Responsible ownership that reinforces the collective actions of owners
In Part 1 of this blog Strategy Director Gudrun Jónsdóttir described the path Reykjavik Energy is taking towards streamlining, good corporate governance and pursuing a transparent and on track company ownership strategy. Here she concludes by emphasizing the need for a culture that is clear, informed and on message.
Execution is like washing up after the party
"It's a known fact that culture eats strategy for breakfast. No matter how brilliant your strategy is, company culture is always critical to success. And it's a challenge to change a culture so that it places the same emphasis on strategic execution as it does on financial results. That's why we work hard to create a culture that understands the importance of strategy being put into practice, and this is an essential part of my job," explains Gudrun Jónsdóttir.
"You could say that the whole execution part is the hard part - the boring part, like cleaning up after the party when the dust has settled, after everyone has been high on visions and dreams of the future. But it's not up for discussion, it just has to be done. When we talk about implementation at Reykjavik Energy Group, we talk first about strategies and policies. We review them every year to take into account changes in the internal or external environment, and because we want all boards and employees to have a constant sense of where we are going."
"Sometimes we have to revise the strategic objectives because we judge that some of them are no longer the right ones," says Gudrun Jónsdóttir, stressing the importance of correcting for changes in internal or external circumstances.
"For example, you can have a five-year plan, but it should ideally be reviewed every year. The plan contains a list of strategic objectives and the initiatives that need to be carried out to achieve the objectives. The way to move from A to B is by taking action, and in Reykjavik Energy, we keep track of the strategic initiatives using a digital platform that contains all the elements of the strategy."
New paradigm pushes companies to be responsible
By following this method and reporting on progress and results, the Board can monitor that Reykjavik Energy Group is working within the framework of the ownership strategy. At the same time, management and the Board can see an overall picture of progress against long-term outcomes - for example, sustainability compared to financial performance.
This has a very positive impact on the work to achieve Sustainable Development Goals (SDGs). Reykjavik Energy Group has prioritized five of the SDGs that it emphasizes in the operation of the business, and the goals are included alongside ESG Strategy (Environmental, Social, and Governance) in the regular annual review and revision of policies and strategies.
"SDG and ESG reporting is particularly important because investors are increasingly using these non-financial factors as part of their analysis process to identify material risks and growth opportunities in relation to long-term exposure. Sustainability is simply the new paradigm that incentivizes or pressures companies to adapt and continue to grow in a green and responsible way," says Gudrun Jónsdóttir.
Everything is transparent and online, and everyone can follow
The ownership strategy thus promotes the long-term commitment of the owners, and the result is responsible ownership that reinforces the collective actions of the owners, despite the fact that they may have different incentives for their ownership. At the same time, the governance tools ensure that the actions of individual companies and departments are aligned with the owners' collective goals and strengthen the whole organization's focus on the SDGs.
It can lead to green solutions that put the environment on an equal footing with the financial aspect, or it can help promote long-term research and development, such as an innovative green tax solution to reduce carbon emissions. Furthermore, Reykjavik Energy's audit concluded that the implementation process has strengthened the internal control mechanisms within the company.
"Everything is fully transparent, and everything is online, so everyone can follow our policies and goals and how we are performing in each area. It all stems from the ownership strategy and a board that plays a very active role. Our board is not just a rubber stamp board. It is deeply involved in the strategy, and therefore also very committed to developing and following it," says Gudrun Jónsdóttir.
For additional insights on how to execute your ownership strategy in a responsible way, download for free the Bold Strategy Magazine. This magazine focuses on the strategies for the utility sector, which nowadays is a very relevant and important matter. Stay on top of the changes!