Scenario of reference for ESG aspects (environmental, social, governance)

2021 saw the start of the revival of economic-productive systems, the resumption of social relations towards the “new normal” that follows the discontinuity generated by the health crisis. The pandemic emergency has joined the climate-environmental crisis, in a reciprocal relationship of causes and effects, with repercussions on the social context that still condition the scenario of future sustainability. This contextual situation is also the key to interpreting numerous international and national events. On the political level, it is worth noting the inauguration of the 46th President of the United States of America, Joe Biden, and the re-admission of the USA into the Paris agreements to combat climate change. In the Italian context, with the formation of the new Draghi government, the NRRP for the post-emergency relaunch of Italy was prepared and initiated. Through the NRRP, and the related funds provided by the EU (Next Generation), a strategic plan is proposed that revolves around the strategic axes of digitalisation and innovation; ecological transition; social inclusion. In Europe, a climate law was passed setting the goal of carbon neutrality by 2050, with a milestone of a 55% GHG reduction by 2030 compared to 1990. Together with the “Fit for 55” legislative initiatives proposed by the von der Leyen Commission, the measure is part of the strategic framework of the European Green Deal. The G20 in Rome affirmed commitments to food security and adequate nutrition (Matera Declaration) and to gender equality, empowerment and leadership of women and girls at all levels for inclusive and sustainable development. 2021 was characterised by the careful management of the pandemic through vaccination campaigns, the continuation of remote work, the introduction of prevention and population monitoring systems to maximise safety while returning to work and social activities. At the environmental level, extreme events (hurricanes, floods, fires) have been recorded, with loss of life and economic impacts all over the planet, from the north-west coast of the USA to Europe, from the Henan region in China to India, from Canada to South Sudan.
At the end of the year, new criticalities emerged, health, with the spread of new variants of Covid, and social, with the rise in energy prices due to the cost of gas, and environmental, with the recording of increased levels of climate-changing emissions. In Italy, the Asvis report indicates that progress towards sustainable development is still uneven, despite several important initiatives, such as the project to integrate the protection of the environment, biodiversity and ecosystems, also in the interest of future generations, into the fundamental principles of the Constitution and the regulation at national level in relation to equal pay for men and women.
In this context, essential service companies, close to the dynamics experienced by the territory, feel the solicitations and suggestions emerging from regulatory frameworks, such as the European Environmental Taxonomy, and managerial frameworks, with the spread of concepts such as stakeholder capitalism or “sustainable success” for listed companies.

The regulatory context of the Acea Group is wide-ranging and articulated according to the specificity of the businesses handled and the variety of the frameworks within which the legal and regulatory disciplines intervene, which affect the business operations, from administrative authorisation profiles to those protecting the market and competition. Added to such aspects is the peculiarity of the nature of listed Company, with the related legal impacts, for example, in terms of regulating communications to the market. The regulatory scenario is therefore analysed from a multidisciplinary viewpoint, applying a 360˚ overview and continuous interpretative analysis, in order to detect developments of particular significance, thus identifying and assessing risks and opportunities in terms of strategy and operating management.
Among the issues worthy of mention, note should be taken of the measures introduced through Italian Decree Law 77/2021, the socalled “Simplification Decree Bis”, containing “governance for the National Recovery and Resilience Plan (NRRP) and initial measures to strengthen administrative structures and accelerate and streamline procedures”, converted by Italian Law 108/2021. This is a package of structural reforms and investments for 2021-2026, intended to accelerate the implementation of the work called for in the Recovery Plan, strengthening administrative structures, streamlining procedures and establishing governance rules for the same.
The Decree also makes changes with regards to public tenders, in that the provisions do not exclusively affect the ordinary regulatory framework for public contracts (Code of Public Contracts, Italian Legislative Decree 50/2016), but also amend the emergency derogation rules such as “Reopen Building Sites” (Italian Decree Law 32/2019) — and the Simplification Decree (Italian Decree Law 76/2020), established to respond to the crisis caused by the pandemic. Finally, special attention was paid to Decree Law 2469 “Draft 2021 annual market and competition law” with provisions to promote the development of competition, remove obstacles to opening markets and guarantee consumer protection.

The natural environment is the scenario where the activities of the Group are performed and is to be preserved with a responsible and efficient use of resources, protecting sources, safeguarding the natural areas where the plants and service networks encroach, mitigating the physical and the external impacts generated in the ecological context of the operating processes. Despite the global adoption of periods of economic downtime or slowdown to limit the spread of Covid-19, Overshoot Day, when the Earth depletes its available renewable resources for the current year, arrived on 29 July in 2021, as it did in 2019, compared to a later arrival in 2020 (22 August). Nationally, this limit was reached on 13 May 2021, one day earlier than the previous year.
The global environmental outlook was the subject of COP26 in Glasgow. In this meeting, in which Italy served as a guide and co-leader, critical issues were examined and important decisions were taken. The 196 countries adhering to the UN Convention on Climate Change, although with results lower than expected, shared important goals, such as keeping the temperature increase to within 1.5° compared to the pre-industrial period, new and binding commitments towards decarbonisation, the cessation of deforestation by 2030 and the reduction of methane losses by 30%. It was also decided to double international funding for adaptation projects, especially in countries most vulnerable to the impacts of climate change, and a programme to define the “Global Goal on Adaptation” was approved, which will identify indicators to monitor the adaptation projects of individual countries. The European Union has continued its work to regulate, through Regulation 852/2020, the Taxonomy of eco-compatible activities with the aim of guiding private investment towards the promotion of an environmentally sustainable economy.
In 2021, the work of the Taskforce on climate-related financial disclosure (hereafter TCFD) continued, which promotes companies’ reporting on climate change-related risks and opportunities and the description of impacts that these have on the company, so as to meet the expectations and needs of investors. Of particular importance in this context are the scenario analyses that companies are called upon to perform in order to assess the future impacts that the climate-related risks/opportunities generate on the company’s business.

Sensitivity to the evolution of climate change and its effects on the businesses managed is a well-established theme at international level, which is also reflected in a greater demand for information in the annual financial report. Although there is no international accounting standard governing how the impacts of climate change are to be considered in the preparation of financial statements, the IASB has issued certain documents to support IFRS-adopters in meeting this stakeholder disclosure requirement. Similarly, ESMA, in its European Common Enforcement Priorities of 29 October 2021, highlighted that issuers should consider climate risks in the preparation of IFRS financial statements to the extent that they are significant regardless of whether or not these risks are explicitly provided for in the relevant accounting standards.
The Acea Group describes its considerations regarding actions attributable to mitigation of the effects of climate change as well as adaptation to climate change in the non-financial statement. In this context, considering the sectors of activity in which the Group operates through its investees, the Acea Group, in continuing to define updated future plans that are currently being developed and prepared, has identified certain risks arising from the current process of mitigation and adaptation.
The following is a summary of the considerations made by management with reference to the aspects considered significant for the purposes of preparing the financial statements in the sectors of activity in which it operates.
With reference to the short term, the management does not detect any significant specific impacts deriving from climate-related risks, to be considered in the application of the accounting standards.
In all the relevant sectors of activity, the Group pursues excellence in service provision; this entails an ongoing commitment to the development of adequate infrastructures and the evolution of their management, with the application of technological innovation and digitalisation, as well as the preservation and protection of water resources, the development of electricity generation capacity from renewable sources, the energy efficiency of production processes, the pursuit of a circular economy approach and the implementation of controls on commodities supplied to customers.
With reference to the medium/long term, the management, while continuing to define updated development plans which are currently being prepared, does not foresee any further specific considerations to be taken into account in the application of the accounting standards for the preparation of the financial statements.
It should be noted that the assessment and, more specifically, the quantification of climate-related risks requires the application of climate scenario analyses - an activity that the Group has launched - and is, however, also exposed to assumptions about highly uncertain future developments, such as future technological developments, government actions or even developments in international political balances.
For the principal sectors in which the Group operates, the main effects arising from climate change have been identified in the need to continue to invest in infrastructure to prevent and/or mitigate the impacts arising primarily from physical risks.
Management has assessed that these investments do not reduce or modify the expectation of the economic benefits associated with the use of the assets recorded under tangible fixed assets as they are investments with regulatory relevance and therefore subject to specific reimbursement mechanisms. Therefore, a critical review of the useful life of fixed assets on the balance sheet was not necessary.
With specific reference to the sale of commodities, the Group monitors the useful life of the customer base and the related financial statement assessments as a potential effect of reputational risk.
With reference to the existence of risks of asset impairment, management has considered that, although actions to mitigate/ adapt to climate risk entail the need to plan maintenance/evolution of plants in order to guarantee the quality of service, the safety of managed assets and the maintenance of their performance — these activities are in any case considered within the scope of the cash flow forecast used as the basis for determining value in use.
Finally, it is highlighted that legislation introduced in response to climate change could result in new obligations that did not previously exist.
Trends in raw material purchase costs along with hedging derivatives require a careful policy of monitoring requirements and price hedging.
Trends in the cost of commodities as a result of the effects of climate change could make certain sales contracts costly. In addition, the unavailability of commodities could make cash flow hedges from highly probable future transactions ineffective.
Finally, with particular reference to regulated sectors, the presence of chronic physical risks could lead to a reduction in service quality resulting in liabilities for penalties.

In Acea, the Innovation, Technology & Solutions Function reports directly to the CEO and has the task of ensuring a model of innovation for the Group through the adoption of processes and approaches typical of open innovation, with the involvement of internal and external stakeholders as defined by the Industrial Plan.
The search for innovative solutions to achieve long-term goals for a decarbonised economy and smart urban infrastructures continues to be a central theme in the general technological scenario. In this context it is worth mentioning the participation of Acea in Zero Accelerator, created from the collaboration of key operators, to support innovative startups and SMEs engaged in reducing greenhouse gas emissions, optimisation of the waste cycle etc., and the Casa delle Tecnologie Emergenti in Rome, the first permanent living lab for ideas relating to the future Rome Smart City. Collaborative networks and partnership development to explore innovative solutions, business and technology opportunities and attract talent are a focal driver for Acea’s positioning in the innovation ecosystem.
To this end, it has adhered to initiatives such as InnovUp (formerly Italia Startup), SEP (Startup Europe Partnership), the Open Innovation programme that connects European scaleups with corporations, and Open Italy. Acea also works with the academic world and with specific Observatories, such as the Observatories for Digital Innovation, Startup Intelligence and Space Economy, all belonging to the Politecnico di Milano. The Group’s industrial areas are committed to identifying innovative and technological approaches to improve industrial processes with a view to social and environmental sustainability. This commitment is also recognised at European level, there is already access to HORIZON 2020 funding programmes for the PlatOne project, in the area of power grids, to develop cutting-edge technological solutions capable of enabling energy flexibility mechanisms, and in 2021 for the PROMISCES project aimed at removing very persistent, mobile and potentially toxic substances in the soil-sediment-water system (identified within the European REACH Regulation) and contributing to the goal of zero pollution and improving the protection of human health.

For every organisation people represent a fundamental asset to remain competitive in a changing economic and social context. During the period in which the pandemic continued to represent the most complex challenge, the ongoing commitment of people allowed the Group to manage its services at a high level, providing continuity to the business with zero interruptions and in complete safety. Acea listens to the needs of its people and develops a People Strategy based on projects and initiatives that, by enhancing the main assets of the Business Plan, meet the needs of technological innovation, corporate culture, data analysis and monitoring, full utilisation of skills and development of well-being. The issues of Diversity & Inclusion has become increasingly important for organisations and Acea promotes greater sensitivity at all organisational levels through projects, initiatives and tools for the integration of these issues in the modus operandi of the Company and its stakeholders: in 2021 it defined a Diversity & Inclusion Plan and a Dashboard in relation to people strategy. Through training, the main lever for personal growth, Acea values the skills and talents of every individual and is continuously improving managerial and digital skills. Taking care of people’s well-being forms part of the Company’s awareness of its responsibilities towards its employees, especially within contexts, such as those still ongoing, of specific health and social emergencies.
With reference to this, Acea has developed an integrated corporate welfare system, based on listening to employees and their needs and divided into six areas: health, psycho/physical well-being, family, reconciliation measures, income support measures and complementary social security.

Aware of the positive contribution that sustainable supply chain management can offer to protecting the environment, Acea is committed to defining purchasing methods that include intrinsic characteristics of the products and aspects of the process that limit environmental impact and foster initiatives aimed at minimising waste, reusing resources and protecting the social aspects involved in the procurement of goods, services and works. In tackling this green procurement issue, Acea has been using the minimum environmental criteria in force for several years, including non-compulsory bonus aspects in its tenders. In order to monitor the supply chain, Acea continued to develop the Group’s Vendor Rating system aimed at analysing, assessing and monitoring the performance of suppliers of goods, services and works to increase the quality of the services rendered. Each company can contribute to promote sustainability along the supply chain, to this end Acea has undertaken a collaboration with Ecovadis, to carry out a performance assessment on specific sustainability criteria of its partners, with the prospect of integrating the sustainability indicator within the Vendor Rating model.

Safety as a strategy, not to be observed only for compliance purposes, is based on the desire to promote the widespread dissemination of a safety culture, involving all employees, and on the possibility of measuring and monitoring results. To this end, Acea runs awareness-raising campaigns on the issue and has adopted an advanced risk assessment model and implemented control and mitigation measures. The Group’s contractors and sub-contractors, who are key partners in the implementation of its businesses, are also involved in awareness-raising and safety initiatives. Acea promotes active participation in analysing indicator trends; this aspect is often considered to be suggestive of the level of maturity of the safety culture and the culture of improvement in an organisation.
An RSPP Coordination Committee is active within the Group. Its purpose is to share the results of safety performance, experiences, good practices and sustainable solutions to prevent accidents in the company. Safety is at the centre of numerous innovative experiments.
Projects aimed at making operations in the field increasingly safe continued in 2021, such as the development of personal protective equipment with sensors that can signal proper usage (Smart PPE). During the year, comprehensive monitoring continued for the prevention and protection from the risk of infection by Covid- 19, through: reorganisation of work activities and smart working, training courses, definition of specific protocols, dedicated communication channels, revision of risk assessment documents and health emergency plans, vaccination and screening campaigns for Acea personnel and activation of dedicated insurance coverage.