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Lelia Lim

Navigating the Future of Corporate Energy Management: Insights from Senior Advisor Robert C. Allender

Robert C. Allender

In the rapidly evolving world of corporate sustainability and environmental stewardship, understanding the intricacies of energy management and its impact on the broader canvas of ESG (Environmental, Social, and Governance) efforts has become paramount. It’s a complex field, one that requires not only a keen eye for current trends but a visionary perspective on future shifts.

To shed light on these critical issues, we sat down with LLM’s Senior Advisor, Robert C. Allender, who is an expert in energy affairs and corporate sustainability. Our conversation navigates through the emerging trends, challenges, and innovative practices that could significantly shape corporate strategies in the years ahead.

Q.How does the energy affairs maturity model specifically help companies manage their Scope 3 emissions effectively?

A complete medical will give you priceless information about your heart, your lungs, your blood, your eyes, your ears, your flexibility, and your strength, and tell you which of those are equal to someone 20 years younger than you and which are equal to someone 20 years older than you. Similarly, an energy affairs maturity assessment tells you an enormous amount about the state of your company’s energy affairs compared to ESA’s proprietary maturity model.

“The concept of a maturity model was originally created by Carnegie Mellon University at the request of the US Department of Defence. It wanted to know how likely it was that the companies it had engaged to develop software for it would deliver on time and at the quality the Department of Defence needed. In a very similar way, companies now needing to know about the Scope 3 emissions of their suppliers want to know what emissions they are taking on from those suppliers now, but, more importantly, they want to know how likely it is that the suppliers are going to be delivering the lower level of emissions that the company requires at various points of time in the future. By asking their suppliers to show them their most recent energy affairs maturity assessment, companies will be given a Department-of-Defence-grade insight.”

Q. Could you highlight key strategies for integrating ESG initiatives into a company’s core energy strategy, particularly for organisations beginning their sustainability journeys?

A functional strategy, such as an energy affairs strategy, is all about making choices that intend to have that function produce the best possible results for the company as a whole. Certainly, some of those choices should be influenced by the company’s intentions regarding improving its position on any environmental, social, or governance matters.

“A risk-based approach is a wise choice to provide a first line of defence. Scanning the universe of consequential environmental, social, and governance factors that could seriously impair the company’s success trajectory, and identifying which of these relate to the company’s energy affairs, will be a far more productive option than simply identifying what energy data needs to be disclosed in the company’s ESG disclosure report. Less common but more interesting is the option of scanning that universe of ESG factors and identifying those where the company’s energy affairs could be applied to create new value.”

Q. Could you elaborate on the most common challenges businesses face in decarbonisation and energy transition within the Asian and Middle Eastern contexts? How does a bespoke’ energy affairs framework’ specifically address these challenges?

“The most important task for a company regarding decarbonisation is to gain a very solid understanding of what various stakeholders are going to want or demand of the company regarding decarbonisation in the years ahead. How much will they need to decarbonise, and by which date will they satisfy which stakeholder? And put a dollar figure on those estimates. Once that roadmap is laid out, how much to invest in skills and technology and advice should be clear.

“This challenge is no different for companies in Asia and the Middle East, except that they are typically less experienced in dealing with these issues compared to, in particular, European companies, which have been working to reduce their carbon emissions for 10 to 15 years or more.”

Q. How does #EcoBizResponsibility programme augment a company’s ability to manage Scope 3 emissions effectively?

Scope 3’s complexity dictates that a company’s leaders must be well-grounded in all the issues and be constantly provided with new perspectives from which to understand the trade-offs involved in their company’s related decisions. #EcoBizResponsibility program is specifically designed to provide a company’s Board and senior leadership with exactly that knowledge and understanding.

“Even a quick look at Scope 3 demonstrates the breadth of that complexity. For some companies, the majority of their Scope 3 emissions are from regular and ongoing supply chain activities, and their purchasing of products or services on an ongoing basis. For other companies, their Scope 3 emissions are more of a one-time decision. The embodied carbon in a 100-story office building is decided at the instant when the materials for that building – the concrete, the steel and the glass – are chosen. While there will be some ongoing supply chain activity, it will be minor in comparison.

For other companies, Scope 3 is much more about their customers’ energy use. This is true of detergent manufacturers whose customers use hot water when they’re using their detergent and generate emissions from that hot water production. It’s true of remote island resorts whose customers fly in. Those flight emissions can be by far the largest portion of the hotel’s Scope 3 emissions. It’s true of internal combustion engine automobile companies. The cars’ embodied carbon from steel is already high. Still, when calculated, it turns out that emissions from their vehicles’ lifetime gasoline or diesel fuel consumption far outweigh that initial chunk of Scope 3.

Q. How do you envision a typical company’s energy use ecosystem transforming over the next decade, and what role does the corporate energy affairs maturity model play in facilitating this transformation?

“Until recently, many companies could accurately describe their energy use ecosystem as having hardly changed since their first day in business. Energy was purchased and put to use. The financial factors didn’t change. The technology factors didn’t change. The knowledge management factors didn’t change. The expectation of external stakeholders didn’t change. And the regulations didn’t change.”

Suddenly, companies now find themselves in the whitewater where all of these factors are constantly changing and at a fast rate. The interplay of the factors alone is beyond realistically projecting. All a company can do is ensure it has the foundational pieces in place to survive the ride. Our energy affairs maturity model has been specifically designed to provide Boards and C-Suites with the answer to their inevitable question – “How are we doing?” How are we doing against our own expectations? How are we doing against other business units in the same corporation? How are we doing against our industry peers? How are we doing against ground-breaking companies in different industries? No company is better off having no answer to that “how are we doing” question.”

Q. For businesses just beginning to integrate energy considerations into their ESG initiatives, what initial steps do you recommend to effectively jumpstart their journey towards sustainability and responsible energy use?

In my experience, companies beginning to look at ESG typically focus quite heavily on energy or, more particularly, the waste product of energy, carbon dioxide, as their very first field of action, because climate change, global warming, and carbon emissions have been front and centre in all the reporting regimes I’ve ever seen.  In fact, it’s more common to hear the complaint that not enough attention is paid to social and governance issues and too much has been paid to environmental issues, particularly carbon emissions, the majority of which – about 60% – are due to business using energy.” 

“What is common is that many companies have taken a piecemeal approach to dealing with their ESG challenges, including energy and carbon-related ones, instead of stepping back, applying their full cognitive ability to the situation, and formulating a strategy that will give their company a greater return for all the time and effort, to say nothing of money, that they will need to spend on getting their ESG housing in order. 

“I recommend that companies, instead of bounding forward, stop and inspect the path ahead and decide which challenges their company is best suited to tackling in ways that give the company a competitive advantage, not in ways that simply mirror what every other company is doing.”

Q. In your viewpoint, what are the emerging trends or innovations in the field of energy affairs that could significantly impact corporate strategies in the next five years?

“I could begin by pointing out that the field of energy affairs is already an innovation in and of itself in that the traditional model of dealing with a company’s energy use, let’s call it Energy Management, continues relatively unchanged at many organisations.  But some of the biggest and most successful companies in the world, Walmart and Google and Microsoft and Tesla, for instance, long ago took a sophisticated and comprehensive approach to their energy affairs, wisely anticipating that it is only with a full view of all the trade-offs that need to be understood and all the decisions that need to be made that they won’t get caught out as climate change accelerates, policies toughen, and old opportunities get squeezed out. But those companies also treated their companies’ energy affairs as a source of value creation from the very beginning, and that is the mindset I recommend all serious companies to take going forward.”

Ready to make a positive impact with your business? Learn more about our #EcoBizResponsibility programme and how you can contribute to a greener future. Click here for more detailed information.

Alternatively, to discuss how you can get involved, don’t hesitate to reach out and speak to Robert C. Allender. Join us in our commitment to sustainability and make a difference today!

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