Challenges

Sustainability and innovation for a just transition. A talk with Francesco Salerni

29/7/2024 19 minutes

For the first time in its history, Terna has integrated its Sustainability Plan into its Industrial Plan, with the goal of a just transition that is fair and inclusive towards all stakeholders. However, there can be no energy transition without the support of a digital transition going hand-in-hand with it. We discussed it with Francesco Salerni, Terna's executive vice president for Strategy, Digital and Sustainability.

To create lasting value, a company must not only focus on its financial management and targeted investments but should also consider the role played by sustainability, making it a cornerstone of its strategy. Terna, the company that owns and manages the Italian national electricity transmission grid, has set itself this challenge with an unprecedented commitment in its 2024-2028 Sustainability Plan, which has now been integrated into the Industrial Plan. While, on the one hand, this approach places ESG (Environmental, Social and Governance) goals on par with industrial and financial targets, on the other hand, it also highlights the importance of achieving a just transition, meaning fairness and inclusivity in the energy and digital transition. After all, “where we invest and how we invest are two equally important questions”, as Francesco Salerni, executive vice president for Strategy, Digital and Sustainability at the Terna Group, explains.

Sustainability is an increasingly important driver of investment for companies. Equally, there can be no sustainability without innovation, in the form of parallel developments in digital technologies. This so-called twin transition, which brings both energy and digital together, is environmentally and economically essential; however, it cannot be achieved without a fair and inclusive decarbonisation process. Thanks to the use of digital technologies, "we can make better and faster progress towards this goal, without excluding anybody", claims Salerni. To fully succeed in this dual transition, both high-level technical skills and an agile and innovative approach will be needed to prepare workers to manage the evolution of the electricity system.

2 CNC Terna 23 low — Terna’s National Control Centre for the electricity system in Rome, which was completely refurbished in 2024, 60 years after its opening (photo by Terna)

Completing this vision, Terna will launch the Terna Foundation in the coming months, with a three-fold aim: to promote the culture of energy, to fight energy poverty, and to improve access to the labour market in the energy sector. This commitment is testament to the company’s deep desire to help establish a sustainable, fair and inclusive paradigm, which takes the social implications of its activities into careful consideration.

FOR THE FIRST TIME IN TERNA’S HISTORY, ITS 2024-2028 SUSTAINABILITY PLAN HAS BEEN INTEGRATED INTO THE INDUSTRIAL PLAN. WHAT ARE ITS MAIN DISTINCTIVE FEATURES?

«When we talk about integration, we mean that the two aspects on which our work is based must go hand-in-hand: business must be sustainable. For any company, but especially a company such as ours, this means that there is no value unless it is sustainable value. Integrating the Sustainability Plan, which covers the three ESG areas — environmental, social and governance — shows the market, our stakeholders and everybody who works at Terna that the Sustainability Plan is worth just as much as the Industrial Plan. In short: where we invest and how we invest are two equally important questions.

3 CMD AD Giuseppina Di Foggia Terna 200 — Taken during Terna’s Capital Markets Day, for the presentation of the 2024-2028 Industrial Plan to the analysts. Sitting in the middle is Terna’s CEO and General Manager, Giuseppina Di Foggia; on her left is the Group’s CFO, Francesco Beccali; and on her right is Terna’s Head of Investor Relations, Omar Al Bayaty (photo by Terna)

From a structural point of view, this need is perfectly in line with the Italian Stock Exchange’s Corporate Governance Code, approved in January 2020. This document represents the first formal discussion of the question of sustainable success for companies; in other words, the need to create long-term value that benefits both the shareholders and all other stakeholders. The Industrial Plan brings together the investment goals, projects and targets set by Europe and transposed into Italian law to be adopted by companies like ours. And that’s not all: we have incorporated the ESG goals along with these.»

«The energy and digital transformation, referred to as the "twin transition" in our Industrial Plan, goes hand-in-hand with the "just transition": a fair and inclusive transition with the shared objective of creating value over time. This transformative value is the only kind capable of generating sustainable success in the long term»

Francesco Salerni Executive vice president for Strategy, Digital and Sustainability at Terna

SO HOW IS THE JUST TRANSITION, WHICH CONSIDERS IMPACTS ON ALL YOUR STAKEHOLDERS, CONNECTED TO THE ENERGY AND DIGITAL TWIN TRANSITION?

«Let me share some personal experience: my background is in the world of telecommunications, and I’ve only recently joined the electricity sector. Why do we talk about a just transition? Well, in the context of telecommunications, one long-standing problem is the digital divide. This refers to the swathes of the country and sections of the population which are excluded from essential services such as broadband. Excluding them from this essential service means denying them access to opportunities which are available elsewhere. Not having a broadband connection can mean, for example, being unable to start up a business, or that individual citizens cannot access many services which are normally available online. In the context of energy, there’s a different divide: energy reaches every part of the country, but the cost of it can create a competitive disadvantage for national companies compared to those in other countries. For citizens, the high cost of energy can make it difficult or impossible to access essential services, with a knock-on effect on quality of life. A just transition means making sure that the energy transition, which seeks to achieve decarbonisation, takes place fairly and inclusively. Digital technologies are one way in which we can make better and faster progress towards this goal, without causing any exclusion. To do so, while upholding the interests of shareholders, stakeholders and the people within the company, we take the results of a materiality analysis as our starting point. This widely accepted methodology allows us to identify the main elements we need to focus on and which must be assessed for risks to be monitored and mitigated, opportunities to be seized and made the most of, and impacts to be considered to prevent our actions from contributing to or exacerbating issues of exclusion.»

4 operativo terna foto inspirational — The energy and digital transition pave the way for an increasingly connected, smart, secure, resilient, efficient and sustainable electricity grid, to the benefit of the entire system (photo by Terna)

THE STRUCTURE OF THE NEW SUSTAINABILITY PLAN HAS BEEN REVISED IN ORDER TO SET MORE AMBITIOUS ESG GOALS THAN THOSE PREVIOUSLY SET, AND TO IDENTIFY NEW ONES. CAN YOU SHARE SOME OF THE NEW CHANGES WITH US?

«We always say that Terna is "green by nature" and "social by purpose". Let me explain: by "green by nature", we mean that in our role as TSO (Ed.: Transmission System Operator), we are in charge of transmitting electricity, which has been identified as the vector of the future in order to achieve the decarbonisation goals. Right now, being "green by nature" means, among other things, reducing the CO₂ emissions released into the atmosphere and strengthening our commitment to the circular economy, reducing waste and other materials left over from our activities, and encouraging the re-use of resources to the extent possible. Meanwhile, "social by purpose" indicates that, as we pursue our business, we take into account the health and safety of our people and of those employed by our contractors and sub-contractors, the inclusive development of our human resources, and the protection of the rights and legitimate expectations of our stakeholders. Moreover, we do so with an unwavering commitment to listening to local communities, with whom we maintain a continuous dialogue, given that what we do has an impact on the land and on communities. While parts of this aspect have remained unchanged, what’s new is the way in which we’ve expressed it. We also take steps to make up for any work we have to carry out in the field. One recent example is the restoration of an archaeological park in the region of Sicily upon the launch of the Tyrrhenian Link (Ed.: the most important project in Terna’s Industrial Plan), in order to preserve for the future a celebration of the rich heritage of our lands. With regard to the equally vital matter of worker safety, again, our dedication to this is nothing new, but our emphasis on the area and the measurement of its targets are. Our workers face two types of risks: working at heights, dozens of metres up on pylons; and working with high voltage, because our technicians work while the grid is in operation in order to avoid outages around the nation.

6 Terna tutta pagina TES — A team of Terna technicians busy with high-voltage work for the maintenance of the national electricity grid (photo by Terna)

Very often, requests for new workplace safety measures and equipment come from those working in the field, showing the importance of mixing a top-down and bottom-up approach. In addition to ongoing training, worker safety also requires constant internal dialogue between the operating teams and those responsible for safety measures. Measuring targets is a new element in the Sustainability Plan, and the company is firmly committed to making these clear for investors. One example of many is the rate of SF 6 gas leakages as a percentage of total gas installed: after years of having the target stalled at 0.45%, we’ve planned to lower it further over the five years of the Plan, progressively bringing it down to 0.36% by 2028. To return to the topic of worker safety, the best and most effective way of managing this is the method we’ve devised with the teams in the field. The youngest workers, who have the most physical strength and endurance, are paired with older workers, who have more experience and understanding of the possible risks that can be faced. In this way, we create a mixture of skill sets that helps to minimise work risks.

7 Cavi 2 — A team of Terna’s workers replacing pylon conductors (Terna photo)

We’ve structured and quantified all of this: what’s new is how we’ve expressed our Plan and explained it to our stakeholders. The Plan is built around four pillars: the energy transition, i.e. reducing our environmental impact, which is our top priority; the sustainable value chain, through which we optimise the circular approach of our operating processes; the creation of shared value, which is to say strengthening our “social licence”, with the support of communities thanks to direct communication; and, finally, sustainable growth, which takes into account the levers of innovation and digitalisation, which are essential to our core business of electricity, with respect for the environment.»

THE MAIN INNOVATIONS IN THE SUSTAINABILITY PLAN FOR THE PURSUIT OF AN INCLUSIVE TRANSITION INCLUDE THE ESTABLISHMENT OF THE TERNA FOUNDATION… CAN YOU TELL US MORE ABOUT THIS NEW INITIATIVE?

«This initiative was approved by the Board of Directors at the same time as the Industrial Plan. It’s a project that we’re particularly proud of, and is currently being formally set up. If we look at the European Transmission System Operators (TSO), we are one of the companies that have chosen to make the greatest commitments to social responsibility. Specifically, we will concentrate on three areas: education, inequality, and equal opportunities. When we talk about education, we are talking about spreading a culture of energy. It is essential to teach people how to use energy wisely, which is why we plan to carry out initiatives starting from elementary, lower and upper middle schools, with the aim of educating young people about what energy is, its value, and the importance of using it wisely. The second area concerns fighting energy poverty, with the aim of reducing inequalities. We believe that the Foundation is the most suitable tool for planning social responsibility activities and will allow us to coordinate our actions even better, by collaborating with businesses and non-profit organisations already active in the sector, offering our cooperation in the form of human resources, programmes and financial support. Finally, the equal opportunities area refers to the actions we intend to take in order to improve access to the labour market in the energy sector, in light of the difficulties of recruiting engineers and technicians, a shortage which affects not just Italy but all of Europe. We will raise awareness of how we can contribute to improving the environment and the country’s system, encouraging people to enter certain sectors and disciplines; all this, naturally, with a keen eye on gender inequality, which is a central element of the Sustainability Plan.»

8 Terna Salerno Talent Attraction 042 — Terna’s professionals at work in one of the offices belonging to the company that manages the national electricity transmission grid (photo by Terna)

HOW DOES TERNA’S 2024-2028 SUSTAINABILITY PLAN ALIGN WITH THE GLOBAL SUSTAINABLE DEVELEOPMENT GOALS IN PURSUING A FAIR AND SUSTAINABLE ENERGY TRANSITION?

«The United Nations Sustainable Development Goals are the guiding light and the benchmark against which we measure the plans we make. It is interesting to note that the SDGs have been set for the year 2030, as has the first significant step towards decarbonisation set by the European Union in Fit-for-55, which aims to reduce net greenhouse gas emissions by 55% compared to 1990 levels. 2030 will be a crucial year for assessing the progress made towards the SDGs; so, in six years’ time, we’ll be able to take stock of our results.

8 Posidonia 2022 160 Terna — Professional divers transplanting and monitoring meadows of Posidonia Oceanica seagrass (photo by Terna)

The goals that are particularly important to us, as they are closely related to our business and allow us to take action, are number 7 "Affordable and clean energy", number 9 "Industry, innovation and infrastructure" and number 13 "Climate action". After these, though still significant, comes number 17 "Partnerships for the goals", which gives further impetus to the speed and overall quality of our actions.»

«In general, we can confidently state that the Industrial Plan and the Sustainability Plan are aligned with the SDGs, and that they can be taken together as the benchmark for assessing whether we are moving towards a just transition, striking the perfect balance between the environmental, social and governance goals.»

Francesco Salerni Executive vice president for Strategy, Digital and Sustainability at Terna

«Moreover, as already discussed, we aim to make efficient use of natural resources, to reduce CO₂ emissions, and to recycle our waste. In terms of social matters, we are committed to quality education, gender equality, and respect for human rights, which also applies to our international suppliers and projects. Finally, good governance includes taking a stand against corruption and reporting with transparency. All of this is contained in our integrated Report, which combines financial and sustainability reporting. This approach has been around for years, and we were pioneers in preparing the integrated Report even before it became a legal obligation. Starting from this year, not only is the report integrated, but the Sustainability Plan itself has been incorporated into the Industrial Plan. In other words, after integrating our reporting on results, we’ve also integrated the planning stage which is a necessary precursor to those results. Therefore, both "doing" and "reporting" will go hand-in-hand thanks to the inclusion of a sustainable perspective in our strategic planning.»