Cindy Kroon (Vattenfall): 'Our Ambition is No Marketing Stunt'
She just completed her first 100 days as director at Vattenfall. On August 1, 2022, Cindy Kroon joined the Board as Chief Commercial Officer, also continuing in the role of Director of Customers Vattenfall Netherlands. Kroon has been with the energy company for nearly 20 years: she joined the then Nuon in 2003, participated in the takeover by Swedish state-owned Vattenfall six years later, and oversaw the name change and rebranding to Vattenfall Netherlands in 2018.
Those two decades of experience will be useful in her new role, as these are turbulent times for an entry into the c-suite. The energy sector is in the midst of a transition from fossil fuels to renewable energy sources and is also severely impacted by the war in Ukraine. The disrupted supply of Russian gas led to a price explosion in the energy market. Customers with variable contracts sometimes saw their energy bills explode after rate increases by the energy companies and sooner experience financial distress: Since early 2022, Vattenfall has seen arrears increase by 20 to 30 percent. Meanwhile, the government has imposed a cap on energy prices for all households and small scale users by 2023, with the energy companies being compensated for lost sales. As CCO, how does Kroon - responsible for two million customers - deal with the energy transition and energy crisis, with the sustainability imperative and with social responsibility in the face of growing energy poverty? In other words, with the E and the S of ESG (environment, social & governance)? These are the questions Xavier Baeten, professor of Reward Management & Sustainability at Vlerick Business School, discusses with the new Vattenfall director.
As CCO you have commercial responsibility, but you also have sustainability in your portfolio. An unusual combination: the outside world might think that Vattenfall approaches sustainability from a sales perspective....
'For us, combining commercial policy and our sustainability efforts is actually very normal and logical. Vattenfall's mission is to make fossil-free living possible within in one generation. We can only achieve that sustainability ambition together with our customers. How can we help consumers live more sustainable by providing green energy? What are the challenges our business customers face in the energy transition and how can we assist them in this? So, our position in the market and our responsibility to the planet go hand in hand. That flows directly from our purpose; it's not a marketing ploy. We see it as our mission, in which we firmly believe and towards which the entire company works extremely hard.'
The 27th UN climate summit, COP27, recently took place. Critics expressed disappointment and frustration at the lack of concrete climate agreements between countries.
'Vattenfall was also present at COP27. There are two sides to the energy transition story, and both are true. Sustainability is not going fast enough, there are no hard climate agreements between countries and, moreover, they are not enforceable. But you can also look at the progress we have realized over the years. First of all, the discussion no longer focuses on the question of whether there is climate change, but how we as countries can combat it together. That was unthinkable ten years ago. Furthermore, COP27 was about the candid narrative: how are we going to finance the global transition to a CO2-neutral world? For the first time, there has been talk of compensation for the damage that the ecological footprint of Western countries causes to developing countries such as Nigeria and Pakistan. I thought that was a surprisingly good outcome. Criticism is good, but I prefer to take a positive approach, otherwise my days will get very bleak. In any case, we at Vattenfall are doing our very best to meet the goals of the Paris Climate Agreement.
What concrete climate goals has Vattenfall set itself?
'We want to bring our CO2 emissions in line with the targets set to limit global warming to 1.5 degrees Celsius by 2030, and our ambition is to be net zero by 2040. Vattenfall has joined the Science Based Targets initiative: this involves testing your CO2 reduction plans as a company against climate science. It's a challenging process. I was initially quite shocked by the results: we have much to do. We have since achieved to become one of the few European SBTi-certified energy companies. It made our ambition to make fossil-free living in one generation concrete and measurable.
How do you view 'greenhushing': companies that do not publish concrete climate targets for fear of liability claims?
'In all sincerity: we have never had that discussion at Vattenfall. Perhaps that's naive. The external pressure is great; we may indeed in future face claims from parties who feel that the energy transition is not going fast enough. Look at Shell, which after a lawsuit brought by Friends of the Earth, has to tighten its CO2 targets. But liability claims are the least of my fears. What matters is that as a company you are serious about sustainability. And again, to us this is not a marketing strategy, it is our true intention.'
The Authority Consumer & Market (ACM) recently reprimanded Vattenfall for greenwashing, or misleading sustainability claims: consumers were given the impression that only green electricity was being sold, while it was still gray.
Greenchoice also received a reprimand from the ACM, even though it is one of the leaders in sustainability. So we were in good company, I was even kind of proud that Vattenfall was mentioned in the same breath as Greenchoice. If you lead the way in sustainability, the ACM keeps an extra close eye on you. The core of the reprimand was that in our online communication we did not indicate clearly what percentage of our energy is green and what percentage is not yet green. This could lead consumers to believe that we supply 100 percent green energy, but that seems unlikely. Vattenfall is often criticized precisely because we also supply energy generated with fossil fuels, that information is readily available to all consumers.
We found it a rather theoretical discussion, but we adjusted our communication and came to a settlement in the form of a donation to a charity. But it was hard to swallow, we were quite grudging at first, as in our view there are plenty of companies in the sector with far more room for improvement. But the ACM wanted to set an example: the regulator calls greening the new marketing gold for energy companies, and they are justifiably critical of that. If we as Vattenfall want to play a leading role in sustainability, this is part of it.'
To what extent is your sustainability policy driven by customer demands?
'A small group of customers is aware of the importance of sustainability, but the vast majority of society is less concerned with it than what might be expected. Energy has always been a low interest product: people took light and heating for granted and paid attention to cost: can we get it cheaper by switching to another energy supplier? Due to high energy prices, energy consumption among Dutch consumers has suddenly dropped by more than 30 percent. The crunch on the wallet therefore leads to an acceleration in sustainability. We also see an acceleration in sustainability investments among our business customers. Transitions need momentum for behavioral change, driving moments to make a leap in development. In that sense, the energy crisis is a gift for the energy transition.'
The end justifies the means?
'That would be a harsh observation. The energy crisis accelerates the achievement of society’s collective sustainability goal, but the high prices sometimes lead to energy poverty for individuals. We hear harrowing stories of people in poorly insulated homes, not protected in their houses, not able to prepare a mealand seeing their debts mount. This causes us to lose sleep and we try to help those people.’
How does Vattenfall specifically implement the S, the social component of ESG?
'Vattenfall has had an early warning covenant with Dutch municipalities for ten years. Energy is, with rent or mortgage and health insurance, one of the three major fixed expenses for households. We report payment arrears to municipalities so that they can come to the rescue in case of financial problems. We are also affiliated with the Dutch Schuldhulproute, a public-private partnership for the prevention of unmanageable debts. Furthermore, we were one of the initiators of a joint emergency fund of the government and the energy sector to prevent vulnerable households from accumulating large debts. We ourselves have always made payment arrangements with people who need more time to pay their bills. From our utility past, we have inherited caring for our customers and often take a surprisingly low-key commercial stance. I see the client relationship as a partnership, based on mutual trust. If one of the partners is struggling, you don't abandon the other. And this idea of being there for others is also reflected in the activities of our Vattenfall Foundation. There, we facilitate voluntary work by our colleagues, bringing light and energy into the lives of people who could use it. As an energy company, we play a major role in society, then you also give back to that society.'
The government has stipulated that households cannot be cut off from energy until April 1, 2023. Would energy companies have done so, otherwise?
'It is a misconception that the minister enforced that people’s energy supply would not be cut. As the Dutch energy sector, we don't disconnect people easily. Several payment reminders, collection letters and contact attempts precede this. Only then can people who really don't want to pay be disconnected. That whole process takes six to seven months. As a sector we just don't shout that from the rooftops, because there are people who abuse it. But with people of good will we naturally always search for a solution, also without an energy crisis.
Back to the E of ESG. Sustainable Development Goal 17 calls for global partnership for sustainable development. How are you giving shape to this?
'A concrete example is our cooperation with Swedish steel producer SSAB and Swedish mining company LKAB in the production of fossil-free steel. Steel production is not only one of the most polluting sectors, but also an important supply industry for us: we need steel for our wind turbines. It is indeed wonderful to see the first Volvo trucks made of fossil-free steel now driving around. We are also working with the aircraft industry on a sustainable alternative to kerosene. We also conclude corporate power purchase agreements with large companies: they make their production more sustainable with wind energy, and we can invest in further sustainability through the guaranteed purchase. We are working closely with environmental organizations and knowledge institutes for the development of our ‘Hollandse Kust Zuid’ wind farm. Along with the Royal Netherlands Institute for Sea Research, we are looking at the impact on biodiversity: for example, we are using underwater cameras to investigate whether fish and seals use the turbines as new habitat. We are also already very far along in recycling old wind turbines. We are also dealing with the issue of forced labor by the Uyghur minority in the Chinese production of solar panels. As an energy supplier, we must take responsibility for our supply chain when it comes to sustainability.'
How do you personally experience the social magnifying glass that companies are under these days?
'If you look at major transitions in history, they are always accompanied by friction. It requires a field of tension. This is also what we experience as Vattenfall: our sustainability policy is under the magnifying glass of politics, media, NGO’s and society. This criticism is not always pleasant; of course, we are only human. It sometimes disappoint, because our ambition is genuine. But precisely because we have such great ambition, we must deal with external pressure in a mature way and be receptive to it.
I think it is important that we stay in conversation and try to understand and find each other in a common goal: to make the world a better place. If the discussion becomes unfair and inaccuracies propagate, it frustrates me. When parties ventilate the opinion that Vattenfall must become more sustainable more quickly, we say: show us how we can do more and how you can help us do that.'
Where does Vattenfall stand in the sustainability transition on an imaginary scale of 1 to 10? What are you proud of and what could be improved?
'Vattenfall's history goes back more than 100 years. We have come a long way: from energy supply by fossil sources to our current ambition to become fossil-free in one generation. With our 20,000 employees we work on it every day with passion and energy, and I'm very proud of that. On that imaginary sustainability scale, I would give ourselves an 8. I see Vattenfall as a frontrunner. We closed our Dutch coal-fired power plant, for example, without going to court. We are one of the largest investors in wind energy in the Netherlands and Europe. We are constructing heat networks and in hybrid energy park Haringvliet Zuid we combine wind energy, solar energy and battery storage. At the same time, there is of course room for realism and modesty, because if you look at COP27, we as a global society are not making enough sustainable progress and we score insufficiently. We will therefore have to accelerate, and we need everyone to do so: the government, our customers, our shareholders and our partnerships. I like to see the glass as half full, but we cannot sit back and think that we arrived.’
This interview was published in Management Scope 01 2023.
This article was last changed on 14-12-2022