At last year’s Green Business / PricewaterhouseCoopers Executive Roundtable, Nelson Switzer, Director of Corporate Responsibility for Direct Energy, shared his first impressions of the corporate culture at Direct Energy, an organization he had joined only six months prior to the event. While he discovered a vibrant culture, and some very good corporate responsibility initiatives, he wanted to further embed corporate responsibility within the organization’s core operations in a way that hadn’t yet been done. Green Business caught up with him recently for an update on his team’s progress.

Green Business: How have you spent the last year in you organization?

Nelson Switzer: Learning, building a network of champions internally and enhancing the CR management framework.  My team and I spent the last year assessing the culture of the organization by consulting with our internal and external stakeholders and our Corporate Responsibility Committee in an effort to understand more fully the impact areas which required the greatest focus and moreover, how our organization could make progress in advancing the CR agenda in a meaningful way — a way that complements the objectives of the business while concurrently reducing the environmental and social impacts of our activities.  We took it back to basics, in a way, by undertaking foundational research including a Gap analysis, a materiality analysis, a stakeholder analysis and then using that information to build-out Direct Energy’s CR enhancement program.

GB: What did you find?

Switzer: We found that we had a host of opportunities and great information on which to enhance our performance by focusing on five areas within CR and our organization, which included: governance, stakeholder engagement, communications, community investment and measurement.  Using the information from our analyses, and with some simple modifications to our governance system, we were quickly able to identify and agree on priority areas of focus and a management system approach.   

GB: Where did you find you needed to focus to build on that?

Switzer: We were able to determine that, while we have seven defined CR impact areas, there are three areas that pose the greatest concern to our stakeholders and the greatest potential risk or opportunity to Direct Energy.  These are climate change and environment, vulnerable customers, and customer service.  This was determined though our materiality analysis:and perhaps what was most interesting was when we surveyed our executive leadership team they identified the same priority issues.  

However, identifying the priority focus areas was only step one.  To operationalize the management of our impact areas — whether a priority or not - we developed the Direct Energy Corporate Responsibility (CR) Dashboard. The Dashboard includes metrics for each of our impact areas. Through this we measure our performance against both explicit targets and goals, or the performance trend.  We monitor performance using this Dashboard on a quarterly basis and have now embedded it within our regular business operating reports, which is delivered through our quarterly business performance review to our executive.  Our team sees this as a big win.

GB: Plans like this are great, but how do you truly drive it through the organization. In other words, how do you keep the enthusiasm up?

Switzer: That’s the million dollar question.  We’ve taken a champion approach — where executive committee members — our most senior leaders — are assigned ownership of the performance of each impact area.  That helps drive it into the businesses directly.  We have also taken a grass-roots approach, by engaging our employees with collateral, regular communication, building executive sponsored CR councils and committees and providing tools and guides.  

In this way, we are helping push from one end of the company to the other with the ultimate intention of meeting in the middle — where employees pull for information and no longer need pushing.  That’s where we are right now and we are seeing impressive signs of progress.  

GB: With a relatively small team in North America, how do you manage that kind of fundamental change?

Switzer: We have support from our colleagues around the business in Direct Energy and our colleagues in the U.K. at Centrica (Direct Energy’s parent company) with whom we work with regularly — some of them on a daily basis. There’s a lot of communication among our offices around the world, and we’ve created a corporate responsibility working group, made up of the heads of CR from all of our different businesses. We speak regularly by phone and meet once a quarter to talk about the issues we have. We’ve actually found that we’ve been able to reduce some of our CR program costs because some programs already existed in other businesses.

GB: Some organizations are hesitant to talk about their progress on CR initiatives because they haven’t hit a certain plateau. How do you feel about how far you’ve come?

Switzer: Since transparent disclosure is at the heart of any good CR program, I am happy to discuss it.  Plus, I think there is a lot to be proud of at Direct Energy.

At Direct Energy, we have accomplished much in a short time. In my book, there are three degrees of CR: there is Corporate Citizenship, CR and Sustainability, with each having a deeper embedding of the principles of sustainable development. Our progress is somewhere between citizenship and responsibility. We don’t lose sight of our intention to shift to the sustainability model however, which is why the management framework we have adopted is about continuous improvement.

Essentially, each time we do something we want to measure it, monitor it and say, ’does this work and does it add value?’ If it doesn’t, let’s talk about how we can improve it. The changes we’ve made so far have been very functional changes — building a framework.

We’ve now moved to the next step, which is our objective for CR here — to embed environmental and social concerns into the decision-making process, and do it early in that process.

GB: How are you operationalizing the dashboard you’ve introduced?

Switzer: We are transitioning very carefully into using key performance indicators (KPIs). We developed a staged approach. The first stage was to evaluate, understand and report back. That essentially means determining what we’re already measuring, and deciding whether these are the right metrics for us, whether they’re critical, and whether someone else is already reporting them. From that, we introduced a set of KPIs. Once those were introduced, we evaluated what the broader scope of KPIs might be, and started introducing additional indicators.  We have been working very closely with the Centrica CR team and our Corporate Responsibility Committee throughout this process.

The reason we did it this way is that we believe that cultural changes such as these are best executed gradually.  I have found that doing things too quickly can close doors rather than open them, so we want to help transition our stakeholders — those reporting the information — over to this new system. That’s what the first step was all about — getting colleagues comfortable with this new system. So, for example, in the first set of KPI discussions, we would discuss carbon intensity because that is a subject that is well understood in our company. During the next round of discussions, we began introducing other considerations like aggregate carbon emissions from our facilities — something that had not been discussed widely before.

Our dashboard is separated into pieces, one for each of the seven CR impact areas.  Each impact area has up to four KPIs. We’ve assigned both a data owner and a data steward to each of these performance indicators. The data owner is the executive responsible for delivery, management and performance of that KPI, and the data steward is the person who actually operationalizes it and reports the information on a regular basis.  

GB: There are a lot of measurement processes out there. What do you think sets yours apart?

Switzer: We have included a data quality indicator for each KPI, because for all of these KPIs we need to know, ’is this data reliable, are we confident it is accurate?’ I think that’s one of the unique aspects of this particular dashboard. It includes: a) the indicator; b) previous performance; c) data quality; d) current performance; e) targets and goals; and f) Commentary. It highlights the two problems people complain about all the time — they can’t get traction for their programs, or they can’t get the data. With this, executives are given an information tool that facilitates decision-making.  For some KPIs and impact areas, it has turned data quality around quickly.

GB: What stage are you at now?

Switzer: We’ve been sitting down with each of our executive committee impact area owners to discuss implementation. All of them have business priorities and it’s really important that whatever we do supports their business objectives. A sustainability strategy is about enhancing business performance, so the first thing we talk about with them is their business priorities and how CR can help them deliver. Our team helps by providing a strategic review of the environmental and social issues that may exist in regards to those business priorities. For instance, if we are meeting with the head of power plant operations, we might mention something like, ’did you hear about the Waxman-Markey Bill and the affect it will have on the cost of producing electricity in the US?’ — just to say, ’are we thinking about these potential issues."

The next thing we do is talk about the impact areas themselves, and what it is that they can do. We discuss both their vision of how they want to manage it, and whether the metrics are right. We also ask questions like, who else needs to be involved in a particular initiative, what responsibilities and resources might they need, and identifying whether other people within the business might have an interest in that particular impact area as well.

Our objective is pretty simple, to help Direct Energy consider the environmental and social consequences of the business decisions we make so that we are the first choice for customers and employees.   And we do that using stakeholder engagement, environmental and social issue identification, partnership and measurement, reporting and communication.

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