EMBRACING THE TRIPLE BOTTOM LINE: A NEW PARADIGM FOR ELECTRIC…

By Mani Vadari, President, Modern Grid Solutions

In today’s rapidly evolving energy landscape, electric utilities face the challenge of  balancing traditional financial metrics required for any good functioning business with  broader  social and environmental responsibilities. In this issue of “Watt’s on Mani’s mind” I offer the triple-bottom line (TBL), a concept that offers a comprehensive  framework going beyond profits to include people and the planet. 

The TBL approach encourages utility executives to consider three key dimensions: financial performance, social responsibility, and environmental impact. Utilities can achieve sustainable growth by integrating these dimensions and still deliver strong  financial results to their stakeholders while contributing positively to society and the environment. 

Financial Performance 

First and foremost, financial stability and performance (returns on investment) must always remain crucial. If the focus on this dimension is lost,  the potential for the utility as a viable business entity will be in jeopardy. The TBL approach emphasizes long-term value creation over short-term gain and a quarter-over quarter focus on returns. Utilities  are already entities that get returns on their investments based on GRC (General Rate  Cases) that go over a 3-5-year cycle and so, a long-term focus is already in their DNA. From an investment perspective, this involves investing in renewable energy sources,  energy efficiency programs, and innovative technologies that reduce operational  costs  and enhance resilience.

Social Responsibility 

Utilities have a monopoly franchise over a specific territory within which, for the most  part, customers are locked into the services provided by them. Given the lack of  competition within the franchise territory, the customers do not have any option to get  their electricity as a service – which in turn prevents the utility from raising rates as  performed by other private service entities. As a result, utilities play a vital role in  communities by providing reliable electricity at affordable rates. The TBL framework encourages utilities to engage with stakeholders (customers and regulators), address  social equity issues, and support local economic development. Programs that promote  energy access for underserved populations and partnerships with community  organizations are examples of this commitment. 

 

Environmental Impact 

Utilities, just like all business enterprises, are stewards of the environment. The US EPA estimated that GHG emissions by the electric power sector accounted for 24% of total  U.S. Greenhouse Gas Emissions by Economic Sector in 2022. #1 on this list is the  transportation sector and they are making significant moves to reduce their carbon  footprint by moving towards electric vehicles. By being second on this list, electric  utilities have an additional responsibility to prioritize reducing their carbon footprint and  mitigating climate change. They need to lead by example by focusing on transitioning to  cleaner energy sources, implementing sustainable practices, and complying with  environmental regulations. By doing so, utilities not only protect natural resources but  also enhance their reputation and build trust with customers. Of course, this must be  done in a responsible manner with a focus on total cost to the customer as well.  

 

The Impact of Scaling Back DEI Programs

The Impact of Scaling Back DEI Programs: Recently, several leading companies have  scaled back or cut their Diversity, Equity, and Inclusion (DEI) programs due to economic  pressures and fear of political backlash. This trend raises concerns about the broader  implications for TBL due to a direct impact on one of the dimensions “Social  Responsibility”. The focus on “Social Responsibility” cannot just be on the affordability  of rates to customers – it needs to be on treating all customers and employees with  respect, empathy, and sensitivity. DEI initiatives are crucial for fostering an inclusive and  equitable workplace, which can lead to improved performance and innovation. Reducing  focus on DEI may hinder progress in social responsibility and negatively impact  organizational effectiveness. 

 

Closing Thoughts 

Focusing on “financial performance, social responsibility, and environmental impact” is  not new by any measure. Most business enterprises focus on them at some level, some  more than others. However, by combing them into a singular focus and calling it the  triple-bottom-line, I am asking utility senior executives to make a shift in their mindset  and make a commitment to transparency and accountability and measure their success  through the lens of economic, social, and environmental outcomes. By optimizing  across these three dimensions, electric utilities can drive meaningful change and lead  the way toward a more sustainable future. 

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