Ørsted, the Danish energy business, has transformed itself from black to green in a decade, and is now “the world’s most sustainable company”
January 30, 2020
Ørsted, Denmark’s leading energy company, based in Fredericia, is ranked “the world’s most sustainable company” for 2020 by Corporate Knights’ Global 100 Index.
- The Global 100 “World’s Most Sustainable Company” Report 2020
- The Global 100 ‘World’s Most Sustainable Company” Ranking 2020
Ørsted has transformed itself in a decade from being a fossil fuel-based energy company into being a world leader in green energy and sustainable practices.
Henrik Poulsen, CEO of Ørsted says “As the global leader in offshore wind, we’ve substantially grown our business while significantly reducing our carbon emissions. We have reduced our carbon emissions by 86%, and by 2025, we’ll be carbon neutral in our energy generation and operations. We also have a target of achieving a carbon neutral footprint by 2040.”
“Green energy is now cheaper than black energy. This is a real turning point, because green energy has become the economic choice. This gives the world a unique opportunity to take real action against climate change and create a world that runs entirely on green energy.” says Poulsen
Transforming an energy company the size of Ørsted has not been easy, but it was necessary. We made the decision to change our business based on the realisation that fossil fuels were neither environmentally nor financially sustainable. Our key drivers for combating climate change are:
Phase out coal
Our business was initially based on fossil fuels, and we were one of the most coal-intensive energy companies in Europe. But we dismantled our fossil fuel business and now focus entirely on renewables. We’ll completely phase out the use of coal by 2023 and generate nearly 100% green energy by 2025.
Offshore wind energy
We develop offshore wind, onshore wind, solar energy and storage solutions, and are the global leader in offshore wind. Through innovation and large-scale deployment of offshore wind technology, we’ve helped bring down the cost of offshore wind. Today, it’s cheaper than newly built coal- and gas-fired power plants in most parts of the world. It’s a game changer that has lifted the offshore wind industry from a niche to a global and rapidly growing industry with the potential to deliver green energy to hundreds of millions of people.
“While we’re proud and grateful to be ranked the most sustainable company in the world in 2020, we’re also painfully aware that the world must speed up green action to stay below the 1.5°C limit for global warming outlined in the Paris Agreement on climate change.
Countries and businesses must take active, ambitious steps to reduce their emissions and help the environment – and they must act now. We believe that our transformation is proof that change is possible. Join us in creating a world that runs entirely on green energy: https://go.orsted.com/Act-now”
Here is an extract from this year’s report, telling the Ørsted story:
A decade ago, offshore wind power was one of the costliest forms of electricity generation in the world, and even its leading exponent was dominated by fossil fuels – right down to its name.
DONG (Danish Oil and Natural Gas) may have opened what was then the world’s largest offshore wind farm in 2009, but the company was also widely acknowledged – and considered itself – as one of the best developers of coal-fired power plants. Since then, it has undergone one of the business world’s most radical transformations and got itself a new name, Ørsted – after the Danish physicist Hans Christian Ørsted, who discovered electromagnetism in 1820.
“In the past 10 years, we have transformed from a company that had fossil fuels at the core of its business to being essentially a pure-play renewable energy company,” says CEO Henrik Poulsen. “If you look at the transformation of the company, it has been dramatic.”
Asked why he thinks Ørsted topped the Global 100 ranking, he suggests that it could be “the sheer scale of the transformation and the speed – the fact that we have done all this within a decade.” “All this” is having reduced its CO2 emissions by more than 80% since 2006 and earning the title of the most sustainable company on the planet.
The company, which produced 85% of its energy a decade ago from fossil fuels and 15% from renewable energy, has reversed that proportion and has a target to “essentially become carbon neutral” by 2025.
“That was important in terms of being a purpose-driven company,” Poulsen adds, “but it is just as important that we managed to do this while demonstrating good shareholder-value creation and strong return on capital employed. Our return on capital is 300 to 400 basis points higher than the European average. Since Ørsted joined the stock market through the world’s second-biggest initial public offering of 2016, the company’s value has more than doubled to $US 40 billion.
“Running the company just for profit doesn’t make sense, but running it just for a bigger purpose is also not sustainable in the long term. Doing good and doing well must go together.”
The transformation has not been an easy one. “Over the past eight or nine years, we have been gradually disassembling the very core of the company and using the cash from that to accelerate the build-out of our leadership position in offshore wind. It has been a dramatic change. Some people have left when we divested, and others have been part of a huge growth journey.”
While the journey has been challenging at an operational level, the company was at least confident it was heading in the right direction. “We were helped by the underlying trends in society. We need to fundamentally change the global energy system from black to green energy. What we saw as an opportunity is now really required,” Poulsen says.
At the same time, the company can justifiably claim to have played a key role in turning offshore wind from an expensive, unviable but interesting technology to a central part of the mainstream energy mix. “Even five years ago, it was no more than a niche. Now it’s a significant part of the future green-energy system. It’s a transformation not just for our company, but a significant contributor to the broader green energy transformation.”
The industry has developed faster than even those involved thought possible, Poulsen points out. In 2013, the industry set a target of reducing costs for offshore wind by 35 to 40% by 2020, but that was achieved in 2016. “We thought 35 to 40% was an ambitious target, but costs fell much faster than we expected. When we set out to change a decade ago, we thought the transformation to green energy would be complete by 2040. But we will reach that 2040 target 20 years earlier than we originally envisioned.”
Given the scale and speed of its transition, Ørsted has become a poster child for the transition to a low-carbon economy, something that Poulsen embraces. “I hope we can be an inspiration to others, yes. Both in terms of the radical nature of our transition and the speed.”
“When you look at the challenge we face as a global community – to halve our emissions by 2030 even though we have not yet had a single year in which emissions have fallen – it’s clear that all companies must become more ambitious with their timeline for action,” he says. “Companies setting a 2050 target for emissions reductions need to reconsider whether they can do it faster and go further. What we have shown is that you can be much more radical than you might think.”