Enlightened Energy

Whether it is legally the case or not, it has become unfashionable to outwardly declare that your company’s purpose is solely to produce profit for its shareholders. Reconciliation of the many understandings and expectations of corporate purpose requires delicate handling. In his paper, Professor Guido Ferrarini provides a useful assembly of reflection points and literature analysis for any professional to ponder. He ultimately leans towards ‘Enlightened Shareholder Theory’ (ESV) while advocating a broader acceptance of the concept from a behavioural perspective.

Once the pondering begins however, where does it end? If you are leading a complex international group, with multiple companies in different jurisdictions where different laws and codes apply and contrast, the ‘interest of the group’, let alone its corporate purpose, can be challenging to pin down. To explore how these interests are reconciled in practice, Professor Ferrarini spoke to Michele Crisostomo, Chair of the Board of Directors and of the Corporate Governance and Sustainability Committee of Enel S.p.A . 

In the interview, Mr. Crisostomo elaborates on Enel’s approach for determining its corporate purpose, for articulating it, and for implementing it. This undertaking, along with deciding on a uniform definition of “corporate interest”, and on the objectives for their strategic plan, are no small tasks. For the latter, Enel conducts an in-depth materiality analysis, mapping out the Group’s main stakeholders, identifying their priority issues, comparing them with those of the Group and creating a ‘priorities matrix’. This already seems more serious than consulting a marketing agency.

Responding to a question about social value, Mr. Crisostomo eloquently replies that; 

“among the infinite ways of making legitimate profits, it is better to choose the one that creates value for the relevant stakeholders, as Enel’s case demonstrates”. 

As an early leader of the energy transition, with a substantially lower risk profile, Enel has been able to generate value by leveraging on this transition since 2015. Demonstrating further leadership, Enel also seems committed to backing up their talk. In 2019, The Group launched the first SDG-linked bonds in the world, with the interest rate dependent on the achievement of ambitious decarbonization objectives and on the strengthening of renewable generation. Mr. Crisostomo said; 

“Committing ourselves to pay more interest if the relevant and measurable KPIs are not achieved (a so-called ‘green-pill’) provides a credible mechanism to back up our public commitments to sustainability-related goals. The decrease in the cost of debt we achieved thorough these and other similar instruments shows that the bondholders share the same confidence as the shareholders in our strategy”. 

Mr. Crisostomo provided several such examples of the practical application of Enel’s vision, culture and strategy, ending with a quote from Mahatma Gandhi: “To believe in something, and not to live it, is dishonest”.

Click here to read the full interview.