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Improving Environmental Performance and Value Capture in Capital Project Execution

george, bruce, dupont sustainable solutionsTremendous time, effort and resources are expended every day to develop and execute major capital projects. These ventures present unique challenges for owners and investors. Indeed, according to industry expert Ed Merrow, 65 percent of all global mega?projects (over $1 billion) can ultimately be classified as failures characterized by cost overruns, lengthy delays, significant waste or the like. Yet growing size and complexity represent only one part of the story when it comes to chronic delays and overruns.

Project managers continue to prioritize cost and schedule imperatives at the expense of meaningful planning for possible environmental risks. Analysis of a sample from Goldman Sachs’ list of the top global mega-projects (ERM, ‘Understanding the Business Case for Sustainable Development’, Rio+20 Position Paper, January 2010) revealed that over 70 percent of delays were caused by sustainability issues – significantly higher than both commercial and technical factors (63 percent and 21 percent respectively). While sustainability considerations have driven a sea change in corporate attitudes toward environmental management in recent years, this has yet to translate into a rigorous approach to environmental performance in the case of capital projects.

Even where sufficient will exists, successfully managing the environmental aspects of complex capital projects can represent a considerable challenge – especially when anticipated effects are significant, requiring formal impact assessments, permits, and regulatory or stakeholder consultation. At the same time, companies must recognize that exceptional environmental performance has now become an essential element of doing business. Beyond simple compliance with minimum legal and regulatory requirements, the delivery of a capital project can – and should – serve as a valuable opportunity to drive broader organizational change and a reduction in overall environmental footprint. Crucially, this need not generate additional costs. A “design for sustainability” approach typically seeks to incorporate the use of new technology or innovations, as well as adherence to best practices for identifying options to reduce resource consumption and the production of waste. Value otherwise left on the table can be recovered through a systematic and structured process of integrating environmental performance at each phase in the project implementation model.

As a science and innovation company, we have operational experience with major capital projects, as well as a commitment to supporting and promoting sustainability advances through the DuPont Sustainable Solutions (DSS) business. Through our background with capital project execution and consultation across multiple industries, we have learned that regulatory?driven waste reduction projects are typically more expensive in the long run than voluntary initiatives – sometimes significantly – and often achieve the same environmental benefits. On the other hand, a disciplined and strategic approach to managing the environmental aspects of a project, as well as identifying opportunities to minimize impacts and maximize the potential value that such opportunities may deliver in terms of reductions in energy use, water consumption, emissions or waste production, can represent a compelling business case. An intelligent, forward-looking strategy can deliver better focus during the life of a project, better environmental outcomes, and better results.

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