sustainability - Home - ERG Refinery’s sustainability from both an...
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seventy years of energy how we work growing sustainably competing responsibly sustainability report 2007
Transcript of sustainability - Home - ERG Refinery’s sustainability from both an...
seventy yearsof energy
how we work
growingsustainably
competingresponsibly
sustainabilityreport 2007
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MESSAGETO STAKEHOLDERS page 2
REFERENCESAND METHODOLOGY page 4
1 SEVENTYYEARS OF ENERGY page 61.1 GROUP PROFILE page 71.2 COASTAL REFINING page 101.3 INTEGRATED DOWNSTREAM page 101.4 THERMOELECTRIC POWER GENERATION page 121.5 RENEWABLE ENERGY SOURCES page 12
2 HOWWEWORK page 142.1 CORPORATE GOVERNANCE page 152.2 PRINCIPLES OF RESPONSIBLE BEHAVIOUR page 162.3 SUSTAINABILITY MANAGEMENT page 162.4 STAKEHOLDER DIALOGUE page 182.5 COMMITMENTS AND ACTIONS page 18
3 GROWING SUSTAINABLY page 203.1 STRATEGY AND INVESTMENTS 2008-2011 page 213.2 POWER GENERATION page 21
AND CLIMATE CHANGE3.3 ENERGY EFFICIENCY IN REFINING page 233.4 FUELS CHARACTERISED page 24
BY HIGH ENVIRONMENTAL EFFICIENCY3.5 A DISTRIBUTION NETWORK AT THE SERVICE page 24
OF CUSTOMERS AND THE COMMUNITY
4 COMPETING RESPONSIBLY page 264.1 PEOPLE page 274.2 ENVIRONMENT page 324.3 THE TERRITORY OF SICILY page 384.4 CUSTOMERS page 42
PERFORMANCE DATA page 46AND INDICATORS
GRI/G3 PROFILE DISCLOSURE page 50
SUSTAINABILITYACTIVITIES page 54CARRIED OUT: LETTER FROMURS ITALY
table ofcontents
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ERG Group is celebrating its 70th anniversary.We have grown a great dealover the years, in terms of industrial and economic results, but also and above all interms of corporate culture and the ability to undertake and manage newentrepreneurial challenges.
This has stemmed from the sound strategic choices made in the past: todaywe are a multi-energy group operating in the sector of refining and distribution ofpetroleum products and in electricity generation, with a strong vocation for thedevelopment of renewable sources.
Over the past decade, however, there has also been a change in the generaland market scenario in which our Group operates.
The dynamics of the energy sector are conditioning those of other economicsegments and are significantly impacting prices and household consumption. As aGroup belonging to this sector we have a greater presence through the media atboth national and local level, particularly as regards Sicily where many of our strategicinterests are located. Moreover, not only the reference shareholders, but also thefinancial analysts and institutional investors are always careful to consider and evaluaterisks of a socio-environmental nature in their respective investment decisions.
Lastly, as a Group of national importance we cannot fail to take intoconsideration our Country’s commitment vis-à-vis the sustainable growth objectivesdefined within the framework of European Union policy, which aim to guaranteecompetitive and “clean” energy within a context characterised by climatic changes,an increase in global demand and the need to be sure of future supplies.
All of this gives rise to new and greater expectations of engagement andresponsibility on our part: to recognise and manage these expectations will become anessential factor for ERG to continue its growth and create sustainable value over time.
This is the path we have taken, and which we shall be portraying each yearstarting with this first Sustainability Report.
Our mission is now to combine the creation of economic and financialshareholder value, which continues to be our primary objective, with the pursuit ofsocial and environmental value in everything we do.
In order to achieve this, during the next four years we shall be committinginvestments of over 2 billion Euro, more than 60% of which will concern theelectricity sector, where the greatest effort will be made with regard to productionfrom renewable sources.We shall be giving importance to operational excellence,the skills and value of our human capital, innovation and our target of integrationwith the local community.
Our daily actions will continue to be guided by the principles and valuesexpressed in the Code of Ethics, which have always been fundamental to our role asan industrial company.
Edoardo Garrone Alessandro GarroneChairman Chief Executive Officer
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message tostakeholders
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The document’s structure, the issues dealtwith and the indicators used are in keepingwith those suggested by internationallyrecognised standards;more particularly,wehave adopted the 2006 revision of the GlobalReporting Initiative guidelines (GRI/G3).Thelevel of application of the GRI/G3 guide-lines has been internally assessed as “C” (asregards the Profile Disclosure level, referenceis made to the specific section).
The data shown, except where otherwisestated, refer to all companies consolidatedin the Group Financial Statements with ref-erence to the 2007 accounting period.To al-low an evaluation of the performance trend,
time series data and indicators for at leastthree years are shown.
A specific symbol identifies the targetsassociated with areas of commitment
to sustainability.
Regarding the Health, Safety and Environ-ment (HSE) data, the methodology adoptedcombines appraisal methods and identifica-tion and quantification criteria set by vari-ous organisations recognised at domesticand international level such as Eurostat, theEuropean Federation of Accountants (FEE),the European Petroleum Companies’ Or-ganisation for HSE matters (CONCAWE),
the American Environmental ProtectionAgency (EPA), the Italian Petroleum Indus-try Association (Unione Petrolifera).
The principal atmospheric emissions aredetermined through continuous measuringat the emission points and,where necessary,by estimates based on emission coefficientsthat take into account both the combustionsystems and the quality of the fuels used. Inparticular, for the purpose of reporting CO2emissions, reference has been made to theItalian and European guidelines which setforth specific procedures for determining thequantity and quality of fuels.HSE economic information is broken down
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between investment and operating expend-itures (current expenditures). It should benoted that, for recording purposes, expend-itures need to be reclassified so that theycan be shown “by use” and not “by origin”,as required for general company accountingpurposes.
The main HSE performance indicators areconstructed bearing in mind the specificnature of the various industrial sectors. Inparticular:• for Coastal Refining, reference has been
made to the quantity“processed”,consid-ered to be the sum of crude oil, semi-fin-ished products introduced and additives
consumed during the reference period;• for Thermoelectric Power Generation,
reference has been made to the net en-ergy output expressed in MWheq; theheat produced has been transformed toelectricity taking account of the fact thatnot all of the thermal energy can be fullyexploited as useful work.From the energygenerated a deduction is made for thecontribution on input, therefore consid-ering it as lost output.
For the standardisation of energy compo-nents, we have used the tonne of oil equiv-alent (toe) conventional unit of energy,equivalent to 10 million kcal.
references andmethodology
This is a CarbonZero® Sustainability Re-port.ERG, through co2balance Italia®, hasneutralised the CO2 produced as aresult of printing the 2007 Report byinvesting in co2balance “Solar Ovens”project, which provides for the re-placement of wood waste fired ovens,in Kenya, with new solar poweredequipment.
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seventy yearsof energy
1938Edoardo Garrone
founded ERG in Genoa.
1947Production began at the
refinery in S. Quirico(Genoa).
1958British Petroleum became
a shareholder of ERG.
ERG’S HISTORY
The ERG Group is divided into four sub-holding companies which operate in thedifferent business sectors:- ERG Raffinerie Mediterranee (coastal re-
fining);- ERG Petroli (integrated downstream);- ERG Power & Gas (thermoelectric power
generation and natural gas procurement,marketing and logistics);
- Enertad (power generation from renew-able sources).
1.1 GROUP PROFILE
Having been founded in 1938 as a familyowned and run business, ERG has passedthrough various growth and consolidationphases to become, today, a multi-energyGroup.ERG operates in the sector of refining anddistribution of petroleum products, and iscommitted to developing and consolidatinga significant presence in the production andmarketing of electricity, the procurement ofnatural gas and power generation from re-newable sources.The Group’s assets are located above all inItaly, with a heavy industrial concentrationin Sicily.
Since being admitted to listing on the MilanStock Exchange in 1997, the ERG Group hasincreased its market capitalisation from 500million to approximately 2 billion Euro.Today it accounts for around 19% of the to-tal national refining capacity and is the se-cond largest sector operator in Italy.Its sales on the domestic market cover 9%of the national consumption of petroleumproducts.Its electricity sales represent approximately2% of the Italian domestic market.
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1963Edoardo Garrone died.
Riccardo Garronebecame Chairman
of ERG.
1967ERG completed
the first Italian oillogistics structureat Arquata Scrivia.
1971ERG joined the project
to build the ISABrefinery in Priolo
(Syracuse).
1975Production commenced
at the ISAB Refinery.
1984ERG purchased
780 service stationsfrom ELF Italiana.
2007 FIGURES
REVENUES FROMORDINARY
OPERATIONS
10,166Million Euro
INVESTMENTS
380Million Euro
EBITDA ATREPLACEMENT
COST
361Million Euro
EMPLOYEESAS AT 31/12
2,825
NET GROUPINCOME AT
REPLACEMENT COST
39Million Euro
IntegratedDownstream
ERG Gestión Ibérica S.L.
ERGPetroli S.p.A.
Gestioni Europa S.p.A.
Gestioni Europa Due S.p.A.
ERG Petróleos S.A.
ERG RaffinerieMediterranee S.p.A.
CoastalRefining
ThermoeletricPower Generation
and RenewableEnergy Sources
ERGPower & Gas S.p.A.
ERG Nuove Centrali S.p.A.
ISAB Energy S.r.l.
ISAB Energy Services S.r.l.
Enertad S.p.A.
Eolo S.r.l.
Parc Eolien de Hetomesnil S.a.s.
EOS Windenergy S.r.l.
EOS 1 Troia S.r.l.
EOS 2 Nurra S.r.l.
EOS 3 Troia S.r.l.
EOS 4 Faeto S.r.l.
EOS 5 Tursi Colobraro S.r.l.
EOS 6 Joppolo S.r.l.
DSI Servizi Industriali S.r.l.
SODAI Italia S.p.A.
Energie Pulite 2000 S.r.l.
EnerFrance S.a.s.
Parc Eolien du Carreau S.a.s.
Parc Eolien de la Bruyère S.a.s.
Parc Eolien les Mardeaux S.a.s.
Parc Eolien de Lihus S.a.s.
EOS 7 Ginestra S.r.l.
WWEH 2 S.r.l.
ERG S.p.A.
51%
100%
100%
95%
99%
99%1%
1%
100% 68 %100%
100%
51%
51% 100%
100%
100%
100%
100%
100%
100%
100%
100%
51%
100%
100%
100%
100%
100%
100%
100%
100%
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1985ERG acquiredChevron Italia
(1,700 service stations).ERG’s market share
rose to 5%.
1988ERG took control
of ISAB.Activities ceased at the
Genoa refinery.
1993ERG formed ISAB
Energy together withEdison Mission Energy,to build Europe’s first
oil residuegasification-cogeneration
plant.
1997ERG flotation on the
Stock Exchange.
1999ERG’s fuel market share
rose to 7%.ERG Petroleos was
created, to enter intothe Spanish market.
ALLOCATIONOF NET VALUE ADDED
TO STAFF
215Million Euro
TO THE PUBLICADMINISTRATION
146Million Euro
TO THE PROVIDERSOF LOAN CAPITAL
95Million Euro
TO SHAREHOLDERS
96Million Euro
TO THE COMPANY
96Million Euro
-5%39%
40%
COASTAL REFININGINTEGRATED DOWNSTREAMPOWER GENERATIONCORPORATE
26%
TO THECOMMUNITY
1,3*
Million Euro
CONTRIBUTION TO EBITDAAT REPLACEMENT COST
(Average 2005-2007)
* This is made up of voluntary disbursements and donations and costs relatingto sports, social and cultural events. It does not include sponsorships for sportsteams taking part in amateur or professional championships.
49%
23%
COASTAL REFININGINTEGRATED DOWNSTREAMPOWER GENERATION
28%
CONTRIBUTION TO NETVALUE ADDED(Average 2005-2007)
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1.2 COASTAL REFINING
The Coastal Refining business is carried on bythe company ERG Raffinerie Mediterranee,owner of two production sites – ISABImpianti Sud and ISAB Impianti Nord – lo-cated in Priolo Gargallo (Syracuse, Sicily),which together form the largest Italian pro-duction structure and one of the more par-ticularly complex “Supersites”.
Activities include the procurement and pro-cessing of crude oil: the Refinery is capableof processing medium-heavy crude oils, ob-taining high value added products, mainlygasoline and diesel.
The month of July 2007 saw the completionof the major investment plan for over 300million Euro, launched in 2003, to fully in-tegrate the production facilities.The refin-ing capacity was passed from 380 thousandto 320 thousand barrels per day, enhancingthe Refinery’s sustainability from both aneconomic standpoint, thanks to the higherconversion capacity, and from an environ-mental standpoint, by reducing the atmos-pheric emissions and improving the qualityof gasoline and diesel.
ERG Raffinerie Mediterranee is mostly ori-ented towards the international market (itis the leading exporter of petroleum prod-ucts from Italy) but is also closely inte-grated with electrical and chemical activitieswithin the Syracuse industrial complex.
1.3 INTEGRATED DOWNSTREAM
ERG Petroli operates either directly orthrough its subsidiaries in all downstreampetroleum phases:procurement of crude oil
U
2000ISAB Energy began
producing and marketingelectricity.
2002ERG Raffinerie Mediterraneewas created, a company whichintegrated the ISAB Refinery
with the former ENI refinery inPriolo.The ERG Group
reorganised its structure intothree subholding companies:
ERG Petroli (integrateddownstream), ERG Raffinerie
Mediterranee (coastal refining)and ERG Power & Gas
(production and marketing ofelectricity and natural gas).
2003After 40 years Riccardo
Garrone retired as Chairmanof ERG. Edoardo Garrone
became the new Chairman andAlessandro Garrone became
the new CEO.
2004The Edoardo Garrone
Foundation was created, as anatural development of the
involvement on the part of theERG Group and the Garroneand Mondini families in the
social and cultural field.
2005 200720062004
19,607
0
10,000
20,000
30,000
8,000
16,000
24,000
02005 200720062004
9,422
9,967
ITALYABROAD
REFINERY PROCESSING(ktonnes)
TOTAL PETROLEUMPRODUCT SALES (ktonnes)
10
1
9414
287218
2
13867
15025
69
48205
12415
11160
45
265
21
2005 200720062004
1,000
1,600
Number
of
Outlets
Average
Throughput
(m3per
outlet
at
the
end
of
perio
700
1,200
1,700
1,274
TOT. OUTLETS
AVERAGE RETAIL THROUGHPUT
400
2,200 2,200
1,959
and finished products, refining, logistics,mar-keting of fuels and combustibles, productionand sale of lubricants.
The supply and logistics for commercial op-erations, performed all over the country,are guaranteed by ERG Petroli through a lo-gistics system which, in terms of dimension,is Italy’s second largest. Procurement takesplace via the products of the two investeerefineries, located in two of the areas fea-turing the greatest intensity of consump-tion in Italy (Sarpom Refinery inTrecate andthe Rome Refinery), and by purchasing onthe petroleum product market.
In Italy, there are around 2,000 ERG servicestations, including 53 directly managed,which, in addition to car accessories andservices, offer a wide and diversified rangeof products. Over 13% of the sales outletsare located in various parts of Sicily.ERG Petroli also sells petroleum productson the Wholesale market, principally via anetwork of retailers.
Activities abroad are concentrated in Spain,where subsidiary ERG Petroleos operateson the Retail (112 sales outlets) andWhole-sale markets, and in Switzerland, whereERG Petroli Suisse manages 16 outlets in theCanton of Ticino.
m
2005ERG’s multi-energy strategy
and its commitment torenewable energy led to theestablishment of Ionio Gas
(50% ERG Power & Gas and50% Shell Energy Italia) for theconstruction and management
of a Liquefied Natural Gasregasification terminal at the
ISAB Impianti Nord refinery inSyracuse.
2005ERG became part of theMIDEX Index within theBlue-Chip segment of the
Italian Stock Exchange.The move from the previous
STAR segment to theBlue-Chip segment took place
following the significantincrease in market
capitalisation of ERG’s shares.
2006ERG acquired a 51.33% equity
interest in Enertad, a listedcompany operating in the
sector of electricity generationfrom renewable sources.
In 2007 the shareholding wasincreased to 68.38%.
2007The restyling of ERG’s service
stations began.The Group commenced the
production of electricity fromwind sources located abroad.
OPERATIONAL DATADOMESTIC RETAIL
ERG ITALIAN RETAIL DISTRIBUTIONNETWORK AS AT 31 DECEMBER 2007
(No. of Sales Outlets per Region)
02005 200720062004
6.9
2
4
8
6
DOMESTIC RETAILMARKET SHARE
(%)
11
0
4,000
8,000
2,000
6,000
4,819
2005 200720062004
0
4,000
8,000
2005 200720062004
2,000
5,6046,000
sources. During the course of 2007, theequity interest was increased to 68.38%.The wind power generation business com-prises sixteen companies, including twosubholding companies (Eos WindenergyS.r.l. and EnerFrance),eight operational com-panies and six companies at developmentstage.The total installed capacity amountsto more than 132 MW (77 MW in Italyand 55 MW in France), plus over 100 MWin additional authorised capacity.ERG is also active in the purification treat-ment of industrial waste water originatingfrom Trenitalia S.p.A. facilities and in the
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1.4THERMOELECTRIC POWERGENERATION
ERG Power & Gas operates in the electricityand gas markets, pursuing development op-portunities for all the Group’s electrical as-sets. Electric power generation is carriedout via subsidiaries ERG Nuove Centrali(100% ERG Power & Gas) and ISAB Energy(51% ERG Power & Gas).
ERG Nuove Centrali owns production fa-cilities located at the ISAB Refinery inPriolo. The portion of utilities producedthat is not used by the Refinery is sold tothird-party buyers at the Priolo/Melilli in-dustrial site, to the National Grid (Gestoredei Servizi Elettrici - GSE) and to “wholesalebuyers”.
ISAB Energy produces electricity at its com-bined cycle IGCC plant in Priolo,which hasan installed capacity of 528 MW and isequipped with a low environmental impacttechnology that utilises as fuel synthesisgas obtained from the processing of residuesoriginating from the adjacent Impianti SudRefinery.The electricity generated is sold en-tirely to the GSE at the CIP 6 tariff.The purpose of Ionio Gas (owned 50% byERG Power & Gas in joint venture withShell Energy Italia) is to design,construct and
operate a terminal to receive and regasifyLiquified Natural Gas,which will be locatedat the Priolo industrial site. Recently theMinisterial Commission for the Environ-mental Impact Assessment has given theacceptation to the project
1.5 RENEWABLE ENERGYSOURCES
In October 2006, ERG acquired a majoritystake in Enertad, a company listed on theItalian Stock Exchange which operates in theproduction of electricity from renewable
TOTAL ELECTRICITYOUTPUT(GWh)
ELECTRICITYSALES(GWh)
150
100
200
02005 20072006
186
50
treatment of liquid and solid waste.In addition to the strategic acquisition ofEnertad, ERG Power & Gas holds an equityinterest in ERG Eolica (created in February2008 from the hived off business unit as-signed to ERG following the demerger ofERG CESA Eolica), which pursues the de-velopment and management of wind farmsin Italy,with 1.6 MW in operation, a further37.5 MW under construction and 110 MWalready authorised. ERG Power & Gas alsoholds a controlling interest in the companiesISEA and Ecopower, both active in the fieldof hydroelectric power generation with an
installed power of over 4 MW.The growing importance of this sectorwithin ERG’s development strategy is lead-ing to the definition of a new corporate
structure providing for the completespin-off and subsequent integration intoEnertad of all ERG Power & Gas assets inthe area of renewable energy sources.
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M&AAWARD 2007The Enertad acquisition was assigned the M&A Award 2007 for the “acquisitionsin Italy by Italians” category.The M&A Award, organised by KPMG in collabora-tion with Fineurop Soditic, with the patronage of AIFI (The ItalianVenture Capi-tal and Private Equity Association) and Bocconi University, now in its third edi-tion, awards a recognition to corporate mergers and acquisitions distinguishedfor their importance in promoting the country’s competitiveness.
ELECTRICITY OUTPUT FROMRENEWABLE SOURCES (GWh)
The figures also concern companies not included withinthe consolidation area of ERG’s financial statements.
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howwe work
GROWINGSUSTAINABLY
To grow sustainably ERG mustintegrate its economic growth andbusiness objectives with the creationof value for the environment and thecommunity, in order to enhance thevalue generated and transform it intoalso a competitive advantage.
COMPETINGRESPONSIBLY
To compete responsibly ERG mustmanage its activities in a transparentand responsible manner, and take intoconsideration, when developing itsindustrial projects, also the requestsemerging from its dialogue with allstakeholders.
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2.1 CORPORATE GOVERNANCE
The ERG Group works to create first andforemost economic and financial value forits shareholders. In this respect, the respon-sibility for defining the business strategiesand objectives falls to the Board of Directors(BofD) of the Parent Company ERG S.p.A.,while the implementation of same is remit-ted to the operating companies,each of whichacts independently within its own area ofcompetence. The Parent Company’s BofDcomprises 13 members,of which 3 are non-executive and 4 are independent.During thecourse of 2007 the BofD met 12 times.
The Parent Company’s CEO is empoweredto legally represent the company and holdsall powers of ordinary and extraordinary ad-ministration, while the Chairman is dele-gated to perform tasks of supervision, di-
rection and control over the staff functionsperformed by the CorporateAffairs unit, in-sofar as concerns Corporate Affairs andInternalAuditing, and by the Institutional andInternational Relations Division.
In addition to the definition of businessstrategies, the Parent Company performsmanagement and coordination activities vis-à-vis the operating companies on various as-pects, the most significant of which include:• organisational aspects and personnel poli-
cies;• strategic finance and group treasury man-
agement;• management of communications policies
and institutional relations;• management of environmental, health and
safety policies;
Within a socio-economic and market con-text in continuous evolution, ERG dealswith the new industrial and managementchallenges by drawing on the val-ues and principles inher-ent in its culture.
This section aims to describe ERG’s way ofdoing business in order to pursue its mis-sion of creating sustainable value over time.
COMPETINGRESPONSIBLY
GROWINGSUSTAINABLY
CREATINGVALUE OVER TIME
Valorisation of human capital
Development of local communities
Customer Satisfaction
Energy Efficiency
HSE management systems
Greenhouse gas strategy
Security of operations
Stakeholder engagement
Social
Environmental
Economic and Financial
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Chairman
Corporate Affairs Unit(Corporate Affairs and Audit)
Institutional and InternationalRelations Division
Chief Executive Officer
Corporate Affairs Unit(Legal Affairs, Special Projects
and Corporate Security)
Planning andDevelopment
Division
Administration,Finance and
Control Division
Human Resourcesand Systems
Division
• definition of risk management policies;• management of “non oil” purchases.
A major role in the development of strate-gic guidelines is performed by the StrategicCommittee, which has consultative andpropositive functions vis-à-vis ERG’s ChiefExecutive Officer and the Boards of Direc-tors of the holding company and the oper-ating companies.
2.2 PRINCIPLES OF RESPONSIBLEBEHAVIOUR
The company’s management operates inaccordance with the Code of Ethics,whichsets out first and foremost the referenceprinciples and values defined with a view toensuring the correct and transparent per-formance of business activities. It appliesto all employees, as well as to the other par-ties acting on behalf of the company.
The Code of Ethics has recently been re-vised in order to give more emphasis to thecommitment to pursue the company’s sus-tainable and responsible growth from aneconomic, social and environmental per-spective. The new version, approved byERG’s BofD at the meeting held on 10March 2008, is available on the Group’swebsite (www.erg.it).The company promotes dissemination ofthe Code of Ethics also by way of specifictraining and awareness initiatives with regardto the issues discussed and verifies its ef-fective application, investigating any mat-ters reported to the Supervisory Commit-tee (no reports were made in 2007).
ERG has accepted the Corporate Gov-ernance Code for Listed Companies,whichwas created in 1999, on the initiative ofBorsa Italiana S.p.A.’s Committee for theCorporate Governance of listed compa-nies, and revised in 2006.The code particularly provides recommen-dations on how to delegate powers in or-der to avoid potential conflicts of interestand on the organisation of the internal con-trol system. In ERG, this system is spreadover various corporate functions, whoseactivity is coordinated by the Internal Con-trol Committee.During the course of 2008,the latter will carry out a revision of the sys-tem’s overall policy guidelines with a view
to enhancing its efficiency.The process of bringing Corporate Govern-ance into line with the recommendationscontained in the latest version of the Cor-porate Governance Code was completedduring 2007.
Furthermore, all the Group’s main compa-nies have completed the process of adopt-ing the organisation model referred to inLegislative Decree 231/2001 for the pre-vention of corporate offences, so-called“market abuse” offences and offencesagainst the PublicAdministration and againstindividuals.The model is currently being revised toalso cover offences connected with viola-tions of the accident prevention and healthand safety in the workplace regulations.
2.3 SUSTAINABILITYMANAGEMENT
ERG has devised a specific managementsystem to oversee integration between theobjective to create economic and financialvalue and the aspects of environmental andsocial responsibility.
In defining the sustainability strategy variousinputs are in fact taken into account, themost significant of which,besides the strate-gic business objectives, are the values con-tained in the Code of Ethics, the results ofstakeholder consultation activities, the rec-ommendations received from the Risk Man-agement function, international best prac-tices for business responsibility.The processof defining the sustainability strategy is con-cluded with the identification of specificenvironmental and social responsibility com-mitments and objectives.
From an operational standpoint, integra-tion takes place within the business planningand control cycle.The system’s organisation model, alignedto the Corporate Governance model, pro-vides for the following corporate bodiesand structures,which operate according todifferent roles and levels of responsibility:• ERG S.p.A.’s Board of Directors;• the Sustainability Committee;• the ERG S.p.A. Sustainability and Health
Safety Environment and Quality (HSEQ)Governance Unit;
• the various corporate functions of the
ERG S.p.A. Organisation Chart
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Sustainability Committee
ERG Board of Directors
Supervisionand Governance
Implementation
Holding company / Operating company
Definitionof strategy
Planningand control
Reporting andcommunication
Sustainability and HSEQ Governance Unit ReportsCode of Ethics
ERG GroupCode of Ethics
holding company and the operating com-panies.
ERG’s BofD has the role of business sus-tainability sponsor, its main responsibilitybeing to provide guidelines and approvethe commitments and principal means of su-pervision and governance.
The Sustainability Committee,on the otherhand, is the system’s central body and com-prises the company’s top management.TheCommittee, supported by the SustainabilityFunction, oversees the dissemination ofknowledge regarding issues of relevance
for business sustainability, promotes andverifies the effectiveness of actions aimed atcontinuous improvement also then acting associo-environmental risk mitigator. It is alsoresponsible for identifying areas for socio-environmental commitment and encourag-ing the definition of objectives to be inte-grated into the plans of the operatingcompanies.The Parent Company and the operatingcompanies are required to integrate thecommitments within their respective plan-ning cycles by:• rejecting specific objectives;
• defining or confirming performance indi-cators (KPI) to be used as a basis for as-sessing the level of achievement of ob-jectives and their integration within thereporting cycle;
• identifying projects already underway oralready scheduled and any specific initia-tives planned that might affect the objec-tives, to which adequate financial and hu-man resources must be allocated.
The system, which is currently being per-fected, will become fully operational duringthe course of 2008.
RISK MANAGEMENTERG considers it essential, within the framework of its sustainability model, to identify and manage all types of risk associated withthe Group’s activities.The phases and principles regulating these processes,within the scope of the guidelines laid down in the Grouppolicy, provide for a dedicated function within the Administration, Finance and Control Division.The Risk Management functionmeasures and checks the level of exposure on a continuous basis, its objective being to safeguard the company’s assets and thecontinuity of the businesses.The activities to minimise significant risks concern above all the financial, credit, liquidity and operational risks.The instruments used for the management of financial risks, such as Options, Forward transactions and Swaps, are utilised mainlyfor hedging purposes, without assuming any speculative positions, in keeping with the Group’s industrial business philosophy.The year 2007 saw the completion of activities to update the risk map launched in 2006.This was carried out also in view ofERG’s evolution towards a multi-energy portfolio.The objective is to create an integrated risk management system, based on anEnterprise Risk Management approach. Furthermore, a specific and adequate Governance system has been developed for the im-plementation, among other things, of an organisation model designed to facilitate the exchange of information between the func-tion at the Parent Company and the operating companies. Plans have also been made for the implementation of computer toolsto support the entire risk management process.
Sustainability management process
• with the local community in Syracuse, inall its various forms, to understand the ex-pectations and open questions of sameand to more effectively and transparentlydirect the communication activities andthe interventions to support the eco-nomic, social and cultural development;
• with the service station operators andconsumers, in order to provide materialinput to define the ERG network’s newcustomer-focused commercial strategy
2.4 STAKEHOLDERDIALOGUE
The dialogue with the groups and institu-tions whose interests are affected by ERG’sbusinesses is one of the main activities in themanagement of sustainability.The operatingprocedures for stakeholder engagementand consultation are based on the funda-mental values expressed in the Code ofEthics:moral integrity and personal honesty,transparency and correctness.
During the past two years, in addition to theconsolidated activities of internal and ex-ternal communication and the periodicmeetings held by the company’s manage-ment with the financial community, majorengagement activities have been launchedwith a series of significant stakeholders:• with staff, through a climate survey on a
sample of over 400 employees from all theGroup’s companies;
and evaluate the first feedback on theinitiatives connected with the new valueproposal.
The requests emerging from the stake-holder dialogue are collected and assessedin order to define and update the specificsocial and environmental responsibility com-mitments and objectives.
18
2.5 COMMITMENTS AND ACTIONS
Shareholders andFinancial Institutions
Customers
Employees
Suppliers
Political andInstitutional System
Community
DIALOGUETOPICS
Construction of new industrialinfrastructures.Transparency and completenessof information.
Economic development and employment.Effectiveness and recognition of socialcommitment implemented in the area.
Safety of operations and Healthprotection.
Development and valorisation of humancapital.
Climate change and energy efficiency.
Pollution prevention.
19
Relationshipanalysis
Classificationof context
Internalverification
Planning andengagement
Strategicalignment
CSR Objectives/InitiativesMission
COMMITMENTS
To develop and consolidate a structuredsystem of relationships andcommunication with stakeholders.
To participate in local developmentthrough intervention in the economic,social and environmental field.
To guarantee people’s health and safetyin the workplace.
To promote and achieve the managerialdevelopment of human capital.
To contribute towards reducinggreenhouse gas emissions.
To improve prevention activities andenvironmental protection.
ACTIONS
• Implementation of the sustainability management system at the holding company andthe operating companies.
• Development of a communication plan focused on business sustainability.• Execution of specific engagement activities correlated to the industrial development
projects.
• Rationalisation of interventions according to a strategy linked to the results of localconsultation.
• Implementation and certification of Health and Safety Management Systems at allindustrial sites.
• Completion of the “Prevention Project” and execution of operational enhancementactivities.
• Extension of the voluntary Health Prevention Project.
• Implementation of the “Managerial Development” project.• Development of a specific Sustainability training and awareness programme and its
integration into the institutional training cycles.
• Development of power generation from renewable sources.• Industrial process energy efficiency improvement.
• Implementation and certification of Environmental Management Systemsat all industrial sites.
• Intensification of activities for the reclamation of surface soil and subsoil.• Launch of specific initiatives to increase the level of pollution prevention.
Stakeholder engagement process
20
growingsustainablyTo grow sustainably ERG must integrate its economic growthand business objectives with the creation of value for theenvironment and the community, in order to enhance the valuegenerated and transform it into also a competitive advantage.
2008-2011INVESTMENTS
2Billion Euro
2008-2011RENEWABLE
SOURCES
2.7TWh 2008-2011
AVOIDED CO2EMISSIONS
1.2Million tonnes
2006-2011THERMOELECTRIC
PARK EFFICIENCY
+20%
3.1 STRATEGYANDINVESTMENTS 2008-2011
ERG plans to operate in the electricity mar-ket through the management and repow-ering of existing assets and by expanding itsenergy output from renewable sources par-ticularly in the wind sector.
Improvement of the electricity business en-compasses the aim of entering the Italian gasmarket in the role of stable long-term op-erator, giving maximum priority to the de-sign and construction of the terminal for Liq-uefied Natural Gas regasification inside theSyracuse industrial complex.
In the refining sector, efforts will be fo-cused on improving the reliability of thenew plant and processing configuration toproduce increasingly greater quantities of fu-els with low environmental impact.
The main objective of the Integrated Down-stream sector concerns the process of
structural enhancement of its Network toimprove its position vis-à-vis the marketleaders.
Overall the investments scheduled duringthe period 2008-2011 will amount to over2 billion Euro.
21
3.2 POWER GENERATIONAND CLIMATE CHANGE
The development of renewable energysources is one of the main objectives ofERG’s sustainable growth policy and formspart of the Group’s contribution to theglobal strategy for reducing and controllingthe effects generated by Climate Change. In-vestments in this area are particularly con-centrated in the wind sector where theGroup is targeting a market share in excessof 10% (around 700 MW installed) by 2011.
Total electric power output from re-newable sources expected during the
period 2008-2011, approximately 2.7TWh,will help to reduce greenhouse gas emis-sions by 1.2 million tonnes.
A further contribution towards reducingspecific emissions in the thermoelectricsector is synergically made both by the sub-stantial increase in the use of natural gas,which makes it possible to achieve high lev-els of environmental efficiency, and the util-isation of plant engineering techniques, such
as cogeneration, capable of ensuring greaterenergy savings.The operational start-up of the new natu-ral gas fired Turbogas Sud plant at the be-ginning of 2007 (502 GWh generated dur-ing the year) and the 480 MW cogenerationcombined cycle power plant at the Northsite in Priolo, scheduled to come on streamin 2009, are two of the most importantprojects for the implementation of thesestrategic lines.
ERG’s goal is a 20% improvement inthe energy performance of the ther-
moelectric power generation facilities by2011 (baseline year 2006).
44%
25%
18%
13%
COASTAL REFININGINTEGRATED DOWNSTREAMTHERMOELECTRIC POWER GENERATIONRENEWABLE ENERGY SOURCES
267
505
362
880
2008-2011 INVESTMENTS*BY BUSINESS DIVISION
(Million Euro)
3
2005 20072006
9.0
0
6
12
9
NATURAL GAS CONSUMPTIONAS PROPORTION OF TOTALPRIMARY SOURCES
(%)
* ERG’s equity participations in the projects for theconstruction of the Ionio Gas regasification terminal anddevelopment of the storage facility at Rivara are notincluded.
Via the construction of the Liquefied Nat-ural Gas regasification terminal, which willhave a capacity of 8 billion cubic metres(operational from 2013), and participationin the development of a storage facility atRivara in the province of Modena (15%ERG), the Group plans to enter the naturalgas logistics and marketing segment, therebyhelping to increase the supply throughoutItaly against the expected growth in con-sumption in the electric power generationsector. More specifically, an annual averagegrowth rate of 2.5% is anticipated, to reachan overall domestic consumption of around106 billion cubic metres in 2015. Efficiencyin the supply of natural gas facilitates thechange in the domestic energy mix towardsa reduction in the use of fossil fuels.
With the investments anticipated for thethermoelectric sector,ERG aims to increaseits annual energy output to over 11 TWhfrom 2011.
The interventions planned will generallyhelp to improve the current level of specificCO2 emissions, especially as regards thesector of thermoelectric power genera-tion.In 2007, total Group emissions for the plantscoming within the scope of application ofthe“EmissionsTrading” Directive amountedto around 7 million tonnes.
22
THE EMISSIONS TRADINGDIRECTIVE
On 13 October 2003 the European Commission published Directive 2003/87/EC con-cerning the emissions market, better known as the Emission Trading System (EU ETS),which defines a system for trading greenhouse gas emissions quotas for the countriesof the European Union.This system allows one industrialised country to sell to anothersurplus rights arising from a reduction in its emissions beyond the threshold to whichit is committed based on the Kyoto protocol.In order to comply with the provisions set forth by the Directive, the operators of plantsbelonging to the above-mentioned sectors and authorised by the Ministry for the En-vironment, must:- monitor their annual CO2 emissions starting from 1 January 2005.- transmit to the competent Authority, on or before 31 March of each year, a report,
certified by an independent third-party Entity, relating to the emissions during the pre-vious year.
- surrender, by 30April of the following year, a number of CO2 allowances equal to ac-tual emissions, trading on the market the differences, if any,with respect to the quan-tities authorised.
The Companies therefore have the possibility to sell surplus quotas or purchase addi-tional quotas required.In case of failure to surrender the quotas, severe pecuniary penalties are envisaged (equalto 40 Euro per tonne of CO2 equivalent during the period 2005-2007 and 100 Euroduring subsequent periods).
2011200976%
100%
84%
92%
2010200820072006
TARGET
THERMOELECTRICPARK EFFICIENCY (Toe/MWheq)
(Baseline 2006 = 100%)
2005 200720062004
7,031
4,000
6,000
8,000
CO2 EMISSIONS(ktonnes)
2005 200720062004
96
60
85
110
135
CO2 INDEX - REFINING(tonnes/processed in thousands of tonnes)
23
EMISSION TRADINGMANAGEMENT SYSTEM
ERG has developed a specific greenhouse gas management system, defining the re-sponsibilities for fulfilment of obligations towards the Authorities, the proceduresfor valorisation of CO2 in investment programming and planning activities, optimi-sation of emissions, minimisation of risks via transactions for the sale and purchaseof emissions quotas and/or utilisation of financial instruments. Management of thereduction of CO2 emissions, as set forth by the National Allocation Plan, is carriedout through continuous evaluation as regards both environmental protection andmaintaining the competitiveness of industrial activities.In the management process, the main activities concern the monitoring and reportingof emissions (system developed and certified by accredited third-party Entities asrequired by the European guidelines) and the trading of rights (quotas).Also in view of the further reduction in CO2 emissions rights, as envisaged by thenew National Allocation Plan for the period 2008-2012, ERG has decided to par-ticipate, along with various other leading Italian companies, in the Italian Carbon Fund,a fund set up by the Ministry for the Environment and Territorial and Marine Pro-tection in agreement with the World Bank.The Fund’s main purpose is to acquire credits on the emissions rights market, financingprojects to reduce the greenhouse gas emissions in developing countries, theso-called Clean Development Mechanism (CDM).The Italian Carbon Fund projectportfolio is diversified insofar as concerns both the type of technologies and the ge-ographical regions,which include China, the MediterraneanArea, Latin and CentralAmerica, the Balkans and the Middle East.The first annual general meeting appointed the Participants’ Committee, the bodywhich oversees the Fund’s activities,made up of 5 members, including one appointedby ERG.
CO2 EMISSIONS REPORTINGERG has engaged DNV Italia, a company accredited by the competentAuthority, to cer-tify the carbon dioxide emissions for the plants coming within the scope of applicationof Directive 2003/87/EC (Emissions Trading).The inspections carried out at the ERG plants concerned the system used to monitorand collect data and the existence or otherwise of non-conformities in the annual Re-port to the Authorities, as required for such data.On completion of its activities, DNV Italia, guaranteeing impartiality and independenceof judgement, expressed for each industrial site a positive opinion with regard to thereporting system, certifying the consistency, conformity with the requirements of theDirective and statistical accuracy of same.
3.3 ENERGY EFFICIENCY INREFINING
The investment strategy as regards thecoastal refining sector envisages, for theperiod 2008-2011, a further increase inconversion capacity, with a view to bothimproving profitability and enhancing op-erating efficiency overall, and energy effi-ciency in particular.
The goal of the various Energy Sav-ing activities already completed and
those planned during the next few years isto achieve at least a 5% improvement in theEnergy Intensity Index by 2011 (baselineyear 2006).
The reduction in CO2 generated as a resultof the increase in efficiency will offset thehigher emissions expected following theincrease in conversion capacity and simul-taneous tightening of certain facilities, for ex-ample the Catalytic Cracking Unit.
2007 201120092006 2010200894%
96%
98%
100%
TARGET
ENERGY INTENSITY INDEX(Baseline 2006 = 100%)
0.60
0.80
2005 200720062004
0.84
1.00
CO2 INDEX - THERMOELECTRIC(Tonnes/MWheq)
3.4 FUELS CHARACTERISEDBY HIGH ENVIRONMENTALEFFICIENCY
In July 2007 the plant for hydrotreatment ofcatalytic cracking feedstock came on stream.Together with the integration of the two re-fineries and operation of a new desul-phurisation plant, this made it possible forERG to increase its conversion and pro-duction of sulphur-free gasoline and diesel(maximum 10 mg/kg).A further step towards improving the pro-duction capacity for products with lower en-vironmental impact is expected to comefrom the revamping of the existing diesel hy-drodesulphurisation plant,which will be up-graded with special reference to the reac-tion section and the hydrogen transmittingdevices. ERG plans to invest over 50 millionEuro in this project.
The investment programme also providesfor specific interventions to be carried outwith regard to the production of biofuels.ERG in fact plans to remodel the existingMTBE (methyl-ter-butyl ether) productionfacility in order to produce bio-ETBE (ethyl-ter-butyl ether) from ethanol of agricul-tural origin.The possible installation of a plant for theproduction of biodiesel is also being evalu-ated. A solution is in fact under considera-tion which provides for the construction andoperation of the facilities by an outsidecompany on sites owned by ERG,closely in-tegrated with the production of the ISABRefinery.
In the distribution area, ERG continues topromote the use of fuels capable of reduc-ing air pollution.The year 2007 saw a con-solidation of the distribution network formethane, sulphur-free fuels (over 10% ofsales outlets), fuels containing biodiesel andDiesel One, the premium diesel with highenvironmental efficiency.The use of Diesel One, which is now avail-able at 970 service stations (690 at the endof 2005, the year in which the distribution
programme was launched), correspondingto almost 50% of the total Retail network,helps to reduce carbon monoxide, unburnthydrocarbons and particulate. It also en-ables a more efficient use of the energyderiving from combustion with consequentoptimisation of consumption.
3.5A DISTRIBUTIONNETWORKATTHE SERVICEOF CUSTOMERSANDTHE COMMUNITY
For the ERG Retail network a major pro-gramme to consolidate its trademark isplanned. In 2008, this will see the comple-tion of the restyling plan,which is highly in-novative and in keeping with the promisedtransparency vis-à-vis consumers.To date,these activities have concerned 60% of thecompany’s sales outlets.The new commercial organisation will utiliseinnovative customer loyalty tools, exploit-ing local and social marketing actions whichwill provide for synergies also using localpartners.
Moreover, the system of consumer rela-tionships will be enhanced, supported bycustomer contact tools (customer service,website and market surveys), via the peri-odic monitoring of customer satisfaction.
The 2008-2011 activity plan provides for in-vestments in the Integrated Downstream di-vision totalling 267 million Euro.The plan’simplementation is aimed at increasing themarket share in Italy to 7.8% by 2011.
24
ERG ALONGSIDE THE UNIVERSITIES FOR INNOVATIONTHROUGH RESEARCH ANDTRAINING
The Group’s sustainability policy aims to promote and support research projects withleading Italian Universities, directed towards product and process innovation.More specifically, at the beginning of 2007 collaboration projects were launched for stud-ies into predictive models and materials for wind power generation, the optimisationof energy consumption, the recovery of secondary raw materials (nickel and vanadiumderivatives) in the refinery production processes, biofuels.Another two major research projects are also currently underway with the Universityof Genoa,which will have a duration of three years, concerning the production of elec-tric power from hydrogen generated by the gasification of crude oil processing residuesusing fuel cells and the optimisation of risk analysis methods for plants subject to sig-nificant risk of accident.
25
26
competingresponsiblyTo compete responsibly ERG must manage its activities ina transparent and responsible manner, and take intoconsideration, when developing its industrial projects, alsothe requests emerging from its dialogue with allstakeholders
4.1 PEOPLE
The ERG Group’s industrial growth has al-ways been accompanied by the need tohave qualified and quantitatively adequatepersonnel available to ensure the correctand effective performance of its business ac-tivities and processes.
At 31 December 2007 the ERG Group hada total of 2,825 employees (+5 compared to31 December 2006), ending a year that saw378 new hires, 384 people leaving and thetransfer of 11 individuals who previouslyworked at nonconsolidated companies.
During the year the turnover process con-tinued, taking the average age of employeesto around 42 years, and giving rise to a fur-ther improvement in the level of educa-tion, with about 80% of employees holdinga high-school diploma or university degree.
From an organisational standpoint, at allthe Group’s companies structural optimi-sations were carried out with a view toenhancing the supervision of business ob-jectives.• In ERG Raffinerie Mediterranee, having
concluded the phase of completing thestrategic investments and plant integration,the plant operation, development andconstruction area was reorganised andthe Planning, Programming and ControlDivision was created as a single unit for
the setting and monitoring of objectives.• In ERG Petroli, marketing activities were
reorganised in order to enhance the at-tention given to the strategic objective of“customer focus”.
• A new commercial organisation was setup at ERG Power & Gas to support theconsolidation and development of thecustomer base in the “end user” marketand commence trading in the electricityand gas markets. Furthermore, the or-ganisational structures of the thermo-electric plant operating companies, sub-sidiaries of ERG Power & Gas, werecompletely revamped with a view to cre-ating a single centre of excellence for ac-tivities connected with the operation andmaintenance of assets.
• The organisational structure of Enertadwas redesigned, particularly with a viewto improving the business managementand development areas and enhancingthe efficiency of staff functions.
Accident preventionand health protection
The safety of its employees and of allexternal personnel working at the
plants is ERG’s foremost commitment andis fundamental to being a responsible com-pany. In this connection, a steady and con-tinuous reduction in casualties is a perma-nent objective.
In 2007, the overall number of casualties asregards ERG employees was 19 (26 in 2006).Most of the events are ascribable to the dis-tribution network’s commercial and su-pervisory activities.
The frequency and severity indices haveimproved with respect to the trend in pre-vious years and are in line with the averagefor the European oil industry (seeCONCAWE Report “European down-stream oil industry safety performance” onthe website www.concawe.be).
27
INJURYFREQUENCY
INDEX
4.0
INJURYSEVERITY
INDEX
0.07
AVERAGETRAINING INDEX
2.8Days peremployee
2005 200720062004
2,825
2,000
2,500
3,000
3,500
HEADCOUNT(No.)
public facilities: via this procedure it waspossible to trigger synergies with the localhealth institutions with a view to setting upan innovative prevention model of generalinterest. During the period 2004-2006 al-most 1,400 people took part in the initia-tive, each person being subjected to ex-aminations, ultrasound scans and completeclinical analyses, as well as any further spe-cialist examinations required.A total of ap-proximately 3,500 clinical and instrumentalanalyses were carried out.At the end of 2007 the project was ex-tended to the entire Group with the ex-pected participation of another 600 people.The initiative is accompanied by health in-formation and education activities, such asthe publication of the magazine “Preven-zione Sanitaria News”,which is distributed in-ternally and externally.
Another health-related project launched in2007 concerns the “Progetto OSAS - Comerespiro quando dormo” (OSAS Project – HowI breathe during sleep), which involves allemployees at the Priolo industrial site in col-laboration with the Palermo CNR (Na-tional Research Council) and the SyracuseHospital. The purpose of the study is toidentify those employees who suffer fromapnea disorders that disturb sleep, a pathol-ogy that can also affect the quality of life inthe workplace.There were 637 participantsin the first screening activity and for 100 ofthese in-depth clinical examinations fol-lowed and are still underway.
Development of human capitalERG considers the development of humancapital a fundamental leverage for ensuringlong-term value creation and makes this anarea of specific commitment.
To this effect, the development activitiesconducted during the course of 2007 fea-tured a continuation of the Managerial De-velopment plan. In particular, following def-inition of the new System of BusinessCompetencies, training activities were ini-tiated during the year with the precise in-tention of supporting and developing themanagerial culture.A survey was also conducted on the Man-agerial Development Model based on a rep-resentative sample of the company’s popu-lation, with the participation of 423
Of the actionslaunched to supportthe commitment tosafety, one of themost important ac-tivities concerned the“Prevention Project”,a long-term programme designed to en-hance awareness and involvement as re-gards risk prevention and management is-sues at all organisational levels.The project was divided into three phases,respectively aimed at the enhancement ofsafety culture, the improvement of com-munication and the motivational aspect forpeople and the definition of even morestringent management standards.Regarding the first phase, during 2007 theworking mechanisms of the HSE Commit-tees at all company levels were revised anda reporting system was set up to monitorthe effectiveness of the Committees’ activ-ities in relation to the handling of non-con-formities observed within the ambit of sites’HSE management systems.The reporting system was also conceived soas to allow verification of the effective par-ticipation of the parties acting on the Com-mittees with respect to the minimum re-quirements established by the GroupGuidelines.In this way the Prevention Project fits intothe development, implementation and cer-tification of health and safety managementsystems according to the OHSAS 18001standard. By the end of 2007, certificationwas completed for the ERG PetroliTrecateand Savona depots and for ISAB EnergyServices, the company responsible for theoperational management of the thermo-electric power stations,while the system iscurrently being developed for the entirePriolo refining site.
Alongside the “safety culture”, ERG hasaimed at disseminating a “health-consciousculture”, intended as both application ofspecific health protocols and the develop-ment of voluntary awareness actions.Coming within this context is the “HealthPrevention Project”, a voluntary initiativedestined, during its first phase, for all per-sonnel of the Sicilian industrial area. Theproject offered the opportunity to carry outa full oncological screening using internalcompany structures combined with local
28
2005 200720062004
4.0
0
2
4
6
8
FREQUENCY INDEX(No. of casualties x 106 / hours worked)
0.05
0.10
0.15
0
0.20
2005 200720062004
0.07
SEVERITY INDEX(Days lost x 103 / hours worked)
2005 2007200620040
3
6
9
12
2.8
5.7
MANUFACTURINGMARKETING
FREQUENCY INDEX PER SECTOR(No. of casualties x 106 / hours worked)
2005 200720062004
MANUFACTURINGMARKETING
0.05
0.10
0.15
0
0.20
0.05
0.11
SEVERITY INDEX PER SECTOR(Days lost x 103 / hours worked)
employees, including executives, managersand clerical staff distributed between theGenoa headquarters, the Rome offices andthe plants in Priolo.The purpose of the sur-vey was to gather the opinions and expec-tations of employees with regard to the in-ternal climate and the overall projectapproach. Insofar as concerns the first point,74% of the employees interviewed declaredthat they were “very satisfied” or “satis-fied” to work for the ERG Group, provid-ing various motivations to support their
intention to remain with the company in themedium to long-term.The expectations expressed and the areasfor improvement identified by employeeswere equally indicative and will help to im-prove the orientation of training and de-velopment programmes in order to aim atthe objective of managerial excellence.The Managerial Development Project is ac-companied by an intense training activitywhich, in recent years,has gradually been re-arranged according to organisational re-quirements. The training programmes arecurrently divided into four areas of value,which reflect the contribution expectedwith respect to the business objectives:• institutional training, which starts from
the time of joining the company and de-velops through periodic cycles on basicsubjects associated with the company’sbusiness;
• individual training which is focused aboveall on the technical competencies associ-ated with the corporate function wherethe employee works and the role covered;
• HSE training as regards the specific tech-
29
nical and management aspects of the ref-erence subject-matter;
• managerial training in order to specifi-cally develop the essential competenciesfor ERG.
Management of suppliersAs an industrial organisation, ERG relieson a substantial number of persons outsidethe Group who work primarily on the plantsperforming maintenance activities and var-ious services.With regard to these “non-oil” suppliers,ERG carries out a policy which aims to rec-
EXTREMELYSATISFIED
VERYSATISFIED
ENOUGH
SOMEWHATDISSATISFIED
VERYDISSATISFIED
9%
65%
3%
1%
22%
OVERALL, HOW SATISFIED WOULD YOU SAYYOU ARE TO WORK FOR THE ERG GROUP?
20%
15%
12%
8%
7%
6%
4%
3%
2%
2%
2%
2%
13%
4%
It is a sound / dynamic / serious / growing company
I like my work
The opportunities for professional growth
I wish to offer my skills / knowledge to help thecompany’s growth / The professional challenges
The sense of belonging / I like Erg
The work environment
The lack of valid alternatives
The salary
I share the company’s basic values
Job security
Age / I am close to retirement
I live near to my place of work
Other
Doesn’t know / No answer
WHEN ALL IS SAID AND DONE, WHAT CAUSES YOUTO REMAIN IN ERG?
(Open answer)
7%10%
17%
25%
41%
Coaching IntrapreneurshipAuthoritativenessVisionTeamworking
IN YOUR OPINION, ON WHICH OF THESE COMPETENCIESSHOULD ERG FOCUS MOST URGENTLY?
INDICATE ONE OF THEM.
8%
32%
32%
42%
55%
Careerpaths
Performanceappraisal
19%
TrainingSalary Potentialappraisal
Internalcommunication
Selection
18%
IN YOUR OPINION, ON WHICH OF THESE TOOLSSHOULD ERG FOCUS MOST URGENTLY?
INDICATE TWO OF THEM.
2005 200720062004
2.8
0
1
2
3
4
AVERAGE TRAINING INDEX(Days per employee)
THE SYSTEM OF BUSINESSCOMPETENCIES
1. Teamworking: working together onshared objectives.
2. Authoritativeness: being recognisedby others as leader.
3. Coaching:encouraging the people andthe team to develop.
4. Intrapreneurship: guaranteeing resultsand taking advantage of opportunities.
5. Vision: seeing beyond and planningmoves.
oncile the company’s economic interestswith the implementation of ethical supplychain management processes, designed tocreate transparency and dynamicity in thereference markets.
The Group Purchasing function periodicallyreviews its “List of Suppliers” with a view torationalising same and enhancing both theeconomicity and efficiency of supplies andthe coherence and compliance of the sup-plier base with respect to the same princi-ples and criteria of ethical-social and envi-ronmental responsibility which inspire itsown business.Qualification, effected on the basis of di-rections contained in the Group Guide-lines, provides for tasks entrusted to theCorporate structure and a specialist supportfrom the operating companies in the analy-sis and presentation of candidatures.There is a single active list of qualified sup-pliers which must be adhered to by allGroup companies and which is accessible toany potential supplier of goods and servicesin possession of the appropriate requisites.
ERG, together with other major Italian com-panies and at the initiative of the Procure-ment Executive Circle (PEC), in 2006 set upa strategic direction and study group which
has led to the definition of Guidelines forSustainability and Integrity in Relationshipswith Suppliers (Italian acronym SIRF), alignedwith relevant best practices and interna-tional social responsibility criteria.During the course of 2007 an evaluation wasperformed among the promoting companiesas regards the level of application of theguidelines and their integration into com-pany policies.The overall judgement of thesurvey, conducted by Avanzi SRI Research,placed the ERG Group among the compa-nies most closely adhering to the SIRF.
30
SUPPLIERS’ HSEPERFORMANCE
The qualification guidelines and the per-formance appraisals for “non-oil” suppli-ers pay special attention to HSE aspects.In particular, the performance systemtakes into account both the findings offield tests, based on a specific check listand carried out by operating personnel,and the casualty level of each firm oper-ating at the ERG industrial sites.During the past few years a general im-provement has been noted in the HSEperformance of contractors, above all asregards casualty indices. Approximately75% of the firms assessed were assignedan overall rating of excellent or good.
2005 200720062004
1,749
0
500
1,000
1,500
2,000
QUALIFIED SUPPLIERS(No.)
2005 200720062004
202
0
100
200
300
400
AVERAGE QUALIFICATION TIME(Days)
2005 2006 2007
1.1
0
1
2
3
4
THIRD-PARTY FIRMFREQUENCY INDEX
(No. of casualties x 106 / hours worked)
2005 2006 2007
0.05
0
0.10
0.20
0.05
0.15
THIRD-PARTY FIRMSEVERITY INDEX
(Days lost x 103 / hours worked)
31
ing the achievement of such objectives.The Committee receives technical supportfrom the Pi.G.A.S.S. (Pianificazione e Ges-tione Ambiente, Salute e Sicurezza) Com-mittee, presided over by the CorporateHSEQ Sustainability and Governance Func-tion, which carries out targeted assess-ments, surveys and studies regarding the var-ious problems arising from HSEmanagement at the industrial sites, therebyfacilitating the liaison and cooperation be-tween all the structures involved.The operating companies, which have fullmanagement autonomy, have set up spe-cific HSE Committees in order to ensure
the standardised and shared application ofthe Policies and Guidelines defined by theParent Company.Each operating company then has specificDivisional Committees (second level) andDepartment Committees (third level).
From an operational management stand-point, ERG has decided to widely adoptHSE management systems that are in keep-ing with internationally recognised stand-ards.Experience has in fact shown that issuesrelating to health protection, safety in theworkplace and environmental protectioncan be dealt with in a much more effectivemanner if managed as an integrated system.The implementation programme as regardsthe specific management systems, launchedin 2003, involved the participation of all theoperating sites (refineries, power stationsand depots), for both environmental andsafety aspects. Many of the operational ar-eas completed the certification process: theERG PetroliTrecate and Savona depots andISAB Energy Services, the company re-sponsible for managing the electric powergeneration plants in Sicily.
ERG’s goal is to have all the industrialsites certified, in accordance with the
ISO 14001 standard for environmental man-agement and the OHSAS 18001 standardfor workers’ health and safety management,by the year 2010.In particular, the ISAB Refinery is expected
32
4.2 ENVIRONMENT
HSE commitments,managementand resourcesThe safeguarding of workers’ health, riskprevention and environmental protectionare commitments which have always beencontinuously pursued by ERG though ade-quate investment in terms of human andeconomic resources.
The management of HSE aspects is carriedout via a structure,divided into Committees,designed to ensure the maximum involve-ment and the widest possible participationof all personnel.
The Sustainability Committee, which hasreplaced and extended the tasks of the pre-vious HSE Committee, comprises ERG topmanagement and represents the highestlevel of supervision also as regards these is-sues. The Sustainability Committee is re-sponsible for defining the policies and strate-gies for the constant enhancement ofperformances in this area, for setting gen-eral and specific objectives and for evaluat-
HSEEQUIVALENTS
13.4%
HSEEXPENDITURES
149Million Euro
LEVEL ISO 14001AND OHSAS 18001CERTIFICATIONS
60%
ERG S.p.A.
Pi.G.A.S.S. Committee
Sustainability CommitteeSustainability andGovernance HSEQ Unit
Electric Power GenerationERG Power & Gas
Coastal RefiningERG Raffinerie Mediterranee
Integrated DownstreamERG Petroli
ERG Power & GasHSE Committee
ERG Raffinerie MediterraneeHSE Committee
ERG PetroliHSE Committee
HSE site units HSE site units HSE site units
HSE management organisation chart
2005 200720062004
13.4
0
5
10
15
20
HSE EQUIVALENTS OF TOTAL GROUP(%)
to achieve OHSAS 18001 certification,thereby completing integration with ISO14001 certification. From the economiccommitment perspective, during the pastfew years ERG has concentrated its invest-ment of resources above all in the areas con-nected with the new environmental instal-lations, in the construction and managementof facilities for the characterisation andreclamation of industrial sites and in people’shealth and safety. Overall environmentalexpenditures in 2007 amounted to 83 mil-lion Euro.Investments in soil and groundwater pro-tection structures and current expendi-tures for their management accounted for
over 16% of total HSE costs.Economic resources dedicated to opera-tional safety and workers’ health, whichmostly concerned prevention structures,amounted to 41 million Euro, up by 22%over 2006.
Water resourcesERG pays special attention to the use of wa-ter resources and endeavours to minimisewithdrawals and maximise the re-utilisa-tion of process water.The drinking water withdrawn from thewells is that required for non-industrial useonly. Seawater,which represents 97% of to-tal withdrawals, is largely used for coolingthe plants and equipment before being re-turned to the receiving body, after ade-quately monitoring its quality.
In order to minimise the withdrawal ofgroundwater, ISAB Energy has two multiple-effect desalination plants, which guaranteepart of the demineralised water requirementfor the industrial site’s thermoelectric powerplants.Part of the water originating from the recla-mation activities and safety measures is re-utilised within the Refinery plants. Fur-thermore, thanks to the presence offilterpresses or equipment for centrifugingthe mud produced from cleaning the plantor decarbonating the water, it is possible torecover part of the industrial water whichis re-utilised within the productionprocesses.
At the Impianti Sud Refinery there is an in-ternal unit dedicated to the physical, chem-ical and biological treatment of the dis-charge water to reduce its pollutant loadprior to its release. During recent years aseries of activities have been carried out toenhance the efficiency and effectiveness ofthe equipment. The concentration valuesof the direct discharge pollutants have re-mained well below the limits imposed bycurrent legislation.At the Impianti Nord, the oily process wa-ter is channelled, via a dedicated seweragenetwork, into tanks/sections of the specialtreatment plant for oil removal and/or elim-ination of the suspended granules.This wa-ter is subsequently sent to the externalconsortium plant for final purification.
33
ERG Petroli• Trecate depot (NO)
ERG RaffinerieMediterranee• ISAB Impianti Nord
and Sud (SR)
ERG Nuove Centrali• Impianti Nord and Sud
Power Plant (SR)
ISAB Energy ServicesISAB Energy
ERG Petroli• Savona depot
Map of certifications as at 31 December 2007
02005 200720062004
113
36
INVESTMENTSCURRENT EXPENDITURES
180
135
90
45
HSE CURRENT EXPENDITURESAND INVESTMENTS
(Million of Euro)
- Compared to the amount shown for investments in the ERGAnnual Report, some additional HSE items have been includedunder the captions “capacity maintenance”and “development”.
- Current expenditures include the cost of HSE personnelwhich, in 2007, amounted to approximately 19 million Euro.
2005 200720062004
523
13
FRESH WATERSEAWATER
300
400
500
600
WATER WITHDRAWALS(Millions of cubic metres)
2005 200720062004
17
0
15
30
45
60
OIL WATER DISCHARGE(Tonnes)
2005 200720062004
0.7
0
8
16
24
32
OIL WATER DISCHARGE - REFINING(Tonnes/processed in millions of tonnes)
Atmospheric emissionsThe objective to improve atmosphericemissions is pursued as an integrated partof the Group’s industrial developmentplans.The actions put forward concern:• increasing energy efficiency during the
process phases, as regards both the con-tribution associated with the type offuel used and the production techniques,in keeping with the BestAvailableTech-niques;
• a greater use of fuels with lower carbonintensity and sulphur content;
• the adoption of plant engineering tech-niques with reduced NOx generation
(for example Low NOx burners and se-lective catalytic reduction systems);
• the adoption of systems for reducing Par-ticulate emissions (for example electro-filter systems);
• the tightening of sulphur recovery andproduction processes;
• improvement of monitoring and controltechniques for minimising losses, espe-cially of Volatile Organic Compounds;
• optimisation of the recovery and moni-toring of torch gaseous effluents.
In 2007 there was a general improvementin atmospheric emissions, above all as re-gards SO2 and Particulate, two important
factors that determine the status of airquality.
34
200720062004 20050
0.1
0.2
0.3
0.4
0.29
NMVOC INDEX - REFINING(Tonnes/processed in thousands of tonnes)
2005 200720062004
15,436
0
10,000
20,000
30,000
40,000
SO2 EMISSIONS(Tonnes)
200720062004
6,234
0
2,000
6,000
8,000
4,000
2005
NOX EMISSIONS(Tonnes)
200720062004
542
02005
300
600
900
1,200
PARTICULATE EMISSIONS(Tonnes)
200720062004
0.33
20050.10
0.25
0.40
0.70
0.55
SO2 INDEX - REFINING(Tonnes/processed in thousands of tonnes)
200720062004
0.08
20050
0.03
0.12
0.06
0.09
NOX - INDEX - REFINING(Tonnes/processed in thousands of tonnes)
200720062004
0.016
20050
0.01
0.02
0.03
0.04
PARTICULATE INDEX - REFINING(Tonnes/processed in thousands of tonnes)
200720062004
1.4
20050
1
2
4
3
SO2 INDEX - THERMOELECTRIC(Tonnes/GWheq)
200720062004
0.76
20050
0.50
1.00
0.75
0.25
NOX INDEX - THERMOELECTRIC(Tonnes/GWheq)
200720062004 20050
0.04
0.08
0.12
0.16
0.07
PARTICULATE INDEXTHERMOELECTRIC
(Tonnes/GWheq)
Pollution prevention andreclamation activitiesThe year 2007 saw an intensification of ac-tivities for the environmental characterisa-tion, safety enhancement and reclamation ofsurface soil and subsoil launched in previousyears at all the Group’s industrial sites.The current expenditures for 2007 relatingto the management of reclamation equip-ment and structures, amounting to almost8 million Euro, were up by 7% over theprevious year.The waste transportation anddisposal costs,mainly deriving from the saidreclamation activities, rose from 17 millionto almost 30 million Euro.The increase in activities particularly con-cerned the Priolo site, which is includedon the list of“National interest sites”, in viewof the area’s heavy industrialisation.This re-quires all the environmental programmesand interventions associated with it to beevaluated and approved by the Ministry forthe Environment and Territorial and Ma-rine Protection with the support of theLocal Authorities (Province, Municipalitiesand the Regional Environmental ProtectionAgency (ARPA) Department for theProvince of Syracuse,within the ambit of theConference of Services).
At the ISAB Energy plant the characterisa-tion activities for the environmental statusanalysis of the soil and subsoil, in both theindustrialised and non-industrialised areas,were completed.The site consequently sub-mitted an operational safety enhancementproject using a risk-based approach, namelya“site-specific risk analysis”, drawn up in ac-cordance with reference domestic and in-ternational standards.Pilot tests were carried out for the dimen-sioning of the system for draining off thegroundwater and preparatory to the start-up and upgrade of the relevant emergencysafety enhancement system (“hydraulic bar-rier”).As regards the soil, no interventions werenecessary since the concentrations ob-served for the reference parameters werebelow the site-specific risk threshold con-centrations.
Insofar as concerns the Refinery, the safetyenhancement activities for reclamation ofthe groundwater continued and were ex-panded.
35
These interventions consist of:• withdrawal and treatment of the con-
taminated groundwater, at facilities insidethe plants;
• recovery of the surnatant;• decontamination interventions, such as
air sparging and soil vapour extraction(among the most effective techniques forenvironmental recovery of the subsoil);
• the development of activities (using adraining-off barrier) to recover thegroundwater and the surnatant in the ar-eas of the connecting pipeline betweenthe Wharf and the Impianti Sud plants;
• the completion of interventions envis-aged in the Impianti Nord reclamationproject (approved by the CompetentAu-thorities) at the various areas of the siteparticularly including the damming of thesea front (intake barrier combined withpumping system).
By setting up these actions on an ongoingbasis and constantly optimising same, it waspossible to achieve notable reductions insubsoil pollution and progressive adjust-ment to the limits set forth by current rel-evant legislation.The effectiveness of theseinterventions is periodically monitored inthe course of sampling and analysis cam-paigns relating to the environmental statusof the subsoil.As regards the considerable investmentsunderway, great commitment has been di-rected towards the characterisation activ-ities concerning the areas destined for newinstallations. Surveys are carried out in or-der to assess, in the presence of the Au-thorities and by way of “in situ” sampling of
land and groundwater, the absence of pol-lution.
As far as concerns the roadside servicestations, 2007 saw the continuation of ini-tiatives designed to effectively prevent soilpollution, including through structural in-terventions such as:- the installation of double-walled tanks
with continuous monitoring for possibleleaks;
- the upgrade of devices for the preventionof accidental product leakages during un-loading operations;
- the utilisation of materials capable of pro-tecting underground equipment from cor-rosion phenomena.
ENVIRONMENTAL RESTORATIONPROJECTS
Within the Syracuse industrial complex, ERG has launched a long-term programme ofactivities, aimed at the recovery and protection of air quality, the minimisation of industrialrisks, the protection of soil quality and the marine coastal environment.Set out below are the main projects and their scheduled completion dates.• 2009 - New utilisation of the treatment facility at the Impianti Nord Refinery for the
recovery of oil from rainwater, seepage and drain maintenance. Moreover, in orderto minimise the emissions given off, interventions are envisaged to cover theAPI tanks.
• 2009 - Installation at the ERG Nuove Centrali North Power Plant of Low NOx burn-ers and an electrostatic precipitator for reducing the Particulate emissions.
• 2010 - Restoration of some reservoirs and pipelines using special technologies to re-cover the iron.
• 2010 - Increase in the number of double seal reservoirs to minimise the emissionsgiven off.
PETROLEUM PRODUCTLEAKS
Each ERG industrial site has a systemfor evaluating and managing environ-mental risks, above all those relating tothe leakage of hazardous substances, andparticularly hydrocarbon leakages (forexample, oil spills).The emergency plantakes into account various accidental sce-narios also related to the type of sub-stance treated. Generally speaking, themain causes of leakage are ascribable tooperational problems and corrosion phe-nomena and/or burst pipes.In 2007 there were 11 events involvinghydrocarbon leaks (16 in 2006), for a to-tal volume of around 150 cubic metres.
WasteERG has set up an internal system that co-vers all phases of the waste managementcycle. Specific procedures exist defining therules and behaviours to be applied, startingfrom the qualification of transportation anddisposal service providers up to the per-formance of prevention and control as-sessments on the final disposal and/or treat-ment plants. The objective is totalcompliance with legislation and the max-imisation of waste quotas destined for re-covery activities.
Most of the waste produced (in 2007 almost90% of the total) originates from the soil andgroundwater safety enhancement and recla-mation activities and from the new con-structions in connection with the develop-ment of ERG’s industrial plan. In 2007, totalwaste amounted to 590 thousand tonnes,18% of which was classified as non-haz-ardous.Among the waste reduction activities, it isworth mentioning the centrifuging and vol-ume reduction (filterpress) activities as re-gards the mud produced from equipmentmaintenance or decarbonation of the wa-ter.
36
200720062004 2005
13.3
0
5
10
15
20
WASTE DESTINED FOR RECOVERY(%)
200720062004 200550
65
70
95
110
88.7
WASTE FROM RECLAMATIONAND NEW CONSTRUCTIONS
(%)
37
REACH REGULATION
As from June 2007 the European Regu-lation REACH (Registration, Evaluationand Authorisation of CHemicals; Rule1907/06) came into force, providing forthe registration, evaluation and subse-quent authorisation, on the part of thecompetent Authority in charge (the Eu-ropean Chemicals Agency, ECHA), ofchemical substances produced or im-ported from non-EU countries, whetherhazardous or non-hazardous.The Regulation will be applied in succes-sive steps and the requirements envisagedwill represent, for the industrial sectors
involved, an actual “licence to operate”.ERG has commenced integrating the Reg-ulation into its HSE management systemsat industrial site level.Three task forceshave been set up, one for each businessarea, to carry out implementation of theRegulation for all the substances identi-fied.To this effect, a specific database hasbeen created, containing the accurateregistration of all the substances and in-termediates produced and/or imported.The Corporate Sustainability Functiondirects, coordinates and supports thework of the task forces.ERG is also actively collaborating with
CONCAWE for the performance of riskassessments relating to the oil substanceswhich will comprise the fundamental partof the registration dossier to be sent toECHA.By 1 December 2008, the Group com-panies will send all information requiredfor pre-registration of the substances andintermediates produced and/or imported.By 1 December 2010, they will registerthe substances and intermediates pro-duced and/or imported in quantities of atleast 1,000 tonnes per year, in accor-dance with the procedures set out in thesaid Regulation.
In order to implement the principles ofprevention also with regard to sea trans-port, ERG has further encouraged re-newal of the fleets operating at its ter-minals.In particular, of the ships used 72% wereless than 10 years old (99% less than 20years). The introduction of stricter pa-rameters as regards hull integrity im-plied a notable increase in the number of
ships rejected already during the Screen-ing phase, showing a preference moreand more oriented towards recently con-structed vesselsPrevention activities also concern thestructural checks carried out prior toacceptance (Vetting) and the on-site in-spections during operations at the ter-minals (Safety), conducted by outsidepersonnel qualified at international level.
02005 200720062004
2,800
2,100
1,400
700
VETTING SAFETY SCREENING
437
909
2,111
CONTROLS IN SEA TRANSPORT(No.)
PREVENTION IN SEA TRANSPORT
4.3THETERRITORY OF SICILY
If Liguria historically represented ERG’s ref-erence geographical area from its foundationup until the 1970’s,with the start-up of theISAB Refinery the company began to moveits attention towards the Syracuse industrialcomplex, where it subsequently concen-trated most of its industrial investments.
The Group has therefore grown in parallelto the aspirations and expectations of theprovince of Syracuse, one of the so-called“complex territories”, in other words hold-ing a contradictory mix of expressed po-tential, unexpressed potential, explicit andhidden criticalities. This land still accom-modates large industrial installations which,whilst they no longer carry the employ-ment weight they once had, neverthelessrepresent a sizeable economic wealth.More-over, its tourist vocation is increasing, sus-tained by a considerable artistic and culturalpatrimony:Unesco has in fact added the areaof Syracuse to its “World Heritage List”.
One of the social responsibility commit-ments undertaken by ERG is to contributetowards the sustainable development ofthis territory.This commitment is realisedfirst and foremost via the transparent man-agement of local operations and the devel-opment of management practices that areincreasingly effective for the control of di-rect impacts.
ERG’s industrial presence andeconomic repercussionsIn operation today in the municipalities ofPriolo Gargallo and Melilli are ERGRaffinerie Mediterranee’s two integratedrefineries, the ERG Nuove Centrali ther-moelectric power plants and ISAB Energy’scombined cycle power plant.Sicilian Coastal Refining presently accountsfor 16% of the national processing capacity.Furthermore, a large proportion of ERGPetroli’s network of service stations is lo-cated in Sicily. More specifically, its marketshare in the area is almost 13%, comparedto the national market share of approxi-mately 7%.As regards power generation from renew-able sources, ERG has started construc-tion of a wind farm inVicari, near Palermo,with a capacity of 37.5 MW.
Of the electricity produced by the powerplants, around 20% is sold in Sicily. In addi-tion to meeting the needs of ERG’s plants,the power generated helps to cover the re-quirement of the other industrial struc-tures in the Syracuse area.
In 2007 ERG operations employed on av-erage 1,578 people (56% of total employ-ees), 90% of which on a permanent basis.About 1,900 workers belonging to outsidefirms based in the area are employed atthe plants on a daily basis to perform on-going activities connected with maintenanceand the construction of new processingunits.Overall the work force employed ac-counts for over 5% of the Syracuse LabourSystem (see ISTAT Report on Local LabourSystems - www.istat.it).
In 2007, Euro 295 million were spent onproducts and services purchased from Si-cilian companies,while Euro 26 million werespent on local taxes (IRAP, ICI,TARSU,har-bour dues and loading taxes).
ERG’s strategic plan for the four years 2008-2011 provides for investments in Sicilyamounting 900 million Euro, correspondingto approximately 50% of the total invest-ments planned by the Group.
Involvement of the localcommunitiesERG has initiated and concluded during thecourse of the last two years major in-volvement initiatives in order to bring intofocus and enhance its understanding of thesensitivity of local players and institutionswith regard to many issues of local interest.A series of specialised outside companies(ISPO,COESIS and URS Italy) conducted lo-cal opinion surveys on representative sam-ples of the population and direct interviewswith qualified groups of opinion leaders.The surveys were designed both to identifya scale of priorities of expectations in gen-eral and as regards ERG’s positioning withrespect to same, and to evaluate the per-ceived value of the social responsibility proj-ects carried out.
Overall 45% of the population consideredthe ERG Group’s presence in the town andprovince of Syracuse “very positively” or“quite positively”,39% took a neutral stance,
only 16% expressed a negative opinion.TheERG Group is acknowledged by most of theinterviewees to be a leader in its sector(sum of “very” and “quite in agreement”amounting to 83%), while 73% of those re-sponding considered the initiatives pro-moted by ERG interesting and 56% saidthat “ERG is a company which inspires con-fidence and security”.
Thanks to the interviews with the opinionleaders, on the other hand, it was possibleto highlight the issues of most interest. Ex-pectations continue to be centred round thequestion of employment and economic de-velopment, but emerging immediately afterthat is the strong request for a more in-depth knowledge of the local area and forgreater transparency and consistency in therelationship with the community and theother local stakeholders, also with a view topromoting more and more effective socio-environmental initiatives.Precisely in response to this last request, theGroup initiated a more organic and struc-tured management of the procedure forlocal stakeholder dialogue and consulta-
38
2008-2011INVESTMENTS
IN SICILY
900Million Euro
SOCIALEXPENDITURES
1.1Million Euro
39
THE LNG REGASIFIERThe Liquefied Natural Gas (LNG) rega-sification terminal is the strategic industrialproject that ERG plans to carry out in theImpianti Nord area of theRefinery, within the Muni-cipality of Melilli.Participating in this initia-tive together with ERG isShell, one of the world’sgreatest experts in the sec-tor of LNG handling anddistribution.LNG is methane gas in li-quid state, commonly usedfor heating, for domesticuse, to generate powerwith low environmentalimpact and in the chemicalindustry. It is a non-toxic,non-harmful, non-irritating,non-cancerous substance.It is safe in the open air and does not rep-resent a risk for the population, for theworkers or for the environment: duringthe past 30 years, in fact, no incidentshave occurred at any of the 54 terminals
in operation throughout the world.The technical and safety conditions ofthe Syracuse complex are ideal for con-structing this type of plant. In fact, already
at the site there is a port, protected fromthe wind and the tides, and important in-frastructures suitable for developing andoperating the terminal (wharf, seawatersystem, utilities and other accessory ser-
vices). Furthermore, the plant fits intoPriolo’s entire economic, industrial and so-cial context.The gas will in fact be madeavailable locally for non-industrial and in-
dustrial use and for thesite’s thermoelectric pro-duction; whereas the coldgenerated during the va-porisation of the gas can beused in new industrial ac-tivities, in chemistry andin the agro-industrial sec-tor.
For the constructionphase 1,500 workers areexpected to be employedover three years with theinvolvement of local busi-nesses for carrying out theworks at sea and on land.On the other hand, duringthe operational phase a to-
tal 150 direct and indirect workers will beemployed.Recently the Ministerial Commission forthe Environmental Impact Assessmenthas given the acceptation to the project.
Natural gasextraction and
liquefactionTransportation Storage and
regasificationTransmissionand utilisation
Ship unloadingand dispatch ofLNG to storage
LNG
Seawater
LNG storage reservoir(temperature – 160°Cand ambient pressure)
Methanegas
WORK FORCEEMPLOYED
"SYRACUSE LABOURSYSTEM"
5%(beyond 3,000
people)
PRODUCTSAND SERVICES
PURCHASED FROMSICILIAN COMPANIES
295Million Euro
LOCALTAXES
26Million Euro
NATIONALREFININGCAPACITY
16%
RETAILMARKETSHARE
13%
tion. In this connection, an important stepconcerned the new dedicated organisa-tional Division set up at the beginning of2007: “Institutional relations, Communica-tion, Environment,Health and Safety Sicily”.During its first year the new structure pro-moted and managed over 40 individualmeetings with the regional and local pressand another 200 with representatives fromvarious associations. It also carried out spe-cialist workshops on the industrial projectsbeing developed. In particular, as regardsthe regasifier construction project, ERG in-tends to hold open and transparent dis-cussions also with the section of the com-munity that does not support the initiative.The communication activities are not just di-rected outside the company but also in-clude enhancing the awareness of internalstaff on ERG’s social commitment guidelinesregarding the area and in particular on thenew rules and procedures for handling sol-idarity-inspired interventions.
Social development of the areaBased on the trends that emerged fromthe involvement activities, ERG reorgan-ised its contribution in support of localgrowth from a social perspective into fourmain areas of intervention:• protection and safeguarding of the envi-
ronment and health;• young people and sport;• culture and knowledge;• improvement of the quality of urban life.All interventions are approved by a specificinternal Committee, which meets on amonthly basis and evaluates the conform-ity of projects with the intervention guide-lines, defining the resources to be invested.During 2007, 110 projects were eitherbacked or carried out directly (of 248 sub-mitted) for a total amount of Euro 700thousand, divided between grants and ex-penses for the realisation of urban requal-ification works and for support given tothe cultural, sports and charity initiatives ofentities and associations.Added to these arethe approximately Euro 400 thousand inexpenses for sponsorships in favour of var-ious local sports teams.Among the most significant social projects,it is worth mentioning the launch in April2007 of a protocol signed with the MegaraIbleo University Association in Priolo(CUMI), for the development of three re-
search projects, primarily concerned withenvironmental recovery, in connection withthe degree course in Industrial Chemistryand Technology,.
The projects were launched, through theDepartment of Chemistry at the Universityof Messina, in collaboration with the Envi-ronment Ministry, the CNR (National Re-search Council) and the Region of SicilyCouncillor’s Office of Territory and Envi-ronment (Assessorato al Territorio e Am-biente della Regione Sicilia), to promotethe training of new professional figures ca-pable of meeting the innovation and envi-ronmental sustainability requirements ofthe industrial activities carried out locally.The project involves the direct interventionof the Group’s technical experts in researchand teaching activities.In order to spread an ever-greater civicawareness of the principles and criteria ofsocial and environmental responsibilityabove all to young people, several educa-tional initiatives have been set up for the lo-cal schools, including:• the“La Strada siamo noi” project on road
safety;
• the educational project on ecosustain-ability involving schools in the Municipal-ity of Melilli;
• the “Il Capitale invisibile” project for thescholastic orientation of young peopleon leaving secondary school.
As part of the“National Electricity Day”,or-ganised by the Italian association of elec-tricity enterprises (Assoelettrica),over 1,000primary and secondary school pupils visitedthe ISAB Energy plants in Priolo.
40
RESEARCH PROJECTS
• Atmospheric pollution from thin dust,to ascertain the extent to which in-dustrial activities affect the problemalso in view of the new more stringentlaws on environmental protection.
• Study into innovative technologies,withlow environmental impact, for the recla-mation of Augusta Harbour.
• Innovative catalytic processes for theutilisation of CO2 in industrial activities.
ERG has contributed towards supportingthe public health department through ini-tiatives aimed at improving the service anddeveloping a state-of-the-art model for theprevention and cure of oncological diseases.An agreement has been signed with ASL 8(the local public health unit) in Syracuse toset up a network of oncology clinics in theprovince, particularly supporting the re-cruitment of additional medical and para-medic personnel to be employed at threelocal hospitals (Augusta, Lentini andAvola).The service will commence from the firsthalf of 2008. As regards the protection ofthe ecosystem, ERG has continued to co-operate with the Plemmirio Consortium,the organisation responsible for managingthe Syracuse marine protected area,withinthe ambit of a specific memorandum of un-derstanding for the construction of a “tac-tile aquarium” for the blind.
41
ERG AND JUNIOR ACHIEVEMENT ITALIA
Junior Achievement Italia is the first nonprofit as-sociation operating in Italy to support the profes-sional and personal future of young students,by pro-moting economic and entrepreneurial education inschools.
The Association is backed by a group of leader companies, sensitive to the issue oftraining for young generations and convinced that to invest in the local community– with the participation of its own people – has a high social impact value. It has beenoperating for over 6 years throughout Italy and,with its 5 JuniorAchievement teach-ing programmes, has involved more than 52 thousand students between the ages of8 and 19.
Starting with the 2007/2008 school year,ERG has be-gun taking part in the projects set up by the Asso-ciation. In this connection, a new training activity has
been developed for first-grade secondary school students in the Syracuse area.
The “Io e l’economia. Comunità e ambiente” programme, via an active and tangibleteaching methodology and the presence in the classroom of ERG personnel, is de-signed to stimulate awareness of the connection between economy and local com-munity. The students discover that the organisational world is a structured systemof relationships where to analyse the values, interests and expectations at stake al-lows decisions to be taken whilst respecting all the parties involved.
THE EDOARDOGARRONE FOUNDATIONERG provides financial support forthe Edoardo Garrone Foundation,which was set up in 2004 and is ded-icated to the Group’s Founder.Thepurpose of the Foundation is to pro-mote cultural and social events, toperform studies and research andto organise seminars and confer-ences, with the aim of contributingtowards the dissemination, enjoy-ment and understanding of culture,art and science and respect for theenvironment.The Foundation is ac-tive throughout Sicily with threelong-term initiatives: a local market-ing project for the cultural andtourist enhancement of the Syra-cuse area, a School for AdvancedStudies in Cultural Tourism Eco-nomics and an experimental teach-ing model for primary schools.
42
4.4 CUSTOMERS
Principles of correctness, transparency andvalue enhancement are the cornerstonefor the Group’s commitment in managing re-lationships with its Customers.ERG’s commitment is realised by adoptinga commercial policy oriented towards“cus-tomer-consumer focus” and a communica-tion strategy firmly based on informationand consultation.
Customer value propositionThe marketing strategy is centred roundthe consumer: to study his characteristics,needs and emotions, and to offer him what-ever he needs, becomes a way of standingout in a market increasingly characterised byoffer range standardisation and generalisedmistrust towards the seriousness of oper-ators and oil companies.This is the main theme of the“Customer Fo-cus” project, launched in July 2006,wherebyERG decided to leave aside the traditionalpromotion mechanics at national level anddevelop initiatives that take account of theparticular features of customers in eachmarket area. The path hitherto followed,which has involved the company’s manage-ment, the operators and the area sales co-
ordinators and,of course, the customers,hasled to the definition of a“Value Proposition”for which ERG would like to be known onthe market. The promise of value, whosefundamental message is transparency andconfidence in its relationship with the vari-ous players in the purchase process (oper-ators and end consumers), reflects the con-scious and responsible commitmentundertaken by the Group.The “Customer Focus” project’s most evi-dent activity is the total refurbishment of theservice stations, launched in close collabo-ration with the operators and developedthroughout the country with the contribu-tion of 47 local companies.The specific objective of the project is toachieve“new” strongly eye-catching and dis-tinctive sales outlets with a high technolog-ical profile, a clear message with regard tothe product and services offered and the in-troduction of efficient management prac-tices such as, for example, the checking ofnozzles with greater frequency than is re-quired by relevant regulations.normative in materia.
Consumer dialogueThe communication developed transverselyby the Group, in order to promote an effi-
cient and complete exchange of informationbetween parties outside and inside thecompany, is supported by specific initiativesdesigned to enhance the dialogue with con-sumers and facilitate the comparison be-tween the service received, the service of-fered and the company’s plans.
Since the outset of the restyling project,ERG has carried out “Customer Satisfac-tion” surveys with a view to monitoringthe project’s impact in terms of satisfac-tion, visibility and effectiveness, and so as toimplement corrective actions again based onconsumers’ expectations.Through the surveys, conducted on a rep-resentative sample in the four Italian re-gions where the restyling was first launched(Lombardy, Liguria, Lazio and Puglia) itemerged that sales outlet visibility has in-creased to the point of making the Retailnetwork seem larger.The satisfaction analy-sis found that 89% of the sample inter-viewed declared that they were “very sat-isfied” with the services offered, 10% were“quite satisfied”, and only 1% were “notvery satisfied”.The most important aspects in the opinionof consumers were the cleanliness of theservice stations, their territorial distribution
CLEAR ADVERTISINGOF THEVARIOUSPROMOTIONS
CLEAR INDICATIONOF PRICES ANDOF PRODUCTS
PERIODICNOZZLE
INSPECTION
COMMUNICATIONOF INSPECTION
TIMING
MULTIPURPOSETOLL-FREENUMBER
43
in terms of convenience/proximity and theprice of fuel displayed at the sales outlet.To coincide with the launch of the “Cus-tomer Focus” project, ERG implemented itsCustomer Service extending the hours (8a.m. to 9 p.m.), also including holidays, andincreasing the services offered in order toenhance its relationship with the customer.The toll-free number provides informationon ERG’s promotions, on fuel cards, onpetrol coupons and on the services offeredby ERG Petroli, in addition to serving as ageneral information channel, useful for up-dates on traffic, transport,events and for en-quiries concerning public and private ad-dresses.The toll-free number is in addition to thewebsite www.myerg.it, set up for the pur-pose of managing the relationship with cus-tomers and operators.
Relationship with operatorsThe Customer Focus project has increasedthe awareness of the importance and therole of operators within the Group’s strate-gies, leading the company to define an in-novative agreement with the Industry As-sociations, based on close collaborationand consultation.This agreement also provides for:• the introduction of a commercial incen-
tive that is much more structured, basedon both quantitative and qualitative ob-jectives (e.g. the service to the consumer);
• the introduction of telematic and com-puter tools (operator’s portal) at everysales outlet in order to manage the com-pany-operator information flow morequickly and efficiently and to offer serv-ices to customers such as the payment offines and bills, and recharging of mobiletelephones and digital TV subscriptions.
In order to make the operator,who repre-sents the first interface vis-à-vis the con-sumers, even more responsible, it was de-cided to assign him the sales outlet’s leadingrole by way of an innovative advertisingcampaign featuring him as the mainspokesman for ERG’s value proposition.The change process as regards the role ofoperator is accompanied by specific train-ing in addition to the traditional trainingprovided at the start of his profession.The training activity is conceived in an orig-inal and innovative manner with a specific
travelling project aimed above all at involv-ing participants emotionally. The trainingwill be provided with the use of speciallycreated teaching aids and will be conductedby specialised trainers with the collabora-tion of the sales force.In order to ascertain the application and thequalitative progresses achieved by each op-
erator, an “Appraisal Card” has been pre-pared to be completed by the operator ona monthly basis and periodically validated bytheAssistente di Rete (Retail NetworkAs-sistant). The appraisal will then be com-pleted by an outside observer who will ap-prove the facility according to MysteriousClient procedures.
PRICE TRANSPARENCYAt the beginning of 2007 the Antitrust Authority announced the launch of an enquiryto establish whether or not a potential agreement existed between the oil companiesto jointly fix fuel prices.ERG stated that it was willing to provide all data, information and evaluation elementsin order to clarify its position and total lack of involvement with the aforesaid charges.The oil companies concerned submitted a document setting out their commitments andthese were accepted by the Antitrust Authority, which concluded its investigation on20 December 2007.
44
Social marketing
No alcoholFrom June to July 2007, 120 sales outlets inLazio were involved in a road safety aware-ness campaign. The operators were giventwo days of training on the contents of thecampaign,which involved the distribution toERG customers of 60 thousand kits com-plete with SOFFIA&SAI informative book-let and single use breathalyzers.Furthermore, inApril, at the request of theLazio Region, another 10 thousand breath-alyzers were sent to 46 municipalities.
101... computersThe year 2007 saw the conclusion of theproject “La Carica dei 101” (101... Com-
puters), during thecourse of which 21sales outlets in theEmilia Romagna Regionpromoted the donationof Personal Computersto 16 schools in thearea, selected via a spe-cial loyalty programme.In fact ERG customers,after refuelling 20 timesfor a value of 10 € eachtime, were able tochoose the school where they wished to as-sign the funds they had raised.Based on the final rankings, at the end of thecompetition, the schools received a numberof PCs in proportion to the preferences ex-pressed by customers.
Misericordia associationForty-one sales outlets in the Province ofTrapani organised a fund-raising campaign todonate a mobile intensive care unit to the“Misericordia” National Volunteers Asso-ciation.Over a period of 14 months (from April
2006 to May 2007) the participating oper-ators undertook to pay ERG, every 3months, by crediting a current accountspecifically opened in the name of the com-pany supplying the unit (ALEA S.a.s. ), 2thousandths of one Euro +VAT for each litrepurchased during the reference quarter.The operators covered 40% of the cost ofthe unit,while the remainder was borne byERG.
118Twenty-one sales outlets inthe Province of ReggioEmilia organised a fund-rais-ing campaign to donate anEquipped Vehicle for maxi-emergencies to the local118 service.At the end of every quarter,each operator made a banktransfer to the special current accountopened byARICAR, the company appointedto supply the vehicle.The cost of the vehicle was 40% covered byoperators, the remaining 60%,plus the costof advertising material, being borne by ERG.
Every time you accelerate or brake sud-denly, your engine uses more fuel and pro-duces more CO2.
8.When accelerating,change up gearsas early as possible.
Higher gears are more economical interms of fuel consumption**.
9.Try to anticipate trafficflow.
Look at the traffic as farahead as possible in or-der to avoid unneces-sary stopping and start-ing within the flow oftraffic.
10. Consider carsharing for work orleisure.
You will help reduce con-gestion and fuel consump-
tion.
* International Energy Agency
** European Commission
For further information visit the websitewww.savemorethanfuel.eu
45
1. Keep your car well serviced andcheck the oil level regularlyCorrectly maintained cars can oper-ate more efficiently and help reduce CO2emissions.
2. Check your tyre pressureevery month.Under-inflated tyres can in-crease fuel consumptionby up to 4%*.
3.Remove unnec-essary weightfrom your bootor back seats.The heavier the car,the harder the en-gine has to workand the more fuel itconsumes.
4. Close your win-dows, especially athigher speeds,and removeempty roof racks.This will reduce wind resistance andcan lower your fuel consumption and CO2emissions by up to 10%**.
5.Use air conditioning only when nec-essary.Unnecessary use increases fuel consumptionand CO2 emissions by up to 5%**.
6.Start driving soon after starting theengine and turn off the engine whenstationary for more than one minute
Modern engines enable you to just get inand go, thus reducing fuel consumption.
7. Drive at reasonable speeds andabove all, drive smoothly.
Savemorethanfuel
ERG is taking part in a project, promoted by the European Commission and by EUROPIA, the European Oil Industry Association, aimedat enhancing consumer awareness on a more eco-compatible behaviour and in particular on a more efficient use of fuel.At all ERG ser-vice stations information folders will be distributed explaining how to drive in a more sustainable manner.
PERFORMANCE DATA AND INDICATORSECONOMY AND FINANCE
46
GROUP ECONOMIC-FINANCIAL RESULTS
2007 2006 2005
Revenues from ordinary operations Million Euro 10,166 9,128 8,958
EBITDA Million Euro 552 442 869
EBITDA at replacement cost Million Euro 361 463 633
EBIT Million Euro 366 285 712
EBIT at replacement cost Million Euro 176 305 477
Net income Million Euro 192 194 421of which Net Group Income Million Euro 171 153 385
Net Group Income at replacement cost Million Euro 39 103 230
Cash flow from operations Million Euro 573 47 435
Net invested capital Million Euro 2,837 2,754 1,977
Investments Million Euro 380 365 274
ROACE (1) % 4% 8% 16%
ROE (1) % 4% 11% 25%
Financial leverage % 49% 49% 39%
Amounts calculated or reconciled in accordance with the valuation and measurement criteria laid down by International Financial Reporting Standards (IFRS)(1) net income and NOPAT calculated at replacement cost
OPERATIONAL DATAAND INDICATORS
2007 2006 2005
Processing at refineries Thousand tonnes 19,607 18,681 21,163
Inventory of raw materials and products Thousand tonnes 2,833 2,630 2,736
Total sales of petroleum products Thousand tonnes 19,389 17,763 19,916of which exports Thousand tonnes 9,967 7,812 9,190
Domestic retail sales Thousand tonnes 1,991 2,019 2,082
Domestic retail outlets (at end of period) Number of outlets 1,959 1,968 1,967
Average domestic retail throughput(based on outlets at end of period) m3 1,274 1,295 1,326
Domestic retail market share (gasoline + diesel) % 6.9 6.9 7.1
Wholesale market share (diesel) % 8.3 8.8 8.9
Total electric power production GWh 5,604 5,098 5,266
Total electric power productionfrom renewable sources (1) GWh 186 66 15
Electricity sales GWh 4,819 4,561 4,797
Electric power production domestic market share % 1.3 1.5 1.6
(1) the figures also concern companies not included within the consolidation area of ERG’s financial statements
47
CALCULATION OF NETVALUEADDED
2007 2006 2005
Production value Million Euro 10,403 9,366 9,157
Intermediate production costs Million Euro (9,597) (8,685) (8,075)
Ordinary gross value added Million Euro 806 681 1,802
Incidental items Million Euro 28 22 41
Overall gross value added Million Euro 834 704 1,122
Amortisation/Depreciation Million Euro (185) (157) (156)
Overall net value added Million Euro 649 546 966
ERG SHARE PRICEANDVOLUMETRADED
2007 2006 2005
Year-end reference price Euro 12.88 17.40 20.29
High Euro 21.73 25.48 23.74
Low Euro 12.25 14.74 8.02
Average price Euro 17.37 18.97 15.61
Average volume no. 1,576,581 1,172,964 830,315
ALLOCATION OF NETVALUEADDED
2007 2006 2005
To Staff (1) Million Euro 215 199 188
To the Public Administration (2) Million Euro 146 85 305
To the Providers of Loan Capital (3) Million Euro 95 67 50
To Shareholders (4) Million Euro 96 97 70
To the Company (5) Million Euro 96 97 351
To the Community (6) Million Euro 1.3 1.3 1.6
(1) this refers to employees, to the directors and statutory auditors, to the external auditors and to people engaged under coordinated and continuous collaboration contracts. In additionto fees, social security contributions and severance accruals, it also includes incidental costs such as canteens and luncheon vouchers,board and lodgings for transferred employees,professionalrefresher courses..
(2) this includes income taxes (IRES, IRAP) and other taxes and dues. On the other hand, it does not include excise duty on the sale of petroleum products which is recovered from theoperators.
(3) this primarily includes interest expenses on short-term loans, bank commission, interest expenses on the ISAB Energy and Enertad Project Financings and interest accrued on loans receivedfrom the credit institutions.
(4) this refers to dividends paid during the reference year to ERG S.p.A. shareholders and to third-party quotaholders of ISAB Energy and ISAB Energy Services following approval of theprevious year’s financial statements. Regarding the dividends paid to shareholders by ERG S.p.A., we report that the unitary amount paid per share in 2007 was 0.40 Euro (0.40 Euro in2006 and 0.30 Euro in 2005).
(5) this refers to the positive variation in shareholders’ equity reserves calculated as the difference between profit accruing during the financial period and dividends paid during the year.(6) this is made up of voluntary disbursements and donations and costs relating to sports, social and cultural events. It does not include sponsorships for sports teams taking part in amateur
or professional championships.
48
HUMAN CAPITAL AND COMMUNITY
HEADCOUNTANDWORK ORGANISATION
2007 2006 2005
Employees as at 31/12 no. 2,825 2,820 2,679
Female employment % 17.3 16.6 16.1
Turnover (1) % 13.8 15.5 11.3
Absenteeism index (1) % 3.1 3.8 4.8
Incidence of part-time (1) % 1.7 1.8 1.6
Incidence of overtime (1) % 11.2 10.8 9.8
(1) excluding companies directly managing the service stations
MANAGEMENT OF“NON-OIL” SUPPLIERS
2007 2006 2005
Qualified suppliers no. 1,749 1,529 1,670
Average qualification time days 202 195 247
Active suppliers (at least one order) no. 3,091 2,958 2,752
Percentage of tenders % 82 55 53
Frequency index no. of casualties per million hours worked 1.1 1.7 3.9
Severity index no. of net days lost per thousand hours worked 0.05 0.04 0.13
CASUALTIES
2007 2006 2005
Total casualties no. 19 26 18
Frequency index no. of casualties per million hours worked 4.0 5.2 4.2
Severity index no. of net days lost per thousand hours worked 0.07 0.12 0.09
Frequency index manufacturing sector no. of casualties per million hours worked 2.8 5.2 1.8
Severity index manufacturing sector no. of net days lost per thousand hours worked 0.05 0.12 0.06
Frequency index marketing sector no. of casualties per million hours worked 5.7 5.9 7.6
Severity index marketing sector no. of net days lost per thousand hours worked 0.11 0.12 0.13
INDUSTRIAL RELATIONS
2007 2006 2005
Unionisation rate (1) % 49.8 54.3 51.1
Ongoing labour disputes no. 6 13 5
(1) figures refer only to companies subject to Energy and Petroleum sector contract
TRAINING
2007 2006 2005
Total training hours 64,024 72,087 52,741
of which Managerial: hours 12,754 – –
Index of average training per employee days 2.8 3.2 2.5
49
ENVIRONMENT AND TERRITORY
ENERGYAND ENVIRONMENTAL EFFICIENCY2007 2006 2005
Energy consumption (primary sources) ktoe 2,215 2,141 2,186of which Natural Gas ktoe 200 47 30
Energy Intensity Index Refining % 98 100 –(baseline 2006 = 100%)Thermoelectric park efficiency toe/MWheq 0.261 0.271 0.266Total CO2 emissions ktonnes 7,031 6,618 7,253CO2 avoided by using renewable energy sources ktonnes 86.5 31.0 7.1CO2 Index Refining tonnes/processed in ktonnes 96 96 106CO2 Index Thermoelectric tonnes/MWheq 0.84 0.89 0.89
Water Withdrawals Millions of m3 536 522 503of which seawater Millions of m3 523 510 489of which fresh water Millions of m3 13 12 13
Water discharge - Oils tonnes 17 28 49Oils Index Refining tonnes/processed in Mtonnes 0.68 1.04 2.19
NOx Emissions tonnes 6,234 5,282 6,258SO2 Emissions tonnes 15,436 18,082 24,358Particulate Emissions tonnes 542 459 1,038NMVOC Emissions tonnes 6,478 5,598 5,573NOx Index Refining tonnes/processed in ktonnes 0.08 0.07 0.09SO2 Index Refining tonnes/processed in ktonnes 0.33 0.33 0.48Particulate Index Refining tonnes/processed in ktonnes 0.016 0.021 0.018NMVOC Index Refining tonnes/processed in ktonnes 0.29 0.29 0.27NOx Index Thermoelectric tonnes/GWheq 0.76 0.72 0.77SO2 Index Thermoelectric tonnes/GWheq 1.4 2.2 2,6Particulate Index Thermoelectric tonnes/GWheq 0.07 0.06 0.11
Waste produced ktonnes 590 280 326of which from reclamationand new construction activities % 89 76 76of which destined for recovery % 13 13 9of which non hazardous % 18 24 19
Petroleum product leaks no. 11 16 18Petroleum product leaks m3 150 750 366
ECONOMIC RESOURCES2007 2006 2005
Total HSE expenditures Millions Euro 149 139 124of which investments (1) Millions Euro 36 37 39of which current expenditures (2) Millions Euro 113 102 85
(1) compared to the amount shown for investments in the ERG Annual Report, some additional HSE items have been included under the captions “capacity maintenance” and “development”(2) current expenditures include the cost of HSE personnel
HUMANAND OPERATIONAL RESOURCES2007 2006 2005
HSE equivalents of total Group % 13.4 10.2 10.3Level of ISO 14001 and OHSAS 18001 certificationof ERG industrial sites % 60 53 47HSE Audits no. 58 76 53
50
GRI/G3 PROFILE DISCLOSURE
ERGGRI Application Levels Disclosure
C B A
1 Strartegy andAnalysis
1.1 Statement from the most senior decisionmaker of the organization about the relevanceof sustainability to the organization and its strategy. � � � pages 21-24
1.2 Description of key impacts, risks, and opportunities.The reporting organization should providetwo concise narrative sections on key impacts, risks, and opportunities.. � �
2 Organizational Profile
2.1 Name of the organization. � � � page 8
2.2 Primary brands, products, and/or services. � � � pages 10-13
2.3 Operational structure of the organization, including main divisions, operating companies,subsidiaries, and joint ventures. � � � pages 7-8
2.4 Location of organization’s headquarters. � � � page 7
2.5 Countries where the organization operates. � � � pages 10-13
2.6 Nature of ownership and legal form. � � � page 8
2.7 Markets served. � � � pages 10-13
2.8 Scale of the reporting organization,(employees, net sales, capitalization, quantity of products provided). � � � pages 8-12
2.9 Significant changes during the reporting period regarding size, structure, or ownership. � � � pages 4-5
2.10 Awards received in the reporting period. � � � page 13
3 Report Parameters
Report profile
3.1 Reporting period (e.g., fiscal/calendar year) for information provided. � � � pages 4-5
3.2 Date of most recent previous report (if any). � � � page 2
3.3 Reporting cycle (annual, biennial, etc.) � � � page 2
3.4 Contact point for questions regarding the report or its contents. � � � page 55
Report scope and boundary
3.5 Process for defining report content. � � � page 17
3.6 Boundary of the report. � � � pages 4-5
3.7 State any specific limitations on the scope or boundary of the report. � � � pages 4-5
3.8 Basis for reporting on joint ventures, subsidiaries, leased facilities, outsourced operations, and otherentities that can significantly affect comparability from period to period and/or between organizations. � � � page 8
3.9 Data measurement techniques and the bases of calculations, including assumptions and techniques � � pages 4-5,underlying estimations applied to the compilation of the Indicators and other information in the report. 46-51
3.10 Explanation of the effect of any re-statements of information provided in earlier reports,and the reasons for such re-statement � � � pages 4-5
3.11 Significant changes from previous reporting periods in the scope, boundary,or measurement methods applied in the report. � � � pages 4-5
GRI content index
3.12 Table identifying the location of the Standard. Disclosures in the report. � � � pages 50-52
Assurance
3.13 Policy and current practice with regard to seeking external assurance for the report. � �
Self Declared
Third Party Checked
GRI Checked
2002in Accordance C C+ B B+ A A+
Mandatory
Opzional
�
Rep
ort
Exte
rnal
lyA
ssur
ed
Rep
ort
Exte
rnal
lyA
ssur
ed
Rep
ort
Exte
rnal
lyA
ssur
ed
51
ERGGRI Application Levels Disclosure
C B A
4 Governance, commitments, and engagement
Governance
4.1 Governance structure of the organization, including committees under the highest governancebody responsible for specific tasks, such as setting strategy or organizational oversight. � � � pages 15-17
4.2 Indicate whether the Chair of the highest governance body is also an executive officer. � � � page 15
4.3 For organizations that have a unitary board structure, state the number of members of thehighest governance body that are independent and/or non-executive members. � � � page 15
4.4 Mechanisms for shareholders and employees to provide recommendationsor direction to the highest governance body. � � � pages 15-16
4.5 Linkage between compensation for members of the highest governance body, senior managers,and executives and the organization’s performance (including social and environmental performance). � �
4.6 Processes in place for the highest governance body to ensure conflicts of interest are avoided. � � page 16
4.7 Process for determining the qualifications and expertise of the members of the highest governancebody for guiding the organization’s strategy on economic, environmental, and social topics. � �
4.8 Internally developed statements of mission or values, codes of conduct, and principles relevantto economic, environmental, and social performance and the status of their implementation. � � pages 14-16
4.9 Procedures of the highest governance body for overseeing the organization’s identification andmanagement of economic, environmental, and social performance, including relevant risks andopportunities, and adherence or compliance with internationally agreed standards,codes of conduct, and principles. � � pages 16-17
4.10 Processes for evaluating the highest governance body’s own performance, particularlywith respect to economic, environmental, and social performance. � �
Commitments to external initiatives
4.11 Explanation of whether and how the precautionary approach or principle is addressedby the organization. � � pages 16-17
4.12 Externally developed economic, environmental, and social charters, principles, or other initiativesto which the organization subscribes or endorses. � � page 18
4.13 Memberships in associations and/or national/international. � � page 37
Stakeholder engagement
4.14 List of stakeholder groups engaged by the organization. � � � page 18
4.15 Basis for identification and selection of stakeholders with whom to engage. � � � pages 18-19
4.16 Approaches to stakeholder engagement, including frequency of engagement by type pages 18-19,and by stakeholder group. � � 29, 38-40, 42
4.17 Key topics and concerns that have been raised through stakeholder engagement, and how pages 18-19,the organization has responded to those key topics and concerns, including through its reporting. � � 29, 38-40, 42
52
ERGDisclosure
Economic Performance Indicators
Economic Performance
EECC11 Direct economic value generated and distributed, including revenues, operating costs, employee compensation, donations and other community investments, retained earnings, and payments to capital providers and governments. **
Market Presence
EECC66 Policy, practices, and proportion of spending on locally-based suppliers at significant locations of operation. **
Indirect Economic Impacts
EECC88 Development and impact of infrastructure investments and services provided primarily for public benefit through commercial, inkind, or pro bono engagement. **
EECC99 Understanding and describing significant indirect economic impacts, including the extent of impacts. **
Environmental Performance Indicators
Materials
EENN11 Materials used by weight or volume. **
Energy
EENN33 Direct energy consumption by primary energy source. **
EENN55 Energy saved due to conservation and efficiency improvements. **
EENN66 Initiatives to provide energy-efficient or renewable energy based products and services, and reductions in energy requirements as a result of these initiatives. **
Water
EENN88 Total water withdrawal by source. **
EENN99 Water sources significantly affected by withdrawal of water. **
Emissions, Effluents, and Waste
EENN1166 Total direct and indirect greenhouse gas emissions by weight. **
EENN1188 Initiatives to reduce greenhouse gas emissions and reductions achieved. **
EENN2200 NO, SO, and other significant air emissions by type and weight. **
EENN2211 Total water discharge by quality and destination. **
EENN2222 Total weight of waste by type and disposal method. **
EENN2233 Total number and volume of significant spills. **
EENN2244 Weight of transported, imported, exported, or treated waste deemed hazardous under the terms of the Basel Convention Annex I, II, III, and VIII, and percentage of transported waste shipped internationally. **
Products and Services
EENN2266 Initiatives to mitigate environmental impacts of products and services, and extent of impact mitigation. **
Overall
EENN3300 Total environmental protection expenditures and investments by type. **
53
ERGDisclosure
Social Performance Indicators
Labour Practices and Decent Work
Employment
LLAA11 Total workforce by employment type, employment contract, and region. **
LLAA22 Total number and rate of employee turnover by age group, gender, and region. **
Labour/Management Relations
LLAA44 Percentage of employees covered by collective bargaining agreements. **
Occupational Health and Safety
LLAA77 Rates of injury, occupational diseases, lost days, and absenteeism, and number of workrelated fatalities by region. **
LLAA88 Education, training, counseling, prevention, and risk-control programs in place to assist workforce members, their families, or community members regarding serious diseases. **
Training and Education
LLAA1100 Average hours of training per year per employee by employee category. **
LLAA1111 Programs for skills management and lifelong learning that support the continued employability of employees and assist them in managing career endings. **
Diversity and Equal Opportunity
LLAA1133 Composition of governance bodies and breakdown of employees per category according to gender, age group, minority group membership, and other indicators of diversity. **
Society Performance Indicators
Community
SSOO11 Nature, scope, and effectiveness of any programs and practices that assess and manage the impacts of operations on communities, including entering, operating, and exiting. **
Anti-Competitive Behavior
SSOO77 Total number of legal actions for anticompetitive behavior, anti-trust, and monopoly practices and their outcomes. **
Product Responsibility Performance Indicators
Product and Service Labeling
PPRR55 Practices related to customer satisfaction, including results of surveys measuring customer satisfaction. **
SUSTAINABILITY ACTIVITIES CARRIED OUT:LETTER FROM URS ITALY
54
ERG S.p.A.
Sustainability Report 2007
Via Vitaliano Brancati, 60
00144 Rome
www.erg.it
ERG S.p.A. - June 2008
This publication is available in pdf format at: www.erg.it
Written by: Sustainability and HSEQ Governance - [email protected]
Editing: Direzione Comunicazione - [email protected]
Graphics: Göttsche. Agenzia di pubblicità e marketing
Printed by: Marchesi Grafiche Editoriali S.p.A. - Rome
