The energy transition is in full swing, and energy suppliers are faced with the challenge of making their business models sustainable.

In the face of climate change and growing societal expectations, sustainability is becoming the decisive factor for the success of the industry. In this article, we take a look at the most important activities of energy suppliers in transition to develop, implement and evaluate sustainable strategies.

Trends and strategies of energy suppliers

The high pressure on energy suppliers to become sustainable results from their central role in climate protection and the energy transition. More than 40% of global CO2 emissions come from this sector. Energy suppliers are caught in the tension between ecological challenges, regulatory requirements, economic constraints and social expectations. Companies that implement sustainable strategies at an early stage can secure long-term competitive advantages and strengthen their social acceptance.

Where do energy suppliers stand in this necessary transformation?
How strategically consistent is their approach? Are they following a master plan?
Are they making progress in terms of E, S and G?

Let’s get started.

Strategic analysis including double materiality

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  • a strategic analysis: SWOT and PESTEL analysis in relation to current sustainability performance (e.g. CO2 balance, resource efficiency, social responsibility), existing sustainability goals and measures. Risk assessment, as well as identification of innovation potential and market opportunities.
  • the business environment: stakeholder analysis, analysis of current and future legal requirements (e.g. EU taxonomy, Supply Chain Due Diligence Act), consideration of global standards and initiatives (e.g. SDGs, GRI, SASB), assessment of trends and developments in the area of sustainable products and services, as well as identification of competitors and their sustainability strategies and positioning of one’s own company in the context of sustainability.
  • Materiality: Systematic identification of sustainability topics as part of the materiality analysis, determination of financial and impact materiality, prioritization of topics, and anchoring of key topics in the corporate strategy.

These three areas form the basis for effective and credible sustainability reporting. They help companies to develop their sustainability strategies in a targeted manner and to communicate progress transparently.

Case studies:

  • EnBW has been integrating sustainability reporting into its annual report since 2014 and is planning its path to becoming a sustainable and innovative infrastructure partner with “EnBW 2025”. On the basis of differentiated market analyses and using portfolio analysis and scenario analysis, EnBW has developed two strategic directions . The materiality analysis ensures that all key topics derived from this are included in the integrated annual report. The “Next Level EnBW” initiative is designed to increase the pace of change and promote innovation.
  • RWE has anchored sustainability as a core element of its corporate culture. Nine priority areas of action have been defined; including climate change, biodiversity, circular economy, diversity, and occupational health & safety. These areas of action are addressed and evaluated in the sustainability reports. RWE aims to achieve climate neutrality by 2040. To this end, the company is investing in the expansion of renewable energies, storage technologies and flexible back-up capacities, as well as in hydrogen production.

Strategy development and operationalization in goals and measures

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  • a sustainability strategy: central fields of action to achieve the vision, for promoting ecological, social and economic sustainability. These include goals, key areas such as climate protection, resource conservation, social responsibility, and good corporate governance.
  • Goals: SMART goals serve to define which results are to be achieved by implementing measures. Examples: climate-neutral by 2025 or 2030 (for Scope 1 and Scope 2 CO2 emissions), annual reduction of Scope 3 CO2 emissions by 2.5 %, climate-positive by 2040, increase in the recycling rate for residual materials to at least 70 % by 2030.
  • derived measures: Companies take measures to achieve the defined goals. Examples: Reduction of CO2 emissions, initiatives to minimize resource consumption and promote the circular economy, programs to promote DEI and improve working conditions, as well as transparent reporting.

This content shows how a comprehensive sustainability strategy is designed and which goals and measures are derived from it in order to make a positive contribution to sustainability.

Case studies:

  • In addition to the aforementioned focus on expanding renewable energies, EnBW plans to end the use of coal by 2028. Strategy, goals and measures are reported in an integrated manner in the annual and sustainability report.
  • RWE is developing from a traditional energy supplier into a leading provider of renewable energies along nine fields of action. The company operates wind farms, solar plants and battery storage systems in many countries, with the majority of its core business now based on green electricity.

In their reports, energy suppliers such as E.ON, ENTEGA, MVV Energie, Vattenfall, Axpo Holding, Alpiq Holding and BKW Energie also attach great importance to integrating sustainability goals into their business strategies and report on measures to achieve their goals. This usually involves expanding renewable energies and reducing CO2 emissions. Some companies also report on their efforts in the social sector.
According to the study “Digital@Utility 2023”, over 60 % of energy suppliers have developed a digital strategy, with digitalization seen as a key prerequisite for achieving sustainability goals.

Strategy implementation and project management

In this context, I would like to refer you to two articles from 2020:

In terms of content, project management of sustainability initiatives is about the time and resource plan, training and workshops, information campaigns, procedural adjustments, as well as continuous improvements along strategy-relevant reporting and management systems such as a Sustainability BSC.

Case studies:

  • E.ON offers a download center where sustainability reports, commitments and guidelines are available. These documents provide insights into the implementation of the sustainability strategy and the associated projects.
  • EnBW reports on its sustainability activities and measures the achievement of its goals using so-called top performance indicators.

Information on strategy implementation and project management has so far been kept general. Formulations such as “efficiency increases”, “increased use of renewable energies” and “optimization of internal processes” predominate.

Reporting and transparency

The content is about

  • sustainability reporting: creating a clear and comprehensible report structure, aligning with international standards and taking legal requirements into account. Implementing systems for data collection, analysis and validation, as well as ensuring data quality and consistency.
  • the key performance indicators: indicators that cover environmental, social and governance aspects (ESG), comparison with industry-specific benchmarks and best practices, and use of digital tools and dashboards to continuously monitor KPIs.
  • Transparency. Disclosure of detailed and comprehensible data and information on sustainability performance and challenges at regular intervals, ensuring that reports are understandable and accessible to all stakeholders, and ensuring report validity through external audits or certifications.

Reporting helps to document the progress and challenges on the way to sustainable business and make them transparent for all stakeholders. The sustainability report to be prepared – which has a fixed structure with four chapters – becomes an integral part of the annual management report.

Case studies:

  • EnBW measures its goals using top performance indicators, such as:
    • Strategy: share of total adjusted EBITDA;
    • Environment: installed capacity of renewable energies, share of renewable energies in generation capacity, CO2 intensity;
    • Employees: People Engagement Index, LTIF: Lost Time Incident Frequency (accident frequency rate)
  • MVV Energie has encouraged the departments to continuously review and evaluate the agreed KPIs. The sustainability indicators include direct and indirect CO2 emissions, electricity generation capacity from renewable energies, green heating generation capacity, and the accident frequency rate (LTIF).
  • Axpo Holding publishes detailed KPI and disclosure reports. These include, among other things, information on greenhouse gas emissions by scope and region, waste generated by production site, and KPIs on diversity.

In general, the following KPIs are the focus of the reports of the energy suppliers:

  • Environmental KPIs: CO2 emissions, energy consumption, water consumption, waste volume and recycling rates.
  • Social KPIs: employee satisfaction, diversity and inclusion, occupational health & safety / LTIF, training and social engagement.
  • Economic KPIs: sustainable investments, cost reductions through sustainability measuresv and long-term economic benefits.

Let’s keep this in mind:

The sustainability reports of energy suppliers have several important similarities:

  1. Strategic orientation: All energy suppliers analyze their business environment and define their sustainability strategy in the context of climate targets (e.g. Paris Agreement) and regulatory requirements (e.g. EU taxonomy, CSRD). Conducting materiality analyses to prioritize the most important sustainability topics is standard practice. Common topics include climate protection, energy security and social responsibility.
  2. Sustainability strategies: Energy suppliers are pushing the expansion of renewable energies (wind, solar, hydropower), promoting energy efficiency and decarbonization, and focusing on innovations such as hydrogen technologies and storage solutions.
  3. Implementation of strategies: The vast majority of energy suppliers have launched projects with specific milestones, often in collaboration with local and international partners. The integration of sustainability into operations and project management is evident in many places.
  4. Key Performance Indicators (KPIs): The purpose of KPIs is to evaluate progress in achieving sustainability goals and to report transparently. The use of KPIs, such as CO2 emissions, the share of renewable energies, energy efficiency improvements and social indicators, is still in its infancy.
  5. Reporting: Energy suppliers integrate their sustainability reports into their annual reports. This enables a holistic presentation of corporate performance and its impact on the environment, society and the economy. The companies are guided by international standards and practice transparency by publishing progress and challenges. Many reports emphasize the importance of stakeholder dialogues in order to identify key topics and align reporting accordingly.

With regards to the three guiding questions of this article, it can be stated that the energy suppliers have recognized the necessary change and engaged in strategic considerations. All of them share a clear focus on climate neutrality, promoting renewable energies and complying with regulatory standards. The extent to which a master plan is in place varies. I would like to highlight EnBW as a positive example. The reporting of energy suppliers is becoming increasingly transparent and data-based, but in some cases there is still room for significant improvement.