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The sustainable business model

In an environment of constant and rapid change, exposing the energy industry to new risks and offering new opportunities, Enel’s model of sustainable business leverages the synergies among the various business areas and the outside world in order to develop innovative solutions to reducing our environmental impact, to meeting the needs of local communities and to improving safety for both employees and suppliers. Understanding the context in which Enel operates and actively listening to everyone with whom we work enable us to create sustainable longterm value, blending economic and social growth.

It is a strategic and operational approach founded on the “Open Power” concept of openness, where sustainability and innovation are an essential combination. Framing this are the principles of ethics, transparency, anti-corruption, human rights and health and safety that have always been a distinctive feature of Enel’s operations and which are a part of policies and standards of conduct that are applicable throughout the Group.

It is a model that promotes sustainable development and is fully in line with the indications of the United Nations Global Compact, of which Enel has been an active member since 2004, reiterating the importance of increasing the integration of sustainability within the company’s strategic decision-making processes.

Enel’s CEO has been a member of the United Nations’ Global Compact Board since June 1, 2015. A key aspect of this approach is the adoption of environmental, social and governance (ESG) sustainability indicators throughout the value chain, not only for assessments of results achieved, but above all to drive decision-making and develop a proactive stance, in line with the Sustainable Development Goals (SDG) 2030 of the United Nations.

Enel’s commitment to the United Nations’ Sustainable Development Goals

Since 2015, Enel has been committed to helping reach the Sustainable Development Goals (SDGs) of the United Nations (UN). Through the SDGs, the United Nations called on companies to be creative and innovative in addressing the challenges of sustainable development, such as poverty, gender equality, clean water, clean energy and climate change.

By way of our business strategies, Enel contributes to reaching all 17 SDGs, and we have renewed our commitment to reaching four goals by 2030 in particular:7

  • SDG 7 - ensuring access to affordable, reliable, sustainable and modern energy, including the promotion of energyefficiency services, the beneficiaries of which will include 10 million people by 2030. For the period 2015-2018, 6.2 million beneficiaries had been reached throughout the Group, 3.3 million of which in Africa, Asia and South America.
  • SDG 4 - supporting projects to ensure inclusive and equitable quality education for 2.5 million people by 2030. For the period 2015-2018, about 1 million beneficiaries had been reached.
  • SDG 8 - promoting sustained, inclusive and sustainable economic growth for 8 million people by 2030. For the period 2015-2018, around 1.8 million beneficiaries had been reached.
  • SDG 13 - taking targeted action to achieve decarbonization by 2050. As of December 2018, specific CO2 emissions totaled 0.369 kg/kWheq , and the new target is 0.23 kg CO2 /kWheq by 2030.

The Group has also added commitments concerning the following two SDGs:

  • SDGs 9 and 11 - promoting the development of sustainable cities and of infrastructures that are reliable, sustainable, resilient and of high quality by providing about 47 million customers with smart meters and 455,000 public and private electric vehicle recharging points by 2021 and investing €5.4 billion in digitalization for the period 2019-2021.
7 The number of beneficiaries takes into account the projects and other activities conducted in all areas in which the Group operates (including subsidiaries consolidated at equity, the Group’s foundations and non-profit organizations, and the companies under the Build, Sell & Operate, or “BSO”, mechanism).

Non-financial information is coming under increasing scrutiny by investors and the financial markets, who are now focusing on the ability of a company to make sustainable long-term business plans that translate into concrete, measurable actions and better financial performance.

Socially responsible investment funds continued growing in 2018. Enel has 169 Socially Responsible Investors - SRI (up from 160 in 2017), which hold about 10.5% of all Enel shares in circulation (compared with 8.6% in 2017), equal to 13.7% of the float (11.3% in 2017). In absolute value, shares held by SRI investors increased by 21.2%.

Priority analysis and definition of sustainability goals

For several years now, Enel has conducted materiality analyses – based on the guidelines of the most widely adopted standards such as the Global Reporting Initiative (GRI) – in order to identify the Group’s intervention priorities, the issues to consider for disclosure and which stakeholder-engagement activities to strengthen. The aim is to map and assess the priority of the issues of interest to stakeholders, integrating them into the Group’s business strategy and priorities for action.

Through this analysis, the main stakeholders of the Group are identified and assessed according to their importance to the company and to their priorities on the various issues approached in the numerous engagement activities.

This information is then crosschecked with the assessments of the issues on which Enel intends to focus its efforts, with the respective priority value. By observing the two perspectives together, it is possible to identify the issues, which, due to their relevance and priority, are essential to Enel and our stakeholders. Consequently, it is possible to verify the degree of alignment or misalignment between external expectations and internal priorities.

The materiality analysis, which is conducted with increasingly greater detail in terms both of issues and geographical scope, makes it possible to identify the company and stakeholder priorities for the entire Group and for each country of operations. It is also possible to obtain results with a specific focus such as the matrix for the sole stakeholder category of “financial community”, which is useful for identifying issues to be discussed in the Annual Report in order to provide integrated reporting on performance. In particular, the analysis of this category of stakeholder has pointed to the following priorities: decarbonization of the energy mix; new technologies, services and digitization; environmental compliance and management; robust governance and transparent conduct; efficiency in operations.

Based on the material analysis results, the issues to be included in the reports are defined and the specific targets and objectives of the 2019-2021 Strategic Plan are set. Operations and projects regarding various functions and Business Lines of the Group contribute towards achieving these targets and objectives as detailed in the 2019-2021 Sustainability Plan.

As part of its Strategic Plan, Enel has identified the most significant emerging risks:

  • cyber attacks (“cyber risk”): the era of digitization and technological innovation means that organizations are increasingly exposed to cybernetic attacks, which are becoming increasingly numerous and sophisticated, partly reflecting the changes in the context in which they occur. The Group is currently undertaking a major process of digitalization, which is expected to intensify in the coming years, thereby further increasing our exposure to this risk. The organizational complexity of the Group and the numerous environments it encompasses (data, people and the industrial world) expose our assets to the risk of attacks, which are a serious threat not only to data, but also to service continuity, and to the automated systems at the power plants and on the distribution network. The Enel Group has adopted a model for managing these risks based on a “systemic” vision that applies both to the traditional information technology sector and to operational technology in the industrial sector, while taking into account the Internet of Things associated with the networking of smart “objects”;
  • extreme weather and natural disaster: forecasts regarding the frequency and intensity of these events point to a marked increase according to analyses within the scientific community, and this increases risk to the Group over the medium and long term.

This risk is also noted as one of the emerging risks in the recommendations of the Task force on Climate-related Financial Disclosures (TCFD) of the Financial Stability Board. The growing emphasis on renewable technologies exposes power plants to greater vulnerability, for which there is a foreseeable increase in the impact of extreme events. The business impact of these phenomena is tied to the risk of damages to assets and infrastruc- 160 Annual Report 2018 tures and of the consequent extended unavailability of those assets. In order to mitigate these risks, the Group has adopted the best strategies of prevention and protection with the goal, in part, of reducing the potential impact on the communities and territories surrounding the assets. Therefore, constant weather forecasting and other monitoring efforts are carried out in the areas in which the assets most exposed are located. Numerous projects are also being carried out to increase the resilience of those assets that are the most exposed to extreme weather or natural disaster. All areas of the Group are subject to ISO 14001 certification, and internationally recognized environmental management systems (EMSs) are used to monitor the potential sources of risk in order to detect any critical issues in a timely manner.

Management and reporting of non-financial information

Enel undertakes to constantly manage and measure sustainability performance by using and developing mechanisms that allow for an integrated, standardized system of activities and information that are kept constantly up to date based on developments in the scope of operations and relevant standards, while promoting the sharing of best practices and experience.

Beginning with the 2017 financial year, in implementation of EU (Directive 2014/97/EU) and national legislation (Legislative Decree 254/2016) that has introduced mandatory of non-financial information for large public-interest entities, the Group has drafted a “Consolidated Non-Financial Statement” that covers the areas provided for in that decree and which since last year accompanies the Group’s Sustainability Report. Furthermore, beginning with the 2018 financial year, in accordance with the 2019 Budget Act, along with a description of the main risks associated with the areas specified in the decree, the report now includes the related approaches to managing the risks.

The reporting process involves collecting and calculating specific key performance indicators of economic, environmental and social sustainability in accordance with the international reporting standard composed of the GRI Standards and the supplementary Electric Utilities Sector Disclosures, as well as with the principles of accountability of the United Nations Global Compact.

Projects, activities, performance and the other main results, including progress made towards the SDGs in line with the indications of the “Business Reporting on the SDGs: An Analysis of the Goals and Targets”, the guidelines developed by the United Nations Global Compact in collaboration with the GRI, are presented in Enel’s Sustainability Report, the completeness and reliability of which are verified by an accredited external auditing firm, by the Control and Risk Committee and by the Corporate Governance & Sustainability Committee. The documents are approved by the Board of Directors of Enel SpA and presented in the Shareholders’ Meeting.

Finally, the Group is included in the leading sustainability indexes, such as the Dow Jones Sustainability Index World, FTSE4Good, the Carbon Disclosure Project (CDP) Climate and the Carbon Disclosure Project (CDP) Water, the STOXX Global ESG Leaders, the Euronext Vigeo-Eiris, the OEKOM Prime Rating, the Thomson Reuters/S-Network ESG Best Practices Indices, the Thomson Reuters Diversity & Inclusion Index, the Equileap’s Top 200 ranking, and the ECPI.