Development of Sustainable Dry Bulk Terminals; Duurzame ontwikkeling van droge bulk terminals

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Delft University of Technology Department Marine and Transport Technology Mekelweg 2 2628 CD Delft the Netherlands Phone +31 (0)15-2782889 Fax +31 (0)15-2781397 www.mtt.tudelft.nl

This report consists of 90 pages and 1 appendix. It may only be reproduced literally and as a whole. For commercial purposes only with written authorization of Delft University of Technology. Requests for consult are only taken into consideration under the condition that the applicant denies all legal rights on liabilities concerning the contents of the advice.

Specialization: Production Engineering and Logistics Report number: 2014.TEL.7869

Title: Development of Sustainable Dry Bulk Terminals

Author: P.F. van der Hammen

Title (in Dutch) Duurzame ontwikkeling van droge bulk terminals

Assignment: Master thesis Confidential: no

Initiator (university): prof.dr.ir. G. Lodewijks

Initiator (company): A van Bruchem B Eng MSc (Royal HaskoningDHV, Rotterdam) Supervisor: ir. T.A. van Vianen

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TUDelft

Department of Marine and Transport Technology

Delft University of Techmology

Mekelweg 2 2628 CD Delft the Netherlands Phone +31 (0)15-2782889 Fax -1-31 (0)15-2781397 www.mtt.tudelft.nl

Student: P.F. van der Hammen

Supervisor (TUD): T.A. van Vianen

Supervisor (Company): A. van Bruchem

Assignment type: Creditpoints (EC): Specialization: 35 PEL Master project Report number: Confidential: 2014.TEL.7869 No

Subiect: Development of Sustainable Dry Bulk Terminals.

Introduction

Royal HaskoningDHV is a leading company in the business of project management and engineering consultancy. One of their areas of expertise is heavy industries and logistics. Within this area of expert:ise there is high involvement in the development of dry bulk terminals.

With a global concern about the availability of resources, sustainability has become an increasing factor in managing business. Under the flag of corporate responsibility it is almost unthinkable that a company nowadays is not incorporating its sustainable performance.

As always there are industries that are early adopters of a concept and industries that follow later. Ports and terminals are one of the latter industnes to incorporate sustainability and it is only in the past few years that sustainable performance has become of real issue. In that footlight more exploiters of dry bulk terminals are interested in their sustainable development.

Within the logistic chain of dry bulk, from the mine pit to usage in a power plant or industrial site, terminals are a small, but vital link. Hence, if there is a need for dry bulk and there is a need for sustainability there is also a need to create insight in sustainability for dry bulk terminals. To be able to serve the customer in that context Royal HaskoningDHV is interested in how such an assessment could be done.

Problem definition

There is a lot of literature written about sustainability and sustainable assessment. Little knowledge is there about the sustainability of dry bulk terminals. To create insights in and handholds for sustainable development for dry bulk terminals it is interesting to examine how these sustainability studies apply to and how they can be used for dry bulk terminals. Therefore the following research question can be proposed:

How to enable sustainable development in dry bulk terminals?

Assignment

Following the research question the assignment for the research will be to develop a method that will enable sustainable development within dry bulk terminals. Subsequently, a quantitative assessment of dry bulk terminals should be performed to create insights and evaluate dry bulk terminals on their sustainable performance.

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Department of Marine and Transport Technology IVIekelweg 2 2628 CD Delft the Netherlands Phone +31 (0)15-2782889 Fax 4-31 (0)15-2781397 www.mtt.tudelft.nl Implementation

• Study relevant literature.

• Analyze sustainable assessment methods.

• Analyze dry bulk terminal according the Delft System Approach. • Identify sustainable performance of dry bulk terminals.

• Apply sustainable assessment method to evaluate different technical solutions within dry bulk terminals.

• Evaluate sustainable assessment method in relation to other methods.

TUDelft

Delft University of Technology

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Development of Sustainable Dry Bulk Terminals

A net present sustainable value approach to embed sustainable development in core processes of dry

bulk terminals

MSc Thesis | Production Engineering and Logistics P.F. van der Hammen| September 2014

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Development of Sustainable Dry Bulk

Terminals

A net present sustainable value approach to embed sustainable development in

core processes of dry bulk terminals

Master of Science Thesis

Author: P.F. van der Hammen BSc Student nr.: 1263633

Report nr.: 2014.TEL.7869 Date: September 2014

Specialization: Delft University of Technology

Master curriculum of Mechanical Engineering Specialization Production Engineering and Logistics Graduation committee:

Prof. dr. ir. G. Lodewijks Delft University of Technology ir. T.A. van Vianen Delft University of Technology A. van Bruchem B Eng MSc Royal HaskoningDHV

Contact Details: Royal HaskoningDHV

Heavy Industries and Logistics George Hintzenweg 85 Postbus 8520

3009 AM Rotterdam, The Netherlands Delft University of Technology

Faculty of Mechanical, Maritime and Material Engineering (3mE) Section Maritime and Transport Technology

Mekelweg 2

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This thesis is the result of an internship at the Heavy Industries and Logistics department of Royal HaskoningDHV. During this period I have studied the development of sustainability within dry bulk terminals. This thesis will provide an approach to ensure dry bulk terminals they develop in a sustainable manner.

I would like to thank everyone at Royal HaskoningDHV for their support and the pleasant time I had there. In particular, I am thankful to Arjen van Bruchem for his daily supervision. In addition, I would like to thank my supervisor from the Delft University of Technology Teus van Vianen, who was always available to support me with my thesis work.

Pieter van der Hammen

Delft, The Netherlands September 2014

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Abstract

With stricter legislations and an increasing customer demand, sustainability seems to be getting more and more important for dry bulk terminals. Although many references discuss sustainable development, the knowledge about sustainable development in dry bulk terminals is missing. Therefore, the aim of this research is to enable sustainable development of core processes in dry bulk terminals by providing insight into sustainable development, translating this knowledge into the decision making process and exploring possible improvements.

Sustainable development

The most common used definition of sustainable development is formulated as follows: ‘sustainable

development is development that meets the needs of the present without compromising the ability of future generations to meet their own needs’ (WCED, 1987). Based on this definition, sustainability is

often accounted by the means of three perspectives – the Triple Bottom Line (TBL) – of economic, environmental and social aspects.

The core process of a dry bulk terminal is to transfer dry bulk cargo from one transport modality to another. Within the terminal area this is carried out by the following functions: unloading/loading, transporting, stacking/reclaiming and storing.

To implement the aspects of sustainability into the core processes, a terminal operator has to go through an innovation process; from exploring the environment for sustainability needs together with developing sustainability goals to developing and organizing sustainability in the processes. To measure the sustainable performance, sustainability criteria and indicators are needed and have to be developed by the terminal management. Examples of criteria and indicators can be found in appendix B and a vast amount of available literature.

To get an insight in the current sustainable performance of dry bulk terminals an assessment has been made of three terminals and equipment alternatives. Because carbon dioxide emissions are the predominant contributors to climate change it has been chosen to solely focus on carbon dioxide emission as an indicator for sustainable performance.

Carbon emission within terminals and for equipment alternatives

A comparison between structural and operational emission showed that the dominant emission within dry bulk terminals is operational emission. The focus for the assessments was therefore on operational emission.

The assessment of operational emission showed that the lowest emission estimate was related to EMO that predominantly uses electrical equipment. The highest emission was for Rietlanden that used both mobile belt conveyors and wheel loaders. Expected was that OVET would have the highest emission because of the sole use of wheel loaders. This was not the case as the combination of equipment used at Rietlanden still needed much extra support from wheel loaders, hence resulting in a less efficient option.

Regarding equipment alternatives, a belt conveyor system with stackers and reclaimers has less emission per handled ton than wheel loaders. Furthermore, bucket and grab type unloaders have the

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lowest emission estimates in comparison to other types of unloaders. This is mainly due to their lower energy consumption and only minimal extra emission from additional clean-up of the ship holds. For other equipment, like ship loaders and stacker/reclaimers, the emission estimate is mainly influenced by the energy consumption related to the feeding height the material has to be transported to, and the size of the machine.

The economic value created per emitted ton of CO2 is higher at larger terminals, as these terminals use their CO2 emission more efficiently and can create economic value through the up scaling of processed quantities. In comparison to other businesses the economic value created per emitted ton of CO2 is high because of high profit margins and not because of the CO2 performance.

Emission of dust and spillage

Most dry bulk commodities are prone to dust pollution and spillage. Measures taken to prevent dust and spillage consume energy and therefore have an impact on the emission of a terminal. Based on an assessment of a transfer point of 2000 tph the results show that the implication of dust is minimal (<8%) in comparison to the operational emission. For dust mitigation on stockyards this implication lies between 1-19% of the total emission at the terminal. Due to the relatively limited amount of spillage (<0.5%) created at the terminals, the relative amount of emission due to spillage is negligible. Net Present Sustainable Value analysis

The basis for selecting the most sustainable alternative among others is a sustainable decision making process, based on the Triple Bottom Line. Currently, the decision making process in terminals is largely dominated by financial motives, which conflicts with the idea of sustainability. To overcome this domination and to enable sustainable decision making within dry bulk terminals the Net Present Sustainable Value (NPSV) method is selected.

Based on the concepts of opportunity costs and discounted rates, the NPSV examines whether the present value of the anticipated future returns from using environmental and social resources is in line with the targets defined by a company’s sustainability strategy. A positive NPSV together with a positive Rate of Sustainable Return (RSR) will result in an improved sustainable performance. The alternative with the highest RSR will have the highest contribution to sustainable development. The net present sustainable value (NPSV) analysis is used to assess three terminal functions: unloading, transporting and storing. These functions are chosen because they represent the largest part of the emission within the terminal. The results of the analysis showed as expected a preferred outcome of resource efficient solutions that create the most economic value. Furthermore, the NPSV resulted in more sustainable alternatives in comparison to a more common accounting method as carbon cost accounting.

Conclusions

In conclusion sustainable development can be enabled within dry bulk terminals by securing sustainability criteria into the decision making process. This can be done by using the innovation process to initiate and evaluate these criteria. By using the criteria with a net present sustainable value analysis for investment appraisals, the preferred outcomes will support a higher degree of sustainability, thus creating sustainable development.

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Samenvatting

Met strengere wetgeving en een toenemende vraag van klanten lijkt duurzaamheid meer en meer van belang te worden voor droge bulk terminals. Hoewel er voldoende kennis is over duurzame ontwikkeling, ontbreekt hierover de kennis specifiek voor droge bulk terminals. Daarom is het doel van dit onderzoek het in staat stellen van duurzame ontwikkeling binnen droge bulk terminals. Dit zal gedaan worden door inzicht te geven in duurzame ontwikkeling, het vertalen van de kennis over duurzame ontwikkeling naar het besluitvormingsproces en het verkennen van mogelijke verbeteringen ten aanzien van duurzame ontwikkeling.

Duurzame ontwikkeling

Op dit moment is de meest gebruikte definitie van duurzame ontwikkeling als volgt geformuleerd: ”duurzame ontwikkeling is ontwikkeling die aansluit op de behoeften van het heden zonder toekomstige generaties te beperken in hun vermogen om in hun eigen behoeften te voorzien” (WCED, 1987). Op basis van deze definitie wordt duurzaamheid vaak benaderd vanuit economisch, ecologisch en sociaal perspectief, ook wel de ‘Triple Bottom Line’ (TBL) genoemd.

Het kernproces van een droge bulk terminal is om droge bulkgoederen van de ene vervoersmodaliteit naar de andere te transporteren. Binnen de terminal wordt dit uitgevoerd door de volgende functies: laden, lossen, transporteren, inslaan, terugwinnen en opslaan.

Om de aspecten van duurzaamheid te implementeren in de kernprocessen zal een terminal door een innovatieproces moeten gaan. Dit gaat van het verkennen van de omgeving naar de behoeften ten aanzien van duurzaamheid en het ontwikkelen van duurzaamheidsdoelstellingen tot en met het ontwikkelen en organiseren van duurzaamheid binnen de processen. Om de duurzame prestaties te meten zijn duurzaamheidscriteria en indicatoren nodig die ontwikkeld moeten worden door het management van de terminal. Voorbeelden van deze criteria en indicatoren kunnen worden gevonden in appendix B en ruim beschikbare literatuur.

Om inzicht te krijgen in de huidige duurzame prestaties van droge bulk terminals is er een evaluatie gemaakt van drie terminals en een aantal machine alternatieven. Een keuze is gemaakt om het onderzoek uitsluitend te richten op de uitstoot van koolstofdioxide als indicator voor duurzame prestaties. Dit is gedaan omdat de uitstoot van koolstofdioxide de grootste bijdrage levert aan de klimaatverandering.

CO2 binnen terminals en machine alternatieven

Als eerste is er een vergelijking gemaakt tussen structurele en operationele emissie, waaruit bleek dat de dominante emissie binnen droge bulk terminals een gevolg is van de operationele activiteiten. De focus voor de evaluatie van de terminals is daarom gelegd op operationele emissie.

Uit de evaluatie van de operationele emissie bleek dat de laagste emissie werd geproduceerd door EMO, dat voornamelijk gebruik maakt van elektrische apparatuur. De hoogste emissie werd geproduceerd door Rietlanden, dat een combinatie van mobiele transportbanden en wielladers gebruikt. De verwachting was dat OVET de hoogste emissie zou hebben aangezien er louter gebruikt gemaakt wordt van wielladers. Het resultaat was anders, omdat de gebruikte combinatie bij

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Rietlanden veel extra ondersteuning nodig heeft van wielladers, wat resulteerde in meer CO2 uitstoot.

Ten aanzien van de verschillende machine alternatieven heeft een systeem van transportbanden in combinatie met stackers en reclaimers minder uitstoot per behandelde ton dan wielladers. Verder hebben ‘bucket type’ en ‘grab type’ loskranen de laagste emissie in vergelijking met overige loskranen. Dit is voornamelijk toe te schrijven aan hun lagere energieverbruik en de slechts minimale extra uitstoot als gevolg van het leegmaken van het scheepsruim. Voor andere apparatuur, zoals scheepsladers en stacker/reclaimers, wordt de emissie vooral beïnvloed door het energieverbruik als gevolg van het vervoeren van het materiaal naar de desgewenste aanvoer hoogte en de grootte van de machine.

De economische waarde gecreëerd per uitgestoten ton CO2 is hoger bij grotere terminals. Dit komt doordat deze terminals een betere efficiëntie hebben ten aanzien van hun CO2-uitstoot en meer economische waarde kunnen creëren door het opschalen van de doorgezette hoeveelheden. In vergelijking met andere bedrijven presteren droge bulk terminals goed vanwege de hoge winstmarges die ze maken en niet vanwege hun prestaties op basis van hun CO2-uitstoot.

CO2 emissie van stof en mors

De meeste droge bulkgoederen zijn gevoelig voor vervuiling door stof en mors. Maatregelen om stof en mors te voorkomen verbruiken energie en zijn daardoor van invloed op de CO2-uitstoot van een terminal. Uit de resultaten, gebaseerd op de evaluatie van een ‘transfer point’ met een doorzet van 2000 TPH, blijkt dat de implicatie van stof minimaal (<8%) is in vergelijking met de operationele emissie. Voor stof mitigatie op open opslagvelden ligt deze implicatie tussen 1-19% van de totaal geproduceerde emissie op een terminal. Vanwege de relatief beperkte hoeveelheid mors die wordt gecreëerd op de terminal (<0.5%) is de relatieve hoeveelheid CO2-uitstoot verwaarloosbaar.

Net Present Sustainable Value analyse

De basis voor duurzame ontwikkeling is het selecteren van het meest duurzame alternatief uit beschikbare alternatieven doormiddel van een duurzaam besluitvormingsproces gebaseerd op de ‘Triple Bottom Line’. Momenteel wordt het besluitvormingsproces in terminals grotendeels gedomineerd door financiële motieven. Dit is in strijd is met het idee van duurzaamheid. Om dit te voorkomen en te zorgen voor een duurzame besluitvorming binnen droge bulk terminals is er een keuze is gemaakt voor de ‘Net Present Sustainable Value’ (NPSV) methode.

Gebaseerd op de concepten van alternatieve kosten en gedisconteerde waarden gaat de NPSV na of de contante waarde van de verwachte toekomstige opbrengsten van het gebruik van milieu en sociale middelen in lijn is met de door de terminal bepaalde duurzaamheidsstrategie en doelen. Een positieve NPSV samen met een positieve ‘Rate of Sustainable Return’ (RSR) zal resulteren in een verbeterde duurzame prestatie. Het alternatief met de hoogste RSR zal de hoogste bijdrage leveren aan duurzame ontwikkeling.

De NPSV analyse is gebruikt om de drie functies binnen een terminal te beoordelen: lossen, transport en opslag. Deze functies zijn gekozen omdat ze het grootste gedeelte van de CO2-uitstoot binnen een terminal representeren. De resultaten van de analyse gaven zoals verwacht een voorkeur voor

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verbruiksvriendelijke oplossingen welke de meeste economische waarde creëren. Bovendien gaf de NPSV methode een duurzamer alternatief als uitkomst in vergelijking met een meer gebruikelijke evaluatie methode als CO2-kostenberekening.

Conclusie

Concluderend kan duurzame ontwikkeling voor droge bulk terminals worden gefaciliteerd door het implementeren van duurzaamheidscriteria in het besluitvormingsproces. Dit kan worden gedaan met behulp van een innovatieproces om duurzaamheidscriteria te initiëren en te evalueren. Door het gebruik van de criteria in combinatie met een ‘Net Present Sustainable Value’ analyse zullen de uitkomsten een hogere mate van duurzaamheid ondersteunen, waardoor er duurzame ontwikkeling wordt gecreëerd.

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1 Introduction

1.1 A need for sustainable development in dry bulk terminals

Sustainability is defined by the oxford dictionary as being able to be maintained at a certain rate or level. Simply said a sustainable system is one that survives or persists. This means that the purpose of sustainable development should be to increase the potential of the system to survive or persist; the higher the potential, the higher the chance of persistence, hence a more sustainable system. To define a systems potential to persist however is a difficult problem, as it is dependent on multiple dimensions that all have an influence on each other (Constanza, 1995; Basiago, 1995).

Sustainability for business

With a global concern about sustainability, it has become an increasing factor in managing business and more and more corporations are nowadays incorporating their sustainable performance (Accenture, 2010; Nidumolu, 2009; Berns, 2009; DESA, 2013).

Beside corporations, more and more investors see the link between corporate and community well-being: “Investors have begun to recognize that the social and environmental conditions in society can

have a direct impact on the business operations of a company and its long-term viability” (pwc,

2012). A dry bulk terminal, for example, has to avoid violation of laws and local community complaints to keep its license to operate and the willingness of the community to cooperate.

At the moment, the most common used definition of sustainable development is formulated as follows: ‘sustainable development is development that meets the needs of the present without

compromising the ability of future generations to meet their own needs’ (WCED, 1987). Based on this

definition, sustainability is often accounted for by the means of three perspectives – the Triple Bottom Line (TBL) or Three P’s (Elkington, 1997):

- People represent the social perspective. Impact of activities to human life. Issues relating to

health and safety, education, labour, human rights etc.

- Planet represents the environmental perspective. The interaction of human and natural

systems. Issues relating climate change, biodiversity etc.

- Profit represents the economic perspective. Preservation of welfare and profit margins.

Issues relating profits, market share etc.

By integrating the economic, environmental and social perspectives Elkington created a scorecard that measures a systems impact on both its shareholders and society. As Savitz (2006) stated: ‘TBL

captures the essence of sustainability by measuring the impact of an organization's activities on the world ... including both its profitability and shareholder values and its social, human and environmental capital.’ The three P’s can help businesses to not only focus on economic value, but

also to consider their effect on the environment and people.

Problems arise when corporations try to integrate sustainability into their core processes. Senior managers recognize the importance of sustainability for the success of their business, however, after formulating a strategy on sustainability, they often ﬁnd it difﬁcult to translate that strategy into action. Commitment to sustainable values is considered important when considering a company as sustainable. In the absence of regulation and without a business rationale for implementation, it is

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unlikely that even those companies that claim to be committed to sustainable development will move closer to this goal (Ramus, 2005; GlobeScan, 2013; Epstein, 2001; BSR, 2012; KPMG, 2011). Though governments are lacking in their performance on advancing sustainability, the number of regulations are increasing (GlobeScan, 2013; GRI, 2013). Most recently, newly-passed regulation on sustainability reporting came into force in Norway. The Norwegian government passed legislation in April 2013, requiring large companies to provide information on how they integrate social responsibility into their business strategies (GRI, 2013). Following these type of regulations, businesses sooner or later are forced to come up with a plan to implement sustainability. Impacts and regulations vary over industries. Therefore, some industries are forced to be early adopters of the concept and other industries are able to follow at a slower pace. The chemical sector for instance adopted sustainability earlier because of environmental restrictions and regulations, while manufacturing industries came later with strategies on sustainability.

Ports are adopting the notion of sustainability into their daily business. In 2007, the port authority of Rotterdam spoke out the ambition to decrease its carbon footprint with 50% in 2025 compared to their 1990 emissions (Port of Rotterdam, 2012). It is not the only one as ports around the world have united themselves in the World Port Climate Initiative (WPCI) to combat climate change. Businesses operating in the port environment, such as dry bulk terminals, will have to comply with that sustainability trend.

Sustainability for dry bulk terminals

Dry bulk cargo is commodity cargo that is transported unpackaged and in large quantities. Major dry bulk commodities are coal, iron ore and grains. Minor dry bulk commodities are items like sugar, rice, bentonite, gypsum, wood shavings & chips, salt, fish, copra (Ligteringen, 2010). Dry bulk is transported via transport modalities such as belt conveyors, trucks, trains, barge ships and sea vessels. The function of the terminal in the supply chain is to store and to move the commodities from one transport modality to the other. During this transfer the terminal acts as an intermediate storage, where value adding activities can be performed. Within the logistic chain of different dry bulk commodities, from the source to usage in a power plant or industrial site, terminals are small, but vital links.

Current projections give a growth in the major dry bulk commodities for the coming years. According to an estimate of the World Resources Institute (Yang & Cui, 2012), 1,199 new coal-fired plants are being proposed globally. Spread across 59 countries, including the Netherlands, they combine a total installed capacity of 1,401,278 megawatts. The world energy outlook (OECD/IEA, 2012) states that demand will increase until 2020 and then stay steady until 2035. Regarding that estimate, the expectation is that there will be a considerable demand for coal the coming years. Projections of the World Steel Association are that by 2050, steel use is increased by 1.5 times compared to present levels. According to the OECD-FAO Agricultural Outlook 2013-2022 (OECD/FAO, 2013), global agricultural production is expected to grow 1.5% a year on average over the coming decade.

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Although on sustainable development extensive literature can be found, currently there is little knowledge on the subject for dry bulk terminals. For container terminals, for instance, Rijsenbrij (2011) and BSR (2011) studied sustainability issues. However, for dry bulk a terminal, apart from the mentioning of some important environmental issues, a study addressing the implications of sustainable development is not yet performed.

1.2 Research outline

To make recommendations on sustainable development in dry bulk terminals, an answer has to be found to the following main question:

How to enable sustainable development at dry bulk terminals?

The purpose of this research is to provide dry bulk terminals with guidelines for the implementation of sustainable development. The implementation focuses on the core processes and decision making within a terminal. To be able to create these guidelines, more knowledge is needed about sustainable development for dry bulk terminals.

The following sub-questions are realised:

1. How to define and measure sustainability and sustainable development at dry bulk terminals?

An answer to this first sub-question gives descriptive knowledge about dry bulk terminals. This knowledge confronted with sustainability results in derivation of sustainable performance criteria and indicators that are later used to evaluate improvement options.

As sustainability currently has a limited to none share in the decision process of dry bulk terminals, this share has to be increased. Finding a suitable assessment method to incorporate sustainability into the decision making process is therefore required.

2. How can decision makers in a dry bulk terminal make a decision between possible solution alternatives to improve sustainable performance?

The answer to the second sub-question explains a way to continuously improve sustainable performance and consequently improve sustainable development.

Nowadays there is no overview of technical solutions and their contribution to sustainability. Such an overview helps terminals selecting sustainable solutions for their terminal and thus creating a more sustainable environment. That is why the last objective for this research is to provide an overview of sustainable technologies.

With stricter legislations and an increasing customer demand, sustainability seems to be getting more and more important for dry bulk terminals. Although many references discuss sustainable development, the knowledge about sustainable development in dry bulk terminals is missing. Therefore, the aim of this research is to enable sustainable development of core processes in dry bulk terminals by providing insight into sustainable development, translating this knowledge into the decision making process and exploring possible improvements.

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3. What are possible technical solutions and how much do they contribute to improvement of the sustainable performance of dry bulk terminals?

The third sub-question explores options to improve sustainable performance and evaluates how much they contribute to the sustainable performance of a dry bulk terminal. An overview of the results to this question gives a toolbox with the larger and smaller contributors to sustainable performance.

4. Does the proposed method result in different decisions in relation to current methods?

Finally the fourth sub-question gives an evaluation of the proposed method in practice via case studies.

1.3 Report overview

The report starts in chapter two by exploring the theoretical background of sustainable development for dry bulk terminals. Here literature on sustainability, sustainable development, management science and their determinants are studied, as well as the Delft Systems Approach is used to define the core processes of dry bulk terminals. The result of chapter two is a focus on carbon emissions and the use of the net present sustainable value (NPSV) analysis as an assessment method for sustainable investment appraisal. In chapter three, a carbon emission inventory method is presented and used to further narrow the scope to operational emission. For chapter four a carbon emission assessment is carried out on three existing terminals, which gives an indication of emission quantities within dry bulk terminals. Chapter five has a focus on two important environmental issues, dust and spillage, and their implications on CO2. Within chapter six the NPSV analysis is used to perform a number of investment appraisals related to CO2 for different terminal equipment solutions. The results from the assessments in chapters 3 to 6 are put in context and discussed in chapter seven.

Subsequently conclusions are drawn and recommendations are given in chapter eight.

Figure 1: Graphical representation of research design

The request for the research comes from the company Royal HaskoningDHV. Royal HaskoningDHV is a leading company in the business of project management and engineering consultancy. One of their areas of expertise is heavy industries and logistics. Within this area of expertise there is high involvement in the development of dry bulk terminals. Due to the fact that sustainable development is of increasing importance to the industry, as a consultancy company they want to support terminals that recognize this trend and have the ambition of becoming a more sustainable business.

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5

2 Sustainable development for dry bulk terminals

Economic development of dry bulk terminals contributes to social development as they provide benefits to society due to the creation of wealth and employment. The benefits effluent from maximizing profits and shareholder value on a micro-economic level, via contributions to the GDP, via tax payments to the public sector and via investments, to a macro-economic level. The final return to society though has its challenges. The domination in terminal decisions is to focus on short-term returns, which for short-terminals often means increased volumes with cheap capital investments. This can result in a libertine use of resources, causing a greater impact on the environment compared to its economic benefits to society.

Above example shows the interdependency of sustainability and the complexity of decisions that have to be made in result of that. Therefore, the chapter makes an introduction to dry bulk terminals and the implications of sustainability. Via the use of the Delft Systems Approach (Veeke et al., 2008) the core operational processes of the terminal are derived. Following the innovation model the implementation of sustainability into the core process is evaluated. In section 2.2.2 carbon dioxide emission is selected as the sustainability criterion to focus on for the remainder of the research and in section 2.2.4 an assessment method is chosen to support sustainable decision making.

2.1 Introduction to dry bulk terminals

Consumers of dry bulk products include manufacturing companies, service industries and private individuals. Figure 2 gives an overview of the supply chain of dry bulk.

Figure 2: Supply chain of dry bulk from the mine where the material is mined to the plant where the material is processed.

There are two types of terminals: export terminals and import terminals. Export terminals are located close to the source. From the source, the commodity is transported to the export terminal via inter-modalities like a truck, train, barge ship, or belt conveyor. At the export terminal the commodity is stored in a storage area or directly loaded onto a ship. Because an export terminal often has the function to move large quantity of bulk into large sea vessels, it is mostly dedicated to a single commodity. This is in contrast to an import terminal, which often has much more diversity in size, location and type of commodities (Ligteringen, 2010).

The use of storage area in the terminals is for different reasons. First it functions as a buffer to take in time differences of ship arrivals and demand fluctuations. Second it creates the possibility to perform certain value added activities, like blending or mixing.

The different commodities all have their own specific handling properties. Coal and iron ore for instance can be stored open field, while grain as a perishable commodity, have to be stored in a enclosed environment with proper ventilation and protection against weather conditions and pests. Depending on the handling properties of the commodity, different type of equipment for the terminal is chosen (Ligteringen, 2010).

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Core Terminal Processes: Process Performance Model 2.1.1

To gain insight in the processes the Delft Systems Approach (DSA) is used. From the DSA, the process performance (PROPER) and innovation model are utilized. The PROPER model is used in the DSA to analyse complex systems. A dry bulk terminal is such a complex system, comprehending transhipment and transport systems, consisting of different subsystems that enable a division of functions according to place, time, personnel and means. Therefore it can be simplified by the use of the PROPER model (Schott & Lodewijks, 2007; Veeke et al., 2008; Bot, 2012).

Process Performance Model

Bot (2012) analysed a dry bulk terminal according to the PROPER-model. The research focused on import terminals and the processes up to the bulk material is reclaimed. To complete the model for the current research a loading function and outgoing modalities are added. The resulting PROPER-model is showed in Figure 3.

Figure 3: Extended version of the PROPER-model of a dry bulk terminal (adapted from Bot, 2012).

The distinguished functions show the core operational processes:

• Unloading is the discharge of bulk material from the incoming modality onto the terminal transport system. There is a variety of unloading systems and equipment, some continuous, some discontinuous, and with a wide range of capacities. The capacity of the unloading system is often decisive for the throughput capacity of the terminal.

• For ships the loading of bulk materials is generally a continuous process in which one or more movable ship loaders are fed by a transport system from the stockyard and discharge the bulk material into the different holds of the ship. For trains, the loaders are fixed towers placed over the rail track that discharge the material into the railcars.

• Transporting on the terminal is the movement of bulk material from the unloading area to the stockyard and from the stockyard to the loading area. Transport is performed by using mobile equipment such as wheel loaders or a configuration of belt conveyors.

• Stacking and Reclaiming are the transfer functions from the internal transport system onto the stockyard and the other way around. Stacking/Reclaiming is done by separate or

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combined equipment. Combined equipment is generally cheaper but also has an influence on the level of reliability and accessibility of the stockyard.

• Storing is done in open storage fields, domes or silos. An open storage has the benefit of flexibility, but has weather influences. Domes and silos are protected against the weather, but are more capital intensive and have limited flexibility.

2.2 Implementing Sustainability: Innovation Model

Sustainable development is part of an innovation process towards increased sustainability. This makes the innovation model an applicable framework to develop sustainability within dry bulk terminals. The innovation process is portrayed in the innovation model shown in Figure 4.

Figure 4: Innovation Model (Veeke et al., 2008).

The innovation process starts with exploring environment for ideas and opportunities, for instance, the recent trend in sustainability. This need for sustainability has to be translated into goals and

objectives. Such a sustainable strategy could be a reduction statement like the Port of Rotterdam has

made, in order to cut back carbon emissions with 50%. To be able to reach that goal this strategy has to be translated into a policy. The definition of sustainable objectives is evaluated in section 2.2.1. When generating a policy, standards to measure the performance are developed. The total mass of CO2 emission can for instance be an indicator of measurement to see the amount of reductions that are made. Development of sustainable standards is carried out in chapter 2.2.2 and Appendix A.

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After initial standards are developed they are confronted and tuned to fit the specific process of the terminal. As the initial standards are still desired situations, these standards have to be confronted with the actual possibilities of the terminal (section 2.2.3).

Finally equipment and tools have to be selected to execute the process. This selection process searches for the best alternative to meet the earlier developed policy standards. It is helpful to use an assessment tool for those complex decisions during the development and organisation of the process. A tool for such appraisals is proposed in section 2.2.4.

As a result of the innovation cycle the ‘new’ process is executed. During execution the output of the process is evaluated according the policy standards and the environment to see if an intervention of the process is needed. The whole innovation process is iterative, which means if a step during the process cannot be taken or new possibilities arise, one has to go one or two steps back, to better fit the specifications. The innovation process is an adaptive learning process and is repeated over time.

Explore Environment and Define Objectives: Stakeholder influence 2.2.1

How terminals are able to react to a constant changing environment defines for a significant part their ability to cope with more and more sustainability requirements. Stakeholders have an influence on the behaviour of the terminal environment in relation to sustainability.

Figure 5: Overview of internal and external stakeholders for dry bulk terminals

The internal influence on sustainability is for the greater part defined by the way the terminal is owned. Willekes (1999) divides three functional classifications of terminals: owner, customer and trade orientated.

• Owner orientated: the owner and the client are the same entity. Example is when a coal plant has a terminal set up. Industry tries to control its own supply chain. Typical properties

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are; handling of a fixed number of products, production and strategic buffer, transformation functions, technical development is industry driven.

• Trade orientated: the owner and the client are the same entity. This is often seen with export terminals as owners are often the mine the exported resource originates from. Typical properties are: specialized in particular product, transfer and distribution function, value added services, specialized handling techniques.

• Customer orientated: the owner and the client are separate entities. These are more commercial type of terminals. Typical properties are: providing service for cargo owners, emphasis on throughput, short storage times, specialized on major or minor bulk, value added services, tendency to use proven all-round equipment.

Because of the different orientations the owners’ perspective differs. For an owner orientated terminal it will be about minimizing costs of the supply chain. Their sustainable interest will lie in the sustainable development of their own supply chain. A customer oriented terminal will look at the value added activities it can perform for its clients, and is more driven to create a larger profit margin. As sustainability of the supply chains they’re operating in is of increasing importance, sustainable development of the terminal can be a competitive advantage towards competing terminals.

The management is an extension of the terminal owners and have to translate strategy into day-to-day decision making. Depending on the owner, management has a different type of role. Independent stevedoring companies, for instance, define their own strategies, but when the terminal is part of a larger corporation, these strategies are defined at corporate level. Terminal management has to comply with a yearly budget and is therefore for a large part managed on cost efficiencies. Interest in sustainability will be higher or lower depending on the corporations’ compliance to sustainability.

Employees are an important asset in the terminal. In addition to fair remuneration packages, they are likely to be interested in good, safe and healthy working conditions, with opportunities for training and career development. These conditions can in turn improve motivation and productivity, lower labour absenteeism and result in fewer union disputes. With an increasing awareness of sustainability in society, many employees are increasingly considering other aspects, including their company’s environmental, social and ethical performance.

The external influence results from a large part by governmental institutions. They have four distinct roles in addressing sustainability concerns (KPMG, 2009): policy development, regulation, facilitation and internal sustainability management. Two basic policy instruments can be employed by governments: direct regulation, market instruments and economic/fiscal measures. Examples of direct regulations are the use of taxes and legislations. Market instruments that can be used include carbon trade markets and subsidising sustainable initiatives.

The provision of financial resources is done by shareholders and creditors. Both have an interest in financial return, and will be more interested when there are higher available returns. Sustainability could put a pressure on higher return rates, and therefore could be of conflicting interest with shareholders and creditors.

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Because stakeholders have a large influence, the engagement of these stakeholders is important in creating a sustainable strategy (Epstein & Roy, 2001). Together with the stakeholders a terminal should analyse the current situation, formulate goals and proposals with respect to sustainability.

Make Policy: Development of Sustainable Standards 2.2.2

After a sustainable initiative is taken by the management of the terminal and objectives are developed, this strategy has to be translated into a desired policy. This means creating deliverables to define the measurement of ‘success’. To be able to gauge the process and the level of success, performance metrics are needed. Developing these performance metrics begins with establishing requirements and demands, followed by identifying specific, quantifiable outputs and finally creating targets to which results can be scored.

To generate sustainability metrics for the terminal, first a look is taken at how the performance of a process is measured. With this insight, subsequently implications of sustainability for those standards can be evaluated. This knowledge helps with the development of specific sustainability metrics for a terminal.

Measurement of Sustainable Performance

Performance standards to measure process performance are the six ‘main process criteria’ of Bikker (Bikker, 1980): Effectiveness, Productivity, Flexibility, Control of System, Quality of Labour and Ability to Innovate. The performance on sustainability reflects in all these criteria. Sustainability with respect to the six criteria of Bikker:

(1) Effectiveness: shows how well the required deliverables are met. These deliverables are compared with actual results. Deliverables for a terminal can be terminal throughput, demurrage, product quality and service level. For sustainability, effectiveness of the operation should be maintained on the same level. In fact sustainability doesn’t alter the goal of transhipping bulk materials, but the means used to accomplish it.

(2) Productivity: shows the ratio between the results and the sacrifices made to get to those results. Minimizing the need of resources to tranship the same amount of bulk material will increase productivity. Productivity is directly related to sustainability, as ‘doing more with less’ helps becoming more sustainable. An example is reduction of energy usage in the terminal.

(3) Flexibility: the ability to react to changes in the terminal. The amount of flexibility required is defined by the type of demands set for the terminal. A constant throughput and low differentiation demands less flexibility, than when there is a higher differentiation and fluctuations in throughput. Generally flexibility can be divided into three types:

- Process flexibility: handling dry bulk in different quantities and the ability to handle different type of modalities.

- Product flexibility: the ability of handling different kind of commodities and different value adding properties.

- Organizational flexibility: the ability to change the lay-out of the terminal.

Flexibility can have both a positive and a negative result on sustainability. When differentiating

there’s often less economy of scale and serving multiple modalities increases the terminal impact, but it also enables more sustainability in the total supply chain by facilitating multiple options. Amount of flexibility needed depends on functionality of the terminal. When the

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terminal is solely operating for an energy plant for instance, it doesn’t need a lot of flexibility. When operating in multiple supply chains, more flexibility is needed

These first three criteria relate to external targets set by demands from stakeholders of the terminal. As the process is designed according to meet those targets, controlling the process by ‘doing it right’ should lead to achieve these targets. Measuring, comparing and intervening in the process will help performing the functions in the right manner. If the process is done right but the wrong results come out, a redesign of the process is needed. Setting up the right control system is therefore the fourth criterion.

(4) Control of system: controlling the loading and unloading time of modalities, speed of transportation, balancing the throughput of the different functions. Control of the terminal is important for enabling sustainable development in the terminal. The right allocation of resources and operating within the defined sustainability boundaries is only possible when there is a solid control of the functions. Better control will result in less waste and misfits, creating a higher productivity and effectiveness, which is positive for a terminals sustainable performance.

The created control system results in the two final criteria; quality of work and the ability to innovate.

(5) Quality of Labour: the terminal must be a healthy and safe environment for employees to do their job. Port workers at dry bulk terminals are continually exposed to extremely challenging and hazardous conditions accessing ships, entering ship holds, working in stockyards, and controlling material flows. Depending on the type of operations and commodities handled on the terminal hazardous situations can arise such as dust explosions, unhealthy fumes and dust particles, and operational accidents. Quality of labour directly affects the social perspective of sustainability. This e.g. includes creating a sufficiently challenging work environment, a healthy and safe work place, a fair remuneration package, and an option for personal development. (6) Ability to Innovate: the terminals ability to evaluate its own performance and react accordingly.

New requirements ask for new standards and an evaluation of the process. For a terminal this means how far the ability of the terminal reaches to improve its transhipment systems to satisfy newly set standards. This is essential for a terminal to ‘survive’ in the long-term. Ability to

innovate is an essential aspect of sustainable development. As the environment is constantly

developing, improved, more sustainable, systems are introduced. The ability to scope the environment for needs and to act accordingly to those needs is essential for a sustainable progress.

To measure sustainable performance, in addition to these criteria, specific sustainability criteria have to be developed. Therefore, following the KPI’s from Bikker, a proposition of criteria and indicators for dry bulk terminals has been made by exploring literature. The set of criteria and indicators are categorised in the three major perspectives of the triple bottom line: economic, environmental and social and included in Appendix B.

It would be most thoroughly to focus on all these criteria, but out of practical reasons for this research it is chosen to focus on a single sustainable development criterion. Apart from economic criteria, which are already widely examined over the years, the problem for social criteria is that there is poor availability of social data. Moreover, it is to a larger extent a quite subjective strategic

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discussion. This leaves us with the more quantifiable environmental criteria. Important environmental criteria for sustainable development in dry bulk terminals are dust, noise, spillage (Lodewijks, 2007) and more generally greenhouse gasses and water use. As ports are having a large focus on greenhouse gasses, whereas dry bulk terminals are operating in port environments, the terminal assessment in this report will focus on greenhouse gasses.

Greenhouse Gasses: Carbon Dioxide

Greenhouse gases are those that can absorb and emit infrared radiation, but not radiation in or near the visible spectrum. Because of that property they contribute to global warming. Example of greenhouse gasses: Carbon dioxide (CO2), Methane (CH4), Nitrous oxide (N2O), Ozone (O3), Water vapour (H2O), HFC’s.

The concentration of greenhouse gasses in the atmosphere is determined by sources and sinks. A source meaning production of greenhouse gasses by human activity and natural systems, a sink meaning the conversion of greenhouse gasses into different chemical compounds (IPCC, 2007). One of the most important contributors to global warming is carbon dioxide. Water vapour is the dominant contributor (ca. 50% of the effect), followed by clouds (ca. 25%) and then CO2 (ca. 20%). All other absorbers play only minor roles (Schmidt, Ruedy, Miller, & Lacis, 2010).

Although there is a lot more water vapour in the atmosphere than CO2, water vapour by itself cannot cause global warming. The amount of water vapour in the atmosphere depends on the temperature of the atmosphere. If the atmosphere is not warming up, water vapour can be emitted and will just fall back to the ground as precipitation. However, if something else is causing the atmosphere to warm up, it can hold more water vapour, which will cause further warming. For this reason water vapour is called a 'feedback'.

Contradictorily to water vapour, CO2 can accumulate in the atmosphere and cause global warming. CO2 is therefore considered a ‘forcer’. The amount of carbon dioxide, for example, has increased by more than 30% since pre-industrial times and is still increasing at an unprecedented rate of on average 0.4% per year, mainly due to the combustion of fossil fuels and deforestation (Stocker, et al., 2013).

Because CO2 is the largest climate forcer and human activities have a considerable influence on the amount on CO2 in the atmosphere, it is an important issue in relation to sustainable development. Also, carbon and water accounting were the dominant sustainability themes that motivated financial capital appraisal (The Prince's Accounting for Sustainability, 2012). Due to this significance and the lack of available CO2 emission data for dry bulk terminals, this research has a further focus on carbon dioxide emissions.

Confront and Tune: Making Standards Terminal Specific 2.2.3

The developed targets for the process are still desires. These desires have to be confronted with the possibilities of the terminal. Does it possess the resources required and is it able to acquire these resources if not available. If, for instance, implementation of a sustainable desire requires a change of the complete terminal organization and there are no financial resources to perform that change, a less sustainable solution with fewer requirements has to be chosen. In an iterative process the

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targets have to be adjusted to fit the specific possibilities of the terminal. When the definite targets are defined, the development and organisation of the process can begin.

Develop and Organize: Sustainable Decision Making 2.2.4

The development and organization of the process relies for a large extent on defining the key activities and the allocation of the required resources. This involves a lot of decision making, which is the thought process of selecting the best among available alternatives (Reason, 1990). Part of the decision making processes in a terminal are investment appraisals. When assessing an investment appraisal one would originally look at financial performance of a terminal, but with incorporating sustainable development, the appraisal has to take place on the Triple Bottom Line (TBL).

For investment appraisals in a terminal based on the TBL, one has to make trade-offs between the performances on different criteria. This trade-off requires synthesis of different kind of information. Automation for instance can have a positive influence on the profit margins, but could decrease the amount of jobs employed at the terminal. To be able to make a trade-off and have a single indicator to evaluate decisions to its sustainable potential, different integrated assessment tools are available. This paragraph explores options for sustainable decision making and selects a method to evaluate decisions suitable for dry bulk terminals.

Sustainable Decision Process

When looking at the innovation model, enabling sustainable decisions comes down to translating the created desires from policy making into the development and organizing of sustainable systems within the terminal process. This translation finds resistance because of shortcomings in structures for sustainable decision making. The lack of structure creates unsustainable outcomes as a result of personal decision biases and errors (NBS, 2012).

To overcome these biases a difference is made between complex decisions and routine decisions.

Routine decisions are frequent decisions that are made daily in a terminal, such as turning on/off

lights or drive speed. Improvement for routine decisions can be made by leveraging the biases in the form of entering commitments, creating defaults, giving feedback, and setting goals. These so called interventions passively support more sustainable outcomes of decisions. On the other hand, when facing more complex decisions like investment appraisal, active support to overcome the biases and errors is needed. To actively support complex decisions the use of structured decision analysis (SDA) or multi criteria decision analysis (MCDA) is suggested (NBS, 2012).

Tool for Sustainable Investment Appraisal

Currently the decision process for investment appraisal is based on operational expenses (OPEX) and capital expenses (CAPEX). The decisions are dominated by a quick return on investment (ROI), where generally a payback period of maximum two to three years is used (Rodrigue, Notteboom, & Pallis, 2010). This merely has a focus on financial performance and doesn’t take into account social or environmental issues. It conflicts with the idea of sustainability, firstly because it assesses only one part of the three TBL pillars. Secondly, it has a short-term time scope, which contradicts with the long-term fundamentals of sustainability.

In general, to overcome the raised difficulties a tool to support sustainable investment appraisal should have the following requirements (Liese et al., 2013; Kuijper, 2006; Lamberton, 2005):

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• Strategic: the tool has to be able to translate a sustainable strategy into tactical decision making. It should therefore show its contribution to a certain strategy.

• Multiple time periods: sustainability is about long-term persistence and should therefore be assessed over multiple periods of time.

• Target the TBL: choosing economic, environmental and social sustainability as a bottom line, the assessment tool should be able to consider all three pillars. Although the research focuses on carbon dioxide, the tool should have the possibility to be extended for implementation of other resources. This extension enables terminals to extend their scope towards sustainability in the future.

• Ease of communication: the easier a tool is in its usage the easier it is to take benefits of the tool. Managers will more quickly use a tool when it is easy to use and communicate across the company. Communication plays an important role in overcoming the mentioned biases. According these four requirements, a set of predominant concepts and tools that exists for the management of sustainability are reviewed by Liese et al. (2013). The review reveals a lack of tools suitable to assist managers in the context of sustainable investment appraisal (Liese et al, 2013). Apart from the mentioned tools, a MCDA tool, often used in decision making, is the Analytical Hierarchy Process (AHP) (Saaty, 1994). It has its applications in sustainability and can aid in making trade-offs between different criteria (Omann, 2004; Kiker, 2005). The problem with the AHP though, is its large dependence on the weight factors and the performance rates chosen for the decision. These rates and factors are dependent on specific processes and interactions between stakeholders and therefore very subjective. Because of this subjectivity, results from an AHP are hard to repeat and verify (Hobbs & Meier, 2000). Also, as it doesn’t use monetary values, it is less practical in communicating towards managerial decision-makers.

Because the predominant assessment tools are not sufficient in accomplishing the set requirements, Liese et al. (2013) developed the Net Present Sustainable Value (NPSV). The NPSV is an extension of the Net Present Value (NPV) approach to include social and environmental resources. The NPSV examines if the present value of the anticipated future returns from using environmental and social resources is in line with the targets defined by a company’s sustainability strategy (Liese et al., 2013). It simultaneously measures the efficiency and the effectiveness of all three dimensions of sustainability and targets them over multiple time periods. As it relates monetary values with environmental and social indicators it can help communicate strategies across managerial decision-makers within the terminal. As it meets the entire set of defined requirements, the NPSV method is useful for the assessment of sustainable decisions in dry bulk terminals.

Theoretical Background of Net Present Sustainable Value Analysis

The NPSV is built on two important concepts: opportunity costs and discounted rates. Opportunity Costs

Opportunity cost is the loss of potential gain from other alternatives when one alternative is chosen. When for instance making a choice between taking a walk in the park or go to work during the lunch, the opportunity costs for taking a walk in the park would be the loss of income for not working. This concept is used for the concept of NPSV by calculating the forgone return that would have been created using an alternative use of a resource (Liese et al., 2013). Sustainable value is created if the generated return exceeds the opportunity cost of the resource used. Where conventional

Development of Sustainable Dry Bulk Terminals; Duurzame ontwikkeling van droge bulk terminals

TUDelft

TUDelft

Development of Sustainable Dry Bulk Terminals

A net present sustainable value approach to embed sustainable development in core processes of dry

bulk terminals

Development of Sustainable Dry Bulk

Terminals

A net present sustainable value approach to embed sustainable development in

core processes of dry bulk terminals

Abstract

Samenvatting

Table of Contents

1 Introduction

1.1 A need for sustainable development in dry bulk terminals

1.2 Research outline

1.3 Report overview

2 Sustainable development for dry bulk terminals

2.1 Introduction to dry bulk terminals

2.2 Implementing Sustainability: Innovation Model