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09th May 2023
Author: Michael Young FAIPM CPPE, Vice President of GPM Global
Environmental, social and governance (ESG) factors like circular economies, zero carbon and diversity are business buzzwords. With investors and stakeholders increasingly demanding sustainable practices, ESG is a topic that can’t be ignored in project management. Project managers must upskill in ESG to ensure their projects meet the highest sustainability and responsibility standards. Michael Young FAIPM CPPE delves into the rise of ESG and explores why ESG expertise is essential for project managers wanting to succeed in today’s business landscape.
ESG focuses on environmental, social, and governance factors that can affect a company’s financial performance and public perception.
With more organisations looking at ESG factors before they invest in a project or partner with a business, understanding what ESG entails has never been so crucial for project management professionals.
ESG is an investment framework that investors use to assess an organisation’s performance and risk. The term ‘ESG’ is often used as a substitute for ‘sustainability,’ but that’s incorrect. Capital investment companies use it as a framework to inform their investment decisions. Companies generally report using recognised international frameworks, such as the United Nations Governance Reporting Initiative (GRI) or the recently recreated International Sustainability Standards Board (ISSB) framework.
ESG reporting focuses on financial and investment info for investors and must disclose ‘material’ matters, referred to as an outside-in perspective. Sustainability reporting focuses on company policies and goals to stakeholders, a voluntary, inside- out approach. Combining both provides a 360° view of an organisation’s risks and sustainable performance.
Much of the ESG and sustainability focus has been on the ‘operations’ side of the business, but this is rapidly changing. CEOs increasingly agree that ESG programs improve financial performance, sitting at 45%, an increase from 37% one year ago, according to the KPMG CEO Outlook Report 2022.
Projects are the delivery vehicles
As organisations set strategic sustainability goals including targets to achieve net zero carbon emissions, projects are the delivery vehicles to achieve those goals and deliver the ESG and sustainability reporting.
Project managers are becoming increasingly aware of the importance of ESG factors when managing projects.
62% of project professionals expect ESG requirements to influence their projects and programs in the future (AIPM and KPMG 2022 State of Project Management in Australia Report). Delivering a sustainable project involves assessing the social, environmental, and economic consequences of the project and the product being produced. By identifying the potential impacts, a project manager can look for alternative lower-impact approaches. Assessing and reducing sustainability impacts also provides a structured and reliable data source for the organisation’s ESG or sustainability reports.
Organisations are acutely aware of the importance of their ESG strategies.
As covered in the above report, Australian organisations have accepted the need for action on ESG issues, driving an increase in transformation projects. Organisations must recognise the need to put PMOs at the helm to get the best ESG outcomes. Similarly, project professionals must upskill to lead these projects to success.
Green Project Management, a global social enterprise, has a ‘P5™ Standard’ which guides project managers to ensure their project outcomes contribute to the organisation’s sustainability and ESG Reports.
When considering ESG in a project, a project manager must:
You can download the P5 standard Impact Assessment and SMP templates for free and learn more about undertaking a P5 Impact Assessment on the Green Project Manager website.
Greenwashing occurs when an organisation spends more time and money on marketing itself as environmentally friendly than on actually minimising its environmental impact
The Australian Securities Investment Commission (ASIC) and the Australian Competition and Consumer Commission (ACCC) have recently acted against organisations found to be greenwashing.
They are currently examining the annual reports published by ASX200 firms and fining them for alleged false or misleading statements. Companies must only make statements about their products that are ‘clear, defined, limited in their claims, and always have strong verification materials.’
ASIC Deputy Chair Sarah Court said, ‘ASIC issued eight infringement notices for alleged greenwashing in late 2022 and has started the year with further action against a listed company. ASIC will continue to closely monitor sustainability claims and take action where we consider representations cannot be substantiated or are factually incorrect.’
Avoid greenwashing by:
As society’s expectations continue to evolve, government bodies are taking legal and regulatory action that places a greater emphasis on ESG disclosures and sustainability reporting. As a profession that accounts for nearly 30% of Australia’s GDP, project managers play a crucial role in meeting these expectations.
Project managers need to understand ESG impacts and support their organisations’ ESG objectives. They must be skilled in identifying which aspects of their projects must be reported through ESG disclosures and hone project elements for optimal ESG outcomes.
If you don’t feel comfortable leading the ESG charge, plenty of professional development options are available through the AIPM.
This article is taken from the Autumn 2023 edition of Paradigm Shift
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