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Utility sector progressing on gender diversity, but experts say more work needed

Maintaining gender diversity should be an essential goal for all organizations, including state utility commissions and the utilities they regulate, although it is an endeavor that constitutes only one part of environmental, social and governance commitments that are dramatically altering the global workplace.

That was the general assessment put forth by several experts on workplace diversity Feb. 4, in a panel titled "Diversity as levers of change: during and after COVID," during the winter policy session of the National Association of Regulatory Utility Commissioners, or NARUC.

Commissioner Sadzi Oliva of the Illinois Commerce Commission began the discussion on behalf of NARUC's Select Committee on Regulatory and Industry Diversity and the Committee on International Relations by introducing details of a recent webinar, "The Intersection of COVID, recession, and race, and their impact on utility regulation."

Oliva said the webinar acknowledged that the COVID-19 pandemic has disproportionately impacted lower-income communities but there is a "large pool of diversity in the pipeline" for various industries. She said it is essential for organizations to hold meetings in communities that have been adversely affected by the pandemic and community colleges and trade schools should be tapped to fill key roles in organizations. Oliva pointed out that employment internships allow newcomers to organizations to be paired with senior officials, improving the prospects for retainment going forward. She concluded by saying it is very important to have diversity in senior leadership positions in the energy sector.

An international perspective

Lorraine Akiba, a former member of Hawaii Public Utilities Commission and current president and CEO of LHA Ventures, said during her focus on "Global gender diversity perspectives: corporate ESG and government directives as levers of change," that former Japanese Prime Minister Shinzo Abe's commitment to address gender diversity and equality in the workplace prompted meaningful government action in that country. Abe said several years ago that women's participation and advancement in the workplace is key to boosting Japan's economy. Japan's original goal in 2013 was to boost representation of women in executive leadership roles to 30% by 2020, but this goal has since been increased to 40% by 2030 under the administration of new Prime Minister Yoshihide Suga.

Akiba said that in Japan, one year of paid parental leave became available to employees in recent years, and this has resulted in 53% of employees returning to work at the conclusion of their leave versus 38% of employees returning to their roles in 2010, before the policy was established. Men in Japan are also participating in parenting to a greater extent than in previous years, and the country's leave policies have helped this take place. Also, expanded childcare capacity has enabled women to join the workforce in greater numbers. Akiba said that Japan has become more focused on the "governance" part of ESG, whereas many western nations appear to be more focused on the "environmental" and "social" aspects of it.

In South Korea, Akiba pointed out that a more sizeable gender gap exists, as the country ranks 108 of 153 in an evaluation of global standards of economic participation, education, health and "promotional empowerment." South Korea has a patriarchal culture in which military service is required for all men, resulting in a male-dominated society. Traditional chores and parenting responsibilities generally fall to women. President Moon Jae-In is attempting to reduce the gender gap by setting standards for creating a framework of gender equality. For example, public universities now have specific recruitment targets for women and there are other affirmative action quotas.

Diversity takes shape at utility commissions

The utility sector has historically been heavily male-dominated, and U.S. utility commissions are no exception. Over the past four years, Regulatory Research Associates, a group within S&P Global Market Intelligence, has been tracking the gender composition of state and federal utility commissions. A gradual trend has begun to emerge that shows more women serving as commissioners and in leadership capacities. Currently, more than 37% of all utility regulators are women; a few years ago, that number stood at 33%. Additionally, over the years, more women have begun to assume leadership positions within their agencies.

Gender diversity at the utility level is critical to ensure that the sector's innovation continues. Groups that are quite comprise of a gender-diverse mix can provide different opinions, perspectives and approach situations in an alternative manner. The past few decades have shown that industry is not one to remain stagnant, with the inclusion of renewable generation, new technologies and more public engagement.

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A diverse workforce can produce successful businesses

Allison Carlson, Managing Director of FP Analytics, a division of The Foreign Policy Group, highlighted in "Women as levers of change" that legacy industries have been under intense pressure to reform their hiring and promotion policies. Carlson said consumers are increasingly conscious about their consumption habits and socially conscious investing is no longer just a niche goal. She said younger generations have become quite focused on the quality of their working environments and are pushing for enhanced diversity and inclusion efforts.

Carlson has studied the changes that are taking place in various sectors of the U.S. economy, including industrials, energy, consumer products, materials and utilities/waste services. More than 2,300 companies were analyzed and one-on-one interviews were conducted with many women working in these industries.

The findings are encouraging but still show that women are "substantially underrepresented" in corporate America according to Carlson. Women are represented in roughly one in five managerial roles and comprise about 13% of corporate boards. Carlson said that electric and natural gas utilities perform better than average on gender diversity metrics, with about 24% representation in their ranks. For these utilities, about 16% of board seats are held by women. Carlson said that women are having a tangible impact on the push for enhanced energy efficiency in the sector.

According to Carlson, the top quartile of companies with the highest percentage of women in executive management and on boards were, on average, 47% more profitable than companies in the bottom quartile. The top companies were also 32% more transparent and ranked 74% higher on ESG metrics. Carlson said that despite relatively low representation, there could be "exponential growth" in these metrics as more women are included in senior roles prospectively. She stressed that companies should consider whether imbalances exist in their employees' work-life balance, and if an "unwelcoming corporate culture," a lack of career advancement opportunities, a negative industry image and a gender imbalance in science, technology, engineering and math, or STEM, recruitment could be hurting their push toward equality in the workplace. Carlson pointed out that often women are limited by equipment in the workplace that is designed for men and this can have important safety implications.

Carlson said "building the pipeline of female talent is incredibly important" and supporting women in STEM education at a young age and offering relevant training and certification support on the job would help to bolster gender equality in management roles. A job application process that is "blind" to gender could allow women to compete on their merits. Carlson concluded that it takes stakeholders in the public and corporate sectors, as well as representatives in industry associations, the investment community, advocacy groups, consulting firms and the media to effectuate meaningful change.

Panelists offer additional perspectives

In response to a question about whether Japan or South Korea have demonstrated efforts to address the need for racial diversity, Akiba said she hasn't conducted research into this area, but she surmises that, by virtue of their aging population and with many younger citizens leaving their country, Japanese officials could move to adopt supportive immigration policies to address labor shortages that are impacting certain parts of their economy. She thinks that similar policies could be adopted to bolster racial diversity.

As to a question about what U.S. companies are doing relative to those in Japan and South Korea on diversity, Akiba said U.S. companies are certainly aware of the need for enhanced diversity and some of the more progressive companies have demonstrated they are open to paid parental leave, remote work and robust use of technology. Akiba acknowledged that not every company or role offers a flexible work environment. "Numbers do matter," Akiba said, and more companies are adopting gender equality as a goal rather than being mandated to do so. Akiba pointed out that "the onus has to be on corporate responsibility" and this will ultimately make U.S. companies more competitive globally. She said if a company is perceived as not being progressive enough, customers may simply go elsewhere for products and services. "It's basic marketing," she concluded.

NARUC's focus on diversity is not new

ESG matters have garnered attention at recent NARUC conferences, including at the organization's summer policy summit held in July 2020. Regulators devoted much of the event to the topics of resiliency and social responsibility in an era of uncertainty.

The summer policy summit highlighted the need for diversity within the utility industry's workforce. A two-part session, "Rekindling a dynamic, diverse and resilient energy workforce," drew attention to the ways in which workforce diversity and inclusion have been shown to benefit companies not just from a societal perspective, but also to their bottom lines.

Though various studies have been published on the correlation between workforce diversity and corporate profits, a panel participant at the time pointed to research from McKinsey & Co. that found companies in the top quartile for gender or racial and ethnic diversity are more likely to have financial returns above their national industry medians. Conversely, the research found that companies in the bottom quartile of these dimensions are less likely to achieve above-average returns.

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