Traditional Profit Focus Shifts to Environmental, Social and Governance

A dramatic change is taking place in what determines a utility’s success or failure. Traditionally, their fate was decided by their ability to deliver their services at attractive prices. Increasingly, Environmental, Social and Governance (ESG) concerns drive customer interest and purchases.

Moving forward, an energy’s company’s fate will have a societal focus, according to Gartner Inc. In order to create long-term value, they need to focus on how the business impacts society. This change is being driven by broad geopolitical themes, such as diversity, equity, and inclusion (DEI), and sustainability

Changes at the Top

As a result, management needs to set clear ESG related operational goals and embed ESG into corporate decision making. This change has a ripple effect in the management team. Top executives will need the skills, knowledge, and experience to oversee this shift. For many utilities, such a change is jarring, and their executives lack such expertise. Consequently, they will need to put processes in place to provide it to top managers, who then can disperse it throughout the organization.

Such thinking represents a dramatic change from traditional measurements. Therefore, making the shift requires risk taking, a trait that has not been widely encouraged in an industry that demands very high levels of consistency in service delivery.

A shift in consumer purchasing criteria is taking place. The traditional emphasis on quality products at low prices is giving way to ESG factors. Utility executives need to be aware of the change and then position their companies to be successful as these new market dynamics take hold.