Overall

The first Tomorrow’s Value Rating of the world’s 10 largest energy utility companies shows that delivering affordable energy to consumers while also responding to significant environmental and social concerns is a tricky balancing act.

Overall, most of the companies studied recognise the importance of sustainability, and particularly of social issues such as health and safety and human resource practices, and environmental issues such as climate change and energy security.

Meanwhile, strategies to address climate change disclosed within the sector are characterised more by similarities than differences, which makes it difficult to point to a clear leader. The majority of companies have some investments in the energy efficiency of existing coal and gas-fired power plants and the development of carbon capture and storage (CCS), while also discussing renewable energies as a part of the solution to combat climate change and as a way to reducing emissions. The lack of more specific plans is also due to a large number of uncertainties regarding future government policy and the technical and economic feasibility of specific low-carbon strategies. Despite its challenges, this situation presents an opportunity for one of these companies to break the mould and emerge as a leader in sustainable power generation.

The companies assessed as part of this Tomorrow’s Value Rating were the 10 largest energy utility companies according to the Fortune Global 500 list, which ranks the world’s largest companies by revenue.

Key findings

1. Need for a step change
There is an opportunity for one of these companies to ‘break the mould’ and emerge as a leader in sustainable power generation. This would require taking a bet on future policy, as well as a bold new vision and strategy for generating power in a carbon-constrained world, together with practical steps to achieve success.

2. Similar approaches to future lower carbon power generation
Almost all the utilities recognise the need to reduce their greenhouse gas emissions and most strategies disclosed include investments in the energy efficiency of existing coal and gas-fired power plants and the development of carbon capture and storage (CCS) as well as renewable energies as part of the future energy mix. The need for a renewed advance of nuclear energy seems to be almost universally accepted, but discussions are fairly limited of how the waste and security-related issues associated with this highly controversial form of energy can be managed.

3. Reducing emissions through reduced demand
Most companies in the sector have programmes to raise customer awareness and advise customers on ways to reduce their energy consumption. Others are testing smart metering installations or planning a diversification of their service and product portfolio towards more efficient, high-performance installations and products. However, to date none of these innovations has been rolled out at a scale that would make a significant impact on customer energy efficiency in the near future.

4. Affordability and protecting vulnerable customers
With rising energy prices, utility bills are becoming an increasingly large share of the average household expenditure. However, only very few companies discuss the relationship between energy prices for the end consumer, fluctuating wholesale prices, company profits and investments into ensuring supply security. Several companies support vulnerable customers in a number of their core operating markets but evidence for the global rollout of such practices is often not provided.

5. Accessibility
Access to energy supply in rural areas will become an increasingly important topic, especially as the utility companies are expanding into emerging economies.

6. Good governance arrangements
Utilities’ average score of 49% in the governance domain is considerably higher than the 29% achieved by other companies assessed with the methodology to date. Environmental and health and safety issues are the areas that seem to be addressed most successfully, but external social impacts appear to be governed less thoroughly.

7. Good management arrangements but performance and targets are lacking
While management systems and corporate policy systems have evolved reasonably well, evidence that these policies translate into actual performance improvements is still rare. Setting solid targets and showing actual improvements in performance remains a key challenge for the majority of companies.

8. Increased activity in less developed and regulated countries heightens the requirement for the diligent local management of impacts
While the risks associated with operating in developing markets are high, most reporting on these operations is very limited. Such reporting should include not just social and environmental impacts, but also efforts to contribute to the economic health of these locations.

9. Sustainability in the supply chain is becoming more important
As the majority of European utility companies tend to source their supplies in their home markets, integrating sustainability principles into the supply chain has often not been at the top of the agenda for most of them. As companies are now expanding into less regulated markets, promoting adherence to social and environmental principles among the supplier base becomes a growing priority.

10. Quality of stakeholder engagement varies across different groups and geographies
The direct workforce, shareholders and customers are engaged by most companies. Most utility companies that have the majority of their operations in Europe also undertake some good quality engagement with local communities, governments and trade unions. However, discussion of engagements with suppliers, NGOs and international organisations is limited and these discussions rarely address their operations in emerging markets.

Summary report

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