People, Planet, Profits & Projects

We all know that there are external factors that affect our projects.  Regulations are one of those factors that have to be considered by the project manager.  Depending on what industry you are in, has a lot to do with what factors we need to consider.   Because of their nature, some industries are more susceptible to risks from regulations than others.

The U.S. energy industry (I am concentrating on the U.S. by it is more global than that) is one of those industries that seem to be at the whim of congress.  Perhaps whim is too severe of a word to use, but it certainly seems appropriate when one considers that energy production and usage is a political hot potato.  Tightly control it, loosen the controls, supplement and reward alternate energy use, expire alternate use incentives, all of these approaches make it difficult to access project risk when energy is a component. 

The most recent event to affect project risk is the new U.S. Environmental Protection Agency (EPA) limits on green-house gas production and the different ways to mitigate the effect.  The elephant in the room, for energy production, here is coal.  According to the U.S. Energy Information Administration, coal is used to generate 39% of our electrical needs.  Natural gas is second with 27%, followed by nuclear (19%), renewable, including hydro-electric (13%) and petroleum (1%).    The EPA is proposing a cap on carbon emissions; reducing 2005 levels by an average of 25% by 2020 and 30% by 2030. It also gives credits to those states and utilities already working to reduce carbon emissions. 

As with most of government regulations, the green-house reduction proposal is so complicated that it will take some time for utility companies to sort is all out.  Talk about increasing risk.  If stakeholder expectations (U.S. EPA in this instance) are not well understood, then what kind of risk management plan can be put into place?  Let’s look at two possible mitigation strategies for this issue.

Cap and Trade Policies

Here is the best explanation I could find and it comes from the EPA.

Cap and trade is a market-based policy tool for protecting human health and the environment by controlling large amounts of emissions from a group of sources. A cap and trade program first sets an aggressive cap, or maximum limit, on emissions. Sources covered by the program then receive authorizations to emit in the form of emissions allowances, with the total amount of allowances limited by the cap. Each source can design its own compliance strategy to meet the overall reduction requirement, including the sale or purchase of allowances, installation of pollution controls, and implementation of efficiency measures, among other options. Individual control requirements are not specified under a cap and trade program, but each emission source must surrender allowances equal to its actual emissions in order to comply. Sources must also completely and accurately measure and report all emissions in a timely manner to guarantee that the overall cap is achieved.

A well-designed cap and trade program delivers:

• Greater environmental protection at lower cost
• Broad regional reductions, facilitating state efforts to address local impacts
• Early reductions, a result of allowance banking and market incentives
• Environmental integrity and transparent operations and results
• Fewer administrative costs to government and industry
• Efficiency and innovation incentives
• Incentives for doing better and consequences for doing worse
• Accounting for all emissions
• Partnership with existing requirements to ensure protection of the local population and environment

To summarize the intent, cap and trade is not meant to allow a particular company to continue to emit significant levels of GHGs in perpetuity.   It is temporary measure to allow companies to minimize the effects of their emissions by “averaging them out” while working to permanently to improve the quality of their emissions.  Further information can be found at http://www.epa.gov/captrade/basic-info.html.

Carbon Taxes

For a comprehensive explanation of carbon taxes, I looked “down under” to Australia’s policy. From (http://www.carbontax.net.au/what-is-the-carbon-tax/), “At the centre of the government’s policy on climate change is pricing carbon. Many commentators and politicians have referred to this as a “carbon tax”. The idea is that polluters will pay per tonne of carbon they release into the atmosphere. This cost will initially be set at $23, and increase gradually until 2015, when we will shift to a trading scheme that will let the market set the cost. This is widely thought of as the most effective and least costly mechanism to reduce carbon output and reduce the level of climate change that is occurring. 

Right now, when you purchase a product that relies on carbon-intensive materials or manufacturing processes, the price you pay does not represent the cost incurred by the environment. The iron ore used to create the product could be sourced from the highest polluting mine in the world, the electricity used to power the manufacturing plant could be provided by the dirtiest coal mine in the world, and the trucks used to transport the product to its final destination in a supermarket could run on the dirtiest fuels in the world, and it would make no difference to the price. With a price on carbon, this equation would change. The amount of carbon pollution involved in producing a product would start to be factored into its final price. Products produced through dirty processes will become more expensive, thereby making it possible for other products produced through cleaner processes to compete on price.

Yes, that’s right. The price of certain goods that are reliant on carbon pollution for their production will go up. However, the majority of Australians will be compensated for this cost, and this cost will be relatively small for most items.

How will this drive a move towards a cleaner future you might wonder.  Well, it’s not hard to see that if pollution-intensive processes make goods more expensive, companies will look to reduce their pollution footprint in order to lower their costs. That’s what businesses do – improve efficiency year on year. It’s one of the key drivers of growth. For this reason, it is actually not necessary for the consuming public to change their practices, although that would help drive you own costs down.”

Project risk needs to consider sustainability to cover all their bases.  One of our founding and guiding principles says it best.  “Project Managers must first understand (all) the green (sustainability) aspects of their projects, knowing that this will better equip them to identify, manage, and respond to project risks.”

Growing up in New England as we have, we know and love our New England accent.  To us, in fact, it's not an accent.  All of the rest of you have an accent, we speak, well, we speak  noahmahlly.

We always get a kick out of those movies in which actahs (actors) from out of our region try to "do" the New England accent.  They get it horribly wrong.  When they try to play, for example, President John F. Kennedy, to us they may as well be speaking in Tamil.  It's just not proppah (proper).

Well, now you have the chance to hear the accent in all of its glory because Boston native, UMass-Boston alum, and US Environmental Protection Agency (EPA) Director Gina McCarthy (pronounced "m'cahh-thy") yesterday addressed the nation on the proposed limits to power plants to reduce cahhbin (carbon) generation.

Below is the video.  You don't have to watch the whole thing but we want to draw your attention to 3:52, where she makes an errah (error).  At least, she misuses a project management term if compared to the way we are told we are supposed to use it by the Project Management Institute (PMI®).

At that point in the video - wait for it, wait for it, THERE - she says, "we'll turn the risks of climate into business opportunity".

We know as practicing PMs that risks can be positive or negative.  Positive risks are opportunities and negative risks are threats.  Therefoah (therefore) she should have said, "we'll turn the threats of climate ito business opporutnity". 

A small sticking point, perhaps but one which has been a calling card for us for 5 years.  In our book, Green Project Management, the very cover makes this point by showing a tree that yields paper money.  The concept of a triple - or really at least quadruple - bottom line is one we've blogged about as well for years, and indeed is the name of the blog you're readning now - People, Planet, Profits & Projects.  We assert that there is a benefit to long-term thinking that means it pays off to consider social and environmental concerns and not only financial considerations - and that this 'extra' effort in long-term thinking is not wasted, often coming back around to provide short-term financial gain.

In McCarthy's reference we can also see the short term opportunities in the form of new projects to reduce carbon from power plants and to move effort to renewable energy - all of which will require a crop of sustainability-aware project managers.

By staying tuned to this blog and an upcoming book (yes, we finally have a follow-up book to Green Project Management, more about that later) you can be part of that crop and you can help gain yourself some powah!

Stakeholder management has always been important.  The new PMBOK® has placed additional emphasis on it by creating an entire knowledge area “Project Stakeholder Management.”  We’ve all seen the various power/interest grids, assessment matrices, and other tools, including analytical techniques, all to determine the influence of a stakeholder. 

How about a tool to determine the where stakeholders are along a sustainability continuum?  As sustainability continuum, what is that?  One of the more popular concepts we developed to help determine an individual’s greenality is The Hugger-Hummer (H-H) Scale.  We’ve talked about this scale before in general terms, but never really defined or explained it.  The H-H scale is configured with the two extremes, those who are tree huggers, or environmental fanatics, to Hummer drivers, or those who really don’t care how much fuel they consume.  I’m not saying that every hummer driver disregards the environment; there are good reasons for some driving larger, less fuel efficient vehicles, like towing trailers, accessing rural areas in bad weather over questionable roads, etc.  I’m also not saying that every hugger is an environmental fanatic that takes saving the environment to the extreme.  It’s just that we needed a scale and those two terms seem to fit the extremes.  As a matter of fact, most of us (if I can speak about most of us) hover around the middle, one side or the other from top dead center.   For instance, I have a fuel efficient car as well as a powerful pickup truck.  The car I use for commuting or daily travel, and the truck I use to tow a camping trailer and to tow a boat (separately) so I can enjoy the outdoors more.

This is what makes it a little difficult when you are assessing stakeholders.  I am interested in the environment, and have a gas guzzler (for a reason).  Your stakeholder may be in the same boat, excuse the pun.  It also makes the H-H tool useful.  To be able to assess a stakeholder along a scale is like using an objective standard.  To be most effective in developing the objective standard, expert judgment can be used to validate the incremental differences along the continuum. 

More and more stakeholders are becoming aware of sustainability issues, on both ends of the H-H Scale.  It is helpful for a project manager to know where the most influential stakeholders appear on the scale.  Combining a power/interest grid with the H-H Scale, helps the PM better understand the stakeholder’s needs and desires.  There are no guarantees for project success, which is why we need to use all tools available.   

To put it in perspective, ignoring the sustainability interests of stakeholders only adds to what?  Project  Risk!  Adding the H-H Scale to your quiver will help you better understand potential risks to the project, therefore “will better equip them to identify, manage, and respond” to those risks, and will add to better stakeholder management. 

We DO NOT know if climate change is real.*

What we DO know, as an absolute, undisputed fact, is that climate change change is real.

Here's the executive summary, fellow project managers: whatever you believe or don't believe about climate change is actually trivial from a project management perspective, compared to the fact that businesses are initiating changes to their fundamental business plans and business cases based on what they perceive to be an issue important for their survival.

Projects - by definition - are about change.  Projects are initiated to incorporate changes, and they are selected by businesses based on their fit with the portfolio of programs and projects that help them stay true to their long-term, sustainable success.

Back slowly away from this blog post, and read this article.  Then return.

If you read the article - great.  That means you can skip this pull-quote because you've already got the point.  For those of you who didn't, please at least read this:

'...many businesses in Boston and beyond are taking matters into their own hands, preparing for a warmer world in which severe weather, rising sea levels, and increased flooding threaten property, operations, and earnings.

Developers have moved electrical units from the basements to rooftops of buildings in the Seaport District along Boston Harbor. Utilities in New England have elevated substations several feet above the ground and replaced wooden electrical poles with steel ones that can withstand powerful winds.

Insurance companies, in response to clients, are testing products designed to protect against varied effects of climate change, and providing more coverage against natural disasters. The Hartford insurance company now offers small businesses policies against losses due to widespread power outages, a growing concern as major storms occur more frequently.

“We think the time for debating [climate change] is over,” said Ed White, vice president of customer strategy and environmental for National Grid, a British company with its US headquarters in Waltham. “We see it occurring. We’ve lived through the flooding, we’ve seen the damage that it had to our communities and our equipment.”'

So, in other words, as we said in a previous blog post, "Get Your Head Outta The Sand", your sponsors are "on board" with climate change.  This means:

• projects are already being launched by businesses in response to challenges posed by perceived threats (and in some cases opportunities) caused by climate change
• enterprises are more commonly connecting their fundamental mission statements and Corporate Social Responsibility (CSR) with their portfolios
• a knowledge of the issues, the language, the nature of climate change is an advantage whatever your beliefs
• jobs - even entire career paths - are bending to the reality of organizations responding to climate change.

What kinds of organizations are reacting to climate change?  Is it just biofuel companies, fair-trade clothing co-operatives, and organic food family farms?

Hardly.

Again, from the article:

'Insurers, too, are concerned about hurricanes, tornadoes, and wildfires occurring more frequently. Three of the top six years for catastrophic insured losses have occurred since 2005 with a combined $142 billion in expenses, according to the Insurance Information Institute, an industry research group that has tracked the costs since 1989.

Data about climate, which was primarily used by federal agencies and insurance companies in the past, is now sought by all types of businesses and organizations, from health care providers to banks to manufacturers, said Kyle Beatty, the president of Verisk Climate. Verisk, headquartered in New Jersey, bought a Lexington climate research firm six years ago in anticipation of growing demand for climate information.

A retailer may want to know the likelihood of major storms downing power lines and triggering blackouts that would close stores, Beatty said. A manufacturer might want to diversify suppliers if a particular contractor is in a flood-prone region.

“The business reaction is to the fact that they’re experiencing impacts to their operations and earnings that they haven’t in the past, they need strategies to address that,” Beatty said.'

So it's retailers, manufacturers, insurers, financial institutions.  These are the types of organizations that get their work done through - you guessed it - projects.  That means they need project managers who understand the background and drivers of these changes.

We insist that it's time to get smart about this, if only for increased job opportunities and security.  Stay tuned to People, Planet, Profits & Projects.  We'll continue to keep you knowlegeable about sustainability and project management - and the increasingly important intersection between the two.

*although the overwhelming majority (97%) of climate scientists will tell you that it is...

I started doing project management work before I knew it was project management work.  Just like a lot of us, I “accidently” became a project manager. Then there was a time when I purposely did project management work.  It was no longer an accident that I was doing it.  The next logical step in the project management progression was to somehow manage a group of projects that have similar or related content is a coordinated way.  Back in the day, at the 1998 Lucent-wide Project Management Conference, I gave a talk entitled Program Management - An Integrated(ing) Approach to Setting and Meeting Customer Expectations.  That was in the relative infancy of program management at Lucent Technologies.   The Project Management Organization was an outgrowth of the coordination of project management within an organization; putting the same face on how projects are managed across the organizations internal boundaries.

Project Portfolio Management is another progressive step in the overall process of managing projects to meet or exceed customer expectations.  It looks closely at aligning organizational strategies and business goals with the projects the organization undertakes.    I needed this first bit of information as background, as a foundation.  Now I’d like to look at the overall, “overall” and the specific of the “specific”.  Meaning, I’d like to kick this all up a level and look at the overall, governance, and the specific, IT governance, as it relates to sustainability.

Simplified, governance is the way an organization is structured in order to pursue its business.  I believe that structure needs to be sustainable.  When I refer to sustainable in this context, I am looking at the way an organization pursues its business with relationship to the social, environmental, and profit (Triple Bottom-line), rather than just its profit objectives.  Of course, one of the objectives of a business is to stay in business.  Even with a not-for-profit, there is a money making motivation to keep the operation afloat.  So both for-profit and not-for-profit are included.

It is easy to relate governance with sustainability when you think about one aspect of governance is the adherence to regulations, as well as using best practices to gain efficiencies, and considering standards and industry recommendations.  One of our assertions state “Project managers must first understand the green (sustainable) aspects of their projects, knowing that this will better equip them to identify, manage, and respond to projects risk.”  This is also words for the governance body to take to heart.  Can you think of any companies that have paid the price because they did not consider sustainability (environmental in particular) risks?  Perhaps those organizations should have thought about including sustainability in their governance strategy.

IT governance is a subset of the overall management of an organizational strategy but has to be closely tied to the overall business strategy.  Why is IT governance so important?  The reason is that an organization’s IT can have the biggest impact to planet, profit and people.  If you are a Google or an Amazon, you rely heavily on IT and can make a huge impact.  Even if you are a one-person company, you probably rely on your computer and Internet connection more than you’d like.  And, whether you are a mega-consumer sales company or a Craigslister, how you manage your power consumption, for instance, will make a difference on your businesses bottom-line, impact on the planet, and how your human resources (maybe just you) are impacted.

It is time to follow the continuum from green project management, to sustainable project management to sustainable program management, to sustainable portfolio management to sustainable governance.  It is no longer adequate to address sustainability only from the project level.  We all know, to be most effective, sustainability has to be part of an organization’s thinking, driven from the top, a strategy incorporated within its governance and particularly its IT governance.