375
million euro
shared value Ebitda,
36% of total Ebitda
(+14% over 2017)
184
million euro
shared value investments,
40% of total investments
71/100
customer satisfaction
our annual survey confirms the high
quality of Group services

Letter to stakeholders

Our sustainability reporting: confirmations and new ideas

The sustainability report that we are presenting reinforces the innovative contents introduced in 2017 which focused on creating shared value (CSV). The positive results that we have been able to report once again this year and the new targets set for the future are our responses to the important environmental, social and economic challenges that the communities we serve are facing.

Consistent with the goal of further improving our accountability profile, the report includes new pages where results are presented by single area served. A fifth report has been added to our thematic sustainability reports which focuses on Goal 17 of the UN Agenda. It deals with the large range of activities that involve Hera and the citizens and entities of the communities we serve.

A new purpose: business strength to regenerate the ecosystem and the environment

The economic, social and environmental changes we are currently witnessing and that are in some ways of epoch-making significance, are so profound that it is not enough for companies to simply contain the negative impact of their work. Furthermore, in a context where institutions struggle to create effective shared solutions, communities have growing expectations towards the world of business, which is increasingly called upon to address the social and environmental challenges ahead of us.

We believe that the answer lies in our approach towards the creation of shared value. This approach calls for reconsidering the connection between CSR and business strategy, bringing the former at the very heart of the latter. While CSR had so far considered the “what” and “how” of business – i.e. it was “reactive” -, shared value focuses on “why”, embracing the actual reason why the company exists – its mission and strategy – and the qualifying aspects that make it stand out from others. We believe that the companies of the future are those that use business strength to regenerate the ecosystem and the environment. We will use our best endeavours to make Hera become one of them.

Reporting: from focusing on “what” and “how” to steering towards “why”

To significantly improve corporate reporting, it is essential to create a direct, binding link between CSR and corporate strategy which must be able to make us think about the “why” of our company and allow us to regard business as a tool for supporting it. What we need to do, therefore, is to supplement the “what” and “how” of traditional reporting. This not only requires a deep knowledge of the company’s activities and the impact they have on stakeholders, but also an accurate analysis of the external environment in order to highlight the points of intersection between the company’s business and the ecosystem, which can be regarded as opportunities for creating shared value and corporate sustainable development.

The opportunities we have identified for our company, based on the analysis of the 2030 UN Agenda and over 60 sustainability policies at global, European, national and local level, are included in three areas: (i) smart use of energy, (ii) efficient use of resources and (iii) innovation and contribution to development. These three areas embrace the “why” of Hera and positively affect current and above all future competitiveness. They also refer to three of the most significant chapters of our sustainability report. 

Confirmation of our new strategic approach: “shared value” EBITDA increases by 14%

One of the strengths of our innovative CSV reporting is the measurement of “shared value” EBITDA: the share of EBITDA that comes from business activities meeting “global agenda” targets, i.e. the “calls to action” for the change to sustainable growth summarised in the three drivers mentioned above. In 2018, “shared value” EBITDA amounted to Euro 375 million, rising by 14% compared to the previous year and accounting for 36% of the total. This result is in line with the 2018-22 Business Plan, developed so that approximately 40% of 2022 EBITDA will come from business activities responding to the priorities of the global sustainability agenda and pertaining to the Group’s activities.

Hera supports the smart use of energy

The projects identified by Hera Spa, Inrete, AcegasApsAmga and Marche Multiservizi in the ISO 50001 area (included in the energy improvement plan) and already implemented, made it possible to reduce energy consumption by approximately 10,300 Toe, equal to -4.4% of 2013 consumption. The improvement plan envisages further energy efficiency projects that will allow an overall saving of 5.3% compared to 2013, thus exceeding the 5% target set for 2020.

Projects for residential customers include commercial offers such as Hera Led, Hera thermo and Hera ContaWatt, in addition to the consumption analysis report, a free service allowing customers to compare their energy consumption with a similar family. At the end of 2018, almost 15% of customers benefited from Hera Comm’s energy efficiency services.

Lastly, of interest is the purchase of 100% renewable electricity to power the business activities of Hera Spa, AcegasApsAmga and Marche Multiservizi, the start of biomethane production from the organic fraction of waste in the Sant’Agata biorefinery in the province of Bologna, and 16% reduction in the carbon footprint of energy production compared to 2015.

Hera supports the efficient use of resources

Separate waste collection continued to increase in 2018, reaching 62.5% (Italian average in 2017: 55.5%), in conjunction with a reduction in the use of landfills for the disposal of municipal waste, settling at 4.5% (Italian average in 2017: 26%). As regards this aspect, Hera has achieved the EU circular economy target almost 20 years earlier, placing it among the best-performing European countries. The ninth edition of the “Sulle tracce dei rifiuti” (“Tracking Waste”) report, published in 2018, showed a total packaging recycling rate of 70%, already in line with the 2030 EU target.

In terms of industrial waste, of interest is the increase in the share of waste recovered by HASI, rising to 41.6% in 2018, as well as the recycled plastic products sold by Aliplast, which exceeded 84 thousand tonnes in 2018 (+4% compared to 2017).

Our strong commitment to the sustainability of the sewage treatment system continued in 2018. Our main projects involved Rimini (7 projects out of the 14 included in the Recovery Plan supplemented with additional projects aimed at mitigating hydraulic risk) and the development of the Servola treatment plant in Trieste (fully operational since June 2018), which allowed the EU infringement procedure (inherited from previous management) to be brought to an end.

Hera supports the innovation and the sustainable development of the local area

In 2018, the Group obtained meaningful results in CSV areas linked to the economic and occupational development of the local area, to innovation and digitalisation, and to air and soil protection.

The value of supplies from local companies reached 69% of total results, coming to Euro 632 million (+7% compared to the previous year), while the estimated employment generated amounted to around 8,100 workers. This figure confirms the Group’s key role in developing the local area.

Investments in innovation totalled approximately Euro 62.4 million for projects in four areas: smart city, utility 4.0 and customer experience. The Group continued to develop customer relation digital channels in 2018. The new MyHera app was launched for residential customers which reached 100 thousand downloads.

Air protection confirms its positive results thanks to the emissions of the Group’s ten waste-to-energy plants: very low levels once again in 2018 and on average 86% lower than legal limits. Furthermore, regarding soil protection, the planning implemented by HeraTech in 2018 reused 68% of total soil.

To conclude, also in the light of the positive results reported in this document, we can state that sustainability reporting guarantees Hera Group’s well-known and consolidated “external” value, but at the same time has paved the way, right from the very start, to creating a highly significant “internal” value. The organisation has been able to develop significant cultural growth exactly on this latter aspect, with tangible and gradual improvements in daily business management and in the relations it holds with stakeholders, by effectively monitoring the company’s “what” and “how”. The new strategic approach to creating shared value has smoothed the path to a new phase focusing on “why”. This has led us to renewing our reporting and, in our opinion, will be able to sustain the future growth of our company.

 

Tomaso Tommasi di Vignano

Executive Chairman

 

Stefano Venier

Chief Executive Officer