Fortum

Published in December 2022, Fortum’s Business Ethics Guidelines for Lobbying establish the company’s principles for lobbying and stakeholder relations. The company has a governance model for public affairs, defining its objectives, roles and responsibilities. In 2021, Fortum has conducted a Climate Lobbying Review to assess industry associations and its own lobbying positions for alignment with the Paris Agreement. In addition to these efforts, the company should create an action plan for addressing any misalignment with its industry associations’ positions.

Excluding its Russian operations, divested in 2022, nearly 90% of the group’s operating income stemmed from its Nordic power generation, primarily based on hydro and nuclear power. This core business is complemented by onshore wind and solar projects, district heating and cooling operations and an electricity retail segment. Fortum is planning up to USD 1 billion as growth capital expenditure (CapEx) for the period 2023-2025, of which USD 740 million is committed to clean energy and decarbonisation initiatives, including building the Pjelax wind park and extending the lifetime of the Loviisa nuclear power plant in Finland.

Fortum aims for carbon neutrality across its operations and value chain by 2030. By 2028, it plans to reduce its scope 1 emissions intensity to under 10 grams of carbon dioxide per kilowatt-hour (gCO2/kWh) for for power generation, representing the reduction of approximately 95% from 2022 levels. However, the 2028 target has been set in 2023 and could not be scored in this benchmark to assess the company’s progress against its target as the base year is the same as the company’s reporting year. Fortum’s targets exceed the requirements of the company’s 1.5°C pathway, but the company can enhance its credibility by disclosing the use of offsets to achieve these goals.

In 2022 the company invested about USD 282 million in low-carbon technologies. This represents about 51% of the company’s CapEx, which is below sectoral expectation of 95% low-carbon CapEx for companies based in advanced economies. The company’s emissions intensity has been reflecting its major structural changes, peaking in 2020 when Uniper, Fortum’s primary fossil fuel-based subsidiary, was consolidated and dropping with its divestment. Overall, the company’s emissions intensity in 2022 was about the same as in 2018. The company must reduce its emissions intensity by approximately 8% per year to align with its 1.5°C pathway.

Fortum uses a supplier qualification process to engage, gather information and assess suppliers’ performance in relation to emissions reduction. The company expects its suppliers to consider the climate impact of their operations and reduce greenhouse gas (GHGs) emissions where reasonable. Suppliers are also expected to promote the circular economy and pay attention to the efficient use of materials and the lifecycle impact of their products. Fortum can improve its performance by setting a requirement for suppliers to publicly report their GHG emissions. Additionally, the company should evaluate the impact of its supplier engagement in terms of emissions reduced.

Fortum aims to become carbon neutral by 2030 across the entire business, including its value chain. The company has accelerated its timeline for phasing out coal and now intends to complete this transition by the end of 2027. By 2028, Fortum is committed to reducing its scope 1 emissions intensity to less than 20 gCO2/kWh for total energy production and less than 10 gCO2/kWh for power generation. These targets represent a reduction of approximately 90% and 95% respectively, compared to 2022.

Fortum has estimated its growth CapEx to amount to USD 1 billion for the years 2023-2025. The company has committed to invest USD 740 million of its growth CapEx on clean energy and decarbonisation projects, including the Pjelax wind park and the lifetime extension of the Loviisa nuclear power plant in Finland. Fortum also aims to explore opportunities in nuclear energy and green hydrogen over time. The company does not, however, disclose if it intends to use offsets to achieve its 2030 target.

In 2022, Fortum completed the divestment of Uniper, a subsidiary responsible for the majority of its fossil fuel-based power generation. Fortum has yet to outline a concrete strategy for addressing its remaining coal capacity in Poland. The company has allocated approximately 51% of its CapEx toward low-carbon technologies, which falls short of the sectoral expectations for companies in advanced economies.

Despite a significant spike in emissions intensity in 2020 with Uniper’s consolidation and a significant drop in 2021 following its divestment, the company’s overall emissions intensity between 2017 and 2022 has remained static; its current emissions intensity is nearly the same as in 2018. To align with its 1.5 C pathway, the company must reduce its emissions intensity by approximately 8% per year.

In the absence of a well-defined timeline and financial strategy for phasing out coal, it’s uncertain whether Fortum can meet its targets. Both short-term and long-term decarbonisation actions of the company lack the necessary level of detail. The company needs to address disclosure gaps around its purchased power and develop a strategy to decarbonise its value chain. Enhancing its financial commitment and establishing clearer steps toward decarbonisation will help the company improve the credibility of its transition plan.

The company publicly discloses a commitment to engaging in social dialogue with workers and unions. However, no relevant disclosure was found regarding the categories of stakeholders it engages with on a just transition. Nor was there any evidence to show the company’s ongoing social dialogue and meaningful engagement with affected stakeholders. No evidence was found of the company undertaking just transition planning to mitigate the social impacts of the low-carbon transition on workers, affected stakeholders and its business relationships. Additionally, no evidence was found to demonstrate the company’s engagement in social dialogue and with stakeholders in just transition planning.

No public commitment by the company was found stating its intention to create and support access to green and decent jobs as part of the low-carbon transition. Moreover, no evidence was found of the company’s actions to promote these jobs in a way that ensures gender balance and inclusion of vulnerable groups. Additionally, no relevant disclosure was found of the company’s assessment of employment dislocation risks. The company discloses the actions it takes to provide training and education opportunities for workers and affected stakeholders. For instance, it offers digital nano-learning courses on topics related to leadership training and IT tools to its workers. However, no relevant disclosure was found of the company embedding equality of opportunity for women and vulnerable groups in these actions. Furthermore, no evidence was found of the company having a process for identifying skills gaps for workers and affected stakeholders or a public commitment to help workers displaced by the transition to reskill or upskill.

No relevant disclosure was found to show if the company identifies impacts of the low-carbon transition on social protection for workers and affected stakeholders, nor how it contributes to social protection. Additionally, no evidence was found that the company expects its business relationships to contribute to the social protection of their workers and affected stakeholders. No relevant disclosure was found to show how the company identifies any misalignment of its lobbying activities with policies and regulations that support the just transition, nor of the measures it takes to address misalignment. Furthermore, no evidence was found that the company lobbies for policies and regulations for green and decent job creation; retention, education and reskilling; and social protection for workers.

The company commits to respecting human rights and the ILO fundamental rights at work, and it expects its business relationships to respect the ILO fundamental rights at work. The company also discloses a human rights due diligence process that includes the identification and assessment of salient human rights risks. However, it is unclear that it has a process or global system to prevent, mitigate or remediate its salient human rights risks within its own operations or within its supply chains. The company has a grievance mechanism available to workers and external stakeholders.

The company commits to respecting the health and safety of its workers and expects the same commitment of its business relationships. However, no evidence was found of the company having a time-bound target for paying all workers a living wage. While the company discloses the proportion of its direct workforce covered by collective bargaining agreements, no relevant disclosure was found of the company’s required working hours. The company discloses some indicators of workforce diversity, including the age and gender of its workforce by employee category. However, no evidence was found that the company commits to gender equality and women’s empowerment.

The company commits to protecting personal data and has a privacy statement regarding the collection, sharing and access to personal data. The company discloses its global tax strategy, and also discloses the corporate income tax it pays in each relevant jurisdiction. The company does have a policy prohibiting bribery and corruption, and it includes corresponding clauses in its business relationship contracts. It also has a lobbying and political engagement policy, and it specifies that it does not make political contributions. Regardless, no relevant disclosure was found of the company’s expenditure on lobbying activities.