With Jakob Askou Bøss, Senior Vice President, Corporate Strategy and Stakeholder Relations, Ørsted

Other organisations and industries must learn from Ørsted’s remarkable ten-year transformation, according to Jakob Askou Bøss, Senior Vice President of Corporate Strategy and Stakeholder Relations at Ørsted.

Ten years

If someone said to you ten years ago that one of Europe’s most fossil fuel intensive energy providers would be producing more than 80% of its energy from green sources in a decade, it would have been difficult to imagine. But that is precisely what Ørsted has done. Ten years — from 2020 to 2030 is also the timeframe the world has in which to halve global carbon emissions and move towards a 1.5°C scenario. Decisions taken today will shape the future emissions curve, impact the level of future warming, and ultimately determine the scale of impact climate change has on humanity.

“We began our transformation with the 85/15 vision,” says Jakob, who is responsible for corporate strategy and stakeholder relations at Ørsted. In 2008, 85% of Ørsted’s power and heat production was black and 15% was green. Within a generation, the ambition was to turn that ratio on its head. But progress has been faster than expected: by mid-2019 82% of the company’s energy was generated from renewable sources, including offshore and onshore wind, solar, and bioenergy. By 2025 that figure will rise to 99% based on decisions already made, making Ørsted’s energy production virtually emission free. The company’s vision is a world that runs entirely on green energy.

“We want to inspire others on their journey of transformation, because the world desperately needs ambitious climate action to stay below 1.5°C.” 

Jakob Askou Bøss, Senior Vice President of Corporate Strategy and Stakeholder Relations at Ørsted.

The key ingredients

These and other supporting figures confirm why true and credible 1.5°C business leadership calls for new mindsets and new business models. And speed matters. Still more reports with still more alarming conclusions confirm that we are far off the 1.5°C trajectory but are heading for critical tipping points and temperature rises of 3°C and more. So this year is really the last, last call for 1.5°C business leadership.

Given the speed and scale of the challenges, we have to downplay the 2030 deadline. Instead, we must deliver breakthrough results within a much shorter time span: three years. If business at large cannot provide major transformations within 1,000 days, we risk falling further behind and any narrative of 1.5°C business leadership will be more fiction than fact. That is why 1.5°C business leadership should entail more than committing to more ambitious targets. It should commit any company to expand its role and responsibility in developing sustainable societies.

One thing is joining the campaign and committing to setting targets. Another and far more demanding challenge is to integrate this into all business decisions and embed the corporate commitment throughout the company with buy-in from all employees. It is a matter of developing a new corporate identity. The 1.5°C campaign should be seen as a major transformer of a business model — an opportunity to rethink the raison d’être of the company in a new world order. Failing to understand and accept that perspective, the commitment risks being reduced to an instant CEO gimmick. Becoming a 1.5°C business leader should be rated as a fundamental strategic decision with widespread implications for the company.

So far more than 600 companies have committed to setting science-based targets and around 60 of those companies have committed to 1.5°C. That is good news for a start, but what really matters are the first impact reports — how did it work out and how did it change the business models and influence the climate? We need to learn these lessons very fast, and we need a breed of ‘1.5°C business heroes’ who can galvanise business leaders to join the 1.5°C campaign.

That is why ‘1.5°C business leadership’ should be seen as a prerequisite for tomorrow’s CEOs — a leadership that must expand its role and responsibility in society. Taking action for 1.5°C means recognising and accepting a new business paradigm that makes private companies entrepreneurs of a new sustainable world order. The 17 Sustainable Development Goals have defined the new role of business, which has been embraced by companies. But as documented in the UN Global Compact surveys, businesses must now translate commitments into new business models, strategies, and solutions.

It all depends on mindsets and how to approach the turbulent business environment. You must understand that the dif- ference between a risk and an opportunity is how soon you discover it, and why the difference between managing risks and opportunities is a matter of being reactive or proactive. There is no doubt about what kind of leadership is needed to remain within 1.5°C degrees.

Clear policy frameworks

The EU’s 2020¹ energy policy goals were decided in 2008 and set a clear direction for energy development in the EU towards 2020. Jakob believes this kind of long-term policy framework was key for Ørsted’s decision to embark on its transformation journey.

Ørsted has also been key in driving down the levelised cost of electricity from offshore wind. The UK government, for instance, wanted to diversify the national energy mix. Ørsted set an ambitious cost reduction target in 2013, promising to deliver new offshore wind energy at 100 EUR per MWh by 2020. This target was achieved more than three years ahead of schedule and helped cut costs by more than 60%. The commitment to cost reduction was important in creating political momentum for large-scale development of offshore wind in the UK, which is the world’s largest offshore wind market today.

Ambitious targets

Setting and meeting ambitious targets for sustainable development of the business, often based on direction set by policy frameworks, has been instrumental to Ørsted’s transformation. That includes the 85/15 vision, the bold cost-reduction targets for offshore wind and, since 2013, incrementally increasing targets for cutting the company’s carbon emissions, Jakob says.

Ørsted was one of the first companies to set a science-based target for reducing emissions from power generation. The company has now raised the ambition level again and committed to reduce its greenhouse gas emissions intensity of power generation by 98% by 2025, compared to 2006. It also commits to reduce indirect greenhouse gas emissions from end use of its products and in its supply chain by 50% by 2032, from a 2018 base-year. Ørsted has also recently joined the 1.5°C campaign.

Innovative partnerships

Companies can also work within strong policy frameworks to set ambition loops in play, Jakob says, adding that Ørsted’s innovative financing model for offshore wind farms has helped accelerate the growth of offshore wind. Stable and long-term government policy enabled the company to invite investors to acquire 50% ownership of an offshore windfarm which allowed Ørsted to free up capital to continue investing in new offshore wind farms, thus further maturing and scaling the industry. It is now cheaper to develop offshore wind power than build a new coal- or- gas fired power plant.²

From vision to reality

Jakob believes that Ørsted is well on the way to completing its transformation to a sustainable energy company. “If we hadn’t embarked on our ambitious transformation from black to green energy, our business model would have been under severe pressure today. Instead, we decided to renew ourselves from within, driven by the vision of creating an energy company based on green energy, and which would have a business model that is fit-for-purpose in the new world of renewable energy. Today, ten years on, we have proven that our vision could be turned into reality,” says Jakob, and concludes:

“We want to inspire others on their journey of transformation, because the world desperately needs ambitious climate action to stay below 1.5°C.”

¹The EU 2020 climate and energy package is a set of binding legislation to ensure the EU meets its climate and energy targets for the year 2020.
² Bloomberg New Energy Finance, 2019. New Energy Outlook 2019.