Sustainability, group 5 (Arturo, Fabio, Luca): IBERDROLA CSR
Business study. What the business consists of?
Iberdrola is a spanish energetic company which is focused on all activities throughout the electricity production chain, from the generation to the distribution to final costumer. Since January 1st, the business is divided into 4 main areas, as we can see below.
● Regulated Business – transmission and distribution businesses.
● Liberalised Business – generation and retail businesses.
● Renewables Business – generation of renewable energy.
● Other Business – energy engineering and real state.
Company position in its industry:
Iberdrola is one of the 5 largest global utilities in the world, and it is present in 40 countries. Furthermore, the group is the worldwide leader in renewable energies, relying on an expressive participation in the US and European markets, besides some important emerging countries, particularly Brazil. In this sense, Iberdrola send a message of a long term-driven company with an increasing participation in the global energy market, especially renewable. As written in its vision: “We aspire to be the preferred Global Energy Company because of our commitment to the creation of value, quality of life, the safety of people and of supply, the protection of the environment and customer focus”.
International presence:
(Source: http://www.iberdrola.es/webibd/gc/prod/en/doc/presencia_paises.pdf)
Sales evolution & Profits evolution and Company situation in the current crisis context:
Iberdrola has grown very fast since 2001, when the internalization was taken as a strategy for the company. The entrance of a new CEO in 2006 fostered the process, and in 2007 Iberdrola increased its equity through the issuance of new shares, as we can see in the graph about capital structure. That capital was invested in the acquisition of Scottishpower and US utility Energy East Corporation, which promoted the massive penetration of Iberdrola in the UK and US markets. However, the growth trend was broken in 2008, because of the economic crisis. The company then was able to recover from this first blow, but the fact is that the economy stagnation has undermined the expectations of revenues and profits increase, as we can see in the respective graphs above.
Stakeholder Study:
Who are its main stakeholders?
Employees Shareholders and financial community Regulatory authorities Customers Suppliers – Media Society Environment
What does the company need from these stakeholders?
– Employees: it’s expected that they share the vision of the company and don’t damage its reputation or credibility.
– Shareholders and financial community: they expect from the company net profit to share or to reinvest in R&D or new plants (or farms) and increase the liabylity of the customers.
– Regulatory authorities: they have to be involved and take in account in every new project and continuously to lobby them and try to set up a common framework field where to work on.
– Customers: part of the society and the most important feedback for the company in term of selling power and power to choose betweew different suppliers.
– Suppliers: continuous barganing with them to obtain the goods, in the meanwhile the company need reliablility from them to have a longlasting relation.
– Media: the company should have a good connection with the media because it’s supposed to be the stakeholder that could share and spread the aims and the well done of Iberdrola.
– Society: the society is the main potential customer of the company, and in the same time the main feedback for its reputation; it’s very important to don’t compromise the relationship with this stakeholder.
– Environment: very important source of energy, especially in the renewable energies field, it should be maintain a low impact on that to gain a sustainable development of the company and to reduce the risk of the externalities.
How important are the different stakeholders for the company?
Employees – nowadays Iberdrola has about 30.000 employees spread over the 40 countries in which company has its activities. The corporate responsibility, of course, starts with them.
Shareholders and financial community – as a private company, Iberdrola has to follow shareholders interests. The company has its shares being negotiated in the Madrid Stock Exchange (Bolsa de Madrid), and nowadays there is a small group of companies with relevant participation in the company (basically spanish companies and financial institutions)
Regulatory authorities – This business is marked by an intensive regulation, since electricity is considered a public service and hence Iberdrola is taken as a utility company. Having business in several countries with different regulatory frameworks make it more complex to comply with the requirements.
Customers – Iberdrola’s business model is partly focused on other companies (B2B) and partly in the final customer (B2C), which means that the company can’t overlook all their preferences at the same time it complies with the applied regulation.
Suppliers – Iberdrola wants its suppliers to provide quality products at a good Price. Also, their suppliers should have a respectful behavior with natural and social environment. In order to achieve that goal, Iberdrola promotes selection processes that are based on transparency and equality principles. Those processes generate competence that increase the efficiency of the suppliers.
Media – it’s very important for the marketing part and selling the Iberdrola brand.
Society – Iberdrola has to take in account the public society opinion to don’t lose the credibility which is very important.
Environment – One of the main stakeholders for Iberdrola, since it’s straight linked with the energy production and it’s externalities.
What are the interests of each stakeholder?
Employees – The most important requirement for employees, particularly in crisis situation, is stability, they need to feel that their jobs are safe. Besides, they want to feel important for the company, earning good salaries. Employees also want to be part of a responsible company that takes cares of the environment.
Shareholders and financial community – In general terms, shareholders want to have a good balance between profit and risk. From that point of view, social and environmental scandals could represent a risk that should be avoided.
Regulatory authorities – In different countries there are different regulatory concepts, but at the end them all want Iberdrola to fit their requirements.
Customers – What clients want from Iberdrola is, mainly, a reliable supply of energy at a competitive price. But customers are also getting more and more involved in fighting against climatic change, and because of that, they are demanding renewable energy supply in their houses.
Suppliers – As well as employees, suppliers want to be sure that they are going to be paid, and prefer stable relationship in order to afford bigger productions and make investments.
Media – Media will put the focus in Iberdrola´s economic performance, and Iberdrola social responsibility if they do well. But if there is a big scandal, media is going to be an enormous speaker, that can damage deeply the company reputation.
Society – Society concept about Iberdrola is going to be very related with the information that they get from media.
Environment – Depending on how governments and big companies like Iberdrola decide to generate energy, this generation can suppose, specially in developing countries, an environmental (social and natural) disaster or an opportunity of employment, development, sustainability and economic growth. It is in their hands to take the good or the bad option.
CSR strategy developed by the company:
Reputational risks for the company.
According to Iberdrola: “From a general viewpoint, a risk is considered to be any threat that an event, action or omission may prevent the Group from reaching its objectives and successfully carrying out its strategies.
Reputational Risks: potential negative impact on the value of the Company resulting from behaviors on the part of the Company that are below the expectations created among various stakeholders: shareholders, customers, media,analysts, Government, employees and society in general.”
Source: https://www.iberdrola.es/webibd/gc/prod/en/doc/gobierno_corporativo.pdf
Real or supposed scandals in which the company has been involved in the national and international level.
Political Entrepreneurship: The Case of Iberdrola:
● http://www.instituteforenergyresearch.org/2011/09/16/political–entrepreneurship–the–case–of–iberdrola/
Obama Caught Sending Stimulus Money Offshore:
● http://www.freerepublic.com/focus/news/2330663/posts
Iberdrola and CEZ strike peace deal over Romania wind farms:
● http://www.rechargenews.com/business_area/politics/article241934.ece
Los rumores sobre la operación Iberdrola se colocan en medio de la precampaña electoral:
● http://www.energiadiario.com/publicacion/spip.php?article5627
Have they affected to its reputation? How can they affect to its sales? Can they affect to its access to capital?
The “scandals” that has been involved Iberdrola seems just supposed scandals and not confirmed ones, some of them are even of international scale; mainly involve Iberdrola as lobbyst of some politicians to obtain new procurements or to install (for instance in Romania, see the example above) new energy farms.
Actually these (supposed) scandals are not affecting the reputation of the company, its sales and its capital; at the end it’s very difficult to find a real scandal that has involved this company and that affected its public reputation.
CSR strategy developed by the company to satisfy the stakeholder’s interests?
1. Comply with applicable law in the countries.
2. Adopt cutting-edge corporate governance practices, based upon corporate transparency.
3. Respect human rights and, in particular, those the violation of which degrades workers, which entails the opposition to child labor and to forced or compulsory labor.
4. Develop a favorable employment relationships.
5. Develop responsible practices in the chain of value.
6. Promote a culture of respect for the natural environment, reducing the environmental impact.
7. Favor transparency and free market rules, rejecting bribery practices.
8. Promote socially responsible actions at those companies in which the Company has control or management capacity.
9. Encourage communication and dialogue with the various groups related to the Company’s activities.
10. Disseminate relevant and truthful information regarding the activities carried out.
Personal opinion:
What kind of policies should the company implement and which of them should be abandoned?
In our opinion, Iberdrola’s CSR policy covers basically all the fields along the companie’s value chain. Our main concern is about its process of internalization toward less developed countries. In these cases, particular topics must be extensively controlled, such as labour rights and environmental issues. Only through this path it will ensure the real sustainability of the company.
Comments Off on Sustainability, group 5 (Arturo, Fabio, Luca): IBERDROLA CSR /
03 Feb 2012
por
Luca Palma
IMSD /
.png)
].gif)
.png){kind=logo}
].png)
].png)
].png)
].png)
.png){kind=logo}
].png)
.png){kind=logo}
