Who’s Driving Sustainability in the Electric Power Sector?
/Historically, companies that comprise the Power Generation Sector have been scrutinized for their positive and negative impacts on the environment, the economy, and society. Regulators, Investors, Customers, Suppliers, and the Communities where they operate are all key stakeholders who engage with and are regularly engaged by Utilities on myriad sustainability issues and interests. Often that engagement involves surveys. Lots of surveys!
Investor Demand for Sustainability in Utilities Sector
Investor interest has demonstrated itself to be one of the most rapidly evolving trends across sustainability. Globally, there are 47 stock exchanges that have issued guidance on reporting ESG as an integral part to their choices. In the debt market space, we are also seeing both green and sustainability bonds being issued more frequently to fund renewable projects. Credit rating agencies are starting to ride the sustainability wave as well – some are crafting methodology to evaluate climate risk, with their intent being to generate a score and integrate it within a company's overall credit rating. For example, in 2017, Fitch Ratings introduced their approach to capturing ESG risk in credit ratings. In January 2019, they launched the ESG Relevance Score to show the impact of ESG on credit ratings. It is presumed that by 2022, most investors will utilize a similar type of rating system, thus transforming the way that credit agencies view the risk level of a utility or company. How is much of this data gathered? You guessed it, surveys!
What Sustainability Metrics Are Most Important to a Company’s ROI?
A literature review by the Electric Power Research Institute (EPRI), revealed that several groups of sustainability metrics were more important to a company’s return on investment (ROI) than others. Some of these indicators included TRI emissions, hazardous waste liabilities, environmental lawsuits, clean energy products, stakeholder engagement, and disclosure (source: EPRI 2015 - The Electric Power Industry Business Case for Sustainability: Literature Review and Executive Rationale). According to this same review, the socially responsible investment arena totaled $3.74 trillion in 2010, up 20% from 2009.
There is an ever-increasing attention to sustainability indicators by analysts and investors. Much has already been written about investor interest being a key driver of sustainability reporting across all sectors. But what about the influence of the other stakeholders of the Electric Power sector?
Customer Interest in Sustainable Practices for Electric Power Providers
Electric Power companies are also experiencing increased engagement by their commercial – or non-residential – customers. If you are an Electric Power provider to Microsoft or Ford or a number of other Fortune 500 companies, you are compelled, often annually, to complete surveys detailing your waste management practices, amount of water consumption, diversity of board members, and remuneration policies, for example.
Stakeholders Want Science-Based Goal Setting
This demand for transparency on sustainability issues, in part, originates from the practice of goal-setting. Many companies – who are utility customers – are closing in on their initial round of 2020 goals. Now they are setting their second-generation goals. Not only should they set a fresh round of goals, they almost have to. Their own stakeholders are not only holding them accountable to this practice of goal-setting, an increasing number of stakeholders are demanding that companies provide a scientific justification for their goals. For example, companies that are looking to reduce their Scope 2 GHG emissions may implement renewable energy generation on site, offsetting purchases of non-renewable energy from the grid. Or, they may pressure their Electric Power provider to add renewable energy capacity to their generation portfolio. In a similar fashion, Electric Power providers are looking at their suppliers to help them reach their own goals. (click here to read more about Sustainability Disclosures for Electric Utility Suppliers.)
Electric Power Providers Want Suppliers’ Help With Sustainability Goals
One example of the way Electric Power companies engage with their suppliers on sustainability matters is the Electric Utility Industry Sustainable Supply Chain Alliance (EUISSCA) supplier survey tool called The Sustainability Project (TSP). (click here to read part 1 of this blog series: Sustainability for Electric Utility Suppliers: EUISSCA & The Sustainability Project.)
During the annual Sustainable Sourcing Conference hosted by the EUISSCA this past September, several EUISSCA members spoke to the benefits of the survey as a means to have a voice across the sustainable sourcing community.
One of the survey participants, Burns & McDonnell, a construction engineering company, said that the survey shouldn’t be seen as a “we have to do it” approach, and should viewed less as an act of compliance, and more as a beneficial incentive to your company.
The Salt River Project (SRP), a utilities company based in Arizona, commented that surveys get people accustomed to talking about sustainability within the context of RFPs and the supply chain.
An important point they brought up is that it's not about the score; it's about what you're doing as a supplier. The score generated at the end of the survey is more so for yourself to see where you are in comparison to your fellow industries. From SRP’s perspective as a utility, having a sustainability plan completed as a supplier will be key to engage with utilities.
Let KERAMIDA assist you with navigating the various reporting frameworks (TSP, GRI Standards, SASB Standards, UNDP SDGs). Our experienced professionals can help guide you, provide Sustainability Reporting training, and provide a wide variety of Sustainability and ESG consulting services for clients in every sector. Please contact us or call us today at (800) 508-8034 to speak with one of our professionals.
Contact:
Becky Twohey, Ph.D.
Vice President, ESG Strategy, Planning and Reporting
KERAMIDA Inc.
Contact Becky at btwohey@keramida.com
