Corporate Sustainability: A Look at American Electric Power
Posted by collegegreenou on July 17, 2009
By Laurie Winston
With an energy system based in fossil fuels, can the nation’s largest electricity company ever be sustainable?
A group of representatives from American Electric Power (AEP) recently visited Ohio University to address that question. Sandy Nessing, AEP’s Director of Sustainability, and four of her colleagues met with students, faculty and community members with vested interests in their answer during a presentation titled “Sustainability & AEP.” Sponsored by OU’s Office of Sustainability as part of Earth Month 2009, the visit took place April 29, the day after AEP released its annual Sustainability Report, and raised tough questions about the responsibility of coal-burning utilities to prepare for a more sustainable future.
Many attendees had questions about what the company was doing to reduce the environmental impacts of using coal as an energy source, the company’s stance on mountaintop removal in West Virginia and other parts of Appalachia, clarification about clean coal technology and whether AEP was currently switching to more environmentally benign forms of energy like solar and wind power.
Responses to Nessing’s sustainability reports were mixed. Gary Houser, an employee of the City of Athens who works to implement 2007’s Cool Cities Resolution (which has the goal of reducing the city’s impact on climate change), said he had waited 15 years for an opportunity to speak with AEP about these issues. He said he was grateful to have the opportunity and was glad that AEP was moving in a more sustainable, transparent and communicative direction, but he added that he knew Nessing and her colleagues were hired to speak with the public.
“(I’m) worried they’re only here to say things that sound green…hopefully they take it to heart,” He said. He also commented to Nessing, “Everything we’re doing here is being negated when we look at the Gavin Power Plant, other power plants [owned and operated by AEP].”
Wren Kruse, an environmental studies graduate student simply stated, “They’re still using coal,” in response to the conflict between sustainability goals and the company’s official stance that coal is “not going away…it is part of our future.”
Loraine McKosker, Environmental Outreach Coordinator for the environmental studies program, expressed concern about whether Nessing had enough knowledge about the realities of the environmental impacts of coal extraction, particularly mountaintop removing mining.
Ohio University purchases almost all of its electricity from AEP Ohio, of which 77 percent comes from coal-burning power plants. The main reason most institutions such as universities buy coal-based electricity is because coal is significantly less expensive than renewable sources of energy.
However, coal represents a classic case of externalized costs. Its extraction and burning result in air pollution (such as the accumulation of greenhouse gases and carbon dioxide), water pollution and loss of biodiversity. There are also health and safety concerns for miners, plant workers, neighboring communities as well as related social and economic issues such as high poverty rates. None of these costs are factored into the artificially cheap price of coal.
At one time it was rare for a company to publicize its environmental or sustainability record, but today it is becoming common practice, and in some industries expected or required. In explaining her role in the company, Nessing noted, “Expectations of companies are high. They are held accountable for human rights…almost expected to be social servants. It’s difficult to balance this with shareholder needs.” This expectation is exactly why Nessing was hired by AEP, which, prior to her arrival, had no integrated sustainability plan and a very poor record of corporate transparency and response to stakeholder concerns.
AEP, as the nation’s largest consumer of coal, has been criticized for its environmental record and role in environmental destruction for many years. The company is headquartered in Columbus and serves 5.2 million customers across 11 states, including many in southeast Ohio. Nessing was hired by AEP three years ago to improve the company’s health and safety record, design and implement sustainability initiatives, and communicate these projects and changes in company culture to the public. Her task is difficult because of the company’s size (22,000 employees), lack of historical emphasis on sustainability, and, in her own words, “coal is not sustainable.”
The challenges AEP faces in creating a sustainable vision are not unique to electric companies. The obstacles inherent in environmental communication, the definition of sustainability, and transitioning to a more environmentally friendly model of operation are reflected in many other sectors of the environmental movement. These challenges, posed in the context of AEP, are interesting to stakeholder communities like OU and Athens, but can no doubt be generalized to illustrate greater truths about challenges faced all across society.
The term sustainability can be problematic because it has no formal definition. Its meaning varies depending on specific goals, biases, background and intentions, making it necessary for an organization to define their vision of sustainability before working toward achieving it.
The most popular definition comes from the 1987 World Commission on Environment and Development: “Development that meets the needs of the present without compromising the ability of future generations to meet their own needs.”
Nessing recognized this definition, but explained that AEP uses an alternate definition that includes the “three pillars” concept, which accounts for environmental, social, and economic needs. AEP defines sustainability as “a long-term profitable business strategy that enhances opportunities to deliver greater shareholder value by: putting people first, respecting and protecting the environment, managing impacts, holding the company accountable with transparency and candor, and engaging with our various stakeholders and listening to all points of view.”
The ambiguity of sustainability as a term and business strategy was illustrated at a Lunch-and-Learn with Nessing during her visit to OU. Nessing said she would rate AEP’s current level of sustainability as a six on a ten-point scale, with ten being the most sustainable. Sonia Marcus, OU’s Sustainability Coordinator, replied that she would rate OU as a one. “There is so much more we can do,” she said.
Corporate Sustainability: AEP as a Case Study
As businesses all across the economy move toward a more sustainable model, AEP is also taking steps in this direction, though the debate as to whether these steps are too slow and come too late continues. AEP’s investment in sustainability shows in the job descriptions of the colleagues Nessing brought with her to Ohio University. Claudie Banner is the principle engineer in charge of developing renewable energy systems including biomass, solar, hydro and wind. David Rupert, Director of Supplier Development, works with equipment and supply companies to see how the products that AEP purchases can be made more sustainable.
Aside from creating these positions, AEP is also implementing company policy that keeps with the commitment to sustainability described by Nessing. To date, some of the company’s self-described successes include developing an energy efficiency policy, implementing a clear climate change position and strategy and demonstrating commitment to working with stakeholders (local residents, environmental organizations, social justice organizations and others) when making decisions related to sustainability.
Nessing stressed that AEP’s sustainability goals are significant and contrast sharply with AEP’s traditional corporate behavior. In the past, Nessing said, the company’s response to stakeholder concerns was conservative — essentially, “This is AEP; this is how we do things.” She recalls that the shift to more meaningful two-way communication was rocky at first, but stated that corporate “listening skills” have improved in the three years she has been with the company.
Beyond soliciting input and implementing broad policy, there are specific issues that AEP is often forced to address. Mountaintop removal coal mining, which involves blasting the tops off mountains in order to access the deep coal seams below, is one of the most highly opposed practices of the coal industry, particularly in Appalachia. Nessing stated that AEP does use mountaintop-mined coal, but there was no way of knowing exactly how much because the coal from mountaintop mines is mixed with other coal before AEP buys it. Nessing said that she knows mountaintop mining is a “sensitive issue” and pointed out that for the first time, AEP addressed it in their sustainability report as a topic of pending investigation. When asked if it is a priority to buy coal from companies that do not use mountaintop-mined coal, she replied, “I believe we’re going in that direction.” She spoke about the possibility of not purchasing mountaintop-mined coal, which might result in increased prices and she emphasized that regulations on utility pricing determine the company’s ability to increase electricity prices since “it’s really hard to convince customers to pay more for using less [in reference to higher prices for cleaner energy sources].”
As the company and its concept of sustainability move forward, AEP will continue with its ongoing commitments and expects new challenges. Nessing says that AEP supports the Waxman and Markey Climate Change bill on carbon dioxide reduction via cap and trade permits, also called the American Clean Energy and Security Act. This support is a serious change from AEP’s early anti-regulation attitudes about government regulations of power plants. The Natural Resource Defense Council says the bill, “opens the door to using the value of the allowances for a wide range of critical needs – supporting investments in the clean energy economy, protecting consumers (especially low-income consumers), dealing with unavoidable climate change impacts, and doing our part to achieve international cooperation against global warming.”
Nessing expects a variety of current issues to impact AEP’s future sustainability measures. Some of these issues are the recent coal ash spill in Tennessee that has prompted the Environmental Protection Agency to consider designating the byproduct of burning coal as a hazardous waste. Nessing also anticipates heightened regulations, biodiversity and ecosystems management concerns and an increased focus on water management due to scarcity in many regions.
Nessing described the top reporting trends that she expects will guide corporate sustainability in the future and give companies greater incentive to implement more sustainable business practices. These include a push to make reporting mandatory, the development of a framework with tools for reporting, active ownership by companies who know that stakeholders will take the lead for them if they do not, and more mainstream investors demanding sustainability data. As AEP works to meet these new demands, other businesses will likely do the same.
Accountability or Greenwashing?
Businesses, even those built on practices deemed inherently unsustainable, are beginning to respond to public environmental concerns with greater attention on environmental communication. Corporate positions like Sandy Nessings’s are becoming commonplace and they can have a variety of positive impacts. However, there is notable public concern about the validity of corporate claims that are not backed up by tangible and effective actions.
‘Environmental communication’ is a sticky phrase in the corporate world, often straddling a blurry line between ensuring corporate accountability and serving as a euphemism for public relations. Consumers can benefit from the communication of environmental practices as long as businesses are honest. When corporate environmentalism is exaggerated or falsified, consumers become indifferent and skeptical of environmental claims. Many sustainability reports are considered by companies to be a form of environmental communication, but they fall short of its true definition if they fail to present a complete profile of a company’s environmental impacts.
A sustainability report that lacks fair critique of company practices would be a well-disguised (and by some standards, deceptive) form of public relations. Public relations focused on the environmental record of a company, often referred to as green or environmental PR, is rapidly expanding as public concern for the environment and corporate use of public relations firms both increase. Green PR includes all the efforts businesses and industries make to present themselves as environmental stewards. In general, many companies now spend more money on PR than they do on general product advertising, a reversal that has occurred in the past twenty years. Sharon Beder, author of Global Spin, The Corporate Assault on Environmentalism, writes that in 2000, the top 25 PR companies worldwide earned over $3.6 billion in revenues, with U.S. firms accounting for more than two-thirds of that total. The PR industry is expected to continue its growth, and public relations information on corporate environmental records and philosophies make up a considerable part of the increase in PR spending.
As Director of Sustainability at AEP, Nessing has a background in radio news broadcasting and company communications management. Her strengths lie in her communication skills and an ability to work with diverse groups of people — not in environmental science or mechanical engineering. When asked if she has received supplemental training in environmental or scientific matters, she explained, “No particular background is needed to work in sustainability.” Her position is about organizing and communicating, and specialists are used for more technical aspects.
Nessing is adamant that her job is not PR-based. She has a variety of responsibilities, but, based on her descriptions of her daily activities, she does spend a substantial amount of time speaking with the public about AEP’s environmental goals and merits. Some would argue that her many speaking appointments, including her visit to Ohio University, are a form of public relations.
There is no federal standard to hold companies accountable for claims of environmental stewardship or transparent communication, and this creates great potential for consumers to be misled or confused by corporate claims of environmental responsibility. Deceptive environmental advertising, or “greenwashing,” results in consumer distrust, an inability to make responsible personal decisions about environmental matters, and disproportionate societal levels of environmental risks, known as environmental injustice.
Environmental issues are topics of global concern. There is more of a push for companies to adopt sustainable business practices than ever before. Those who voiced their questions and opinions to AEP officials showed that some members of this community, like many others, are concerned about environmental issues and skeptical of AEP’s claims of sustainability.