2001, had you asked any of Cinergys 7,000 employees
to define the term sustainability, most would have been
hard-pressed to provide an answer. Times have changed dramatically
at this Cincinnati, OH-based gas and electric utility, however.
Today, employees can not only easily define the concept, they can
also tell you how their day-to-day actions contribute to it. Above
all, they can point to a respected external rating systemthe
Dow Jones Sustainability Indexes (DJSI)to prove that their
actions speak as loudly as their words.
Thats pretty impressive for a company that only recently catapulted
into the sustainability limelight. There was no one solitary event
signaling an upheaval in Cinergys corporate philosophy, or
a crisis that forced a transformation in its business practices.
Rather, it was more of a gradual awakening to what the concept represented
and a curiosity of sorts about how its existing programs might apply.
In fact, it was Cinergys desire to have an outside perspective
on the social, economic and environmental aspects of its business
practices that prompted it to create a multi-disciplinary team to
work together to apply for the indexes in June 2003.
There were not that many places in the U.S. where you could
go to have your program gauged by an external authority, explains
John Stowell, vice president, Environmental Strategy & Sustainability.
The DJSI appeared to be the gold standard for that kind of
an evaluation. So when we applied, we did so not thinking we would
be named to the list, but to get some idea where we stood vis-à-vis
other industries that were already deeply into sustainability. Basically
we were looking for a report card.
And what a report card it was. When the results were announced in
September 2003, Cinergys overall score in the utility category
was the highest rating for any U.S. utility, and the company ranked
third internationally. It was named to the DJSI again this yearone
of only three utility companies in the U.S. and 16 worldwide to
The process has been an eye-opener.
The actual process of applying for DJSI forced us to stop
and do an assessment of where we are and what we are doing,
says CEO Jim Rogers. Its like a lot of things in life
when you stop and reflectit helps you gain insight and wisdom.
The whole process gave us some ah-hahs! about where we are. But
once you have been given that recognition, it raises the bar. What
creates the greatest cynicism is when you have been given recognition
and then you dont live up to it. So I believe that looking
out to the future, now that we have been named to it two years in
a rowthe fact is that we have to be more aggressive going
forward. As Will Rogers says, You might be on the right track,
but if youre sitting still you will get run over.
I have been with this company for 18 years and knew that a
lot of our people were doing a lot of good work, but until you try
to bring this all together under one hat, you dont know how
productive your company is, you dont know how embedded your
company is in the communities it serves and the enthusiasm people
have when you ask them to tell you what they are doing, Stowell
The bottom line, says Rogers, is that Cinergy now has a new
way of looking at our business.
It also has its own unique definition of the term sustainability
(responsible actions lead to long-term success) and a new way of
applying the concept (The Hand of Sustainabilitysee page 15),
which goes beyond the familiar three-legged stool of economic, environmental
and social responsibility. Cinergy has also implemented what some
might argue is the most important element of all: an innovative
internal communications program centered around a Sustainable Landscape
image map that raises employee awareness of Cinergys sustainability
initiatives and clearly indicates how each employee contributes
to their success.
One of the things I discovered is that sustainability is a
morale builder because it allows people to talk about the contributions
they are making not just to the company, but to the community,
Stowell says. And when thats all brought together as
part of the business plan, they suddenly realize that what they
are doing has a loftier goal than making a dime. The dimes
importantbut theres more to it than just the dime.
Sustainability, writes Rogers in the companys recently published
and first-ever sustainability report, is about creating economic
opportunities for our customers. Its about improving the quality
of life in our communities. Its about looking inward, too,
nurturing a quality workplace and workforce and ensuring our company
maintains the highest of ethical standards. Sustainability should
not be mistaken for corporate altruism. There are solid business
reasons for focusing our business on the right thing to do.
Weve been doing it for years and its been paying dividends.
Jim Rogers and John Stowell recently spoke with green@work about
Cinergys exploration into the sustainability arenaand
what lies next on its agenda.
|Cinergy Corp. (NYSE:CIN) has a balanced, integrated portfolio
consisting of two core businesses: regulated operations and
commercial businesses. Cinergys regulated public utilities
in Ohio, Indiana and Kentucky serve 1.5 million electric customers
and about 500,000 gas customers. In addition, its Indiana regulated
company owns 7,000 megawatts of generation. Cinergys competitive
commercial businesses have 6,300 megawatts of generating capacity
with a profitable balance of stable existing customer portfolios,
new customer origination, marketing and trading, and industrial-site
WHAT ARE SOME OF THE MOST PRESSING ENVIRONMENTAL
CHALLENGES TO YOUR BUSINESS TODAY?
Rogers: For a six-year period,
I chaired the environmental policy committee of our industry trade
association, the Edison Electric Institute. As chair of that committee,
I have spent a great deal of time digging into the details of these
issues and trying to have an understanding of their impact around
the country. For instance, 52 percent of the electricity in the
United States comes from coal. Cinergy burns 30 million tons of
coal per year to generate our electricity. So we are very dependent
on coal as a fuel source. Obviously when you burn that much coal,
you have significant emissions of sulfur dioxide [SO2], nitrogen
oxide [NOX] and mercury. If you go back to 1990, we spent about
$1.7 billion reducing these emissions; as we look out over the next
four years, we estimate that we are going to spend between $1.6
and $2.1 billion for reductions. So one of our largest challenges
today is to provide reliable electricity at low cost with the smallest
environmental footprint possible.
There is also great uncertainty today as to what future rules will
be regarding SO2, NOX and mercury emissions. The EPA has two rules
pendingone on sulfur dioxide and one on mercurythe first
expected to be out later this year; the second released the first
part of next year. So as I try to project what we are going to spend,
I am doing so in an environment of uncertainty about future rules.
WHAT ABOUT CO2 REDUCTIONS?
Rogers: In regard to CO2, my
starting point on this issue is that one day we will live in a carbon-constrained
world. So then the question becomes: What steps should we be taking
today to prepare for that? One thing that we have done is to make
a commitment to reduce the CO2 emissions from our plants by five
percent off our 2000 base leveland to achieve that by 2010.
I think its do-ablewe wouldnt have made the commitment
unless we thought that it could be done.
Another thing that we are doing is negotiating with GE and Bechtel
to build a coal technology plant that uses old technology in a new
way. Its called Integrated Gasificiation Combined Cycle or
IGCC. As luck would have it, there were two demonstration projects
built in the early 90s and we happened to participate in one
of themthe Wabash River Station. So we want to convert this
coal plant to receive coal gas. Coal gas allows you to take out
more SO2 than at a traditional plant, you can also take out the
NOX, and you can also reduce the mercury at a much lower cost. The
unique advantage of an IGCC plant given the technology today is
that youve also got the ability to significantly reduce the
CO2 from that plant. The technology isnt completely proven,
but what we are planning to do is apply for DOE dollars and try
to work on carbon sequestration at this plant. Its not only
in a region of Indiana where we have the grid infrastructure, but
its also in a part of the state where the geology is very
receptive to sequestrationwe can try to re-inject carbon into
the earth. Theres a lot of debate about whether it can be
done, theres a lot of debate about whether it will ever be
economic to do, but we feel that we need to experiment.
AS A COAL BURNER, CINERGY IS OBVIOUSLY
A TARGET FOR MANY ENVIRONMENTAL GROUPS. HOW DO YOU CONVINCE THEM
OF THE SINCERITY OF YOUR COMMITMENTS IN THIS AREA?
Rogers: I understand their motivations.
I have learned to frame the issues from the perspective of all of
stakeholders: consumers, investors, employees, the communities we
serve and also broader societal concerns. We need to consider the
interplay of goals and objectives from each stakeholder group, which
sometimes are at odds with one another. We need to calibrate the
conversation in terms of how it will affect everyone involved. I
believe that the perfect is the enemy of the good. If
you strive to make everything perfect, you will never make progress.
Five or six years ago, I tried to get more aggressive emission reduction
legislation passedto tie SOX, NOX and mercury all togetherand
to spread reductions over a period of time. If we had been able
to pass that, we would have greater reductions in our plants today
than we do under the current law. But everybody sort of stiffed
the idea in the hopes that eventually they would get everything
they wanted tomorrow, rather than get some of it today. We cant
just shut down all the coal plantswhen 52 percent of all electricity
in this country comes from coalits just not do-able.
Whats better is to determine how to make sure all the incremental
coal plants are really good, how to retrofit some and how to shut
down others that are really old. That gets us on the path to cleaner
air soonerand it allows us to make real progress.
WHATS YOUR MOTIVATION TO DO ALL THIS?
Rogers: Theres a couple
different motivations. I started my career as a consumer advocate
fighting utility rate increases. And I spent time as a federal regulator.
As a result, I have come to the realization that I am a pragmatist.
And the pragmatist in me says that we have certain environmental
goals in this country, and those goals are only going to get greater
and we need to plan for that. So lets be pragmatic about how
the rules are evolving and get positioned to do it in the way that
has the lowest cost possible. Lets start planning to be consistent
with that evolution.
From a personal view, I apply what I call the grandchildren
test. Simply put, when my grandchildren get to be my age,
will they say that their granddaddy made good decisions that remain
good decisions. Will these decisions stand the test of time? I have
been CEO for 16 years and have had a lot of pressure to earn quarterly
earnings and annual earningsbut I have a self-imposed pressure
to make good decisions for five, 10 or 15 years out.
WAS PREPARING YOUR FIRST SUSTAINABILITY
REPORT SIMILAR TO THE DJSI EXPERIENCE?
Stowell: The DJSI experience
brought a lot of people here in the company into the sustainability
family. And so when we sat down to create our sustainability report,
we decided to follow the advice of all the people we talked to when
we were preparing our benchmarking study: Make this program your
owndont let someone create it for you. In the end, we
came up with five aspectsinstead of the famous three-legged
stoolbecause we recognized that we also have a unique economic
development arm and a unique way of dealing with our employees that
needed to be acknowledged. So the sustainability report that we
have prepared built off those five aspects; when we focused on each
one, it really wasnt that hard to put together. What I hope
to improve next year is for our metrics to be stronger, so we are
now looking at the Global Reporting Initiative. We will continue
to tell stories because the public understands those
and it humanizes the information; what we will attempt to do is
improve the metrics of the report.
HOW HAS YOUR OWN JOURNEY IMPACTED YOUR
RELATIONSHIPS WITH YOUR SUPPLIERS?
Stowell: We just held our first
sustainability awards last year, but we did it before we actually
completed our thinking regarding the five aspects of sustainability.
So going forward we will focus on those five aspects. Weve
had environmental awards with our suppliers for a number of years,
but we will be changing from a strictly environmental focus to a
sustainability focus. Because this business strategy is important
to us, our suppliers recognize that it should be important to their
business planning as well. Our last questionnaire did ask what kind
of business practices they had engaged in during the last calendar
year that they would consider to be sustainable and to provide examples.
Some questions were environmental, but some were also related to
social and economic issues.
WHATS NEXT ON YOUR AGENDA?
Rogers: I believe we need to
help create a national conversation about environmental and energy
issues. Our country is unique in that weve never adopted a
national environmental policy or a national energy policy where
the people that create that policy look at the interplay between
energy and the environmentthese issues are interrelated in
so many ways. For example, we could go to a renewable portfolio
of wind and solar to reduce emissions, but today that brings prices
way up. Then theres the whole issue of our aging nuclear fleetthe
news headlines these past few weeks regarding problems with nuclear
plants prove theres some legitimate issues that need to be
addressed there. There are also issues that need to be addressed
about how we use coal and how we can reduce those emissions. This
national conversation needs to be about looking at what we are trying
to achieve in terms of fueling our economy, maintaining our standard
of living, but at the same time making sure we have clean air.
There is so much uncertainty in our industry; so much of what I
call stroke of the pen risk, where the value of an enterprise
can be changed by the signing of a law or a regulation. I think
to be able to manage during that uncertainty is one of our biggest
challenges, but resolving that uncertainty is about trying to stimulate
a national conversation that leads to comprehensive environmental
and energy legislation. As I look out over the next two years, this
country needs an energy and environmental road map for the future.
Think of all the dependency on foreign oil that we have. Think about
our growing dependency on foreign sources of natural gas. Think
about our environmental goals. As a country we cant wait until
the next crisis to deal with these things; we need to deal with
them now so that we can have a sustainable future. We need to lead
on environmental issues, not follow. We need a planand if
that plan translates into regulations, then we need more regulations.
We need this plan so that we can build our strategies and make our
investments in such a way to match up with the energy and environmental
goals of our country. Right now its hard to find anyone to
tell us what those goals are.
Dr. Joseph Fiksel, principal and co-founder of Eco-Nomics LLC,
a sustainable business practices consultant, contributed much of
the background information for this report. Fiksels clients
include companies in a wide array of industries, as well as leading