By Greg Baird
Sustainability in Financial Decision Making
In 2009, the National Research Council called for, in concept, a national integrated framework for infrastructure asset management to develop an alignment of cost and value of infrastructure services, user rate structures, community and regional fees, and life cycle cost and financial analysis incorporating the performance criteria of economic, environmental and social sustainability measures.
The U.S. Conference of Mayors, in a 2010 published report on local government expenditures on water infrastructure, stated “One of the biggest impediments to renewing our national public water and wastewater infrastructure is the lack of precision in our understanding of who is paying how much for what; and how much total investment needs will be in the near future.”
Clearly, there is a need for an “all-sector” involvement in the planning and funding of our infrastructure with a clear designation of responsibilities, authorities and financial means for delivery, operations, maintenance and upgrade for infrastructure services. Our water assets are aging and the costs are increasing and will continue to do so in an uncoordinated and ineffective manner without an integrated sustainability approach.
Sustainability Can’t Always Mean More Money
To be sustainable, we need to overcome the inefficiencies. The Johnson Foundation at Wingspread, in collaboration with American Rivers and Ceres, reported on some recommendations to begin to chart the pathways toward innovative and sustainable funding mechanisms that support the long-term sustainability of our water systems — both built and natural. The report highlighted the concerns of the inefficiency of existing systems, which lose six billion gallons of expensive, treated water each day due to leaky and aging pipes. This is 14 percent of the nation’s daily water use, underscoring the fact that the American Society of Civil Engineers gives the nation’s water systems a grade of “D–” — the lowest grade of any infrastructure including roads and bridges.
The report also stated that only about 1,500 to 2,000 of the roughly 52,000 water systems in the United States are large enough to issue their own bonds and pointed out, “One of the main impediments to change is the very nature of the systems themselves, where potable water, wastewater, stormwater, greywater and rainwater are not treated as part of an interconnected system, but rather as distinct, separately financed and regulated units. Progress towards more sustainable, resilient and cost-effective systems is attainable, particularly if a long-term view is taken. Consumers should be given choices and options. The financial health of our water systems is directly linked to their long-term sustainability. Our nation’s water systems need to embrace various financing changes in order to ensure long-term sustainability.”
Sustainability Analysis
Sustainability is generally embraced and supported by policy and industry as a necessary path for development. Even though climate change and other pressing environmental problems are of high importance, there is a general consensus that, besides environmental aspects, sustainable development needs to consider also economic and social considerations (World Commission, 1987).
Life Cycle Costing: The “New” Revenue for Infrastructure Reinvestment
A long-term perspective with integrated asset management and finance should be able to create synergies and create cost savings. In fact, the objective of asset management programs is to manage assets at the lowest life cycle cost. This type of cost savings, by seeking the lowest life cycle cost and “capturing the savings” is the “new” revenue source for infrastructure reinvestment, yet many asset management programs fail to have a life cycle cost principled framework which tracks, monitors and audits expected and planned cost savings and cost avoidance measures.
According to the Energy Information Administration, if applying triple bottom line sustainability analysis, it is also important to adopt new technologies and innovative materials which can allow people to provide power and mobility using alternatives to reduce energy consumption and dependence. This will help to save water and other dwindling resources, to reduce greenhouse gas emissions, and to create infrastructure systems that are more durable, reliable, resilient and cost-effective.
Sustainability Tools
Asset management heavily focuses on the evaluation of monetized risk balanced with the economic analysis of life cycle costing (LCC). Decision making with sustainability assessments is complex. Developing and gathering the data is the first critical step. The best platform to gather this data (as discussed in Part 1) is a GIS-centric approach using the Esri ArcGIS geo-database as the data repository and combining that with a GIS-centric CMMS like Azteca System’s Cityworks which shares the geo-database. Once you can capture equipment, labor and materials (ELM) costs other software applications can be used to perform life cycle cost analysis or asset management planning through another GIS-centric product like Innovyze’s InfoMaster.
Performance and cost data is required to have an environmental point of view and the life cycle cost (LCC) approach with life cycle assessments (LCA) is a widely accepted and standardized method for measuring environmental life cycle impacts of materials and services. Life cycle assessment is an analytical technique for evaluating the full environmental burdens and impacts associated with a product system (ISO, 1997). By widening the life cycle thinking to the economic dimension of sustainability, the life cycle sustainability assessment can include a combination of LCA and LCC for measuring sustainability for utilities.
In a LCA, all phases (“from the cradle to the grave”) of the life cycle of a product, material, system or a service is analyzed; from the extraction and processing of the resources, through production and further processing, distribution and transport, use and consumption to recycling and disposal. (LCA, 2012)
In these approaches the physical material and energy flows are quantified to create a comprehensive “carbon” footprint. This type of analysis, combined with monetizing energy costs and carbon output, another dimension of sustainable performance measurement between alternative materials or processes can be developed. Through this analysis, many times, recycling does not always mean that a product or process is “green” as the recycling process could exhibit a higher global warming potential (GWP) impact than disposal.
In evaluating underground pipe infrastructure, it is important to take into consideration the surrounding environment, all materials making up the system, all maintenance activities, water loss and the degradation of the internal pipe which increases surface roughness increasing pumping energy costs over time. Water quality risks with bacteria build up and metallic pipe leaching can also be an important social, community public health and environmental cost consideration. By integrating life cycle assessment and life cycle cost analysis and other cost benefit analysis practices, environmental indicators, utility and social costs can be evaluated over a sustainable life period of 100 years (International Organization for Standardization).
Sustainability: The ISO-Certified Environmental Product Declaration
While the term “green infrastructure” is an approach to water management that protects, restores or mimics the natural water cycle and incorporates both the natural environment and engineered systems, utilities still require a great deal of “sustainable” underground infrastructure. Best practice requires the materials to have an environmental product declaration (EPD).
NSF Sustainability provides independent, science-based verification of environmental claims that achieve the highest levels of transparency. An environmental product declaration (EPD) is an ISO 14025 standardized report of data collected in the life cycle assessment (LCA). All Environmental Product Declarations are developed per ISO-14025 standards and must conform to an established product category rule (PCRs) (Sustainable Solutions, 2016).
Third-party EPD validation by NSF Sustainability proves that the data was collected in accordance with the applicable PCR and meets all ISO requirements. Environmental product declarations (EPDs) offer manufacturers an international standard of communication to compare and describe their product’s environmental impact throughout its entire life cycle from cradle to grave. Verification of EPDs allows manufacturers and utilities the ability to:
- Benchmark against other EPD reports;
- Identify areas for improvement of their environmental attributes;
- Provide customers with a way to choose between products based on environmental attributes;
- Help eliminate greenwashing by bringing transparency and credibility to the sustainability marketplace; and
- Save money by adopting more sustainable operational practices and business approaches.
Verified EPDs are type III environmental product declarations and may help building projects qualify for points through the Leadership in Energy and Environmental Design (LEED) Green Building Rating System. According to NSF, EPDs are also increasingly required in international markets for consumer and commercial products. “This is increasingly valuable as demand for healthier, more sustainable products has grown. In fact, 65 percent of consumers globally agree or strongly agree that they would purchase more environmentally responsible products if the companies’ health and environmental claims were more believable” (UL, 2016).
The challenge is to combine the knowledge, creativity, financial resources and energy of a diverse array of individuals, interests and organizations to develop new concepts, approaches and strategies for critical infrastructure renewal. A first step is for a utility to develop the policies and procedures to help guide a sustainability-focused environment.
Cooperation and Planning
The overwhelming and ever-growing infrastructure challenges and the need for repair, replacement and rehabilitation of vast numbers of water and wastewater pipelines will require innovative ideas, practices and products. Engineering design practices and utility investments in long-term infrastructure assets require prudent and responsible consideration. Balancing innovation with historical practices is, and will continue to be, a challenge for water and wastewater utilities and their political and financial decision makers, according to AWWA.
Innovation takes a new effort or approach. Albert Einstein proposed that the significant problems we face cannot be solved at the same level of thinking we were at when we created them. The challenges related to the replacement, repair and expansion of water sector infrastructure will require innovative solutions which can be supported by AWWA standards developed for the water industry.
As new innovative and sustainable cost effective practices are developed, shared and accepted, cross-functional interdependent critical infrastructure domains can start to join resources to prioritize the nation’s infrastructure renewal programs and address economic competiveness, realistic climate change mitigation, public health protection and water and energy use recalibration for the sustainable delivery of critical life services for future generations. The water infrastructure sector can be a growing example and leader of sustainable infrastructure planning and help integrate with smart communities through a GIS-centric approach.
