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Why Should Renewable Energy Companies Practice Sustainability Disclosures?

Introduction

Sustainability disclosures are designed to provide information on a company’s environmental, social and economic performance and impacts and the initiatives for improving the performance. Companies across the globe are practicing transparency and accountability to communicate to their stakeholders by disclosing their sustainability practices. One of the most widely used framework for reporting on sustainability is the Global Reporting Initiative’s G3 Guidelines and recently to the new GRI G4 guideline. As per Global Reporting Initiative (GRI) nearly 7500 reports have used this framework to report on sustainability worldwide and more than 300 GRI reports have been published by Asian companies so far. At present, there are no regulations that mandate sustainability reporting. However, the stock exchanges across Asia require the disclosures on sustainability. Companies in manufacturing activities constitute significant majority among st the ones disclosing sustainability performance annually.

A question that arises is whether companies which are into clean/renewable energy business, publish sustainability reports? Some in this sector feel that sustainability disclosures are needed for only those in businesses involving polluting activities. As clean/renewable energy is, per se, non polluting, is there need to demonstrate diligent environmental and social behaviour. The answer is an emphatic “YES”. Renewable energy companies, no doubt, are in the business of generating clean energy; avoid combustion of non renewable resources and subsequent emissions and discharges. But can change the land use/form and impact the environment negatively. It may not follow safe practices in logistics and operations, etc.

A Pharmaceutical company engaged in  Cancer Research , drug discovery and clinical trials, can fail to  demonstrate responsible behaviour in clinical trials or waste disposal or anti competitive behaviour or lack of processes to prevent sexual harassment. Fact that company is involved in laudable objective of cancer research, does not give it a licence to follow irresponsible practices in other sectors. Equally, a company that generates significant local employment cannot deviate from responsible environmental and social behaviour.

In the case of an RE entity….the equipment uses non renewable resources, it transports equipment to generation sites, generation sites are prepared and equipment is erected etc. which cause significant environmental and social impacts. Hence RE Company has to demonstrate that it conducts all its activities responsibly. RE companies operate in subsidy and tax exemption regimes in many countries. It is important to demonstrate that RE companies are not involved in anti competitive behaviour and have not followed any unfair means to influence public policy and obtain public contracts. There have been public outcry on land occupation and use by RE companies as the generation is land intensive. Are RE companies responsible to address this? Unless RE entity addresses how it is contributing to local economy,  managing its diverse work force, following human rights compliant security policies, have a system of engaging with all stakeholders (suppliers, customers, government, employees and communities ) , listens and addresses their grievances through structured mechanisms, deploys appropriate whistle blower policies etc., it will find it hard to grow the business sustainably. So sustainability report by RE is communication to its investors assuring that it has thought through all the short and long term risks and practices  sustainable business model. RE entity, through its sustainability report communicates to government and local communities, how it is contributing to national, regional and local economies much in excess to what it draws from local resources, society and economy. It communicates to suppliers and customers, how much it values their contribution and engages to co create solutions. The employees are an important stakeholder group and engagement and communication of responsible and fair human resource practices, boosts employee morale and commitment.

A few renewable energy companies have risen to this challenge. A few publish their commitments in their Sustainability Reports.

Insights into the top 10 renewable energy companies and what they do

The following are sustainability practices of top ten Renewable energy companies:

Iberdrola: Iberdrola’s sustainability- report provides a thorough and transparent account of the company’s economic, social, and environmental performance in 2014, in accordance with the guidelines of the Global Reporting Initiative (GRI). https://www.iberdrola.es/shareholders-investors/annual-reports/sustainability-report/

In the upcoming years, Iberdrola will continue to develop our sustainable business model focused on the long term. For this purpose, we will continue to implement our investment programme in the amount of 11,200 million Euros in the 2014-2016 period, to be used primarily in the areas of electricity transmission and distribution networks and renewable energy in our primary markets.

  1. Iberdrola main projects include new wind farms in the United States of America, the United Kingdom, Mexico, and Brazil;

  2. An undersea cable that will connect Scotland, Wales, and England;

  3. The implementation of smart grids in Spain; the construction and expansion of combined cycle plants in Mexico;

  4. The installation of new hydroelectric capacity in Brazil.

Looking to the future, we are confident that we will continue creating value for our shareholders, employees, customers, suppliers, and all of the regions in which we operate, aware of the essential role played by our Company as a driver of economic and social development. Iberdrola serves society and, more importantly, the well-being of people.”

          – Ignacio S. Galán, Chairman of Iberdrola

Calpine Corp.: Calpine believes that a strong commitment to environmentally responsible electrical generation is a key element to achieving their vision of being the premier power generation company in the United States. However they have not published their sustainability report yet. http://www.calpine.com/about/oc_safety.asp

China Yangtze Power: The Company has published the sustainability report 2014 covering all the environmental, social and economic parameters into consideration as per GRI.

http://static.globalreporting.org/report-pdfs/2014/26a1eca205eb8062d85d83aa588641bd.pdf

Siemens: Siemens sustainability report of 2014 focuses on research and development, customer relations, suppliers, energy-efficient technologies, environ – mental protection, employees or compliance – and an outlook for the coming fiscal years. The reporting is in accordance with the Sustainability Reporting Guidelines of the Global Reporting Initiative (GRI).

http://www.siemens.com/about/sustainability/pool/en/current-reporting/siemens_ar2014_sustainability_information.pdf

Supply chain management – At Siemens

Requirements for suppliers

  1. We expect all our suppliers to make a clear commitment to the principles of sustainability.

  2. Our requirements – such as respect for the basic rights of employees, health and safety, environmental protection and zero-tolerance on corruption and bribery – are defined in the Code of Conduct for Siemens Suppliers.

  3. Under the relevant clauses in our procurement contracts and our Conditions of Purchase, all Siemens suppliers must undertake to meet these requirements and also promote compliance with them in their own supply chain.

  4. The Code of Conduct for Siemens Suppliers is based on the ten principles of the UN Global Compact and reflects the content of our Siemens Business Conduct Guidelines.Suzlon Energy: The Company has not published their sustainability report in accordance to GRI guidelines. Only a brief of the CSR activities in mentioned at their website. http://www.suzlon.com/csr_landig_page.aspxNext Era Energy: The Company has not published their sustainability report in accordance to GRI guidelines. However the report addresses all the issues that can very well lead to publishing the first sustainability report of Next Era Energy. http://www.fplfeeds.com/pdf/www/At Next Era Energy :

  5. The protection of our natural environment is not only important to our business, but also to our employees, customers and our communities.

  6. We are committed to being an industry leader in environmental protection and stewardship, and our exceptional environmental performance record and clean energy portfolio demonstrate just how well we are doing.      -Randy LaBauve, Vice President of Environmental Services

  7. The improvements we’ve made since 2005 have reduced outages and improved restoration times.

  8. Our investments are making the electric grid better able to withstand severe wind and storms, helping us restore power faster following storms and improving everyday reliability for our customers. It’s an exciting time to be at FPL.

 -Manny Miranda, FPL Vice President of Power Delivery

  1. Diversity and Inclusion at Next Era Energy

  2. Achieving At Next Era Energy we define diversity very broadly. It includes traditional measures like gender and ethnicity.

  3. Additionally, diversity should include appreciation for differences in thought, style, technical and functional capabilities or leadership. When talented employees from varied backgrounds are engaged and contributing to our business success, we all benefit.

  4. First Solar: The Company has addressed all the relevant issues pertaining to environmental, social and economic parameters in accordance with GRI. http://www.firstsolar.com/en/about-us/corporate-responsibility

  5. E.ON: The Company has published all the relevant issues pertaining to environmental, social and economic parameters in accordance with GRI. http://www.eon.com/content/dam/eon-com/Nachhaltigkeit/CS-Bericht_2013/Downloads/E.ON_Sustainability_Report_2013.pdf

Discussion with Johannes Teyssen, Chairman and Jørgen Kildahl, Member of the Board of Management

Moderator: Anette Bickmeyer, Vice President Sustainability Management

AB: Since mid-2013 E.ON has had a Chief Sustainability Officer. Why did you create this new function?

Johannes Teyssen: Sustainability has a strong tradition at E.ON, and we’ve accomplished quite a bit, particularly in recent years. In 2005 we signed the UN Global Compact and have put in place business processes that comply fully with its ten principles. Now we’re committed to making sure that our business partners and our supply chain comply with these principles as well. But we felt that the responsibility for delivering on this commitment was dispersed among too many functions at our company. So we decided to place the overall responsibility in a single Board-level function: the Chief Sustainability Officer. We also thought it was important to give sustainability a high-profile face at E.ON.

  1. LDK Solar: The Company has not published their sustainability report in accordance to GRI guidelines. However the report addresses all the issues that can very well lead to publishing the first sustainability report of LDK Solar.

http://www.ldksolar.com/com_business.php

  1. Bronzeoak Philippines Inc: The Company has not addressed the sustainability performance. http://www.bronzeoakph.com/

Conclusions

The renewable energy sector is rapidly growing and has attracted significant investment. The regulators and the public now consider this as mainstream sector and expect it to behave responsibly while delivering clean energy. Besides, global investors and FIs who have significant interest in this sector, are committed to social, economic and environmental responsibility practices enumerated e.g., in Equator Principles. RE industry in Asia should adopt sustainability and begin disclosures, sooner than later.

#GRI #RenewableEnergy #Sustainability #SustainabilityDisclosures

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