For years, utility giant Southern Company treated proposed government climate-change regulations like they were teetering trees threatening power lines.
CEO Tom Fanning even rejected overwhelming scientific understanding in 2017 when he said on CNBC it "certainly" wasn't proven that carbon dioxide, a pollutant that spews from some of the company's power plants, is the primary driver of climate change.
But, whether he’s convinced of the emissions harm or not, Fanning now has a personal financial stake in reducing them.
Southern’s board of directors recently disclosed it plans to link part of his pay to success in making further cuts in greenhouse gases discharged by Georgia Power, AGL and other holdings of the Atlanta-based company.
Up to $2 million of Fanning’s annual incentive compensation could be affected this year, according to a recent company filing. His total compensation last year was $13.1 million.
A number of public companies are under pressure from shareholders to reduce their carbon footprint. Relatively few corporations, though, have tied those efforts to CEO pay.
That Southern will be one of them has amazed some, given that the company had been one of the most potent fighters against government attempts to force businesses to cut emissions. The company said such regulations were overreach, too demanding and too costly for consumers and businesses. Southern also has been among the heaviest spenders on lobbying Congress and the federal government.
“It is kind of remarkable in a lot of ways in terms of where we first started,” said Sister Patricia Daly, a Dominican nun, Southern shareholder and environmental activist based in Montclair, N.J.
She and others have been pushing Southern to deal with carbon for decades. They gained steam when shareholders nearly passed a 2017 proposal, fought by the company, requesting a report on how to make steep carbon cuts to meet international guidance. Daly described Southern’s latest moves as just a first step, but also a serious shift.
Already cutting carbon
Despite its resistance on the regulatory front, Southern has been curbing its carbon footprint in Georgia for years.
That's the result of shifting economics that led Georgia Power and other utilities to switch from heavy reliance on coal to cheaper natural gas, which tends to have significantly lower CO2 emissions. Under pressure from state regulators and business customers, the company also has put more emphasis on carbon-free solar power.
And Southern is boosting nuclear energy with the expansion of Plant Vogtle, south of Augusta. The project is years behind schedule and billions of dollars over budget, costs that are likely to be passed on to Georgia consumers and business. But the two new reactors will produce more carbon-free power.
Additional carbon cuts are on the horizon. A year ago, Southern unveiled its first companywide goals to reduce CO2 emissions.
By 2030, the company said, discharges will be half of what they were in 2007. The company had accomplished much of that goal before it was announced, having sliced greenhouse gas emissions in the preceding decade by 36 percent. It still emitted more than 97 million metric tons of the gases in 2017.
Southern’s commitment for “low- to no-carbon emissions” by 2050 may be a far steeper challenge.
The company said it expects to close more coal units and rely more on natural gas-fueled plants, nuclear power, renewables, energy efficiency and research into fresh options.
“Southern Company is focused on developing and deploying technologies that reduce greenhouse gases while making sure that energy remains clean, safe, reliable and affordable,” a spokesman wrote in an emailed statement. “We believe this is the most responsible approach for our customers, our communities and our shareholders.”
Still, Georgia Power didn't specifically factor in its parent company's reduction goals when it updated long-range energy plans, one of the utility's executives recently said in a hearing with state regulators.
Growing pressure
Dan Bakal, a senior director at Ceres, a sustainability nonprofit that works with investors, said Southern’s 2030 goal “is not that ambitious” and the later goal is a bit vague. Nonetheless, he said, “I do commend Southern Company for taking this step.”
While other large U.S. companies include greenhouse gas reductions in broad scorecards about health, safety and the environment, “very few tie it formulaically to short- or long-term CEO compensation,” according to John Roe, head of ISS Analytics, an arm of Institutional Shareholder Services.
Among the few that do are Verizon Communications, Alcoa and Xcel Energy, Roe wrote in an email.
But pressure is growing. Royal Dutch Shell announced that next year it will link executive compensation to cutting emissions. And Chevron said reducing methane and flaring intensity would become part of a scorecard tied to pay, according to Reuters.
Past doubt
Even as Southern uses money to motivate its CEO on climate change issues, Fanning has left differing public impressions about his own thoughts on the causes of climate change.
Two years ago, during an appearance on CNBC, he was asked, "Do you think it has been proven that CO2 is the primary climate control knob?"
“No, certainly not,” Fanning replied. “Is climate change happening? Certainly. It’s been happening for millennia. That’s not the issue.”
But a month later, when talking about human-caused climate changes, Fanning said: “Does anthropogenic CO2 emissions influence global warming? Well, most science says it does. Absolutely.”
While there is debate related to how much temperature change might be involved, he said, “I would say that generally people believe – I believe – that anthropogenic CO2 emissions do impact global warming.”
Asked by The Atlanta Journal-Constitution to clarify specifically whether Southern’s leaders believe carbon is the main driver of climate change, a company spokesman didn’t give a clear affirmative or negative. He wrote: “Southern Company recognizes the importance of climate change for our nation and our world and is committed to our low- to no-carbon goal.”
Why it matters
Research into climate change has sparked worries about increasingly volatile weather and rising sea levels. It also raises investor concerns about potential risks for businesses — such as Atlanta-based Southern Company, the parent of Georgia Power — that have big investments tied to facilities emitting greenhouse gases blamed for contributing to the changes.
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