Sustainability according to Enel

Published on Thursday, 19 April 2018

The term is used very frequently, but sustainability is actually a strategic factor for companies when it comes to the management of long-term risk.

The April issue of Harvard Business Review Italia, the national edition of the magazine that is a reference point in the field of management, features an article by Patrizia Grieco, Enel Chairman and Chairman of the Italian Committee for Corporate Governance.

The supplement on “Governance and Sustainability” (by Governance Consulting in collaboration with Nedcommunity) gathers the views of numerous industry experts, chairmen and CEOs of companies for which sustainability is a strength. The commitment to ethical, social and environmental policies has grown considerably in Italy in recent years, but, as Patrizia Grieco points out, if its strategic importance is not valued, it can become a mere expression of convenience and of little effectiveness, “which risks being almost trite.”

“Sustainability, in its essence, is a tangible and dynamic tool for the management of long-term risk, and one that is essential for companies that want to prosper and grow within a global context that is characterised by increasingly unpredictable and disruptive changes,” writes Grieco.

While it may provide immediate benefits, a short-term vision can also be damaging and destroy value. Advantages in terms of profitability, access to capital and job creation are achieved through a broader vision, which, in addition to the economic and financial return, also draws attention to the social and environmental impact. Both areas are now on an equal footing: beginning from the 2017 financial year, large companies are now required by law to publish an annual non-financial statement, which also includes a certificate of conformity issued by independent auditors. The law also sets out the specific responsibilities of the board of directors and statutory auditors.

Patrizia Grieco cites that “sense of purpose” outlined by Larry Fink, CEO of BlackRock (the world’s largest investment company), in the 2018 annual letter to major international companies. To be truly “sustainable”, the company must adopt an innovative way of evaluating, measuring and integrating financial with non-financial data, because the combination of the two can create value.

The effectiveness of this approach necessarily depends on fostering human capital and responds to the needs expressed by investors today.

Large companies are called upon to play a pioneering role vis-à-vis small and medium-sized firms, making them aware of the opportunities for change and improvement in the field of corporate governance. Sustainability and responsibility, also towards the system, always go hand in hand.

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