This Is How Vattenfall's CEO Anna Borg Tackles the Energy Transition
It is difficult to imagine that, until a few years ago, energy companies were seen as utility companies that hardly innovate. The energy sector now plays a crucial role in the current energy transition. Not only by making their own organizations more sustainable, but also those of customers. Vattenfall, for example, enables the electrification that the industry needs to become more sustainable and invests heavily in the generation of energy from renewable sources.
Coincidently, the undisturbed supply to households and businesses must continue. Vattenfall is fully aware of that role in the transition. The Swedish energy company is one of the largest players in offshore wind energy generation. Anna Borg, who has been CEO since last year, openly declares her ambitions in this regard. Geert van den Goor sat with her and talked about her mission to improve the sustainability of Vattenfall’s own organization, as well as the organizations of its customers. In order to achieve major innovation goals, Vattenfall starts to collaborate more and more with other companies within and outside its own industry. That approach attracts a great attention. Case in point, in August, Borg had the opportunity to report about this approach to U.S. president Joe Biden and the other participants at the White House Leaders Summit on Climate.
You started as CEO last year. Your predecessor Magnus Hall set a highly ambitious goal for the company: To enable fossil-fuel free living within one generation. That sounds like a challenging task?
‘I feel comfortable around our goals and ambitions. I also constantly remind people that our mission is not a sustainability strategy. It is not part of a larger business strategy. This is Vattenfall’s business strategy. The world around us is changing in a multitude of ways. To be competitive and profitable, we need to become more sustainable and eliminate emissions that cause climate change. Simultaneously, we need to help our customers achieve the same.’
The energy transition requires actions on various fronts. How do you prioritize the areas in which the company should operate?
‘That is challenging and requires concrete decision-making. First and foremost, it is important to establish what reality will look like. One should not look at the ideal state of the world or their own business. The realistic situation must be the foundation for all decisions. In any business there is a tendency to trust in the way things have always been done. It is discouraging to decide to shut down or divest parts of your company. However, occasionally taking that step is necessary to focus on the areas most important for the future. It is not in our best interest to hold on to an old business model for too long when the market changes.’
How do you avoid this pitfall?
‘By looking critically at reality, at the market opportunities and at the competitive advantages we have developed through our knowledge and experience. New actions must be in line with the company’s strategy and must be sufficiently profitable. Not just for the future, but for the present as well. Profit is necessary to pay for this energy transition. Insolvent companies cannot drive this transformation.’
In what areas do you see Vattenfall’s competitive advantages in the energy transition?
‘As an integrated energy company involved in energy production, energy delivery and services, we operate in different parts of the value chain. We derive maximum benefit from that position within the energy transition. This requires innovation throughout the chain. Thanks to our expertise, we understand how most processes work and where opportunities lie. Not only within the energy sector, but also to an increasing extent outside of it.
This secures a genuine advantage, even over certain other competitors who solely focus on one element of the chain. Thanks to our expertise in offshore wind projects, we are able to adapt quickly. Vattenfall is one of the main developers in offshore wind projects in Europe. There are currently several promising projects in production. We develop these ourselves or in collaboration with partners. Our experience with collaborations, which are increasingly cross industry, accelerates the transition. Not only within our organization, but also progressively within other industries and sectors.’
Vattenfall and other Swedish industrial companies are praised for this industry-wide collaboration. You were even asked to speak at the White House Leaders Summit on Climate. What is the secret to a successful collaboration? Executives of other organizations have their own agendas, priorities and missions. How do you still get them on the same wavelength?
‘The purpose to enter into partnerships must be clear. From there, you determine a common approach. During our cooperation with BASF within the offshore wind farm Hollandse Kust Zuid, it became apparent that, in addition to the business interest, the emphasis had to be on the long term of the collaboration. (BASF has a stake in the wind farm and has entered into a long-term purchase agreement, Ed.) Executives need to talk about their long-term vision. The visions must be aligned. On the basis of that connection, a definitive yes or no follows. If the benefits are not convincing or are not in line with the conditions, I do not hesitate to say no.
In my presentation at the Summit I emphasized the importance of building relationships. Familiarity, trust and a certain understanding are essential. Even in the face of adversity. Relationships must be solid enough to stand the test of time of any proverbial rainy day.’
This might be challenging, especially when the financial interests are large.
‘Correct. If you keep an eye on the opportunities, however, an agreement is most enjoyable. The energy transition is challenging for all companies. Still, with a common goal in mind, it releases unprecedented power from all people involved. Usually there is a sufficient amount of energy and resources available to bring about the intended change and solve challenges. Taking into account the financial interests.
It is important to stay critical. When the focus lies on technological innovation, the organization could live under the illusion that opportunities seem to be everywhere. Therefore it is necessary to be clear about what expertise and resources the organization truly possesses. Only when you understand this, you can actually contribute and take advantage of opportunities.’
Could you give an example of such an opportunity?
‘Not long ago the first fossil-free produced steel rolled off the production line at the SSAB steel plant in Oxelösund, Sweden. Produced with sustainable hydrogen generated from hydropower, instead of coal. The material has now been delivered to the first customer, car manufacturer Volvo Group. This is the result of a long-standing cooperation between Vattenfall, steel company SSAB and mining company LKAB. For this to happen, we have screened the entire steel production chain to investigate how we can make it fossil-free. It soon became apparent that not only steel and mining companies are highly interested in sustainably produced steel and iron, but many industrial customers are as well. That makes long-term investments like these appealing.
From a business point of view, this is successful. But success to me is also to see the eyes of the production employees at SSAB spark with joy when the first sample rolled off the production line. These people are extremely proud that a sustainable product can be produced without compromising on quality.’
Innovation and changes within the organization require significant investments. These types of projects entail uncertainties and risks as well. How do you manage the expectations of, for example, the shareholders?
‘In this area too, we benefit from our integrated approach, which results in a diversified portfolio of activities. For instance, our grid management activities are a regulated stable establishment with relatively low risks. Consequently, this allows us to take more risks in other fields, such as offshore wind projects and innovative hybrid hydrogen projects. We also try to mitigate the risks within those projects. For example, we initiate a collaboration with partners with whom we will then share some of the risks. Our experience with capital-intensive activities in hydro-energy and nuclear energy assists in this. Furthermore, risk sharing provides the chance to take advantage of new favorable circumstances: if we sell part of the wind farm to BASF, we can reinvest the invested resources in a next project.’
What do you consider to be the biggest challenge in collaborations like these?
‘The biggest challenge can be found mainly outside the organization. There is a strong demand for a level playing field. Not only in our concern, but in large numbers of European industrial companies. In Europe, companies pay for their CO2 emissions. This stimulates innovation and sustainability. In other parts of the world, there is no price on emissions yet. This causes industrial activities to shift away from Europe and makes the European industry less competitive. To increase innovation and development, we need a level playing field.’
What do you think would be the first step towards such a level playing field?
‘A global trading market on which CO2 emission rights can be traded. Similar to Europe. A single global emissions trading platform may still be a step too far for now. Nonetheless, if platforms are emerging in other parts of the world that support the pricing of CO2 emissions, it is an important step forward.
Then we can ask ourselves how to settle this for border crossings and for imports to Europe. Before we do this, let’s first come to a platform. I am convinced that it will present itself, driven by one of the most powerful mechanisms I know: Customer demand. Customer demands are the top drivers of innovation, more than political change and industrial processes. Take for example Volvo, which is currently working on production with fossil-free steel. They do this to reduce their own carbon footprint and because their customers, who buy the car, demand it. When consumers purchase a car, they increasingly opt for a model that causes the least possible damage to the environment and the climate.’
How do you balance Vattenfall’s role in the energy transition with the demand from households? The latter simply desire reliable delivery for a low price.
‘I do not perceive a contradiction. We must always provide reliable and affordable products and services. This is a matter of steadily listening to the customers, who are well aware of the energy transition that is taking place. The challenge mainly lies in the social contract: How do we want to organize society? Where should we build windmills and solar parks that are fundamental for sustainability? Politicians and citizens must collaborate to resolve this.’
Most people applaud the rapid energy transition, but the construction of a large solar park or the installation of a windmill in the vicinity leads to local resistance.
‘The consequences of the energy transition are becoming increasingly visible. This is inevitable. There is a great public resistance to some of these projects. These subjects must be discussed between politicians and citizens. After all, we are all members of society and must take responsibility together. Subsequently it is our responsibility to correctly execute good projects.’
Let’s talk about Vattenfall’s energy transition. You have held various positions in your many years at Vattenfall. How has your leadership changed since you took on the role as CEO?
‘My leadership style might have changed slightly since I became CEO. I think a top executive should first and foremost be authentic and reliable. People need to trust you, regardless of your role in the organization. Only then can you get both colleagues and other stakeholders to join you in achieving your goals. No CEO is able to bring about change on their own. This requires a team effort.’
Looking back to the beginning of your time as CEO. Did your expectations of this new role correspond with reality?
‘Prioritizing work and delegating are my strong suit. However, this role brings setting priorities to another level. Especially since my position requires me to be visible. I have no desire to alter this, as it creates a conversation with customers and other stakeholders. Furthermore, it encourages making relevant decisions. It is crucial for CEOs to be broad-minded and to make their vision subject to reality checks: A customer’s experience or the idea of an employee in one of our business units. I try to prevent information from being filtered too much and I wish to avoid situations in which people are too polite to share their experiences.’
How do you organize this feedback?
‘I am supported by a diverse team of people with different backgrounds and visions. I invite everyone to provide feedback, and I would gladly face a discussion. I am curious and find it important to work with professional specialists whose knowledge is far beyond mine. This does not necessarily mean I follow the advice offered, but I do take everything into consideration in my final decision.’
This interview was published in Management Scope 08 2021.
This article was last changed on 29-09-2021