‘ESG as a Bridge Between Industry and Society’

From 2024, the European CSRD is in effect, requiring large companies to report on their sustainability performance. Eventually, CSDDD will be added. As a result, ESG is becoming increasingly important for companies and investors. What opportunities and challenges do this present for your organizations?
Tabak: ‘First of all, this is an excellent opportunity to produce an increasing amount of renewable energy. RWE would be able to live off this. At the same time, legislation assists in making the entire value chain more sustainable. It not only concerns the offshore wind farms; but also involves the ships that transport the materials, the concrete and steel needed for construction, the recycling of turbine blades, and much more. Also, ESG is to our benefit in the labor market as well. Although my last name is Tabak, I always wonder: who would in this day want to work for a tobacco company? I most certainly not. For the new generation joining us, purpose and a desire to positively contribute to society are even more significant. Young people would not even consider working for us if we did not fully commit to sustainability. This requires us to be able to make our social impact tangible, and that is the challenge. Our annual reports are impressive, but we must become far more creative in translating that information to the outside world. This remains a große Baustelle, as the Germans say. We do much of our work behind large fences, literally because the work can be dangerous, but we need to get out from behind those fences more often.‘
Waas: ‘Challenges yes, but ESG offers a huge opportunity to restore the trust between industry and society which has been damaged over the past decades. CSRD reporting, no matter how inconvenient it may at times be, can certainly help. This will create standardisation - which helps to distinguish true performance from greenwashing - and, above all, transparency. Such transparency will open the door to re-engage with society, and in doing so we should above all suppress our tendency to repeatedly explain our own position. We must first listen and understand the problem before we can be understood.’
Rietveld: ‘Indeed, we still have a world to win in bridging the gap to society. It starts with us, because we have been doing this wrong for generations – resulting in a lack of pride among the Dutch people for ‘our’ industry and ‘our’ companies. We should be more vocal about the crucial role we play in the energy transition. ESG legislation is key here, as significant ambitions and concrete targets can drive change. At the same time, a sense of realism is necessary. We are here to contribute to solutions, but then some prerequisites must be met. The nuance often gets lost. If we fail to deliver on our promises in the eyes of politics and society, despite having valid reasons for failing, this fragile trust we are slowly rebuilding can disappear like snow in the sun. I do struggle with that. As a knowledge partner in the discussion on the energy transition, I constantly try to bring a sense of realism to the table, but that often puts me in the position of the one who does not want to get to the program or is resistant.’
Waas: ‘To get society and politics on board, companies need to participate more actively in  the public debate, even the difficult ones. I am positive about a TV program like DWDD University, where a trusted individual is given time to explain various facets of the energy transition.’
Tabak: ‘In my experience, most people understand that something needs to change and that it is complicated. The issue is that the two percent advocating for degrowth or extreme capitalism drowns out the silent majority. This polarization drives people away. They simply lose interest.’

Companies are increasingly held legally responsible for meeting or not meeting their targets. Does that lead to less ambitious targets in your experience?
Tabak: ‘After the 2021 court decision in the climate case against Shell, we did another check on our strategy and business case to confirm that we will indeed succeed. But we are in a fortunate position. With our coal-fired power plants, we were forced to be the first to move, so now we are moving first. Moreover, we have no competition in the Netherlands. There is no electricity coming from China. Not yet. But, as a citizen, I was concerned about the Shell ruling, because I do not see how it is going to help us. I would dare to say the opposite, that the ruling has delayed the transition.’
Waas: ‘This legalization has made us more aware that we need to be able to deliver what we promise. That is unfortunate, as it is simply better to stretch your goals.
With ambitious goals - even if you do not meet them - you achieve better results than with less ambitious goals which you do meet. Whereas achieving or not achieving those ambitious goals is not always within your control.  For instance, the raw materials needed to build wind turbines may not be available at a given time due to geopolitical tensions.’

Rietveld: ‘This can indeed have substantial consequences. We are expressing strong ambitions for the energy transition and want to try our utmost to achieve it, but we cannot guarantee it will succeed. Besides political circumstances, societal perceptions can also change. We really understand that coal-fired power stations are not the way forward and I no longer want to have it on my balance sheet. But what if the government calls me in 2029 and asks me to turn on the coal-fired power plant again because consumers can no longer afford the energy price? Will I say: ‘I refuse to do that’, or will I stop the phasing out plan last minute? I miss debate in the Netherlands about these kinds of dilemmas and the preconditions needed to achieve our goals. This does not contribute to positive energy to tackle the issue.'

What is your biggest concern when it comes to the energy transition?
Rietveld: ‘We all grew up in a time of immense prosperity. Energy was always available and affordable. With the invasion of Ukraine, we saw how vulnerable that system is and how vulnerable our economy can become when parts of our industry suddenly disappear. In reaction, there are calls for certain companies or sectors to relocate to other parts of the world. I find that a non-discussion. My premise is that everything must continue to function. The discussion should focus on how we can build a sustainable, future-proof system around our realities. The problem is that politics still pursues short-term policies, while the objectives are long-term. This constant clash is truly my biggest concern.’
Waas: ‘In the Netherlands, we still think we can polder our way out of any problem. That was a possibility in the days when we were enormously affluent. Now we need to make choices. The Netherlands can be competitive in the European market with a system based on wind, solar and storage in batteries and salt caverns. To realize this, all parties - government, industry, civil society organizations - must formulate a master plan now and allocate the necessary money. A challenge in this is that the balance between individual interest and the interest of society has slipped. We have not yet found an effective way of dealing with objections that are intrinsically unreasonable or incorrect, but which nevertheless cause huge delays that do not serve the general interest. We cannot tolerate this any longer if we aim to complete the energy transition in 10 to 15 years. We need to devise a system in which real questions and problems can be dealt with and go through a legal process, while unrealistic objections can be dismissed after a brief check. In a system where we have the rule of law, which is of paramount importance, it must be possible to find this solution.'

Tabak: ‘You should indeed balance interests and make timely decisions, something akin to the Dutch TV series, ‘De Rijdende Rechter’, which provides legally binding, on-air advice. It is of no benefit to anyone if procedures take years, not even for the petitioners who must wait in suspense for a decision on their objection.’
Rietveld: ‘In fact, the conclusion always is that our government fails to make fundamental choices. If they did, something could be done about licensing procedures and comment deadlines, and individual rights can be adjusted in small ways, for the sake of the public interest. If the government does not dare to choose and has no plan of its own, it leaves the system open to abuse. Also, we are too focused on the end goal, while the steppingstones towards the goal are what makes the difference in the meantime. Nobody wants a biomass plant in their residential area, however small it may be, but for the time being it may be necessary to be able to achieve negative CO2 emissions. In this too, we need to make choices. If we cannot agree on certain technology and fuel types as temporary steppingstones towards the big end goal, we will not reach that end goal.

When considering the S in ESG policy, to what extent does your sector need to take steps toward diversity now to ensure success in ten years?
Tabak: ‘Engineering should be much less of a male thing. My wife is from India, where half the engineers are women, so there really is a world to gain here. Business-wise, it is shortsighted not to utilize 50 per cent of the potential. And how robust can a strategy be which only middle-aged white men have worked on? At RWE, diversity at management level is higher than in the rest of the population. This is simply a result of targets, because these force you to try just that little bit harder to find the woman or the person from a different background. I think it is enormously important to keep doing our best towards this diversity.'
Rietveld: ‘If the system still functions in such a way that it is more beneficial to stop working than to take your child to childcare, our system is wrong and we cannot tap into the work potential needed to realize our plans. That is one of those prerequisites.’
Waas: ‘Besides diversity, we should also prioritize how to get the young generation involved. We are moving our research activities to the University of Twente campus with the aim of involving the students there in our projects. We can put sustainability and energy transition projects on track, but they need to make it happen. The future does not only belong to the young, but they must also create it.’

This interview was published in Management Scope 09 2024.