Power companies will face increasing pressure to respond to both social and governance issues while navigating their way through the energy transition process in the following decade, according to GlobalData, a leading data and analytics company.
A focus on ‘E’ in ‘ESG’: 40% global power to come from renewables by 2030
GlobalData’s latest report, ‘ESG Top Trends by Sector – Thematic Research’, reveals that renewable energy initiatives have been gaining traction globally, with power companies primarily focusing on the environmental factors (‘E’) in ‘ESG’. However, it is important that these companies focus not only on the environmental and technical aspects of their operations, but also maintain a holistic approach to sustainability.
Adrian Li, Energy Transition Analyst at GlobalData, explains: “Renewables taking an increasing share in the global power mix can be seen as a consequence of multiple environmental efforts from power companies to increase investments in developing clean power generation projects. This increasing share in the global power mix is also supported by government subsidies which have made green energy more price competitive, decreasing its costs exponentially and allowing companies a faster shift from fossil fuels.
“There has been a dramatic growth in the global renewable energy share; 2024 looks to be the watershed when renewable sources overtake coal-fired power generation share globally. By 2030, it is expected that more than 40% of global power will be supplied by renewables. This increase has been driven by both technological advancement and favourable government policies.”
Cybersecurity, workplace conditions and corruption key ‘S’ and ‘G’ focuses
GlobalData also notes that care must be taken by power companies not to neglect social and governance factors. In Q1 2022, social media conversations around ESG declined by 36%, compared to Q4 2021. This can be attributed to the COP26 event held in October 2021 that ignited intense interest in climate change on social media. Sentiment remains pessimistic in social media conversations regarding ESG, reflecting consumer caution towards changes in the power industry.
Li adds: “Consumers have become very conscientious about carbon emissions and climate change, and, by extension, the social impact of these companies. Factors such as poor workplace conditions or corruption will severely damage the reputation of power companies and decrease investment, as interest in energy becomes increasingly consumer driven. Even something such as poor cybersecurity—although not directly related to climate change—could sour the public’s impression of a company and make them lose confidence.”
Corporate image and responsibility have become more important than ever and being resilient across the three aspects of ESG, will define which companies emerge as the leaders.