Can Renewable Energy Companies Improve Sustainable Growth Ambitions?

Published on Dec 15, 2021

Renewable energy companies are also seen as a catalyst in the battle against climate change. We know that energy accounts for around 60% of global greenhouse gas emissions2. This has seen major economies focus on transitioning from fossil fuels for energy to greener alternatives. Equally, the pressure to decrease emissions and decarbonise has seen big businesses and consumers gravitate towards renewable energy.

The result of this twin focus of societal purpose and the transition to greener energy has witnessed a growth phase for the renewable energy sector as it scales up to meet greater global demand. This presents a range of challenges, including pressure on the supply chain that can delay projects and impact operability and performance, the cost pressures of the rising price of raw material, as well as the technical challenges of exploring innovative solutions to our energy problems.

Additionally, there will be scrutiny on how companies conduct business as the sector becomes more mainstream and finance providers demand more performance indicators in line with regulatory and investor needs. So how can renewable energy companies deal with the opportunities and challenges of being in a growth sector and still keep a line of sight on business sustainability?


Raising sustainability standards
Due to their purpose, sustainable business is not an entirely new concept for renewable energy companies where environment, societal and governance (ESG) assessments can naturally flow into projects as part of risk mitigation. This is supplemented by the fact that there are global sustainability frameworks that companies work to already. Yet as more companies enter the sector and competitive forces begin to bite, companies will need to be able to articulate how sustainability is embedded in their business model in a way that differentiates and resonates clearly with governments, financial sponsors and consumers alike.

As the sector matures, there will be more focus from stakeholders on operational issues linked, for example, to the workforce, safety and sustainability within the supply chain. Equally, decarbonisation efforts and the reuse of materials will be put under the spotlight. While renewable energy companies have the resilience gained from working in a fast-growing, purpose-driven and innovative sector, those companies that can clearly demonstrate their sustainable business credentials will help raise standards overall and give additional credibility to how the sector is ready to capture opportunities and meet the challenges ahead.

"According to the World Economic Forum, up to 85% of an existing wind turbine can be recycled. Yet turbine blades, which already account for 10% of Europe’s fibre-reinforced composite material waste, cannot be recycled."

Bridging the gap between regulatory drivers and innovation
Alongside regulatory initiatives on global reporting and climate-related disclosures, there is the EU Taxonomy, which will act as a green classification system that will act as a benchmark for investment purposes. In addition, the introduction of legislation by several EU member states to improve the reuse and recycling of materials and components used by companies is putting the focus on end-of-life management and circularity in general. According to the World Economic Forum, up to 85% of an existing wind turbine can be recycled. Yet turbine blades, which already account for 10% of Europe’s fibre-reinforced composite material waste, cannot be recycled. As a demonstration of high levels of innovation in the sector, we are beginning to see examples of renewable energy companies developing the technology to enable more efficient recycling of wind turbine blades.

Yet while the technology is progressing, there is currently no consolidated recycling market in which renewable energy companies can participate. Building partnerships and encouraging investment in the early development of recycling systems can help bridge the gap between regulatory requirements and recycling ambitions.

A further trend that is helping improve sustainability ambitions is the use of data analytics to extend the life of materials by predicting maintenance interventions, reducing downtime, and retrofitting equipment to improve operational efficiency to reach sustainability goals. This focus on improving the efficiency, adaptation and lifecycle of materials in the renewable energy sector also reduces the need to install more pipes, solar farms or wind turbines in locations where there may be community resistance or disruption of natural habitats. Fewer installations can help reduce any negative impact on biodiversity and improve consumer relations.

"The renewable energy sector must engage meaningfully in the global imperative to preserve biodiversity and protect natural capital through resource management, impact measurement, stakeholder engagement, land use and project siting."

Can green be greener?
While renewable energy companies are working hard on innovative solutions, sustainability disclosures and impact reporting offer ways to showcase their sustainability credentials even further. As the transition from brown to green energy gathers pace, the pressure to deep dive on disclosures related to end of life product recycling or local community issues will increase. This is an extra factor for renewable energy companies to consider when differentiating themselves in a highly regulated market.

Initiatives such as the Science Based Targets campaign to mainstream 1.5°C as the new normal for business emphasise the role of renewable energy companies as part of the solution in reducing emissions and helping businesses decarbonise their processes. However, industry leaders are demanding more stringent sustainability standards and action from their suppliers, including renewable energy procurement programmes that facilitate shared goals and the exchange of best practices. This focus will require renewable energy companies to ensure their sustainability ambitions are fully aligned with customers as industry leaders look to cherry-pick suppliers.

At the same time, the growth in demand for renewable energy is increasing the sector’s own carbon footprint. With regulations tightening up, green credentials will be scrutinised. Clear evidence that renewable energy companies are operating ethically and taking their environmental impact seriously will add resilience to business models and growth strategies.

In addition, renewable energy companies should increase efforts to engage with stakeholders, regulators, associations and partner firms to ensure sustainability challenges are fully understood and recognised as the regulatory landscape progresses.


Widening the lens
As we advance, there’s a strong case for renewable energy companies to widen the lens in terms of conversations around impact, particularly on efforts to measure and report on impacts when looking to access capital markets. Such conversations have extended well beyond the positive impacts of low-carbon energy sources and now require consideration across the supply and value chains. A deeper analysis of impacts will improve risk management and value creation through R&D, materials innovation, waste management, and circularity, which give the tools to compete for investment capital.

Similarly, conversations about workforce and job creation must focus on diversity, equity and inclusion (DEI) and opportunities for wealth creation and equity in rural and underserved communities as a prerequisite to access impact capital and public subsidies. In addition, the renewable energy sector must engage meaningfully in the global imperative to preserve biodiversity and protect natural capital through resource management, impact measurement, stakeholder engagement, land use and project siting.

As the sector matures, increased visibility on how renewable energies companies operate will help provide a fresh vision of what we mean by sustainable business This is not just about producing a sustainable product, but whether that product is being made in a way that is completely aligned with environmental and societal needs. Equally, that company culture, leadership and governance clearly support that journey.

At the same time, whether it’s workforce considerations, improving health and safety or greater stakeholder engagement, the benefits of looking at sustainability through a wider lens give visibility on helping renewable energy companies build capabilities in a more efficient and resilient way and shines a light on added value required to differentiate and give a competitive advantage.

"Creating a sustainable product lacks credibility without a sustainable company strategy behind it that improves safety, respects the environment and prioritises stakeholder engagement."

Developing and aligning clear metrics and methodologies

Renewable energy companies that can produce clear metrics that align with investors’ needs when looking to attract capital will become increasingly important. In particular, pension funds and impact investors are under pressure to demonstrate their investments perform to sustainable guidelines. Renewable energy companies developing a rigorous and granular impact reporting strategy will be more attractive to investors.

A company culture that acknowledges the business benefits of sustainability is also a way to improve engagement and buy-in internally and externally. Sound environmental practices by emitting less carbon and reducing waste products that impact the environment enhance brand value and customer loyalty which are attractive features for investors. In addition, using less or recycled materials that are often cheaper also reduces operational costs.

Importantly, it’s about renewable energy companies aligning and integrating sustainability initiatives with doing business in a sustainable way; the two are inextricably linked. Creating a sustainable product lacks credibility without a sustainable company strategy behind it that improves safety, respects the environment and prioritises stakeholder engagement.

Strong leadership that encourages sustainable solutions before they become mandatory by law highlights foresight and agility. It also demonstrates a market-leading company serious about its sustainability ambitions, which is an additional advantage when seeking finance to kick start projects. Teaming up with like-minded partners and companies can scale up sustainability projects and help transform whole industries.

Renewable energy companies that can join the dots on their sustainability ambitions will unlock the potential of sustainable business growth. Such companies will not only blaze a trail as role models for the sector but, as studies prove, are more likely to outperform financially.

 


SOURCES:

  1. https://www.un.org/sustainabledevelopment/energy/
  2. https://www1.undp.org/content/seoul_policy_center/en/home/sustainable-develop-ment-goals/goal-7-affordable-and-clean-energy.html

Business leaders

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Marta Lema Garabatos
Head of Renewable Energy,
Europe
Throughout her extensive 20+ years experience Marta has worked in Energy, Renewables, Chemicals sectors, supporting international clients in the fields of operations management consulting, strategic management consulting, engineering, project management, operations and business development. Now, as a Head of Renewables Industry Practice Europe at dss+, Marta focuses on the Renewable Energy sector and works with clients to help protect their employees and assets, realise operational efficiencies, innovate rapidly and build workforce capability for sustainable growth.
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Federico Magalini
UK & Ireland Sustainability Market Lead
Federico, UK & Ireland Sustainability Market Lead at dss+, has background in Mechanical Engineer, and holds a PhD in Management, Economics and Industrial Engineering. In the past 15 years he focused his research and consultancy on e-waste management and industrial eco-efficiency. Federico has been working or coordinated several studies for EU Commission on e-waste and focused in the last 5 years on capacity building activities in developing countries, working with various UN agencies and developing training programs for policymakers and entrepreneurs.
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Jessica Martin
Director, ESG & Sustainable Finance
Jessie is a Director at KKS Advisors and an environmental and behavioral economist with expertise in sustainable finance, impact valuation, impact strategy, and natural capital valuation. She has more than 15 years of experience in the corporate, public, financial, and non-profit sectors and oversees the firm’s strategy, operations, and business development activities.

Jessie is a frequent speaker on sustainable finance, climate policy, and natural capital, and her work has been featured in Bloomberg, The Seattle Times, The New York Times, and by the World Congress for Environmental and Resource Economists. Jessie has an M.S. in Cultural and Environmental Resource Economics from Central Washington University and a certificate in ESG Investing and Sustainable Finance from the Stern School of Business at NYU.
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Tina Passalari
Global Lead ESG and Sustainable Strategies
Tina has more than 20 years of experience in sustainability and management consulting, including business performance, governance, risk and compliance services. Tina specialises in working with corporations on integrating sustainability in their business models and has worked in advisory, assurance, business development, client relationship and project management roles in Europe, the Middle East and the USA. She has worked with policy makers, non-profit organisations and corporations from different sectors and industries such as energy, financial services, food and beverage, IT, infrastructure, mining, telecommunications, gaming, transportation, tobacco and textiles. Tina holds an MBA from the Henley Business School at the University of Reading; an MSc in Environmental Technology from Imperial College of Science, Technology and Medicine in London; and a BSc in Geology from the National and Kapodistrian University of Athens.