Enel, Italy’s state-owned power company founded in 1962, was one of Europe’s largest coal users and polluters. Now it is recognized as a leader in renewable energy services and has integrated sustainability into its business model and operations.explains how Enel made that enormous strategic change — from its long-range planning to how it tackled the dreaded “innovator’s dilemma.
BRIAN KENNY: MARK KRAMER is a leading researcher, writer, and lecturer on strategies for social impact. He also co-founded FSG, a social impact consultancy that operates globally. Mark, thanks for joining us today.BRIAN KENNY: So, I enjoyed reading this case.
BRIAN KENNY: And we’ll talk a little bit about how Europe is looking at this versus the US too, because I think that’s an interesting dimension that surfaces in the case as well. What are the sort of the main pieces of power generation and distribution? On the other hand, that tends to discourage companies from greater cost-effectiveness or other innovations that might lower their cost base. And it has tended to discourage the investment in renewable power as well, where the initial investment up front is much lower and the predictability, the return is much less.
MARK KRAMER: Well, the EU has been a very strong proponent of a shift to renewables and commitments about reducing carbon emissions. And that has been a big factor. I think simply the regulatory environment has been much stronger about promoting the shift to renewables in Europe than it has been in the US.MARK KRAMER: There’s also been a willingness of governments to step in and subsidize the cost to get to the point of parity that we’ve not had as much in the US.
Well, the consequence of that was that a new entity was created that was only focused on renewables and was staffed by people who were very different from the traditional utility executive in the old Enel, people who are really committed to renewable power. And one of the fascinating differences is traditional power generation is all about a few massive capital investments with a decade or many decades long return that’s highly predictable. Renewables requires much less capital investment.
BRIAN KENNY: And a whole different view, I guess, of where sustainability sits within the organization. You look at some of the major fuel companies in the US and a lot of them have sustainability programs of one kind or another, but they have been accused in the past of doing sort of green-washing and not really making it a part of the culture of the organization.
BRIAN KENNY: It really is. So, they’re on the ground floor because all of a sudden now electronic vehicles are going to be much more popular and become affordable by more people. So they could really be at the beginning of a whole movement and be at the ground floor.