Feasible, Viable and Sustainable
For ages, the terms Feasibility and Viability are widely used in any investment decision. They are used to establish the implementability of a project, a business or any perceivable concept. Often these two terms - Feasibility and Viability - are used interchangeably, though there remains a thin difference.
The term Sustainability has its roots in the mining and forestry issues of 1700, its applicability in business gradually received momentum since 1997 i.e., from the time of Kyoto Climate Change Conference. Since then, the term Sustainability is getting prominence very rapidly. In a holistic term, sustainability is more inclined towards business’s long term existence without damaging the environment and promoting social causes.
Under this backdrop, it is appropriate to understand the differences between these terms, Feasible, Viable and Sustainable which are adjective forms of Feasibility, Viability and Sustainability.
Oxford dictionary suggests feasibility as - “the state or degree of being easily or conveniently done”.
Similarly Investopedia suggests that - “A feasibility is an analysis that considers all of a project's relevant factors—including economic, technical, legal, and scheduling considerations — to ascertain the likelihood of completing it successfully”. The above definitions refer to the probability of successful implementation of a Project. In certain cases, feasibility may also mean evaluation of alternative approaches and determining the most workable solution.
Let us understand the below given case:
“A company ‘X’ is setting up a new facility at a place which is 25 kilometers (shortest distance) from a creek. The facility will require a good amount of water for process purposes. The authorities have approved ground water extraction for the facility, but the approved quantity is insufficient for the operational need. Under this scenario, the company understood the following options,
- 1. Plan for a plant capacity considering the allotted water. In that case, the company will be able to set-up a capacity, which is 25% of what they could have otherwise implemented. It would lead to lower economies of scale and lost opportunity.
- 2. Implement the facility for a higher capacity and plan to draw water from the creek which will increase their capex. They would also have to see the feasibility of the water intake point and transportation line from the creek. This option will improve their economies of scale.
After the initial thought process, the company planned to have water intake from the creek. To assess the possibility, the company commissions a feasibility study. The outcome has the following observations,
- 1. First the water intake point at location ‘A’ on the bank of the creek is identified. It is also at the shortest distance from the proposed location. The problem started when they started planning for the right of way (RoW) for the water pipeline from the creek to the proposed location. Most part of the pipeline would run on private land, and the land owners are not agreeable for the pipeline from their land.
- 2. The company identified another intake point - ‘B’ - which is slightly further away from the proposed facility and also there is no RoW issue. When studies were conducted on round the year water availability at point ‘B’, this location was found to be not appropriate as an intake point.
- 3. Finally, the company finalized on point ‘C’, which is further away but, this place has both water availability as well as clear RoW.
On this basis,the feasibility for location ‘C’ is found to be satisfactory.”
If the above example is related to technical feasibility, feasibility can be for any perceivable component like,
- Locational feasibility - undertaken to understand if a particular location is appropriate for a project.
- Market feasibility - undertaken before launching a new product or starting in a new geography etc.
- Technical feasibility - it is relevant to understand the technical feasibility of taking up a project.
- Technology feasibility- to assess if the technology is appropriate for the purpose.
- Operational feasibility - to assess the potential issues that may come up during the operating phase of a project.
- Economic feasibility - to see if the economics of scale can be achieved.
- Resource feasibility - assesses the type of resources required and its availability.
- Financial feasibility - to check the ability to bring in finance for a project and the project's ability to be profitable.
- Legal feasibility - to check if the project complies with all the legal requirements
Oxford dictionary suggests viability as - “ability to work successfully”. Investopedia suggests viability as - “the extent to which a company's management or analysts can estimate future performance. Visibility can range from low to high or from the near term to the long-term”.
Considering the above case, the viability of the project is assumed to be the long term operability and financial success of the project under two scenarios- (i) standalone viability of the water intake point at location ‘C’ and (ii) viability of the total project.
Thus, it refers to ability to run the plant continuously over its lifetime and its ability to generate sufficient return.
Difference between Feasibility and Viability
DifferenceBetweezn (a website that provides differences between different words), defines the difference as, “Feasibility is about whether or not an idea can be turned into a reality. To be feasible, an idea must be technically possible and there must be a market for it. Viability, on the other hand, is about whether or not an idea can be profitable”.
The purpose of business
Before we talk about the broader aspects of Sustainability, it is good to recap the purpose of business. Initially the purpose of business was conceived on the premise of making profit and profit at any cost. In the urge to generate profit, business owners started exploiting natural resources, damaging the environment, creating a large economically backward people and a tottering society. Then came the concept of stakeholder, which attempted to create a circle of related parties like investors, customers, employees and promoted the idea of satisfying these stakeholders. Finally, the stakeholder circle expanded to include, environment, society and government, because an uninhabitable earth will not be in anybody’s interest and a dissatisfied society would not be capable of contributing to the business requirements.
Let us understand the below given case of The case of single use plastic:
A young entrepreneur came up with an idea of setting up a plant to manufacture plastic items. He conceived his market to be big public gatherings. He knew his distant cousin has been involved in the same business for the past many years and he is doing fine.
He took up preliminary activities like,
- 1. Visited some of the manufacturing facilities
- 2. Met a few dealers and distributors for these products
- 3. Approached the suppliers of plant and machinery to know the capex requirement
- 4. Interacted with a financial consultant to work on a financial plan
With all this, he realized that the project is good and fundable. The plant was set up. After a few years of operation, they faced a serious threat when government banned single use plastic. The products are non-degradable and are an environmental hazard.
His company was appointing more than 100 people. The setback was serious and he is clueless about the future.
This example is a classic case of established feasibility and viability but failed on long term sustainability. The promoter could have tried to assess what was happening globally and even in some of the domestic markets relating to use of plastic. The promoter, the funders, the employees all are in trouble. It is a loss to the government due to loss in taxes and causing unemployment.
Oxford reference explains sustainability as - A process, business, or activity that is capable of being maintained at a steady level without exhausting natural resources or causing adverse ecological damage. Founded on the three elements of economics, effects on society, and the environment, it considers the wider effects and longer-term implications on the planet.
Investopedia explains sustainability as - In business and policy contexts, sustainability seeks to prevent the depletion of natural or physical resources, so that they will remain available for the long term.
Thus sustainability in the broader sense encompasses three elements of Economic, Social and Environmental factors - which in a conventional approach of Feasibility or Viability is either missing or of lower importance. In the conventional sense, it typically covers the economic aspects, while from the sustainability point of view, it adds two other aspects of social and environmental implications.
To achieve these three dimensions of development, The United Nations - Department of Economic and Social Affairs have identified 17 goals for sustainable development which are to be followed by every body - individual, business/industry & government.
- Goal 1: No poverty
- Goal 2: Zero hunger
- Goal 3: Good Health and Well-being
- Goal 4: Quality Education
- Goal 5: Gender Equality
- Goal 6: Clean Water and Sanitation
- Goal 7: Affordable and Clean Energy
- Goal 8: Decent Work and Economic Growth
- Goal 9: Industry, Innovation and Infrastructure
- Goal 10: Reduced Inequality
- Goal 11: Sustainable Cities and Communities
- Goal 12: Responsible Consumption and Production
- Goal 13: Climate Action
- Goal 14: Life Below Water
- Goal 15: Life on Land
- Goal 16: Peace and Justice Strong Institutions
- Goal 17: Partnerships to achieve the Goal
The reader may view the linked video to have some understanding. Do you know all 17 SDGs?
Feasibility and viability are important aspects in project evaluation. They carefully analyze the project components that can further or damage the business prospect. Sustainability is the ultimate aim of a project/ business and both feasibility, viability are its supporting factors.
Business in the future will not be as usual as it is now. In the coming days, every investor or lender will look into the sustainability aspect in a project before exposure, where only potential financial success will not attract funds. Hence, in addition to the project’s technical, market and financial success, any project developer will have to ensure that the social and environmental aspects have been addressed.