Enron Was An ESG Pioneer, Too: That’s the Danger We Face!
Robert Bradley
Founder and CEO of the Institute for Energy Research
Principal, MasterResource: A Free-Market Energy Blog….
.…
…
[Editor’s Note: How very quickly we forget! SVB was far from the first ESG disaster. No, that would be Enron, which was as politically correct as it got and that’s what killed it.]
In the fall of 2001, Ken Lay set the tone for what would be Enron’s last Environmental, Health, and Safety Management Conference:
We believe that incorporating environmental and social considerations into the way we manage risk, govern our projects, and develop products and services will help us maintain our competitive advantage. As we move forward, we will leverage our intellectual capital and innovative capabilities to promote sustainable business practices around the world.
At this meeting, Enron’s Corporate Social Responsibility (CSR) task force listed its “Accomplishments to Date,” which were:
- Secured board oversight of social/environmental performance
- Expressed support for Universal Declaration of Human Rights
- Completed corporate responsibility task force
- Developed and pilot-tested human rights audit
- Developed security and human rights guidelines
- Established formal partnerships with WBCSD [World Business Council on Sustainable Development], IBLF [International Business Leaders Forum], and CI [Conservation International]
- Identified language to strengthen code of ethics
- Providing project support—Calypso, Transredes, Dabhol and Cuiabá
- Responding to stakeholder concerns on an ongoing basis
The goals for 2002 included:
- Formally adopt CERES Principles
- Complete indigenous peoples’ policy
- Specify social/environmental expectations in formal relationships with vendors and contractors
- Review results of stakeholder survey and develop strategy to address outcome
- Create awareness of social/environmental trends among [Enron’s] origination and investment groups
- Add corporate responsibility performance attribute to PRC [Performance Review Committee] process
- Present task force recommendations to Dr. Lay and senior management
Make no mistake—Enron was trying to practice CSR, so that it could monetize its “green” energy model. This had been Lay’s strategy for a decade with natural gas, as well as internationally, as with Enron Global Affairs’s 1999 launch of the Social and Environmental Responsibility Program.
Enron’s CSR initiatives came to a screeching halt in December 2001, along with all of the company’s other discretionary activities. The company was out of money and out of time. But the ship went down with its green lights on.
“Shhhh! A Little Coal”
“I have never known much good done by those who affected to trade for the publick good,” Adam Smith cautioned in 1776. “It is an affectation, indeed, not very common among merchants, and very few words need be employed in dissuading them from it.” Milton Friedman said the same in his 1970 essay on the social responsibility of business.
And on close inspection, Enron was trying to eat its cake and have it too. The company was building oil-fired power plants internationally and erecting (sans press releases) a profitable coal subsidiary. This created internal tensions, but Enron president Jeff Skilling assuaged the concerns of one of his coal executives with the words: “Mike, we are a green energy company, but the green stands for money.”
Still, with $300 million (and counting) invested in coal properties, and the imminent prospect of becoming the world’s leading coal trader, coming on top of a decision to sell the solar division, Enron’s head of European government affairs warned in 1999, “Our position as a ‘green’ company is getting thin.”
It was not easy being green in other ways too. Environmentalists lambasted Enron for building energy projects in pristine areas, even wind turbines in southern California. Wind (when blowing) was mostly backing out natural gas, the cleanest of the fossil fuels, which created a financial downside for natural gas giant Enron.
Enron stayed silent on the patent disadvantages of wind relative to natural gas in terms of cost and reliability. Wind is a free energy source, but turning wind into electricity is very capital intensive compared to generating electricity with relatively BTU-intensive fossil fuels. Wind power has been propped up by disproportionate tax subsidies, as well as by state-level mandates requiring that utilities buy renewable energy whether or not they need it.
In particular, the windpower boom in Texas was not about economics. It was about a successful lobbying effort by Enron Wind Company in 1999 to include the nation’s strictest renewable quota mandate in an electricity restructuring bill. Texas Governor George W. Bush aided Ken Lay on that one.
The post Enron Was An ESG Pioneer, Too: That’s the Danger We Face! appeared first on Natural Gas Now. This post appeared first on Natural Gas Now.
