National Grid: We're Not In It To Win Prizes
National Grid has been taking its responsibility to its wider stakeholders seriously for some time, and without the need for legislation. Steve Holliday, CEO at National Grid, tells Steve Coomber why he cares.
National Grid is one of the largest utilities in the world: it operates gas and electricity transmission and distribution networks in both the UK and the US.
The statistics are staggering: it supplies gas to 11 million homes and businesses in the UK, serves 3.3 million electricity customers in the northeastern US and manages 82,000 miles of gas distribution pipeline in the UK, plus 4,479 miles of overhead power lines. And that's just a fraction of its total infrastructure and consumer base.
Once its acquisition of US energy company Key Span has been concluded, National Grid's operations will be almost equally divided between the US and the UK in terms of revenues, asset base and employees.
STRONG CSR FRAMEWORK
For a company this size, corporate social responsibility (CSR) is a big issue, one that Steve Holliday, CEO at National Grid, takes very seriously: 'We have included CSR in our reporting for a number of years. We have a set of processes called Our Framework for Responsible Business. As part of that, we produce an annual CSR report encompassing everything to do with running a responsible business. We are ranked as the industry leader in the utility sector of the Dow Jones World Sustainability Index.'
National Grid's CSR reporting covers a number of areas where its actions might impact on various stakeholders. It even includes human rights, for example, not an obvious topic for a major utility operating in the UK and US energy transport market. But, as Holliday points out, responsible businesses need to consider their impact all the way down through the supply chain.
RECOGNISED AS A LEADER
As well as the Dow Jones ranking, National Grid has placed highly across a range of CSR indicators, including those produced by the Roberts Environmental Centre at Claremont McKenna College in California, which analyses CSR reports, and Business in the Community (BITC) in the UK.
In May 2007, National Grid was rated a platinum company in the BITC Corporate Responsibility Index, as well as a Global Top 10 company among those companies with significant global operations. However, it is not in the business of behaving responsibly just to win awards.
'The BITC changed its ranking last year to a type of medal classification system and we were designated a platinum company,' says Holliday.
'While that's something we are very proud of, this isn't about trying to win prizes, it is about running the business in the way that we should be running it.'
INTELLIGENT INVESTMENT NEEDED
National Grid has some major challenges to face, which feed into CSR, not least in how it responds to climate change and sustainability issues.
Some might consider it a difficult time to be in the energy business, yet it is both refreshing and encouraging to hear Holliday talk passionately and enthusiastically about his commitment to tackling these issues head on.
He points out that over the next 20 years there is expected to be some $10 trillion of investment in the utilities industry worldwide, including substantial investment in the UK. National Grid, for example, has agreements in place with the regulator to invest in the gas and electricity transmission networks, and expects to invest some £10 billion as part of its ongoing gas distribution network renewal programme and to deal with climate change.
It is all part of meeting two of the most significant challenges facing National Grid: climate change and security of supply.
Holliday explains: 'Some people see these as two separate challenges, but in our minds they are very much interlinked. Security of supply, for example, is linked to new sources of energy, which is associated with climate change.
'We are trying to ensure that we can transport electricity from new sources of generation that are often much more remote than in the past. Our challenge, both in the UK and the US, is to make sure that the networks we invest in and install today are significantly more flexible than those in the past – flexible enough to meet a complex range of scenarios going forward.'
The future of energy production presents many unknowns, making flexibility key to effective and efficient energy supply.
Holliday asks: 'What is the mix of generation going to be? How much generation is going to be distributed locally, in people's homes, at factories, at schools? You will see people generating some of their own energy, but at the same time still wanting the security of being connected to a system, plus the opportunity to export when they are producing energy surplus to their own requirements. We need a very different sort of system than that which existed in the past.'
ACTIVELY SEEKING CHANGE
National Grid has already met the Kyoto targets for the UK, and, had the US signed up to Kyoto, the company would have met those targets as well. In fact, National Grid has reduced direct CO2 emissions from its operations by 15% in the last year alone. And this is not jumping-on-the-bandwagon activity. Holliday was in the US this summer when the company was celebrating 20 years of energy efficiency investments in its networks and customer base.
He says: 'This type of activity has to be at the core of what we do. Not only do we supply and transport energy to people, we work with them and help them reduce their energy consumption. We can make a huge difference. In certain buildings in the US, we have reduced energy consumption by 20–40%.'
A sign of National Grid's commitment in this area is Holliday's campaign against the rather perverse situation that the company finds itself in in the US. 'At the moment, National Grid is part of an industrial economy that rewards companies in pricing, for supplying greater volumes of energy. It is a system that needs changing and that's one of the major improvements we are campaigning for in the US. We have successfully removed that incentive to ship more energy from our regulatory arrangements in the UK.'
Holliday's lobbying efforts have helped make some headway with legislators and politicians. While many US states still link volume to pricing, some states have decoupled the two in new rate plans.
But Holliday believes corporations and governments must push for more: 'You want a set of incentives in businesses like ours that make sure that we are investing, working and advising to reduce energy consumption. And, not only are we not damaging our business in doing this, potentially we are seeing some financial benefits.'
Holliday realises that talk is cheap: 'You can talk about these things a huge amount, but with a business you need to get the dollars and pounds to line up with the rhetoric – when they do we can make a tremendous difference.'
The companies that have the competitive edge in the future will be those that actually deliver when it comes to challenges such as climate change, sustainability and corporate responsibility. Holliday has every intention of making sure National Grid is one of those companies.