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“We Can’t Sit on the Sidelines”– Climate Leadership

September 19, 2019

Utilities’ customers and stakeholders are driving them to address climate and decarbonization. If you think about it, this is surprising because their customers are so dependent upon the electricity and natural gas they provide – as well as sensitive to price hikes. Nevertheless, utilities around the country are having to respond to decarbonization pressure that you can expect to move up the pipeline to your company.

Thank you to Both True readers who led me to Don Raikes, Dominion Energy’s SVP of Gas Transmission Operations. Don caught their attention during his remarks at DUG East when he said: “We can’t sit on the sidelines and be climate deniers.” I gave Don a call to find out how a lifetime gas exec can be comfortable taking on such a tough and touchy issue in front of an industry crowd.

I think Yogi Berra sums up the theme of our talk nicely: “The future ain’t what it used to be.” 

Both of these things are true:

  • The industry gets assaulted with all kinds of critiques of its environmental footprint, particularly in the context of climate and carbon. Many of these critiques are grossly oversimplified and unfair.
  • You have to be engaged in climate, carbon, and environmental commitments to earn a seat at the table where future energy and environmental policy will be decided.

The problem path forward

Don told me he was preparing several years ago for a Southern Gas Association executive meeting where he participated in a discussion articulating the hot topics facing the gas industry. During the meeting he used the following analogy with his peers:Imagine yourself attending a meeting of coal executives 15 years ago.  As they sit around the board table, the coal executives dismissed nascent environment opposition to coal: “They can’t touch us. We are too important to the economy.” It’s déjà vu all over again, Don thought. It was clear to him: the oil and gas industry was suffering from a similar blind spot.

At that time, environmental organizations were still supporting natural gas as a “bridge” fuel, and the climate conversation was happening, but didn’t seem to have much traction. So, it was easy for gas executives (and me) to imagine that “they can’t touch us.”

Did we all turn out to have a blind spot? Absolutely.

Dominion Energy is one of the U.S.’s largest gas and electric utilities, operating in 18 states with over $100B in assets. In 2018, they took on the monumental task of reshaping their company’s vision, incorporating bold climate statements and decarbonization missions.  

Don was unequivocal when I asked him about taking decarbonization and climate on: “Regardless of how you feel about climate change, we all affect the environment,” he said. “We need to be keenly focused on committing to drive that impact down.”

Don made it clear that, for industry supporters, engaging on climate is not about agreeing with the opposition regarding oil and gas projects. “We have to have a seat at the table,” he told me. “If we stick our head in the sand, changes will happen and regulations will be passed.” Without us.

I think Both True readers will find that, compared to me, Don’s interpretation of events is pretty traditional. “We have a very aggressive, well-funded opposition that’s very good at messaging,” he said. “The facts are on our side. We cannot be afraid to talk about the issues.”

Regardless, Don and I share an understanding of the existential risk oil and gas opposition poses for the industry as well as the prescription for mitigating that risk.

“Being silent is not an advocacy position,” Don elaborated. “Grassroots advocacy is critical. Not to fight, but to seek to understand.”

How does a behemoth company with deep fossil roots engage in a climate and decarbonization strategy? Don described a healthy internal debate, a process that engaged a wide range of company stakeholders, and ultimately a bold and wise leadership decision. In their report, Dominion Chairman and CEO Thomas Farrell begins with this passage: “Climate change is one of the most challenging issues of our time, and Dominion Energy has been deeply engaged in the worldwide effort to limit global temperature increases. Our stakeholders want cleaner energy. We intend to deliver it.”

How are peer companies reacting? Those of us who work in this industry know that the peer-company pressure is no joke. Don finds that increasingly gas industry executives are engaging on the topic of climate and decarbonization: “The tide is turning,” he told me. “More people talking about it.”

And has it been worth it? Dominion has made significant headway, such as a documented 50 percent reduction in carbon emissions over 10 years and a 50 percent reduction in carbon intensity since 2000. They continue to make dramatic pledges for carbon and methane reductions. In fact, this past spring, Dominion’s Gas Infrastructure group announced a commitment to reduce methane emissions 50 percent by 2030. “That has gotten us a seat at the table,” Don said.

Will the goal post ever stop moving? “I don’t think so,” Don told me. “What you hope is to get a more realistic approach from your stakeholders.” This allows the company to engage immediately. “Can we start to make reductions? Absolutely,” he added. “Should we make significant commitments? Yes.”

It matters because

Utilities’ customers are both extremely dependent on energy and very sensitive to affordability. And yet, customers and stakeholders are driving pressure on utilities is to address climate and decarbonization. They are the front lines. Expect this pressure to move up the value chain to your production and transportation. 

The critical mistakes companies are making: 

Critiquing peer companies for “caving in” to public pressure. Instead, companies should watch carefully how and why utilities are identifying these risks. As utilities navigate how to build shared ambitions with their customers and stakeholders, they chart a path up the value chain for your company.

Seize the day. Successful companies will:

  • Be bold. Be brave. I know first-hand how brave you have to be to talk to a room of industry execs about climate. Start within your company.
  • Have internal conversations about risk, not politics. The external drivers for your company to address social pressure on fossil fuels are undeniable. As Don conveyed, you don’t need to agree with what your stakeholders are saying, but you do need to understand the risks oppositional perspectives pose to your business.
  • Talk to industry leaders. As I’ve advocated throughout this series, fast following is a great strategy. Emphasis on the fast. Talk to your peers at companies that are responsive to ESG, climate, and decarbonization pressures to understand how they are making progress.
  • Reach out to meI’m here to help your company get ahead of these risks and chart a proactive, risk-mitigating ESG and carbon strategy. You’ll get what you pay for, which means you’ll get a lot.

I learned a lot from my conversation with Don, and I hope you did too. Is someone in your company providing industry leadership on climate? Hit reply and tell me about it.

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