By Laurel Peacock
It is an exciting time to be a sustainability practitioner, particularly in the energy industry. Working with a cross-functional team of subject matter experts to execute voluntary reporting isn’t a simple process, but by setting and tracking against the best average targets for its operations, NRG Energy is executing its vision and holding itself publicly accountable.
Companies cannot achieve goals that they don’t set, and goals without action are meaningless. There is no single entity that can mitigate climate change, but as one of the nation’s most carbon-intensive businesses- NRG is working to take a leadership role in making a difference; namely, by reducing its environmental impact while profitably growing the company.
A few years ago, NRG began a science-based approach to developing carbon reduction targets, and thereby set what continue to be some of the industry’s most aggressive goals. In addition to developing targets that would drive progress towards the IPCC 2º budget, NRG’s executive sustainability steering committee strived to ensure that the company’s goals – a 50 percent reduction by 2030 and a 90 percent reduction by 2050 – would be relevant and in-step with its growing clean energy investments and diverse fossil-fueled fleet. It committed to addressing climate in a public, open, and active way.
With no desire for greenwashing, NRG’s sustainability commitments are about mitigating the operational risks associated with the negative climate impacts of carbon. Those commitments seize upon the opportunities created by consumers’ growing interest in companies who care about preserving resources for future generations; in order to stay relevant, there’s a need to take action.
NRG is not alone. As of March 2016, there are 181 companies around the globe that have publicly committed to reporting environmental, social, and governance data in mainstream reports as a fiduciary responsibility. This step toward radical transparency indicates a growing acceptance that the externalities of climate change have important implications for both economic activity and company performance. Bringing company sustainability initiatives out of the CSR group and into the c-suite pulls new players into the conversation, offers organization-wide credibility to these programs, and ensures that key stakeholders understand how smart capital commitments can be aligned for optimal impact.
With this expanded set of stakeholders come new organizations that are developing a fresh and standardized framework for advanced reporting requirements. Two key players in this standardized reporting movement are the Sustainability Accounting Standards Board (SASB) and Bloomberg’s Financial Stability Board (FSB). SASB’s mission is to develop and disseminate sustainability accounting standards that help public corporations disclose material, decision-useful information to investors. The FSB is an industry-led Task Force on Climate-related Financial Disclosures (TCFD), which will develop climate-related financial disclosures that are both voluntary and consistent. The disclosures can be used by companies to provide information to lenders, insurers, investors, and other stakeholders. These leaders have pulled together financial and sustainability experts from the public and private sector to use evidence-based research to establish rigorous reporting standards for more than 80 industries in 10 sectors.
The field of sustainability reporting is also seeing significant advancements in the tools used to measure and report impact. Because sustainability communications are increasingly scrutinized for valuable economic, social, and governance metrics, the pressure is on for practitioners to produce data with the precision that we’ve come to expect from financial documents. Sustainability reporting software offerings can be customized to aggregate the appropriate key performance indicators from a vast array of data sources that are relevant to business priorities. This space is becoming crowded and complex, not unlike the alphabet soup of reporting frameworks. As companies continue to set ambitious goals-such as NRG’s carbon reduction target-there is a subsequent need to perfect data gathering and reporting systems so that the company can report information timely, accurately, and consistently to all key stakeholders.
NRG will continue to be disciplined and wise with the resources it has; its reporting process is unique because of its business operations. It is already held accountable for reporting on federal and state environmental regulatory parameters, and therefore that data is already heavily scrutinized and audited. Its trading operations, with regard to commodities as well as the electricity the company generates, are also subject to intense oversight and regulation. For the sake of reporting efforts across the organization, NRG has created an internal task force comprised of sustainability, environmental, business operations, compliance, and IT. This group is working to streamline all existing data collection systems across the organization, with the goal of identifying synergies, performing a gap analysis, and looking for opportunities to maximize the capabilities of each platform.
The company strives to continue taking a leadership role in the conversation about integrating economic, social, and environmental metrics into decision-making. In November of 2015, now NRG President and CEO Mauricio Gutierrez, joined Bloomberg BNA’s Bloomberg and Accenture Strategy for a Sustainable Business Summit, and highlighted the importance of disclosure in this increasingly transparent business economy. Gutierrez stated that to NRG, sustainability means the ability to endure in an increasingly carbon-constrained world and explained the importance of clear and open communications with investors through reporting and disclosure. Gutierrez was a key player in the development of NRG’s sustainability goals to grow the business while reducing CO2 emissions. NRG’s sustainability steering committee is aligned on the importance of disclosures and worked hard to foster a sustainability-centered culture across the organization by bringing internal and external stakeholders, in addition to investors along as reporting on progress against the goals set forth in 2014 occurred. Transparency and communication are critical in NRG’s success in light of its current, ambitious carbon-reduction goals.
Voluntary reporting helps businesses and investors understand and plan for all of the social and economic responsibilities that customers expect them to address. By participating in this movement toward transparency, organizations are demonstrating their commitment to working towards a future where we can all thrive-in NRG’s case that includes an energy future that will be more diverse, distributed, and ultimately lower in carbon.