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map marker Global | Tuesday, January 21, 2025
Reading Time : 6 minutes

 

Regulatory agencies set out their expectations, and project proponents need to meet them. But there is a whole other layer to this – the expectations of stakeholders including local residents and the project proponents Environmental and Social Governance policies. How can projects meet regulations and stakeholder expectations, without adding too much to costs and timelines, and what happens when regulation or commitment to ESG changes?

Globally, projects are required to meet various environmental and social regulations. However, mere compliance with these might not suffice. Stakeholders often hold distinct perspectives on acceptable levels of environmental impact, noise, or interference with their sacred spaces. In such instances, adherence to governmental rules alone is insufficient; the expectations of stakeholders come into play. Consequently, project proponents find themselves navigating the delicate balance between fostering positive stakeholder relationships, commitments they have made independently for ESG, such as reduction in carbon emissions or waste generated, and adhering to the critical demands of cost and timeline, as we will explore further.

To see how this plays out, consider a standard infrastructure project – the construction of the Auckland City Rail Link, a $4B tunnelling and above ground rail loop. The need for and benefits of the project is widely supported, however, throughout the construction period, the project causes extensive traffic disruptions, generates noise and vibration, and cause dust emissions.

Maree Drury
New Zealand

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In parts of the world where communities are informed and enabled, there’s public pressure to go beyond what the regulations require.

Regulations impose restrictions on certain project elements, such as the allowable operating hours, noise and vibration levels, stormwater treatment standards. But in parts of the world where communities are well-informed and empowered, there is public pressure to go beyond the minimum regulatory requirements. This pressure might come from retailers along the road advocating for noise limitations or from indigenous peoples or local environmental groups demanding measures to prevent construction runoff from entering nearby streams, even within regulatory allowances. 

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Earning and keeping a Social License to Operate

All these steps can form part of earning the project’s “Social License to Operate,” (SLO) which refers to the ongoing acceptance of a company’s business practices by its employees, stakeholders and the public. Those beyond-regulation steps can include:

Stormwater discharge: Regulations might require removing 75 percent of suspended solids before discharging water into surface water. But as is sometimes the case in New Zealand, the indigenous communities expect higher purity for discharged water. They also expect that the water will be discharged not directly into surface water, but onto land, typically involving wetlands or stormwater swales, allowing for natural purification before it reaches surface water. This is rooted in the profound spiritual significance that streams and rivers, hold for the indigenous Maori, resulting in a deep commitment to preserving their cleanliness.

Construction noise: As with our CRL example, many stakeholders are concerned about construction noise. So, although the approvals process has allowed for the noise generated, it requires the “best practical option” be adopted to minimize noise impacts. With complaints, media attention and projects proponents seeking to avoid the “ front page test”  they  incur substantial costs if they are to stay to project deadlines,  including by  relocating individuals from their residences to hotels.

Wildlife impacts: In the case of a highway being constructed through a forest that offers significant bat habitat, the expectation is to offset the impacts on habitat, at sometimes high initial and ongoing operational costs such as for pest control in the area. Although “no net loss” is imbodied within regulation and National Policy Statements, when government repeal those regulations, will the community accept the loss?

Local procurement and hiring: In some situations, project proponents, for example central government, ESG drivers have required that 30 percent of procurement comes from local businesses and embed this within tender documentation. But what happens if the government changes, and the drive to upskill a local workforce is diminished?

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While official regulators can impose penalties such as fines, and even project shutdowns, it is crucial not to underestimate the influence of stakeholders. They can hold protests, block access roads, initiate hearings, and undertake actions that incur costs and disrupt project timelines.

Extra precautions may be taken under stakeholder pressure, but these measures can be susceptible to shifts in priorities. A recent example in New Zealand highlighted this dynamic, where a change in government has led to a “do minimum” approach.

In such cases, the voluntary, beyond-regulation, stakeholder-pleasing measures may find themselves reconsidered or discarded altogether.


How professional firms can help projects happen in the best way

Professional firms like WSP play a crucial role in facilitating the realization of infrastructure projects, ensuring they bring benefits while safeguarding stakeholder interests and the natural environment. The pivotal role of professional firms encompasses several key aspects:

Trend and regulation awareness: Clients rely on professional counsel to stay abreast of current standards and regulations, including those related to air quality, noise levels, and community engagement. Firms should not only inform clients of existing requirements but also track regulatory trends, such as evolving groundwater standards or shifts in government priorities following elections.

Incorporate a company or Government Department ESG and SLO costs into project planning: While many project proponents acknowledge the need for community consultation, impact mitigation, and local hiring, they often overlook the extent of the financial implications. Professional firms can assist by emphasizing the need to factor these measures into the project’s financials, timelines, and overall management from the start of the project.

Adopt a Whole-of-Life Project Perspective: Some industries, like mining, excel in considering and costing the entire project lifecycle, including post-closure site maintenance. Project proponents should extend this perspective to regulatory and SLO requirements, encompassing ongoing responsibilities like upkeep of offset sites, and continuous monitoring. Professional firms play a crucial role in early quantification of these expenses.

Strategic advice: While companies are committed to meeting regulations and maintaining their SLO, they seek cost-effective solutions. Professional firms should provide strategic advice, guiding clients on the most effective measures to ensure projects gain the necessary permits and highlighting the non-legislative drivers that can determine project success. This involves a proactive approach that outlines the necessary steps to bring the project to fruition. Caution is advised however against incorporation of ESG goals into permitting documentation as this can “muddy the waters” of what must be done vs what is nice to do. The precedent consequences this evokes must be absolutely understood by the client.

As a result, clearly defining the balance of risk the project proponent is faced with; including how that may change over time with change to legislation and changing community and partners expectations is a place professionals should step into.

While regulatory requirements and stakeholder expectations wield distinct influences on project planning and management, their combined impact can shape the trajectory of success. Recognizing the nuanced interplay between these factors underscores the necessity for project owners to engage with seasoned professional counsel. This collaboration ensures a comprehensive approach that navigates regulatory intricacies and aligns with stakeholder needs, ultimately paving the way for a successful project.

 

About the author:

Maree Drury, Technical Director

Maree is a Technical Director with WSP in New Zealand. She has 30 years’ experience in planning and environmental management in New Zealand Arica and the Pacific. She leads teams of planning and environmental specialists to provide smart, strategic thinking and advice to deliver investigations, ESIA’s, iwi partner and stakeholder engagement that represents a best for project and community approach for large infrastructure projects. This included as Planning and. Environmental Lead within City Rail Link for 3 years, NZ largest infrastructure project to date. The depth and breadth of Maree’s leadership, planning, and project management experience, means her technical capability and behaviour attributes are sort to direct teams and projects across a wide range of resource fields, industry types and government planning processes.