Table 18. Business Context – Utility Company

108 | Carlos Fúquene Retamoso

There were not observed environmental practices associated to imitation of competitors´ best practices. For example, they have been certified under ISO 14001 since 2004 (BVQI, 2004) and subscribed to Global Compact since 2004 (Utility Company, 2015). In the meantime, its closest competitor in energy operations was certified under ISO 14001 nine years later (Competitor, 2013) and subscribed to Global Compact in 2006, two years after Utility Company (Competitor, 2018)

In 2016, Utility Company was the number one in the power generation business, achieving a small advantage over its main competitor. In fact, Utility Company holds 19.9% of the market, while its main competitor holds 18.46% (Utility Company, 2016a). The power generation sector in Colombia operates under an oligopolistic structure wherein three companies have a moderate concentration of the market (Moreno et al., 2014), including the case under analysis.

According to the requirements for the execution of power projects, companies must comply with the same requirements for environmental management plans in order to win the bid. Because of that, there is no significant difference in the environmental practice proposals among the companies that compete for this type of projects. Table 19 shows a summary of ESA factors found at the Business Context dimension.

Finally, in addition to coercive and normative pressures, the power industry is sensitive to climate variability. Due to reliance on hydraulic availability and exposure to scarcity during dry periods (e.g., El Niño phenomenon), the power sector relies on the rainfall regime. Colombia is supported on hydropower generation (77%) and thermal generation plants (18%) (CREG, 2006). In order to counter the risk of supply shortages, Colombian regulators have implemented a financial scheme to cover the energy generation costs during dry periods through alternative sources, mainly coal.

Table 18. Business Context – Utility Company.

esa factor categories main features

Business context

Coercive * Environmental licensing and general operation requirements imposed by regulators. * Social licensing from farmer communities located nearby company facilities. Mimetic Competitor´s best practices were not observed. Normative Industry standards such as UN Global Compact principles, GRI guidelines and ISO 14001 standards.

Case studies | 109

b) Business model:

Utility Company exhibits a stable business model when it has kept its portion of the market through business efficiencies, while fulfilling requirements for legal and social legitimacy. Company relies on a capital and technology intensive business to keep its portion of the market under an oligopolistic structure established by the Colombian government, wherein three companies have a moderate concentration of the market in order to avoid an advantageous position of any of them.

Company counts on a long and worldwide experience in the development of power infrastructure and management of power plants around the world. The business model is supported by lobbying and financial capabilities, technical know-how and stakeholder management.

Lobbying and financial capabilities has supported the business model in terms of risk management, through the development of specific practices such as environmental plans to fulfill regulation, environmental litigation and lobbying activities to buffer regulation impact, and the substitution of toxic materials restricted by law trough the adoption of technologies to comply with regulation (e.g., PCB-oil-free transformers).

In conjunction with financial capabilities, Utility Company has used its previous experience around the world for energy trading and buying of companies and infrastructure to operate. The firm has completed strong investments in infrastructure relying on its financial capabilities and previous technical know-how in order to gain business efficiencies and notable rents, thus keeping its market position and fencing-off competitors.

Technological capabilities were found to be related not only to technical know-how for the development of power facilities intended to achieve business efficiency, but also for the development of preventive maintenance to avoid operation emergencies.

Stakeholder management has supported the development of alliances between the company and local authorities and other market players, in order to foster electric mobility in Bogota. Additionally, stakeholder management has supported the implementation of socialization campaigns to present the company as a responsible and socially focused brand, by investing in communities to introduce the projects of the company. Finally, stakeholder management has supported the establishment of relations with communities in order to achieve social license to operate, by constructing win-win deals offering communities access to electricity. Environmental communication