DATAMARAN PODCAST #3
Powering Through Uncertain Times with AEP
Sandy Nessing - Managing Director of Global Sustainability
Sandy Nessing, Managing Director of Global Sustainability at American Electric Power (AEP), is a central figure in the energy sustainability space. As COVID-19 continues to cause a public health crisis and disrupt the most carefully laid plans, we caught up with her to discuss what it might mean for the future of corporate strategy, risk management, and ESG.
AEP’s business practices demonstrate how this future is more digital and connected than ever before. The company, and Nessing’s team specifically, have been investing resources and capital into digital solutions to ensure that they have solid internal processes in place to prepare for and respond to external risks.
COVID-19: a call for authenticity
In order to respond to COVID-19, companies need to be authentic - in their risk assessments, in their dealings with stakeholders, and with themselves. “We’re at a moment in time with COVID-19 and climate change where the societal impact that companies have is very apparent.”
It is more clear than ever that companies need to offer meaningful and impactful responses - or get left behind. As Nessing puts it, “it’s not just about reporting something, but about doing something.” Having internal processes to monitor the changing external market and build solid relationships across the value chain is essential.
At AEP, there is a common understanding that “now is the time when a company really needs to show its corporate purpose and be involved in its community of stakeholders.” Why? “When you bring people together, you change perspectives and dialogues.”
As the societal role of business undergoes something of a reevaluation in response to the current crisis, authenticity, engagement, and resilience are at a premium. Now, more than ever, demonstrating and assuring these things weighs heavily on a digital transformation.
What digitalization means at AEP
Digital technologies are central to increasing stakeholder engagement, improving efficiency, and ensuring a path for future innovations - in order to respond effectively to changes in the external landscape.
This is what Nessing means when she says that “digitalization is an external process.” To this end, AEP has been able to create a digital hub for building on outside relationships and planning for the future. In the time of COVID-19, this has led to some remarkable outcomes.
“Our digital team has allowed us to have an impact in ways we never thought possible. They came forward and volunteered to make PPE and digital thermometers using the power of 3-D printing and other digital tools.” And digitalization makes sense financially, too. According to Nessing, “[Our digital hub] is allowing us to save money - we aim to save $200MM by 2030.”
Placing a high value on digitalization has allowed AEP to be “proactive and efficient,” particularly when it comes to having reliable data to inform decision-making. “Data is so important to credibility, particularly in ESG. Being able to show the board and executives about how, for example, human capital management is rising in importance is critical to informing high level decisions.”
In this way, Datamaran is “very important to AEP’s strategy,” says Nessing. Even as COVID-19 “places an exclamation point on the ‘S’ in ESG, what we’ve been able to do in Datamaran has allowed us to prepare and manage our risk.” As Nessing explains, “to be able to scan the global landscape is so critical to understanding emerging trends and issues.” This is essential to “helping AEP prepare for the future and be more resilient.”
How stakeholder engagement, data, and digitalization come together
One of the central strategic priorities at AEP is that of a ‘just transition’ away from coal and natural gas. AEP has been doing work on this issue for years. Nessing notes that “as AEP makes the transition to a clean energy economy… we are always reevaluating our impact on not just our workers, but on the communities in which our coal and natural gas power units are located.”
Fully grasping these impacts - financial, social, and environmental - requires a deep and meaningful engagement with local stakeholders, robust data analytics, and the digital tools required for achieving both of these.
The coronavirus crisis has done more than anything else in recent times to demonstrate this critical fact. “By bringing ESG concerns [public health, the environmental positives of quarantine, employee and customer safety beyond regulatory guidance, and so on] to the forefront, COVID-19 has made ESG and sustainability teams invaluable.”
In doing so, the pandemic is accelerating understanding of the financial impacts of these so-called “non-financial” issues - and placing a spotlight on making preparations for the future.
Keeping an eye on the horizon
When it comes to preparing for the future, there is clear evidence that “companies can’t just talk about earnings anymore.” Case in point: a growing number of strategists believe that the coronavirus crisis is serving as a ‘dry run’ for the biggest strategic challenge of the 21st Century - climate change.
“The linkage to climate change is really interesting - the environmental impact of coronavirus forces us to confront the question of the price we are willing to pay.” This is to say: the personal and economic cost borne in response to COVID-19, which has as a secondary effect yielded environmental benefits, might prove to be a stumbling block if similar costs have to be shouldered during the climate transition.
Nevertheless, the crisis has sharpened the focus on ESG, and there is good reason to be happy with the changes that are already taking shape. Emphasis on the external landscape has redoubled. Nessing concluded in this vein, saying “the pandemic is creating a greater sense of urgency towards everything - this is a new day for corporate strategy.”
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