Enel launches a new model for assessing value creation
The ENEL STAKECAP®™ model was introduced in 2021 and was inspired by the principles of stakeholder capitalism theory, which was popularized by R. Edward Freeman in 1984 with his book Strategic Management: A Stakeholder Approach. This approach goes beyond profitability targets and traditional financial indicators, such as net income and free cash flow, to consider the company’s wider effects on society and the environment.
The model Enel proposes adopts new financial metrics, concepts of value creation and its distribution to stakeholders, and an evolving set of indicators that address the needs of the various players, in addition to measuring the company’s related actions. This is all within the scope of the broader objective of creating value.
It is based on five pillars, centered around the concept of quality. This can be defined as a company’s ability to plan and follow a sustainable strategy that is mindful of the interests of all stakeholders, encompassing the main value drivers for each stakeholder in its strategy.
The other four pillars (in addition to quality) are: value creation, value distribution, development strategy and communication.
The value created is the sustainable result a company generates that is available for distribution and supporting future growth.
The value distributed is the portion of value created that is passed to direct beneficiaries (employees, communities, debt holders, and shareholders) in an equitable way.
The development strategy is the way the value retained by a company after distribution is used to support future sustainable value creation. The investment plan for this type of strategy needs to focus on sustainable goals for the benefit of both the organization and its stakeholders.
Finally, this is backed up by a new communication strategy, which constantly presents the results achieved for each stakeholder and plans for the future in a structured way. This must be specific for every stakeholder, explaining the plans, progress, value created and distributed for all, with the aim of increasingly engaging the stakeholders and strengthening the relationship with them.
The overview for 2021
Under this model, the value created for all stakeholders amounted to 23.1 billion euros in 2021. About 70% of this (i.e., 16.1 billion euros) was distributed: 5.3 billion euros to employees, 3.0 billion euros to communities, 2.8 billion euros to debt holders and 5.0 billion euros to shareholders.
Value retained totaled 7.0 billion euros in 2021, or 30% of the value created. This is being used by Enel to fund further growth and development through investments focused on new renewable capacity and on distribution networks, in line with the United Nations’ Sustainable Development Goals (SDGs) and the European Taxonomy.
In 2021, the Group achieved its goals, while maintaining its environmental and social objectives, thereby ensuring a significant level of sustainability for its stakeholders, including customers, suppliers, partners, employees, the financial community, and communities. This was measured by indicators such as investments aligned with the afore-mentioned SDGs, the circularity index and the reduction of materials consumption, and suppliers with positive ESG (Environmental, Social and Governance) assessments.
The future outlook
Enel’s short- and long-term strategy is centered on increasing investment in the decarbonization of its energy mix and the electrification of consumption. It plans to bring forward its Net Zero emissions commitments to 2040, leveraging on platforms in order to create shared and sustainable value for all stakeholders.
Enel expects the value created by its operations to rise by 16% to reach 26.8 billion euros in 2024. Value distributed is set to increase to 18.6 billion euros: 5.8 billion euros to employees, 4.9 billion euros to communities, 2.3 billion euros to debt holders and 5.6 billion euros to shareholders. Value retained is expected to reach 8.2 billion euros by 2024.
For the years 2021 to 2030, the Group plans to increase value created by about 60% and value distributed to direct beneficiaries by about 40%, thanks to its long-term sustainable strategy and the quality of its actions across all its businesses.
Value retained is expected to double by 2030 and this will enable Enel to fund future growth and development and to continue along the path in its commitment to achieve Net Zero by the accelerated 2040 deadline.
Enel’s Strategic Plan through 2030 is to achieve a total installed renewable capacity of roughly 154 GW, thereby confirming its role as a major player in renewable energy. The Group will also reach a total of 86 million customers connected to its distribution networks.
The company will be increasingly supporting the shift to sustainability for its customers, bringing renewable energy to 88% of all electricity sold, alongside new services, such as electric public and private transport or flexibility solutions like behind-the-meter storage.
It expects to mobilize 210 billion euros of investments between 2021 and 2030, including 170 billion euros invested directly.