Hera has designed its Business Plan to 2024 consistently with the external scenario, where international policy makers are indicating clear priorities in terms of environment, society, and innovation. Hera has outlined a dual path, both for the creation of Shared Value and for the industrial strategy, pursuing respectively the UN 2030 Agenda and the European policies – especially those featured in the “Next Generation EU” program. This approach allows Hera to make a concrete contribution to the achievement of major sustainability goals, while offering the perspective of attractive returns by fuelling Group growth.
We discuss those topics with Mr. Massimo Vai, Hera’s Strategy, Regulation and Local Bodies Central Director.
Hera’s new Plan to 2024 is set in a precise external framework. What are the international policies that a Company cannot disregard in achieving its value creation objectives?
Today, the external scenario has two main points of reference in our case: on one hand, the policies of the European Union included in the “Next Generation EU” (NGEU), the €750 billion package for Europe’s recovery and resilience from the Covid-19 pandemic, which was approved in July 2020; on the other, the 17 Sustainable Development Goals, or SDGs, of the UN’s 2030 Agenda.
What are the key aspects of these policies?
The purpose of the NGEU’s grant and loan programme is to contribute to the economic and social recovery of our continent, following the critical issues caused by the global pandemic that we are experiencing. At the same time, it aims to define and help achieve the objectives of a long-term development of the EU in a “green” and digital key. The NGEU’s approach is deeply consistent with the contents of the “Green Deal”, which the European Commission presented in December 2019, with the underlying goal of achieving climate neutrality in Europe by 2050. On the other hand, as far as the 17 UN SDGs to 2030 are concerned, they are interconnected goals, guiding the path of companies, institutions and local communities towards climate neutrality and long-term prosperity of the economy and society, through full environmental, social and technological sustainability.
How did the UN 2030 Agenda and the European policies impact your strategic planning?
For several years Hera has been following the approach proposed by the United Nations, having incorporated it in its own Shared Value model. Over time, through this approach, not only have we highlighted and reported on the contribution yearly achieved to the goals of the UN 2030 Agenda, but we have also leveraged those reference points to develop and share our Purpose, i.e., the fundamental reason that inspires the Company and all its employees in their daily actions.
The 17 SDGs and the NGEU policies represent two sides of the same coin. However, they have led Hera Group to draw two complementary paths: the UN 2030 goals have inspired our Shared Value model for years now, while EU policies are fundamental references to guide the evolution and updating of our business strategy.
You mentioned that European policies, on the other hand, helped designing the business strategy…
Exactly so. European policies – both high-level strategies and contents of binding regulatory texts – have been translated into our Business Plan framework through the six dimensions of the GROWTH acronym: Green, Resilience and Regeneration, Opportunities, Welfare, Technology, Humans. These dimensions guided us to identify, for the Plan to 2024, the actions and projects that are most consistent with EU policies.
Therefore, these are two pairs of closely integrated elements….
Undoubtedly. The EU strategy can be interpreted as a concrete translation of the sustainable development goals of the UN 2030 Agenda, just as our business strategy is a concrete fulfillment of our corporate purpose. The success of the European strategies and, at the same time, of our corporate strategy depends on the complementarity and consistency between these pairs of elements.
Taking a closer look at the new strategic GROWTH framework, how does it reflect the main dimensions of “Next Generation EU”?
On one hand, the EU policy is articulated in three priority areas: the environmental area, with the European “Green Deal” and the related legislation, the socio-economic area, with the report “A Strong Social Europe for Just Transitions”, and the technological area, with the “A Europe fit for the Digital Age” factsheets. Hera’s strategy, through the GROWTH acronym, addresses the environmental issues of decarbonisation and circular economy in the initiatives included in “Green” and “Resilience & Regeneration”. The social area, which at the level of EU policies is focused on the issues of gender, income and access to services and education inequalities, in Hera’s strategy is interpreted in the chapters “Opportunities” and “Welfare”, through projects that bring mutual benefits to the company and its stakeholders. Finally, in the technological area, where the EU aims to support a rapid development of Digitalisation and Artificial Intelligence, ensuring an ethical use of data, Hera is committed to actions that fall under “Technology” and “Humans”: two chapters that are closely related in our strategy.
What are the advantages for Hera of a strategic approach that is so deeply consistent with European policies?
The main advantage of adopting a strategy closely aligned with EU policies is certainly that planned projects will make a concrete contribution to the achievement of EU objectives in terms of the environment, society and technological progress. And in the long term, this will increasingly become essential for companies that are leaders in their markets.
If we look at the investments put into play to implement these strategies, what results do you expect?
About 60% of investments included in the 2020-2024 Plan are intended for projects consistent with the EU guidelines. To be even more precise, 42% of technical investments will be dedicated to projects related to the European “Green Deal”, while another 18% is destined to nurture the technological evolution both of Hera and of the territory in which it operates.
Overall, what amounts are we talking about?
The Group will invest about 2 billion euro by 2024 in initiatives that are strictly consistent with EU objectives.
What do you expect in terms of resulting margins?
Considering the significant investments made to achieve the objectives set by the UN and the EU, we expect an important contribution in terms of margins. The impact of having followed this line will therefore be considerable from all points of view, including the economic one. In fact, we estimate that in the period 2020-2024 these projects can generate an overall increase of 190 million euro at EBITDA level.
We expect that almost 90% of the Group EBITDA growth over the Plan’s period, estimated to reach 215 million euro in total, will come from initiatives consistent with European policies.
Was it challenging to reflect the new guidelines of international policy makers in the Plan?
Actually, it was an alignment in the way we have represented and classified our investment projects, because in substance we were already “compliant”. The effort was to translate each aspect of the EU policy documents in the initiatives of the coming years; but when it comes at the strategies underlying those initiatives, we were already perfectly compliant with the new orientation of EU policies. If we had not already been aware and committed to those themes, we would not have adopted long ago a model for Shared Value creation. Moreover, in designing the new Plan, we would not have been able to follow the paths imagined by the EU so faithfully.