Discover the Acea Group online 2019 Sustainability Report

Corporate governance at Acea

The governance model adopted by Acea complies with the recommendations of the Corporate Governance Code for listed companies and with the principles of transparency, balance and separation between guidance, management and control activities.

The Acea SpA Board of Directors establishes the strategic guidelines of the Group and is responsible for corporate governance. According to the best practices of the Corporate Governance Code, three committees were set up within the Board with propositional and advisory functions: the Control and Risk Committee, the Appointments and Remuneration Committee and the Ethics and Sustainability Committee.

Two other bodies are also operational: the Committee for Related Party Transactions, in implementation of Consob regulations and composed of independent directors, and the Executive Committee, set up in accordance with the Italian Civil Code (art. 2381) and the By-laws (art. 20, para. 1), composed of the Chairperson and Managing Director of Acea SpA and two independent Directors, one of whom chairs it, with powers relating to institutional affairs, sponsorships and donations, to be managed within the budget established by the Board of Directors.

Lastly, the Board of Statutory Auditors performs supervisory duties, according to the traditional model in force.

CHART NO. 10 – ACTIVITIES OF CORPORATE GOVERNANCE COMMITTEES

The company is managed by the Board of Directors, which can have from 5 to 9 members depending on the decision of the Shareholders’ Meeting. The members of the BoD – identified and appointed according to Acea’s By-laws, according to applicable law – remain in office for three financial years and can be re-elected. The method for selecting the members of the Board guarantees the representation of the genders, an adequate number of Directors representing the minorities and independent Directors in accordance with the law²⁰.

The Board in office, appointed in April 2017, is composed of 9 directors, 5 of whom are women. In April 2019, following the resignation of the Director Luca Lanzalone, the Shareholders’ Meeting appointed Ms Maria Verbena Sterpetti to the Board of Directors. In December 2019, following the resignation of the Director Fabrice Rossignol, the Board of Directors co-opted Diane Galbe.

The Board of Directors met 13 times during the year. The Chief Executive Officer is the only executive Director.

In accordance with the Corporate Governance Code, Acea carries out a board evaluation annually, availing of an external advisor in order to assess the adequacy of the dimension, composition and function of the BoD and its internal Committees, as well as the issues discussed.

The Report on corporate governance and shareholders’ structure, available on the institutional website (www.gruppo.acea.it), provides information about the Directors of Acea SpA: CVs, diversity, qualification of independence, presence in meetings of the Board and the Committees they are members of and any positions in other Companies listed in regulated markets, including abroad, in financial, banking or insurance companies or of significant size.

TABLE NO. 8 – STRUCTURE OF THE BOARD OF DIRECTORS AND COMMITTEES OF ACEA SPA (AS AT 31.12.2019)

	ROLE IN THE BoD	EXECUTIVE COMMITTEE	APPOINTMENT AND REMUNERATION COMMITTEE	CONTROL AND RISKS COMMITTEE	ETHICS AND SUSTAINABILITY COMMITTEE	EXECUTIVE DIRECTOR	INDEPENDENT DIRECTOR
Mrs. Michaela Castelli	Chairman	De jure component		Member	Member
Mr. Stefano Antonio Donnarumma	MD	De jure component				X
Mrs. Liliana Godino	Director		Chairman	Chairman			X
Mrs. Gabriella Chiellino	Director		Member		Chairman		X
Mr. Luca Alfredo Lanzalone	Director until 15/3/2019
Mrs. Maria Verbena Sterpetti	Director since 17/4/2019						X
Mr. Massimiliano Capece minutolo del sasso	Director	Member	Member	Member			X
Mr. Alessandro Caltagirone	Director						X
Mr. Giovanni Giani	Director	Chairman	Member	Member	Member		X
Mr. Fabrice Rossignol	Director until 06/12/2019						X
Mrs. Diane Galbe	Director since 11/12/2019						X

THE ROLE AND POWERS OF THE BOARD OF DIRECTORS IN ACEA

The duties lying with the Board of Directors pursuant to the law provisions, the Articles of Association and in compliance with the recommendations provided in the Code of Conduct include:

Definition of the strategic direction;

Economic and financial coordination of the Group’s activities;
Definition of the guidelines of the Internal Control and Risk Management System (SCIGR), nature and level of risk compatible with the Company’s strategic objectives, including significant risks for medium-long term sustainability;
Establishing the Committees required by the Code of Conduct and appointing their members;
Adopting the Organization, management and control model as pursuant to Legislative Decree no. 231/01;
Assessing the adequacy of the organisational, administrative and accounting structure of Acea and its strategic subsidiaries;
Interacting with the shareholders, encouraging their participation and enabling them to exercise their rights;
Evaluating the independence of its non-executive members at least on a yearly basis.

FUNCTIONS OF THE CHAIRMAN, CHIEF EXECUTIVE OFFICER

The Chairman is the legal representative of the Company and is vested with powers of signature. He/she also convenes and chairs the Board of Directors and Shareholders’ meetings. He/she has powers relating to: overseeing the activities of the Group, verifying the implementation of Board resolutions and corporate governance rules; verifying and monitoring delivered and perceived quality indicators and issues related to corporate social responsibility. Supervises the corporate secretariat of the parent company and chairs the Tenders Supervisory Committee.

The Managing Director is entrusted with the ordinary business of the Company. He/she has signing powers for the company and legal and procedural representation and any other powers delegated to him/her within the limits of the law and the By-laws. His/her terms of reference are based on long-term plans and annual budgets approved by the Board of Directors. Moreover, he/she ensures and monitors compliance with operating guidelines, implementing organizational and procedural changes to the Parent Company’s activities consistent with the guidelines issued by the BoD. The current Managing Director is identified by the Board of Directors as the Director in charge of the SCIGR and performs the duties of Head of the Foreign Industrial Area and Business Development Strategies.

The Chairman and the Chief Executive Officer may jointly implement acts reserved for the Board of Directors concerning contracts, purchases, participation in tenders, issue of sureties, appointment of members of the Board of Directors and Boards of Statutory Auditors of the most significant subsidiaries and affiliates when the urgency of the matter does not allow their convocation, informing the Board at its first subsequent meeting, which shall verify the legitimacy of such operations.

TOWARDS AN INTEGRATED GOVERNANCE STRATEGY: 2019 INTEGRATED GOVERNANCE INDEX AND ACEA POSITIONING

The Integrated Governance Index (IGI) clearly and succinctly expresses the positioning of companies in relation to sustainability governance (or integrated governance). Developed by ETicaNews, the project reached its fourth edition in 2019. With an expanding panel of companies involved, the index was applied to the first 100 companies listed on the Milan Stock Exchange, to the companies that publish a Non-Financial Statement pursuant to Legislative Decree no. 254/2016, and to the first 50 non-listed and industrial companies in the Mediobanca classification. Based on a questionnaire, the index calculates the assessment according to a predetermined score.

The questionnaire consists of an ordinary area, divided into eight areas of investigation, and an extraordinary area, which varies each year, and explores challenging issues. In 2019 the Extraordinary Area concerned the management of ESGs by the Human Resources function. The topics examined by the Ordinary Area were: Code of self-discipline and sustainability; Diversity, professionalism, independence of the board; ESG integrated into remuneration; ESG integrated into business strategies; Board committees and sustainability; Materiality, Succession plans; ESG Finance.

In the third year of participation in the IGI survey, Acea scored 62.78 (scale 0-100), ranking 23rd out of 61 respondents. In particular, the areas where Acea performed best were compliance with the Corporate Governance Code, the composition of the Board of Directors in terms of diversity and skills, the Board Committees with particular focus on the Ethics and Sustainability Committee and the Materiality Analysis. The aspects with a lower score were those relating to the integration of the ESGs in remuneration, succession plans and ESG Finance.

Note: The data and information related to the Integrated Governance Index were prepared with the cooperation of ETicaNews.

In accordance with current legislation, the Ordinary and Extraordinary Shareholders’ Meeting may be called up by the Board of Directors and at the request of shareholders representing at least 5% of the share capital. Furthermore, in compliance with such provisions, the shareholders representing at least 2.5% of the share capital may request the addition of new topics be added to those to be discussed and submit resolution proposals for matters already included in the agenda.

Shareholder participation is facilitated by technology-based interactions (electronic notice of proxies; notice of call posted on the website). Prior to the date set for the meeting, the shareholders may submit enquiries regarding topics on the agenda, also by email. There are no shares with limited voting rights or devoid of such right²¹.

Except for the shareholder Roma Capitale, restrictions shall apply to the voting right of shares exceeding 8% of the share capital, as laid down by the Articles of Association. Neither shareholders’ agreements nor special rights of veto or in any way affecting the decision-making process exist other than as a result of the equity interest held.

The Parent Company has a number of Company Committees that operate on a continuous or periodic basis, chaired by the Managing Director of Acea SpA or by a Business Area Manager, where the Managers of the Industrial Segments and Functions of Acea SpA take part. The matters dealt with may be the subject of reports to the Board of Directors. The following Committees are set up with technical and advisory functions that are carried out in synergy, facilitating decision-making processes and increasing the ability to respond to emerging problems promptly and in a coordinated manner:

the Steering Committee, composed of the first reports of the Managing Director;
the Business Review Committee for the analysis of data and economic-financial performance;
the Business Strategy Committee, which analyses the possibility of developing core and non-core activities in Italy;
the Post Audit Committee, which analyses the corrective actions taken to overcome any critical issues identified in audit reports;
the Procurement Supervisory Committee, which the Chairperson also participates in, which monitors the application of current legislation and company procurement procedures as well as the progress of the tender procedures and execution of the most significant contracts (in terms of economic value, strategic value and executive risks); informs the company bodies of new tenders and potential risks and impacts on existing and planned tender procedures.

Finally, at the industrial segment level, ad hoc committees work in specific operational areas: the Investment Committee, the Public Lighting Committee, the Private Electricity Grid Committee, the Group Water Company Committee, the Aqueduct Development Committee and the Treatment Development Committee.

TOP MANAGEMENT REMUNERATION DETERMINATION PROCESS

A remuneration policy is in place in Acea concerning top management, directors tasked with specific duties and executives holding key positions.

The remuneration system regarding these individuals is based on a clear and transparent process, with a key role being played by the Appointment and Remuneration Committee which formulates proposals regarding the remuneration Policy and the Board of Directors of the Company which approves them. The role of the two main corporate governance bodies ensures the observance of rules which avoid producing conflicts of interest and ensuring clarity through adequate information.

The Shareholders’ Meeting may set the fixed emoluments of the Board members throughout their term of office and, furthermore, issues a non-binding resolution on the Policy pursuant to Article 123-ter, paragraph 6, of the Finance Act) on remuneration. In relation thereto, the remuneration was confirmed for the Board members, as established by resolution of 5 June 2014 whereas, in exercising its competence in setting the payments for the Directors with special offices, the Board of Directors resolved on the retributive references for the Chairman and the Chief Executive Officer throughout their term in office.

For further details, see the Remuneration Report Financial Year 2019 available on the website www.acea.it.

Acea’s Internal Control and Risk Management System (SCIGR), which solidifies the Group’s corporate governance structure, consists of a set of people, tools and organizational structures whose objectives are:

identify the risks that can affect the pursuit of the objectives defined by the Board of Directors;
encourage the taking of conscious decisions that are consistent with the company’s objectives, within the framework of a widespread knowledge of the risks and the level of propensity for them established by the Board of Directors, legality and company values;
safeguard the company’s assets, the efficiency and effectiveness of its processes, the reliability of the information provided to corporate bodies and the market and compliance with internal and external regulations.

The SCIGR Guidelines, which were updated in 2019 and approved at the beginning of 2020, promote the proper management of the Group consistent with the corporate objectives through an adequate process of identification, measurement, management and monitoring of the main risks and the structuring of the information flows necessary to ensure sharing and coordination between the various SCIGR actors. The Guidelines, which take into account the recommendations of the Corporate Governance Code of Borsa Italiana and are inspired by existing best practices, in particular COSO – Internal Control – Integrated Framework (Committee of Sponsoring Organizations of the Treadway Commission), are intended to:

Provide guidance for the actors of the SCIGR, so that the main risks pertaining to the Acea Group, including those regarding sustainability in the medium-long term, are correctly identified and adequately measured, managed and monitored;
Identify the principles and responsibilities of the governance, management and monitoring of the risks connected to the Company’s activities;
Provide for control activities at all operational levels and identify tasks and responsibilities to ensure coordination between the main subjects involved in the SCIGR.

Risk management is a cross-cutting process with widespread responsibilities involving all the parties of the company in various ways: the Board of Directors and the Board Committees, the Director in charge of the SCIGR (who is also the Chief Executive Officer), the Board of Statutory Auditors, all the managers and employees, the Manager in charge, the second level Supervisors, the Supervisory Body and the Internal Audit Function.

CHART NO. 11 – THE ARCHITECTURE OF THE SCIGR

CHART NO. 12 – THE KEY PLAYERS OF THE SCIGR

Dedicated corporate structures in the Parent Company have the task of creating and adopting specific models for monitoring risks, including those relating to the commission of crimes.

TABLE NO. 9 – MODELS AND CONTROLS

	OVERSIGHT AREAS
Organization, Management and Control Model as per Legislative Decree 231/01	Risk of committing crimes and administrative offences in the performance of the Company’s activities
Guidelines of the Management and Control Model pursuant to Law 262/05 (updated in 2019 together with the Regulations of the Financial Reporting Officer)	Risks the Group’s Financial Statement
Privacy Governance Model	Compliance with EU Regulation 2016/679 (GDPR) and other national and European provisions on the protection of personal data
Antitrust Compliance Programme	Compliance with antitrust and consumer regulations and development of a corporate culture to ensure the protection of competition and consumers
Oversight of ISO45001 and ISO14001	Monitoring workplace health and safety risks and environmental risks in accordance with international standards
Oversight of Cyber Security	Cyber risk management, also in compliance with EU Directive 1148/2016 on European Information Systems and Networks (NIS)

COMPLIANCE WITH EU PERSONAL DATA REGULATION (GDPR)

The programme of compliance with the European Regulation on the protection of personal data (GDPR) launched in Acea in 2017 is developed according to a modular logic. After the definition and implementation of the Privacy Governance Model for the Group last year, topical follow-ups were carried out in 2019 on areas and processes with a high privacy impact. The 3rd phase of the GDPR compliance programme was then launched, dedicated to identifying the specificities of the company, ensuring the widespread dissemination of the Model including through personalized training initiatives, and at the same time to achieve the refinement of the actions implemented at the central level to verify their effectiveness and correct any inefficiencies for the benefit of the Parent Company’s processes, with effects on the entire corporate scope.

The internal network between the structures (the Parent Company’s DPO, the DPO Office and the Privacy departments within the Risk & Compliance Units of the Operating Companies) has been consolidated by sharing information and support tools released over time and with a cross-cutting impact. In accordance with the Regulation, the privacy risk assessment methodology applied to some processing was validated, also to develop the corresponding DPIA (data protection impact assessment), identifying the sources of risk (threats), their impact and mitigation measures (or controls).

The online training programme, already carried out in the Parent Company, has been extended to the Companies to achieve the first level of compliance for Data Controllers with regard to the training of Data Processors, on individual corporate processes (for example, commercial activities, IT Systems).

No cyber incidents have been reported affecting the personal data held by Group companies.

ANTITRUST COMPLIANCE PROGRAMME

The Acea Group pays constant attention to compliance with antitrust law and consumer protection regulations. Following Acea’s adoption of the Antitrust Compliance Programme aimed at strengthening internal controls, implementing organizational and regulatory instruments and promoting the principles of fair competition and consumer rights and the appointment of the Holding Company Antitrust Officer, activities already carried out last year, in 2019 the main Group companies adopted the Antitrust Compliance Programme in line with the indications of the Holding Company, and set up organizational structures to which Company Antitrust Officers were appointed. These have the task of implementing the programme, depending on the specific characteristics of the company, the regulatory provisions and the market context they operate in. To this end, the Group companies are responsible for the implementation of the Compliance Programme in their own organizations. Corporate representatives also received specific training and support coordinated by the Holding Company’s Antitrust Officer, aimed at implementing their technical and regulatory skills.

Within the framework of the internal control and risk management system, Group companies adopt their own organization, management and control models pursuant to Legislative Decree no. 231/2001 to prevent the risk of certain crimes or administrative offences committed in their interest or benefit by top management or subject to the management or supervision of the latter. The development of the Models is preceded by a mapping of the business areas concerned (so-called risk areas) and the identification of sensitive activities and potential offences. The Models are updated in response to changes in the organization or activities carried out, or following the introduction of new cases in the catalogue of predicate offences of the aforementioned legislative decree. The Supervisory Body (SB) has full and autonomous powers of initiative, action and control regarding the operation, effectiveness and observance of the specific Models²².

For Acea, the adoption of principles and compliance with the rules set out in the Company Code of Ethics – an integral part of the 231 Model and the internal control system – are also relevant to prevent crimes pursuant to Legislative Decree no. 231/2001, as well as being a ready reference for all those who are addressed by the Code.

The Internal Audit function carries out the controls envisaged in the Audit Plan, approved by the Board of Directors and subject to the opinion of the Control and Risk Committee. The Plan is drawn up on the basis of the analysis and prioritisation of the main risks for Acea and its subsidiaries, carried out during the Risk Assessment, also thanks to the monitoring carried out by the corporate Functions responsible for second-level controls.

In 2019, about 81.4% of the Plan activities concerned corporate processes deemed as exposed to the risks as per Legislative Decree no. 231/01, amongst which the crimes regarding corruption and the environment, and in violation of injury prevention laws and the laws safeguarding health in the workplace.

With regard to audits of processes related to risks of corruption, there are in particular periodic audits of “Sponsorships”, “Consulting”, “Personnel selection”, “Purchasing and payments”.

As required by the professional standards of the Institute of Internal Auditors (IIA), the audits also assess the specific fraud risks of the process analysed and test the operation of the related controls. With reference to fraud detection activities, 5 Fraud Key Risk Indicators have been adopted for the purchasing area, which are analysed every six months.

REPORTS RECEIVED RELATED TO THE CODE OF ETHICS

Acea has adopted a procedure that can be followed by both employees and external parties for the reception, analysis and processing of reports – so-called “Whistleblowing” – relating to any failure to comply with the law, internal rules and the Code of Ethics, as well as issues relating to the Internal control system, corporate notices, the administrative responsibility of the Company (Legislative Decree no. 231/01), fraud and conflicts of interest. This procedure requires an assurance of the maximum level of confidentiality and privacy in the processing of communications received, protecting those voicing their concerns and those responsible.

In coordination with other competent corporate Functions when necessary, the Internal Audit Function is responsible for acquiring, registering and ascertaining the existence of violations, and in 2019 analysed 5 cases of presumed violations of the Code of Ethics. One was attributable to Article 13 “Relations with customers” and the other four to Article 14 “Management, employees and collaborators”. There are no reports related to discrimination.

The Internal Audit Function prepares periodic reports on the progress of the findings, forwarding the most relevant cases to the Control Bodies.

In December 2019, the Ethics Officer was established as a collective Group Body whose purpose is to manage the system for reporting alleged violations for non-compliance with the law, internal regulations and the Code of Ethics and to monitor compliance with the values of transparency, legality, fairness and ethical integrity in relations with employees, suppliers, customers and all stakeholders.

INTEGRATED ANALYSIS AND RISK MANAGEMENT METHOD

To improve an integrated vision of risks and their proactive management within a structured and continuous process, in 2019 Acea further developed the ERM Programme based on the COSO framework “Enterprise Risk Management (ERM) – Integrating with Strategy and Performance” 2017.

The purpose of the ERM Programme is to:

Represent the type and significance (probability and economic-financial and/or reputational impact) of the main risks, including sustainability risks, that may jeopardize the achievement of the Group’s strategic and business objectives;
Address strategies and subsequent additional mitigation actions.

The methodology implemented and the tools developed to identify risks and assess their severity in a consistent manner at a Group level – definition of the Risk Model – included ESG aspects and risk scenarios associated with the issues that emerged from the Materiality Analysis. The first evidence from the risk assessment, which represents the risk scenarios related to the material issues with the possible impacts and monitoring procedures prepared by Acea, are shown in table no. 10.

The results of the ERM Programme are also taken into account when planning actions to mitigate risks and seize opportunities by Group companies with certified Management Systems.

The ERM processes allow for constant interaction between the ERM Unit of the Parent Company’s Risk & Compliance Function and the focal points in the Risk & Compliance Units of the Operating Companies (see chart no. 13).

CHART NO. 13 – THE ERM UNIT AND THE CORPORATE FOCAL POINTS

THE ERM UNIT AND THE CORPORATE FOCAL POINTS

TABLE NO. 10 – MATERIAL TOPICS, RISKS AND MANAGEMENT METHODS

HIGHLY SIGNIFICANT MATERIAL TOPICS AND RELATED RISK	POTENTIAL IMPACT ON ACEA	POTENTIAL IMPACT ON STAKEHOLDERS AND CAPITAL	RISK MANAGEMENT METHOD
SUSTAINABLE WATER CYCLE MANAGEMENT Unfavourable natural events and/or climate change; authorisation delays impacting on optimal management conditions; monitoring and analysis	economic/financial reputational	environment and community natural and social-relational capital	- system of procedures and emergency plans – ad hoc maintenance – disciplined relations with institutions and authorising bodies – ISO 17025 accreditation Analysis laboratories
SUSTAINABILITY IN INFRASTRUCTURE DESIGN, CONSTRUCTION AND MANAGEMENT Environmental and social impacts from inadequate and failed design, construction and/or management of plants/networks	economic/financial reputational	environment, community, institutions, suppliers natural, production and social-relational capital	- design procedures – monitoring and reporting of the progress of the authorisation/design process – asset monitoring and inspection
OCCUPATIONAL HEALTH AND SAFETY Accidents at work	reputational	employees	- company policies and compliance guidelines – training and communication plans – ISO 45001 health and safety management systems
INNOVATION OF SMART UTILITY PROCESSES, INFRASTRUCTURE AND SERVICES Operational inefficiency due to technological and innovative inadequacy	economic/financial reputational	community and business partners production, intellectual and social-relational capital	- monitoring the technical and technological progress of projects
SUSTAINABILITY AND CIRCULARITY ALONG THE SUPPLY CHAIN Failure to control the purchasing process – failure of suppliers to comply with the requirements (health and safety, environmental, anti-corruption)	economic/financial reputational	environment and suppliers natural, human and social-relational capital	- system of procedures – quality monitoring of goods/services received – ISO 45001 health and safety management systems – qualified suppliers register
RECOVERY OF WASTE FOR A CIRCULAR ECONOMY Failure to comply with regulations; obstacles in the waste treatment and delivery market	economic/financial	environment natural capital	- monitoring and control plans for Integrated Environmental Authorisations – ISO14001 and EMAS environmental management system
STRATEGIC APPROACH TO STAKEHOLDER RELATIONS Tensions with stakeholder representatives in the region with negative effects on the development of activities	economic/financial reputational	community social-relational capital	- stakeholder engagement activities – Code of Ethics
BUSINESS ETHICS AND INTEGRITY Conduct contrary to binding regulations, internal rules and standards of reference	economic/financial reputational	community, institutions and business partners production, intellectual and social-relational capital	- 231/01 organization, management and control model – Code of Ethics – whistleblowing system – training and communication plans
CUSTOMER FOCUS Failure to achieve service quality levels until they are discontinued	economic/financial reputational	customers social-relational capital	- customer analysis – analysis of services – monitoring of regulatory framework of reference (e.g. Consumer Code) – ISO 9001 quality management system
AIR QUALITY: CONTAINMENT OF POLLUTANT EMISSIONS INTO THE ATMOSPHERE Exceeding the emission limits envisaged by laws and authorisation decrees	economic/financial reputational	environment and community natural capital	- monitoring and control plans (Integrated Environmental Authorisations) – ISO 14001 and EMAS environmental management system
INVOLVEMENT OF PERSONNEL, INVESTMENT IN HUMAN CAPITAL AND DEVELOPMENT OF SKILLS Lack of adequacy both in terms of skills and organic plants	economic/financial	employees human capital	- remuneration and incentive policies – performance evaluation system – training and education plans
PROTECTION OF THE COMMUNITY AND BIODIVERSITY Impacts on environmental balance conditions caused by plants that unexpectedly do not comply with legal limits	economic/financial reputational	environment natural capital	- plant management procedures – control and monitoring – training plans – ISO14001 and EMAS environmental management system
DECARBONISATION AND ADAPTATION TO CLIMATE CHANGE Failure to build sustainable plants and to adapt operating practices to the evolution of climate change (production of energy from renewable sources, resilience of the electricity grid, availability of water)	economic/financial reputational	environment and community natural and production capital	- monitoring and reporting – ISO 14001 and EMAS environmental management system – ISO 50001 energy management system
CONSOLIDATION OF SUSTAINABILITY ELEMENTS IN CORPORATE GOVERNANCE Violation of Italian Legislative Decree 254/16; inadequacy of the internal regulatory system with respect to the guidelines of the Corporate Governance Code	reputational	shareholders economic-financial and intellectual capital	- auditor’s assurance – activities of the board committees (Ethics and Sustainability, Control and Risks) – Sustainability consultation table – certification of data managers – updating and verification of information systems and organization
BUSINESS EVOLUTION THROUGH OPEN INNOVATION AND DEVELOPMENT OF SYNERGIES WITH SCIENTIFIC AND ENTREPRENEURIAL PARTNERS Inability to seize opportunities deriving from technological innovations and their integration into business processes	economic/financial	community, institutions and business partners production, intellectual and social-relational capital	- organizational structure responsible for innovation (innovation board and ITS function)
COMPANY WELL-BEING, DIVERSITY AND INCLUSION Increased absenteeism rate; negative company climate; possible lawsuits from employees	reputational	employees intellectual and social- relational capital	- “Protection, inclusion, promotion of diversity and workers’ well-being” procedure – teleworking – diversification of working hours and economic adjustments – Code of Ethics – Diversity management charter – health plans (health check-ups)

ACEA AT THE CSR MANAGER NETWORK WORKING GROUP ON ERM AND SUSTAINABILITY

The growing legislative and self-regulatory attention to the management of corporate risks, financial and otherwise, has stimulated companies to deal with these new challenges, pushing them towards an integrated approach to the Internal Control and Risk Management System, also thanks to the role assumed by the Management and Supervisory Bodies.

The CSR Manager Network, a national association that brings together professionals engaged in the management of sustainability issues related to business activities, has selected the proposal formulated by Acea and SCS Consulting to establish a working group between ESG and ERM representatives, to share and analyse the experiences of integration of sustainability issues in risk management.

The first phase of the activity was aimed at sharing and analysing the experiences of sustainability integration in the field of ERM, both with regard to international best practices and initiatives already developed within the companies participating in the working group. To this end, an online survey was prepared thanks to which companies were able to compare their business models with reference to the areas of governance, materiality and risks and the ESG risk management process. Parallel to the survey, an analysis was done of NFSs from 2018 prepared pursuant to Legislative Decree no. 254/2016, and the corporate documents produced by the companies in the FTSE MIB and by the companies of the working group. The second phase led to the development of Operating Guidelines, including procedures and tools, for the management of risks related to ESG issues.

As shown by the CDP (formerly Carbon Disclosure Project) questionnaire, one of the ways that Acea monitors climate change is through the assessment of risks and opportunities related to its activities in the short and medium term. Table no. 11 provides a representation of the main evidence: short- and medium- term scenario and more significant implications for the company in terms of financial, reputational, environmental and customer impact.

TABLE NO. 11 – RISKS AND OPPORTUNITIES RELATED TO CLIMATE CHANGE: CDP EVIDENCE

TYPE OF RISK	DESCRIPTION OF THE RISK	MOST IMPACTED INDUSTRIAL AREAS
TRANSITION Risk arising form the ongoing transition to decarbonized economic system (e.g. regulatory, technological, market)	The main risks identified relate to the political-regulatory sphere. The expected scenarios related to a transitionto an economic system committed to tackling climate change take the following forms: increasing carbon tax policies; changes in incentive programmes; tightening of the values associated with the Emission Trading Scheme (both in terms of allowances – paid or not – and actual emission allowance costs); increased legal and financial risks for non-compliance with performance standards (fines and incremental compliance costs).	Energy production (thermoelectric and waste-to-energy) Management of electrical grids Management of water
PHYSICAL Risks arising from the physical effects of climatic events (acute if related to episodic phenomena, or chronic if related to long-term changes)	The main risks identified relate to both extreme weather events and possible chronic environmental changes: stress on the resilience of the power grid due to extreme weather events; changed weather conditions with impact on the availability of water for human consumption.	Management of electrical grids Management of water
	OPPORTUNITIES
Circular economy	Opportunities to promote circular economy models and waste recovery projects, for example with thermal renewal processes combined with material recovery (sodium).	Environment Segment
Development of photovoltaic plants	Opportunities related to the diversification of production facilities with the acquisition and/or construction of photovoltaic plants that, in addition to receiving incentives for the feeding of electricity produced into the grid, allow balancing any reductions in hydroelectric production.	Production of electricity
Increase in network resilience	Opportunities arising from investments promoted by the Authority for the safety of the electricity network.	Distribution of electricity
Market and services	Opportunities arising from the change in energy demand related to changes in peak ambient temperatures, with an impact on price growth and volumes sold.	Energy sales

ANALYSIS OF POTENTIAL ENVIRONMENTAL RISKS

The companies operating in the industrial segments of Water, Energy Infrastructure and the Environment with ISO 14001:2015 certified environmental management systems have identified the potential negative environmental impacts generated by the activities. Therefore, specific events have been hypothesised with respect to the different operations, which could have a significant impact on the environment.

For the Water sector, the main risks are due to the effects of acute or chronic climatic phenomena: inefficient operational management of water, which could cause high levels of losses with consequent excessive consumption; water stress; possible breach of water control parameters with environmental consequences; inadequate interventions on the sewerage treatment system with possible contamination of the soil and water bodies; risks of fires and explosions in treatment plants related to the production of biogas, with possible impacts in terms of emissions into the atmosphere.

In the context of Energy Infrastructure, for the transformation of electricity and transport for delivery to end users, the main risks are attributable to: existence of overhead and underground systems with impacts in terms of land use and subsoil; generation of waste and impacts on ecosystems; generation of electromagnetic fields with impacts in terms of exposure; maintenance of transformation plants with potential soil and subsoil contamination with hazardous materials; maintenance and construction of plants with impacts in terms of production of special waste. With reference to electricity production using renewable and conventional power plants, the potential environmental risks concern the accidental spillage of pollutants or the exceeding of threshold values in emissions (into the atmosphere, surface water and sewerage) in the ordinary management of plants or in the event of critical events like fires or explosions. An example of environmental risk derives from the potential dangerousness of structural failure of hydraulic works attributable to critical natural phenomena (such as earthquakes of particular intensity), which could affect the territory downstream of the plants (e.g. floods).

For the Environmentalindustrial segment – operating in the treatment, recovery and disposal of waste, the recovery of materials and energy through waste-to-energy and composting plants and the collection, transport, recovery and disposal of non-hazardous waste produced by waste treatment plants – the potential risks with environmental impact could arise with spills of hazardous substances and consequent contamination of the soil and aquifers or surface waters or with emissions into the atmosphere above specific prescribed limits.

²⁰ Pursuant to art. 147 ter., para. 4 of Legislative Decree 58/98, so-called Finance Act (TUF), the minimum number of independent Directors must be 1 in the case of a BoD up to 7 members, 2 in the case of BoD exceeding 7 members. During the year the BoD verified that the Directors met the conditions required to qualify as independent. As at 31/12/2019, 7 directors are effectively independent.
²¹ With the exception of 416,993 own shares (corresponding to about 0.2% of the total shares) for which the right of vote is suspended pursuant to art. 2357-ter Civil Code. See also the Report on corporate governance and the shareholders’ structure 2019.

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