Siemens has finally abandoned its nuclear business after some months of speculation. In an interview over the weekend with Der Speiegel magazine, Siemens CEO Peter Loescher said:
The chapter for us is closed.....We will no longer be involved in managing the building or financing of nuclear plants.
Siemens' nuclear business has been troubled for some time after a failed joint venture with Areva in France was terminated in favour of a new deal with Russia's Rosatom now aborted. Siemens would have been a minority partner in the new business but was said to have rapidly cooled on the idea after the Fukushima accident in March.
Siemens is walking away from a not inconsequential market opportunity with their own projections showing nuclear power generation growing by 90% over the period 2009 - 2030. The company had built all 17 of Germany's nuclear power plants which Chancellor Merkel has now decreed must close earlier than planned and no later than 2022. Merkel bowed to German public pressure in the wake of Fukushima and has redoubled industrial policy to make Germany a green tech leader. Loescher in turn has fallen in line with stakeholder opinion. He said he believed it to be:
the clear positioning of German society and politics for a pullout from nuclear energy.
He also supports Merkel's goal to move from 17% to reach a 35% renewables target for the German national grid by 2020 as the:
....project of a century.
Before this announcement Siemens were turning over €27 billion or 35% of total revenue from its environmental solutions portfolio with a target to grow the business to €40 billion by the end of 2014. Pulling out of nuclear will mean a more intense concentration on the green portfolio.
But what is somewhat more curious is how Siemens' communicated its changing nuclear position & stakeholder demands in its sustainability reporting. As late as 2008 it reported a commitment to its nuclear business but then fell completely silent in the 2009 and 2010 reports. The 2010 report was issued just one month after the Fukushima accident which clearly had a dramatic influence on the sustainability strategy of the firm given today's announcement but the nuclear question was not aired. Indeed, PwC signed off on the report and published an independent opinion of assurance that all material issues had been addressed even though the issue of its nuclear business was not addressed.
In contrast, arch competitor GE's 2010 corporate citizenship report issued in July takes the issue of nuclear head on and without the benefit of an independent assurance provider's prompting. It describes concerns over nuclear power as a strategic issue for its energy business and Jeff Immelt also addressed it writing in the foreword:
We remain committed to nuclear as part of the overall energy mix, and we are committed to learning from all the events created by the horrific earthquake and tsunami in Japan.
GE designed and built the reactors which failed at Fukishima and it is prepared to take the hit from the ethical investor constituency over it's long term commitment to nuclear.
And while GE is widely acknowledged as a sustainability leader in its products and processes, the traditional 'socially responsible investment' community, primarily because of its aversion nuclear technology or defence related activities, holds very little stock.
There are important questions here about standards of reporting, timing, consistency, comparability, materiality and of the role & professional practice of an independent assurance provider. Sustainability reporting is still in its infancy so its natural that variability will arise at this stage even amongst the reporting practices of closely comparable industry peers. A trend towards more integrated financial, non financial and sustainability reporting may help iron out some of these creases in the longer run and help ensure there firms are challenged not only to be transparent but also to perform against common or comparable strategic sustainability objectives. Big 4 independent assurance providers too must up their game.
Siemens is making very tough choices of leadership in shifting its business model to embrace sustainability and, indeed, it is already the leader in its sector according to the Dow Jones Sustainability Index. If Siemens is successful with its emergenct sustainability strategy, over the longer run it will have a defining role in speeding the transition to a lower impact & more stable global economy.