Scribd Logo
Upload

Welcome to Scribd!

  • 30 views

    Pauling, John

    Uploaded by

    dhiraz
    The document discusses sustainable port management from a financial perspective. It outlines an approach called EcoNomics that monetizes all costs and benefits to help identify the most sustainable and optimal solutions for port development projects and remediation projects. The approach aims to take a broader, longer-term view to properly account for environmental and social factors beyond just budget and schedule.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PDF, TXT or read online from Scribd

    Pauling, John

    Uploaded by

    dhiraz
    30 views32 pages
    The document discusses sustainable port management from a financial perspective. It outlines an approach called EcoNomics that monetizes all costs and benefits to help identify the most sustainable and optimal solutions for port development projects and remediation projects. The approach aims to take a broader, longer-term view to properly account for environmental and social factors beyond just budget and schedule.

    Original Description:

    HRM

    Copyright

    © Attribution Non-Commercial (BY-NC)

    Available Formats

    PDF, TXT or read online from Scribd

    Did you find this document useful?

    Is this content inappropriate?

    The document discusses sustainable port management from a financial perspective. It outlines an approach called EcoNomics that monetizes all costs and benefits to help identify the most sustainable and optimal solutions for port development projects and remediation projects. The approach aims to take a broader, longer-term view to properly account for environmental and social factors beyond just budget and schedule.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    30 views32 pages

    Pauling, John

    Uploaded by

    dhiraz
    The document discusses sustainable port management from a financial perspective. It outlines an approach called EcoNomics that monetizes all costs and benefits to help identify the most sustainable and optimal solutions for port development projects and remediation projects. The approach aims to take a broader, longer-term view to properly account for environmental and social factors beyond just budget and schedule.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    You are on page 1of 32

    Port Sustainable Management: A Financial Perspective

    John D. Pauling, P.E., BCEE


    Executive Management Conference: Leading Your Seaport to Prosperity Tampa, FL May 2-6, 2011

    Outline

    Overview of Financial Aspects of Sustainability Making the Business Case for Sustainability An EcoNomics Approach Case Studies Sustainable Port Management Conclusion

    Overview of Financial Aspects of Sustainability

    Sustainability

    A means of configuring human activity so that society, its members, and its economies are able to meet their needs and express their greatest potential, while preserving biodiversity and natural ecosystems in the very long term Easily put Sustainability is about thinking and acting in the future tense (Planning for the Future)

    Economic Objectives Profit Highest Value Planet People Environmental Objectives

    Sustainable Growth
    Social Objectives

    The leader business spectrum

    Beginner

    Performer

    Leader

    Pioneer

    Understanding of key CR issues Compliance systems in place

    Senior-level buy-in CR a strategic opportunity Vision of sustainable future Sustainable innovation Systems in place to across business delivery

    Business model refocused to profit from sustainable value creation

    Making the Business Case for Sustainability

    How Sustainability Creates Value

    1
    Create value

    2
    Identify material contribution to drivers of:

    3
    Calculate specific financial contributions

    4
    Combine to give addition to value

    Activity Initiative Decision

    Turnover growth Margin growth Reduce capital expenditure Risk reduction Duration of competitive advantage Reduced cash tax rate Reduced cost of capital

    Calculations for the material contributions to value

    Additional value

    How Sustainability Creates Value (Contd)


    Financial Drivers

    Reduce capital expenditure Duration of competitive advantage

    Avoiding unnecessary demand for fixed assets

    Shaping the market to the companys advantage Attracting people Prompt action on emerging strategic issue Enhanced access to key resources

    Reduce cash tax rate


    Reduced cost of capital

    Reduced payments to government


    Improved access to financial capital at lower rates

    How Sustainability Creates Value (Contd)


    Financial Drivers
    Turnover

    growth

    Product differentiation New products New customers / market share / reputation / brand equity Innovation

    Margin

    growth

    Eco-efficiency

    Risk

    Motivating and retaining people

    reduction

    Increased security and quality of supply chains Reduce regulatory risk Reduced reputation risk Maintain license to operate

    Why is the Business Case so Difficult?


    Challenge

    Solution

    There is no one size fits all business case The societal case doesnt automatically make a business case for all situations People have led with responsibility which feels like compliance

    Only try to find your companys business case Dont expect a business case to exist for future things the company needs to do Opportunity trumps responsibility: frame sustainability as a way of unlocking opportunity for the company now and in the long-term

    The more you look, the more you find


    Sustainability and finance professionals speak different languages The no business case, no permission vicious cycle

    Plan to explore how to make sustainability commercial, and how to keep improving your companys business case
    Frame the case for sustainability in terms your finance director will understand, ideally in drivers of shareholder value Plan small steps to iteratively establish a process of permission and results

    Delivering Profitable Sustainability

    Quantifying sustainability Informing, decisionmaking (DELT)

    Embedding capabilities Delivering sustainable projects

    Assessment

    Delivery

    Strategy

    Identifying opportunities Helping forge new directions advanced solar thermal initiative

    Implementation Strategies

    See finding your business case as part of a wider change program.


    Who are the key stakeholders? Who can be your champion in the finance function? What are your consistent key messages?

    Go to the finance department with a safe pilot.


    Identify a decision/project which wont trigger defense routines and only needs a small amount of resource to investigate.

    Use the pilot to build credibility and awareness.


    Where possible, have the finance function do the analysis building their capacity Demonstrate you are concerned with finding the business case, not only justifying sustainability

    Keep creating a permission and results cycle


    Address larger and more important areas: key decisions and financial processes (i.e. capital expenditure) Keep building capacity of key individuals along the way

    Port Development Projects Economic Considerations


    Longer Term Benefits Lower Discount Rates Lower Transportation Costs Less Ship Delays Direct/Indirect Sub Job Creation Induces/ Supporting Jobs

    An EcoNomics Approach

    New Broader, Longer-Term Perspectives


    An EcoNomics approach broadens the perspective (decision window) out to the future to consider factors beyond budget and schedule. Projects are future-proofed

    Environment Current Decision d Window Efficiency Impact Reduction Sustainability Now


    $8/T $0.1/m3 $0.05/kWhr $20/T $0.3/m3 $0.20/kWhr

    Cost & Schedule

    Expande Decision Window

    Society

    30+ Years
    $85/T $2/m3 $0.50/kWhr cost of CO2 emissions cost of water cost of power

    Monetizing External Costs, Benefits & Risks


    Trade-offs: Risk and Value : Cost and Benefit

    EcoNomics Approach

    An EcoNomics project alternatives assessment develops a comprehensive accounting of all benefit, cost, and risk by monetizing ALL influencing factors Key features:
    Analyzes both financial and non-financial costs, benefits, and risks through monetization Process designed to support clients overall sustainability objectives Built-in future-proofing so that client can see long-term effects of and to project options Defensible results based on reliable, non-subjective methodologies and data input Improved ability to communicate value of action to all stakeholders including regulators

    Principal of Full Economic Analysis

    NPV
    0

    (Bp

    Bx ) (Cp C x ) (1 i )
    x p a
    t

    P = project (internal) x = society and environment (External)

    Finding the Economic Optimum

    Full Societal Net Benefit (NPV)

    Optimal Sustainability

    Enhanced Compliance
    Zero Impact Business as Usual

    Increasing Level of Action

    Hierarchy of Assessment Project Type


    What level of assessment is appropriate? Comparison of options at which level?

    Policy Objective Level

    Approach Level

    Technology Level

    Assessment Process
    EcoNomics Framing Workshop
    Customer Input ESIA Eng. Cost Estimating

    LCA Risk Assessment CBA

    DELT

    Sensitivity Analysis

    Report
    27/04/2011

    Presentation

    Decision Making Support

    Communication

    ENA Example 2: Former MGP Site Remediation

    Decision - Making

    What should I do at this site? Most sustainable method of remediation and how much should I spend?
    Nature and extent of contamination Risk (Human Health, Controlled Waters, Resources, Environment, Property) Regulations Stakeholder views

    What Could We Do?

    Possible Objectives:
    Eliminate Human Health Risk Make site fit for redevelopment Property Holder Protect the Public Water Supply (PWS) by preventing vertical migration Water Utility Protect the River Environment Agency Remediate the aquifer itself Environment Agency

    Which one is best??

    Remedial Approach Options


    R1: Treat water at Public Water Supply Well (PWS) Monitored Natural Attenuation (MNA) P1: Hydraulic containment in bedrock (Agency + WCo favored) P2: Hydraulic containment in gravel P1 and P2 S3: Excavation above WT, ex-situ treatment (PH favored) S1: Partial excavation + In-Situ Chemical Oxidation S2: Full excavation (with piling), ex-situ treatment (Local Government favored)

    External Costs of Remediation

    Intended Cx:
    GHG emissions during remediation External costs of road transport

    Unintended Cx:
    Introduction of contaminant to bedrock via piling (putty chalk risk)

    CAPEX: Role in Decision Making

    Base Case Benefits

    Benefit Category Property value increase Neighborhood blight reduction Aquifer Protection River Protection TOTAL (Maximum)

    20 Year Benefit ($m) 10.5 3.9 (77.5 x 5% BF) 8.1 2.8 $ 25.3 m

    Base Case NPVs

    Sensitivity Analysis: DELT-2

    Robust Optimal Solution

    Using EcoNomics Assessment

    Good for complex, high value issues Good when outside forces are pushing for expensive solutions Good for helping determine course of action when multiple stakeholders involved Good when perspective is needed Good when multiple risks and tradeoffs are evident Sustainability issues important Significant external assets at risk Regulatory or public scrutiny Reputation issues Decision-making challenge

    You might also like