The Corporate Social Responsibility of Hydropower Companies in Alpine Regions—Theory and Policy Recommendations

Abstract

Hydropower activities must increasingly be evaluated from a sustainable development perspective. Corporate social responsibility (CSR) is the principle frequently applied to evaluate corporate contributions in this regard, though there exists no conceptual and theoretical basis that is common to the various approaches. With the present work, we fill this gap and provide a generic model that formally integrates the corporate and societal perspectives of hydropower activities within a welfare-economic framework that encompasses both externalities and distributional concerns. Building on this background and focusing on the current situation in Switzerland, the water tower of Western Europe, we particularly address the issues of water rights, resource rents and governance. This is crucial when analyzing investment projects of hydropower companies with shared private and public ownership; i.e., if external stakeholders are also sensitive shareholders who grant, at the same time, the company the right to operate. Altogether, this contribution shall support better informed decision making on both corporate and policy levels, especially regarding new and retrofitting investments in hydropower when social concerns are at stake.

The Future of Swiss Hydropower: Realities, Options and Open Questions

“…Altogether, the net revenue of hydropower operations (i.e., the resource rent) as well as the external contributions to society (externalities and distributional effects) and the related changes of the firm's reputation capital determine the instantaneous value of hydropower from a societal perspective. The "total value of hydropower" is the net present value of these elements (Hediger, 2018a). This "social net present value" allows investments to obtain positive indications even in uncertain electricity market environments.…”

“…On the other side, the water fee revenues contribute to cantonal and municipal budgets, especially in mountain areas, where HP can also play an important role in providing income and employment to the local economies and thus foster regional development (see next Section for details). Accordingly, changes in the regulatory system of water fees and concessions must not only be regarded from a corporate and industry perspective of competitiveness, but also from a point of view of regional development and public finance (Hediger, 2018a(Hediger, , 2018b.…”

“…Accordingly, the different stakeholders need to find, above all, a compromise between companies' profit perspectives, federal energy targets, cantonal and local budget requirements, regional development goals, as well as national and international regulations. This involves various synergies and trade-offs that are the most suitably analysed within the frame of a regional sustainability assessment Hediger & Voegeli, 2016) whose results can then be transferred to the corporate level (Hediger, 2018a). Moreover, it must integrate the "two sides of the coin", such as illustrated in Figure 12.…”

“…wages), society and the environment. It implies corporate and social accounting prices to weigh the external and distributional effects of HP from a societal perspective against the financial concerns of the shareholders and other recipients of revenues from the HP company (Hediger, 2018a). Using the above described approach, one can separate the total value of HP (defined in terms of net present value) into a private and external value.…”

“…Building on this background, investments into HP plants should be undertaken from a societal point of view as long as the total value of HP is positive, even if the private value is negative. Thus, from a societal point of view, investment decisions should not be solely guided by financial considerations but must also take into account the results of sustainability assessment or a similar approach (Hediger, 2018a).…”