CSR Issue

Energy Crisis: Impact and Sustainable

Solutions [Learner Name]

Capella University

May 25, 2022

Introduction

Resilient companies avoid making corporate social responsibility (CSR) an add-on to their regular operations.

Accounting for stakeholder interests should be integral to a company’s transformation efforts (Kaplan, 2020).

In the context of its entry into the European electric vehicle (EV) market, Tesla’s key strength is its core purpose— its exclusive focus on sustainable energy (Tesla, 2021).

Other automakers are mainly manufacturers of conventional cars and manufacture EVs to meet government regulations. Tesla, on the other hand, does not manufacture conventional cars.

The Problem

The CSR Issue Tesla’s Business Problem

• Europe has been facing a severe

energy crisis.

• Increasing energy costs impact

consumers and small businesses.

Driving the mission of transition to

sustainable energy in Europe

Impact of the

European

Energy Crisis

Impact on low-income households in the European Union (EU)

 Low-income households in the EU are unable to afford energy bills and pay proportionately more for energy (Right to Energy Coalition, n.d.).

 Energy poverty is expected to rise in the EU, making energy a social justice issue (Right to Energy Coalition, n.d.).

Impact on Germany

 The electricity prices in Germany are among the highest in Europe (Appunn, 2022), with the poorest paying proportionally more (Wehrmann, 2022).

 The German economy's reliance on Russian gas makes it particularly vulnerable (Chazan et al., 2022).

Advantages and Limitations of Possible

Solutions

Possible Solution Advantages Disadvantages

Sell power directly to low-

income households

Is feasible and can provide relief to

impacted households

May not be profitable for

Tesla

Set up virtual power plants

(VPPs)

Is feasible and sustainable for local

communities as well as for Tesla

May face competition

from local energy

companies

Carry out product donation in

worst-hit areas

Is impactful when the crisis is

localized and offers a sense of

purpose to employees

May not be profitable for

Tesla and may not impact

large-scale

transformation

substantially

Recommended

Solution

Setting up VPPs in Germany and impacted EU countries

 Aligns strongly with Tesla’s sustainable energy goals

 Bridges the affordability gap that keeps average

consumers from purchasing Tesla’s products

 Could play a crucial role in accelerating decarbonization

efforts

 Could help build clean energy ecosystems that boost the

use of Tesla products to their full potential

 Provides a viable solution to the energy crisis

 Could strengthen brand image and improve

shareholders’ market valuation

Sustainability of the CSR Solution

 Tesla’s VPP in South Australia has established the model as a sustainable clean

energy solution that can be scaled up.

 VPPs provide energy security and energy resilience to communities (Naval &

Yusta, 2021).

 Lower costs for consumers make it sustainable for low-income homes

(Lambert, 2022).

 Lower establishment costs and less reliance on big investments improve

profitability (Naval & Yusta, 2021).

 Shared ownership in the form of stock-based compensation allows Tesla to

pass on financial benefits to its employees (Tesla, 2021).

Conclusion

 Sustainability is integral to Tesla, not an expendable CSR agenda.

 The factory in Berlin is an opportunity to drive EV sales and accelerate

decarbonization in Europe.

 Responding to the energy crisis in Europe could deepen Tesla’s presence in the

continent.

 The energy crisis impacts low-income households.

 VPPs can address the current energy shortages while fulfilling Tesla’s mission

to accelerate the transition to sustainable energy.

References (1)

Appunn, K. (2022, February 24). The energy crunch – Effects on households and businesses and government’s reaction. Clean Energy Wire. https://www.cleanenergywire.org/factsheets/energy-crunch-effects-households-and-businesses-and-governments- reaction

Chazan, G., Miller, J., & Arnold, M. (2022, April 21). ‘Worst crisis since the second world war’: Germany prepares for a Russian gas embargo. Financial Times. https://www.ft.com/content/e82b11a1-cf1f-4543-9f9f-6ab70da6b746

Crispeels, P., Robertson, M., Somers, K., & Wiebes, E. (2022, April 21). Outsprinting the energy crisis. McKinsey & Company. https://www.mckinsey.com/business-functions/operations/our-insights/outsprinting-the-energy- crisis#:~:text=European%20energy%20markets%20are%20experiencing,higher%20than%20their%202021%20average.

Department for Energy and Mining. (n.d.). South Australia’s virtual power plant. Government of South Australia. https://www.energymining.sa.gov.au/growth_and_low_carbon/virtual_power_plant

Eckert, V., Steitz, C., Käckenhoff, T., & Taylor, E. (2020, September 2). Tesla tests the circuits for German energy market push. Reuters. https://www.reuters.com/article/us-tesla-energy-germany-focus-idINKBN25T1S7

Euronews. (2022, February 10). Why is there an energy crisis in Europe? https://www.euronews.com/2022/02/03/europe-s- energy-crisis-why-are-natural-gas-prices-soaring-and-how-will-it-affect-europeans

Hanley, S. (2020, September 9). Tesla puts new emphasis on becoming an electricity supplier in Germany. CleanTechnica. https://cleantechnica.com/2020/09/09/tesla-puts-new-emphasis-on-becoming-an-electricity-supplier-in-germany/

Kaplan, S. (2020, August 20). Why social responsibility produces more resilient organizations. MIT Sloan Management Review, 62(1), 85–90. https://sloanreview.mit.edu/article/why-social-responsibility-produces-more-resilient-organizations/

Kuiper, G. (2022, March 21). Why virtual power plants are the future of electricity retailing. Renew Economy. https://reneweconomy.com.au/why-virtual-power-plants-are-the-future-of-electricity-retailing/

References (2)

Lambert, F. (2022, April 27). Tesla expands its virtual power plant to new regions in Australia. Electrek. https://electrek.co/2022/04/27/tesla-expands-virtual-power-plant-new-regions-australia/

Lee, J., & Kwon, H.-B. (2019). The synergistic effect of environmental sustainability and corporate reputation on market value added (MVA) in manufacturing firms. International Journal of Production Research, 57(22), 7123– 7141. https://doi.org/10.1080/00207543.2019.1578430

Naval, N., & Yusta, J. M. (2021). Virtual power plant models and electricity markets - A review. Renewable and Sustainable Energy Reviews, 149, 11393. https://doi.org/10.1016/j.rser.2021.111393

Nazaruk, Z., & Pedersen, M. (2022, March 1). Why energy poverty is rising among low-income households in the EU. Euronews Green. https://www.euronews.com/green/2022/02/23/why-energy-poverty-is-rising-among-low-income-households- in-the-eu

Next Kraftwerke. (n.d.). The power of many. https://www.next-kraftwerke.com/vpp

Ohnsmann, A. (2022, January 26). Sales surge–but EV competition is building. Forbes. https://www.forbes.com/sites/alanohnsman/2022/01/26/tesla-notches-record-profit-on-sales-surgebut-ev-competition-is- building/?sh=1eb6f22d1ef6

Right to Energy Coalition. (n.d.). About energy poverty. https://righttoenergy.org/about-energy-poverty/

Tesla. (2020). Impact report. https://www.tesla.com/ns_videos/2020-tesla-impact-report.pdf

Tesla. (2021). Impact report. https://www.tesla.com/ns_videos/2021-tesla-impact-report.pdf

References (3)

Wehrmann, K. (2022, January 12). Poorest households in Germany pay highest share of income on energy expenditures. Clean Energy Wire. https://www.cleanenergywire.org/news/poorest-households-germany-pay-highest-share-income-energy- expenditures

Wickert, C., & de Bakker, F. G. A. (2019, January 10). How CSR managers can inspire other leaders to act on sustainability. Harvard Business Review. https://hbr.org/2019/01/how-csr-managers-can-inspire-other-leaders-to-act-on-sustainability

Wilmot, S. (2022, March 22). Tesla could take back Europe’s EV market. Wall Street Journal. https://www.wsj.com/articles/tesla-could-take-back-europes-ev-market-11647969137