In order to evaluate the economic, social and environmental challenges, identify the risks, limit their impacts and take full advantage of the relative opportunities as part of the broader materiality analysis process, an analysis of the main current and future ESG megatrends was carried out.
Within today’s complex scenario, new generation and consumption models are emerging, dictated by ongoing technological and demographic changes, as well as by new economic and geopolitical balances.
Based on the main publications within the scope of the Electric Utilities sector and the current public policies, the analysis of the sustainability context identified 14 main ESG megatrends, which include the digital revolution, definition of new governance models, climate and demographic change, preservation of resources. These phenomena influence both today and in the future the economic, social and environmental dimensions of sustainable development and often are mutually conditioned and act in combination, reinforcing their individual impact. The technological revolution and digitalization have in several cases accentuated income disparity and the consequent increase in inequalities.
Climate change is contributing to displacement from rural to urban areas, and therefore to demographic changes in countries. Safeguarding resources entails the need to use and adopt technologies with a lower environmental impact. The impacts of the 14 ESG megatrends identified in the social, economic and environmental context were analyzed and evaluated using a specific questionnaire completed by external, national and international stakeholders and experts. The results confirm climate change, the digital revolution and the preservation of resources as the main ESG megatrends, and highlight the increase in inequalities as a further area of focus in the current and future scenarios.
Furthermore, due to the nature of its business and its geographical distribution, the Enel Group is exposed to various types of ESG risk, identified within the reference framework relating to the risk categories adopted by Enel, of which there are six: strategic, financial, operational, governance and culture, digital technology, and compliance. For further details and a description of the actions intended to mitigate their effects and ensure their correct management, refer to the chapter “Sound governance” in this document.
Through the materiality analysis, which involves various categories of internal and external stakeholders, the material topics, namely the topics that represent the organization’s most significant impacts on the economy, environment, people and human rights, are defined. The results of this analysis are used to help define the objectives to be included in the Strategic Plan and the Sustainability Plan, the achievement of which is contributed to by the various Group Functions and Business Lines, as well as the topics covered by the Sustainability Report and other Corporate Reporting documents.
As a result of the continuous monitoring of stakeholder expectations (“dynamic materiality”(1), the traditional way of looking at the priorities of ESG topics (“Priorities’ Materiality”) has been enriched by incorporating a view of the significance of the impacts generated and suffered (impact materiality and financial materiality) by the Company in the reference context (“Double Materiality”).
The impact analysis model is of fundamental importance as it enables the Company to identify the material topics and focus on the best way to manage them, both in terms of risk management as well as in terms of strengthening opportunities. In addition, the Company must recognize its strategic priorities, taking into account also the view of its stakeholders. Identifying the priority ESG topics with which the Company wants to engage therefore strengthens the profile of impact management.
(1) The concept of dynamic materiality – announced in 2020 by the World Economic Forum in the document “Embracing the new age of materiality” – represents materiality as a dynamic process according to which what may be financially irrelevant today can become material tomorrow.
* The identified impacts are linked to the main ESG megatrends and the 1st, 2nd and 3rd level priority topics.
From a “double materiality” perspective, according to which the Company can influence and be influenced by ESG topics, the topics are material to one or both of the following dimensions:
The materiality analysis was developed in line with the GRI 2021 and the AccountAbility AA1000 Stakeholder Engagement Standard (AA1000SES), taking into account the draft of the ESRS 1 standard – General Requirements prepared by EFRAG (European Financial Reporting Advisory Group), the Value Reporting Foundation – SASB standard and the SDG Compass, which supports companies in adapting their strategies to comply with the UN SDGs.
The Holding’s Sustainability Planning, Performance Management and Human Rights unit, as part of the Innovability Function, is responsible for analyzing materiality at Group level and plays a guidance and coordination role, providing guidelines and methodological support for the country, Company and site level analysis conducted by local managers, with the involvement of stakeholders and the key figures at Company level.
The materiality analysis and the relative results, such as the material topics identified, are subject to specific examination by the Corporate Governance and Sustainability Committee, set up within the Board of Directors, when examining the Sustainability Plan guidelines. Furthermore, the Corporate Governance and Sustainability Committee and the Control and Risks Committee issue prior opinions on the Sustainability Report, which includes the materiality analysis, and submit them to the Board of Directors’ meeting called to approve the Report.
The collection, aggregation and processing of data relating to the engagement and analysis initiatives of the stakeholders and experts involved are managed through a dedicated computer system (“e-mia®: Engagement – materiality & impact analysis”), which also allows the best stakeholder engagement and monitoring practices to be shared within the Group in line with the Company’s organizational model. The results, which are updated annually, are presented to the Group, the individual companies, the Business Lines/Corporate Functions and sites (potential or actual operating sites), as well as to the different categories of stakeholders. Every two years, an analysis is carried out with a view to possibly reviewing the topics and categories of stakeholders so as to take into account any significant changes in the internal and external context of the Company. In 2022, the scope of the materiality analysis included 21 countries, covering all continents where the Group is present. In particular, in 2022, new sites were added in Chile, Greece and Peru, with increasing integration of the results due to the application of the Creating Shared Value (CSV) tools to the Group’s assets.
The topics subject to the 2022 analysis cover the entire sustainable business model and are classified into three categories: business and governance topics, social topics and environmental topics, divided into three levels to cover all the different cases.
In defining the ESG topics, multiple sources were considered and various stakeholder categories were directly and indirectly involved. The instruments used include:
We define and update the list of ESG topics every two years, with the support of the various units involved each year in the analysis process.
The stakeholders involved in the 2022 materiality analysis represent the individuals or interest groups that are affected or could be affected by the organization’s activities, with a view to successfully implementing its strategies and achieving its goals. We regularly involve our stakeholders through numerous listening initiatives in order to capture their expectations and identify potential and future impacts (please refer to the section on the “Priorities’ Matrix”). The stakeholders are grouped into categories, classified on three levels, in line with the structure of the topics analyzed.
The first level stakeholder categories are the following:
Please refer to the table in section “Assignment of priority to the topics by external stakeholders”, which shows the stakeholder categories with their respective degree of relevance).
With the support of the various units responsible for stakeholder relations, which are involved in the analysis process every year, we identify and update the list of relevant stakeholder categories every two years, in order to define a complete list of actual and potential stakeholders and to ensure continuous alignment with the sustainability context in which Enel operates.
The process of assigning stakeholder relevance is conducted in accordance with the applicable standards and entails the involvement of the business units responsible for stakeholder relations and an assessment of each stakeholder according to their respective relevance.
In 2022, a specific questionnaire was put to the Top Management at the Business Line and country level, who were asked to assess the relevance of the categories based on the following parameters:
| Dependence | Importance of the relationship for the stakeholder, indicating groups or individuals who directly or indirectly depend on the activities, products or services and associated services, or on which the organization depends in order to operate |
| Influence | Importance of the relationship for the Company, indicating groups or individuals that may have an impact on the organization or on a stakeholder for strategic or operational decision-making |
| Tension | Temporal dimension of the relationship, indicating groups or individuals who require the immediate attention of the organization on broader financial, economic, social or environmental topics |
(See table in the section “Assignment of priority to the topics by external stakeholders”, which shows the stakeholder categories with their respective degree of relevance).
In particular, the analysis carried out at Group level shows that the relevance of “Suppliers and Contractors” stakeholder has grown over the last year, particularly given the awareness of their key role in managing the energy transition process. On the other hand, the relevance of the stakeholder “Enel people”, as a strategic player in the pursuit of sustainable business and continuous improvement of the Company, remains constant.
Having identified the topics and stakeholder categories and weighted them according to their respective relevance, the materiality analysis process then proceeds with an assessment of the priorities assigned to the topics by the external stakeholders, taking into account the related impacts generated on the economy, the environment, people, and human rights (horizontal axis of the priorities and expectations matrix) (please refer to the “2022 Priorities’ Matrix”). An analysis of the priorities assigned by the Group’s relevant stakeholders results in the definition of the priority topics for stakeholders, based on which the potential and actual impacts of the Company are defined.
In 2022, the priorities assigned to the topics were identified thanks to the implementation of approximately 460 engagement initiatives (surveys, focus groups, interviews, document analysis, etc.) with relevant stakeholders for the Group. Less than 1% of the assessments were carried out indirectly, through interviews with the business units responsible for the relationship with the reference stakeholder (“self-assessment”), demonstrating the objectivity of the analyses carried out. The engagement initiatives used in the materiality analysis are part of the various engagement initiatives carried out during the year by the Group’s various units. These initiatives include: customer satisfaction surveys; the “Wellbeing Global Survey”, aimed at collecting expectations and the degree of satisfaction regarding the numerous initiatives promoted by the Company concerning the physical and psychological well-being of Enel people; questionnaires from sustainability rating agencies; customer complaints; relations with analysts and investors, representative and trade associations; institutional relations at national and local levels, as well as with trade unions; media monitoring and opinion polls. In some cases, where necessary, ad hoc materiality analysis initiatives were implemented, including an online questionnaire for suppliers or focus groups aimed at specific categories of stakeholders.
The following table shows, for each internal and external stakeholder category identified at 1st Level and involved in the materiality analysis process, the respective degree of relevance, the engagement initiatives used, the priority topics and the Company’s response methods.
Since 2016, in order to more precisely define the topics on which the Company needs to focus, Enel has been combining the stakeholders’ assessment of priorities with an analysis of their satisfaction with the topics identified. The 2022 results of the expectations analysis show a substantial alignment between the priorities assigned by stakeholders and their level of satisfaction. It should be noted that the topic related to the “Sustainable supply chain” experienced an increase in satisfaction in terms of positioning compared to 2021, denoting appreciation for Enel’s strong commitment to managing the environmental and social impacts associated with the supply chain.
For the purposes of drawing up the 2022 Priorities’ Matrix, Enel assessed the priority of the topics in its strategies (vertical axis of the Priorities’ Matrix), taking into account the guidelines set by the Strategic Plan, the objectives of the Functions/Business Lines and the commitments made by the Group through its own policies and conduct criteria. This analysis involved the Company’s various Functions and Top Management (Chief Executive Officer and Chairman) through ad hoc interviews and specific questionnaires.
The aspects covered in the previous paragraphs, namely the priority of topics for stakeholders and in corporate strategies, contribute to the development of the Priorities’ Matrix. The process makes it possible to identify the priorities for stakeholders and the Company at both Group and country level, down to each Business Line/Corporate Function and individual asset (understood as a potential or effective operating site). In 2022, the analysis covered 21 countries, 64 companies and 36 sites and considered 463 engagement initiatives involving stakeholders relevant to the Group.
Shown below are:
The following are some of the main priority topics and how they should be handled.
The priority topics for stakeholders and the Company thus defined are subject to analysis according to the double materiality approach, which aims to identify the material topics (please refer to the section “Material topics”).
The materiality analysis process has evolved and the traditional view is now complemented with that of double materiality, in which financial materiality and impact materiality each represent an equally important perspective. Through the involvement of the Group’s key stakeholders and internal and external experts, the process seeks to analyze the most significant impacts in order to identify material topics, taking into account – especially for negative impacts – the due diligence process and the relative results.
Enel has therefore identified the impacts based on the following activities:
Once the impacts have been identified, Enel proceeds with their analysis, that is with the assessment of the respective significance, both on a material level of the impact as well as financial materiality level, through the involvement of the Group’s internal stakeholders and experts who, in performing their business activities, have a greater relationship with the main stakeholders and so have a complete view of the actual and/or potential impacts in the external context in which Enel operates.
As regards the impact materiality, in 2022, Enel strengthened the methodology for analyzing the impacts generated by the Company to bring it into line with the provisions of GRI 2021. Following the pilot project launched in 2019 and its completion in 2020 and 2021, with the involvement of all the countries participating in the process, in 2022 the Group conducted an impact materiality analysis which, through the involvement of the relevant stakeholders and experts and based on the best practices dictated by the due diligence process, identified the impacts generated by the Company on the economy, the environment and people, considering any violations of human rights as among the negative impacts and the contribution to sustainable development among the positive impacts. The impact analysis was carried out by each local Sustainability and Holding unit in order to assess the significance of the impacts, a process involving the Group’s internal experts and stakeholders who, in performing their business activities, have a close relationship with the main stakeholders and so have a complete view of the actual and/or potential impacts in the external context in which Enel operates. This analysis took into account the internal company context, including upstream and downstream activities in its value chain, the main stakeholders, and the best practices dictated by the due diligence process, and assessed the (actual and potential) positive and negative impacts generated by the Company. Negative impacts were analyzed according to their significance based on the degree of severity(2) and likelihood, in the case of potential impacts. Positive impacts were analyzed according to their significance(3) and based on their scope and direct and indirect contribution to the SDGs, in line with the commitment made by the Group, and with respect to the management instruments put in place to monitor the objectives set. On the basis of the impact materiality assessment, for reporting purposes the most significant positive and negative impacts generated (actual and/or potential) were selected according to their highest degree of significance for each material topic (1st Level). The table below shows:
(2) The severity of an actual or potential negative impact is determined by the following parameters: • scale: how severe the impact is; • scope: how widespread the impact is; • irremediable character: how difficult it is to counteract or repair the resulting damage. (3) The significance of a positive impact is determined by the scale and scope of the impact, as well as by the probability of the impact in the event it is potentially positive.
The impacts and associated material topics that have been determined through this process are used to identify the financial risks and opportunities related to the organization’s impacts and for financial assessment purposes.
As regards financial materiality, in 2022 the Group conducted an assessment, analyzing and identifying the material topics from a financial perspective, namely those that affect or could affect the Company’s financial condition or operating results, and are therefore most relevant to investors. The financial materiality analysis was performed by each Local Sustainability and Holding unit, in order to assess the significance of impacts arising from the external context. This entailed the involvement of relevant stakeholders and experts within the organization who have a close relationship with the main stakeholders, and thus a comprehensive view on sustainability aspects related to risks and opportunities that influence or may influence substantially the Company’s cash flows, development, performance, positioning, cost of capital or access to borrowings in the short, medium or long term. In conducting the financial materiality analysis, Enel also considered the relevance of ESG topics according to the SASB Standard for the prevailing Electric Utilities sector and the Gas Utilities, Solar Technology and Wind Technology sectors.
On the basis of the financial materiality assessment, for reporting purposes the most significant potential(4) positive and negative impacts were selected according to their highest degree of significance for each topic of the materiality analysis. The table below shows:
(4) For financial reporting input purposes, the financial materiality analysis looked at the actual and potential impacts suffered by the Company from a financial point of view. However, in order to select the most significant impacts for reporting, it focused on potential ones with a view to assessing the potential economic effects on the Company.
The impact analysis model is of fundamental importance as it enables the Company to identify the material topics and focus on the best way to manage them, both in terms of risk management as well as in terms of strengthening opportunities. In addition, the Company must recognize its strategic priorities, taking into account also the view of its stakeholders. Identifying the priority ESG topics with which the Company wants to engage therefore strengthens the profile of impact management. The assessment of the impacts generated and suffered and their relative significance guides the identification of the material topics: identify, within each 1st Level material topic, which 2nd-3rd level topics are material. The result of this analysis are used to help identify and define the objectives to be included in the Strategic Plan and the Sustainability Plan, the achievement of which is contributed to by the various Group Functions and Business Lines, as well as the topics covered by the Sustainability Report and other Corporate Reporting documents. The list of 1st, 2nd and 3rd Level material topics is provided below together with the respective reference GRI as a monitoring and management indicator and the reference to the Sustainability Plan and Sustainability Report 2022.
