February 13, 2024
February 15, 2024
 min read

Lighthouse of sustainability - Municipal Utilities and Energy Providers

Discover how Municipal Utilities and Energy Providers can efficiently implement the EU Taxonomy and CSRD with VIRIDAD.
Klemens MARX
Klemens MARX

The expectations placed on public enterprises to serve as role models for sustainable transformation are high. If sustainability doesn’t work for them, where else would it? That exerts Energy Providers and their managers with a major challenge!

Municipal Utilities and Energy Providers not only supply us daily with energy, water, and heat but are also instrumental in driving sustainability due to their visibility and energy intensity. These topics, encompassing Environmental, Social, and Governance (ESG) aspects, also enable Green Controlling. Green controlling is the integration of ESG key figures and targets into decision-making processes and provides a great opportunity for good managers. Interested?

Sustainability is Not Only a Duty but Also the Essence

Municipal Utilities and Energy Providers are integral parts of our society. Run by people from the region, for people from the region. It is, therefore, understandable that they want to lead by example for the community. But how? How can managers recognize and control the pain points of sustainability if they are not measured?

VIRIDAD was founded on the belief that sustainability reporting is not a burdensome obligation but a significant opportunity!

Sustainability is no longer an option but a necessity. With the adoption of the CSRD (Corporate Sustainability Reporting Directive), the ESRS (European Sustainability Reporting Standards), and the expansion of the EU Taxonomy to include new activities and environmental goals, it is clearly defined when, who, and how sustainability should be reported. With partners like AIT Austrian Institute of Technology, First Climate and OMNIA, who are specialists in the field of energy supply, we bring abundant experience. Together with our experts in EU Taxonomy, we have solutions before problems arise.

The illustration shows when the requirements of the EU Taxonomy and CSRD will have to be applied.
EU Taxonomy scope and applicability

By no later than the reporting year 2025, most Energy Providers and Municipal Utilities must implement the EU Taxonomy and CSRD mandatorily. For those not directly affected by this obligation, the question arises: Do I want to be a role model and position myself sustainably and securely for the future, or not?

"Forward-thinking municipal utilities set a good example and lead by example for the community" (Andreas Pointvogl, 2024).

Every Challenge is an Opportunity

Municipal Utilities and Energy Providers are naturally resource-intensive and asset-heavy, making them particularly affected by the EU Taxonomy and CSRD. This may sound burdensome, but it doesn't have to be.

Sustainability is an opportunity! A good manager asks themselves: "What have I overlooked? Where can we improve?" Sustainability reporting can be used as an effective control instrument, based on existing data, to set goals and quantify their achievement. And, incidentally, it fulfills the CSRD requirement for a management incentive system that demands sustainable efforts within a manager's respective area of responsibility through a remuneration system (cf. GOV-3 in ESRS 2). Some companies already apply such systems, as described by EnBW Energie Baden-Württemberg AG:

The sustainable adjusted EBITDA is the proportion of total adjusted EBITDA that makes a contribution to the environmental objective of climate change mitigation. With this KPI, we can create a direct link to our key performance indicator adjusted EBITDA that is relevant for the management of the company. (EnBW, 2023).

The selected approach by EnBW is summarized under Green Controlling. Green Controlling is about integrating environmental considerations into the core processes of business management. It involves setting clear environmental goals, monitoring performance against those goals, and allocating resources effectively to achieve sustainability objectives.

Specifically, the topics of energy supply, water and wastewater infrastructure, and transportation are comprehensively covered in the EU Taxonomy. A total of 54 economic activities from these areas are described, accounting for more than 50% of all economic activities mentioned in the regulation.

Municipal Utilities and Energy Providers, therefore, cannot avoid subjecting a significant portion of their assets to a sustainability assessment according to the EU Taxonomy and CSRD. This is often a challenge due to the large number of assets and their long service life. For example, hydroelectric power plants are often 100 years or older, and relevant data and information may not be available or difficult to ascertain. For this reason, and because of the new mandatory requirements for processes in sustainability management, it is advisable to act early.

The Early Bird Catches the Worm

Start early! Implementing the EU Taxonomy and CSRD is not only complex but also challenging for Municipal Utilities and Energy Providers due to their significant consideration in both regulations and ongoing energy crises. At the same time, high expectations regarding transparency and sustainability are placed on these public companies by the population and policymakers.

For your energy company, the time has come to leverage all the benefits of the EU Taxonomy and CSRD. With VIRIDAD, you will reach your goals safely! Obligation was yesterday; intelligent implementation of regulations is the essence. VIRIDAD and its experienced partners such as First Climate, AIT Austrian Institute of Technology, and OMNIA support you in efficiently implementing the requirements of the CSRD and EU Taxonomy. Through the optimal combination of consulting and digital solutions, time and costs are saved, and audit-proof sustainability reports are created.

So that you can go hand in hand with your community into a sustainable future.