Business is more than business, more than a corporate balance sheet. Consumers want to know more about the companies that serve them, more than bottom line figures.
Important topics are about ESG – environmental, social, and governance. These are activities like community engagement, sustainable practices, leadership, board information, diversity, ethics, workforce development, meaningful philanthropy, and thoughtful economic development.
Utilities have known this for some time because their service touches people’s health, safety, and finances – not just convenience. Utility and energy companies have expanded their ESG reporting. There is no sign that trend will lighten up. Only gets more detailed, really. That’s good.
At the end of this blog ECC will ask its readers to look at some utilities’ ESG reports to learn about ESG performance.
ESG metrics are a way for investors to determine where to put their money, but also help customers decide to use products or whether a city or state can judge the presence of certain companies. The question: Is the company a good corporate citizen?
Many companies now issue ESG reports, though they may be called sustainability reports or corporate citizenship reports. Utilities have jumped in with both feet. Their trade group, the Edison Electric Institute, has put together a template for reports that facilitates apples-to-apples comparisons of companies.
EEI has a lot of large corporate members, though ESG reporting can be done by even small, non-investor-owned organizations. Accountability is universal.
ESG reports say a lot about a company and its attitude about corporate citizenship. Take a look at a report and consider if it is reality or “feel good.” For instance, is there data? Is there blunt discussion about society, science, and business? Or, for instance, is it mostly glossies of employees in perfectly pressed and spotless volunteer t-shirts, or in carefully staged photo ops? Are reports about problems to solve, or shining “look at us” reflections to superficially show well?
ESG – corporate citizenship – is not a lighthearted activity if it is done right. It is not an accounting of checks issued by a company foundation (checkbook citizenship). It is not just photos of civic activities that happen as one-offs.
ESG is not an “also ran” management mandate. Whether or not to be a good citizen is not a choice for companies these days. How well companies understand and act on corporate citizenship is a choice and a reflection of corporate culture and management abilities (read that ultimately as competitive capabilities).
“Corporations are now entering what meteorologists call a convergence zone, where prevailing systems interact to disrupt the status quo,” says Barie Carmichael, author of RESET: Business and Society in the New Social Landscape. “External forces like investor activism are converging with internal forces like employee activism to disrupt business and change the way boards and c-suites are forced to see and respond to risk.”
External forces can be local, like a group of customers or part of a community. External forces can be large, like the group represented in the United Nations through its Emissions Gap Report (left).
For utilities, issues are as obvious as emissions that can affect people’s health and the climate, or safety in their operations. Risks are more numerous and nuanced, too. Business ethics pervade the behavior of companies for good or bad. Workforce education impacts the sustainability of talent to keep the company running (and by-the-way, contribute to civic quality of life). Management capabilities (i.e., smarts, common sense, planning) saturate the good ways a company acts … or not.
Looking ahead with brutally honest analysis makes a difference in corporate performance and surviving.
Here’s how Carmichael explains it, and it is an interesting concept: “The immediacy of a business’s competing visible urgencies usually will trump the proactive idea of setting aside resources to manage emerging issues.” In other words, what is easy to see is easy to see, and if those issues still hamstring a company, you have to wonder why. “Line-of-sight obstructions are often self-inflicted,” said Carmichael.
Inherent negatives is Carmichael’s term for this; how a company looks ahead at concerns in its business, then solves possible issues before they impact society or stakeholders.
“Manage by looking through the windshield versus the rear-view mirror,” says Carmichael. Seems so obvious, but a lot of corporate behavior is not like this. “What is most frustrating for many corporate executives is the clarity with which they can see trouble spots in retrospect. A majority of headline-level crises are small, internal, smoldering items and could have been avoided.” (A friend said to me, “Preventive maintenance is what my dad would have called this.”)
In this light ECC provides links to the ESG reports of several utility companies. Here are a few to start off, presented in an alphabetical list.
ECC‘s call to action is this: Check these reports. See if each report shows clear-headed analysis and action. Real results. Meaningful measures. A careful review of the companies’ inherent negatives (which every business has).
ESG criteria will evolve even more. These are moving targets. It won’t get easier, so if a company is not cutting it now, well…
And if a company is not even issuing and solving thoughtful ESG measures, ask why. No matter the size of the company or ownership.
Conversely, ESG reports may show how well a company looks ahead and acts. Applaud those companies.
ECC will be watching and reporting more about ESG in the future.