Governance

Enterprise Risk Management

Enterprise-wide risk assessment and oversight are fundamental responsibilities of our board. Directors are involved in the process of overseeing the primary risks facing the company.

As part of the company’s Enterprise Risk Management program, our board receives on an ongoing basis information from management related to key business risks and mitigation strategies. These business risks include existing and emerging risks related to environmental performance and sustainability, among other risks.

The company’s Internal Audit department, on behalf of MGE management and the Board of Directors’ Audit Committee, conducts an annual Enterprise Risk Management meeting with each officer of the company. The sessions with individual company officers and management update existing areas of risk, classify new or emerging areas of risk and identify owners responsible for assessing, managing and/or mitigating areas of risk.

In addition, the board engages in a biannual comprehensive risk assessment and mitigation with quarterly review. And, on a biennial basis, the board conducts a broad-based exercise with company officers on risk and emerging risk identification, assessment and mitigation strategies. This review last occurred in fall 2021.

The company’s comprehensive approach to risk management encourages all directors to initiate discussion at any time, either directly or through the Lead Independent Director, on any areas of concern, including risk identification and assessment, controls, management and oversight. The board and MGE management have created a culture of sustainability, responsibility and risk management. All officers of the company take ownership in and are accountable for managing and mitigating corporate risk.

Environmental Management System (EMS)
An EMS is a continuous improvement process that evaluates, prioritizes and manages environmental risks. MGE’s first Continuous Improvement Sustainability Team oversaw the expansion of the company’s EMS to cover all of MGE’s operations. The expanded scope of our EMS captures environmental improvements across the company.

MGE employed an independent third party to oversee the expansion of the EMS. The independent third party’s expertise in risk management and compliance helped MGE to identify operational and environmental risks and to evaluate those risks under the scope of the expanded EMS. The EMS has a risk profile or scoring convention to evaluate risks consistent with how the company assesses risk throughout the organization. The EMS process helps to ensure effective identification, assessment and management of risk at all levels of the organization.

EMS and Green Tier participation
As a participant in the highest level of the WDNR’s Green Tier program, MGE’s EMS is required to be aligned with ISO 14001, an internationally recognized EMS, to manage our operational environmental impacts, opportunities and risks.

MGE is in our third year of successfully expanding our ISO 14001-based EMS into all company operations. Our expansion to all operations allows for a consistent and comprehensive approach to reducing impacts and to furthering continuous improvement.

Participation in the Green Tier program provides certification for our EMS. Certification is based on an external system audit and an external compliance audit as explained below. Reporting on the performance of our EMS, including audit results, occurs annually with results available on the WDNR website.

EMS internal and external audits
As noted above, MGE works to ensure the EMS is functioning properly by participating annually in internal and external audits. We also ensure our compliance with regulatory obligations by participating in third-party compliance audits.

MGE’s ISO 14001-based EMS is audited annually by a third-party auditor who is approved by the State of Wisconsin to perform ISO 14001-based EMS audits. Approval from the State of Wisconsin requires ISO 14001 accreditation or certification through the State of Wisconsin.

In addition, MGE hires a third-party compliance auditor to audit our environmental regulatory compliance in our operations areas. Third-party compliance audits are scheduled to ensure all operations areas are audited by an external auditor at least once within a three-year period.

Under our Green Tier contract, MGE agrees to a superior level of transparency and accountability. The results of our third-party EMS and Green Tier compliance audits are shared with the WDNR. Corrective action taken on any minor or major EMS audit findings and on any Green Tier compliance audit findings also are shared with the WDNR.

EMS goals, targets and action plans
MGE’s Sustainability Steering Team develops environmental objectives, targets and action plans annually. These goals are informed by MGE’s Environmental and Sustainability Policy and by MGE’s operational environmental impacts.

A number of the goals achieved under the expanded EMS include:

• Completed one year ahead of our five-year schedule a voluntary effort to replace 440 polychlorinated biphenyls (PCB) contaminated transformers located around our service area, reducing potential impact to our waterways. These transformers contained more than 10,000 gallons of PCB-contaminated mineral oil that we removed for proper disposal. Even as the daily workforce and priorities were restructured during the pandemic, we were able to keep the project moving forward.
• Continued to increase the electrification of our operational fleet by replacing fossil-fueled light-duty vehicles in our fleet with plug-in electric vehicles (EV) and plug-in hybrid electric vehicles (PHEV), consistent with our Fleet Alternative Vehicle Policy and corporate goal to achieve 100% all-electric or plug-in hybrid light-duty vehicles by 2030.
• Incorporated environmental emergencies into MGE’s corporate-wide All Hazards Response Plan, which utilizes a formal incident command structure to assess, mitigate and address MGE hazards.
• Converted indoor lighting in a majority of MGE facilities to LED lighting, which resulted in energy savings of 18 kilowatts and a carbon dioxide emissions reduction estimated at 30 tons per year. Conversions to LED lighting are ongoing.

Additional goals adopted by the Sustainability Steering Team and consistent with its commitment to continuous improvement include:

• Enhance MGE’s environmental emergency response plans for the facilities with high risk to waterways, human health and sensitive environmental features.
• Evaluate MGE’s recycling and disposal options for existing MGE solar panels and wind turbine blades and develop environmental aspects to consider for future purchases of solar panels and wind turbine blades.
• Determine current pollinator-friendly habitat on MGE properties and increase pollinator-friendly plantings where feasible.
• Perform an analysis of MGE’s Scope 3 emissions to inform future goal setting related to MGE’s natural gas distribution.

Spotlight on Scope 3 emissions
When companies look at measuring their greenhouse gas (GHG) emissions, they often look at their Scope 1 GHG emissions, which are direct emissions from their operations, and Scope 2 GHG emissions, which include indirect use such as electricity, steam, heat and cooling.

Scope 3 GHG emissions are indirect emissions caused by what is referred to as “value chain” activities, such as purchases of materials, the creation of waste and how a company’s product is used by its customers and consumers. Under the EMS, MGE has set a goal to better understand our Scope 3 GHG emissions. This ongoing analysis will help us consider ways to reduce our indirect impacts. MGE is conducting an inventory of the company’s Scope 3 emissions to inform our 2023 EMS goals.

Environmental Management Information System
MGE transitioned in 2019 to a new software system for use in risk minimization. MGE’s Environmental Affairs team oversees hundreds of routine monitoring, record-keeping and reporting tasks, some of which occur every week. MGE’s Environmental Management Information System (EMIS) makes it significantly easier to see and track the different tasks. For example, waste inspections are now done and saved electronically, which means the data can be retrieved instantly. The new system provides MGE with better and quicker access to the status of compliance activities and improved information for analysis, resource planning and performance reporting. This leads to more efficient use of time, better alignment of information management processes and simplified training for turnover or responsibility transfers.

 

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