Enel’s evolution towards stakeholder capitalism: ENEL STAKECAP©TM, integrating sustainability into the business model

A Word from Alberto De Paoli

The concept of capitalism is evolving, from shareholder capitalism to stakeholder capitalism, thanks to the role that sustainability is now playing in guiding business choices. How did this transformation come about for Enel? How did the idea of creating shared value come into being and how has our language changed?

The beginning of this change coincided with the decision to adopt a fully sustainable business model rather than limiting our commitment to some simple initiatives. In the traditional business system the three key elements for quantifying the value of a company are: free cash flow, the cost of debt and overall risk.

Integrating sustainability into strategy has an impact on these three elements, offering companies a better growth trajectory and enabling the generation of more predictable cash flows, less volatility and, therefore, lower risk compared with the traditional business model. As a consequence, the cost of debt and refinancing is lower. The result, therefore, is that the integration of sustainability into companies’ business models brings greater value. And this is the story of our Group.

Within this context an additional dimension to the current model is required to help companies represent and communicate the value created for each individual class of stakeholder.

Furthermore, the quality of the value created is a relevant factor as this represents the company’s soul – its purpose. Stakeholders must be able to clearly understand the value the company creates and distributes for them. We therefore need to express this succinctly through targets, KPIs and numbers. How is this data constructed and what are the trends?

At Enel we began to communicate in a different way: not simply by adding documents but by giving a new interpretation using our new ENEL STAKECAP©TM model, which outlines how we create value for each category of stakeholder, as well as our purpose and our goals.

And this is how capitalism is evolving, thereby enabling it to create value for all.

Towards stakeholder capitalism: Integrated Reporting 2021