Big organizational change doesn’t happen in a silo
By Terence de Pentheny O’Kelly
Imagine you are toasting a big transaction at work. Say, a transformation of the organization’s real estate portfolio. Who is in the room and being recognized for enabling the deal? It would take a cross-functional team to guide the organization’s strategic shift, negotiate the terms, mitigate high-stakes risk, and forge a long-term path, wouldn’t it?
Replace one RE (real estate) with another RE (renewable energy) and the same picture holds true.
Gaining the support of functional and leadership colleagues is critical to implementing a meaningful carbon reduction strategy. The recipe for success will be different for every organization, but the ingredients will be similar.
Here’s a roadmap to guide your approach to this critical yet often overlooked component of your energy transformation: 1) identify the right functional and leadership stakeholders to engage, 2) develop a gameplan for engaging each group over the lifetime of the initiative, and 3) tailor briefings to reflect the needs of each group.
Identify the right functional and leadership stakeholders to engage
To begin, it is important to recognize that you are orchestrating a significant departure from the status quo. That means many people in your organization have a stake in this effort.
Switching to renewable energy involves a shift from short-term energy purchasing to longer-term energy commitments. Expect more finance and accounting colleagues will take an interest.
This is also a big change to how your organization manages commodity risk and commodity procurement, so risk and procurement colleagues will pay attention. A successful carbon-reduction strategy will have strategic value for the organization—perhaps Marketing, CSR, Customer Relations, Investor Relations, and others will feel invested in this transformation.
If you multiply your historic energy purchases by 10X or 20X (based on a 10-year or 20-year contract), do you know the approval and execution pathways in your organization for the deals of this size? It is critical to map out the approval and execution pathway, as well as who those approvers will seek out for a trusted vetting of the transaction on their behalf.
Develop your gameplan for engaging each group over the lifetime of the initiative
With your cast of characters identified, shift your focus to when each needs to be engaged along the journey. We recommend developing a RACI chart (Responsible, Accountable, Consulted, Informed) to bring clarity to the nature of your engagement with each of the stakeholders.
Some will need engagement just once, while others might need more regular briefings. For example, ensure that leadership is supportive of your strategy before you go out to the market to obtain proposals. It would be a shame to lose time collecting and evaluating proposals for a transaction type that leadership has critical concerns about.
We stress the importance of engaging leadership early and often throughout the process, especially at major milestones such as when the strategy is developed, initial market results are received, there is a final counter-party selection, and the final contract is negotiated.
Tailor briefings to reflect the needs of each distinct group
The same briefing will not meet the needs of every stakeholder group you engage with. Consider whether you are seeking a decision from your audience, input on a specific aspect, or to educate them broadly about the initiative.
It is commonly a safe assumption that each of your stakeholder groups will have little knowledge of this space when you first brief them, so early education will likely be required. A few working sessions that you will likely need to prepare for include:
- Review of strategy to ensure no red flags from legal, risk, finance, or accounting
- Shaping of procurement documents with legal and procurement, to ensure inclusion of key Terms & Conditions (T&Cs)
- Deep dive with finance on the economic model and how market risks are being evaluated
- Accounting review to determine treatment of the contract (on or off-balance sheet?)
- Detailed review of transaction mechanics with legal, finance and accounting, as a nuanced understanding will be required for them to validate an acceptable set of final T&Cs
Proactive engagement of internal stakeholders is a commonly overlooked aspect of energy and carbon transitions, yet it is critical to the success of these initiatives. By planning early and investing the time to bring your colleagues to the table, you will be able to successfully orchestrate major reductions in your organization’s greenhouse gas footprint.
Interested in learning more about this topic? CFR specializes in helping large organizations design RE strategies and would be happy to connect you with one of our subject-matter experts. Contact us at firstname.lastname@example.org to schedule a time to discuss with your organization.