We had the pleasure to speak with Ørsted’s Devapriyo Das (Senior Communications Advisor). He works with Rasmus Skov (Head of Sustainability) and the broader organization at Ørsted on its sustainability strategy and communication. It is exciting to engage with Ørsted about their transformation from a very traditional fossil-fuel based energy producer to a champion of sustainability and world’s largest developer of offshore wind. Their efforts were fruitful, as they have been ranked by Corporate Knights as the #1 most sustainable company in the world in 2020 (links: CK Ørsted articles). And more importantly, they have managed to grow their profitable business in a very sustainable manner. We are keen to find out why, how and with whom this came about. What has this transformation brought Ørsted? Which lessons are in their story for other companies? And how does their journey resonate with our Wearth frameworks for sustainable strategy & value creation?
How Ørsted successfully transformed from coal to wind, 20 years ahead of schedule - Wearth 'Sustainable frontrunners' series
Introduction & Highlighted lessons
All three participants to the conversation left even more energized than they entered (honestly not always the case in times of covid-19 mass video calls). Here are some of the key take-aways:
- Set a clear vision and ambition to get a clear company-wide story and create medium term goals to make an immediate impact and measure traction
- Interact with your ecosystem partners to build and support your vision and strategy – this includes clients, suppliers, investors, regulators, scientists and society in general
- Don’t make the perfect the enemy of the good: allow yourself an ‘evolution’ in some places. If you can’t achieve the big-bang-move all at once, go for what you can do now. Progress gradually, while maintaining focus (e.g. for Ørsted: approach on existing biomass assets)
- Invite, expect and embrace participation of value chain partners during the journey – better to re-design existing bridges than burning them (e.g. challenging suppliers who have traditionally supplied the fossil fuel industries to innovate and thereby maintaining and developing the relationship for offshore wind)
- And last, but not least: stay ambitious. Ørsted has achieved all of their targets (so far) ahead of schedule and has been named the most sustainable company in the world, but they continue to look forward: “The 2020s are the decade of climate action!”
Read the full story in this publication and soon on our new website. We have discussed 7 themes; 1. Sustainability meaning & benefits; 2. the Why; 3. the How; 4. the What; 5. with Whom; 6. Trade-offs (4x P); 7. Next horizon
And as a spoiler alert: yes, our thinking resonated very well with what Ørsted has done. Plus, with what is on their radar today and tomorrow. Because their sustainability journey is far from over, and they keep working to have an even larger positive impact on a global level.
1. SUSTAINABILITY (1*) - What is Ørsted’s take on what sustainability means? What has Ørsted gained by focusing on sustainability; and did it perhaps work against you, too?
Our take on sustainability is guided by our vision: “Let’s create a world that runs entirely on green energy”. Which speaks for itself and gives direction to our sustainability approach; a cleaner, healthier and more productive world, that works for more people within the planetary boundaries.
At the same time, we have aligned ourselves with major (international) frameworks early on. We were an early signatory to the UN Global Compact, and adopted the UN Sustainable Development Goals (SDGs). All of this together has guided our translation into our sustainability programs. 15 of our 20 strategic programs are linked directly to SDGs. We focus on making maximum positive impact on the goals where we can contribute the most (in our case SDG 7 ‘Affordable Clean energy’ & SDG 13 ‘Climate action’), whilst ensuring no negative impact and where possible positive impact on others. As an example: if 90% of our business is offshore wind, then of course we take our impact on the maritime environments (SDG 14) and biodiversity seriously – and align what we do with others.
Do bear in mind though; our strategic transformation towards a green energy company started in 2008 – that is 7 years before the SDG’s were formulated. And although they were not written for companies per se, rather aimed at nations to begin with, it is interesting to see how businesses can have a tremendous impact by creating scalable, sustainable solutions. And the beauty of the SDGs is, that they help everybody to move beyond opinions and provide a blueprint for companies to progress in a sustainable way – they give clarity and focus. Plus it helps us to engage in a transparent dialogue with our stakeholders about sustainability.
2. WHY – purpose-driven company; how and when did this come about? Triggered by what or who?
Our journey started in around 2008. Circumstances were favourable, amongst others:
- We were a Danish state-owned company and there was a favourable public opinion within Denmark towards Green Energy
- Denmark has a legacy when it comes to green/wind energy so there was already quite some knowledge and experience
- The COP Copenhagen in 2009 (despite, or perhaps because of it being considered a failure) accelerated our transformation.
The purpose-driven vision then was: to transform Ørsted (then DONG Energy) from a Danish fossil fuel company into an international green energy company within a generation. To our own surprise, we have achieved this within 10 years instead of about 30 years. Which reinforces our belief that a strong purpose & vision combined with bold ambition-setting (and measurement!) has helped us – and will help others – in successfully achieving a fundamental transformation of our business model.
It is interesting to note that we have not really experienced any negative impact from positioning ourselves as ‘sustainable at the core’. Some of our suppliers were not immediately ready to meet our expectations of them developing instruments like a ‘carbon roadmap’ for the aim of reducing emissions in the supply chain. It seems to inspire rather than demotivate them.
3. HOW – Developing and deploying the organization, which elements (2*) have been particularly crucial for Ørsted’s transformation? And for the next part of the journey?
The three most important elements for Ørsted’s transformation are Leadership, Metrics and Innovation.
Leadership (connected to ‘Purpose’) enables us to create and share a clear long-term vision. And to inspire others to join us on our journey. See for example Mr Poulsen’s (Ørsted CEO, ed.) recent speech at UN with a very clear message: “We must act now.” (image courtesy of Ørsted)
Through Metrics we are able to translate this long-term vision into tangible mid-term goals, and asking everyone internally and externally to rise up to the challenge.
The above helped to promote Innovation: by setting a very bold vision at a ‘just-far-enough’ time horizon, we invited existing partners as well as newcomers to foster solutions. We further promote this with industry-wide and academic collaborations and various other alliances aimed at stimulating innovation in line with our vision.
4. WHAT (source, create, sell & use, re-value en move) – which ‘value chain/loop’ elements have seen the biggest (r)evolution since the ‘old’ days of DONG Energy transforming into Ørsted as #1 sustainable company? And what is Ørsted’s view on circular resource usage?
The order in which we embarked on our sustainable transformation is: first, we transformed our own operations and what we offer to customers (‘create’ & ‘sell & use’). Next up was a ‘sustainability lens’ on all materials, movements and services going into our solutions. We have made great strides here already with advanced procurement/sourcing standards. Still, a lot more can and needs to be done. A big part of our bold 2040 ambition is transforming entire value chains relating to our business. This year (2020) for instance, a key part of our strategy is co-creating ‘carbon roadmaps’ with some of our key suppliers, with the aim of mapping and reducing their emissions. A huge challenge for them and for us; but we trust we can once again realize or overshoot our ambitions, and we have our own transformation so far to help inspire our suppliers – who at times see this as a daunting challenge.a
In terms of circular resource usage, this honestly is the next frontier for us. Since we have built the first offshore wind-farm back in 1991, we do have experience with decommissioning – which is quite unique in our industry. Still, we don’t have all the answers here yet and design/innovation is not yet fully circular. We do believe in and push for innovative breakthroughs that will help us utilize the best ‘re-value’ options by the time most of our assets will be approaching end-of-life, which is only in about 25-30 years’ time.
5. WITH WHOM Stakeholder landscape (3*) - which forces have supported or hampered Ørsted during its transformation? How important is the ‘participation’ element on the next part of the journey?
The partnership aspect has been crucial to the impact Ørsted has had during its transformation journey. We see this mainly on three levels;
- Investors, including governments, partners and asset investors
- Regulators/government: stable, long-term policies are key to trigger much-needed innovation and investments for this transition. We are in continuous dialogue with partners in our existing and new markets to facilitate favourable regulatory environment for the development of offshore or onshore wind to meet local or national demand for renewable energy.
- Suppliers / value chain partners; huge opportunity and responsibility to, on the one hand, set very ambitious targets to inspire action and combat inertia, whilst also inviting incumbents (often still fossil-fuel based) to become part of the transformation and start their own.
6. TRADE-OFFS – How is Ørsted dealing with trade-offs relating to the 4Ps: Planet, People, Profit & Participation
With regards to financial versus non-financial trade-offs? Since profits have been healthy (in fact, significantly improved since 2012, also see history of investor reports), we haven’t had to quantify a trade-off of profit versus other P’s as such. In fact, the integral view on Planet, People, Profit & Participation has served us very well overall, including our financial results. Yes, cost levels are sometimes a bit higher when including considerations on biodiversity, CO2 reduction and social equality – but the good thing is that our customers a) look for long-term solutions, and b) tend to have national/regional governments and authorities as stakeholders. Therefore it is easier for them to appreciate and value all the non-financial benefits, too.
7. NEXT HORIZON – what are the future sustainability ambitions and intended impact?
Now that we are approaching carbon neutrality in energy generation and operations (expected in in 2025), there are three major next steps to further drive our impact. Firstly, continue sustainable growth and international expansion. Secondly, working with suppliers to reach our 2040 goal of a carbon neutral supply chain (Scope 3 emissions, including energy trading). Thirdly, further considering the circular use of resources and best long-term ‘re-value’ options, and incorporating these into innovation and design for the next generation.
These first two are a core part of our current strategy and full focus in 2020/2021 and beyond (e.g. see theme #4: WHAT). The third one is on our radar, but a bit further out on our strategic roadmap.
Interviewers: Willem Bijleveld & Casper ten Kate – founders of The Wearth Company and The Wearth Collective
Notes*
(1*) Definition used by The Wearth Collective, based upon the ecological sustainability definition: “The properties and abilities of systems to remain diverse and productive indefinitely”
(2*) Six elements of running an organization: Leadership, Strategy, Innovation, Organization, Assets & Risk; Metrics
(3*) Four ‘ecosystem forces’: Customers & Society; Authorities & Science; Investors & Shareholders; Competitors & Cooperation