Determination of the Group’s strategy is based on an assessment of options that will enable the sustainable generation of value for all stakeholders.
Fundamental to this is the assessment of the external environment and its evolution. To determine the framework in which we operate, we conduct in-depth scenario planning in order to be prepared to seize opportunities and manage future risks and uncertainties in the most robust manner possible. This analysis of what could happen in the external landscape, together with the Group’s purpose and our Open Power mission, is key to defining the Group’s positioning within that landscape. We then define our longterm ambitions and design the strategic options that characterize our long-term planning.
In recent years, the increasing complexity of the rapidly changing context in which we operate has made it so that the process of defining the Group’s strategies has also evolved in order to capture as much of this dynamism as possible, so as to make it an enabling factor in the definition of goals.
Today, this process is organized into the following main activities:
The process is centrally governed and includes milestones and deadlines that are defined based, in part, on the relative priority of the decisions to be made. In 2022, the working groups were organized around strategic priorities: “Impact of the external context”, to analyze the impacts and repercussions on the business of the energy crisis and the persistent turbulence that characterized the year, “Customer centricity and digitalization” and “Resource allocation”, which were addressed by defining the integrated strategy of Countries, the repositioning of the Group and all the issues discussed during Capital Markets Day. The outputs and integrated strategy plans are then discussed and approved by top management in dedicated meetings. These meetings include one special event, the Top Team Offsite meeting, at which all senior management discusses the priority topics; the most significant conclusions are then included in the Group’s long-term planning. This is then followed by the Strategic Summit, in order to discuss the annual guidelines of the new Strategic Plan with the Board of Directors. This framework enables governance of the treatment of strategic issues, while at the same time ensuring swift identification of emerging trends and the necessary cross-business involvement for a complete analysis of complex and interdependent issues in the presence of an organizational structure based on the country/business-line/service functions matrix.
The strategy of the Enel Group has proven its ability to create sustainable long-term value, fully integrating the themes of sustainability and close attention to climate change issues while simultaneously ensuring increased profitability.
The Group is among the leaders guiding the energy transition through the decarbonization of electricity generation, digitalization of distribution networks and the electrification of final consumption, which represent opportunities both to increase value creation for all and to contribute positively to more rapid achievement of the Paris Agreement goals and the Sustainable Development Goals set by the United National in the 2030 Agenda.
The last three years have seen events that are without precedent. The combined effect of two years of pandemic and the ongoing war at Europe’s doorstep has heightened the need to accelerate digitalization and the energy transition and to reorganize and restore equilibrium to the world’s supply chains,
General concerns regarding the effects of climate change have been increased by a growing number of extreme weather events, record droughts, and flooding in various parts of the world.
Governments around the world have, in general, turned to measures aimed at stimulating and shoring up their economies. In Europe, in response to the great volatility in gas prices, fiscal and regulatory measures have been introduced in many countries, to varying degrees of success, and different significant funding has been made available to help overcome or mitigate the crisis brought about by high energy prices.
In order to speed up the energy transition, we are seeing an acceleration in the implementation of energy policy and of the new market design.
The current landscape is marked by a need to achieve certain objectives that have come to be known as the “energy trilemma” of:
Source: EU Commissions (Fit for 55, REPowerEU), IEA WEO 2021, IEA WEO 2022; Net Zero report , internal elaborations
The Group’s strategy for achieving these objectives is centered around:
Over the course of the Plan, the Group intends to:
To this end, from 2023 to 2025, the Group expects to invest a total of roughly €37 billion to implement the following strategic actions.
I. Balancing supply and demand in order to optimize the risk/return profile
By 2025, in the Group’s six core countries, we expect to sell roughly 80% of total electricity volumes on fixed-price contracts, an increase of about 15 TWh (+7%) on 2022 estimates. We also expect to serve 100% of fixed-price sales with the Group’s own production and long-term power purchase agreements (PPAs), with the expectation that about 90% will be covered by carbon-free sources, so as to further ensure growth in the Group’s margins.
This will enable the Group to implement a stable, visible, long-term commercial strategy that reduces the shortterm risks associated with outside volatility, while promoting the transition of the Group’s customers from energy from fossil fuels to sustainable electricity.
To this end, thanks to the longstanding contractual relationships with our existing customer base, the Group expects to accelerate the dissemination of high-value services and next-generation infrastructure over the next three years, and specifically:
II. Decarbonization to ensure competitiveness, sustainability and security
By 2025, the Group expects to add about 21 GW in installed renewables capacity (of which about 19 GW in core countries), putting us in a strong position to achieve our decarbonization objectives in line with the Paris Agreement.
The Group expects to develop this renewables capacity with the help of a market-leading pipeline of about 455 GW.
The Group is continuing work to implement the Stewardship business model with the goal seizing additional opportunities in non-core countries, so as to maximize the creation of value globally.
Our decarbonization strategy, together with our push towards electrification, will enable the Group to once again confirm our commitment to achieving zero emissions by 2040, with targets set for all Scopes and covering both direct and indirect emissions throughout the Group’s value chain. These objectives have been certified by the Science Based Target initiative (SBTi) to be in line with keeping global temperature increases below 1.5 °C from pre-industrial levels.
(1) I target non includono il piano M&A.
(2) Anche i target su rimanenti emissioni Scope 1, 2 e 3 sono stati cert ifi cati: 2030 target 10,4 MtCO2eq; 2040 target -2.5 MtCO2eq (da neutralizzare per raggiungere Net-Zero).
The plan is based on the implementation of certain fundamental steps: (i) the expectation to abandon coal- and gas-fueled generation, replacing the thermal generation portfolio with new renewables capacity and combining renewables with storage solutions; (ii) abandoning the retail sale of gas by 2040, with all electricity sold by the Group to come from renewable sources.
III. Grid digitalization, enhancement and development to enable the transition
The Group’s grid strategy concerns five of the six core countries, i.e., Italy, Spain, Brazil, Chile and Colombia, where our unique experience in digitalization can be used to full effect, especially in large metropolitan areas.
We expect the Group’s grid investment per customer to intensify by an average of about 30% over the period 2023-2025 compared to 2020-2022.
The drivers of this growth will be:
(1) Sources: MIT Technology Review Insights, The Green Future Index, 2021.
IV. Rationalization of the business portfolio and geographical areas
In 2022, the Group saw a marked acceleration in implementation of strategies to streamline the organization. During the year, we completed the following transactions: the sale of Enel Russia; the sale of the Fortaleza CCGT plant and Goiás distribution network in Brazil; the sale of transmission assets and crystallization of the value of the gas portfolio in Chile; and the transaction concerning Gridspertise.
On the back of this acceleration, over the period 2023- 2025 the Group expects to further optimize our operations, including exiting from certain businesses and geographical areas that are no longer in line with our broader strategy. We also expect to continue implementing our Stewardship model in non-core countries. At the same time, in line with the objective of exiting from carbon-intensive businesses, the Group expects to take advantage of the current market landscape to begin the process of exiting from the gas business. This overall program of disposals is an integral part of the plan to redefine the Group’s structure while maximizing value for shareholders.
We expect 2023 to be the key year in the Group’s longterm rationalization strategy. Over the course of the plan:
The plan described above is expected to result in an optimized organization with the following effects on the Group performance:
By the end of the plan period, the Group expects to have a more agile organization focused on the core countries, with an expected reduction in minority interests and a significant improvement in credit metrics. By 2025, the Group expects to be managing a total of about 75 GW of renewables capacity (including 4 GW of batter energy storage systems, or BESS), equal to about 75% of total production and bringing zero-emission generation to around 83% of the total.
(1) Includes about 4 GW of BESS capacity.
Integrated strategy in the core countries
Enel’s decision to enact an integrated commercial strategy centers on the opportunities that integration will bring in terms of more effective policies that embrace the entire value chain. This strategy is being applied in countries in which the Group has an integrated presence, beginning with a base of end users to whom the energy generated can be sold. We are calling these regions “core” or “Tier 1” countries, and they are: Italy, Spain, the United States, Brazil, Chile and Colombia.
For each country, we have defined a commercial plan and a sourcing plan, which have been developed in an integrated manner and with the goal of maximizing the creation of value.
Definition of an integrated strategy for these core countries called for a generalized overhaul of both our commercial approach and our infrastructures, in part to be able to define differentiated plans and execution options for the various characteristics at play from the start.
For each country, we have defined a commercial plan and a sourcing plan, which have been developed in an integrated manner and with the goal of maximizing the creation of value.
More specifically:
In a subsequent phase, the two plans will be optimized based on integrated value, such as by revising the sales portfolio so that it is oriented more towards segments of higher rates of electrification or by optimizing the sourcing plan through greater organic growth or other strategic options.
Therefore, the optimization process is iterative and will be rolled out at preset intervals throughout the year or in response to certain trigger events.
In order to ensure the efficacy and consistency of the outputs by country, central process coordination is being implemented to define the integrated strategy for each country. In particular, a central team will be providing the six core countries with a series of inputs (e.g., scenario assumptions, methodologies, models, and financial limits to be met, etc.) within which the business will identify the most effective options.
Investment by the Group in 2023-2025, in the amount of about €37 billion, will mainly be focused on the six core countries.
Roughly 60% of the Group’s investments – 50% in power generation plus 10% in customers and advanced energy services – is expected to support the Group’s integrated commercial strategy. Grids are expected to account for about 40% of total investments over the course of the Strategic Plan.
With regard to the integrated commercial strategy, the Group is expected to invest around €22 billion over the period 2023-2025. By country, nearly 90% of this investment is expected to be allocated to Italy, Spain and the United States, where the Group can take advantage of policies in support of sustainable electrification, while also taking account of favorable regulatory frameworks. More specifically, the Group expects to accelerate the development of renewables:
EBITDA from electricity generation and retail markets is estimated to reach around €15 billion in 2025, for a CAGR of about 20% over the course of the plan.
With regard to networks, for 2023-2025 the Group expects to invest some €15 billion, mainly in Europe (at more than 80% of the total), given the Group’s balanced geographical presence and favorable regulatory climate, and so as to promote the role of networks as enablers of the energy transition.
We expect the allocation of Group capital to result in an increase in EBITDA from networks of up to €7.3 billion in 2025, from about €8.3 billion in 2022 (including the contribution of the distributors sold over the course of the plan).
Finally, with regard to the Stewardship business model, we expect the mobilization of investment by the Group and by others to total about €15 billion, including:
These funds will serve to add new renewables generation and new infrastructures and services in order to accelerate the transition of Group customers to electrification.
Over the next three years, we expect this model to generate some €1.5 billion in cumulative EBITDA, with an expected value of the Group’s investment of €2.5-3.0 billion in 2025.
We expect the actions of the Strategic Plan to have an immediately visible, positive impact on the Group’s net debt, which is expected to fall significantly to within a range of €51-52 billion by the end of 2023, down from €60 billion in 2022. As a result, the ratio of net debt to EBITDA is expected to fall from the estimated 3.0X of 2022 to 2.4-2.5X in 2023, remaining stable for the remainder of the plan period. In the same way, we expect the ratio of FFO to net debt to increase by 13 percentage points, from 15% in 2022 to an expected 28% in 2023, remaining stable for the remainder of the plan period.
As a result of this financial strategy, we expect the cost of debt to remain essentially stable, despite the recent increase in interest rates, at about 3.4-3.5%.
Sustainable finance will remain a key focus on the Group’s financial strategy. We expect the share of sustainable finance to increase to about 70% of total gross debt by 2025, compared to 60% in 2022.
We expect the Group’s ordinary EBITDA to grow to within a range of €22.2 billion to €22.8 billion in 2025, up from €19.7 billion in 2022 for a CAGR of 5%. The Group’s ordinary net profit is expected to increase to €7.0-7.2 billion in 2025, up from €5.4 billion in 2022 for a CAGR of 10%.
The Group also confirms the simple, predictable dividend policy, with a DPS of €0.43 for the period 2023-2025, increasing from €0.40 in 2022, and the DPS for 2024 and 2025 is to be considered a sustainable minimum.
(1) Minimum DPS
Climate change is the world’s primary challenge of this century. In a climate such as this, and as a global player in the energy market, Enel is on the front lines playing an active role in combating climate change. This includes both helping to guide the global energy transition towards zero emissions as a mitigating lever and working to determine the best ways to adapt to the changes that are inevitable to varying degrees of frequency and intensity.
Therefore, the work Enel is doing to combat climate change represents one of the pillars of the Group’s short and long-term strategy.
Mitigation efforts include all those initiatives aimed at reducing the impact that the activities of the Group and of our stakeholders have on climate change, and first and foremost those that aim to reduce the emission of greenhouse gases.
Adaptations, on the other hand, include all actions that Enel chooses to take to make assets more resilient, to increase our ability to react to extreme weather events, and to come up with business models and other strategic options targeting various needs in this constantly changing climate.
In each of these two areas, the challenges present opportunities that we will seize through Group strategy. Here at Enel, adapting to climate change also means exploring new business opportunities to come out of the changing landscape, developing new technologies, and creating value from the capabilities acquired. The mitigation of climate change involves, in part, research into innovative technologies that will enable an economy that is green by design or that, for example, simply improve performance and circularity.
The experience we gain and our study of possible climate scenarios that have been seen above also play a crucial role in guiding both areas of action. As we will discuss in the section related to climate change risks and opportunities, the Group has also established internal policies for the assessment and management of these challenges.
Being among the first signatories of the “Business Ambition for 1.5 °C” campaign promoted by the United Nations and other organizations, the Enel Group has publicly declared our commitment to developing a business model in line with the goals of the Paris Agreement (COP 21) to limit the average global temperature increase to 1.5 °C.
Enel’s commitment to combating climate change reached another historical milestone in 2022, with the Group defining a decarbonization roadmap covering both direct and indirect emissions throughout the Group’s value chain. This roadmap includes four targets certified by the Science Based Target initiative (SBTi) to be in line with limiting global warming to 1.5 °C.
Enel’s new certified targets come on the back of our ambition declared in 2021, when we moved up our commitment to achieving zero emissions by 10 years, from 2050 to 2040.
Enel’s ambition goes beyond the SBTi certified targets and aims to pave the way to becoming a zero-emission organization by 2040. Our roadmap currently calls for reducing all direct and indirect greenhouse-gas (GHG) emissions by about 99% from 2017 levels by 2040 throughout our value chain, which is well below the overall threshold set by the SBTi (of 90%). The Group aims to reduce all emissions by 100% with a view to overcoming, over the short to medium term, all exogenous factors, such as the development of new technological solutions for the supply chain over a wide scale or the implementation of certain market-based and political strategies. Enel actively collaborates with vendors, customers and policymakers to promote solutions and accelerate necessary actions.
Enel’s decarbonization roadmap is centered around promoting electrification based on renewable energy, fully phasing out fossil fuels, accelerating the development of renewables, and enhancing grids and going digital. More specifically, the roadmap includes the following business milestones
| Our zero-emissions ambition Enel is committed to achieving zero emissions by 2040 and to developing a business model that is in line with the objectives of the Paris Agreement (COP 21) to limit the average increase in global temperatures to 1.5 °C. For this reason, the Group has defined a decarbonization roadmap that covers both direct and indirect emissions throughout the value chain. This roadmap includes four targets that were certified by the Science Based Target initiative (SBTi) in December 2022 to be in line with the Net Zero Standard. |
The Group implements solutions to adapt to weather and climate events in order to effectively manage both chronic and acute situations for each business line and all activities.
These adaptation solutions may concern both short-term actions and long-term decisions, such as planning for investments in response to weather events. Adaptation efforts also include procedures, policies and best practices for resiliency, response and innovation.
For new investment, we can also take action right from the design and construction phases to reduce the impact of climate risks by design (e.g., by assessing risks and vulnerabilities during the design stage) and to take account of any chronic effects (e.g., including climate scenarios in longterm estimates for renewable resources).
Once the weather and climate events have been identified, actions to maximize our capacity for adaptation may be categorized as follows.
In order to assess the impact of climate change for the purpose of making business and strategy decisions, and thereby aimed at implementing adaptation measures in line with the above, the Group is investing in the development of quantitative models that also make use of climate scenario data in order to assess the impact of climate change on specific assets or areas of production.
A number of these models are intellectual property as specified in the related section of this report.
Electricity has emerged as a crucial vector in facilitating the transition to clean energy and the decarbonization of energy consumption. The scenarios that target the objectives of the Paris Agreement currently consider electrification rates of at least 50% by 2050 in order to limit the increase in global temperatures to 1.5 °C by the end of the century as compared to the pre-industrial era.
The electrification of consumption is, therefore, a central factor in reducing society’s primary energy needs. Its intrinsic efficiency makes it an essential partner of renewable energy in order to achieve zero emissions worldwide.
Based on this assumption, the long-term strategy of the Enel Group places the following at the core of our objectives:
The Group’s strategic actions have the goal of increasing value for customers in the business-to-consumer (B2C), business-to-business (B2B), and business-to-government (B2G) segments by increasing the level of electrification of these customers and improving the services provided. In order to achieve UN Sustainable Development Goal (SDG) 7, i.e., to ensure access to affordable, reliable, sustainable and modern energy for all, increasing the volume of electricity sold and developing beyond-commodity services will be accompanied by a general reduction in costs. The value created by the Group by way of electrification seeks to guide our customers along the gradual process of replacing fossil fuels in the various segments of consumption.
Expanding the electric vehicle charging infrastructure is key to the mass dissemination of electric cars, so it is a necessary condition to the transition towards carbon-free mobility. This objective is shared by Enel X Way, which is further expanding its charging network and is seeking to have more than 4 million charging points by 2030.
Another key factor is the electrification of residential consumption, which Enel will be pushing by promoting heat pumps for home heating and induction cooktops for the kitchen. This will lead to an increase in the electrification rate for Enel customers from the current 17% to around 20% by 2025 and to 30% by 2030, thereby making it possible to reduce their total energy spending by 5% by 2025 and by around 20% by 2030, while also reducing their carbon footprint by 2030 thanks to a reduction in gas sales from the current 10 bcm to around 3 bcm by 2030, bringing this to zero by 2040.
Enel will also be supporting electrification through investment in infrastructure, given that the grids are the true enablers of the transition. Out of the total investment in grids over the coming years, an increasingly large part will be dedicated to increasing both the number of connections with new users and the flexibility and capability of the grid to handle an increasing share of distributed generation.
Smart grids, clean energy and energy efficiency are accessible to Enel customers thanks to the innovations brought to each smart meter. At present, the Group has already installed 45 million digital meters, and we expect to reach 80 million units by 2030.
To reach these objectives by 2030, these actions must be put into practice immediately in order to have the desired effect in time. We therefore need to design a path forward that enables us to reach our long-term objectives and make a concrete contribution to solving the world’s challenges through practical action and innovative solutions. The following are of particular note.
Enel X is actively involved in managing three flagship projects in three different locations of strategic importance for the Group: Sardinia (Italy), Zaragoza (Spain), and Santiago (Chile). The goal is to create testbeds of electrification and sustainability to test various business models that can be implemented quickly and with low levels of risk. The success of these projects will be key to broadening and exporting these strategies into other areas of the world. The projects in these three locations will focus on promoting greater-than-average local penetration of electricity, while also building renewables capacity in order to serve the growing energy demand, supported in part by batteries to store electricity. Electrification can thereby contribute to the decarbonization of the energy system as a whole.
The nexus of electrification and efficiency needs to be easy for the public to understand. All too often this concept, like others, can be confusing and only accessible to the experts. To come up with examples and other content that is easy to grasp with regard to financial savings, energy security, and the creation of jobs through system electrification, a group of clean-energy organizations, including Enel, has created a campaign specifically aimed at promoting the benefits of clean electricity for consumers in terms of efficiency, energy saving, and emission reduction. The project has been structured in two cycles, which accompanied the release of the “Fit for 55” publication in July 2021 and of the REPowerEU plan in May 2022.
Grid Futurability® is a global, customer-focused approach that Enel is adopting in order to renew, reinforce and expand our networks over the coming years. With Grid Futurability®, Enel is anticipating emerging needs related to electrification and establishing a roadmap of investment in our electricity distribution infrastructure in order to meet those needs. By combining the use of robust infrastructures and advanced technologies, Grid Futurability® seeks to provide grids that are increasingly resilient, interactive and intrinsically sustainable in the countries in which we operate, with a focus on urban areas. This approach harmonizes the short and long-term strategic needs, while maximizing benefits and stakeholder satisfaction, and reducing the carbon footprint of our grids. It calls for the strategic use of technology in order to make the best use of existing electrical grids and build fully digital smart grids.
Enel Flexibility Labs aim to strengthen our collaboration with all stakeholders involved in the development of the distribution and electrical systems (e.g., providers of flexible services, producers of related technologies, energy communities, DSOs and TSOs). Using an open-platform grid simulator, the project makes it possible to test, in a realistic setting, behavior and events that are typical of an electrical grid, along with possible innovative solutions, so as to study this behavior in order to continue developing and improving all systems. The tests are a way to promote collaboration among the parties involved and reinforce the use of distributed energy resources, thereby contributing to the ambitions of decarbonization and electrification on the road to a net-zero future.
Launched by Enel Grids in May 2022, the Open Power Grids Association was created to promote a convergence on and co-design of operating standards for grid components, while maximizing the creation of shared value through sustainability and security, cost efficiency, and technical performance. The association brings together electricity distributors, components producers and suppliers, research institutes, and other stakeholders in order to co-design and develop operating specifications for electrical grids that are increasingly sustainable and respectful of the environment, with the shared goal of accelerating the energy transition.
With the goal of electrifying Enel’s fleet of vehicles, this project is a strategic lever in decarbonization and electrification. It will reduce the environmental impact of our vehicles and create economic value by reducing both fuel consumption and maintenance costs.
Enel is involved in various international round tables and other projects promoting clean electrification. One main example is the Net Zero Carbon Cities initiative of the World Economic Forum (WEF), which aims to enable urban transformation towards clean electrification and the circular economy, using integrated energy solutions for buildings and mobility. The project has enabled Enel to play an active role in the City Sprints in São Paulo and Cagliari, which is a series of workshops that bring together local businesses and city leaders in order to define new partnerships and promote public-private partnerships. Enel’s smart meter has also been included in the Toolbox of Solutions, a digital platform encompassing more than 200 best practices and case studies of clean electrification, energy efficiency, and smart infrastructure.
With regard to green hydrogen, Enel is one of the leaders in the project H2 Zero Pledges, led by the World Business Council for Sustainable Development (WBCSD) to engage companies in supporting the use and provision of hydrogen with the lowest possible carbon intensity. Enel, for example, has committed to produce solely green H2 and expects to reach 2 GW of electrolyzer capacity by 2030 (to be updated to 3 GW in 2023).
Enel is one of the companies that has been involved in the United Nations High-Level Dialogue on Energy (HLDE) right from the start. The HLDE has led to the launch of a global roadmap to set specific targets for the acceleration of the energy transition and ensure universal access to affordable, reliable, sustainable and modern energy systems by 2030.
Enel’s commitment includes several key objectives in support of the Company’s green electrification pillar to increase renewables capacity and demand response, to reduce GHG emissions in line with the (SBTi-certified) 1.5 °C scenario, to install new electric vehicle charging points, and to make new connections in rural and suburban areas in the countries in which the Group operates. The commitments stated in the Energy Compact are in line with our Strategic and Sustainability Plans so as to ensure transparency and accountability on the Group’s journey to clean electrification.
The Group will continue pursuing sustainability in our investment decisions, while creating shared value for all our stakeholders. The Group’s investment plan is fully in line with the goal of exiting from the coal industry and achieving zero emissions by 2040 (in line with the Paris Agreement objective of limiting global warming to 1.5 °C). As a result, our investments in products or businesses of high carbon intensity will gradually fall to zero by 2040.
Roughly 94% of the Group’s total investment in 2023-2025 is in line with the United Nations Sustainable Development Goals (SDGs) and directly work towards SDGs 7 (“Affordable and Clean Energy”), 9 (“Industry, Innovation and Infrastructure”) and 11 (“Sustainable Cities and Communities”), all of which help to achieve SDG 13 (“Climate Action”), up from 92% of investment in 2022 aligned with those goals. The alignment of investments stated in the Group’s Strategic Plan with the objectives of decarbonization and the reduction of greenhouse gases is based on a specific approach by which investment in renewables and retail power, by their nature, fall under SDG 7, investment in distribution networks fall under SDG 9, and investments by Enel X concern SDG 11. Of the above, 94% thereby excludes investment in conventional power generation (including maintenance) and in retail gas.
Furthermore, we expect that, from 82% in 2022, more than 80% of all Group investment will continue to be in line with the EU taxonomy over the period covered by the plan, given their substantial contribution to mitigating climate change.
With this model, we expect to generate an increase in GDP of roughly €70 billion through 2025 in the countries in which we operate, while also creating some 160,000 new jobs and gradually increasing wealth for lower-income households by about €12 billion over the same period in the communities affected by our business. With regard to developing countries, our Group is also contributing to the growth of local communities by way of direct investment, particularly in Latin America, which remains a key region for the Company.
Enel’s path to sustainable finance has shown how important this can be in supporting the organic growth of a business. The Group’s goal is to gradually refinance outstanding balances using sustainability-linked instruments. In the years to come, Enel will continue to make use of sustainable financial instruments, confirming their central role within the Group’s financial strategy, with the goal of bringing sustainable debt to about 70% of the Group’s total debt by 2025, up from an estimated 60% in 2022.
The value of the relationships we build with our stakeholders is at the core of our commitment, and meeting their needs also means focusing on and supporting those who are most exposed to the transition towards a decarbonized economy. By listening to and engaging with the various categories of stakeholders, we can identify the priorities and define the Group’s Sustainability Plan, in harmony with the Strategic Plan, based on specific short-, mediumand long-term objectives, so as to ensure transparency and accountability in our path to sustainable progress.
Our sustainability strategy, which centers around decarbonization and electrification, is founded in a respect for human rights, the assurance of health and safety, and a solid structure of governance.
Our commitment to human rights calls for an integrated, global approach that takes account of the needs of our stakeholders throughout the entire value chain. Safeguarding the health and safety of all who work for and with the Group is a responsibility that is shared at all levels of the organization by integrating safety into processes and training, in relations with contractors, in managing and analyzing injuries in the workplace, and in ongoing quality controls. A solid structure of governance also enables us to ensure that our stakeholders benefit from our principles of transparency, fairness and integrity.
The planet plays a fundamental role in the creation of value at Enel, and combating climate change is one of the Group’s primary challenges. We have defined specific actions aimed at reducing greenhouse gas (GHG) emissions and improving air quality in the areas in which we operate, while focusing on developing our renewables capacity and gradually closing coal-fired plants.
Protecting natural capital and biodiversity and making responsible use of water resources are key to protecting natural ecosystems and to the wellness of the people who live in them, all to the benefit of generations present and future.
With regard to our customers, we are committed to ensuring high standards of service quality to the utmost satisfaction by anticipating market needs, so as to ensure reliable solutions and establish lasting relationships based on open dialogue, collaboration and trust, traits that concern not only the provision of electricity and/or natural gas but also, and above all, the intangible aspects of our service as perceived by the customer.
It is our goal to be able to provide simple, innovative and inclusive solutions and to anticipate customers’ needs as we support them in the path to electrifying their energy consumption.
The rapid, ongoing evolution of our business has resulted in a need for new technical and professional skills and led to the natural obsolescence of others. Within this landscape, with regard to all the Group’s people, Enel is constantly committed to improving the offering of training, increasing the average hours of training per employee, and promoting individual growth, career training, skills development, and performance optimization as new needs arise. In this context, the Group aims to have 40% of all training focus on upskilling and reskilling by 2025.
Enel is committed to promoting initiatives that disseminate and strengthen a culture of health, safety, wellness, and work-life balance, that ensure a workplace that is safe, inclusive and able to value diversity and individuality, all within an approach based on innovation and entrepreneurial spirit. At Enel, inclusion means caring for all aspects of diversity and valuing the talents of every individual. In today’s world, it is essential to innovate, co-create, attract and draw out talent, and develop a workplace that enables every individual to always express their unique traits in order to seize new opportunities.
The Group has always been committed to gender equality, and in 2021 Enel joined the “Equal by 30” campaign of the Clean Energy Ministerial (CEM), by which various organizations from the public and private sectors commit to promoting gender equality in wages, among leadership, and in opportunities by 2030 within the clean energy sector. We have confirmed our objectives for the percentage of women managers to reach 26.9% of senior management and 34.1% of middle management by 2025.
A key factor in achieving our goals of decarbonization and electrification is the existence of a resilient, sustainable supply chain. For this reason, we work closely with our suppliers, viewing them as partners in this change and basing our relationship on mutual loyalty, transparency and collaboration. This commitment translates into concrete action in the various stages of the procurement process: in the qualification of vendors on social (human rights, health and safety) and environmental aspects; in requiring environmental certifications as part of the tender process, such as carbon footprint certification (75% in value of all procurement agreements in 2025 will include CFP certification); and in the application of rankings and/or targets for supplier carbon footprints.
With regard to the communities in which we operate, we are committed to establishing strong, lasting relationships as a fundamental part of a business model that is able to create shared value over the long term for all stakeholders. The sustainability of our strategy has received confirmation in the progress we have made in terms of our contribution to reaching the United Nations Sustainable Development Goals (SDGs) through the Group’s work with our communities, particularly with regard to ensuring inclusive and equitable quality education (SDG 4), providing access to affordable, reliable, sustainable and modern energy (SDG 7), and promoting sustained, inclusive and sustainable economic growth (SDG 8). The important successes thus far have been made possible by our Creating Shared Value (CSV) strategy and model, which integrate social and environmental factors in business processes throughout the value chain, with a particular emphasis on business development, engineering and construction, procurement, and asset management and maintenance.
Innovation, digitalization and the circular economy embrace and strengthen all aspects of Enel’s sustainability strategy and accelerate our path to sustainable progress.
To promote new uses of energy and new ways of managing it and making it accessible to more people in a sustainable manner, we have made innovation a key aspect of our business strategy. This open-innovation approach, which we have named Open Innovability®, involves traditional action and the development of new models and technologies based on cutting-edge innovation. We promote open collaboration with startups, small and medium-sized enterprises (SMEs), large businesses, academia, in-house and other experts, investors, and all our partners such that the entire organization can focus on constant renewal, while ensuring the creation of long-term value.
Finally, the energy transition cannot come about without digitalization and cyber security, for which the Group is committed to disseminating the most advanced solutions and reinforcing efforts to verify them, so as to prevent cyber-attack.
The circular economy, in turn, is increasingly seen as an accelerator of growth throughout the value chain and has become an essential factor in Enel becoming a leader not only in sustainability and innovation, but in the energy transition as a whole. A circular approach makes it possible to reduce both waste and the use of finite natural resources, while maintaining the value of goods and materials. In this way, we are able to generate benefits for the environment related not only to the reduction of greenhouse gas emissions, but more generally as well to the consumption of water and other natural resources, to the production of waste and lost biodiversity.
In 2023 in Davos, to reinforce this commitment, Enel officially presented the KPI “Economic CirculAbility©”, which compares the Group’s financial performance against the quantity of resources consumed by the various business activities throughout the value chain. The Group has also taken on the commitment to double this indicator by 2030 over 2020 levels.
In the words of Ernesto Ciorra, Enel’s Chief Innovability© Officer, “We must work so that raw materials are not consumed, but rather used and made available again for future production cycles. In this way, we can ensure, for ourselves and for the countries in which we operate, freedom from future supplies and independence from geopolitical tensions. We must do this now, because raw materials are available today, but global demand is increasing disproportionately, in parallel with efforts to decarbonize energy generation and industrial production generally. We are the first to have taken up this commitment, and we are proud of this, because the first will have a competitive advantage in the circular economy, while the last risk not having access to dwindling materials”.
The process of defining the Group’s strategies is accompanied by a careful analysis of the risks and opportunities connected with those strategies.
Identifying those risks and opportunities within the Enel Group’s strategic and industrial planning process is designed to span the horizon of the Plan in an integrated manner.
Although the strategy underlying the Plan, as described above, envisages a phase of careful analysis and verification of the strategic risk factors and variables, it retains scenario assumptions regarding future events that will not necessarily occur or not occur to the extent assumed, as they depend on variables that cannot be controlled by management. Upside and downside developments may occur as time unfolds.
Before being able to approve the Strategic Plan, a quantitative analysis of the risks and opportunities associated with the Group’s strategic positioning is presented annually to the Control and Risk Committee appointed by the Board of Directors. In particular, risk factors such as macroeconomic and energy variables (such as exchange rates, inflation, commodity prices and electricity demand), regulatory developments, weather and climate events and risks connected with the strategy are identified.
Based on the nature of the risk and opportunity drivers, the analytical approach that best represents their volatility is selected. In practice, we perform a deterministic analysis based on what-ifs of the possible evolution of the main market and business variables with respect to the main risk factors for the execution of the Business Plan.
The validity of the results is also monitored with ex-post analyses by risk cluster. In 2022, most of the actual upside and downside events fell well within the limits estimated by the risk models of the Strategic Plan presented at the end of 2021.
Focusing on the scenario risk analysis for the Strategic Plan, exchange rates, electricity demand and the volatility of energy and commodity prices, together with possible reviews of regulatory frameworks, represent almost all the volatility of the drivers. In particular, in addition to the US dollar the most impacting currencies are the Chilean peso, the Colombian peso and the Brazilian real. Italy and Spain represent nearly all of the Group’s exposure to the impact of the volatility of energy prices and commodity price fluctuations on margins.
Examining the other risk factors, such as those connected with weather and climate events, we can see that geographical diversification significantly reduces the exposure to the risk associated with renewable resources – a highly positive factor considering the Group’s positioning and the steady expansion of renewable generation. Furthermore, with regard to climate change, the risk associated with chronic effects is of little significance over the course of the three years of the plan.
The monitoring of all possible regulatory issues is crucial for assessing any upside or downside impact on the Group.
