Our impact and value creation
As a network company, Alliander plays a significant role in the prosperity and well-being of millions of people. We work every day to secure a reliable and affordable energy supply that is accessible to everyone on equal terms. Without energy, almost everything grinds to a halt.
Our activities have multiple social impacts at community and environmental level: on the economic development of regions and stakeholders, on the emission of greenhouse gases, on the knowledge development and well-being of our employees and on the safety and stability of the energy system. We measure the impacts of our activities on all these fronts. The resulting insights help us to optimise our impact on society.
We want to increase our positive impact, for instance by increasing the well-being of customers thanks to a reliable and affordable energy supply that is accessible to everyone on equal terms. In addition, we want to minimise our negative impact such as the emission of greenhouse gases. To achieve this, we provide a balanced quantitative picture of the significance of our activities. The insight gained from our impact measurements serves several purposes: we obtain a more accurate picture of our social performance and the extent to which we achieve our objectives. Transparency about our impact offers stakeholders the possibility to make a better estimation of our contribution to social developments, and supports our decision-making on projects and activities. We are thus better able to control and improve our integrated value across the financial, ecological and social spectrum.
Alliander and the Sustainable Development Goals
Based on our activities, objectives and impact, we have determined the contribution we can make to the Sustainable Development Goals 2030 of the United Nations. More specifically, we are working on:
SDG 7: Universal access to reliable and clean energy
SDG 8: Decent work
SDG 11: Sustainable cities and communities
SDG 12: Responsible consumption and production chains
SDG 8, Decent work, was added as a fourth objective in 2017. We see that our activities have a relatively large impact on work, working conditions and the development of employment in the energy chain. Read more about this in the SDGs chapter.
Why quantify impact?
Reliable, affordable and sustainable energy is of great social and economic significance. Our choices for today and the future must therefore be made with great care. Alliander plays various roles, including that of network operator in the evolving (sustainable) energy system, employer and responsible corporate citizen. In all these roles, we can make a meaningful contribution to society. When assessing the social contribution of our activities, our main focus is currently on the inputs (costs) and outputs (direct consequences). Impact measurements are performed to quantify and monetise the effects resulting from our outputs. The biggest impacts concern economic value, prosperity, well-being, the environment and employment. The insights acquired in these areas cast light on both the interrelationship between impacts as well as on the biggest levers we can pull to increase our beneficial contribution to society.
Our journey in impact measurement
In 2015, we started to analyse, quantify and report on our social impact. In 2016, we took stock of the activities that Alliander undertakes and our participation in a large number of significant projects. Examples are the smart meter roll-out and the digitisation of the electricity network in the northern part of the province of Noord-Holland. In 2017, we took impact measurement further steps forward:
We aim to increasingly express our social impact in significant units. To meet the need to compare diverse forms of impact, we quantify these in a single monetary unit (euros). This is done for the areas that are logically related to the quality of our activities both now and in the future, namely the (changeable) economic value of our infrastructure, the climate impacts in our chain, our partnerships in neighbourhoods and districts, and the well-being of our employees.
Last year, we investigated our impact on the well-being of our employees. In this context we looked at our positive contribution as an employer to the intangible aspects of work and the negative impact of safety and work-related complaints.
At project level, we performed two impact analyses. The first analysis involved the environmental impact of the heating networks completed last year. Secondly, the social impact of our employees' volunteer work that is supported by Alliander Foundation was the subject of a case study into human capital.
Impact identification, quantification and monetisation is undergoing rapid development. More and more organisations want to understand and control their impact. Consistent comparison of impacts is vital to enable constructive collaboration in the energy sector. There is also a need for greater alignment of calculation methods and assumptions at both international and national level. With our impact reports we want to contribute to this development. In 2017, we worked with other network and infrastructure companies to lay the groundwork for a sector-wide impact measurement model. In the coming years, the experiences with the model will be used as input for further improvements and refinements. To this end, we have also teamed up with the Next Generation Infrastructure Platform, which carries out research into the value of infrastructure. This helps us to measure the value of our networks in the energy transition.
2017 impact at a glance
Our impact model for Alliander follows the ‘six capitals model’ of the International Integrated Reporting Council (IIRC) http://integratedreporting.org/. We distinguish two types of impact. On the one hand, there are impacts that fully result from the activities of Alliander. Examples are the impact of grid losses, our own emissions and the well-being of Alliander employees. On the other hand, there are large impacts that are the joint responsibility of parties in the supply chain. We call these supply chain effects. Examples are the impact of energy transport on the well-being of consumers and emissions from the use of electricity and gas in Alliander's service areas. The impact calculations as stated in our Annual Report 2016 were updated with data for 2017. The illustration below shows the relative size of Alliander's social impacts as currently identified, quantified and (partly) monetised. One new addition to the overview is the monetisation for the impacts falling within human capital (well-being and safety of work).
Most important social impacts of Alliander1
- 1 For comparison purposes, the attribution of impacts across the supply chain players has been adjusted with the values from 2017.
Impact measurement results in 2017
The results of the impact calculation show the - approximate - size of our impacts for 44 indicators. The size of twenty indicators was calculated and expressed above in monetary terms. For comparative figures from 2016, we refer to Comparative impact figures for 2017 and 2016. For the other indicators, we made a qualitative description and an estimation based on external sources. In all cases, incidentally, the size referred to here is relative, i.e. the impact may be small at group level but large at individual level, such as with an accident. The insight into our impacts helps us to manage our activities and, increasingly, to control and improve our social performance.
- 1 Our measurements contain uncertainties as we sometimes have to make assumptions about future developments in the calculation. A further explanation can be found in Other information. Our website www.alliander.com contains an additional extensive explanation with full details on the criteria, starting points, assumptions and calculation methods used.
The financial capital impacts indicate the funds flows of our stakeholders. The change for stakeholders is shown as an incoming and outgoing cash flow. The regulated tariffs that we apply as well as our other income and revenue give us the financial means for investments in and maintenance of our energy networks. We thus withdraw capital from society to finance our activities. Through our role and position in the energy chain, we feed a lot of value back into society. We pay our suppliers for goods, services and costs of operating assets. We generate a lot of work and income for other parties. Our employees receive a salary for their effort and time. On balance, our work stimulates the economy and generates employment, income and prosperity.
The value for manufactured capital is made up of two components: the first consists of the regulated tariffs for transmission and connection services as well as metering services for small users. These have been designated as exclusive statutory tasks of network operators. The second consists of the consumer surplus. This is the added value that customers are, in theory, prepared to pay above the price for a service or product. The prosperity value of energy transmission relates to all price elements in the energy chain, including taxes, and the partly regulated prices for the supply and transmission of energy. The amounts shown as manufactured capital relate to the economic part of the energy value chain that is attributable to Alliander. The consumer surplus is currently the most common method for determining economic value, both for liberalised and regulated markets.
Energy transmission has a high prosperity value for society. Alliander's share in the value for consumers amounted to € 4.7 billion in 2017, virtually unchanged from 2016. The regulated tariffs increased whereas the consumption of electricity and gas decreased. Alliander's share in the value for business customers for electricity and gas transmission rose from € 477 million to € 510 million. This stems primarily from an increase in regulated tariffs. The net calculated impact for manufactured capital, in terms of added value, remained stable in 2017 compared to 2016.
On balance, the climate-related impact from our activities decreased from € 363 million in 2016 to € 341 million in 2017. This is a direct result of our greening policy to reduce our own CO2 emissions. The monetised impact of our own CO2 footprint came to € 69 million in 2017, mainly due to our grid losses. More about this can be found in ‘Our sustainability performance’. As in 2016, the biggest negative impact was caused by our position in the Dutch energy chain, which still contains a large fossil-based generation component.
Against this, there are environmental impacts - both positive and negative - that have not yet been quantified. These include the construction of sustainable heating networks and e-charging infrastructure for electric cars. In addition, our core activities such as network management make inroads into scarce resources of our planet. We have not yet been able to put an exact figure on our impact in these areas.
On average, people who are in work tend to experience a greater sense of well-being than those who are unemployed. Alliander contributes to the well-being of employees by offering rewarding and fulfilling work. Work is not just about income. Immaterial factors matter too. In 2017, we calculated the Well-Being Effect of having work. This concerns the direct non-financial benefits that employees derive from having work versus unemployment. The analysis shows that immaterial factors such as appreciation, contact with colleagues and customers, and the structuring effect of work represent a positive impact value of € 108 million. This comes on top of compensation and benefits, which are included in financial capital.
On the downside, the loss of well-being and happiness due to work-related accidents and sickness is estimated at just over € 950,000. This impact value is relatively small compared to the positive impact of having work. Safety and prevention of work-related complaints are a constant high priority for Alliander. As an employer, we always aim to make a positive contribution to the well-being of our employees.
The purpose of regulation is to ensure that everyone makes an equal contribution (socialisation of the costs). One important impact of an energy network operator is the contribution towards social cohesion in residential areas. High social cohesion ensures that local energy initiatives are broadly supported. In addition, participatory projects result in solutions that are better aligned with local needs. As local energy generation increases, so will the importance of local projects. This change occurs at various levels. New parties are collaborating in innovative partnerships to set up local sustainability and energy-saving projects. Greater local involvement in energy issues is expected to galvanise new social interaction in other areas as well. Damage resulting from the unsecured exchange of privacy-sensitive information must be avoided in order to limit the risk of negative social impacts. We want to further quantify our impact on social capital in 2018.
Alliander invests time and money in its network operations of the future: the digitisation of our networks, the use and application of data, the adoption of new business and market models for the energy transition, and alternatives for natural gas. This creates intellectual capital for Alliander and its stakeholders. This capital comprises the stock of immaterial man-created goods. New open infrastructures for electric vehicle charging stations and heating networks, for instance, do not only enhance our own knowledge and expertise but also unlock new market opportunities for other companies. The quantification and monetisation of intellectual capital calls for reliable historical data and well-considered choices. In 2018, we want to examine and explore this in more detail.
What we have learned
Collaboration with our knowledge partners has produced new insights into the consequences of our activities. Reliable network management is a source of great and constant financial and economic value. Our impacts on human capital have been quantified in more detail. We have learned that data based on research into our employees' perceptions and experiences form a good starting point for impact measurement. We have thus identified variables that influence the impact of our actions on employees.
The impact measurements continuously force us to make robust assumptions about the expected CO2 impacts and about the relationship between the experiences of employees and their perceived well-being. This is the way to deal with uncertainties that inevitably arise when making estimates of indirect and complex impacts. The same applies to the value of well-being as an aspect of human capital. The impact measurement of Alliander Foundation showed that impact is much more than a number and that qualitative findings are also crucial for a proper understanding. The various impacts were calculated with a critical and conservative mindset, and we realise that some assumptions and criteria are still subject to debate, both within Alliander and among stakeholders outside our organisation. Our method is explained in more detail at www.jaarverslag.alliander.com. One of the next steps concerns the decision to develop a sector model for impact calculations, together with a broader group of businesses.
Our plans for 2018
Alliander continues to improve and expand its impact model, giving particular priority to the measurement of the social impacts. This reflects our growing role in districts and neighbourhoods where we work together with municipalities and housing associations to explore alternatives for natural gas heating. We have joined forces with other network operators to work out the details for a widely supported sector model. Thanks to this collaborative approach, the model can be developed faster and with more robust coefficients. We also want to use our impact model more to make better-informed choices as to new developments and investments. Finally, we will continue the dialogue with stakeholder representatives in order to improve our method.