Finding emerging ESG issues using Datamaran

American Electric Power (AEP) owns and operates the largest transmission system in the US, with a distribution network providing power to homes and businesses in 11 states. Whilst climate is a key focus for businesses, AEP recognized they need to be ahead of emerging ESG issues and identify risks and opportunities to strengthen their policies.

Diversity, equity and inclusion are cornerstones of AEP’s company culture, mandatory ESG regulations have increased tenfold in the last five years, and the SEC proposal on climate-related disclosure marks the beginning of a further influx of mandatory regulations.

AEP uses data to implement a meaningful ESG strategy and focus on material issues. “AEP is a company of lawyers and engineers – there’s no gray area, it’s black and white, show me the data” said Sandy Nessing, Vice President and Chief Sustainability Officer at AEP.

Climate is a topic that is currently front-and-center in the business world, but AEP takes a broad-lens approach to managing and monitoring ESG. In their current Corporate Sustainability Report, AEP disclosed the company’s human rights policy for the first time.

Getting to that point required insights from Datamaran.

When Nessing and her team did a materiality assessment with Datamaran in 2020, human rights was flagged as an important emerging trend for AEP.

“We started to do research and benchmarking with peers, to understand why this would affect AEP,” she said. “Part of our research was a deep-dive look at every policy we had in place already that had human rights-related aspects to it. We saw it as an opportunity to better define and strengthen those policies before bringing them all together.”

The new Human Rights Policy has sparked conversations across the business about how people can best apply it. “It took us almost a year to put it together, make the case and get support,” Nessing said.

AEP’s standardized disclosure process sets the expectations, roles and responsibilities for people across the company who provide the data, which is collated using Smartsheet. Recently, the team set up the ESG Data Center, a part of the website that hosts more than 250 ESG metrics. “It’s incredible how much data flows through our group,” Nessing said.

The sustainability team owns certain policies and is responsible for data collection and storytelling. It works within an extensive ESG governance framework:

• The Corporate ESG Committee – the issue-spotter group uses Datamaran to monitor the ESG landscape.
• The Enterprise Sustainability Council has an accountability function for the organization.
• The ESG Subcommittee focuses on the sustainable finance framework.
• The Risk Executive Committee receives reports on how climate change and ESG are managed.

External groups such as the American Clean Power Association also help AEP manage and navigate some of the issues globally.

“We’re building a risk mindset and an audit mindset,” Nessing said. “We want people to come into this space prepared for the auditor to knock on their door, because it’s that important.”

“People are really engaged. They come to the table to share information and learn. And when they hear something from a different part of the business, it’s like an aha moment – they make the connections. That’s what we want them to do, because that’s where the risk mitigation comes into play.”