1. Sustainability – A Practical Approach
for the Electrical Power Industry By
Bill Blackburn
June 23, 2009
Edison Electric Institute
Environment Executive Advisory Committee
Marriott San Francisco
William Blackburn Consulting, Ltd.
Web:
Phone:
© Copyright 2009: William R. Blackburn
How many of you would go to the drive through of a fast food restaurant, consume the burger and malt on the road, then toss the bag out onto the roadside? Seems highly irresponsible now, but for those of us old enough to remember the 60s, we can tell you it was common practice then. Why don’t we do that now? Because public awareness and expectations changed, the definitions of right and wrong changed, and business changed too. No longer is it acceptable to pollute rivers to the point they catch fire. Now we find ourselves in the midst of more change in public expectations about corporate environmental and social behavior—the most profound change I have witnessed in the 3 ½ decades I’ve been involved in this area. We can see evidence of that change all around us. New Green terms are creeping into our language--like climate change, post consumer waste, social responsibility, corporate citizenship, sustainable development, and our term for today—sustainability. Sustainability and sustainable are terms commonly associated with “Green.”. As we will see, it involves a combination of economic, environmental and social responsibility. More and more we are hearing about sustainability in the news.

2. Why are companies (even small ones) going Green??

3. Top Reasons For Increased Focus on Sustainability by Companies (Source: 2007 Conference Board study of 18 major corporations. )
Reputation, brand
Stakeholder pressure (esp. customers)
Reduce waste (and costs), increase productivity
Employee morale, motivation and recruitment
Peer pressure (competitors, high-visibility companies)
WHY?
7% growth in natural food sales in Dec 09
No of sustainable product launches if 4 times faster in 2009 as last year---- (500) in Q1 is about same as for all of 2008.

4. Sustainability Issues in Tough Economic Times
Financial viability of the organization, its suppliers and key customers
Waste/energy reduction (cost)
Cost-efficient products
Employee relations
Safety
Ethics
Support for the unfortunate
The Greenwash Index4 found that four out of five people in the US say they are still buying green products and services today—which sometimes cost more—even in the midst of a recession.
In the UK similar figures were released in late 2008 in a report on ethical consumer spending by the Co-operative Bank5. The report stated that the economic downturn would not halt the growth in ethical consumerism, and that despite the first tremors of the downturn being felt towards the end of last year, the overall ethical market in the UK was up 15 percent from the previous 12 months.
Marks & Spencer (Retail, UK)
M&S launched a program called “Plan A” in January 2007, setting out 100 commitments on the most important social, environmental and ethical challenges. Highlights from Chairman Stuart Rose’s letter include “… the economic downturn has made (Plan A) targets even more challenging. However, we don’t feel this is a reason to compromise, or an excuse for not delivering. … Plan A isn’t only important to us, it matters to our customers too. They’ve told us that despite the impact of the recession, our commitment to Plan A remains important to them. They value the difference between us and other retailers…”
In early 2009 the UK Social Investment Forum7 released figures showing that retail inflows into ethical funds have now exceeded outflows for each of the fourteen months since February 2008.
Number of sustainability product launches is proceeding at three times the rate for 2008, per Datamonitor's Product Launch Analytics.
Seventh Generation CEO Jeffrey Hollender said his company's sales were up 50% last year (2008) and 20% in March 09 year over year.
Nielsen Co. data show sales growth of organic food at 5.6% year over year in December from a year ago, though that's down from the double-digit pace of years past,
and its SPINS tracking service showed sales at natural-food stores up 10.9% to $4.2 billion last year. Though growth slowed in the fourth quarter, it was still more than 7% in December

5. Two Benefits for Organizations in Proactively Seeking Sustainability
Long-term financial viability
Loyalty of key stakeholders
DuPont, Dow and 3M saved $1 billion from P2
GE $50 million from safety, Intel $30 mil from contractor safety programs.
Baxter $800 million cumulative over 12 years
Raytheon saved $10 mil in electricity costs in 2007 from energy reduction efforts

6. Business Needs the Loyalty of Key Stakeholders to Be Successful
Other
Companies
Investors
Our
Company
Government
Communities
Carbon Disclosure Project
Customers
Rating
Groups
Activists
General
Public

7. Supplier Programs in the Electric Utility Sector
Supplier screens
Environmental ( most power companies in 2005 Innovest Study)
Health, safety, labor, human rights [third party evaluation at National Grid (UK)]
Corp responsibility/ sustainability [RWE AG (Germany), Centrica (UK); planned for Duke]
Monitoring of contractor safety [ Exelon]
Code of conduct for suppliers on EHS, ethics, diversity [PG&E]

8. Building Stakeholder Loyalty
Transparency
Credibility
Stakeholder
Loyalty
Stakeholder
Engagement
Strategic communications (reporting; engagement); no “greenwash”
Working in the “discomfort zone” on the toughest issues
“See ourselves as others see us”
Econ, Env, Soc
Performance

9. Public Reporting in the Electric Utility Sector
GRI Electric Utility Sector Supplement (2009)
GRI reports [National Grid, Veolia Environment (FR), PSEG, Duke, EDF Energy (UK), AEP]
Verified reports [National Grid, Veolia Environment (FR), Duke, EDF Energy (UK)]

10. Transparent Reporting in Electrical Utility Sector
Measurable goals and results [Duke]
Employee information
Employee survey results [Centrica (UK), National Grid, Duke]
Diversity stats [PG&E, Duke]
% workforce unionized, no. of jobs created [Duke]
Lowest wage paid in each state vs minimum wage [Xcel]
Safety stats relative to benchmarks [Exelon, Duke]; contractor safety stats [Exelon]
Turnover number and % by reason [Duke]

11. Transparent Reporting in Electrical Utility Sector
Stakeholder Feedback
Key suggestions from engagement with external stakeholders [AEP, RWE AG (Germany), EDF Energy (UK)] and auditors [Duke]
Governance ratings by external groups [Duke]
Noncompliance, liabilities
Number and amount of fines over multiple years [PSEG, Duke]
Legacy clean-up expense [PSEG]
Gallons of reportable spills [Duke]
Extent of new jobs, investment, business and economic development attracted by state with the help of company economic development specialists; amount of spending on diverse suppliers;

12. Transparent Reporting in Electrical Utility Sector
Emissions
Toxic releases over 7 years [PSEG]
Individual facility SOx, NOx, and CO2 emissions [Exelon]
Customer-related Data
Customer survey results and planned response [Duke]
Service availability statistics [Exelon, Duke]
Political Activities
PAC contributions by state [Duke]

13. Large corporations are beginning to see the strategic importance of sustainability.
e.g., Wal-Mart vice president of strategy & sustainability, 2005; senior vp, 2007
Some years ago a McKinsey study funded by Wal-Mart showed it had lost 8% of shoppers due to its bad social and environmental reputation
Company also began to see they could drive down costs while boosting green reputation.
2007 made position senior vp.

14. Wal-Mart Packaging Initiatives
Environmental Sustainability Packaging Summit
45 major packaging suppliers
2,000 attendees
Sustainable Packaging Value Network
200 global packaging leaders from government, academia, NGOs, and industry
5% Packaging Reduction Goal
60,000 suppliers
$11 billion savings ($3.5 billion to Wal-Mart)

15. What is sustainability??

16. General Definition of Sustainable Development/ Sustainability
Brundtland Commission, 1987
Elkington’s Triple Bottom Line, 1997

17. General Definition of Sustainability 2R’s (Blackburn 2007)
Respect: respect for people and other living things
Resources: the wise use of economic and natural resources
---for the purpose of promoting the long-term well-being of the organization and society.
Write this down:

18. Sustainable Products & Services
Improve the efficient use of natural and economic resources along the product life cycle
Provide greater respect and accommodation for the needs of people and other living things along the product life cycle
Toyota Prius; energy-efficient appliances
Organic food (Fresh Fields)
Biomaterials (DuPont, Cargill=Dow)
Renewable Energy
Fairtrade coffee
Fair-labor certified factories-Nike, Gap
Real estate development (Prairie Crossing)
P&G (water purification, sachets)
Grameen Bank (microcredit)
Hewlett Packard (“e-inclusion”)

19. A Corporate Commitment to Sustainability (A Sample Sustainability Policy)
It is within the best interests of our company and society as a whole that our company move along the path to sustainability. To that end, we will strive to achieve the following vision of performance:
1. Economic success: the wise use of financial resources
a. Company Economic Prosperity
Our business is positioned to survive and prosper economically.
b. Community Economic Prosperity
We are helping our community survive and prosper economically.

20. 2. Social responsibility: respect for people
a. Respect for Employees
We treat our employees in a respectful, fair, non-exploitative way, especially with regard to compensation and benefits; promotion; training; open, constructive dialogue with management; involvement in decision-making; working conditions that are safe, healthy and non-coercive; rights of association, collective bargaining and privacy; employment-termination practices; and work-life balance.
b. Diversity, Fair Hiring Practices
We promote diversity and use hiring practices that are fair, responsible, non-discriminatory, and non-exploitative for our employees, board members, and suppliers.
c. Responsible Governance
We manage our risks properly, use our economic power responsibly and operate our business in a way that is ethical and legal.
d. Respect for Stakeholders
We are transparent, respectful and fair to local populations, investors, suppliers and other stakeholders outside our organization who may be affected by our operations. We work collaboratively with our communities, governments and supply chain to enhance the well-being of others.
e. Fair Dealing With Customers
We are honest and fair with our customers, competing fairly for their business, anticipating their needs, respecting their privacy, and providing them safe and effective products and services under the conditions we promise.

21. 3. Environmental responsibility: respect for life; the wise management and use of natural resources
a. Resource Conservation
We conserve our use of natural resources to the extent practicable.
b. Waste Prevention and Management
We reduce to the extent practicable the volume and degree of hazard of the wastes we generate from our operations, and handle them in a safe, legal and responsible way to minimize their environmental effects.
c. Environmental Risk Control and Restoration
We minimize the risk of spills and other potentially harmful environmental incidents, restore the environment where damaged by us, and enhance it to better support biodiversity.
d. Supply Chain Impacts
We work with others in our supply chain to help assure environmental impacts and risks associated with our products and services are reduced and properly controlled.
e. Collaboration With Communities
We collaborate with our communities to protect and improve the environment.

22. Examples of Economic Topics
Sales
Profits
Dividends
Cash flow
R&D investment
Capital expenditures
Debt and interest
Wages
Market share
Retained earnings Liabilities
Return on investment
Community donations
Taxes
Tax subsidies
Local purchasing
Credit rating
Brand strength

23. Examples of Social Topics
Ethics Workplace safety Employee shared values
Product usefulness Corporate governance Employee work-life balance
Product quality Employee relations Human rights (security policies, etc.)
Product safety Product labeling Fair advertising and labeling
Union relations Board diversity Impacts on local cultures
Producer responsibility Supplier diversity Employee diversity
Consumer privacy Employee privacy Employee training and development
Emergency preparedness Non-discrimination policies Employee wellness programs
Child labor Community outreach Employee assistance programs
Forced labor Employment Employee turnover
Disciplinary practices Transparent public reporting Employee layoff policies
Flexible work options Dependent care benefits Anti-sexual harassment policies
Charitable donations Bribery and corruption Political contributions
Antitrust practices Securities regulation Helping the disadvantaged
Occupational health Industrial hygiene Food product nutrition
Bioterrorism Worker violence Support for community services
Indoor air pollution Indigenous rights Access to healthcare by the poor
Legal compliance concerning the above topics

24. Examples of Environmental Topics
Waste disposal Air pollution Water pollution
Chemical spills Greenhouse gases Ozone-depleting substances
Water conservation Energy conservation Natural resource usage
Pollution prevention Recycling Biodiversity
Packaging reduction Soil contamination Product take-back
Natural habitat restoration Wetlands protection Wildlife conservation
Animal rights Product energy use Customer disposal of products
Precautionary Principle Spill prevention Renewable energy and materials
Endangered species Soil erosion/depletion Environmentally sensitive design Compliance with environmental laws and permits

25. Some Observations About Sustainability
Sustainability is not about one thing.
The business case for sustainability is really the business case for a process that looks at sustainability trends and issues and prioritizes among the opportunities and threats to an organization to select those for action that contribute the most value.

26. Common Organizational Threats & Opportunities
-Legal
-Financial
-Reputational
-Competitive
-Operational
-Productivity, cost
-Employee relations
-Reputation
-License to operate, community appeal
-Sales, new markets, customer appeal
-Innovation, new products and services

27. Sustainability Trends: Conditions and Responses
Opposition to Globalization
Extended Producer Responsibility
Green Products
Green Marketing/Labeling
Green Product Certification
Rise in Socially Responsible Investing
Investor Concerns about Corporate Governance
Increased Demands for Transparency/ Public Reporting
Growing Power of NGOs/CSOs
Increasing Global Terrorism
Over-consumption of Resources
Obesity; Poor Food Nutrition
Fossil Fuel Depletion
Climate Change
Deforestation
Threats to Biodiversity
Fresh Water Depletion/Water Contamination
Wetlands Destruction
Fish Depletion
Coral Reef Destruction
Spread of Hazardous Pollutants
Declining Soil Quality
Ozone Depletion
Declining Corporate Credibility
Growth in Global Business Competition
Speed of Communications/ Digital Divide
Widening Prosperity Gap (Health, Income, Services)
Population Growth
Serious Disease
Mental Health Problems
Increased Immigration; Lower Fertility in Industrialized Nations
Hunger and Malnutrition
Child and Forced Labor
Education Needs for the Disenfranchised
Urbanization
No of TNCs jumped 10x in 30 years
51 of world’s largest companies aren’t countries but companies
10% have access to internet; 50% haven’t used a phone
Extended Producer Resp: proactively control risk; hazards info, responsible for harm; take back
Light brings heat brings change; surge in reporting; stockholder resolutions
150% increase in International NGOs in 20 years

28. How do these sustainability trends affect organizations??

29. Sustainability Trends Drive Response of Organizations
Climate Change
Fossil Fuel Depletion
Energy Conservation
Carbon Footprinting
Recycling
Recycled Content
Dematerialization
Over Consumption
of Resources
Changing Population
Profile
Diversity Programs

30. The Sustainability Handbook– The Complete Management Guide to Achieving
Social, Economic and Environmental Responsibility (order thru
The Drivers
The Efficient Enablers
The Pathway
The Evaluators
A champion/leader with mgmt support
Approach for selling the organization on sustainability
Accountability mechanisms
Organizational structure
Deployment and integration
Vision and policy
Operating system standards
Strategic planning for aligned priorities
Indicators and goals
Measuring and reporting progress
Stakeholder engagement and feedback

31. No. of Companies
with Goals on
Subject Per
Conf Bd. Study
(total=11)

32. Organizational Structure for Sustainability: Leadership
Chief sustainability officer with top management support oversees development of 5-year sustainability plan [Duke]
Sustainability Steering Committee co-chaired by CFO and the exec. vp EHS, with reps from every business function, guides sustainability program, including monitoring and reporting performance. [AEP; similar at RWE AG (Germany)]
Public Policy Committee of the board has oversight for environmental, climate change, philanthropy and diversity. [PG&E]
85% of the CDPG Carbon Disclosure Project Report 2008 Global 500
utility respondents have a dedicated board member responsible for carbon emissions.

33. Organizational Structure for Sustainability: Policies
UN Global Compact [RWE AG (Germany), Suez and Veolia Environment (FR)]
Triple Bottom Line Sustainable Development/CSR Charters [Veolia Environment, Kansai Electric Power Group]

34. Duke Sustainability Strat Plan
Internal Inputs
Company vision & values,
Business strategy,
Recommendations from functional and operational experts.
External inputs
Key sustainability issues,
DJSI results,
Benchmarked best practices
Stakeholder feedback.
Initiatives and goals supporting the plan placed in annual departmental plans, with oversight assigned to specific execs.
Progress against plan and goals measured and evaluated with senior mgmt semi-annually; plan is refined annually.

35. Material Sustainability Issues (A=AEP; NG=National Grid (UK); X=Xcel Energy)
General
Leadership, management & strategy [A]; ethical governance [X]
Growth [A, NG]; financial performance [NG, X]
Workforce
Safety [NG, X]
Workforce efficiency [NG]; workforce issues [A]
Environmental
Climate change [NG, A]; environmental performance/impact [X, A]
Clean energy [X], energy security [A]
PRIORITIES!
for Action and Reporting

36. Material Sustainability Issues (A=AEP; NG=National Grid (UK); X=Xcel Energy)
Improving infrastructure, service
New infrastructure and transmission projects [X]; investment [NG]
Reliable service [A, NG, X]; affordable service [X]
Stakeholder issues
Community activities [X], public policy [A]; stakeholder engagement [A]
PRIORITIES!

37. Special Programs
Smart meter programs [PSEG, Vestor Ltd (NZ)]; extensive demand side programs [Florida P&L]; Smart Grid model program in Boulder, CO [Xcel Energy]
Carbon budgets for each business [National Grid]; major tree planting programs [PSEG, Exelon]
Biodiversity restoration on ROWs [Exelon]; wetlands restoration [PSEG]
for Action and Reporting

38. Special Programs
Professional training program for the disadvantaged [Florida P&L]; “solar schools” for students [PG&E]
Fuel poverty programs [National Grid, Centrica (UK), Duke]
Just a sampling of best practices in integrating sustainability into the utility industry. No doubt more good examples out there.

39. William Blackburn Consulting, Ltd.
Web:
Phone:
Book: The Sustainability Handbook—
The Complete Management Guide
to Achieving Social, Economic and
Environmental Responsibility
(See Web site)
If you’re Interested in digging deeper into the effective management of sustainability, please take a look at my book—a publication being used at many MBA schools now. Indeed a proactive approach to sustainability can provide real value– value for the company and its investors, value for its employees and external stakeholders, and , if done right, value for our children and our children’s children and all who come after them.