Defining A Commercial Strategy Toward SBTi Accreditation

In this insightful discussion, Matthias Witzemann, partner in our Energy and Natural Resources Practice, interviews Kunal Chandra, the chief strategy and sustainability officer of RWE.

The conversation delves into Kunal's extensive career in the energy sector, spanning leadership roles at Shell and Siemens, culminating in his pivotal position at RWE.

A key highlight is RWE's recent accreditation from the Science Based Targets initiative (SBTi), achieved with crucial support from Oliver Wyman. Kunal details how this collaboration enabled RWE to thoroughly assess its carbon inventory and navigate the complexities of decarbonization, leveraging our expertise to shape a strategic pathway toward its climate goals.

Kunal also shares his leadership philosophy, which emphasizes team well-being and cross-functional collaboration. He outlines RWE's ambitious renewable energy commitments and reflects on the challenges of aligning with the SBTi framework.

Finally, he concludes with a forward-looking perspective on the emerging opportunities in renewable generation and energy storage, underscoring the vital role of innovation in achieving sustainable progress.

Matthias Witzemann: My name is Matthias Witzemann and I am a partner at Oliver Wyman in our Energy Natural Resource Practice. Today with me is Kunal Chandra, chief strategy and sustainability officer of RWE. We are gathered here in our London office to gain insights from Kunal’s experience in leading RWE through the entire energy transition. Kunal, warm welcome. Thanks for joining us today.

Kunal Chandra: Thanks for having me Matthias.
Matthias: Could you please briefly describe your career path and highlighting the experiences that shaped your leadership philosophy?

Kunal: So I've spent a lot of time in the energy industry now in different companies around the world. I worked for Shell, I worked for Siemens, and now I'm at RWE. The way I describe my career is it's a truly integrated energy career. I have done various technology, operational and now commercial roles.
At RWE, my remit is to look after the group strategy, portfolio, target portfolio, capital allocation, but also to lead all the sustainability efforts. We have a lot of priorities, besides only decarbonization. For example, we are looking at circularity, we are looking at biodiversity. So, my job is to bring it all together for the group and meet our targets.

My leadership philosophy has, of course, evolved over the many years in my career. I have lived in seven different countries. And I think that has been the single source of biggest transformation in how I approach my job, how I approach working with other people. The leaders, in my opinion, should of course be curious. They should be energetic. But the most important leadership attribute that I have come to now believe in and adopt is that a leader should be more focused on taking care of their team members, and the team members will then take care of the business. And this mindset where you focus on the needs of your teams, what do they need in order to perform best in order to be their best, including also their own well-being. And I have seen the results seem to follow from there. So, at the moment this is a leadership style, which I think it works well for me. And I think this is also a style that is more useful and helpful in the future.

We have really started investing large amounts of capital in renewable technologies. We look at onshore, we look at offshore wind, we look at photovoltaic batteries. And in 2022, after I joined, we also gained a strong position in the US. So now we are a transatlantic renewable energy company. 90 to 95% of our investments are going into renewable energies because this is where, we believe, the future is. A lot of the renewable energy technologies are already quite competitive, and therefore we think that they should now be scaled and that's what we are doing.

Additionally, of course, we are not only focused on producing the marginal electron, but we believe that the system also needs resilience and flexibility, and therefore we do operate gas plants. Here in the UK, we are also one of the biggest electricity providers with a big gas fleet and renewables. And of course, the next challenge for us is now to start thinking about how to decarbonize these flexible assets, which partly you do by installing more batteries. But also, we believe that decarbonized gas will be a part of the system as well. That's what the journey we have been on. We have been installing between 5 and 8 GW of new renewables every year. And we have very ambitious targets towards the end of the decade and beyond.

Matthias: Congratulations to your ambitious climate targets, and also to the validation of the 1.5 degrees target by SBTi. So, what were the most challenging obstacles you faced on that important milestone, and how did you perceive the collaboration with us, as Oliver Wyman, in that project?

Kunal: Well, first of all, just to highlight, the importance of why we wanted to be SBTi certified. So we were always on this pathway, but we thought that being aligned with SBTi and the 1.5°C pathway gives a much clearer understanding to our investors, our other stakeholders of not only that we are transforming, but also at what pace and with what ambition level. So that's where SBTi was very important for us, and we are very proud with the help of Oliver Wyman to have achieved it.

There were several challenges. Let me take them in sort of internal and external buckets. On the internal side, of course, it's easier said than done to fully understand where is the entire inventory of CO2. So, we are operating in different technologies. Some of them are still fossil heavy. But then on the decarbonized side, in renewables, you still have a lot of Scope 3 carbon, which is embedded into the capital investment. We are also one of the largest power and commodity traders in Europe, which means that in the products that we are buying and selling, there is a lot of carbon footprint coming from those products. So, what are the key challenges for us was indeed to understand what is this carbon inventory? Where is it coming from? The simple ones, like emissions from power production, were easy to understand, but as I describe, there are other portfolio elements that have a carbon footprint which was not fully understood. So, I think, working with your teams, who are very willing to get their hands dirty, get inside the organization, and really figure out every single carbon molecule, was very important for us.

The second challenge is that the SBTi framework is quite broad. It goes through some sectors, but still, it takes a lot of effort and expertise in order to interpret what this framework lays out, in the context of your own company and your own company targets. Because the most critical thing about SBTi is not just knowing where the emissions are today, but also where they need to go in the future. And lastly, of course, we did not just stop at understanding where the emissions are and where they need to be. But we also worked with you to come up with the most meaningful, cost-competitive strategy to get there. The discussion was around what are the key levers? For example, in Scope 3, we looked at green steel, polysilicon, or decarbonized cement, etc. But the challenge, of course, is that many of these solutions are not available commercially in the market. And therefore, we had to go through a merit order, to understand which of these options would become commercially viable earlier than others. Having that very deep, strategic analysis, and understanding the merit order of these solutions, ultimately gave us an SBTi aligned pathway and strategy. And your teams at Oliver Wyman really helped us through this project. First of all, the expertise that you pulled together from your pan-European offices—there were people on the team from Vienna, Paris, Amsterdam—helped us understand the SBTi frameworks and how it applies to us.

What was also very important is that in our company, which is a bit of a complex portfolio, it's not easy to find the entire CO2 inventory, where it sits, and your team was not shy in rolling up their sleeves, going inside the organization, and making sure that we have the best data necessary to baseline where we are, and then to figure out where we are headed. So, I think the collaboration with your team was great. For us, it's always very important not only to work co-creatively with our clients, as you mentioned, but also to have impact. And that's why I believe this project was so successful, because we not only developed the strategy together, but we also worked together with the different operational companies on how to set up the governance, how to reach your targets, and how to adjust key projects or processes like the strategy allocation process to make it really happen.

Matthias: Exactly. And I think that's very important to understand that for something as complex as applying an SBTi framework to your strategy, you can’t just stop at understanding targets and where you have to be, but you have to have a holistic strategy around how to get there. Looking ahead, what would you identify as the primary strategic opportunities that an energy company will encounter in the next couple of years on their journey on the energy transition?

Kunal: So there are plenty of opportunities. And of course, depending on which markets you are playing in, which countries, which technologies, there is still a lot of opportunity to build renewable generation, even in merchant markets in the US, where we have seen that the AI revolution has significantly increased the demand projections. There is still a lot of opportunity for renewables developers just to build renewable plants in contracted markets or merchant markets, especially in the US, with the demand growth that we are seeing from AI. There is a lot of growth of renewables possible and profitable in the coming years. So, of course, that's also where we have a portfolio focus. But if you want to become, and remain, a system-critical energy company, then storage is the biggest opportunity. These are not just short-term storage, which is serviced by batteries, but also long-duration storage. A lot of this demand cannot be met with current solutions, especially when the renewable penetration goes beyond 70%, 80%. How do we cater for those two weeks? And that's just one example. I believe storage is a very important topic.

In the last couple of years, of course, there has been some mixed emotions around energy transition and how expensive it is. And therefore, people have stopped talking about hard-to-abate sectors. But let's not forget sector coupling, and using electrification of other sectors to decarbonize them, would also continue to be a big area. And we at RWE are also playing in the downstream part of the value chain as a valued partner on the other side. And they look at it from their view of the future and where they believe that being part of such a deal is a better option for them to decarbonize than some of the other options. And therefore, the opportunities you see in the future are also a little bit dependent on how you see the future unfold. Depending on market, focus, and role you want to play, you could be a marginal electron producer, with a lot of renewable development, or you could play a different role.

Matthias: Supporting all the other clients on this for our societies is also very important, as it is such an important topic to reduce climate emissions. And with that, again, thanks for joining us and happy to continue the dialogue.

Kunal: Thank you, and thanks to your team for the great collaboration. We look forward to this collaboration in the future as well. Thanks for joining us.

In this insightful discussion, Matthias Witzemann, partner in our Energy and Natural Resources Practice, interviews Kunal Chandra, the chief strategy and sustainability officer of RWE.

The conversation delves into Kunal's extensive career in the energy sector, spanning leadership roles at Shell and Siemens, culminating in his pivotal position at RWE.

A key highlight is RWE's recent accreditation from the Science Based Targets initiative (SBTi), achieved with crucial support from Oliver Wyman. Kunal details how this collaboration enabled RWE to thoroughly assess its carbon inventory and navigate the complexities of decarbonization, leveraging our expertise to shape a strategic pathway toward its climate goals.

Kunal also shares his leadership philosophy, which emphasizes team well-being and cross-functional collaboration. He outlines RWE's ambitious renewable energy commitments and reflects on the challenges of aligning with the SBTi framework.

Finally, he concludes with a forward-looking perspective on the emerging opportunities in renewable generation and energy storage, underscoring the vital role of innovation in achieving sustainable progress.

Matthias Witzemann: My name is Matthias Witzemann and I am a partner at Oliver Wyman in our Energy Natural Resource Practice. Today with me is Kunal Chandra, chief strategy and sustainability officer of RWE. We are gathered here in our London office to gain insights from Kunal’s experience in leading RWE through the entire energy transition. Kunal, warm welcome. Thanks for joining us today.

Kunal Chandra: Thanks for having me Matthias.
Matthias: Could you please briefly describe your career path and highlighting the experiences that shaped your leadership philosophy?

Kunal: So I've spent a lot of time in the energy industry now in different companies around the world. I worked for Shell, I worked for Siemens, and now I'm at RWE. The way I describe my career is it's a truly integrated energy career. I have done various technology, operational and now commercial roles.
At RWE, my remit is to look after the group strategy, portfolio, target portfolio, capital allocation, but also to lead all the sustainability efforts. We have a lot of priorities, besides only decarbonization. For example, we are looking at circularity, we are looking at biodiversity. So, my job is to bring it all together for the group and meet our targets.

My leadership philosophy has, of course, evolved over the many years in my career. I have lived in seven different countries. And I think that has been the single source of biggest transformation in how I approach my job, how I approach working with other people. The leaders, in my opinion, should of course be curious. They should be energetic. But the most important leadership attribute that I have come to now believe in and adopt is that a leader should be more focused on taking care of their team members, and the team members will then take care of the business. And this mindset where you focus on the needs of your teams, what do they need in order to perform best in order to be their best, including also their own well-being. And I have seen the results seem to follow from there. So, at the moment this is a leadership style, which I think it works well for me. And I think this is also a style that is more useful and helpful in the future.

We have really started investing large amounts of capital in renewable technologies. We look at onshore, we look at offshore wind, we look at photovoltaic batteries. And in 2022, after I joined, we also gained a strong position in the US. So now we are a transatlantic renewable energy company. 90 to 95% of our investments are going into renewable energies because this is where, we believe, the future is. A lot of the renewable energy technologies are already quite competitive, and therefore we think that they should now be scaled and that's what we are doing.

Additionally, of course, we are not only focused on producing the marginal electron, but we believe that the system also needs resilience and flexibility, and therefore we do operate gas plants. Here in the UK, we are also one of the biggest electricity providers with a big gas fleet and renewables. And of course, the next challenge for us is now to start thinking about how to decarbonize these flexible assets, which partly you do by installing more batteries. But also, we believe that decarbonized gas will be a part of the system as well. That's what the journey we have been on. We have been installing between 5 and 8 GW of new renewables every year. And we have very ambitious targets towards the end of the decade and beyond.

Matthias: Congratulations to your ambitious climate targets, and also to the validation of the 1.5 degrees target by SBTi. So, what were the most challenging obstacles you faced on that important milestone, and how did you perceive the collaboration with us, as Oliver Wyman, in that project?

Kunal: Well, first of all, just to highlight, the importance of why we wanted to be SBTi certified. So we were always on this pathway, but we thought that being aligned with SBTi and the 1.5°C pathway gives a much clearer understanding to our investors, our other stakeholders of not only that we are transforming, but also at what pace and with what ambition level. So that's where SBTi was very important for us, and we are very proud with the help of Oliver Wyman to have achieved it.

There were several challenges. Let me take them in sort of internal and external buckets. On the internal side, of course, it's easier said than done to fully understand where is the entire inventory of CO2. So, we are operating in different technologies. Some of them are still fossil heavy. But then on the decarbonized side, in renewables, you still have a lot of Scope 3 carbon, which is embedded into the capital investment. We are also one of the largest power and commodity traders in Europe, which means that in the products that we are buying and selling, there is a lot of carbon footprint coming from those products. So, what are the key challenges for us was indeed to understand what is this carbon inventory? Where is it coming from? The simple ones, like emissions from power production, were easy to understand, but as I describe, there are other portfolio elements that have a carbon footprint which was not fully understood. So, I think, working with your teams, who are very willing to get their hands dirty, get inside the organization, and really figure out every single carbon molecule, was very important for us.

The second challenge is that the SBTi framework is quite broad. It goes through some sectors, but still, it takes a lot of effort and expertise in order to interpret what this framework lays out, in the context of your own company and your own company targets. Because the most critical thing about SBTi is not just knowing where the emissions are today, but also where they need to go in the future. And lastly, of course, we did not just stop at understanding where the emissions are and where they need to be. But we also worked with you to come up with the most meaningful, cost-competitive strategy to get there. The discussion was around what are the key levers? For example, in Scope 3, we looked at green steel, polysilicon, or decarbonized cement, etc. But the challenge, of course, is that many of these solutions are not available commercially in the market. And therefore, we had to go through a merit order, to understand which of these options would become commercially viable earlier than others. Having that very deep, strategic analysis, and understanding the merit order of these solutions, ultimately gave us an SBTi aligned pathway and strategy. And your teams at Oliver Wyman really helped us through this project. First of all, the expertise that you pulled together from your pan-European offices—there were people on the team from Vienna, Paris, Amsterdam—helped us understand the SBTi frameworks and how it applies to us.

What was also very important is that in our company, which is a bit of a complex portfolio, it's not easy to find the entire CO2 inventory, where it sits, and your team was not shy in rolling up their sleeves, going inside the organization, and making sure that we have the best data necessary to baseline where we are, and then to figure out where we are headed. So, I think the collaboration with your team was great. For us, it's always very important not only to work co-creatively with our clients, as you mentioned, but also to have impact. And that's why I believe this project was so successful, because we not only developed the strategy together, but we also worked together with the different operational companies on how to set up the governance, how to reach your targets, and how to adjust key projects or processes like the strategy allocation process to make it really happen.

Matthias: Exactly. And I think that's very important to understand that for something as complex as applying an SBTi framework to your strategy, you can’t just stop at understanding targets and where you have to be, but you have to have a holistic strategy around how to get there. Looking ahead, what would you identify as the primary strategic opportunities that an energy company will encounter in the next couple of years on their journey on the energy transition?

Kunal: So there are plenty of opportunities. And of course, depending on which markets you are playing in, which countries, which technologies, there is still a lot of opportunity to build renewable generation, even in merchant markets in the US, where we have seen that the AI revolution has significantly increased the demand projections. There is still a lot of opportunity for renewables developers just to build renewable plants in contracted markets or merchant markets, especially in the US, with the demand growth that we are seeing from AI. There is a lot of growth of renewables possible and profitable in the coming years. So, of course, that's also where we have a portfolio focus. But if you want to become, and remain, a system-critical energy company, then storage is the biggest opportunity. These are not just short-term storage, which is serviced by batteries, but also long-duration storage. A lot of this demand cannot be met with current solutions, especially when the renewable penetration goes beyond 70%, 80%. How do we cater for those two weeks? And that's just one example. I believe storage is a very important topic.

In the last couple of years, of course, there has been some mixed emotions around energy transition and how expensive it is. And therefore, people have stopped talking about hard-to-abate sectors. But let's not forget sector coupling, and using electrification of other sectors to decarbonize them, would also continue to be a big area. And we at RWE are also playing in the downstream part of the value chain as a valued partner on the other side. And they look at it from their view of the future and where they believe that being part of such a deal is a better option for them to decarbonize than some of the other options. And therefore, the opportunities you see in the future are also a little bit dependent on how you see the future unfold. Depending on market, focus, and role you want to play, you could be a marginal electron producer, with a lot of renewable development, or you could play a different role.

Matthias: Supporting all the other clients on this for our societies is also very important, as it is such an important topic to reduce climate emissions. And with that, again, thanks for joining us and happy to continue the dialogue.

Kunal: Thank you, and thanks to your team for the great collaboration. We look forward to this collaboration in the future as well. Thanks for joining us.