AN ENERGY COMPANY AND LOCAL COMMUNITIES: A SHARED VALUE APPROACH

MILAN, 17th April, 2015FRANCESCA MAGLIULO, CSR DEPARTMENT

Business Opportunities &

Challenges

Shared Value is: Policies and practices that enhance the competitiveness of a company while simultaneously advancing the economic and social conditions in the communities in which it operates

The overlap between the three circles defines the shared value opportunity setShared value initiatives must be designed to: 1.Provide a business return2.Address a specific social need3.Efficiently and effectively leverage corporate assets

Social Needs

Corporate Assets and Expertise

Shared Value: a definition

Seeking shared value with stakeholders

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Two challenges for the company:

1)To combine the difficult challenge of company competitiveness and reliability with its presence in the territories

2)To reconcile the double level on which Edison operates: the Company plays the "macro" role of a leader on a national and international market with its widespread presence throughout Italy and abroad and the need to maintain constant and transparent dialogue with local stakeholders in each territory.

Double dimension that combines a complex scenario at international level and numerous specific scenarios at local level, with the relative impacts on development, people, environment, cohesion and social inclusion.

In accordance with the principles of the Global Compact , a healthy social and territorial context depends on the presence of companies that are able to provide employment, pay adequate salaries, purchase quality goods and services, pay taxes, protect the environment and use resources in a respectful and efficient manner. On the otherhand, a solid territorial context in itself creates a competitive advantage for the company that operates within it, indirectly increasing the social legitimacy of the organization.

A path to the creation of shared value

To reinforce its sustainability strategy, Edison has set itself the ambitious goal of maximizing the positive benefits of its presence in Italy and in local areas, and consequently, embarking on a path to redefine and strengthen its practices of dialogue, debate and partnership with the stakeholders, positioning them with an innovative approach that aims to generate shared value.

The shared value approach aims to capitalize on positive external effects, integrating them into Edison’s long-held commitment to risk mitigation, protection of its reputation and the reduction of negative external effects.

A path to the creation of shared value

In 2013- 2014, Edison has started a strategic reflection and an internal path to Shared Value that, after mapping the existing, permitted to read and identify some projects that can create social value through the exploitation of business levers.

1.Materiality analysis: during the Sustainability Report 2014 work a materiality analisys was updated (in line with GRI G4) and identified relevant issues according to stakeholders and corporate perspectives .

2.Mapping corporate assets: at the same time, the major corporate assets have been mapped, to identify new opportunities for value creation consistent with the core business.

3.Corporate shared value action plan: match of business activities with materiality issues, internal sharing and prioritization. Goal: corporate sustainable development action plan linked to business (in progress).

Materiality Analysis, the results

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Sustainable energy, protection of the environment and climate change, with the promotion of energy efficiency, innovation in production and distribution, sustainable use of resources and energy access.

Local Content and responsibility towards people and regions, guaranteeing health, safety, professional development and shared skills and involving stakeholders

Commercial fairness, innovation and quality of customer service.

Mapping corporate assets

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Edison, like any company, is characterized by corporate assets that act as levers for the creation of value. In the preliminary phase, the analysis model has identified specific company assets and the positioning of ongoing projects.

The path taken in 2013-14 was based on 5 modular steps:•Understanding which characteristics of the Edison business are compatible with the Shared Value approach;•Tailoring a methodological approach borrowed from the theory of Porter and Kramer;•Identifying stakeholders who benefit from this business approach;•Selecting the existing initiatives that are to be reread with regard to the stakeholders, identifying those that can be projected externally as levers for the creation of value for the company and territory;•Developing a strategic approach and an intervention model based on this model, that can be integrated into the action plan for sustainability and allow for dialogue with the local communities.

The shared value action plan

Edison is completing a sustainability action plan based on the shared value approachFocus:

Leveraging key tangible assets (places, technologies) Intangible assets (resources, company skills and relational capital)

The purpose is to grasp opportunities in priority areas identified by the management in accordance to the following lines:

Initiate new business opportunities able to satisfy social needs, while optimizing existing company resourcesStrengthen the citizenship model of production facilities and infrastructuresStrengthen the macro role of market leader and the requirement to manage infrastructures in the country with the relative impacts on development, people, the environment and cohesion

The action center is on the material topics of Edison, in particular access to energy, climate change and relations with local communities.

Further initiatives envisaged by the plan are undergoing feasibility studies and will be implemented over the next two years.

How we can create shared value?

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I primi approcci al Valore Condiviso First approaches to shared value

Access to energy in EgyptIn Egypt, where Edison operates, has been developed a partnership with American University of Cairo and Politecnico of Milan to support a research on energy and sustainable development, in the perspective of establishing an effective synergy with the local university sector, promoting actions to foster local development and sustaining the empowerment of new generation of employees. The initiative will constitute an effective beginning of collaboration between the university and the company, which will lead Edison to have positive effects on the local context and to strengthen its interaction with other stakeholders, as industries, municipalities, ministries and international institutions.

Edison PulseThrough Edison Pulse, the Company wants to find and support best solutions integrating Edison’s competences, knowledge and assets for a more effective and shared answer to local needs. Two categories: Territorial developmentResearches and projects to mitigate the impact of energy activities and optimize deriving opportunities , favoring local development.EnergyResearches and projects to favor energy access and the management of new forms of production, storage and consumption of energy according to a sustainable perspective in those territories still off-grid.

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I primi approcci al Valore Condiviso First approaches to shared value

Improving energy efficiencyEdison Energy has made its know-how available to more than 200 business customers with specific training initiatives aimed to share technical skills designed to increase awareness on energy consumption and energy audits.

The Vega field biodiversity laboratoryIn collaboration with the Protected Marine Area of the islands of Cyclops, the project envisages a series of activities which will make Vega a biodiversity laboratory, including a survey of the species and algae on the jacket, the steel structure which supports the platform.