ESG Q&A with Southern Company
Tom Fanning
Chairman & Chief Executive Officer
Southern Company
Environmental
You have a net zero by 2050 goal, but what are your interim milestones? What are the KPI’s we can track to monitor your progress?
We are proud of our recent progress in reducing GHG emissions by 52% in 2020 relative to 2007 levels, and we expect to achieve reductions of 50% or greater on a consistent basis by 2025, a full five years ahead of our goal. Our net zero goal includes direct GHG emissions across our electric and natural gas businesses.
Social
Some companies are resetting DE&I goals. How have the goals changed, and how are they measured? What operational changes have been made to support achieving the new goals? How are management and Board engaged in DE&I?
Diversity and Inclusion have long been core values for our company. The events of 2020 highlighted the racial inequity that persists in America. We have refocused our efforts toward a more holistic goal of diversity, equity and inclusion to ensure that all groups are welcomed, well represented, engaged and treated equitably.
Our management and Board are heavily engaged in the oversight and management of ESG. Each of the board committees have primary oversight over specific areas. For instance, the Compensation and Management Succession Committee has primary oversight over human capital management which includes our DE&I initiatives.
In fact, we created a Racial Equity framework that focuses on talent, culture, community, political engagement and suppliers. This effort was led by senior management and has been instrumental in analyzing where we can make the biggest impacts for racial equity so that we can be hyper focused to making lasting change.
Our employees and workplace culture
Over the next five years, we’ve committed to increase and improve outreach, recruitment, hiring and retention of diverse groups at all levels of the workforce. That includes equity in our leadership development programs, recruiting processes and candidate selection slates. Across our company, each subsidiary and function will establish lawful and measurable goals in these areas to achieve by 2025.
We will proactively track, analyze and benchmark key metrics to understand our opportunities for improvement across the full talent journey for each underrepresented group of employees. We commit to act on these learnings and communicate them with transparency.
The community
“A Citizen Wherever We Serve” has long been our mantra. We consistently enrich our communities through partnerships with local organizations, charitable donations, volunteerism, and active engagement.
Through our foundations, we have committed $200M over five years to advance racial equity and social justice across three key pillars: education, criminal justice reform and economic empowerment. As part of this commitment, in Jan 2021, we announced our partnership with Apple to launch the Propel Center that will invest in students at historically black colleges and universities (HBCUs) with the vision to build generations of black leaders who advance equity and justice through technology, entrepreneurship, education and social impact. You can learn more at https://propelcenter.org/
Additionally, we have committed to advocate for racial equity through our political engagement, policy positions and ongoing public discourse.
Suppliers
We will increase our total spend with Diverse and Minority Business Enterprise (MBE) suppliers and place greater focus on doing business with diverse and Black-owned businesses, both as prime suppliers and sub-contractors. We set a goal of increasing our MBE spend to 20% and Diverse spend to 30% by 2025.
I invite you to learn more at: http://southerncompany.info/bethechange
What is the most important component of the “Social” part of ESG to you and how do you plan to enforce or strengthen it?
Each of these areas is important to us as we strive to make a meaningful impact in our communities and with our employees and customers.
Importantly, we want to know that our actions are making a difference, so we’ve established measurable, time bound goals around each of our social pillars to create accountability that will support our ability to realize results.
Governance
Does your company actively monitor (at the Board and executive level) any gender pay gaps in like-for like positions? What is your strategy for addressing any gaps?
Our compensation system is designed to promote pay equity throughout the entirety of each employee’s tenure. To help ensure compensation is fair, competitive and equitable, we have adhered to several key strategies:
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We pay market-competitive rates. We use highly reliable data sources and rigorous compensation analysis to help ensure alignment to the market.
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We adhere to the pay for performance philosophy which allows managers to reward employees based on performance within established controls.
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We utilize several additional measures to promote fairness, including strong market data and job pricing, well-defined salary structures, comprehensive merit and incentive processes -- along with clear procedures for employees to voice concerns.
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When appropriate, pay adjustments may occur in accordance with an employee’s performance or changes in responsibilities. Adjustments may also occur with ad hoc market-based changes or as the result of an equity audit.
We internally conduct a pay equity audit each year. These audits are performed to evaluate potential inequities or inconsistencies in our pay practices. In 2020, we engaged an independent third party to perform the annual pay equity audit plus wage gap and glass ceiling analysis. Detailed results are reported to the Compensation Committee and to senior leadership. This annual audit helps us evaluate our compensation program and consistently confirms strong pay equity across all operating companies.
The Compensation Committee and senior management remain vigilant in our efforts to help ensure all employees are treated fairly and consistently.
Further Reading
