A Triple Bottom Line Reporting Framework For Property Development Portfolios

Theme 1: Integrated Urban Land Management
A Triple Bottom Line Reporting Framework for Property
Development Portfolios
Professor Paul W Jowitt Scottish Institute of Sustainable Technology, Heriot Watt University, Edinburgh,
EH14 4AS, UK. p.w.jowitt@hw.ac.uk
Panagiotis Panagiotakopoulos Heriot Watt University
George Paschke Wren and Bell Consulting Engineers
Derrick Turner The EDI Group
Introduction
The external perception and internal behaviour of
property development companies has often been one of
opportunistic site acquisition and development,
informed by trends in the property market and geared to
long term profit growth and a return on capital.
Property developers have not been seen as conscious
agents for environmental improvement, prudent use of
natural resources and inclusive social progress. This is
now changing in response to a combination of
regulatory pressures, a greater awareness of the
Corporate Social Responsibility and Sustainable
Development agendas, and recognition that there are
broader measures of success and reputation than the
annual profit and loss account.
Growing awareness of the diminution of natural
resources over the latter part of the 20th
century has led
to a creative re-assessment of what business success
means, and how it can be measured. Wealth creation
is traditionally a strictly financial calculation, but even
within that limited criterion a longer-term view of
profitability and value growth may call for investment,
and possibly losses, in the short to medium term.
Similarly, when considering the wider interests of the
community at large, individual businesses are starting
to re-balance financial returns with other social and
environmental objectives as their contribution to
society. This is particularly true when supported or
driven by shareholder and customer pressure.
This paper describes an approach developed for a
Property Development Company to develop a “Triple
Bottom Line” reporting framework for its property
portfolio. Although assessment methodologies are
available to benchmark the environmental performance
of both new and existing buildings (e.g. BREEAM), and
engineering projects (e.g. CEEQUAL), such
approaches are usually more focussed on measures of
best practice in environmental design and
management, and less on their social performance.
They are also much more closely associated with the design
and construction process, in which Environmental
Management Systems (and the availability of detailed data to
support them) are more common than is often the case in the
property development business. Over time there will be
convergence as the supply and delivery chains become better
connected.
As a step in this direction, innovative frameworks for
assessing the performance of property companies within a
broad spectrum of sustainable development criteria need to
be developed and which can have proper regard for the very
specific context of individual projects. This paper describes
the development of such a framework, based on a Triple
Bottom Line/Five Capitals reporting methodology, and
resulting in nine KPIs that can be applied to any project with
no loss of local context. The methodology is essentially one
where the evidence to justify the assessments needs to be
capable of audit. It is outcome/output focussed rather than
input focussed. A supplementary assessment of the
developer’s internal underpinning business protocols and
systems is also part of the overall assessment framework,
and which serves to indicate those areas where
improvements at the project level can be made.
Sustainability Frameworks
Since sustainability is still a very new and complex issue,
there is not yet an agreed definition, model or frame work to
conceptualise and implement it. When referring to
sustainability, organisations usually mean balancing the
Financial, Environmental and Social aspects of their activities,
in other words their Triple Bottom Line (1). Even though this
approach is very simple it is widely used to realise the
organisation’s sustainability aspects and to easily raise
awareness.
A more elaborate framework is the 5 Capitals Model (2).
This model identifies five sources of capital: the natural,
manufactured, human, social and financial capitals.
CABERNET 2005 – The International Conference on Managing Urban Land
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Natural Capital represents the stock of environmentally
provided assets and falls into two categories:
i) Resources, some of which are renewable (trees,
vegetation, wildlife, water), some non-renewable
(fossil fuels, minerals)
ii) Services, such as climate regulation/air conditioning
or waste processing cycles.
Manufactured Capital comprises the entire fabricated
infrastructure that is already in existence (tools,
machines, roads, and buildings). It does not include the
goods and services produced.
Human Capital consists of the health, knowledge,
skills, motivation and spiritual ease of people. It is all
the things that enable people to feel good about
themselves, each other, and to participate in society
and contribute productively towards its well-being
(wealth).
Social Capital is all the different cooperative systems
and organisational frameworks people use to live and
work together, such as families, communities,
governments, businesses, schools, trade unions,
voluntary groups. Although theses involve different
types of relationships and organisations, they are all
structures or institutions that add value to human
capital.
Financial Capital has, strictly speaking, no intrinsic
value; whether in shares bonds or banknotes. Its value
is purely representative of natural, human social or
manufactured capital. Financial capital is nevertheless
very important as it reflects the productive power of
other types of capital, and enables them to be owned or
traded.
Sustainability in the Construction Industry
The construction industry has recently started to face
the challenge of improving its performance in terms of
sustainable development. The impacts—both negative
and positive—of its operations and of its product, the
built environment, on all the above dimensions of
sustainability are indeed very significant.
Assessing the sustainability performance at the project
level is very important in realising the impacts and
possible improvements that the industry can make. As
an example the case studies of two similar construction
projects are presented: the Skye Bridge and the
Gateshead Millennium Bridge over the Tyne. The case
studies were performed by representing the various
sustainability aspects of each project in terms of the 5
Capitals on a Mind Map, as shown in Figure 1, which allows
the various aspects of the construction project and their
interconnections to be visualised.
The Gateshead Bridge is widely recognised as a successful
project. It has won several awards for its design which
incorporated environmental aspects (waste traps, energy
efficient tilting mechanism), it was socially acceptable and
enhanced the human capital (inspiring, aesthetically
pleasant).
The Skye Bridge in contrast has been a very contentious
project especially in terms of its financial, aesthetic and social
aspects. It was one of the first PFI projects in Scotland and
financial arrangements were severely criticised. The tolls
were considered to be extremely high, especially for the local
community, leading to an active anti-toll campaign (SKAT).
Just recently, the Scottish Executive bought ought the PFI
franchisee and cancelled the toll charges. On the other hand,
its design and construction did make efforts to minimise
environmental impact in an area of particular sensitivity, for
example by the construction of special tunnels to protect the
otters living in the area and certain measures taken to
minimise the environmental impacts during the construction
phase.
These two examples show the great number and complexity
of the issues involved in assessing sustainability in
construction.
Sustainability Reporting in Property Development
The above frameworks and approaches are very useful in
conceptualising and understanding the meaning of
sustainability in the construction sector. However,
sustainable construction needs to be addressed and
implemented by all those involved in the operation of the
construction industry and Property Developers can play a
significant role in this effort. Their operations usually results
in significant sustainability impacts, but on the other this can
be viewed as an opportunity for those wishing to take
responsibility and improve their sustainability performance.
One common way of achieving this is to assess the
performance of their portfolios according to sustainability
criteria, and reporting it to their stakeholders.
The remainder of this paper presents the development of
such an assessment and reporting framework for a major
property developer company (PDC) operating in Edinburgh.
Its portfolio includes offices, residential, industrial and area
regeneration projects.
From the beginning of this project the PDC showed that it had
a clear underlying sustainability ethos that reflected its
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ownership, its origins and its staff. This was also
evident from the company’s stated mission:
“to develop the property, economic and
employment opportunities in Edinburgh and
surrounding area through commercial, innovative and
sustainable activities for the benefit of Edinburgh and its
citizens.”
Moreover, the initiative and motivation of the project
came from a senior level within the organisation and
appeared to reflect not simply an opportunity to
establish a market edge, but to benchmark its
performance against implicit values and because “it
was the right thing to do irrespective of market benefit”.
FIGURE 1: Mind Map showing the 5 Capitals involved in the Skye Bridge
Project Assessment KPIs
In order to assess its portfolio, the PDC wanted to have a
custom made framework relevant to its operations instead of
applying an existing assessment tool such as BREEAM.
Initially the development of this framework was based on
detailed KPIs from various literature sources that would
provide an objective performance assessment for each of the
company’s projects. These KPIs were organised using the
Triple Bottom Line/ 5 Capitals frameworks and were
represented in Mind Maps to help the company’s staff
understand how they relate to the general assessment
framework, as shown in Figure 2.
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FIGURE 2: Mind Map showing indicative project
KPIs
This bottom-up approach, however, encountered
various problems in its implementation. First of all, the
data required for the detailed KPIs were not available or
were held by the supply chain of each project. Second,
the use of common detailed indicators resulted in the
loss of the particular context of each project (e.g.
project location and type), making it difficult to make
useful comparisons. Finally, the detailed KPIs had to
be compiled in long spreadsheets making the overall
assessment process difficult and time intensive.
The solution to these problems was to use a top-down
approach that drew back from requiring detailed data.
Instead of being input driven (e.g. asking for various
information on CO2 emissions; energy consumption/m2
;
embodied energy etc. to make some high level
statement about resource efficiency), it was output
driven, i.e. asking for high level issues directly (e.g. “in
terms of current best practice, how does this particular
project rate against this headline criterion?”).
This new approach used nine high level KPIs, three for
each bottom line, as shown in Table 1.
In terms of the Natural & Manufactured capitals the
KPIs were:
a) Resource Use: Does the project make prudent
use of natural resources (materials, water, and
energy)?
b) Waste Minimisation: Does the project facilitate the
minimisation and appropriate treatment of its wastes to
land, water or air?
c) Land Use: Does the project promote efficient land use?
The thinking behind this selection of assessment KPIs is that
they relate to use of resources in construction, in use and in
the environmental capital embedded within the site.
In terms of the Human & Social capitals the KPIs were:
a) Customer Satisfaction: Does the project meet or
exceed customer requirements?
b) Employees/Job: Does the project take account of and
promote employee (PDC) satisfaction?
c) Community Development: Does the project support the
overall development of the community?
The choices of these three assessment headings relate to the
contribution the project makes to satisfying the needs of the
Client, PDC staff and the wider community.
In terms of the Financial capital the KPIs were:
a) Added Value: How much has the project gained
through the bringing together of the various resources
used in delivery?
b) Return on investment: The added value expressed as a
percentage of the developer’s capital, taking into account
the length of time the investment was utilised.
c) Brand Strength: How much has the project enhanced
the reputation of the company with customers and other
stakeholders? (For example through such things as
aesthetic impact; creative respect for design standards;
efficient, professional delivery; or any other unique
feature.)
TABLE 1: High Level KPIs
Natural &
Manufactured
Human & Social Financial
Resource Use User Satisfaction Value Added
Waste
Minimisation
Employee
Satisfaction
Return on
investment
Land Use
Community
Development
Brand Strength
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Project Assessment Methodology
The PDC’s portfolio was assessed by asking the
Project Managers to score the performance of their
projects according to each one of the above KPIs. A
four point scale was used were:
1 = NOT GOOD,
2 = FAIR,
3 = GOOD, and
0 = NO DATA AVAILABLE
For example, in terms of energy consumption the
answer could be Fair, because there have been some
relevant considerations in the initial design, or Good,
because there are also energy data measurements
which are better than best practice standards.
However, the Project Managers were prompted to
explicitly support their judgements by providing the
evidence on which each assessment was based. This
way they were encouraged to improve their assessment
measurements each year. If for example the first year
the energy efficiency of a project was assessed based
on a value judgement, the PM was prompted to state
this and next year he may wish to support his judgment
by applying an assessment tool such as BREEAM. In
this way the framework could become as data intensive
as the company itself wished.
The results of the assessments were compiled for each
project and presented in spider diagrams, as shown in
Figure 3, which allowed an instant performance
overview and identification of strong/weak points.
Similar diagrams were compiled for the aggregated
performance of different types of development (e.g.
industrial, residential) to identify other critical trends.
FIGURE 3: Project assessment spider-diagram
In summary the Project Assessment Methodology has a
number of advantages:
1. It ensures the context of the project is taken into account;
2. It doesn’t require performance data on what might be
regarded as irrelevant performance indicators;
3. It allows the project manager to exercise judgement;
4. It focuses on outputs, not inputs.
5. It is more akin to a high-level audit process and not a
bottom up tick-box procedure.
6. There is a corollary: the judgements have to be
substantiated by evidence.
Assessment at the Process/ Management Level
A second assessment was developed to identify whether
certain management processes and standards likely to
enhance the sustainability performance of particular projects,
were part of the company’s operations. A list of such
processes was compiled for each bottom line, and those that
the PDC was implementing were identified, as shown in Table
2. Some of these processes were also identified as
appropriate for formulating supply chain requirements and
introducing them into the tender documents.
TABLE 2: Sustainability processes at the process/management
level
Natural &
Manufactured
Human & Social Financial
Used currently
• Car-free schemes
• Home Zone
Designs
Not used currently
• Sustainable
Procurement
policy
• Waste
minimisation
policy for
contractors
• Green transport
policies
Used currently
• Health & Safety
management
systems
• Stakeholder
engagement
mechanisms
Not used currently
• Staff
recruitment and
training
requirements for
contractors
Used currently
•Change control
procedures
•Project governance
methodology
•Post Project
Appraisals
•Business Continuity
Plan
•Risk Management
Policy
Not used currently
•Quality Management
Systems for
contractors
0
1
2
3
Resource Use
Waste
Minimisation
Land
Use
User
Satisfaction
Employee
Satisfaction
Community
Development
Value
Added
Return on
Investment
Brand
Strength
5

Conclusions
This paper describes a Triple Bottom Line assessment
methodology developed for property development
portfolios. The method is output focussed and flexible
enough to allow the local context of particular projects
with a varied portfolio to be accommodated.
The assessment technique focuses on 9 high level
KPIs. The Developer’s underpinning business
processes also form part of the overall assessment.
The process does not rely on prescriptive sets of
project data but instead allows the assessors to
exercise judgement in the selection of the appropriate
evidence to underpin assessment KPIs. These
judgements must be evidence based.
It is anticipated that over time, the developer’s supply
chain will become part of the process and that such
evidence will become more routinely available.
The Triple Bottom Line Assessment has proved useful
to the developer both externally (eg providing the basis
for a section on sustainability in the annual report) and
internally, stimulating discussion among staff and
highlighting areas for improvement.
References
(1) ELKINGTON J. Cannibals With Forks: The Triple
Bottom Line of 21st Century Business. New Society
Publishing (1998)
(2) EKINS P et al. A framework for the practical
application of the concepts of critical natural capital and
strong sustainability. Ecological Economics (2003) 44
(165-185)
Jowitt P W, Panagiotakopoulos P, Paschke G U & Turner D
A Triple Bottom Line Reporting Framework for Property Development Portfolios
CABERNET 2005, Proceedings of The International Conference on Managing Urban Land; (eds Oliver, Millar Grimski,
Ferber & Nathaniel), April 2005, Land Quality Press, Nottingham. ISBN 0-954747-1-0, pp174-179
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A Triple Bottom Line Reporting Framework For Property Development Portfolios

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