Disclosure on management approach

Sustainability management model

Sustainability is part of Eni’s business model and is integrated in all company processes: from planning, monitoring and control to risk prevention and management, from the implementation of operations to reporting and communication with internal and external stakeholders.

According to this, all corporate targets are pursued with an approach strongly oriented towards operational excellence, technological innovation, cooperation in the development of the Countries involved, the central importance of people, responsible business management based on strict financial discipline, the highest ethical principles and the synergies resulting from integration along the entire energy supply chain.

Eni’s Board of Directors has a central role in determining sustainability policies and strategies and in approving the sustainability results, which are also presented at the Annual General Meeting.

Since 2011, following the approval of the Board of Directors, Eni has had a Sustainability Policy that outlines the fundamental sustainability principles upon which the Company bases its operations and forms part of the highest level of Eni’s new internal regulatory system.

To maintain high standards in operating activities, Eni has set priority sustainability goals to be pursued with projects and initiatives included in the Strategic Plan. Implementation of projects relating to priority goals is supported by economic incentives. Project progress status and achievement of targets are monitored by the Sustainability Unit via a system of annual and semi-annual reporting. The approval of the related action plans and the review of the major achievements are subject to the highest levels of corporate decision-making.

Regulatory system

Eni undertakes to ensure the integrity, transparency, fairness and efficiency of its processes by adopting appropriate tools, standards and rules for the conduct of activities and the exercise of powers, promoting rules of conduct based on the principles of traceability and segregation of duties.

Eni’s regulatory system is based on a coherent reference framework, which includes the essential elements of the By-Laws, the Code of Ethics, the Corporate Governance Code, the Principles of Model 231, the SOA Principles and the CoSO Report.

The system is made up of policy, coordination and control tools (Policies and Management System Guidelines – MSGs) and operational tools (Procedures and Operating Instructions). The Policies are approved by the Board of Directors of Eni SpA and define the principles and general rules of conduct on which Eni’s activities must, without exception, be based. Eni has ten policies: “Our people”, “Our partners in the value chain”, “Global compliance”, “Corporate Governance”, “Operational Excellence”, “Our institutional partners”, “Information management”, “Sustainability”, “Our tangible and intangible assets” and “The integrity of our operations”.

The MSGs issued by Eni provide guidelines for the management of operating and business support processes, including sustainability aspects. They are also used to describe Compliance and Governance models. Each individual company formally adopts the MSGs and adapts its own regulatory framework as a result. By the end of 2013, Eni had issued twenty-eight process MSGs and ten for Compliance/Governance, thereby completing the redesign of its processes, redefinition of the governance/compliance guidelines and simplification of the regulatory framework.

In conclusion, the procedures define the operating methods which must be used to carry out company activities while the Operating Instructions define detailed operating procedures for a specific department, organizational unit or professional area.

Economic performance and market presence

Making use of the integrated business model, Eni has identified a long-term sustainable growth and value creation strategy for shareholders, the implementation of which is based on specific guidelines and strategies at the business level. In 2013 Eni achieved solid results in a difficult market (see the “Profile of the year”). In a market environment that is expected to remain difficult, Eni’s strategy for the 2014-2017 period will be based on selective growth in activities of the E&P sector, accelerated restructuring of mid and downstream activities and value creation resulting from disposals and disciplined investment management. All these operations will result in an increase in the cash flow over the four years to sustain progressive growth in dividends for shareholders and a strong financial position for Eni (see “Our strategy”).

Management of procurement activities

The purpose of the procurement process is to translate the requirements expressed by company units into a supply of goods, works or services from suppliers, in line with quality standards, time schedules and other specific requirements, while minimizing procurement costs as far as possible. Furthermore, each phase of the procurement process complies with Eni HSEQ principles.

In order to manage this process in a systematic and structured manner, Eni has adopted the “MSG Procurement”, which: (i) regulates the various phases and activities included in the procurement process, such as procurement planning, tender management, contract award and post-award contract management; (ii) establishes the roles and responsibilities of the main actors involved in the procurement process; (iii) defines the general rules for key crosscutting activities in the procurement process, such as vendor management, procurement monitoring and reporting and document management.

Audits are performed continuously on vendors both at the qualifying stage and during service provision.

Indirect economic impacts

In addition to direct employment, Eni participates in the development of the Countries in which it operates by strengthening the supply chain linked to induced activity and implementing specific local development projects. Eni, in its areas of expertise, systematically makes use of the supply of local goods and services as well as the local workforce, thus responding to the demand of many national and international stakeholders to create value locally. Many affiliates have adopted local procedures that define the process to be followed for using local labour from the areas surrounding our operations in each region. In operational contexts, market analysis is systematically conducted at a local level in order to include companies from the local area in the vendor lists. Also, when selecting international companies, one of the technical assessment criteria is the percentage of local content and the presence of a plan to develop it. Eni promotes annual training programs with the aim of enabling local personnel to obtain high responsibility jobs and to replace international staff.

Environment

Eni’s environmental commitment is one of the pillars of its sustainability strategy. Eni has adopted a unique system for managing Health, Safety and the Environment (HSE).

Management of environmental issues is based on prevention, protection, information and participation criteria and its goals are: identification of significant environmental aspects and adoption of the best technologies; mitigation of environmental impacts; management of a system to prevent events with a direct or indirect adverse environmental impact, connected to specific production unit activities; and the adoption of site-specific methods for protecting biodiversity. Eni has defined and constantly updates an integrated health, safety and environmental (HSE) management system managed by the HSE corporate department, which is responsible for promoting the management and continuous improvement of HSE performance. The tools used by Eni to manage environmental issues are the policies “Operational excellence”, “The integrity of our operations”, “Sustainability” and the MSG HSE in addition to the various procedures and operating instructions (OPI). Work on HSE topics is coordinated by an HSE Coordination Committee, chaired by Eni’s Safety, Health and Environment Manager, and is made up of Managers of the business unit HSE functions.

Energy

Energy efficiency is, for Eni, a key factor in good management and sustainability. It is linked not only to responsible management of resources but also to reduction of the impact of GHG emissions and control of emissions of nitrogen oxides and sulphur, indicators of the proper functioning of the combustion processes and choice of the best fuels. Eni undertakes to reduce greenhouse gas emissions by improving efficiency and increasing the use of fuels with a lower carbon content, and promotes an informed and sustainable use of energy through information campaigns and internal and external education and through the inclusion of sustainability criteria in the selection and evaluation of suppliers. Eni is also steadily reducing its emissions indexes for the amount of energy produced/developed and promotes the development of gas associated with oil in all projects.

Water

Eni is aware that access to water is an important issue for development and has undertaken to optimize the use of fresh water in the production cycle to limit the impact on its availability for local communities. Over the last few years Eni has been constantly reducing its fresh water use by implementing the best technologies and aims to gradually increase the re-injection of the water from extraction and production back into the reservoirs of origin.

To assess the impact of its activities in the so-called “water stressed” zones, where even a low consumption of fresh water could compete with primary needs, Eni has decided to apply the Global Water Tool developed by WBCSD and adapted to the oil&gas sector by IPIECA in 2011.

Biodiversity

Eni considers the preservation of biodiversity and ecosystem services to be an essential component of sustainable development when implementing its industrial projects and undertakes to integrate this preservation goal in its own activities throughout the lifecycle of its facilities and in all the contexts in which it operates. In its design and operational practices, Eni considers the presence of protected areas and areas that are significant in terms of biodiversity, the presence of threatened species and ecosystem services of environmental and social importance. Eni identifies and assesses the potential impacts of its operational activities on biodiversity and implements mitigation actions to offset and minimize the effects. Eni also evaluates the interaction between its activities and the ecosystem services, in particular by promoting efficient water management, especially in areas subject to water stress, and by reducing emissions into the air, water and soil. For this purpose, Eni has adopted protocols developed within the framework of IPIECA and contributes to the global mapping of protected areas through the Proteus project. Eni has adopted site specific methods for protecting biodiversity that are based on the principles of the Convention on Biological Diversity, the guidelines of the Energy and Biodiversity Initiative and the operational tools developed by the IPIECA-OGP Biodiversity Working Group. Eni maps its operational sites in relation to the areas of high biodiversity value to differentiate its operational practices on the basis of their relevance and identify priorities for implementing specific action plans.

Emissions

Eni has established a carbon management strategy for reducing greenhouse gas emissions and manages participation in the European Emission Trading system through complex management procedures including physical accounting, reporting and monitoring of emissions, as well as the related operations for the administration of quotas and the related trading. For other emissions (SOx, NO_x, etc.), Eni undertakes to apply the Best Available Techniques (BAT) and best standard procedures to reduce emissions and control the main pollutants in the atmosphere.

Waste

In all the places where it operates, Eni is committed to complying with the existing legislation on waste and reducing the environmental impact associated with different phases of the management process. Moreover, as established by the EU, Eni has adopted the principles of the waste management hierarchy with the aim of preventing the production of waste, minimizing disposals in landfills and increasing recovery.

Labour practices and adequate working conditions

Part of Eni’s culture and the basis for the success of the company is the central importance given by Eni to its people: from employment protection to the development of skills and competencies and creation of a work environment which offers equal opportunities to all based on shared, merit-based criteria, without discrimination. These principles are confirmed in Eni’s Code of Ethics which explicitly refers to the United Nations Universal Declaration of Human Rights, the ILO Fundamental Conventions and the OECD Guidelines for Multinational Enterprises; particular emphasis is given to the protection of labour and trade union freedom, repudiating “any sort of discrimination, corruption, forced labour or child labour”.

The promotion of international labour standards in all contexts is the focus of Eni’s regulatory documents, the trade union agreements in force at the national and international level, personnel management and development processes and training and communication initiatives.

Health and safety

The health and safety of Eni’s people, the community and Eni’s partners are a priority for Eni in pursuing its business activities. All of Eni’s organizational solutions guarantee respect and protection for health and safety based on the principles of precaution, prevention, protection and continuous improvement, making all company levels responsible for achieving this. Operating sites conduct risk assessment activities to identify the major threats to personnel safety. Eni has a health management system based on the OHSAS 18001 international standard and annually introduces specific safety goals connected to the remuneration of Eni’s people. Campaigns to raise awareness, information provision and specific training courses on the subject for the whole workforce, without exception, are an additional element of Eni’s safety culture, which is seen as an essential component of Eni’s corporate culture.

Employment and quality of work

The strategic importance of Eni’s people is enshrined in the Policy “Our people” where it states that “people are the indispensable and essential element for the very existence of the company and business goals can be achieved only through their dedication and professionalism”.

The Policy emphasises the importance of the human factor and the drivers that determine development and improvement, identifies the principles and values that should inspire actions and behaviours and affirms Eni’s commitment to supporting “the observance of the rights enshrined in the Universal Declaration of Human Rights”.

These principles are reflected in the MSG “Human Resources” that standardizes and defines all the processes within the sphere of Human Resources.

For Eni, offering quality work also means enhancing the working practices, results, professional skills, experience and potential of its people using integrated and consistent assessment systems. The remuneration systems are also oriented to guarantee recognition of the contribution of our people to the achievement of company objectives. In relation to these principles, the remuneration policies are defined in an integrated manner at the global level, in line with the reference indicators for the local markets and specific sectors. Eni “encourages, in its labour relations, the adoption of conduct based on mutual respect and condemns any form of behaviour interpretable as bullying or harassment” and as part of this commitment has developed a web seminar on “non discrimination” which explains the ILO Convention 111, one of the documents that governs the international standards on workplace discrimination. This initiative, evaluated as a “best practice” by the International Labour Organization (ILO) was inspired by our belief that awareness by all people of the importance of equality and non discrimination is an essential requirement for the creation of an inclusive environment, which promotes respect for and gives value to diversity.

Freedom of association and collective bargaining

In conducting its activities Eni guarantees freedom of association and the effective recognition of the right to collective bargaining. In order to develop an effective and continuous trade union dialogue, Eni has set up with the Trade Unions an industrial relations model with phases that allow for all the information, consultation and engagement needed to meet business and organizational requirements. The industrial relations model ensures broad prior participation, guaranteeing the existence of a process of continuous dialogue with the trade unions during changes involving the company and the workers. Therefore, Eni protects people’s right to form and join the trade union of their choice without discrimination, interference or prior authorization, with the sole constraint of the rules of the organization involved. Eni’s Industrial Relations are regulated at the national level by the 2001 Industrial Relations Protocol and by the agreement on development and competitiveness and for a new industrial relations model signed on May 26, 2011. Issues of note in relation to industrial relations activities at an international level are the relations with the European Works Council (CAE) on the progress of Eni policies within the European framework and with the representatives of the European Risk Observatory for Workers’ Safety and Health.

Diversity and equal opportunities

Eni promotes behaviours aimed at improving diversity, inclusion and non-discrimination and is committed to creating a work environment where personal and cultural characteristics are considered a resource and a source of mutual enrichment.

As enshrined in the Policy “Our People”, Eni respects the dignity of each individual and offers equal opportunities regardless of race, colour, gender or any other individual status unrelated to the requirements contained in the job specification.

The respect of equal opportunities is guaranteed by the application of internal systems and procedures for selection, evaluation and development and Compensation & Benefit based on the enhancement of skills and merit and a fair compensation system. In fact the pay gap analysis, conducted using a methodology that, in remuneration comparisons, neutralizes any effects arising from differences in position and seniority level, reveals a general uniformity of remuneration between genders.

Training and awareness

Eni has developed training paths for its people that represent privileged tools for promoting personal and professional development and contributing to the quality of work. Eni Corporate University is the main route that Eni uses to develop and enhance knowledge and people’s managerial and technical-professional skills. The different courses provide both for strengthening of the process of cultural, professional and managerial growth and in-depth exploration of specialist topics with a direct impact on the business. For members of the Board of Directors, a series of specific training and awareness initiatives on issues linked to sustainability are provided as part of the Board Induction process.

Human Rights

Eni operates in accordance with the highest international standards concerning the responsibilities of companies with regard to Human Rights, including the Guiding Principles for Business and Human Rights approved by the UN Council for Human Rights in 2011. These guidelines require that companies implement a coherent system of rules designed to prevent, manage and report Human Rights violations and adopt a due diligence process, understood as a management system that enables measures and functional processes to be adopted to achieve these goals. Eni’s regulatory system explicitly requires that “the company undertakes to respect internationally recognized Human Rights as part of its activities and to promote respect as part of activities contracted out to, or conducted with, partners and by its stakeholders”. Since 2007 Eni has adopted a Guideline which regulates the protection and promotion of Human Rights in all the company’s actions. In the same year the Code of Ethics, which describes the company’s expectations with regard to various areas relating to Human Rights, was approved. Over the years measures to respect Human Rights have been integrated in the various corporate regulatory instruments relating to Sustainability, Human Resources, Security, Sustainability Stakeholders Engagement and Community Relations, HSE, Planning and Control, Procurement, Energy and Environmental Industrial Project Development and Integrated Risk Management.

The commitment to respect Human Rights is also met at Eni through initiatives and projects focused on priority areas identified through the Human Rights Compliance Assessment project. The related improvement actions are carried out by the relevant departments with the support of a specialist function and are coordinated by a multi-departmental Working Group.

Indigenous peoples

Eni undertakes to respect the rights of indigenous peoples on the basis of Convention No. 169 of the ILO concerning Indigenous and Tribal Peoples. Compliance with this international standard is provided for in the Eni Guidelines for the protection and promotion of Human Rights. Other references to the methods by which Eni intends to implement the Convention are explained in the Sustainability policy and in the MSG Sustainability Stakeholders Engagement and Community Relations. Corporate tools and methodologies reflect this approach, starting with the standards for the assessment of environmental, social and health impact.

In contexts where indigenous populations are present, the adoption of specific policies, which enshrine Eni’s commitment to respect the rights of indigenous peoples and to take their expectations into account in business decisions, is encouraged. To date, Indigenous Peoples Policies have been adopted for Eni’s operations in Australia and Norway.

Security

Security activities, governed by the MSG Security, are aimed at ensuring the protection of people and assets from any security threat stemming from the criminal acts of third parties that could cause direct or indirect damage, including damage to Eni’s reputation. This objective is achieved through the implementation of an effective and efficient system of Security Risk Management that defines the organization and tools needed to determine the nature of the threats, track the evolution of vulnerability over time, understand the potential consequences of future events and develop a strategic approach to their management and mitigation, as required. Preventive and defensive measures are taken that are most suitable to minimize the impact and the likelihood of adverse events occurring, always in full compliance with Human Rights and the highest international standards.

In support of these objectives, clauses related to Human Rights protection are inserted in contracts with security services providers, and training courses are carried out that also involve representatives of public security forces.

Society

Eni operates by defining long-term cooperation agreements with governments and joint ventures with the National Oil Companies, taking into account the importance of enhancing the skills of local people and businesses and promoting the transfer of knowledge and the growth of local professionalism. This willingness to take action and create development opportunities for the local population is put into practice by signing a Memorandum of Understanding (MoU).

Eni identifies and assesses the environmental, social, economic and cultural impacts generated by its activities, including those on the indigenous peoples, ensuring their mitigation and implementing improvement processes. The company adopts appropriate tools to manage and plan projects in order to identify, define and manage the initiatives for the benefit of the local communities. The process involves the use of specific operating procedures: Stakeholder Management Process; Social Baseline Analysis; Social Impact Assessment, Community Investment Planning, Monitoring & Evaluation. In 2013 the MSG “Stakeholder Engagement and Community Relations” was issued with the aim of: (i) regulating the phases and activities of the process of stakeholder engagement and sustainability relations with local communities and relations with the other business processes; (ii) establishing roles and responsibilities of the main macro players involved in the process of stakeholder engagement sustainability and community relations.

Local communities

The MSG “Stakeholder Engagement and Community Relations” regulates the community relations sub-process in order to manage relationships with the local communities residing in a specific territory in which Eni operates, including responses to their demands, and generate value in the territory through projects for local sustainable development. This sub-process, performed by the relevant company function, defines the management procedures for community relations and relationships with local communities relating to specific aspects of Eni’s business in a specific territory. These procedures include: (i) identifying the community relations strategy and the related directions for the implementation of Eni’s cooperation and development model in the territories where it has a presence, adopting an inclusive approach with stakeholders and local communities; (ii) defining, planning, mapping and implementing community relations; (iii) defining methodologies and tools that the company departments responsible must use for proper planning and management of community relations.

Eni also has appropriate standards for the assessment of impacts on local communities: i) the ESIA which gives further depth to the cultural and socio-economic part of the impact analysis; ii) the ESHIA which provides a combined and integrated assessment of the environmental and social and health impact of projects. In addition to direct employment, Eni participates in the development of the Countries in which it operates by strengthening the supply chain linked to induced activity and implementing specific local development projects. Eni manages relationships with the territories in a fair and transparent manner, establishing an ongoing dialogue with stakeholders. In order to guarantee access to information and community participation, Eni has units responsible for relations with the territory in all its subsidiaries.

Anti-corruption

Eni believes that corruption is an unacceptable obstacle to business efficiency and fair competition. Therefore, Eni uses its internal organizational and regulatory structure to combat corruption and ensure respect for transparency as part of its business model.

Since January 1, 2010 Eni has set up an Anti-Corruption Legal Support Unit (ACLSU) which provides Anti-Corruption consulting and specialist assistance for Eni’s people and Eni’s non-listed subsidiaries. The Anti-Corruption Legal Support, Sustainability and Internal Control System unit currently performs the role of the ACLSU.

Moreover, since January 1, 2012 the current MSG Anti-Corruption has been updated to include the UK Bribery Act of 2010 (in force since July 1, 2011) and supplemented with the Anti-Corruption Regulatory Instruments, which replace the previous Ancillary Procedures.

In 2013, under its new Regulatory System, Eni continued the process of revising and reissuing the Ancillary Anti-Corruption Procedures issued under the previous system, which covered sponsorship and Non-Profit Organizations. Rules for some specific relationships such as those with brokers and JV Partners had already been formulated in 2012.

Grievance Mechanism

Eni has a dedicated channel for reporting any suspected or known violation, including corruption. This disclosure channel, provided by the procedure “Whistleblowing Reports” received (including anonymously) by Eni and by its subsidiaries in Italy and abroad, allows employees, members of corporate bodies or third parties to submit, also confidentially or anonymously, reports of problems relating to the internal control system (compliance with laws and regulations, and corporate rules and procedures, fraud relating to corporate assets and company information, company’s administrative liability, etc.) or other matters in breach of Eni’s Code of Ethics (issues related to ethical behaviour, cases of bullying, harassment, conflicts relating to the management of the personnel concerned, etc.). Eni, in order to facilitate the receipt of reports, provides all possible channels of communication, including ordinary post, fax numbers, voice mail, electronic mail and communication tools on Eni’s intranet/internet websites.

Eni guarantees receipt, analysis and initiation of an investigation conducted by the Internal Audit Department. The outcomes of these investigations are submitted to the control and supervisory bodies in charge.

To support wide-ranging and sustained stakeholder engagement, which Eni pursues to improve relationships with local communities, enable more responsive and responsible management and contribute to long-term business prospects and social well-being, mechanisms for collecting and managing alerts are already active in Countries were Eni has a long established presence such as Nigeria, Kazakhstan and Pakistan; others are being strengthened in new countries of activity such as Ghana. Special attention is paid to situations where indigenous communities are present, such as in Australia, Ecuador and Norway. As part of its role in the project promoted by IPIECA to define sector-specific guidelines for the Grievance Mechanism, Eni has started a pilot project aimed at developing a site-specific mechanism for complaints in local communities and to define the basis for a valid best practice for the whole Group.

Product Responsibility

All Eni’s activities are carried out with commitment and professional rigour, with a duty to provide adequate professional input for the functions and responsibilities assigned and to act so as to protect Eni’s prestige and reputation. Business objectives, project proposals and implementation, investments and actions must all be aimed at increasing the long term value of the company’s operating assets, technological know-how and knowledge as well as creating value and wealth for all the stakeholders, especially our customers.

Consumer health and safety

Eni pursues business success with a strong market orientation, recognizing that the appreciation of those who demand products or services is of primary importance for the success of the company, and endeavours to assure the quality of the goods and services provided. It pursues business success in its markets by offering quality products and services under competitive conditions, and in accordance with all the standards established to protect fair competition. Eni is committed to respecting the right of consumers of not receiving products which are harmful to their health and physical integrity and to have complete information on the products offered.

Satisfaction of our customers and consumers

Customer Satisfaction (CS) is regularly monitored in all Eni businesses involving the sale of products or services to end customers (fuel and gas distribution, power generation, natural gas and energy sales, engineering and construction, petrochemicals). In the Gas & Power sector, Eni conducts CS surveys among its customers to monitor the level of CS and to achieve continuous improvement in the quality of services. The retail and back office processes are certified by DNV in accordance with UNI EN ISO 9001: 2008.

In the fuel distribution sector (R&M), satisfaction is evaluated by assigning detailed targets to service stations and sales agents; in addition, the performance of the vendors is measured using Mystery Shopping surveys (performed three times a year in each service station) and the CS Index.