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Ørsted
The world's most sustainable business
Ørsted, the energy company based in Fredericia, Denmark, was recently ranked "the world’s most sustainable company", by Corporate Knights 2020, which is not bad given that 10 years ago 95% of its energy came from fossil fuels. Ørsted’s vision is a world that runs entirely on green energy.
In 2012, then known as DONG, Danish Oil and Natural Gas, it found itself in a financial predicament as global overproduction sent gas prices plunging. S&P downgraded the 6,000-employee firm’s credit rating to negative, raising the cost of its considerable debt. The board hired a former leader of the transformation at Lego, Henrik Poulsen, as the new CEO. Whereas some leaders might have gone into crisis management mode, laying off workers until prices recovered, Poulsen recognised the moment as an opportunity for fundamental change.
“We saw the need to build an entirely new company,” Poulsen says. “It had to be a radical transformation; we needed to build a new core business and find new areas of sustainable growth. We looked at the mandate to combat climate change, and we became one of the few companies to wholeheartedly make this profound decision, to be one of the first to go from black to green energy.”
Poulsen emphasized both the short-term and long-term nature of the change. “We looked at the 12 different lines of business we were in and went through them asset by asset, to see where we saw competitive strength. Coal, oil and gas were rapidly eroding as businesses, so we decided to divest eight of our twelve divisions and use the proceeds to reduce our debt.”
The had also started looking beyond its core, and had invested in offshore wind power, but the technology was still too expensive, producing energy that was more than double the price of onshore wind. Under Poulsen, the company embarked on a systematic “cost-out” program to reduce the expense of every aspect of building and running offshore wind farms while achieving scale in this emerging market.
Poulsen renamed the company Ørsted, after the legendary Danish scientist Hans Christian Ørsted, who discovered the principles of electromagnetism. This helped infuse a sense of purpose into the organization that drove it to cut the cost of offshore wind power by 60% while building three major new ocean-based wind farms in the UK and acquiring a leading company in the USA to pioneer North American offshore waters.
Previously 80% owned by the Danish government, Orsted’s IPO in 2016 was one the year’s largest. Net Profits have surged more than $3 billion since 2013, and Orsted is now the world’s largest offshore wind company, with a 30% share of a booming global market.
On its ranking as “the world’s most sustainable company” for 2020 by Corporate Knights’ Global 100 Index, Poulsen 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.”