Tepco’s most recent report gives some insight into a company in trouble
The central purpose of sustainability reporting is foresight. What does a company’s report tell us of its ability to manage risk and exploit opportunity?
The Japanese utility giant Tepco was one of the pioneers of environmental reporting, now having more than 15 years’ experience behind it. The company’s 2010 sustainability report is an 80-page PDF and website covering the year to March 2010, a year before disaster struck.
Does the 2010 report hold clues that a crisis like the one at the Fukushima Daiichi nuclear power station could occur? Warning signs come thick and fast.
On page one, Tepco claims “the report has been produced in line with the AA1000 Assurance Principles”. Yet this report has not been assured and there is no independent assurer’s statement.
A nuclear operator that cannot communicate accurately about independent oversight immediately raises concerns. There are more worrying gaps in balance, transparency and stakeholder engagement.
One of the principles of AA1000 is an assessment of material issues. The report lacks this and a glance at the contents page suggests the company had its priorities seriously askew. Nuclear risk and safety were relegated to three pages at the back of the report. Any alarms ringing?
Tepco’s report revealed it had direct experience of the risk that earthquakes present to its operations. In 2007, a magnitude 6.6 earthquake crippled its major Kashiwazaki-Kariwa nuclear power station, necessitating a two-year shutdown. In the aftermath, Tepco reported on establishing an emergency framework and risk-managing committees, training employees and earthquake-proofing sites.
It is often the case with corporate responsibility reports, however, that what is not reported is more informative than what is. The omissions here betrayed an opaque approach to corporate responsibility and stewardship of nuclear facilities.
Tepco was thorough in covering the energy equation, highlighting efforts to help customers reduce energy use, work with the government to electrify major infrastructure such as transport, and reduce the emissions intensity of power generation.
Company president Masataka Shimizu uses his letter to introduce the company’s new 2020 Vision: Medium to Long-term Growth Declaration – essentially a post-2007 quake-recovery plan presented as a low-carbon strategy. Tepco’s vision was to cut costs, improve financial performance and deliver more low-carbon (nuclear) power. Missing though was any mention of strengthening safety systems and earthquake resilience.
Throughout, the treatment of nuclear power is rose-tinted. The Environmental Characteristics of Nuclear Power Generation section focuses entirely on low-carbon benefits, omitting radiation risks and storage and waste challenges.
Where the report did touch on nucler safety it offered a list of committees and initiatives without revealing the underlying thought. What is the earthquake resilience of each of its stations? How did Tepco decide what magnitude to anticipate, and who did they consult to determine this? With multiple magnitude 8-plus earthquakes on record in the past 150 years, hindsight is readily available to those deciding on safety margins.
Friendly audience
The value of engaging with stakeholders is to point out omissions from the report and areas where company focus needs to be sharpened. Tepco relied on its environmental advisory committee to provide this challenge but the committee either fell short of its mission or was edited by the company.
The questions from the committee included in the report were mild and unchallenging, almost like cues for the company’s prepared responses.
The two expert panel questions on nuclear power generation, for example, concerned the long-term availability of uranium and future fuel storage. Since the company had two years earlier experienced a major earthquake failure at its largest site it might reasonably have expected to face a robust challenge from expert advisers on its ability to withstand future earthquakes. Predictably, Tepco’s responses were bland and self-serving – a dialogue of complacency.
The lone voice of stakeholder reason comes from one reader of the previous year’s report who rightly called for a “wider range of third-party opinions in the report”. Spot on.
If the function of a sustainability report is to inform outsiders of the competence of a company in managing environmental and social issues, you could argue this report performed admirably. The lack of candour, over-confidence in nuclear safety, absence of credible external review and obfuscation about earthquake resilience provided a clear and prophetic warning. The big question here is, was anyone looking?
Susie Keane is a senior consultant at Context.
Snapshot
Follows GRI? “Used for reference”.
Assured? No
Materiality analysis? No
Goals? Yes
Targets? Yes
Stakeholder input? Partial
Seeks feedback? Yes
Key strengths? Identifying opportunities.
Chief weakness? Thin acknowledgement of risk and weak stakeholder engagement.
Pleasant surprise? Detail on seismic-isolated buildings.