By now, it’s been widely documented that the COVID-19 pandemic has accelerated numerous forces already in play before it began, including digitalization and flexible working models. One area that deserves more attention because of its long-term implications on sustainability is transport infrastructure.
Worldwide, according to the Global Infrastructure Outlook, more than $2 trillion of transport infrastructure investments will be needed each year until 2040 to fuel economic development. Rapid urbanization, surging demand for freight services, and not to mention the COVID-19 response stimulus plans in many countries are putting pressure on stakeholders to step up the pace of infrastructure development. Also, although the pandemic temporarily pushed people out of cities in Europe and the United States into more rural areas, signs point to people going back to urban areas, where many students and professionals are returning to schools and offices in person.
Before contractors start improving current infrastructure, or break ground and build airports and ports, lay fresh railway tracks, and pave new roads, it’s critical that stakeholders work together to devise ways to transform infrastructure building to become more sustainable. The transport sector is the largest contributor of greenhouse-gas emissions (GHG) within the European Union, accounting for around 28 percent of total emissions. Unlike many other industries that are gradually taking steps to meaningfully reduce their emissions, the transport sector continues to report around 0.8 percent growth in metric tons of carbon-dioxide equivalent (MtCO2e) every year, with passenger cars accounting for the highest portion.
If significant steps are not undertaken to reverse this trend, achieving the climate goals set by global institutions such as the Paris Agreement, the United Nations Sustainable Development Goals, and the EU’s aspirations to reach climate neutrality by 2050 would be nearly impossible. Furthermore, regulators and consumers alike are demanding greater sustainability across all industries, including infrastructure.
How can we transform infrastructure to be more sustainable, ultimately improving the level of service and infrastructure durability without compromising on speed of design and construction?
This article presents a holistic road map toward sustainable transport infrastructure, accounting for sustainability’s four dimensions: environmental, social, institutional, and economic. In simple terms, this means that sustainable infrastructure should be resilient to climate change, socially inclusive, technologically advanced, productive, and flexible. Proper organizational design, digital tools, performance indicators and a joint approach among all stakeholders are essential to effectively transform infrastructures and ensure long-lasting development. Stakeholders need to collaborate to apply sustainability concepts and metrics across all stages: planning, design, tender, procurement, construction, and operational excellence.
From now until 2040, approximately $2 trillion in transport infrastructure investments would be needed every year.
Opportunities and costs in a golden age of transport infrastructure
Many forces are converging to usher in an age of significant transport infrastructure spending (Exhibit 1). From now until 2040, approximately $2 trillion in transport infrastructure investments would be needed every year.
The global pandemic may have resulted in a pause for much of global travel last year. Compared with 2019, global air traffic fell by 65 percent in 2020 with regard to passenger volume, while rail traffic dropped by between 40 and 60 percent among European countries. However, the effect is only temporary.
First, by the middle of 2021, many signs point toward recovery. The size of China’s domestic-travel market has surpassed 2019 levels since March of this year. Domestic-trucking demand swelled by 15 percent in May 2021 compared with the same time in the previous year, while demand for express cargo continues to surge. Second, passenger and freight transport demand is expected to grow briskly in the coming decades, according to the OECD International Transport Forum 2021. The total passenger demand is projected to increase from roughly 53 trillion kilometers in 2015 to between 65 trillion and 75 trillion in 2030 and 105 trillion and 125 trillion in 2050.
Despite some structural changes triggered by the pandemic, like shifts in the passenger mix, passenger growth is expected to be driven mostly by Asia, which is forecasted to grow by around 3 percent annually between 2015 and 2050. In comparison, in Europe and the United States, growth is expected to be more moderate, at less than 1 percent per year. The rising global population and ongoing economic growth are expected to increase the customer base, demanding transport of people and goods steadily and hence increase the total demand for transport significantly.
A main driver of transport infrastructure spending is the dizzying pace of ongoing and continuing urbanization. According to World Bank data, the global population reached 7.8 billion in 2020, with urban areas accommodating the majority of this boom. According to the World Population Prospects data by the United Nations, between 1950 and 2018, the world’s population grew from around 2.5 billion people to 7.6 billion, an annual growth rate of 1.6 percent. Urban population grew faster at a yearly rate of 2.6 percent. In 1950, 30 percent of people globally lived in urban areas. By 2018, the figure had reached 55 percent. Experts predict that the figure will reach 70 percent by the middle of the century.
As urban areas burgeon and sprawl across the world, so too will the transport infrastructure necessary to connect them. In developing and high-growth countries, new transport infrastructures are needed to support population shifts from the countryside to cities. In mature countries, existing infrastructures need to be upgraded to bolster resilience, lower carbon emissions, and decrease maintenance costs.
Furthermore, to mitigate the economic wreckage left by the pandemic, governments around the world have introduced stimulus programs that have sizable infrastructure components. In the United States, President Joe Biden introduced a $2 trillion plan to upgrade the nation’s infrastructure over the next decade. Europe’s Recovery and Resilience Facility plan provisions around $850 billion, while China launched a $500 billion fiscal stimulus plan targeted at boosting infrastructure investments.
This constellation of market and interventionist forces is generating invaluable opportunities for the transport infrastructure sector; however, it comes at a growing cost to the environment. Not only is the transport sector the biggest contributor of GHG emissions (around 28 percent) but it is also bucking the general decarbonization trend. While other sectors such as industry and power are decreasing emissions annually by 1.5 percent and 1 percent, respectively, the transportation sector is reporting a 0.8 percent annual growth in MtCO2e, with passenger cars accounting for the highest portion. It’s incumbent on the transport sector to shoulder its part of the global responsibility toward shared environmental goals.
A 360° framework to transport-infrastructure sustainability
How can the transport sector reduce its emissions in line with global climate goals while keeping up with demand for transport infrastructure?
The answer is neither straightforward nor simple, and what’s needed is a conceptual framework providing a comprehensive way for stakeholders to approach sustainable transport infrastructure. Sustainable transport infrastructure needs to fulfill the four common sustainability criteria (environmental, social, institutional, and economic), which can be accomplished by prioritizing five strategic elements. On top of this, and to do better than what is common practice today, transport infrastructure operators should have clear performance indicators and targets—not only for economic performance but also for environmental, social, and institutional performance (Exhibit 2).
Environmentally, transport infrastructures could be planned, designed, constructed, and operated with the aim of increasing their level of climate resilience—which includes mitigating climate impact, protecting biodiversity, and minimizing pollution. Sustainable transport infrastructure should catalyze a virtuous circle, in which finite materials are gradually replaced with renewable materials. Where possible, materials should be reusable, reparable, recyclable, and recoverable.
Socially, sustainable infrastructures should consider the external effects on vulnerable populations, preserve cultural heritage, protect human rights, improve quality of life, increase the level of inclusiveness, and make transport services accessible.
The institutional aspect focuses on transport infrastructure’s alignment with its country’s overall objectives, such as specific paths toward decarbonization. Finally, the economic facet covers the infrastructure’s long-term financial viability and its contribution to job creation and economic growth.
With a clear understanding of what sustainable transport infrastructure is, stakeholders could approach each project from these five angles.
- Climate resilience. Builders of transport infrastructure could prepare for the rising frequency of extreme weather events due to climate change. Over the next three decades, the McKinsey Global Institute predicts that the global average temperature is expected to climb between 1.5°C and 5°C, and there’s more than a 15 percent probability of an increase in extreme temperatures during the summer months. As long-lived assets, transport infrastructure stands to be particularly impacted by the effects of climate change. For instance, many airports are located near water, with a quarter of the world’s 100 busiest airports situated less than ten meters above sea level. A handful of them are at less than five meters. As they are more vulnerable to precipitation flooding during hurricane storm surges, more has to be done to help them adapt to rising sea levels.
- Inclusion. Transport infrastructure is a public good and should promote inclusion in surrounding communities. According to the Global Infrastructure Hub, inclusive infrastructure can be defined as “any infrastructure development that enhances positive outcomes in social inclusivity and ensures no individual, community, or social group is left behind or prevented from benefiting from improved infrastructure.” Examples of inclusive actions are stakeholder engagement, stakeholder empowerment, inclusive policy development and implementation, inclusive project life cycles, and inclusive opportunities such as job generation for business and communities.
- Technology. Digital technologies are critical in the transitioning of transport infrastructure across its myriad forms toward greater sustainability. In rail, the deployment of advanced train-control and signaling systems—such as the European Rail Traffic Management System (ERTMS) level 2 technologies that use wireless communications to supervise train movement—will eventually enable the rail sector to meet the European goal to make freight transport more sustainable, reaching 30 percent of modal share, from current levels of 18 percent, while reducing capital expenditures and maintenance expenses. Digital applications including optimized movement sequencing, smart metering, and energy solutions can reduce airports’ carbon footprint, while the all-around digitization of the shipping supply chain (including cloud and IoT technology, advanced analytics tools to optimize freight scheduling and routing, and adoption of biofuels) could reduce the sector’s emissions globally. For roads, the installation of charging infrastructure for electric vehicles is among the most effective smart solutions for roads and highways to improve their sustainability footprint. Other initiatives like smart maintenance (that is, optimization of road maintenance through data analytics) reduces traffic jams, which leads to other environmental, social, and economic benefits.
- Productivity and value creation. To be more appealing to private capital, transport infrastructure assets need to be highly productive and delivered in a timely manner. This is a particularly challenging issue for the sector due to a high level of fragmentation. Stakeholders could move toward a more circular economy, where the entire supply chain could be incentivized to care about an asset’s full life cycle. Instead of being a financial liability, sustainable transport infrastructure should be value creating through sustainable business-model innovation. Global institutions play a critical role in setting up carbon-neutrality targets. Along with the penalties, carbon taxes or carbon price premiums might cause nonsustainable infrastructures to become financial liabilities for owners. Identifying the total cost of ownership and initiatives that can increase revenues or reduce maintenance overheads is also a critical component. Actors across the value chain could leverage digital platforms to improve visibility, streamline processes, and collaborate to boost efficiency. Similarly, sustainable brownfield interventions could focus on creating value by reducing redundancies and leveraging smart infrastructure capabilities, data analytics, and connectivity across the value chain. For instance, condition monitoring and predictive maintenance paired with road-user data could reduce lane closures and optimize traffic to reduce blockades, congestion, and emissions from vehicles idling.
- Flexibility. If the COVID-19 pandemic taught us anything about transport infrastructure, it’s the importance of flexibility. Transport infrastructure should be able to accommodate abrupt and significant shifts in demand—both predictable and unpredictable—and thus needs to become more flexible. For instance, sustainable transport infrastructure will need to be able to absorb abrupt shifts in types of traffic, such as the air-traffic shift from passenger flights to freight transport experienced during the pandemic.
These four sustainability dimensions and five strategic elements provide a robust definition of what sustainable transport infrastructure could accomplish financially, environmentally, and socially. Tracking performance with clear indicators and metrics, including the number of safety-related incidents or the cost of public transport, has societal benefits. Similarly, the institutional performance of a transport infrastructure asset could be measured by tracking the contribution of the asset toward a country’s overarching objectives, such as complying with a specific decarbonization target or regional development plan. Long-term sustainable performance is a competitive advantage that could appeal to many investors.
Applying the framework: From planning to operations
Sustainability should be embedded into all five stages of the life cycle of transport infrastructure: planning, design, tender, procurement and construction, and operations (Exhibit 3). Key stakeholders—government ministries, technical advisers, local communities and their representatives, developers and contracts, and investors—could apply the holistic framework in a methodical way (see sidebar, “Enablers: Organizational structure, digital tools, and multistakeholder collaboration”).
Planning and design
Whether it’s a brand-new project or intervening on existing infrastructure, sustainable concepts can be applied from the planning and design phase. For new projects, all externalities—from environmental to social to economic impact—should be carefully studied and planned for. Care should also be given to the asset’s resilience to climate risks.
When it comes to brownfield interventions or making improvements to existing infrastructure, an integrated planning process can optimize resource allocation (both human and financial capital) on critical areas. Planners could identify the major environmental regulations and objectives of the respective area and align interventions with national and sector plans. For instance, the authorities of a specific place may be focused on increasing the uptake of more environmentally friendly modes of transportation. A priority infrastructure project might be blanketing the city with enough electric charging points.
To be in lockstep, key stakeholders should fully understand the needs and interests of all parties and agree on key performance indicators and key metrics to track performance during construction as well as during the life span of the asset. For instance, stakeholders could agree to implement risk-mitigation actions to enhance climate-change resilience, which may cost more initially but will lower operating expenses in the long term. Plans could also be drawn up to tap into the local workforce, providing equal employment opportunities to both gender and minority groups.
Stakeholders could agree on how to optimize and streamline the speed of execution while maximizing positive socioeconomic outcomes such as ensuring accessibility to all vulnerable groups. A holistic approach to value creation reduces capital expenditures across categories such as superstructures, electrical, or main equipment, with the potential to generate 10 to 15 percent in savings. Simultaneously, targeted interventions can exceed business objectives with a relentless focus on the full life-cycle cost and benefit of the project, unlocking positive socioeconomic effects.
The main objective during the tender phase is setting up optimal sustainable processes and strategies to shorten the overall duration of this phase.
The technical sustainability criteria used for the evaluation of offers should be clearly defined; providing a tool kit for tender management and using a standard template to evaluate offers can speed up this process. A proper score allocation of technical and economic criteria could provide an objective way to select suppliers based on the optimal combination of works’ and services’ quality, environmental performance, utility requirements, and price.
Terms could require bidders to have a proven track record of positive sustainability impact, optimize operations in line with energy efficiency and environmental standards, prioritize natural and renewable capital, and employ local workers. Setting economic parameters can help limit excessive valorization of price differences among competing offers. Avoiding excessive discounts may mean foregoing some cost savings, but discounting too much could lead to compromised quality.
Procurement and construction
A timely implementation between the tender offer and project execution is important. It’s also an opportunity to safeguard the environment and the communities involved in the project execution.
Decision makers may consider optimizing capital expenditure during the procurement phase, which includes volume bundling and unbundling. When selecting suppliers, contractors could encourage effective competition and equal opportunities. Care should be taken to ensure a fair process, complying with internal governance procedures. Suppliers could be required to foster respect for human rights and environmental protection. For instance, they could provide evidence for leveraging energy-efficient equipment and materials and using energy produced through renewable sources to reduce the Scope 3, or indirect value-chain, carbon emissions of the infrastructure owner or operator.
Materials employed during construction require special attention. Where possible, sustainable construction materials—such as net-zero CO2 concrete elements, CO2-free steel with improved corrosion resistance, or fit-out materials with reduced volatile organic compound emissions—are preferred. For instance, paving roads with asphalt containing ground rubber from recycled tires could lower the life cycle CO2 emissions by around 30 percent when compared with conventional asphalt. The recycling of asphalt could also save a significant amount of transport and processing associated carbon emissions. Plus, all raw-material-embodied CO2 emissions could be potentially saved when asphalt raw materials are recycled. This alone roughly accounts for 40 percent of the cradle-to-gate carbon of new asphalt, according to the European Asphalt Pavement Association.
Industry players could experiment with ways to reuse construction waste. For example, a player in the energy sector stores every used or broken wind turbine blade trying to find a solution to reuse or recycle. Even though the technology does not yet exist, the embodied value for future business could potentially be significant.
During construction, construction processes and logistics have to adhere to the highest environmental standards to minimize carbon emissions. Digital tools, such as digital twins and five-dimensional building-information modeling (5D BIM), could be leveraged to optimize construction processes and reduce unnecessary carbon emissions from rework, inefficient equipment usage, or resource wastage and scrap material. Additionally, stakeholders could adopt a lean construction approach incorporating schedule-compression initiatives and parallelization of activities to increase execution speed and make the infrastructure available to their users sooner. For example, the acceleration of protracted construction activities such as interior fit-out, the detailed analysis of construction interdependencies, and respective phasing of activities can lead to an acceleration and time savings of around 20 to 25 percent.
Finally, after the construction of the project, operational excellence involves continuously tracking and enhancing the infrastructure’s sustainability impact. All four dimensions—environment, social, institutional, and economic—should be considered. Stakeholders may monitor the infrastructure’s actual contribution to institutional commitments regarding GHG emissions reduction, increased national competitiveness, and improved safety.
To track ongoing performance, key metrics are critical. Digital tools could be employed to monitor business dynamics. Environmental data (such as GHG emissions, energy consumption, ratio of renewable energy to nonrenewable energy, and waste management) could feed into impact assessments and evaluations. Similarly, instruments such as end-user satisfaction surveys could be deployed to track inclusion levels and identify potential areas of improvement.
Leveraging advanced data analytics and digital tools, infrastructure operators may be able to maximize savings and increase efficiency by acting on indirect costs, maintenance, inventory, risk management, and workforce management. For example, railway operators are reducing Scope 1 carbon emissions (GHG emissions produced directly from the operation of trains) by leveraging automated speed control. Automated speed control systems, such as the ERTMS, reduce power consumption by optimizing the speed of the train, which also increases the capacity of the infrastructure. As a consequence, the carbon footprint for the transport of people and goods decreases.
Another example can be found in the transport infrastructure supporting the logistics sector. Automating truck and crane equipment to minimize container movements in terminal yards improves efficiencies and reduces waiting times for shipping lines and trucks. A logistics player found that digitizing port infrastructure using RFID technologies led to an 80 percent drop of air pollution. Optimizing the container movement within the yard lessened energy consumption by 6.5 percent when the top speed was reduced from 28 km per hour to 25 km per hour.
Our experience indicates that maintenance optimization can unlock 15 percent in cost reductions by adopting state-of-the-art technologies and improving quality and service levels. Advanced inventory techniques could eliminate up to 50 percent of unnecessary steps and costs. Financial flows and operations should be transparent and traceable. Sustainability concepts should be included in the Regulatory Asset Base tariffs and capital-expenditure programs.
Growing awareness for sustainability topics, carbon-neutrality targets, and frequent delays in project execution have led to increased scrutiny of the transport infrastructure sector. As reducing environmental impact while keeping pace with demand becomes more urgent, it is time for stakeholders to work collaboratively with one another to embed sustainability practices, concepts, and metrics into every stage of the transport infrastructure life cycle. With the help of the latest digital tools at our disposal, the promise of truly sustainable transport infrastructure is well within reach.