ESG utilities survey

Utilities go all in on ESG, but getting it right isn’t a given


Report an uptick in ESG investments


Expect to reach net zero goals by 2050


Have the right structure to grow ESG-related business

The power and utilities industry is invested in environmental, social and governance (ESG). From spending and executive support to stakeholder communication and reporting, they’re “all in,” according to findings from a recent PwC benchmarking survey of leaders from large utilities across North America. Nearly all of those surveyed report significant increases in spending on ESG-related initiatives, with much more planned in the years ahead. Beyond this commitment, there’s a healthy dose of confidence in achieving net zero carbon emissions by 2050. 

While a majority expect to be on track, it’s not a given that everyone will get there. In fact, some wonder if they have the right organizational “backbone” to do what’s needed on the ESG front. This includes harnessing data to measure efforts or seizing future ESG-related growth opportunities. So how can industry players make even more progress toward their goals? Here are some of the common themes we saw in our survey results, as well as some (possibly untapped) opportunities to consider as you continue to turn ESG theory into action:

Influencing from within

CEOs lead the way for utilities

Overwhelmingly, support for ESG initiatives comes straight from the top, with nearly 70% of respondents saying the CEO is the main decision maker. Rounding out the list of top executives influencing the approval and launch of initiatives are the chief sustainability officer (38%), chief operating officer (35%), chief financial officer (28%) and general counsel (25%).

At many companies worldwide, boards are tying executive pay more closely to ESG success, incentivizing the C-suite to prioritize articulating and meeting ESG goals. So far, less than half of utilities surveyed are following suit, with 44% saying ESG goals and targets are tied to executive compensation. A majority aren’t planning to do this for a few years (26% by 2024) or at all (26%).

The takeaway: Make ESG a team effort and tie financial incentives to it

It’s no secret that customersboards and investors are increasingly focused on ESG. Recent PwC analysis found that almost 70% of investors think ESG should figure into executive compensation targets. Those not yet moving in this direction should consider fast-tracking the conversation, as it’s a tangible way to close the “say-do” gap.

Aside from this, we’re seeing the responsibility expand beyond the CEO to touch every part of the business. Here are some of the questions that every member of the C-suite and board should be asking:

  • CEO: How can we evolve our business and put in place an operating model that can drive action and deliver positive environmental and social change?
  • CFO: How can a sustainability strategy help enhance our reputation with customers, employees, investors and analysts, while delivering value? How should we prepare to manage our performance against audit quality ESG measures and data?
  • COO: How can we operate our business as efficiently as before (if not more so) with an evolving reduced carbon footprint? How do we realize efficiencies across all the inputs to our operation—from the assets in our portfolio to our people in the field?
  • CRO: How do we continue to build increased resilience to business disruptions caused by climate change, resource scarcity and an increasingly carbon-free or reduced footprint? 
  • Marketing and customer service: How can we tell our social and environmental story to customers, regulators, investors and other stakeholders while improving regulatory outcomes and reputational strength? 
  • Board: How can we drive commitment to our long-term vision and purpose and make swifter strides in areas that matter the most to our stakeholders?

Telling your story, with data

Data is the differentiator

Utility stakeholders—including governments, regulators, customers and shareholders—increasingly expect transparent accountability for sustainable ESG initiatives. Utilities are heeding that call, with 78% saying they already publish a sustainability or ESG-related report, and 16% saying they plan to do so in the next one to two years. Such transparency is one of the nine key building blocks for net zero transformation described by PwC. But compelling ESG reporting requires collaboration and insights from across the organization, fueled by consistent and accessible data. Many still grapple with this part of the ESG equation: Consider that less than half of utilities report being highly capable of gathering ESG data (48%). Others are still learning (40%) or just beginning to learn (13%).

The takeaway: Keep your end goal in mind

If you’re facing highly manual reporting from disparate data sources, you’re not alone. Moving toward a world with automated, enterprise-wide reporting and a centralized source of key ESG data and metrics doesn’t happen overnight. If you’re looking for a next step, here are some to consider:

1. Begin with the end in mind: Determine what metrics and data are material, or relevant to, your broader strategy. Be candid about the gaps that exist, such as data that may not yet exist.

2. Lean on established standards as a baseline: Start with the standards laid out by the Sustainability Accounting Standards Board (SASB), the Task Force on Climate-related Financial Disclosures (TCFD) as well as recommendations from the Edison Electric Institute (EEI) and the American Gas Association (AGA).

3. Map out the process for gathering, and acting on, the required information: Note where the data resides, so you can begin to imagine how to automate reporting or migrate data to a new system.

4. Treat ESG reporting like the integrated effort that it is: Design your reporting architecture and technology with an understanding of how you will use the data. Create data stewards, or clear owners of ESG data, and cascade the importance of ESG measures down into the day-to-day of your operations and decision-making. Treat improving your ESG performance in the same way you treat improving financial performance.

Building your organizational “backbone”

Your growth depends on it

It’s no secret that utility business models are shifting to stay relevant and viable in this ever-changing world. So where do utilities stand in terms of having the right operating models and governance in place to achieve their ESG goals? There’s a pretty even split between those who think they have the right structure and skill set in place (43%) and those who are not quite there yet but are making good progress (40%). A similar divide emerged when utilities were asked whether they have the right operational structure and skill sets needed to expand or grow new lines of business emerging from their ESG strategy. Nearly half of respondents (48%) feel that they have the right structure and skills. Others are at varying degrees of maturity but nevertheless expect to have the structure and skills within one to three years.

The takeaway: Prepare today to deliver the needs of tomorrow

The utilities that get their ESG strategy right to ask hard questions of their organization. This means looking inward to confirm that you have the right structure, skills and technology to meet the demands you face, while also moving full speed ahead to meet aggressive net zero and ESG goals. 

The following questions may be helpful for leaders when evaluating whether their company’s operating model is designed to deliver what’s needed:

  • Have we established clear responsibilities and accountabilities to achieve net zero?
  • Is our culture aligned, and do our people have the necessary skills and capabilities to meet the demands of the future? 
  • Do we have the right policies, processes and measurement framework in place?
  • Are we leveraging available technologies and focusing our digitization efforts?

Investing and growing ESG

Utilities are committed

Investments in ESG-related initiatives are rising, with no slowdown expected anytime soon. The vast majority of utilities (91%) have increased spending on ESG-related initiatives over the past three years, with nearly half saying they’ve increased investments by 25% or more. This level of commitment is expected to continue ramping up through 2024. Over the next three years, almost every respondent expects investments to increase further, with about a quarter of those surveyed projecting an additional increase of 50% or more.

When asked what can help to accelerate ESG-related efforts even more, utilities ranked the following factors in their top three: refundable renewable credits (65%), tax credits for energy storage (58%) and carbon capture credits (40%). As such, the industry will continue to closely monitor how infrastructure and carbon reduction policies crystallize—and what that will mean for future investment and capital decisions. A narrow majority feels confident in their ability to access the capital they need to achieve their ESG goals, with the rest in the process of exploring—or just beginning to explore—what’s needed and how to secure it.

The takeaway: Evolve your investment strategy

While there are many global projections about the actual cost of achieving net zero, the jury is still out on the magnitude of investment required of individual utilities. As the industry pushes to solve this looming cost question, we’re seeing power and utility companies adopt a green finance framework, exploring new financing options to fund their efforts. This includes green or sustainable bonds, which are intended to accelerate net zero investments with cost-efficient capital. 

There’s also been a mindset shift—from defining capital investment priorities through financial benefits and risk-reduction lenses to an expanded view of ESG initiatives and targets. Many utilities are already factoring environmental impacts into their capital allocation and analyzing performance through an ESG perspective. Continue to evolve your capital planning and investment strategies by asking these questions:

  • How can we ready our operations to adopt the new ESG lens in terms of performance, data and decision-making? How can we attract the right talent to support the transformation?
  • How can the capital prioritization processes and tools better align to ESG metrics, in addition to traditional financial and traditional risk metrics?
  • How can green financing help to transition our generation fleet? 
  • In what ways can we reshape our spending to fund ESG investments? 
  • What are the opportunities to save on operations and maintenance (O&M), and use savings for net zero initiatives?
  • How do we balance ESG investments with the need to keep customers’ rates low?

Where net zero nets out

At the end of the day, the industry faces a herculean task of reducing carbon emissions in a manner that still provides reliable and affordable energy in increasingly unpredictable conditions. It’s no surprise that carbon reduction, the impact of environmental regulations, climate change vulnerability and intermittency of renewable energy surfaced as the biggest ESG-related challenges utilities face.

Despite these challenges, 63% of respondents say they expect to achieve net zero carbon emissions by or before 2050. That means that more than a third are uncertain or doubtful. 

While there’s no single path to success on the road to decarbonization, those utilities getting it right generally hug closely to the following commitments: 

  • Setting clear goals centered on bold targets. Elevating ESG to a strategic priority at all levels of the organization.
  • Applying an ESG lens to everything. Old methods for making strategic decisions and prioritizing capital investments may need a mindset shift.
  • Asking the hard questions. This means truly evaluating if you have the right capabilities, technologies, processes and people to be successful—and, if not, doing something about it.

About the survey

This report reflects responses from 54 electric, gas or water utility leaders, mostly based in the US and Canada. The respondents represented large, predominantly investor-owned or public companies with 1,000 employees or greater. The survey was conducted from July through August 2021.

Contact us

Dan Whigham

Dan Whigham

PwC's US Energy, Utilities and Resources Consulting Leader, PwC US

Casey Herman

Casey Herman

Sustainability Partner, PwC US

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