging, but climate and social issues have strengthened the awareness of governments to search for solutions. Moreover, it is necessary to strengthen the connection with people, involve the local community as much as possible, and build trust. When it comes to the cost of these initiatives, the professionals who operate in the project management field are responsible for the results and searching for what is possible to be implemented. It is a matter of integration – a holistic view that needs to integrate all the important components. The wind towers and the solar plants could provide a significant contribution to a reduction in energy supply costs. Mr. Reyes concluded that there is a growing interest in ESG practices and growing awareness. It is in the best interest of the country and professionals to follow ESG practices like IPMA through ICB4 and other standards.
Author: Dr. Danijela Toljaga-Nikolic
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