Vincent de Rivaz Speech to Cranfield Business School 28 April 2010 Tone from the top – Leading business sustainably and responsibly Contents : Introduction Our Journey So Far Delivering Sustainability to our Customers Decarbonising our Generation Revisiting our Commitments Concluding remarks INTRODUCTION Ladies and Gentlemen… I am delighted to be here at Cranfield Business School. This is a great seat of learning, and one which has put sustainability and social responsibility right at the centre of business thinking. That is exactly where they should be. Any business in 2010 which sees its duty to the environment and society as merely “nice‐to‐have” luxuries is heading for extinction. In tough times, it is tempting simply to focus on today’s profits, and shut our eyes to the world our grandchildren will inherit. But I believe passionately that to survive, any business has to tackle tomorrow’s problems today, before it’s too late. And that is particularly true for us – because the energy industry is the key to our society’s do‐or‐die battle to defeat climate change. Sustainability – putting our duties to the environment, society and employees at the top of the agenda – is good business. At EDF Energy we are convinced that it is the only kind of business which can survive the huge challenges we face over the next two decades. We meet in the middle of the most closely‐fought General Election for years. People are beginning to confess in hushed voices that it’s even a little bit exciting. Politics – exciting? ...that for a Frenchman seems so very un‐British! But I am fascinated by the issue which bubbles under the surface of all the debates about policy. The overriding concern of voters is with trust. We are emerging from recession into a world which seems crowded with anxieties, from public debt and eroding pensions to global warming. It is a time for leadership. Yet trust in the political and business leaders who should be delivering solutions is at rock‐bottom. Helping to rebuild that trust is a core responsibility of big companies like EDF Energy. Without trust, a society cannot take the long‐term collective decisions which deliver future security and prosperity. In my view, trust and sustainability walk hand‐in‐hand. I hope today to explain the steps we are taking to embed concepts of environmental and social responsibility deep in the culture of EDF Energy. And equally important, how we strive to build the trust of the communities we serve, particularly as we shift generation from carbon to nuclear and renewable sources. Despite the recent furore over “Climategate” there is, thank goodness, at least a consensus between the main UK parties on the need to decarbonise the economy. In the final TV debate tomorrow evening, the three leaders are expected to proclaim their faith in a “green recovery” from recession. And all are committed to 80% carbon cuts by 2050. But that strategy demands huge investment in human as well as financial capital. Yet there is an acute skills shortage in key areas. A dynamic “green” economy will require very different skill‐sets from those which have traditionally dominated the UK. In the industrial sector, the creativity of engineers and scientists will be crucial in developing the technologies needed to generate economic growth while drastically cutting carbon emissions. Equally important will be inspired strategic leadership from a new generation who can look beyond short‐term financial considerations to truly understand what long‐term sustainability means. I am sure that description includes many of the people in the audience here this evening, not least of all David Ferguson, who has just completed his PhD on Corporate Sustainability Performance, with a specific focus on EDF Energy. I hope that EDF Energy has taken the right first steps in that direction ‐ David’s work with us certainly helped us on our journey. Tonight I will chart our exploration so far in this new territory. OUR JOURNEY SO FAR First, let me turn back 4 years, long before we came together with British Energy to form Britain’s largest nuclear energy company. It was in 2006 that our thinking about sustainability began to crystallise. I was awed by the sheer scale of the environmental mountain EDF Energy had to climb. It was, and arguably still is, greater than for any other UK company. Our fleet of coal, gas and renewable power plants provided a large part of national energy needs, but also produced 5 percent of the UK’s carbon emissions – roughly equivalent to the total carbon emissions of Peru. We needed to do better. And, we also had thousands of customers in fuel poverty, people who needed to spend more than 10% of their available income to heat and light their homes adequately. 2
On top of all of this, 2006 was also the year when it became clear that the rules of the energy game were going to be transformed. The UK Government and the European Union were promising tough legislation to set limits on carbon emissions. I knew that the old way of running the business was not sustainable. Doing nothing was simply not an option. Environmental and social responsibility had to be at the heart of our future strategy. I hold much stock by what Richard Locke at MIT has termed the “sustainability opportunity” – the leap of faith a confident business can take to move from the old carbon‐needy world to a new, greener future. We were convinced in 2006 that we had to capitalise on that opportunity, to make that bold leap. Locke has made clear that sustainability is “not only a challenge affecting every aspect of management”, but it could provide “first movers with a source of enormous competitive advantage.” Around the world you see that chance being seized with both hands – not least in China, with its huge investment in green technologies, from photovoltaics to electric cars. I knew that EDF Energy had the scale and engineering expertise to become the first mover in a green UK energy market. We are part of the EDF Group, which has by far the lowest carbon emissions of all the major European energy companies. The electricity we supply to French homes and businesses has just one‐tenth of the carbon intensity of the average UK supply. It was obvious to me that our competitive advantage lay in a rapid transition from a carbon‐hungry past to a bright green future. The strategy we drew up gravitated around three core elements: 1. Decarbonising electricity generation. 2. Cleaning up our day‐to‐day operations. 3. Helping customers to reduce their energy use. These were not vague aspirations, but would demand a cultural revolution for our 13,000 staff. A radical change like this could be delivered only by highly‐motivated people confidently sharing a clear vision of the future. Success would be measured in totally different ways. The business would be transformed from top to bottom. So I worked with my Executive Team to publish two sets of binding commitments in 2007 and 2008. The first was on Climate Commitments and the second on Social Commitments. We emphasised from the start that sustainability was about more than just cutting carbon use. We must operate within rigorous environmental limits. We must actively promote social well‐being. And of course we must deliver long‐term profitability – because financial sustainability is the vital foundation for everything else we do. Our Climate Commitments set the business clear environmental targets. The headline commitments were ambitious but achievable: 
A 60% reduction in CO2 emission intensity from electricity generation by 2020. 
Cutting CO2 emissions from our vehicles by 20% and from our buildings by 30%, both by 2012. 
Helping customers cut their energy carbon intensity by 15% by 2020. 3
We were promising hugely‐ambitious cuts to the tightest of deadlines. These were not mere tweaks to our business model, but a fundamentally new way of doing business. We had been a successful high‐carbon company, contributing to global warming. We would become an even more successful low‐carbon business – a friend to the planet, not a burden. Our Climate Commitments would demand billions in new investment, but they would also slash millions of tonnes from the nation’s carbon footprint. We called our second set of pledges our Social Commitments. These set equally ambitious targets for the social and human impact of our business. We promised to: 
provide long‐term support for our most vulnerable customers, particularly people trapped in fuel poverty; 
make sure all our suppliers met the ten principles of the UN Global Compact to guarantee an ethical supply chain; 
launch a lively schools programme so that by 2012, 2.5 million young people would have learned about the sustainable use of energy; and 
achieve gold standard awards from key independent advisory bodies in the field of diversity and social inclusion. gold external ad of diversity an Change‐management on this scale demanded a robust framework for governance and accountability. Progress would have to be rigorously measured, and where we were falling short, decisive action would have to be taken. This was the responsibility of an executive level Sustainability Committee, supported by additional technical working groups. In each business unit, sustainability leaders and expert teams were appointed to set and monitor local targets. The change cut to the heart of the way we decided our budgets. Potential investments would be tested not just against financial criteria, but also against each of our sustainability goals. As part of any initial business case, project sponsors were required to complete a formal assessment of its impact, positive or negative, against the climate and social commitments. So in effect the business bottom‐line became 3‐dimensional. We would only approve projects which met our financial as well as our environmental and social credentials. We also joined with the Prince of Wales’s Accounting for Sustainability programme to create a connected reporting framework, which made explicit connections between social, environmental and economic performance. From 2007 onwards, sustainability was embedded as a mainstream measure of performance. Delivering these targets linked directly with annual bonuses, creating a strong incentive for every employee to play his or her part in changing the way we did business. This transformation is happening. EDF Energy is now a very different company. We have successfully come together with British Energy, and the result is a team which knows exactly where it is going – not just in terms of financial success, but also in service to the nation and responsibility to the planet. The transformation has external implications. It involves a new relationship with our customers and sets new standards for the way we behave as corporate citizens in the energy marketplace. Let me turn first to the work we have undertaken with our customers. 4
DELIVERING SUSTAINABILITY FOR OUR CUSTOMERS Here we have a huge responsibility but also great opportunities. Our climate and social commitments seek to help our most vulnerable customers and also to offer ways all our customers can reduce their carbon footprint. The two aims fit together. More effective use of energy through better insulation, management and technology means lower carbon emissions and cheaper bills. This pulls people out of fuel poverty, and at the same time reduces the impact on climate change. So I decided we had to tackle both areas head on. We led the industry by introducing a social tariff for vulnerable customers in 2008. We now support over 155,000 of our most vulnerable customers, representing a spend this year of around £16 million. We also rolled out a programme of loft and cavity insulation across homes in the most deprived communities of Britain. We have already made good progress, delivering well over 80% of our target to insulate homes within the first two years of our programme being operational, whilst also introducing a further specific initiative in London – the Warm Zone partnership – which co‐ordinates work across 24 boroughs, providing the very poorest households with individual heat efficiency advice from EDF Energy experts. By exceeding Government targets, we expect to reduce our CO2 emissions within the UK’s domestic sector. Customers are the winners: improved home insulation means they use energy more efficiently, reducing their energy bills, and at the same time they are making a personal commitment on the road to sustainability. Our toolkit has to expand if our customers are to cut the carbon intensity of their energy consumption by our target of 15% by 2020. We now offer solar panels to domestic users who qualify for our Feed In Tariffs, so they receive direct payments for the renewable energy they produce and sell back to the grid. We are about to launch Smart Metering across 5.5 million British homes, and we are supporting the installation of air‐source heat pumps. Our research support for electric and hybrid vehicles also ensures that we reach across the length and breadth of the product pipeline. Technology is only part of the solution. Central to our philosophy is the belief that climate change is as much a social as an environmental challenge. We must also lead the battle for hearts and minds, particularly at a time when climate change deniers are raising doubts about sustainability. Above all we want people to welcome the transition to a greener future with enthusiasm. That’s why I was delighted when EDF became the first Sustainability Partner of London 2012. The Olympic Games provide an amazing opportunity to inspire the nation to adopt greener ways of living. As I said earlier, I want my company – and the nation it serves – to enjoy the competitive advantage of being first movers in sustainability. That’s in harmony with the Olympic commitment to excellence. Remember the Olympic motto: “Faster, Higher, Stronger”? I want us to add... “and Greener”. In 2009 we joined with the Eden Project to launch Team Green Britain, an ambitious initiative to persuade people to adopt more sustainable behaviour. More than 850,000 people have already joined the Team. We are now working with a growing number of partners including Global Action Plan, Bike Week and Eco Schools, helping to inspire the next generation of energy users, and helping us to meet our commitment of engaging 2.5 million school children across Britain on sustainability by 2012. I will turn now to our core responsibility to decarbonise our own electricity generation. 5
DECARBONISING GENERATION At long last we have the legislation on carbon emissions we need to plan for a green future. The 2008 Climate Change Act prescribes the legally binding commitment which is etched on our collective conscience – a massive 80% reduction in carbon emissions in the UK by 2050. This complements our earlier commitment to a 60% cut in CO2 emissions by 2020. We were very clear about the low carbon path we had to take. Nuclear power must have a key role in decarbonising the UK’s energy. The EDF group has vast experience of delivering nuclear power safely over four decades to homes and businesses in France, where 80% of generation is nuclear. By coming together with British Energy at the beginning of 2009, we not only gained 8 nuclear power stations across the UK, but created a sound foundation for a new, low carbon nuclear building programme in the UK. This would be no leap in the dark, but use proven 3rd generation European Pressurised Reactor (EPR) technology. We now have multi‐billion pound investment plans for four new EPR reactors in the UK over the next 15 years: two at Hinkley Point in Somerset, and two at Sizewell in Suffolk. We hope the first will become commercially operational in 2018, and the last in 2025. That new generating capacity will help the UK meet its 2050 target. When our 4 new reactors are on stream EDF Energy will be supplying up to 40% of UK homes with secure, safe, low‐carbon energy. The go‐ahead for this ambitious new‐build programme forced us to refresh our Climate and Social Commitments. Our review of them has just come to a close. REVISITING OUR COMMITMENTS The new document adds a new set of commitments to ‘Deliver Low Carbon Nuclear Responsibly’. It recognises that many people are still alarmed about the safety and long‐term consequences of nuclear generation. This brings me back to the vital issue of trust I discussed earlier. We have not yet done enough to earn the public’s trust for taking a step we passionately believe is in their and the environment’s best interests. So we now commit to: 
work with Government, NGOs and others to demonstrate real progress in finding a long‐term UK radioactive waste solution; 
an open and transparent dialogue to win public trust that we will always act to the highest professional standards on nuclear security issues; and 
active support for the development within the UK of the skills necessary to sustain our nuclear businesses by working with schools, universities and other bodies. These are challenging new objectives. Perhaps the toughest is the last one. It is the key to a sustainable future. Without a rapid expansion of the pool of UK engineering expertise and craft skills we cannot achieve any of our other goals. 6
SKILLS FOR A SUSTAINABLE ECONOMY We believe that sustainability depends as much on people as technology or Government policy. We need the right technical skills, but also an education which instils the right values in our staff and our customers. We can take this journey together only if we all have a clear vision of its destination. Let me turn first to a critical need for my business: getting the right skill sets to deliver low carbon solutions. There is an alarming skills gap opening up in our industry. We are losing a crucial cohort of engineers to retirement. Too few new engineers are entering the industry. The Gibson Review of Engineering Construction, commissioned by the Government last year, made this starkly clear. The average age of UK engineers is now over 50, and some 15% of our workforce are over 55. Just at the moment when a talented army is needed to decarbonise the British economy, many of our most experienced and valued engineers will be retiring from the battlefield. That is why EDF Energy is pushing ahead with a plan to renew our workforce by recruiting 10,000 new people over five years. We are expanding our academy at Barnwood, and developing two new flagship campuses at other UK locations. Our aim is to nurture a first‐rate team to take our industry forward, and to grow stronger links between the company and the community. It is not just a question of engineering expertise but also of leadership. Who will have the vision and values to lead companies like ours confidently into a sustainable future? Last year I was honoured to accept His Royal Highness The Prince of Wales’s invitation to become his National Ambassador for Business in the Community. As part of that role I led an enquiry into the skills required to green the British economy. Specifically, we wanted to learn about: 
the role businesses will play in the transition towards a sustainable economy; 
the types of leadership skills required at different levels of an organisation, for example CEOs, middle managers, customer facing employees and trades unionists; 
the extent to which these skills are already present within business. Our conclusions will be published early next month, but I can trail some of the headline findings this evening from our survey of business people within Mayday Network and BITC member companies: 
70% of respondents agreed that the gap in skills for a sustainable economy will become one of the most urgent challenges facing UK business in the next five years. 
There is deep anxiety that too little is being done. 92% of participants felt that businesses must do more to give their people the skills needed. 
And the research shows a real need to develop skills targeted at different roles: o
for senior managers and board directors: the ability to inspire change in a wide range of people, and consistently work towards a longer‐term vision; o
for middle managers: to know enough about sustainability to translate it into successful business strategies as well as effective communication, and 7
o
for customer ‐facing staff: to be effective and persuasive communicators, using clear, accessible language. While it is clear that much still needs to be done to implement this agenda, I was encouraged to read that almost half of those who had completed the survey are already starting to address the issue strategically. I count EDF Energy firmly within that group. But I know we are at the beginning of a long journey. Charters of commitments and board committees may provide the necessary infrastructure. But a business model changes only when a fundamental shift takes place in its deep culture – in the way thousands of staff feel about their jobs and the public benefit they deliver to society. I hope to nurture that new thinking with the imminent launch of a bespoke sustainability training programme in EDF Energy. Its aim is to help every one of our employees to explore the meaning of ‘sustainability’, and understand exactly how they can contribute to it. We all need to feel in our bones that sustainability is critical for the success of our business – that it is not just about building new low‐carbon generating capacity, but also about the values we share and the way we care for our customers. CONCLUDING REMARKS The title of this talk is “Tone from the top – leading business sustainably and responsibly”. I have shown how we took a radical decision in 2006 to transform our business model, and how we have since taken irreversible steps to deliver that greener vision at all levels in our company. I am worried that recent controversy over climate change research, and the muddle of the Copenhagen summit, are giving business leaders a lazy excuse to drop sustainability down their list of priorities. If so, they are 100% wrong. These issues could not matter more – and each year it will become even more critical to win public trust for what we are doing. Leading the transformation of EDF Energy into a truly sustainable company is my top priority. Without it I am convinced a business like ours will in time wither and die. After all, sustainability is all about long‐term survival, securing not only the right business practices but also ensuring we have installed the right values amongst future generations. We often ask ourselves what sort of planet we are going to leave to our children…we should also ask ourselves what sort of children we want to leave for our planet? My job is to not only give the 20,000 individuals in my team self‐belief and a vision of something better,– a destination to strive for well beyond today’s horizon, but also to spread that vision across communities and schools. And every day I humbly remind myself that this long and exciting journey has only just begun. Thank you. 8