CLAREMONT MCKENNA COLLEGE ROBERTS ENVIRONMENTAL CENTER

2005 FORTUNE GLOBAL 500 AND FORTUNE 1000 ENERGY & UTILITIES SECTORS Corporate Environmental and Sustainability Reporting PACIFIC SUSTAINABILITY INDEX SCORES

J. Emil Morhardt Elgeritte Adidjaja Guillermo E. Cuevas Jennifer C. Goodward Robert F. Heilmayr Kelly A. Janes Joseph R.D. Russell Elizabeth M. Sears Elizabeth A. Tedsen Elizabeth A. Thomas

Morhardt, J. E., E. Adidjaja, G.E. Cuevas, J.C. Goodward, R.F. Heilmayr, K.A. Janes, J.R.D. Russell, E.M. Sears, E.A. Tedsen, E.A. Thomas (2005) Energy and Utilities Sector: Corporate Environmental and Sustainability Reporting, Pacific Sustainability Index Scores. Claremont, CA, Roberts Environmental Center, Claremont McKenna College Price: $20.00 www.roberts.mckenna.edu 2005 Energy and Utilities Industry Report 1 CLAREMONT MCKENNA COLLEGE ROBERTS ENVIRONMENTAL CENTER Contents Corporate Environmental & Sustainability Report- ing...... 3 Company Rankings ...... 3 The Pacific Sustainability Index (PSI) ...... 4

The PSI Scoring System ...... 4 Environmental vs. Social Scores ...... 4 Intent, Reporting, and Performance...... 4 More Environmental than Social Reporting ...... 4 Distribution o f Possible PSI Scores ...... 4 Visual Cluster Analysis ...... 5 Environmental & Social PSI Scores ...... 6 Use of Environmental and Social Indicators ...... 8 Voluntary Guidelines and Third Party Verification. 9 Relationship between company size and overall PSI Scores ...... 9 Analysts’ Comments ...... 10 Adams Resources & Energy ...... 10 Publications from Roberts Environmental Center American Electric Power ...... 10 Black Hills...... 10 Calpine...... 10 Centrica ...... 10 The Roberts Environmental Center publishes analyses of Chubu Electric Power ...... 10 corporate environmental and social reports—together Constellation Energy...... 10 Dominion Resources...... 10 called sustainability reports—on the web and in special Duke Energy...... 11 reports. Dynegy ...... 11 Edison International...... 11 El Paso ...... 11 We also write books about environmental and Electricite de France ...... 11 sustainability reporting, the first of which is Clean, Green, Endesa...... 11 Enel...... 11 and Read All Over: Ten Rules for Corporate Environmental Exelon ...... 11 and Sustainability Reporting, available from ASQ Press, Ferrellgas Partners...... 12 First Energy...... 12 and publish articles in academic technical journals. Gasunie ...... 12 Gaz de France ...... 12 Gazprom...... 12 For more information please visit our web site at: Iberdrola ...... 12 www.roberts.mckenna.edu. Kansai Electric Power...... 12 Korea Electric Power ...... 12 Kyushu Electric Power...... 12 To order additional copies of this reportreport, please contact: MDU Resources Group ...... 12 Mirant...... 13 National Grid Transco...... 13 Dr. J. Emil Morhardt, Director ONEOK...... 13 Roberts Environmental Center PG&E Corporation...... 13 Plains All American Pipeline ...... 13 Claremont McKenna College Public Service Enterprise Group ...... 13 925 N. Mills Avenue Reliant Energy ...... 13 Claremont, CA 91711-5916 RWE ...... 14 Southern ...... 14 USA State Grid ...... 14 Suez ...... 14 Tohoku Electric Power...... 14 909-621-8190, Fax 909-607-1185 Tokyo Electric Power ...... 14 [email protected] TXU ...... 14 UGI ...... 14 USEC ...... 14 Veolia Environnement ...... 14 The goal of corporate report analysis conducted by the Roberts Environ- Vattenfall ...... 15 mental Center is to acquaint students with environmental and social issues Williams ...... 15 facing the world’s industries, and the ways in which industry approaches WPS ...... 15 and resolves these issues. The data presented in this report were collected by student research assistants and a research fellow at the Roberts Roberts Environmental Center, Claremont McKenna Environmental Center. Copyright 2005 © by J. Emil Morhardt. All rights College, and The Claremont Colleges...... 15 reserved. Director’s Comments ...... 16

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2005 FORTUNE GLOBAL 500 AND FORTUNE 1000 ENERGY & UTILITIES SECTORS Corporate Environmental and Sustainability Reporting uring the past decade, large corporations have begun to produced formal environmental or sustainability reports. It is report voluntarily on the environmental issues affecting based on all environmental and social information available on Dtheir companies and on how they deal with them. The their web sites during the period of our analysis from October addition of social issues to these reports has resulted in some firms 20, 2004 through June 15, 2005, including annual reports and, designating them “sustainability reports.” Some firms produce for American companies, 10-K forms. The quality of the these reports yearly, others only occasionally, and some not at all. environmental and social reporting was characterized by We obtain these reports and any additional information exclusively students at the Claremont Colleges using the Roberts Environ- from corporate web sites. mental Center’s Pacific Sustainability Index (PSI). This report covers all of the companies in the energy and utilities sectors of the 2004 Fortune Global 500 and all energy companies from the Fortune 1000 list, whether or not they Energy and Utilities Company PSI Rankings 1 National Grid Transco (Britain) National Grid Transco Iberdrola 2 Iberdrola (Spain) Tokyo Electric Power 3 Tokyo Electric Power (Japan) RWE 4 RWE (Germany) Vattenfall Endesa 5 Vattenfall (sweden) Kansai Electric Power 6 Endesa (spain) Public Service Enterprise Group 6 Kansai Electric Power (Japan) Electricite de France PG&E Corp. 8 PSEG (USA) Mirant 8 Électricité de France (France) Centrica Chubu Electric Power 10 PG&E Corp. (USA) Gaz de France 11 Centrica (Britain) Veolia Environnement 11 Mirant (USA) Exelon Enel 13 Chubu Electric Power (Japan) Gasunie 14 Gaz de France (France) SUEZ Duke Energy 15 Veolia Environnement (France) Calpine 15 Exelon (USA) Kyushu Electric Power 17 Enel (Italy) Dominion Resources Southern Company 18 Gasunie (Netherlands) TXU 19 SUEZ (France) American Electric Power Constellation Energy 20 Duke Energy (USA) USEC 21 Calpine (USA) Dynegy 21 Kyushu Electric Power (Japan) FirstEnergy Edison International 21 Dominion Resources (USA) Wisconsin Public Service 24 Southern (USA) MDU Resources Group 25 TXU (USA) Tohoku Electric Power Reliant Energy 26 American Electric Power (USA) Black Hills Corporation 27 Constellation Energy (USA) Williams Plains All American Pipeline 27 USEC (USA) Oneok 27 Dynegy (USA) Gazprom 30 FirstEnergy (USA) Adams Resources and Energy, Inc. Ferrellgas Partners 30 Edison International (USA) El Paso 32 Wisconsin Public Service (USA) UGI Corporation Korea Electric Power 32 MDU Resources Group (USA) State Grid 34 Tohoku Electric Power (Japan) 35 Reliant Energy (USA) 0 1020304050607036 Black Hills Corporation (USA) 36 Williams (USA) 38 Plains All American Pipeline (USA) 39 Oneok (USA) The overall PSI score includes all 140 environmental and social 40 Adams Resources & Energy (USA) topics. Because both environmental and social performance 40 Gazprom (RussIA) scores, which make up 35 percent of the total possible score, 40 Ferrellgas Partners (USA) tend to be low, the overall scores are seldom above 50 percent 40 El Paso (USA) for any company. Nevertheless, there is a very large range of 40 UGI Corporation (USA) scores among these companies on the Fortune lists. 45 Korea Electric Power (South Korea) 46 State Grid (China)

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The Pacific Sustainability Index (PSI)1 The PSI Scoring System Combined Environmental Score The Pacific Sustainability Index (PSI) comprises a list of 140 Scores for all 80 environmental topics in the three categories topics that should be addressed in corporate environmental above. and sustainability reports.1 The topics were derived from the ISO 14000 family of international environmental standards, Social Intent Score from reporting guidelines, including those of the Global Scores from PSI questions 81-108, 124, and 125. They reflect a Reporting Initiative (GRI), and from a variety of other firm’s commitment to social reporting. sources. The philosophy of the PSI is described in detail in our book, Clean, Green, and Read All Over, published by and Social Reporting Score available from the American Society for Quality Press2. Each Scores from PSI questions 109-123, reflecting amount of of the topics has a maximum score of either two or three reporting of social performance without reflecting the quality of points. The overall scores are presented in the graph on page that performance. three. The overall score is calculated as a percentage of the maximum possible score. Social Performance Score Scores from PSI topics 126-140. These scores reflect Visual Cluster Analysis improved social performance, or performance better than the For the first time we have tried using a visual clustering average of a firm’s peers, or both. technique (the histograms on the opposite page) to illuminate the patterns of reporting of specific topics. Combined Social Score Environmental vs. Social Scores Scores for all 60 social topics in the three categories above. In addition to the overall score, we have subsetted the PSI into its environmental and social components and reported each of these independently in graphs on pages six and Distribution of Possible PSI Scores seven. The subsetted scores are also calculated as percent of The pie diagram below shows the quantitative distribution of maximum possible score for each subset. possible points for the 140 topics in the PSI scoring system. Intent, Reporting, and Performance Environmental topics make up a little more than half of the Both environmental and social subsets of scores reflect intent, total and social topics the remainder. Environmental and reporting, and performance. Intent scores are derived from social intent topics make up 41 percent, reporting topics make topics in the PSI that reflect a stated willingness to perform up 24 percent, and performance topics make up 35 percent of well, to monitor that performance, and to report it. Reporting the total possible score. Two thirds of the possible perfor- scores reflect presentation in the report of data on specific mance score requires that firms compare their performance to environmental and social topics, but not on how good that that of their peers and do better than peer average. Because performance was—they indicate transparency in reporting few companies compare themselves to their peers, the overall independent of success in making improvements. Perfor- performance scores tend to be low, and drive down the mance scores reflect better performance on specific environ- scores. mental and social topics than in the previous reporting period, better performance than peer companies, or both. ENTA ONM L T IR O V PI N Environmental C E S Overall Score Reporting The PSI has a total of 140 topics, 80 of them on environmen- tal issues and 60 on social issues. The overall score is the percentage of the maximum possible score on all 140 topics. Environmental Environmental Intent Performance Environmental Intent Score Scores from PSI topics 1-27, 54, and 55. These topics reflect a Social Social firm’s comitment to environmental reporting. Performance Intent Environmental Reporting Score Scores from PSI topics 28-53. These topics reflect reporting Social of environmental performance without reflecting the quality of Reporting S that performance. O C S C I A L T O P I Environmental Performance Score Scores from PSI topics 56-80. These scores reflect improved environmental performance, or performance better than the 1 average of a firm’s peers, or both. PSI scoring sheets are available on our web site 2http://www.qualitypress.asq.org/perl/catalog.cgi?item=H1145

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VISUAL CLUSTER ANALYSIS Multivariate data of the sort produced by the PSI is difficult to summarize. Here we have created histograms of the percentage of total possible score in all 11 environmental categories (the upper histogram for each company) and all 11 social categories (the lower histogram for each company). Some categories have many possible points, others just a few, but in this display all are considered equal and the height of the bars represents how well the report did in terms of each of 21 categories.

Company Profile KEY: Vision and Commitment Stakeholders Policy and Management Aspects and Impacts Upper charts show environmental scores Performance Indicators Initiatives and Mitigations Performance Comprehensiveness Costs and Investments Goals and Targets Lower charts show social scores Quantitative Performance

National Grid Iberdrola Tokyo Electric RWE Endesa Vattenfall Public Service Kansai Electric

Électricité de France PG&E Mirant Centrica Chubu Electric Gaz de France Veolia Exelon

Enel Gasunie Duke Energy SUEZ Calpine Dominion Kyushu Electric Southern

American Electric TXU Constellation USEC Dynegy Wisconsin MDU Resource FirstEnergy

Edison Tohoku Electric Black Hills Reliant Energy Williams Plains All American Oneok Ferrellgas Partners

Adams Resources Gazprom UGI Corporation El Paso Korea Electric State Grid

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Highest Ranked Scores NVIRONMENTAL NTENT CORES E I S Environmental Intent 1 RWE RWE 2 National Grid Transco National Grid Transco Gaz de France Public Service Enterprise Group 3 Gaz de France Tokyo Electric Power Gasunie 4 PSEG Endesa Électricité de France 5 Tokyo Electric Power Vattenfall Kansai Electric Power Iberdrola 5 Gasunie Chubu Electric Power PG&E Corp. 7 Endesa Centrica Exelon 7 Électricité de France Veolia Environnement Enel 9 Vattenfall Southern Kyushu Electric Power Mirant 9 Kansai Electric Power SUEZ TXU 10 Iberdrola Calpine Duke Energy 10 Chubu Electric Power American Electric Power Edison International Constellation Energy Wisconsin Public Service Environmental intent scores include topics Tohoku Electric Power FirstEnergy about the firm’s products, environmental Dominion Resources USEC Black Hills Corporation organization, vision and commitment, MDU Resources Group Williams Reliant Energy stakeholders, environmental policy and Dynegy Gazprom certifications, environmental aspects and Oneok Plains All American Pipeline Adams Resources and Energy, Inc. impacts, choice of environmental El Paso UGI Corporation Korea Electric Power performance indicators and those used by Ferrellgas Partners State Grid the industry, environmental initiatives and

0 20406080100 mitigations, and environmental goals and targets. ENVIRONMENTAL REPORTING SCORES Environmental Reporting 1 Iberdrola 1 Tokyo Electric Power 1 Kyushu Electric Power Iberdrola Tokyo Electric Power Kyushu Electric Power 4 PSEG Public Service Enterprise Group Kansai Electric Power 5 Kansai Electric Power National Grid Transco Chubu Electric Power 6 national Grid Transco Exelon Electricite de France Vattenfall 7 Chubu Electric Power Mirant Gasunie 7 Exelon PG&E Corp. Enel 7 Électricité de France RWE Endesa 7 Vattenfall Centrica American Electric Power Gaz de France 8 Mirant Calpine Duke Energy 9 Gasunie TXU Dominion Resources 9 PG&E Corp. FirstEnergy Southern Company SUEZ 10 Enel Constellation Energy Wisconsin Public Service Tohoku Electric Power Veolia Environnement Environmental reporting scores are based USEC Reliant Energy on the degree to which the company Edison International MDU Resources Group Dynegy discusses its emissions, energy sources and Black Hills Corporation Plains All American Pipeline Gazprom consumption, environmental incidents and Oneok UGI Corporation violations, materials use, mitigations and Korea Electric Power Williams Adams Resources and Energy, Inc. remediation, waste produced, and water El Paso Ferrellgas Partners State Grid used. They also include use of life cycle analysis, environmental performance and 0 20406080100 stewardship of products, and environmen- tal performance of suppliers and contrac- tors. ENVIRONMENTAL PERFORMANCE SCORES Environmental Performance 1 Kansai Electric Power Kansai Electric Power Tokyo Electric Power 2 Tokyo Electric Power Iberdrola Kyushu Electric Power Electricite de France 3 Iberdrola Exelon Public Service Enterprise Group 4 Kyushu Electric Power Mirant Centrica 5 Électricité de France Endesa TXU 6 Exelon National Grid Transco PG&E Corp. Calpine 7 PSEG Southern Company Vattenfall 8 Mirant Enel RWE 8 Centrica Duke Energy USEC Gasunie 10 Endesa SUEZ Dominion Resources Gaz de France Chubu Electric Power Environmental performance scores are Tohoku Electric Power Veolia Environnement Reliant Energy based on whether or not the firm has FirstEnergy Constellation Energy American Electric Power improved its performance on each of MDU Resources Group Dynegy the topics discussed under the heading Gazprom Wisconsin Public Service Edison International of environmental reporting, and on Black Hills Corporation Plains All American Pipeline Oneok whether the quality of the performance UGI Corporation Korea Electric Power is better than that of the firm’s peers. Williams Adams Resources and Energy, Inc. El Paso Scoring for each topic is one point if Ferrellgas Partners State Grid performance is better than in previous 0 5 10 15 20 25 30 reports, two points if better than industry peers, three points if both.

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SOCIAL INTENT SCORES Highest Ranked Scores Social Intent Gaz de France Vattenfall National Grid Transco 1 Gaz de France RWE PG&E Corp. Chubu Electric Power 2 Vattenfall Veolia Environnement Tokyo Electric Power 3 National Grid Transco Electricite de France Endesa 4 RWE Iberdrola Mirant Enel 5 PG&E Corp. Kansai Electric Power Public Service Enterprise Group 5 Chubu Electric Power Centrica SUEZ 5 Veolia Environnement Duke Energy Exelon 8 Tokyo Electric Power Calpine Dominion Resources Gasunie 8 Électricité de France Dynegy Edison International 8 Endesa Southern Company MDU Resources Group USEC American Electric Power Williams FirstEnergy Social intent scores include topics about the Constellation Energy El Paso firm’s financials, employees, safety Black Hills Corporation Ferrellgas Partners TXU reporting, social management organization, Reliant Energy Plains All American Pipeline Oneok social vision and commitment, stakeholders, Kyushu Electric Power Tohoku Electric Power social policy and certifications, social Wisconsin Public Service UGI Corporation Adams Resources and Energy, Inc. aspects and impacts, choice of social Korea Electric Power State Grid Gazprom performance indicators and those used by

0 20406080100 the industry, social initiatives and mitigations, and social goals and targets.

SOCIAL REPORTING SCORES

Iberdrola Social Reporting National Grid Transco Endesa 1 Iberdrola Public Service Enterprise Group Vattenfall 2 National Grid Transco RWE Tokyo Electric Power Mirant 3 Endesa PG&E Corp. Veolia Environnement 4 PSEG Electricite de France Kansai Electric Power 5 Vattenfall Chubu Electric Power Centrica Duke Energy 5 RWE SUEZ Gaz de France 7 Tokyo Electric Power Enel Exelon 7 Mirant Gasunie MDU Resources Group 9 PG&E Corp. Dominion Resources Calpine USEC 10 Veolia Environnement Oneok Wisconsin Public Service Williams Southern Company Ferrellgas Partners Social reporting scores are based on the Constellation Energy Plains All American Pipeline Dynegy degree to which the company discusses American Electric Power Black Hills Corporation Kyushu Electric Power various aspects of its dealings with its Adams Resources and Energy, Inc. Gazprom employees and contractors. They also include Edison International FirstEnergy El Paso social costs and investments. TXU Reliant Energy Tohoku Electric Power UGI Corporation Korea Electric Power State Grid

0 20 40 60 80 100 120

SOCIAL PERFORMANCE SCORES

Social Performance National Grid Transco Centrica Endesa 1 National Grid Transco Veolia Environnement Iberdrola 2 Centrica Mirant PG&E Corp. RWE 3 Endesa Vattenfall Gasunie 3 Veolia Environnement Kansai Electric Power Public Service Enterprise Group 5 Iberdrola Electricite de France Duke Energy SUEZ 6 Mirant Chubu Electric Power Exelon 6 PG&E Corp. Southern Company Plains All American Pipeline 8 RWE Tokyo Electric Power Enel Calpine 9 Vattenfall USEC Gaz de France 9 Gasunie Gazprom Edison International MDU Resources Group Dominion Resources Oneok Social performance scores are based on Wisconsin Public Service Williams Ferrellgas Partners improvement, performance better than the Constellation Energy Dynegy sector average, or statements of compliance American Electric Power Black Hills Corporation Kyushu Electric Power with established social standards. Centrica Adams Resources and Energy, Inc. FirstEnergy El Paso achieved such high scores because of its very TXU Reliant Energy strong statements supporting various human Tohoku Electric Power UGI Corporation Korea Electric Power rights. State Grid

0 1020304050

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Use of Environmental Reporting Indicators

he PSI evaluates the coverage of the 24 environmental performance indicators used by the energy and utilities sectors. This graph shows the total sector-wide scores for each of these. Not surprisingly, for the energy and utility sectors gaseous T emissions to air are the most widely reported topics, with greenhouse gas emissions nearly as frequently reported as those of other gaseous pollutants. This sector is also focused on issues regarding protection of the natural environment, the consumption of energy, and environmental costs and investments. Also not surprisingly, unreported for this sector is use of packaging materials since its products (mainly electricity and natural gas) are characteristically unpackaged. It is a little surprising to us that only a handful of companies is doing life cycle analysis (LCA): Kyushu Electric Power is using it as part of an EcoLeaf certification effort and Veolia Environnement and Électricité de Greenhouse Gas Emissions France are using it to explore the balance Non-greenhouse Gas Emissions between production of electricity and creation of Natural Environment Protection environmental impacts. Environmental Costs We also had assumed that given the Environmental Investments Energy Sources & Consumption contentiousness surrounding the recent Hazardous Emissions application in the United States of cap and Waste Recycling trade regulations to mercury emissions from Hazardouse Waste Produced power plants, that soil contamination would Remediation Activities have been more widely discussed. Recycling of Materials Incidents & Violations Few companies in this sector produce Use of Green Materials their own fuel, so raw materials management Geographic Variation is seldom discussed, and only occasionally is Non-hazardous Waste Produced product stewardship viewed as an issue: Total Waste Disposed of Water Consumption Constellation Energy, for example, discusses Emissions to Water the issues associated with disposing of Supplier performance streetlights which have high lead and mercury Environmental Product Performance content, and PG&E Corporation discusses Use of Hazardous Material Product Stewardship demand-side management. Soil Contamination Life Cycle Analysis

0 20406080 Total sector score for the specific topic

Use of Social Reporting Indicators

he PSI evaluates the coverage of 15 social indicators to determine the PSI social reporting score. This graph shows the total sector-wide scores for each of these. The most commonly discussed is the human environment around power T production facilities. Training and education is the next most discussed social topic. In general, the social topics covered in the PSI, largely derived from the SA8000 standard and similar documents, were addressed much less frequently than the environmental topics. Considering the costs associated with properly managing these issues, one might expect an accounting of them, but there is almost none. Only a few companies address Human Environment Protection employee working hours: Centric, Training & Education Tokyo Electric Power, and RWE Employee Discrimination describe programs of flexible Social Investments working hours; Chubu Electric Employee's Freedom of Association Power describes a process by which Incidents & Violations it discovered work-hour problems Suppliers' Performance and paid 6.5 billion Yen in back Advancement Opportunities wages. More discuss employee Geographic Health & Safety Data compensation and a few address Use of Forced Labor their non-use of illegal child labor, Employee Compensation forced labor, and corporal Use of Illegal Child Labor punishment. We imagine that most Use of Corporal Punishment companies on this list have very Social Costs strong policies against the latter items; Employee Working Hours publishing these policies would raise their PSI scores. 0102030405060 Total sector score for the specific topic

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hts Rig an m Use of Voluntary Guidelines and Third Party Verification f Hu ises tion o clara al Enterpr Force ation se of ds niversal De ulti-N the U n io S A d pact, U 1 alidat bor Standar s V rtifie Com elines for M rinciples onne Ce uid arty lobal G ore La asic P uideli 1000 14001 or EM G C B A 8000 N ECD N RI G everal companies have chosen to have their reports Third P A ISO SA U O ILO U G verified by third parties, but none has asserted that Sthis verification is done in accordance with the AA 1000 verification standard, a standard that perhaps will never become an accepted one. Most companies are in the process of, or have completed, adoption of an International Organization for Standardization (ISO) 14001 environmental management system. None has signed on to the SA 8000 social accountability standard, the basis for É much of the socioeconomic scoring in the PSI. Ten companies formally subscribe to the United Nations Global Compact Universal Declaration of Human Rights; five subscribe to the Organization for Economic Cooperation and Development Guidelines for Multi-National Enterprises; four subscribe to the International Labor Organization Core Labor Standards; and one to the United Nations Basic Principles on the Use of Force—all guidelines with components similar to those of the SA 8000 standard. The Global Reporting Initiative (GRI) Sustainability Reporting Guidelines are an important part of the basis for the PSI, but only two of these companies have written their reports in accordance with them. Five others report that they are in adherence with the guidelines, and seven acknowledge some guidance from the GRI guidelines.

1 Open circle if the company acknowledges some guidance from the GRI guidelines. Donut shape when report is "in adherance" with the 2002 or later GRI guidelines, solid circle if the report is "in accordance" with the 2002 or later GRI guidelines. Relationship Between Revenue and Overall PSI Score

here is a general overall trend of better PSI scores with increasing company size, but there are many smaller firms with very high scores—indeed the highest score is from National Grid Transco, a third the size of the largest firm, China’s T State Grid. The latter has the lowest score resulting from no attempt at all to report on environmental or social issues on the World Wide Web. Regressions of overall PSI scores on revenue are highly statistically significant for energy and utility companies combined and for each independently if State Grid is National Grid Transco excluded (as it is for both of the regression 60 Iberdrola lines on the graph). Whether State Grid is Tokyo Vattenfall Endesa Kansai RWE truly an outlier is open to question, PSEG Centrica Électricité de France Chubu Mirant however, since its geographical neighbors, PG&E Gaz de France Russia (Gazprom) and Korea have also Veolia Environnement Exelon Enel failed to produce much information despite 40 Gasunie significant amounts of revenue. It remains Suez Calpine Kyushu to be seen whether environmental and Dominion Resources

sustainability reporting will take hold Scores PSI Overall Southern TXU Energy companies AEP throughout Asia as they clearly have in Dynegy Utility companies Europe. 20 Constellation WPS First Energy Regression line of Tohoku Our choice of a combination of Fortune MDU Edison energy companies Black Hills Reliant Global 500 and Fortune 1000 (American) Ferrellgas Williams Regression line of companies to analyze results in the smallest Onoak Plains All American Pipeline utility companies El Paso Gazprom State Grid UGI Korea companies in this analysis being all American. Adam Resources It would be interesting to see whether 0 including equally small European and 0 10000 20000 30000 40000 50000 60000 Revenue ($M, from 2003 Hoover's) Japanese companies altered the slopes of the regression lines.

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Analysts’ Comments impacts by producing geothermal and natural gas energy The solid bars in the small graphs accompanying the report- (both of which emit less greenhouse gas than coal or oil). In specific comments show the overall environmental (E) PSI scores, addition, Calpine provides some useful information about its the overall social (S) PSI scores, and the total (T) PSI scores as emissions of greenhouse gases compared to its peer average in the percentages of the total possible scores in each category. The US. However, the reports lack discussion of other specific environmental or social information and fail to report on lighter bars are the sector averages and are the same in all graphs. performance in the previous period.-Tedsen Adams Resources & Energy, Inc. 2003 10-K Centrica 2005 Corporate Responsibility Report and 2005 web pages Report and web pages

Adams Resources The annual report of Adams Resources & Energy E In general, Centrica’s Corporate Responsibility Inc. is very clear and simple but fails to provide Centrica S E web pages do a commendable job of showing much information beyond financial positions and T S Centrica’s commitment to social as well as 0 20 40 60 80 100 other external factors affecting the company. T environmental sustainability. Centrica could Statements pertaining to the environment and 0 20 40 60 80 100 improve its reporting by comparing its health & safety are strictly limited to a confirmation of compliance quantitative data with those of other companies in the industry. with the necessary oil and gas industry regulations. No other Furthermore, more attention could be given to the internal reports were found and the website gives only a company history, procedures for determining environmental and social impacts recent press releases, and contacts.-Adidjaja and aspects as well as the resulting initiatives. Nevertheless, AEP 2001-2002 Corporate Environmental Centrica has done an excellent job showing its transparency in Performance Report and An Assessment of most areas of the PSI scoring.-Heilmayr AEP’s Actions to Mitigate the Economic Chubu Electric Power 2004 Annual Impacts of Emissions Policies Environmental Report AEP’s current corporate website provides very AEP Chubu’s 2004 Annual Environmental Report E Chubu limited quantified information with the E S provides much general information and many S T exception of the out-of-date Corporate goals and objectives. From its policies and 0 20 40 60 80 100 Environmental Performance report for 2001- T 0 20 40 60 80 100 investments, Chubu Electric Power appears to be 2002. Most program and policy summaries are very environmentally and socially focused. vague. The old report is in a question-and-answer format with the Although the report is well done in its description of and use of questions being provided by CERES guidelines (though not all visuals for environmental and social management, it needs to questions are answered). The report gives a decent account of support its claims with more detailed quantitative data that shows environmental performance, though it would be much clearer if improvements in relation to previous years and compares itself to the question and answer format were abandoned. Most of the the rest of the industry.-Janes questions (when answered) are answered in a way that seems as if AEP is doing the bare minimum. There is little discussion of Constellation Energy 2002 Environmental major policies or environmental information management. There is Report and 2005 web pages no social information or any information on stakeholder Constellation Energy Constellation Energy’s 2002 Environmental E interaction.-Janes Progress Report and web pages leave much S room for improvement. In the environmental Black Hills Corporation 2003 Annual Report, T 2004 Form 10-K, and 2005 web pages 0 20 40 60 80 100 arena, the company should discuss its environmental impacts and aspects as well as

Black Hills Black Hills Corporation does not currently E those of the energy industry in general. It should include more publish a formal corporate environmental or S environmental indicators (such as emissions to water and soil, T sustainability report. We gathered minimal waste production, energy consumption, water consumption, etc.) 0 20 40 60 80 100 sustainability information from the company’s and not only compare them to previous years but also to industry annual report, 10-K report, and all applicable averages. Furthermore, it should provide more information on documents on the company’s web pages. The score is slightly employee relations, including the status of women in the higher than for most companies that do not have a formal report or company, health and safety figures (lost workdays, accidents, a specific section on their web pages dedicated to sustainability fatalities, etc.), and explicit commitments to meet minimum wage issues, since the 10-K report meticulously includes information on standards. The company could also better describe its relations environmental protection activities, environmental cost and with environmental and social stakeholders. For example, how investment. The visionary statement in the company’s annual does it define its stakeholders, how is dialogue with stakeholders report addresses the environmental and social aspects of the established, what information is obtained, and how is it used?- company.-Adidjaja Sears Calpine 2003 Annual Report, Form 10-K, 2005 Dominion Resources 2005, For the web pages, and 2005 Code of Conduct Environment: A Matter of Commitment, 2004 The information Calpine provides in its reports Calpine 10-K, and 2005 web pages E and web pages highlights its commitment

S Dominion Resources Dominion Resources’s current reporting doubled towards clean, renewable energy. Calpine fares E T its previous PSI score. The current report’s better than most companies in the energy sector S 0 20 40 60 80 100 scope treats the entire company rather than just by providing information about its general T 0 20 40 60 80 100 one of its subsidiaries and there is more visions and policies as well as its efforts to reduce environmental

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discussion of environmental intent and much more Electricité de France 2003 Annual environmental data. -Adidjaja Sustainable Development Report and 2005 web pages Duke Energy 2003 Environment, Health & Safety, Electricite de France Electricité de France shows that it has made a and Community Relations Report and 2005 web E clear corporate commitment to environmental pages S sustainability. Its 2003 Annual Sustainable Though Duke Energy has not released a new T E Duke Energy 0 20 40 60 80 100 Development Report, which follows GRI Environment, Heath, & Safety (EHS) Report S guidelines, is clean, readable, and is informative since the 2003 publication, the company’s T as to the merging of EDF Group’s business, environmental, and 0 20 40 60 80 100 overall PSI score has increased due to new employee welfare policies. However, EDF’s reporting lacked resources available on their web site. The 2005 quantitative data for certain environmental and social areas of Charter clearly outlines the corporate agenda and the EHS performance, especially a comparison with the rest of the Management System, and lays out business planning, industry. EDF does show improvement in some areas, but implementation, measurement and improvement. However, Duke needs a more comprehensive demonstration of the company’s could be more detailed with its environmental and social overall progression.-Tedsen reporting. The company should discuss more of its environmental aspects and impacts beyond greenhouse gas Endesa 2003 Sustainability Report and 2005 web emissions. While the Code of Business Ethics is an informative pages

social policy document, the company could more specifically Endesa Endesa has left no doubt about its commitment E describe its treatment of employees. Duke compares some to the environment and community. The S aspects of its environmental and social performace to industry T company has proven itself to be a leader in averages, which is very useful and seldom done by other 0 20 40 60 80 100 sustainability in the energy sector in Europe and companies. For further credit, it should show this comparison Latin America. From the implementation of more consistently. -Sears renewable energy technology to numerous community initiatives, Endesa went above and beyond what was required. Endesa Dynegy 2003 Annual Report and 2004 web pages supplies a wealth of information which is almost overwhelming Dynegy Corporation could considerably Dynegy at first glance. An index of GRI indicators helps readers navigate E improve its reporting by incorporating more S the many pages of Endesa’s reports. While the mass of environmental information. There are a couple T information is wonderful, it would be useful if Endesa could 0 20 40 60 80 100 of blurbs on the side-margin of the company’s condense some of it into a more reader-friendly format, perhaps annual report that mention the company’s beginning with a condensed section of quantitative graphs. The commitments to the environment and the community, and some report is lacking in certain social data scored by the PSI, and in information about environmental projects and initiatives is also quantitative comparison with performance of peers . Still, available through the company’s online web-casts. But most of Endesa’s commitment remains impressive and one to be the information appears to cover the bare minimum of what the followed.-Tedsen law requires. -Adidjaja Enel 2003 Sustainabiltiy Report, 2003 Edison International 2004 10-K Report and 2005 Environmental Report, and 2005 web pages web pages Enel Both of Enel’s reports provide information on a E Edison There has not been much inclusion of new wealth of environmental indicators, a number of E S information since the last time we analyzed which are ignored by other utility companies. S T T Edison International’s sustainability reporting, 0 20 40 60 80 100 However, this information should be 0 20 40 60 80 100 and little evidence of improvement in their supplemented with comparisons to the industry environmental and social practices. It would be averages. Additionally, Enel could expand its social reporting by extremely helpful to integrate the performance data from all providing numerical data as well as activities or case studies subsidiaries into one report. Some performance data displayed pertaining to employee treatment, minority employees, and union on the web pages is anecdotal and very sketchy.-Adidjaja relations. -Sears El Paso Code of Conduct, 2004 10-K Report, and Exelon 2002/2003 Progress Report, 2004 10-K 2005 web pages Report, and 2005 web pages

El Paso The environmental, health, and safety Exelon Exelon’s reporting covers a broad array of E E information gathered from El Paso 2005 Web environment, safety, and community topics S S Pages, Code of Conduct, and the 2004 10-K incorporating discussion and data on T T 0 20 40 60 80 100 report is very minimal and does not illustrate 0 20 40 60 80 100 performance, programs, and activities. The any commitment to the environment and its company shows clear commitment to stakeholders. The 2005 web pages do not have any kind of continuous improvement in its environmental and safety policy, quantitative data on either environmental or social aspects. While however its approach to selection of quantitative metrics is climate change was one of the major issues discussed in El scattered and non-systematic. On the environmental side, Paso’s previous reports, the current report does not even mention although the report covers most of the important areas of the company’s air emissions. This company appears to be environmental aspects and impacts, there is no discussion on decreasing, rather than increasing, its environmental how these indicators were selected, their specific relationship to transparency.-Adidjaja the industry, and the company’s goals with respect to environmental performance. On the social side, there should be a stronger social policy that states a more explicit standard of

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practice, i.e. “we do not practice illegal child labor, Iberdrola 2004 Sustainability Report corporal punishment, etc.”-Adidjaja This report addresses a broad range of issues with particular focus on social sustainability concerns. The Ferrellgas Partners 2004 Annual Report, 2004 10- Iberdrola E format, which incorporates financial, K Report, and 2005 web pages S environmental, and social reporting is well done, Ferrellgas Partners does not currently publish a T E Ferrellgas Partners although it results in a very lengthy document. formal corporate environmental or sustainability 0 20 40 60 80 100 S The table of contents could have been broken report and has very little information at all T into more subcategories to provide for easier reference. Many 0 20 40 60 80 100 online.-Adidjaja criteria of the PSI were met only through a cursory mention of First Energy Corp. 2004 Environmental Report and activities, especially with regards to questions of social 2005 web pages sustainability.-Cuevas

First Energy The First Energy publication titled “Our E Kansai Electric Power 2004 Environmental Report S Commitment to the Environment” has almost no The Kansai Electric Power Co. 2004 Kansai Electric Power T information on the company’s commitment to E Environmental Report was exceptional in many 0 20 40 60 80 100 minimize impacts to the environment. The S respects. The overall presentation and structure discussion is very sketchy and anecdotal, and T 0 20 40 60 80 100 of the report made information concise and easily provides few examples of improvements that the company has accessible. In addition, the section on employee made. There is scattered information on the company’s web pages relations was quite remarkable when compared to other reports. that provides a little more social and environmental data. One point to improve would be in providing information on the FirstEnergy should consider a more integrated and systematic rationale for certain environmental and social objectives.-Cuevas approach to measuring its performance and reporting its progress.-Adidjaja Korea Electric Power 2005 web pages Korea Electric Power offers almost no Gasunie 2003 Safety, Health &Environment Korea Electric Power E environmental or social policy or numbers on Annual Report and 2005 web pages S their English websites. Entirely focused on This report gives a fairly transparent view of T Gasunie E 0 20 40 60 80 100 customer and shareholder satisfaction, the site environmental and social issues. Were the S mentions almost no responsibilities to its performance data better than last year’s T employees, its communities or to the environment within which it 0 20 40 60 80 100 performance, the PSI score would have been finds itself. KEPCO should attempt to report on more quantitative much higher. There is very little discussion on environmental and social data as well as show a greater engaging stakeholders, and on the company’s social management commitment to corporate responsibility through more direct and system and labor standards. Although the company website is positive policy statements.-Heilmayr initially appealing, it was almost impossible to find the Safety, Health, and Environmental Annual report.-Adidjaja Kyushu 2004 Environmental Action Report Kyushu Electric Power Company’s 2004 Gaz de France 2003 Sustainable Development Kyushu Electric Power E Environmental Action Report is well-organized Report and 2005 web pages S and transparent. The report compiles a significant Gaz de France provides an informative report of T Gaz de France amount of information about the company’s E its efforts in pursuit of sustainable development. 0 20 40 60 80 100 S environmental initiatives and performance into a While it follows GRI guidelines, it lacks much compact document that is easy to navigate. To be even more T quantitative information and is a little out of date. 0 20 40 60 80 100 transparent the company should consider publishing all of its Gaz de France could increase its PSI score by environmental performance data for the current year accompanied including more numeric data that relates to current and previous by the data from a few years previous against which to reference environmental and social performance, beyond carbon dioxide the current year and look for improvement. It seems that in and nitrogen oxide releases, as well as that of its peers.-Janes general the company’s environmental performance improved in Gazprom 2003 Annual Report and 2005 web pages 2004. The Environmental Action Report was the only Gazprom has an environmental report for 2002 sustainability reporting on the company’s website and was not Gazprom E that is poorly translated from Russian to English. intended to include social performance; because of this the social S The report attempts to cover many relevant scores were low.-Goodward T 0 20 40 60 80 100 issues, however it is extremely difficult to MDU Resources Group 2003 Annual Report, 2004 understand. It does not specifically address the 10-K Report, and 2005 Web Pages issues but merely states the names of many policies and MDU Resources Group’s annual report and web E MDU Resources Group programs. There is very little data and the data that is reported pages include very little information about its S uses confusing metrics. There is also frequent mention of ISO environmental performance. In fact, like many 14001 standards but it is never clearly stated that Gazprom T 0 20 40 60 80 100 of its competitors, the company makes only follows these standards. The report would be significantly broad statements about its commitment to the improved if it were better translated. From a better translation it environment on only a few pages on the website and in the annual would be much easier to see other areas in need of improvement.- report. In addition, it does not provide any statements about Fleischmann social policy except to say that it tries to enhance the employee environment to promote productive capabilities and commits to “perform all tasks with health and safety first.” However, the annual report does provide extensive information about the company’s social initiatives and efforts to enhance surrounding

12 2005 Energy and Utilities Industry Report www.roberts.mckenna.edu CLAREMONT MCKENNA COLLEGE ROBERTS ENVIRONMENTAL CENTER

communities. For example, the company funds a PG&E 2005 First Annual Corporate foundation that contributes to “institutions, organizations, Responsibility Report and programs” that promote the environment, education, art, etc. This report tackles many difficult challenges that the industry in communites where MDU conducts business. Nonetheless, the faces, including emissions, energy consumption, PG&E Corp. company reports very little on its environmental and social E and compliance issues, and does a good job of activities and performance. By adding this information to the S addressing demand-side power management. T annual report or by creating a separate report altogether, the 0 20 40 60 80 100 There is still much discussion needed, however, company would greatly improve its PSI score.-Russell of the company’s internal environment and social structure, procedures, background, and organization. Overall Mirant 2003 Global Corporate Citizenship Annual though, the report successfully conveys the essentials of Report and 2005 web pages corporate responsibility reporting within the utility industry.- Mirant’s 2003 Global Corporate Citizenship E Mirant Adidjaja Report, Code of Ethics and Business Conduct, S and web pages comprise a comprehensive Plains All American Pipeline 2004 web pages T 0 20 40 60 80 100 picture of Mirant’s values. The report was well Although they thoroughly cover the company’s Plains All American Pipeline organized and easy to follow but would be even E business strategy, commitments, principles, and a clearer if it expressed more of the rationale for valuing S good intention to be socially and environmentally T environmental and social standards and goals and how these 0 20 40 60 80 100 responsible, Plains All American Pipeline’s web objectives are beneficial to the company. The report does not pages discuss very little quantitative information adequately document the environmental aspects and impacts—or on environmental and social aspects of the company. The 2003 10- the procedures to identify these—of the any of the company’s K report covers the environmental aspects of the company, such as operation, products, or services. Mirant also demonstrates little water, air emissions, solid waste, hazardous waste, and more, but or no quantitative improvement in environmental performance. not in specifics. If these environmental topics listed in the 10-K The document should report social performance indicators with report were discussed in greater detail, the PSI score of the case studies, and document quantitative changes on an annual company could be improved significantly.-Goodward basis. The company should also specifically state its social Public Service Enterprise Group 2003 Annual policies on issues such as forced labor, child labor, and corporal Report, 10-K, and 2004 web pages punishment. Mirant’s comparison of its air emissions to those of PSEG does not publish an environmental or the industry as a whole is valuable as would be similar E PSEG sustainability report; therefore, the environmental comparisons for other quantitative environmental metrics. S information used to score the report came either Graphs and tables were used well to clarify the text.-Thomas T 0 20 40 60 80 100 from the company’s web pages or from its National Grid Transco 2003 U.S. Environmental Annual Report and 10-K. Nonetheless, PSEG Performance Report and 2005 web pages includes a great deal of information about programs the company National Grid Transco’s 2003 Environmental has implemented to improve the environment. For example, it National Grid Transco E Report and web pages have the highest scores in devotes several pages to a comprehensive discussion of its S this analysis and provide a good picture of the Estuary Enhancement Program in Delaware and New Jersey.- T 0 20 40 60 80 100 company’s dedication to environmental and Thomas social issues. The report’s main shortcomings Reliant Energy 2005 web pages are that it is a little outdated and fails to compare 2003

Reliant Reliant Energy does not have a formal corporate quantitative data against data from previous years. The report E environmental or sustainability report. The also does not compare its metrics to any industry benchmarks. It S information gathered from the corporate 2005 should also provide more information on organizational and T management systems for environmental and social issues, as well 0 20 40 60 80 100 web pages is very minimal and covers little as offer rationales for why the company may not be able to information about the environmental and social achieve its environmental and social goals. The company should activities of the company.-Janes explain why it chose specific performance indicators to measure RWE Group 2003 Corporate Responsibility Report environmental and social issues. While the company shows a and 2003 Personnel Report dedication to recycling, it would be helpful if this data were RWE RWE’s 2003 Corporate Responsibility Report is explained in terms of life-cycle analysis or planning. More E S very impressive, open, and thorough. It does a transparency would also be helpful with respect to fines, good job of integrating environmental and social penalties, incidents and violations, and usage, mitigations, and T 0 20 40 60 80 100 information into one easy-to-read report of disposal of hazardous wastes.-Thomas reasonable length. However, social performance ONEOK 2003 Annual Report, 2004 10-K Report, and information and data are less complete than the environmental 2005 web pages data, particularly in terms of commitments to basic human rights Oneok does not currently publish a formal standards that the company probably already endorses. The 2003 Onoak E corporate environmental or sustainability report. Personnel Report is also extensive and thorough, showing strong S We gathered minimal sustainability information attention to the company’s international workforce.-Russell T 0 20 40 60 80 100 from the company’s annual report, 10-K report, and the few applicable documents on the company’s web pages.-Adidjaja

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Southern Company 2004 10-K Report and 2005 TEPCO. The company’s effects on the human web pages environment are also given much attention, and there is a This year’s PSI analysis includes the thorough presentation of environmental data.-Russell E Southern company’s 10-K reports and 2005 corporate S TXU Environmental Review 2003: A Focus on Our web pages. Although the progress report T Commitment To Clean Air 0 20 40 60 80 100 appears to be in need of an update, these This somewhat dated review provides careful documents give an overall impression of TXU E documentation of historic performance to show environmental responsibility. There are only a few mentions of S social issues, namely diversity practice in the press releases operational improvement and corporate T responsibility to the environment. Although the section, and workforce and demographic/labor-union issues in 0 20 40 60 80 100 the 10-K report. Social reporting is much less developed than report does not cover all the environmental environmental reporting. -Adidjaja aspects of the company, it does cover critical environmental issues in the energy sector including air emissions, hazardous State Grid 2005 web pages waste, protection of the natural environment and land rehabilitation. TXU ranks well among its peers in air emissions State Grid As a recently listed emerging company from E China on the Fortune Global 500 list, State Grid and continues to improve. There is no information on social S Corporation has not posted much information on issues. The overall score would improve tremendously if more T information on social issues were included in the report.-Tedsen 0 20 40 60 80 100 its web site.-Adidjaja Suez 2003 Activities and Sustainable Development UGI Corporation 2004 Annual Report, 2004 10-K Reports, 2003 Environmental and Social Report, and 2005 web pages

UGI UGI Corporation does not currently publish a Responsability Report and 2005 web pages E formal corporate environmental or sustainability Suez Suez publishes a comprehensive Sustainability S E Report, an Environment and Social Performance T report nor does it make any relevant data S 0 20 40 60 80 100 available on its web pages.-Adidjaja T Report, and an accompanying guideline 0 20 40 60 80 100 explaining the procedures used in its reporting. USEC 2003 Annual Report and 2004 web pages While extensive quantitative data on The USEC web site lacks both an environmental E USEC environmental and social indicators are given, the company’s or sustainability report and a health and safety S performance is not compared to that of its peers. Suez stands out report. As such, very little statistical data is for its commitment to sustainbility; it would be even more T 0 20 40 60 80 100 made available. The Code of Conduct and the impressive if it quantitatively defined its environmental and social Annual Report have statements on goals and targets.-Goodward environmental and social commitment which are clear but not Tohoku Electric Power Co. 2004 Environmental quantitative and the environmental goals are stated in broad terms Action Report with no specific targets.-Thomas

Tohoku Electric Power Tohoku Electric has plenty of room for Veolia 2003 Sustainable Development E improving its environmental and social Performance and 2005 web pages S reporting. The company needs to identify its Veolia Environnement Veolia Environnement has reported very T E 0 20 40 60 80 100 stakeholders, how and when communication is comprehesively its goals and progress with S established, and what information is obtained respect to corporate responsibility and from such stakeholders. Tohoku needs to include a more T 0 20 40 60 80 100 sustainability. It is especially strong in the comprehensive discussion on its own environmental and social reporting of social responsibility, with two full aspects and impacts, as well as those of the industry. reports covering its multitude of social initiatives. It is also a Environmental data should be expanded to include emissions to member of the UN Global Compact, and the faithful reporting of soil and water, documentation of any incidents or violations, fair labor practices and human rights respect greatly improves sources of water consumption, and the environmental Veolia’s social reporting performance. The company also makes performance of suppliers. Furthermore, in order to demonstrate very clear its commitment to environmental responsibility. sustainability, the Company needs a thorough discussion of its However, its score in this section would be much improved by social aspects and impacts, especially regarding employee the addition of more specific data on environmental performance, relations. Any data or discussions pertaining to minority and especially if the data were compared to past years or to industry female employees, anti-discriminatory policies, commitments to averages. Like many environmental service providers, Veolia’s minimum wage compensation, health and safety concerns, and environmental performance data focuses almost entirely on the other factors should be included. Both the environmental and benefits created by its services while neglecting to address the social indicators should be compared to industry averages for data on the environmental impacts resulting from its operations.- optimal credit.-Sears Goodward Tokyo Electric Power 2004 Sustainability Report, Vettenfall Group 2003 Sustainability Report and and 2005 web pages 2005 web pages

Tokyo Electric Power TEPCO’s 2004 Sustainability Report is well E Vattenfall Vattenfall’s 2003 Sustainability Report, the written and clearly formatted based on serious E S company’s first such report, is an excellent start. consideration of the 2002 GRI reporting S T T Fundamentally, the report offers not just 0 20 40 60 80 100 guidelines. It is unusually open, especially with 0 20 40 60 80 100 statements, but analysis of what it means to be respect to the difficulties of nuclear power “responsible” in the corporate world. It is production and the recent challenges nuclear power has posed for uniquely and effectively structured as a response to the demands

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of a variety of stakeholders in light of the company’s Roberts Environmental Center position that “being socially responsible means balancing The Roberts Environmental Center is an environmen- the needs and wants of different stakeholders.” The report gives a tal research institute at Claremont McKenna College strong breakdown of social and environmental issues by geographic region and a realistic analysis of the current state and (CMC). Its mission is to provide students of all the utility of renewable energy sources. However, figures for social colleges with a comprehensive and realistic understand- and environmental indicators could be more clearly displayed, ing of today’s environmental issues and the ways in and the social report is heavily slanted towards the quality of which they are being and can be resolved, and to identify, service, rather than the company’s community involvement. All in publicize, and encourage policies and practices that all, a very good start for this company’s social responsibility achieve economic and social goals in the most environ- reporting.-Russell mentally benign and protective manner. The Center is Williams Companies 2005 web pages funded by an endowment from George R. Roberts Williams does not publish a formal (Founding Partner of Kohlberg Kravis Roberts & Co. and Williams E environmental or sustainability report. Its CMC alumnus), other endowments, grants, and gifts, and S website offers some data on social and is staffed by faculty and students from the Claremont T 0 20 40 60 80 100 environmental initiatives as well as outlining a Colleges. Center staff are happy to consult with compa- basic environmental vision but does little nies wishing to improve the quality of their environmen- beyond this. Williams should try to give a better picture of its tal and sustainability reporting. Center students are often environmental as well as social aspects and impacts, including looking for corporate summer internships and post- quantitative data.-Heilmayr graduation positions, and the center director can aid firms WPS Resource Corporation 2004 Environmental in finding the right student. Commitment, 2003 Community Involvment, and Claremont McKenna College Code of Conduct WPS Resource Corporation published a Claremont McKenna College, a member of the Claremont E Wisconsin Public Service community involvement report, an Colleges, is a highly selective, independent, coeduca- S environmental report, and a code of conduct, all tional, residential, undergraduate liberal arts college with T 0 20 40 60 80 100 of which are very pertinent to the PSI Index. a curricular emphasis on economics, government, and The problem is that much of the reports public affairs. consisted of stories regarding the company’s actions, rather than The Claremont Colleges facts about policies, management, or pollutants. Very minimal quantitative data is given, which greatly weakens the reports. The The Claremont Colleges form a consortium of five Code of Conduct does not provide any information about undergraduate liberal arts colleges and two graduate company policies regarding employees or their treatment. The institutions based on the Oxford/Cambridge model. The reports also fail to mention any efforts to consult with consortium offers students diverse opportunities and stakeholders. Greater focus on company policy would have resources typically found only at much larger universi- resulted in a much higher score. Furthermore, the10-K implied ties. The consortium members include Claremont that the company managed some of its own resources but the McKenna College, Harvey Mudd College, Pitzer College, implications of this were never discussed within the environmental report. Also, a similar dilemma appeared Pomona College, Scripps College, Keck Graduate surrounding the company’s nuclear power production. At several Institute of Applied Life Sciences, and the Claremont points throughout the environmental report nuclear power is Graduate University—which includes the Peter F. Drucker mentioned as a side note but the full implications of this are never and Masatoshi Ito Graduate School of Management. discussed. WPS should clarify the environmental aspects of such important subsidiaries.-Heilmayr

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Director’s Comments To the extent that anthropogenic greenhouse gases nuclear options. Cost is obviously an important are influencing the global climate, the energy and consideration. utilities sectors share a considerable amount of the

responsibility. Almost all electricity is made by But CO2 emission is not the only impact of power burning fossil fuels which releases carbon dioxide production. Do the other environmental benefits associated with natural gas outweigh the cost and (CO2)—a greenhouse gas that remains in the atmosphere-climate system for about a century. security advantages in Germany of coal and nuclear However all fossil fuels are not equal in this respect. fuels? How about in other countries? The Nature paper doesn’t help in this regard: it is focused purely A recent study1 published in the British scientific on methane leakage and its consequences. journal Nature estimates that switching from coal to natural gas would mitigate climate change as long as The choice of fuel mix is clearly a complex issue, gas-associated leakage of methane, the main certainly beyond the scope of short scientific papers, component of natural gas, from pipeline distribution but, as RWE’s chart shows, at the heart of decisions systems is kept below about 6%. Above that value, on reducing environmental emissions and other the leaked methane would itself contribute as much impacts. Cutting through this complexity is important if we are to understand why energy and utilities to atmospheric warming as would the CO2 from burning coal. If natural gas were used to replace oil companies make the decisions they do and what the in electricity production the leakage would have to impacts on us will be. What would help is life cycle be less than 3%. The results of this study on Russian assessments of various energy mixes. pipelines which supply much of Europe with natural gas show that leakage is on the order of 1%, thus We imagine that the industry is routinely conducting strongly favoring natural gas over coal or oil if such analyses, but it is not discussing them much in reducing greenhouse gas production is worth the its environmental and sustainability reports. We additional cost. would like to see more discussion of the full range of costs and benefits—economic, environmental, and Is it? The amount of global scientific effort now social—of energy and utilities companies’ choice of being expended on climate change will sooner or fuels for electricity generation. later resolve questions about its existence and anthropogenic origins. It is the energy and utility 1Lelieveld, J., S. Lechtenböhmer, S. S. Assonov, C. A. M. industry, however, that must implement means of Brenninkmeijer, C. Dienst, M. Fischedick, T. Hanke. (2005) Low carbon reduction and must analyze the costs and methane leakage from gas pipelines. Nature 434:841-842. benefits associated with each of them.

Such a summary analysis is provided in the chart on page 25 of RWE’s 2003 Sustainability Report showing its costs associated with different means of

CO2 reduction. For RWE, the most cost-effective approach is increasing the efficiency of existing lignite coal-fired plants which make up almost half of their energy mix in Germany. Close on its heels is nuclear power overlapped a bit by combined cycle [gas fired] power plants (CCGT). New lignite

plants are as cost-effective at CO2 reduction as the J. Emil Morhardt more expensive of the CCGT plants. Renewables Claremont, California are all more expensive than any of the fossil fuel or 1 October 2005

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