Risk management

Our Enterprise Risk Management (ERM) Department oversees the Group’s integrated business risk management process. The ERM activities focus on the definition, maintenance and evolution of a homogeneous, transversal model for assessing the risks, assign risk priority, ensuring consolidation of the mitigation actions and developing a reporting system.
The ERM methodology adopted by the Italgas Group is in line with the reference models and the existing international best practices (in particular, the 2017 COSO framework relative to the Enterprise Risk Management, issued by the Committee of Sponsoring Organizations of the Treadway Commission, and ISO 31000:2018). The process for the identification, assessment, measurement and management of the risks is carried out periodically, at least once a year, on the basis of the importance of the risk and any changes in context.
The activities directly involve all business departments through dedicated meetings that make it possible to update the information on the description, significance and management of the risks already existing in the portfolio, and the detection of new emerging risks. These activities are carried out in a way that covers the entire scope of the Group and all the potential applicable events. In order to ensure the correct assessment and prioritisation of risk events, the assessment is carried out considering the following potential types of impact: economic-financial; operative; legal, governance and compliance; environment, health and safety; reputation and market.
The ERM model establishes an integrated, cross- cutting and dynamic risk assessment that enhances the management systems already existing in the individual business processes. Each risk is assessed using a specific assessment scale that sets out the thresholds of relevance for the Group and attributes a rating to each risk, thereby making it easier to prioritise them.
For all risks, the risk ownerships are identified. Management strategies are defined and drilled down into specific actions for dealing with the risk and establishing the relative implementation time.

With reference to strategic risks, the Enterprise Risk Management Department, in coordination with all relevant departments, carries out a specific in-depth analysis of risks, opportunities and uncertainties related to the Strategic Plan. The analysis is conducted using a proprietary Monte Carlo simulation model that uses the information gathered on risks, opportunities and volatility and on related correlations to generate a multitude of alternative scenarios for the evolution of the variables underlying the Strategic Plan and evaluates their overall impact on the value drivers. In addition, specific “what if” scenarios are identified in relation to the reference context on which the Strategic Plan is based, and the impacts that these scenarios would have on the strategic agenda are then assessed. The analysis allows estimation of the overall volatility of the defined economic and financial targets and evaluation of the level of resilience of the Strategic Plan. The “Risk Analysis” section of the “Strategic Plan” document, which has been approved by Italgas S.p.A.’s Board of Directors, focuses on the output of this analysis.

The Enterprise Risk Management Department draws up specific reports on the identification, assessment and management of the risks and shares them with the different company levels. The risks are updated once a quarter, half-year or year, depending on their relevance.
The results found in relation to the main risks and related management plans are presented to the Control, Risk and Related Party Transactions Committee at each updating. Moreover, the mapping of risks and the relative management strategies are presented periodically to the Board of Statutory Auditors and the Supervisory Body of Italgas and to the Boards of Statutory Auditors and the Supervisory Bodies of the Subsidiaries.

Description

Risk of changes in the regulatory and institutional context in Europe
or nationally affecting the natural gas sector. Risk of a penalising update of the rate of return on net invested capital recognised by the Regulator. Focus on Greece: Risk of review by the Greek Regulator of the investment and tariff plans submitted for approval.

Main methods of management

Structures dedicated to the oversight of regulations, legislation and their future plans for evolution including at European level

Active participation in the consultations called by the Regulator, sharing corporate positions and/or proposals for defining, updating and implementing clear and transparent regulation criteria

Active participation in consultations called by the Italian

Government or by European

Community organisations on relevant topics, including the Taxonomy

Guidance to define the associative sector positions

Description

Physical Risk: increased frequency of extremely intense natural events in the places where Italgas operates (more or less prolonged unavailability of assets and infrastructure, increase in repair and insurance costs, service interruption, etc.) with a negative impact on costs, revenues and level of service

Emerging risk: Physical Risk: an increase in average temperatures in the areas where Italgas operates with a possible negative impact on the number of active re-delivery points served and, consequently, on revenues

Emerging risk: Transition Risk: changes in the legislative and regulatory context in terms of greenhouse gas, with the objective of limiting emissions, for instance by introducing measures that require natural gas distributors to acquire certificates to cover emissions, with a negative impact on costs.

Emerging risk: Transition risk: technological evolution that may have a negative impact on the number of active re-delivery points served with a negative impact on revenues and the level of expected investments

Emerging risk: Transition Risk: uncertainty of the role of natural gas in the future energy mix with a negative impact on costs, revenues and level of expected investments

Main methods of management

Operational countermeasures as described in the “Service continuity:  malfunctioning, accidents or extraordinary events” risk

Targets for reducing net greenhouse gas emissions56:
I) by 2030: reduction of Scope 1 & 2 emissions by 42% and reduction of Scope 3 emissions by 33%, compared to 2020 values
II) by 2050, the target of Net Carbon Zero

Target to reduce net energy consumption by 33% by 2030, compared to 2020 values

Use of Picarro Surveyor technology, currently the most advanced technology in the field of gas network monitoring activities, with significant benefits in terms of speed of execution, extent of the areas being controlled and three times greater sensitivity of detection of gas in the air than those currently used by sector operators (parts per billion versus parts per million)

Adoption of internal leakage repair SLAs stricter than those defined by the Regulator

Process of converting the network into digital infrastructure to enable the distribution of gas other than methane, such as hydrogen, biomethane and e-gas

Development, implementation and adoption of digital applications for the remote control of network and facility construction, development and maintenance worksites

Conversion to methane of the distribution networks supplied by LPG, with resulting reduction in emissions compared to the current configuration

Actions to modernise the network (investments in maintenance, replacement of cast iron pipes with mechanical joints, clean up upright columns and brackets)

Promotion of responsible business practices, by joining the UN Global Compact and the OGMP 2.0 of the UNEP

Guidance to define the associative sector positions

Active participation in consultations called by the government or by European community organisations on relevant topics

Active participation in the activities of sector associations to oversee technological changes

Carrying out energy efficiency projects through the subsidiary Geoside

Investments intended to increase the Group’s presence in the water and energy efficiency sectors

Promotion of sustainable mobility

Development of power-to-gas technology powered by renewable energy in order to produce renewable gases that can be used in the existing networks

Network and facility analysis initiatives for the evaluation of their adequacy and of interventions intended to enable the distribution of gas other than methane, such as hydrogen, biomethane and e-gas

Climate Risk Assessment – Physical and Transitional Risks

To ease risk identification related to Climate Change, Italgas  performs a specific analysis based on physical and transition scenarios identifying a list of risk/opportunity events applicable to Italgas. Climate Risk / Opportunity analysis involves ERM Function,  Strategy Function, Sustainability Function as well as the relevant Risk Owners. Climate Change Risk and Opportunities are reported to Control and Risk Committee, Sustainability Committee and Board of Directors.

Regarding Climate Risk and Opportunities measurement, given the long timeframe that has to be considered to fully take into the account of occurrence and/or impact of such events,  climate risks and opportunities are measured both over the Strategic Plan 7-years timeframe and beyond it. Climate risks/opportunities are assessed with reference to the Strategic Plan assumptions flexed to account for possible alternative evolution of scenarios.

In the case of Physical Climate Change Risks, the climate scenario analysis uses a third-party climate model that allows to obtain the evolution of main physical parameters, up to 2050, under RCP 1.9, 2.6, 4.5, 8.5 scenarios in all the local areas (up to municipal level) already served by Italgas or in those areas the company plans to serve in the future. Physical parameters considered by the model include for example heating degree days and days with heavy rainfalls. Their potential impacts are then assessed on key business variables (e.g.   active redelivery points),  as well as considering potential damages to overall gas infrastructure (upstream and downstream relative to distribution).

Regarding Transition Climate Change risks, they are analyzed on several third parties climate and energy related scenarios with each Process Owner, as for Italgas ERM model described in the section “Overview of Enterprise Risk Management Model” . In particular, the following risks have been considered: risks associated to potential changes in National and European regulation, risks associated to non-compliance with regulation or failure to intercept/transpose new regulation falling under the scope of application, risks associated with technological changes, risks related to energy efficiency certificates, risks associated to environmental protection. Considerations of impacts include the overall gas infrastructure (upstream and downstream relative to distribution).

Adaptation Plan

Coherently with Group Strategic Plan targets and Climate scenario analysis outcomes, the Group has identified and is currently implementing a set of specific actions that enable the adaptation to climate change:

Network: mitigating impacts and/or reducing time of intervention in case of occurrence of extreme natural events

• Rome – Replacing the grey cast iron pipes with hemp and lead joints
  Timeline: Completion expected in 2022 (subject to permitting)
  Reference: Integrated Annual Report – pag. 135In support of network safety, the plan has almost been completed for replacing the grey cast iron pipes with hemp and lead; this will not only increase the safety levels but also help reduce gas leakages into the atmosphere: there are now only 1.7 km left of grey cast iron with hemp and lead joints located in Rome, concentrated below Via Casilina, an important metropolitan road. Completion of the replacement is expected for 2022 (subject to permitting).
• DANA – Digital Advanced Network Automation – the command-and-control system of the network of the future
  Timeline:
  – 2021: Project Launch (status: completed);
  – 2022: Installation on 4 distribution plant (status: completed);
  – 2022: Installation on 10 distribution plant Italgas and on 63 distribution plant MEDEA (status: in progress);
  – 2023-2024: roll out plan to all Italgas plants
  Reference: Integrated Annual Report – pag. 134
  The command-and-control system unlocks 3 major benefits: i) Ensure the monitoring of a distributed system in which physical variables are interdependent; ii) Enable remote management with commands on main processes of network and plants and increase the efficiency of the governed processes and the flexibility of the network; iii) Enable management of renewable gases (e.g., biomethane, hydrogen).
• Smart maintenance initiative 
  Timeline:
  – 2022: release of an initial prototype (in progress);
  – 2023–2024: roll out plan to all Italgas distribution plants
  Reference: Integrated Annual Report – pag. 148
  The launch of the development, jointly with Picarro, of a GIS model for asset management used to design smart maintenance for the Italgas networks, with a view to extension to Group level thereafter. From 2022, these innovative tools will be implemented as a basis for the development of the network maintenance CAPEX plan, in order to focus on interventions on the most emissions-heavy networks.
• Radio Frequency Identification Markers in new networks  
  Timeline:
  – 2019: first installation (completed);
  – currently ongoing (19.343 markers already installed)
  Reference: Integrated Annual Report – pag. 135
  The new distribution networks are equipped with Rfid markers, again positioned inside the excavation at an average step of 1 every 50 metres, which allow for the traceability and localisation of the pipes directly from the road level without any need for invasive interventions in the subsoil and consequent interference with traffic.

Real Estate: reducing office energy consumptions, mitigating the impact of an increase of annual average temperature (that would otherwise result in an increase of energy consumption)

• Building renovation: Corso Regina Margherita – Turin
  Timeline: 2023-2024
  Reference: Integrated Annual Report – pag. 144
  Towards the end of the year, the office on Corso Regina Margherita in Turin was partially closed, and will be subject to a significant redevelopment in 2023 and 2024 which will see it become the operating heart of the Piedmont region and a national hub for training and Cybersecurity activities. The new complex at Corso Regina Margherita will also represent a unique example of a “nearly netzero energy building.”
• Building renovation: operation offices in Italy
  Timeline: 2021-2025 (by 2025 the installation of photovoltaic panels across more than 30 properties and the complete renovation of the heating systems for the majority of the small-medium branches across Italy will be completed).
  Reference: Integrated Annual Report – pag. 144
  With a view to improving efficiency a wide range of projects has been launched for the monitoring of consumption, office temperatures, and every type of building system in order to evolve towards a smart building architecture and management capability. 2021 was characterised by a renewal and optimisation process of the spaces and warehouses occupied and the improvement of the energy performances of the buildings in order to achieve a significant reduction in consumption. The renewal process of the real estate assets will also continue throughout 2022 and 2023with the launch of new important construction sites that will affect some of the main operations offices of the territory in order to improve personnel working conditions by providing state-of-the-art working environments that are more functional and pleasant, as well as allowing for further optimisation of consumption for civil use. Furthermore, the entire Real Estate Department is undergoing a complete digitalization of both Property and Facility management processes. This project has the objective to further increase visibility of assets’ performance, space utilization and optimization.

Description

Risk of not being awarded concessions in the planned areas, or being awarded concessions with less favourable conditions than previously.

Risk of higher management costs borne by the Group with respect to its operating standards in case of concessions awarded in ATEMs (Minimum Territorial Areas) previously managed entirely or partially by other operators.

Risk of legal and/or arbitration disputes with possible negative effects on the business and the equity, economic and financial position of the Italgas Group deriving from the complexity of the legislation that governs the expiry of the concessions held by Italgas.

Risk that the redemption value of the concessions for which, following the assignment process, a third party is an assignee is lower than the value of the RAB, with possible negative effects on the business and on the equity, economic and financial position of Italgas.

Main methods of management

The existing legislation states that, in the event of failure to be awarded concessions previously managed, the outgoing operator is entitled to the redemption value for the networks it owns.

Specific procedures that govern the pre-tender activities, including calculation of the redemption value, and participation in area tenders

Monitoring of legislative changes (national, regional, local) and evaluation of the potential impacts on the tender process

Planning of the Tender calendar and the bidding strategy integrated into the Group’s Strategic Plan.

Critical analysis of the quality of the tender bid and implementation of improvement measures, including through use of external experts, organisations and universities

Description

Potential risk of economic loss due both to the possible negative difference recorded between the mean purchase value of the Energy Efficiency Certificates purchased and the recognised tariff-based fee at the end of each year of obligation and the failure to achieve the targets annually set

Main methods of management

Established a specific provision to cover the liabilities associated with the Energy Efficiency Certificates

Process for the acquisition of Energy Efficiency Certificates and the management of related obligations

Monitoring of legislative changes

Active participation in working groups and development of sector position papers with proposals for guidelines for reviewing the rules of the EEC system

Optimised purchasing strategy through access to the market, evaluation and development of any reports for bilateral agreements, periodic reporting to company management

Presence in energy efficiency sectors through the development of projects with partial reduction of the EEC short position

Description

Risk of potential losses arising from counterparties failing to fulfil their obligations or delayed payment of amounts owed with negative effects on the financial results and financial position of the Italgas Group

Main methods of management

Rules for user access to the gas distribution service established by the Regulator and set out in the Network Codes, namely, in documents that establish, for each type of service, the rules regulating the rights and obligations of the parties involved in the process of providing said services, and lay down contractual conditions that reduce the risk of non-compliance by customers, such as the provision of bank or insurance guarantees on first request

Analysis and monitoring of the credit portfolio

Assessments of initiatives for outsourcing to external companies specialised in credit recovery.

Monthly monitoring of the activities and performance of the appointed companies

In Italy, as at 31 December 2022 there were no significant credit risks. Note that on average, 98.4% of trade receivables relating to gas distribution are settled by the due date and over 99.7% within the following 4 days, confirming the strong reliability of the customers

In Greece, as at 31 December 2022 there were no significant credit risks. Note that on average, 83.2% of trade receivables relating to gas distribution are settled by the due date and over 90.8% within the following 4 days, confirming the strong reliability of the customers.

Description

Risk of fluctuations in interest rates, impacting the market value of the Company’s financial assets and liabilities and its net financial expense. The risk that an extended period of inflation lower than the Group’s forecasts could have adverse effects in the long-term on the RAB value and expected regulated revenues. Risk of an unexpected increase in the inflation rate with possible adverse effects on expected costs

Main methods of management

Process for the preparation and monitoring of the financial and management plan, control and reporting of Financial Risks

Financial planning activities with a time frame of 7 years, carried out annually

Maintenance of a debt ratio between a fixed rate and floating rate to minimise the risk of rising interest rates (as at 31 December 2022, 90.8% of the gross financial debt was at fixed rate and 9.2% at floating rate)

Use of a diverse mix of external financial resources (bonds subscribed by institutional investors, syndicated loans with banks and other financial institutions, in the form of medium-to-longterm loans and bank credit lines at interest rates indexed to benchmark market rates, in particular the Europe Interbank Offered Rate [Euribor])

Monitoring of the main economic and financial indicators, including financial structure indices used by rating agencies, liquidity indicators and liquidity buffers, risk indicators of counterparty liabilities, and of certain key parameters, such as the ratio between debt and the RAB, indicators of debt mix/composition (fixed/variable, short/long, used/agreed)

Description

Risk that new financial resources may not be available (funding liquidity risk) or that the company may be unable to convert assets into cash on the market (asset liquidity risk), meaning that it cannot meet its payment commitments. This may affect profit or loss should the company incur extra costs to meet its commitments or, in extreme cases, lead to insolvency and threaten the company’s future as a going concern

Main methods of management

Process for the preparation and monitoring of the financial and management plan, and control and reporting of financial risks

Financial planning activities with a time frame of 7 years, carried out annually

Adequate level of cash held in current accounts and fixed-term deposits with leading banks

The EMTN programme, in addition to funding from the banking system, which presently allows issue of the remaining bonds worth a nominal € 2.0 billion to be placed with institutional investors

Monitoring of the main economic and financial indicators, including financial structure indices used by rating agencies, liquidity indicators and liquidity buffers, risk indicators of counterparty liabilities, and of certain key parameters, such as the ratio between debt and the RAB, indicators of debt mix/composition (fixed/variable, short/long, used/agreed)

Description

Risk of a downgrade in Italgas’ credit rating due to worsening in the economic and financial parameters or due to a downgrade of the rating of the Italian Republic, which, based on the methodologies adopted by the rating agencies, could trigger a downward adjustment in Italgas’ rating

Main methods of management

Process for the preparation and monitoring of the financial and management plan, and control and reporting of financial risks

Financial planning activities with a time frame of 7 years and carried out annually

Monitoring of the main economic and financial indicators, including financial structure indices used by rating agencies, liquidity indicators and liquidity buffers, risk indicators of counterparty liabilities, and of certain key parameters, such as the ratio between debt and the RAB, indicators of debt mix/composition (fixed/variable, short/long, used/agreed)

Constant dialogue with rating agencies

Description

Risk of failure to comply with financial covenants for existing loans (in some cases only when this non-compliance is not remedied within a set time period, and the occurrence of other events, such as cross-default events, some of which are subject to specific threshold values), which could result in Italgas’ failure to comply and could trigger the early repayment of the relative loan

Main methods of management

Absence of financial covenants and/or collateral in the loan agreements (as at 31 December 2022, there were no loan agreements with these characteristics, except for the EIB loan taken out by Toscana Energia, for an original nominal amount of € 90 million and some credit lines granted to Greek operating companies that require compliance with certain financial covenants)

The issue of bonds as part of the Euro Medium Term Notes programme, requiring compliance with covenants that reflect international market practices regarding, inter alia, negative pledge and pari passu clauses

Monitoring of compliance with the following types of contractual clauses:
(i) negative pledge undertakings, pursuant to which Italgas and its subsidiaries are subject to limitations regarding the creation of real rights of guarantee or other restrictions concerning all or part of the respective assets, shares or goods;
(ii) pari passu and change of control clauses;
(iii) limitations on some extraordinary transactions that the company and its subsidiaries may carry out (as at 31 December 2022, these commitments appear to have been respected)

Description

Risk of increased levels of malfunctioning of smart meters with lost/ failed reading of the use and/or requiring replacement or regeneration

Main methods of management

Maintenance of an adequate provision to cover the liabilities generated by the costs arising from malfunctioning

Issue of adequate guarantees by the suppliers of materials

“SmartTracker” Digital Factory application for the tracking and management of smart meters throughout the entire life cycle

Plan to replace and/or repair meters with function anomalies

Operating centres for the regeneration of Smart Meters with anomalies

Audits on suppliers and supply tests

Update of technical specifications, including in consideration of technology changes

Adoption in the field of smart meters equipped with NB-IoT communication technology

Project for the development of latest generation smart meters, also compatible with renewable gas like biomethane and hydrogen and patented by Italgas

Description

Risks of malfunctioning and unforeseeable distribution service disruptions from unintended events, such as accidents, breakdowns or malfunctioning of equipment or control systems, the underperformance of plants, and extraordinary events such as explosions, fires, earthquakes, landslides or other similar events beyond Italgas’ control

Main methods of management

Third Party Liability Insurance and Asset Protection coverage Procedures and systems for emergency management, emergency plans with measures defined to make facilities safe and guarantee  service continuity

Health and safety procedures, communication campaigns, training and meetings to raise awareness of and analyse the prevention of accidents, initiatives that also involve suppliers/
contractors

Integrated Centre for Supervision (ICS) active 24/7 which makes it possible to monitor the status of the network remotely using remote monitoring systems, manage requests for prompt intervention, identify the places that require intervention and monitor the progress of making conditions safe

Facility and asset safety and network monitoring systems

Introduction of DANA – Digital Advanced Network Automation – the network command and control system with 3 main advantages:
a) To ensure the monitoring of a distributed system in which physical variables are interdependent;
b) To enable remote management with commands on the main processes of the network and facilities and to increase the efficiency of the governed processes and the flexibility of the network; c) To enable the management of renewable gases (e.g. biomethane, hydrogen).

Smart Maintenance initiative: development and gradual adoption of a GIS model for asset management used to plan smart maintenance of the Italgas networks.

Planned search for leaks using the best systems and technologies (Picarro Surveyor) and with higher levels of annual coverage of the network inspected than the standards defined by the Regulator

Adoption of internal leakage repair SLAs stricter than those defined by the Regulator

Continuous modernisation of the network (investments in maintenance, replacement of cast iron pipes with mechanical joints, plans to clean up upright columns and brackets)

Prevention of potential damage to pipes caused by third parties (e.g. other sub-services)

Qualification procedures for third-party construction, engineering and works supervision companies, contractor monitoring

Digital Factory for the development of innovative solutions intended to digitise processes and improve the network operating and management activities and the quality of service

Description

Risks of cyber attacks on the IT (Information Technology), OT (Operational Technology) and IoT (Internet of Things) sectors

Main methods of management

Specific insurance coverage of the risks related to cybersecurity

Cybersecurity organisational and operational model

Group Policy on Integrated Security, Resilience and Crisis Management

Models and procedures for business continuity, network and information security, and emergency and crisis management

Monitoring of the Group’s Bitsight cyber risk rating, currently positioned in an advanced range that corresponds to a high level of maturity of the cybersecurity frameworks

Adoption of conditional access solutions on the basis of certain risk factors (illegitimate accesses, accesses from unusual locations, etc.) and Multi-Factor-Authentication for the Group’s employees and most critical IT suppliers

Adoption of security measures to protect endpoints (antimalware) and e-mail through the implementation of antispam solutions (protection of mail from spam), anti spoofing solutions (protection from attacks that impersonate the address of the sender of a communication), advanced hunting (advanced analysis to proactively verify possible threats), safe link/safe attachment (protection from harmful links and attachments present in e-mails through simulation in a test environment, sandbox)

Specific training for Group employees on cyber risks, common vulnerabilities, phishing and spam

Possibility for Group employees to report suspected phishing e-mails (phishing alarm) to a team specifically appointed to analyse and manage these e-mails

Phishing simulations for Group employees intended to test and strengthen their ability to recognise malicious emails

Secure Product Development Lifecycle process which defines an operational and project approach in which the considerations and measures to prevent and mitigate cybersecurity risks are integrated from the very start of the procurement process and/or the development of hardware and software

Security measures to protect the network infrastructure from unauthorised alteration, disservices, incorrect applications and unauthorised data disclosure through firewall solutions, intrusion prevention systems, web application firewalls, anti DDoS (Distributed Denial of Service) systems, protection of Internet browsing (proxy) and network segmentation

Continuous real time monitoring, through Security Information and Event Management (SIEM) solutions, of IT and OT systems aimed at identifying and correlating events on monitored devices and acting accordingly where necessary

Periodic IT and OT vulnerability assessments and penetration tests performed by third parties

Definition and periodic updating of contract technical specifications, including in relation to cybersecurity

Leading sector suppliers that guarantee maximum levels of security and performance, the service levels of which are defined by contract and monitored

“Cybersecurity Awareness for third parties”, with which the suppliers of the Italgas Group must formally comply. It promotes the application of appropriate cybersecurity processes by third parties

Adoption of Cyber Threat Intelligence services aimed at proactively identifying new techniques used for attacks, monitoring the main players in threats and verifying any company data available outside the Group scope

Description

Risk of incidents and/or injuries involving employees and partner companies. Risk that Italgas may incur costs or liability, including to a significant extent, arising from any environmental damage, including in consideration of changes in legislation on protecting the environment and the possible occurrence of disputes.

Main methods of management

Specific insurance policies for “individuals”, which cover both cases of professional and non-professional accidents, and death by illness

HSEQ system in compliance with the reference standards, certified according to international legislation for aspects of health, safety, environment, quality and energy efficiency, which envisages compliance audits carried out by the certification body

Research and technological innovation and actions and projects for the energy efficiency of processes, the improvement of plant safety conditions and the environmental recovery of former manufactured gas production sites

Monitoring of HSE legislation, formation and dissemination of applicable legislative oversight

Training on HSE issues and digital management system for courses (Learning Management System)

Digital applications for reporting and recording “near misses” and for waste management

Communication campaigns and meetings to raise awareness about safety and other HSE topics Reward systems for virtuous operating structures in terms of health and safety

Establishment of the Partners HSE Lab with training, information and workshop events with suppliers/contractors intended to raise awareness/create alignment on HSE topics

Internal procedures that involve specific measures with regard to suppliers/contractors in case of HSE non-compliance and reward system for virtuous behaviour (Contractor Safety Trophy)

Compliance audits on the HSEQ and ISO 37001 integrated system and technical audits on suppliers and contractors during qualification and normal activities

With particular reference to reclamation activities:
– Established a specific provision to cover the estimated liabilities in relation to the formalities required by the law in effect
– Reclamation process of contaminated sites, which defines the tasks, operating procedures and indications in operations of waste removal, land analysis, establishing safe conditions and/or reclamation of sites contaminated by previous activities
– Structure dedicated to monitoring the design and construction phases. Audits on sites being
reclaimed, carried out internally and by third parties, both during the works and for the final
inspection

Description

Risks associated with the development of human resources, including risk of resources in key roles leaving, lack of technical and specialist know-how, increase in the age of company personnel, drop in the level of satisfaction and/or increase in workplace disputes

Main methods of management

Knowledge transfer system developed in the Italgas Digital Factory, which involves the video coding of operating activities and real-time instructions available via wearable devices

Refining of training processes, with a multimedia platform for planning, managing and accessing the various managerial, technical, HSEQ and digital training activities

Initiatives for the dissemination of the culture and digital knowledge (mapping of digital skills,
creation of Digital Ambassadors and training on digital topics)

Personnel scouting and recruitment process, performance management system and development plans for resources with a role-specific training programme

I-Grow Programme, Italgas’ graduate programme aimed at strengthening internal know-how in accordance with the principles of meritocracy and transparency, which provides for the acceleration of the development of transversal skills through induction paths, training programmes and structured job rotation paths

Succession plan for senior roles

Collaborations with Italian universities intended to anticipate talent acquisition

Organisational structures dedicated to diversity and inclusion and to HR sustainability

Periodic survey on the corporate climate extended to all Group employees

System of services and welfare under constant expansion in order to intercept new requirements and expectations

Italgas Human Rights Policy

Italgas Diversity and Inclusion Policy

Adoption of the Mac ecosystem, capable of ensuring ease of approach to new digital solutions,promoting the sharing and collaboration and improvement of the everyday experience

Smart Rotation system, the internal Italgas job posting, to foster the exchange of skills within the Group, enhancing its people and facilitating upskilling and reskilling

System for the classification and protection of information according to criteria of Confidentiality, Integrity and Secrecy

Description

Risk of non-compliance of the commercial levels of service for services to sales companies and/or risk of delayed or partial compliance with the obligations assumed, such as execution of the investments plan related to concessions involving obligations borne by the concession holder

Main methods of management

Continuous monitoring of Key Performance Indicators on commercial processes, alerts and communication to Territorial Hubs for activation/acceleration of territorial interventions

Ad hoc analysis of commercial processes and development of improvement measures

Operating procedures and instructions for Commercial Management of the Service

Acceleration in improvements to the level of service driven by the digitisation of assets and processes

Surveys at sales companies

Italgas digital portal dedicated to Gas2Be sales companies, developed to strengthen the partnership, facilitate the accreditation process of the network and allow the sales companies direct and immediate access to information and news about Italgas such as the most recent
promotions launched in the territory, or about the upcoming webinars designed specifically to increase and improve the exchange of know-how between Italgas and the sales companies

Allocation to a specific business unit of the responsibility for mapping the existing concession obligations, monitoring and activating the network technical units for prompt interventions

Monitoring of the works progress on the basis of the obligations assumed

Constant dialogue with contracting parties, including in order to understand and satisfy update requirements

CRM to support people working at the Italgas Contact Centre in carrying out front-end activities (Customer Service)

Description

Risks associated with the availability and cost of materials, services and supplies, the operating capacity and scalability and the reputational and compliance reliability (including respect for human rights) of the suppliers and contractors of the Group

Main methods of management

Planning of procurement, analysis and monitoring of department KPIs

Supplier qualification process which provides for specific reputational checks, including regarding ESG

Anti-mafia audits in tender procedures relating to special sectors pursuant to Article 80 of Legislative Decree 50/2016, to the Reclamation sector and to works under Title IV of Legislative Decree 81/2008 – New digital IT4Buy platform, which improves
i) the speed and simplicity of the supplier registration and qualification process;
ii) the tender process;
iii) contract management

ESG reward criteria during the tender phase on Legality topics, possession of specific ISO certifications, environmental impact (e.g. CO2 emissions)

Verification of sustainability and economic-financial requirements through recognised external providers, as early as during the supplier registration stage

Standardised tender processes and regulations

Weekly tender committee with analysis of the activities performed, vendor list, tender time frames.

Supplier performance evaluation, including in terms of sustainability, integrated into the vendor management module

Management of unforeseeable events: risk assessment to suppliers; procurement diversification; scouting for alternative raw materials

On-site technical and ESG checks for the Qualification purposes of Suppliers deemed Critical/ Strategic

Scouting activities for innovative assets, produced with alternative materials and/or different technologies, functional to asset management/maintenance

Technical specifications being continuously updated including in consideration of the technological changes and contractual clauses that govern cases of goods and services exposed to cyber risk

“Supplier Code of Ethics”, requiring a commitment from suppliers. The code is inspired, among other things, by the information set out internationally in the UN Universal Declaration of Human Rights, the Declaration on Fundamental Principles and Rights at Work and the Conventions issued by the International Labour Organization (ILO) and the Ten Principles of the UN Global Compact, in addition to the contents of the UN Guiding Principles on Business and Human Rights and the OECD Guidelines for Multinational Enterprises

Anti-Bribery Policy Awareness for third parties – request for anti-bribery and/or ISO 37001 declaration from suppliers

“Cybersecurity Awareness for third parties”, with which the Italgas Group’s suppliers must comply

Renewed logistics model with Warehouse Centralisation and management of Withdrawal Points in the territories (UT) and consequent digitisation of monitoring materials in stock/transit

Description

Risks associated with the health crisis arising from COVID-19 and/or the spread of new pandemics or new diseases that have repercussions on health and safety, on the operating context and on the resulting economic and financial framework of reference of Italgas

Main methods of management

Establishment of a Crisis Committee to monitor and manage the different phases of the pandemic

Continuous monitoring of the changes in the reference regulations and solutions for the management of the COVID-19 emergency both nationally and internationally, maintaining constant connections with the authorities, research organisations and hospitals

Adoption of the Italgas Group Protocol regulating measures to combat and contain the spread of the COVID-19 virus in the workplace

Specific indemnity insurance policy for all employees who test positive for COVID-19 in case of hospitalisation

Flu vaccination campaigns

Specific operating measures to minimise contact (e.g. smart working, starting from home for operating staff) and control (e.g. temperature scanners upon entry, hand sanitiser towers, anti-gathering rules)

Periodic monitoring of positive cases and personnel in quarantine, including through the Appointed Physicians and process for the receipt and management of reports regarding positive COVID-19 cases, which provides for the identification, contact tracing and activation of quarantine in coordination with the Local Appointed Physicians

Periodic distribution of the rules of conduct in relation to changes in the pandemic and the provisions of the Health Authorities

Description

Risk of non-compliance with legislation at European, national, regional and local level with which Italgas must comply in relation to the activities that it carries out and/or risk of failure to intercept and transpose new regulations falling under the scope of application

Main methods of management

Internal control and risk management system and areas of responsibility defined in terms of compliance

Code of Ethics, Model 231, Policy for the prevention of and fight against corruption, ISO 37001 anti-bribery certification

Monitoring, analysis, distribution and implementation of legislative measures on topics of interest for the Italgas Group and verification of correct implementation

Training for personnel on compliance issues

Analysis and monitoring of the reputational requirements of the Group’s counterparties

“Supplier Code of Ethics”