Mitigating Risk by Doing Good: Staying Ahead of the Energy Sector’s Evolving Corporate Responsibility Curve
As we know and as is frequently – and obviously – stated: elections matter. Regardless of this election’s outcome, the intensity around shaping policy priorities is compounding.
This is especially true across the energy sector, which has been a central focus of the presidential campaign as well as down ballot.
Lost or certainly not fully appreciated during the campaign has been the objective and rapid rate of evolution across the broader energy sector over the past several years.
Energy industry participants – of all forms – are by and large planning and executing forward-looking strategies that focus on core commercial factors and market dynamics, including and especially increasing multi-stakeholder demands, regardless of the election’s outcome.
Patterns are evolving and emerging related to lessons learned, what “good” corporate citizenship looks like, and how to avoid being a sector or sub-sector laggard that does not effectively manage non-technical risk. In fact, many of these business fundamentals – and dos and don’ts to risk management – extend across the energy industry writ large.
While the engineering, technical and regulatory aspects of constructing and commercializing electric transmission lines and natural gas or refined petroleum pipelines are starkly different, both uniquely require similar stakeholder engagement strategies to enable energy to move from where it’s produced to where it’s consumed.
One is aboveground and the other is below, yet both require significant investments in managing non-technical risk and targeted stakeholder engagement across the project’s footprint.
The similarities don’t end there.
As power companies move more aggressively and urgently to further broaden their renewable generating capabilities, those energy sources (primarily wind and solar) are often sited in locations that are remote and far from where those electrons will ultimately be consumed by end-users.
Same is true when it comes to natural gas and oil development. Production fields, in most cases, are not conveniently overlaid with population centers which require essential infrastructure to safely move those BTUs to market.
This one example can be replicated to the generation of power itself.
Whether it’s a utility scale solar project in Nevada, offshore wind in the Atlantic, or a combined-cycle natural gas plant in Ohio, the permitting and construction of these facilities almost always encounters some level of activism that adds time and costs to the overall project.
This reality is unlikely to change anytime soon – or ever for that matter.
But developing a meaningful and authentic set of corporate values and stakeholder partnerships built on transparency and trust in the communities where one intends to do business will enhance an organization’s social license to operate and reduce risk.
Effective environmental, social and governance (ESG) frameworks – which are measurable and clearly reflect an organization’s values, including guidance from critical internal and external stakeholders – is corporate table stakes. The demand for companies to operate with greater transparency and purpose has increased both risks and opportunities across a spectrum of stakeholder groups – external and internal. A strong ESG strategy enables a company to authentically tell its story in a way that can be used to protect long-term business success while promoting the important work it does to create a competitive advantage.
From institutional investors – large financial houses to others including pension funds as well as family offices – to credit providers and even insurers, effective ESG strategies are imperative to maintain confidence. At the same time, demonstrating the ways in which a company delivers value beyond its bottom-line is an increasingly important competitive differentiator that can help a company attract and retain key talent.
Put another way, simply meeting regulatory requirements is not enough. Indeed, doing the bare minimum represents added risk exposure to the enterprise – regardless of who occupies the White House.