November 2021 Volume 3

OPERATIONS & MANAGEMENT

Getting a Handle On Sustainability By Neil Webb and Corey Barnes-Covenant

In an ever-changing marketplace, we are constantly being exposed to new vocabularies that we are trying to make sense of as it relates to our business. In the latest chapter of “things I need to worry about” is the concept of SUSTAINABILITY . Perhaps the first time you heard the term was when a questionnaire landed in your inbox asking questions about “How sustainable are your operations?” If you haven’t yet received one—get ready, it will be coming. You too will scramble to Google it and meet a dictionary of new terminology: ESG, decarbonization, climate resilience, energy transitions, environmental justice, GHG assessments – the list goes on and on. Let’s take a collective deep breath and jump in on the topic. For those of you who have participated in one of our energy outlook presentations over the past several years, you have probably noticed a shift in where the compass is pointing. In the past five years, the shape and form of this sector has evolved significantly through the transition from coal to natural gas to now the switch to renewables. Often, this is part of the efforts we as business leaders are already doing as part of long-term corporate strategy setting, which generally includes expectations of being responsible, efficient, and strategic, not just for next year, but for the next decade. And let’s face it, the world has been changing for a long time. In the 1970s, there were environmental regulations to which companies had to adapt; in the 1990s, the quality movement swept through businesses and changed the way they operated. We have all performed environmental reporting for years (and usually see the value in it). And we have gone far beyond tracking quality production. It has become embedded in our operations because we know it provides long-term value. At its core, sustainability is just surviving changing times, and the times, they are always changing. Today, “sustainability” comes in the form of increasing focus on air emissions, water emissions, and materials. When considering a sustainability strategy, it’s important to think in terms of defense and offense. On defense, you make sure that you

are ready for any change that is going to get thrown at you. When on offense, you configure circumstances to your advantage and push out your competitors. DefenseWins Championships In today’s markets, there are new risks that you’ll need to take into consideration to ensure your business isn’t shut down or outmaneuvered. This is all about risk reduction: how do you make sure that your business is bullet-proof, no matter how the climate or regulations change? First, consider cost risk. One significant uncertainty facing industry worldwide is availability of reliable and economical energy. There are two defensive solutions you might consider: 1. Efficiency – If you are like most, you are looking for efficiency all the time. And you should. Making sure that you are the most efficient that you can be is, by definition, a sustainable strategy. The less energy you use, the less that your cost is driven by things outside of your control and the less impact on the environment. In many ways, the most valuable kilowatt hour or dekatherm is the one you never have to use in production. And by the way, these aren’t simply one-time savings, but continually accrue to your bottom line. 2. Energy price stability – How often have you seen your energy costs ride the roller coaster? After going through all the efficiency measures above, you can implement a mix of energy procurement and on-site energy development to stabilize costs and protect your balance sheet (and the environment). A proactive energy procurement strategy is a defensive maneuver that makes your operation more sustainable in the long term. Another defensive play is sustainability reporting. This isn’t new— we’ve been reporting on environmental issues and financial issues since the dawn of business. As with those other reports, there are

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