By Michelle Weijing Lau
Electricity generation is the largest single source of GHG emissions in the United States, accounting for 41% of all US carbon emissions. So within CSR circles, is an electric power company’s corporate responsibility best judged by how carbon-intensive its assets are? Companies with large coal portfolios like American Electric Power would be at the very bottom of the list, while nuclear power companies like Exelon would be the darlings of CSR.
Alas, corporate responsibility is not so black and white. Like individuals, corporations have unique stories and face trade-offs. Managing carbon emissions is certainly a significant risk for electric utilities, but stakeholder and community interests cannot be ignored.
Last week the New Yorker published a story on communities in southwestern Colorado that once thrived on mining for uranium, the chief element that goes into producing low-carbon nuclear energy. Focusing on the demolished town of Uravan, a Union Carbide (now Dow Chemical) Superfund site, the author finds that despite health risks such as radiation exposure, nearby residents and even “uranium widows” largely welcome proposals for new uranium mining in the area. In defiance of some activist views, former miners said they knew of and accepted health risks because the jobs gave them a good living. These miners provide a perspective that is often missing in CSR circles. After all, a major role of business is to generate wealth and economic opportunity in the communities where they operate.
Of course, creating economic opportunity is not the only social responsibility companies have. In the utilities sector, the raw fuels that go into producing electricity are often difficult or dangerous to obtain and use. The Massey coalmine tragedy earlier this year is an apt reminder that worker health and safety should always be a top priority. At a time when even one-time skeptics like Senator Mark Udall are changing their tune in support of high-yield, low-carbon nuclear energy, and the US utilities landscape is dramatically shifting towards low-carbon alternatives like wind, proactive stakeholder engagement in evaluating social impact is as important as ever.
It may come as a surprise then that one of the most proactive utility companies in engaging stakeholders is American Electric Power – a company that has the largest portfolio of coal-based generation in the US. Coal is the most carbon-intensive fuel for power generation, and produces over 50% of US electricity. Yet, AEP with a 66% coal portfolio has mitigated its huge reputational risk by engaging stakeholders, recognizing its environmental impact, and demonstrating a commitment to address its carbon footprint. Last year the company conducted a survey of its coal suppliers, identifying major risks in mining operations, and even confirming that 7% of its coal-supply comes from the environmentally-disastrous practice of mountaintop removal mining. Later, the company convened a meeting that brought its coal suppliers together for the first time with environmental groups, government, community leaders, academics and AEP executives.
While AEP’s environmental impact will not be erased overnight, its commitment to stakeholder engagement shows that the company both recognizes that coal is still the lifeblood of parts of the American landscape, but that coal-based utilities and their suppliers need to adapt to the demands of a lower carbon economy and that the planet depends on it. The company’s aggressive carbon reduction goals, carbon capture and storage capabilities, and leadership in expanding Smart Grid programs are early signs that stakeholder engagement is paying off.
Michelle Weijing Lau is a corporate responsibility consultant based in New York City. She helps clients realize the value of stakeholder engagement in managing sustainability risks and opportunities.