InvestorNews

In this context, our relationship with local
communities is a fundamental component of
our ability to create sustainable value over the long term.

Territorial Governance allows us to enrich Corporate Governance when we recognize that value creation does not depend solely on business decisions but also on our ability to build and nurture an ongoing dialogue with the stakeholders who represent the local community: through a fruitful relationship with local institutions, we are able to create mechanisms for listening and co-design, which lead to an effective alignment of our investment strategy with the needs of the municipalities where we operate.

When this relationship works well, it not only
strengthens the quality of our investment
decisions but also fosters the creation of new business opportunities.

How does this approach contribute to the creation of public value?

We are deeply aware that the investments we make in our assets – whether in networks, plants or new services – have impacts that extend beyond Hera’s P&L: we actually increase the resilience of the areas in which we operate, improve the quality of the environment, support the competitiveness of local businesses and contribute to people’s well-being.
We can say that Hera is an integral part of the local value chain, and vice versa. The competitiveness of a local area also depends on the quality of the energy, environmental and water infrastructure that serves it. Likewise, Hera’s ability to create value depends on the economic and social vitality of the local communities.
This interdependence creates a unique responsibility. We are not simply a service provider; we are an actor that contributes to the local area's ability to attract investment, foster business growth, address the ecological transition and build resilience.
Through our ongoing engagement with local institutions, we identify emerging needs, enabling us to align our planning with shared objectives, with clear benefits in terms of risk management.

In this sense, our relationship with local
communities is itself a source of public value.

You often refer to Hera as a "distributed factory." What do you mean by that?

Unlike many industrial companies concentrated in a single production site, Hera is a large, distributed factory spread across the territory. Our networks, plants, construction sites, operational centres and the people who work every day within local communities form a distributed operating system capable of generating value at the local level.
This distinctive feature makes the quality of our relationships with local stakeholders even more important. Our proximity to local communities is not merely an organisational feature; it is a defining element of our industrial model.

In our previous interview, you mentioned that you were conducting, for the first time, a listening initiative involving local administrations. What were the key findings?

The survey, conducted directly by our people, achieved a very high response rate, considering the breadth of the territories in which we operate and the number of municipalities we serve: around 90% of mayors took part. The survey also provided us with very positive feedback. Respondents said they perceive Hera as very close, considering the work it carries out across the territory, and expressed appreciation for the management and the high level of professional expertise it brings.
We also received a clear message to intensify our efforts in innovation – an area in which Hera already invests significantly and delivers strong results, but which we evidently need to communicate more effectively. Many of our innovations have limited visibility because they often involve making our network infrastructure and waste management facilities increasingly "smart".
One of the issues to which municipalities were most sensitive, moreover, is energy, due to its impact in terms of costs, along with concerns about the potential impacts of climate change.

What are their expectations of Hera?

The survey found that local communities place
significant expectations on us.

They are looking to build even closer partnerships with us in the development of new infrastructure and expect to see continuous improvements in service quality, particularly in waste management.

What will this entail for Hera?

For Hera, it essentially means continuing along a path we have already embarked on, with responses already delivered to local communities through the significant increase in investments over the past two to three years.

Finally, the survey revealed an expectation that
Hera will stick to the commitments set out in
the Business Plan, while continuing to demonstrate reliability.

Will you repeat this local stakeholder listening initiative in the future?

For sure. We are planning to conduct the survey every two years, while also exploring specific topics even on an infra-annual basis. This will provide us with a systematic stakeholder listening process that will generate continuous input for our Strategic Planning process.
Following the implementation of the investments and new initiatives set out in the Business Plan, we will measure the outcomes of our relationship with local communities through a structured system of KPIs and scenario analysis.

What measurement systems do you have in place?

Relationships with local communities are part of Hera’s intangible asset. However, we made an effort to measure their tangible effects as rigorously as possible.
We developed very articulated KPI systems, tailored to each business within our multi-utility portfolio and to each type of territory – from urban areas, where we expect population growth, to industrial districts and areas at risk of depopulation. We have also applied our newly developed what-if analysis models.
Leveraging on these analyses, we are now able to assess the contribution that our institutional relationships make to the quality of our decision-making, the level of stakeholder alignment on projects, the speed of the authorisation processes, our corporate reputation and ultimately our ability to deliver effective investments, with the resulting benefit of reducing the risk profile across Hera’s businesses.

In these analyses, we do not simply measure
the impact of the activities undertaken, but we
quantify the value created for the Company and for the local communities.

What are the most significant insights generated by the what-if analysis models?

The fundamental question we asked ourselves was: what would the Group's actions have looked like without a structured relationship with local communities?
The analyses we conducted indicated that we would have been less able to anticipate the needs of local communities and would have had limited alignment to investment priorities, likely resulting in greater difficulties in managing change, slower authorisation procedures and reduced opportunities to maximise the impacts generated.
On many projects, without a clear understanding of local communities' needs and timelines, or without already established channels of dialogue, we would have faced significant challenges, which could sometimes have jeopardized even our most important investments.

What has become unequivocally clear is that
actively managing the relationship does not
eliminate complexity, but it does allow us to govern it.

Therefore, it is an enabling factor that makes our operating activities both more effective and more sustainable.

The additional evidence you have shared thus confirms that relationships with public shareholders and local institutions are not simply a contextual cost, but rather a strategic investment for Hera…

Exactly. As a multi-utility, our ability to create value for shareholders is closely linked to our ability to create value for the local communities we serve.
It represents this balance that underpins our concept of Territorial Governance. In my view, this concept resonates with both investors and public administrators because it brings together governance, value measurement, sustainability and operating performance within a single narrative.