Exclusive Q&A: American Electric Power Chief Sustainability Officer on ESG vs. CSR

After more than a century in operation, American Electric Power (AEP) is about to embark on a first.

Effective Jan. 1, Julie Sloat will become AEP’s first female CEO. She currently serves as the company’s president and CFO.

The milestone reflects many of the initiatives AEP has implemented when it comes to ESG and recruitment efforts, according to Sandra Nessing, the company’s chief sustainability officer.

Founded in 1906 and based in Columbus, Ohio, AEP has approximately 16,700 employees that operate and maintain the nation’s largest electricity transmission system. The system has over 224,000 miles of distribution lines and delivers power to 5.5 million regulated customers in 11 states.

“ESG can impact your access to and cost of capital, your credit ratings, your ability to insure your assets, your brand, your reputation, your license to operate—all those things. So, why would you not pay attention to ESG?”—Sandra Nessing, American Electric Power

Additionally, AEP is one of the U.S.’ largest electricity producers with approximately 31,000 MW of diverse generating capacity, including more than 7,100 MW of renewable energy.

Nessing spoke with Hart Energy’s Senior Energy Reporter Pietro D. Pitts on the sidelines of Reuters’ Energy Transition North America 2022 event on Nov. 10 in Houston about the excitement around AEP’s incoming female CEO plus ESG versus corporate social responsibility and building a talent pipeline. 

Pietro D. Pitts: What's the difference you see between ESG and the seemingly old buzzword corporate social responsibility or CSR?

Sandra Nessing: I think they are two different things. They’re complementary to each other, but they are different things.

CSR I see as… that’s your long game. That’s your vision. Sustainability is where you’re going in the future. That’s what you’re working toward. ESG is the external world and the impacts that it has on our company. So, it’s the inside looking out and the outside looking in and ESG is really where we’re measuring our progress and we’re also managing all the risks associated with the externalities that are impacting our business.

So, I think they’re both legit, and one has not replaced the other, but they’re also not the same thing. 

PDP: You see the ‘E’ in ESG as a kind of risk management and have said that ESG is not dead. Could you expand on these thoughts?

SN: ESG is definitely a form of risk management for companies because what it does is it puts a focus on your non-financial performance. And, CFOs and companies are really focused on the bottom line: the balance sheet and the financials.

But if you are not doing well in the non-financial side of your business, it can have tremendous impacts on your finances. [In terms of safety] it’s a proxy for governance. So, when you don’t think about something and that impacts your financials. So yeah, it is definitely a risk management strategy for us.

We have ESG on our risk registry and we monitor that and report out on that multiple times a year about how we’re managing it and the controls in place. So, it’s really important. I’ve seen that show up and impact so many different parts of our business.

ESG can impact your access to and cost of capital, your credit ratings, your ability to insure your assets, your brand, your reputation, your license to operate—all those things. So, why would you not pay attention to ESG? 

PDP: AEP has a new incoming female CEO that is highly focused on the ‘S’ in ESG. Why is the ‘S’ so important to her, in your words?

SN: That’s just the kind of person that she is. She has always been about people and the team.

She’s also an executive sponsor of one of our ERGs, our employee resource groups, and she’s just very socially focused. She’s a big volunteer in the community, she runs marathons, and she’s done peloton raising money for cancer treatment and research. So, she’s just very big on the social aspect.

She also actually, with our chief diversity officer, organized what we call an IDEA summit which is short for Inclusivity Diversity Equity and Accountability, to help address and talk about some of these issues around diversity and inclusion, and she’s just very passionate about it. And I’m super excited about that. 

Editor’s Note: Effective Jan. 1, Julie Sloat, AEP president and current CFO, becomes the company’s first female CEO.

PDP: In terms of diversity in the energy industry, your company is active in the recruitment of students from HBCUs or historically black colleges and universities and other schools where there are Latinos or other minority groups who may have heard about the energy sector or some that no idea about what the sector does. What is your company doing in the recruitment space? 

SN: I really think Human Resources is much more progressive and in tune with the need to build a talent pipeline right from kindergarten on up. We want to reflect and represent our communities that we serve and our customers that we serve. We can’t do that if we just do the same old, same old thing. So, there’s a very intentional approach and strategy for this type of recruitment. Having a chief diversity officer has made a world of difference. She brings really great ideas and connections, and we’re doing things that we hadn't done in the past, or we do that sporadically. Right now, it’s very intentional and strategic. 

I personally think this is a really exciting industry to be in and as our current CEO has said, “come join us and lead the future” and that’s really what we’re talking about. Who doesn’t want to be part of something like that? But getting to those diverse institutions and even the diverse student bodies of community colleges is really important. There are so many important jobs that don’t require four year degrees. We want to be able to build that talent pool, not just in this area, but more broadly and that’s really important for our industry because you can’t walk off the street and be a line worker, you can’t walk off the street and operate a wind farm or a power plant or something like that. It takes a big commitment of education and training. 

We have a program called Women in Line Work. It’s a pilot program in Ohio, but we’re looking to replicate this around our service territory and hopefully within the industry and it is targeting women who are in disadvantaged communities. And we’re giving them—if they’re interested and they want a career to be a line worker—the training, pay for the training, and a salary with benefits and at the end of their training if they complete all the different steps and they get the certifications, they have a job. We’ve got a small class right now that we’re piloting but it’s really exciting to see that because there are so few women in line work. So, it’s not just looking at the colleges, you’re looking in your communities too.

PDP: Is the U.S. oil and gas industry trailing others from say Latin America or other parts of the world in terms of female representation within the higher ranks of companies and beyond say Vicki Hollub the CEO at Occidental Petroleum?

SN: I think we’re getting there. We’re starting to see a real change… with Lynn Good as CEO at Duke Energy, she was one of the first, and then Patricia Poppe as CEO at PG&E Corporation. We just hired a female CFO and our lead director is a Hispanic female. So, our company is going to be led by all women starting Jan. 1. But, yeah we’ve been lagging for a long time but I do think we’re starting to make up some of that ground.