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‘Fairness’ in UK energy and water sectors: roles, responsibilities, and changing expectations

This summer, Sustainability First convened the third workshop in our Fair for the Future project, aimed at establishing a 'Sustainable Licence to Operate' for the energy and water sectors as set out in our proposed strawman.  The third pillar of the strawman focuses on the roles and responsibilities of key sectoral stakeholders in terms of delivering fairness – and how expectations are changing in a 'disrupted world' of political, social, and technological change.

One crucial way in which expectations have changed is a pendulum shift from stakeholders on what is meant by fairness.  Fairness can be interpreted or framed in a number of different ways: one might look at the additional needs or potential vulnerabilities of energy and water customers, or indeed increasing inequality and insecurity among consumers.  The question of environmental fairness also looms large as we look to tackle the climate emergency and achieve net zero in a way that does not unfairly impact the already disadvantaged – or store up costs or reduce quality of life for future generations and nature itself.  Clearly, these issues interact with one another, and if not dealt with will entrench the challenges the sectors face.

In our Pillar 3 workshop, we suggested that whereas fairness in energy and water has historically been perceived predominantly through the lens of fair markets, there is now a much greater onus on fair outcomes – both for today and for tomorrow.  We went on to highlight three dimensions of fairness – procedural fairness, distributional fairness, and fairness of opportunity – with the aim of testing principles for each of these with our invited attendees, around 40 senior stakeholders from across energy and water sectors, as well as government, regulation, and charities.

We proposed the following principle for dealing with procedural fairness: the greater the a) distributional impacts and b) degree of ethical or political judgement, the greater the importance in the decision-making process of accountability, transparency and consistency – and the decision maker having a democratic mandate.  For distributional fairness, principles could include costs being met by those who benefit from the service, who are best able to manage the risks, and who cause pollution; and the need for a joined-up and cumulative approach to long-term fairness and affordability.  Possible principles for fair opportunities meanwhile might include a focus on delivering long-term public interest outcomes which can help identify emerging boundary issues and discover the mutual interests/co-benefits that may help overcome these, as well as strategic current and future customer/citizen journey mapping which can clarify roles and accountabilities.

On the roles and responsibilities of companies, regulators, government, and other stakeholders, given the significant uncertainty in the sectors, we posited that there may be a need to move from 'territorial' and hierarchical models to those of collaboration for discovering and delivering mutual interests.  This may require companies to move from a current focus on silo-based strategic goals towards one on governance processes that identify common ground, aligning interests between investors and other stakeholders.  Additionally, this may require a step-change in stakeholder engagement on fairness in order to maximise legitimacy and address future challenges, engaging people as citizens, not just consumers.  Deliberative engagement such as citizens' assemblies or juries can help to identify values and common goals in this regard.

Sustainability First's proposed 'Sustainable Licence to Operate' strawman

Following these initial discussions, the workshop heard from a distinguished panel of experts on how they perceive their roles and responsibilities around fairness. Declan Burke, Director of Energy Strategy at the Department for Business, Energy and Industrial Strategy (BEIS), set out the Department's approach to tackling net zero – an approach guided by a belief in the creativity of markets, but one which should ensure adequate agility amid digitalisation and leave no room for 'free-riding', making sure distributional impacts are evenly shared. Gemma Holmes of the Committee on Climate Change summed up the roles and responsibilities of government and business respectively for adapting to and tackling climate change; while it is for individual organisations to determine their strategy, the onus is on government to create national strategic frameworks and show climate leadership.

Alex Plant of Anglian Water talked about the need for monopoly utility companies to move beyond merely delivering services and returns to shareholders, but also to explore adopting 'social contracts' through changing their Memorandum and Articles of Association along the lines of Water UK's Public Interest Commitment in order to tackle issues such as intergenerational inequality. Finally, Simon Roberts, Chief Executive of the Centre for Sustainable Energy, laid out the importance of making changes to the energy system work in the disruptive, innovation-driven way all of us need, but without leaving people in vulnerable situations behind – a key driver behind the charity's Smart and Fair? project.

Break-out groups discussed how to achieve greater clarity on roles and responsibilities for delivering fair public interest outcomes. Emily Anderson of the National Infrastructure Commission (NIC) set the scene, with an update on the Commission's review of regulation. Stakeholders were then invited to consider the 'ideal world' for delivering fairness in their respective roles and provide feedback on what would be needed to change to bring this about. Among other thought-provoking responses, participants stressed the importance of strong partnership-building, consistency and clarity from policymakers, and perhaps a greater emphasis on the local and 'place' in future frameworks – but also noted there may be a need to review how regulatory success is measured.

A second break-out group explored what is needed to bring about a step-change in stakeholder engagement on fairness issues. This was introduced by Clive Mitchell from Involve, the public participation charity awarded the contract for the UK parliamentary citizens' assembly on climate change. Such deliberative methods of engagement could, he argued, add value to stakeholders across the piece, helping to navigate uncertainty and complexity and unlock complex questions and trade-offs. Attendees indicated that it is important engagement is as open as possible, framed in such a way as to include a wide community of stakeholders including future generations. For companies carrying out this engagement, there is a need for independent and expert facilitation; regulators meanwhile should 'call out' where companies are not necessarily 'walking the talk' on delivering in the public interest. A step-change is possible, but this will require structures that enable the pooling of research within and between sectors, with the proper and timely sharing of learnings and good practice.

In this spirit of cross-sector learning, we also welcomed Peabody to the workshop for an illuminating case study on what the energy and water sectors can learn from social housing in terms of fairness. Peabody focused particularly on its Mission, Priorities and Values – a statement of purpose which has driven the Group's action on social rents, changes to tenancy periods, and establishing 'children's community' pilots in their areas. The case study is available to read in full on our website.

We will continue to explore these issues as part of our 'Talk into Action' series of papers on best practice and common challenges for the sectors, carrying out bilateral primary research with companies over the next month. We will then convene for the fourth and final Sustainable Licence to Operate workshop on 19 November 2019, where we will consider Pillar 4 of our proposed strawman – on the strategy and narratives companies may need to maintain a licence to operate. It will be another full agenda, and we hope a fascinating day. Do get in touch if you are interested in attending. 

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