The engagement of the Italian energy sector in the transition to the green economy

Università degli Studi di Torino

Corso di Laurea: Management dell’informazione e della comunicazione aziendale

The engagement of the Italian energy sector in the transition to the green economy

Tesi di Laurea

Relatrice De Bernardi Paola

Candidata Pinto Arianna

Matricola 1014621

Anno Accademico 2023/2024

A chi coglie, sfida e abbraccia il cambiamento. Il sole esiste per tutti.

Index

• Abstract (Italian)..................................................................................................... 4
• Abstract.................................................................................................................. 5
• 1. Introduction to circular economy........................................................................6
• 1.1. Principles and stages of Circular Economy...................................................8
• 1.2. The European framework for sustainable development.............................11
• 1.3. Rating ESG and sustainability reporting.....................................................15
• 2. Overview of the Italian energy sector...............................................................18
• 2.1. Oil & Gas sector and Hydrogen's creation of new opportunities.................22
• 2.2. Renewable sources for electricity...............................................................26
• 3. Case study: Iren’s empirical and theoretical analysis of CSR politics...............32
• 3.1. Iren’s sustainability report and KPIs analysis (2023)..................................34
• 3.2. Iren’s structure and commitment in northern Italy.....................................38
• 3.3. “Circular Wood” The plant in Vercelli: an example of circular economy and environmental protection.................................................................................. 42
• Conclusions.......................................................................................................... 46
• Bibliography......................................................................................................... 48

Abstract (Italian)

L’elaborato si propone di delineare e approfondire i temi di sostenibilità aziendale e di transizione verso la green economy, con particolare riguardo al settore energetico italiano. Le motivazioni che mi hanno spinta ad illustrare tale tema hanno duplice natura. In primis, l’interesse nei confronti delle multiutility, realtà aziendali alla ricerca di una congrua sinergia tra l’utilizzo delle materie prime, il capitale disponibile, il rispetto dell’ambiente e i bisogni pubblici. In secondo luogo, una crescente curiosità personale verso discipline quali il controllo di gestione, la responsabilità sociale delle imprese e l’attività di Investor Relations, affrontate durante il corso di laurea.

L’obiettivo di questa tesi di laurea è quello di fornire un’analisi empirico-teorica accurata dei dati raccolti con il fine di proporre nuove chiavi di lettura del concetto di economia circolare, sempre più diffuso nella società contemporanea. Le informazioni sono state ricavate da materiale accademico-letterario tra cui libri di testo del corso di laurea, bibliografia online, paper e/o giornali internazionali e siti internet. Per quanto riguarda il caso di studio, sono stati analizzati vari documenti di natura finanziaria e non, reperiti dal sito web aziendale. Inoltre, è stata condotta un’intervista in loco presso l’impianto “Circular Wood” di Iren Ambiente (in provincia di Vercelli).

La tesi si articola in tre capitoli: nel primo capitolo viene fornita un’introduzione dell’economia circolare e dei criteri ESG. Il secondo capitolo si propone di approfondire l’impegno delle aziende italiane nella transizione energetica, attraverso l’utilizzo delle risorse rinnovabili e progetti green innovativi. Infine, nel terzo capitolo viene presentato il caso di studio incentrato sull’azienda Iren S.p.A. Grazie a questo lavoro di ricerca è stato possibile analizzare lo stato di avanzamento del settore energetico italiano verso un’economia più sostenibile. I relativi risultati saranno esposti nelle conclusioni finali di questa tesi.

Abstract

This paper aims to outline and deepen the themes of corporate sustainability and transition to the green economy, with particular regard to the Italian energy sector. The reasons which induced me to illustrate this subject are twofold. Firstly, the interest in multiutilities, companies looking for a fair combination between the use of raw materials, available equity, respect for the environment and public needs. Secondly, a growing personal curiosity towards disciplines such as performance auditing, corporate social responsibility and Investor Relations activity, which were explored during the degree program.

The purpose of this thesis is to provide an accurate empirical-theoretical analysis of the data collected with the aim of proposing new interpretations of circular economy which is an increasingly widespread concept in contemporary society. The information has been collected from academic-literary material including course textbooks, online bibliography, papers and/or international newspapers and websites. Regarding the case study, financial and non-financial documents found on the company website have been analysed. In addition, an onsite interview was conducted at the plant “Circular Wood” of Iren Ambiente (in the province of Vercelli).

This thesis is divided into three chapters: the first chapter introduces circular economy and the ESG criteria. The second chapter aims to deepen the commitment of Italian companies in the energy transition, using renewable resources and developing innovative green projects. Finally, the third chapter presents the case study focused on the company Iren S.p.A. Thanks to this research, it was possible to analyse the progress of the Italian energy sector towards a more sustainable economy. Relevant results will be detailed in the final conclusions of this argument.

1. Introduction to circular economy

The concept of circular economy emerged in the seventies of the last century, when the European Commission published the article “The potential for substituting manpower for energy” defining the idea of an economy in loops and its impact on job creation, resource savings and waste prevention. With the course of time the idea of an ‘open’ economy was born. In contrast to a closed economy, the open one draws on unlimited input resources and output sinks [ CITATION Wik24 \l 1040 ]1.

Thus, why circular? According to Ellen MacArthur Foundation, since its inception, economy has been ‘linear’, moving in a straight line from resource extraction to waste disposal. Nowadays, this principle is slowly being replaced by the notions of reusing, repairing, refurbishing, repurposing and recycling products or materials [CITATION Ell \l 1040 ]. This means that in a circular economy nothing is waste, people and companies try not to squander goods, packages or raw materials. It is about using worthwhile supplies wisely, considering waste as a resource instead of a cost and finding innovative ways to enhance the environment and the economy.

The benefits that this new economic model brings to society will be explained in the drafting of this thesis. In support of these concrete actions there are several international associations, such as the Ellen MacArthur Foundation, a charity founded in 2009 and «committed to sustaining changes towards an economic system which delivers better outcomes for people and the environment»2.

It should not be forgotten that the European Union and its Member States play a fundamental role in the transition to the green economy. One of the most important documents at European level is the 2030 Agenda that points out the guidelines and defines concrete goals to be achieved during this decade. However, a question that arises is whether the circular economy model implies also disadvantages for companies and families.3

According to the Earth Day Organisation, the two main disadvantages are the absence of an efficient circular supply chain designed to recycle and reuse various resources, as well as the lack of critical infrastructures. As claimed by the Swiss publisher ‘Frontiers’, the largest obstacle to the circular economy is the need for increased government funding, which should assist businesses that must deal with upfront expenses and limited choices. These cons are a result of a root problem: circular economy lacks a clear theoretical foundation. Therefore, some nations are having difficulties in transforming their corporate models to fit circular economy [ CITATION Kon23 \l 1040 ]. This is the reason why in recent years international organizations are striving to deepen the knowledge related to this theme, creating a real new subject of study, increasingly explored in the academic field.

1 The name of the Foundation comes from the female solo sailor Ellen MacArthur, who in 2005 won the award for sailing the fastest around the globe. In 2010, she set up the Foundation in her name to accelerate the transition to a circular economy. Nowadays, it is one of the most important foundations related to circular economy.

2 The aim of Ellen MacArthur Foundation [ CITATION Ell \l 1040 ]

3 Every year on April 22, Earth Day is observed as a way to show support for environmental protection and conservation.

1.1. Principles and stages of circular economy

To better understand the concept of circular economy, its principles and foundations are listed below. We can take into consideration what is displayed on Ellen Macarthur Foundation’s website. Circular Economy (CE)’s goals are basically three: to eliminate waste and pollution; to circulate products and materials; and to regenerate nature.4

Figure 1, 10 R-Strategies - 1.1. Principles and stages of Circular Economy. Source: www.circularise.com

Today’s world economy is based on a linear system: take-make-waste. It means that we take raw materials from the Earth; we make products from them and eventually we throw them away as waste, most of which ends up in landfills or incinerators. It is known that this linear system cannot work in the long term because the resources on our planet are finite.

According to Ellen MacArthur Foundation, the key to achieving the first two objectives is the design of the package. It is known that many plastic packages or disposable products cannot be reused, recycled or composted. So, manufacturers should ensure that the materials could re-enter the economy at the end of their use with the aim of changing the linear take-make-waste system into a circular system, but how? For instance, by continuing to use materials as products or,5 in case they can no longer be used, as raw materials or components [CITATION Ell20 \l 1040 ]. This way, nothing turns into waste and the intrinsic value of products and materials is retained.

In more practical terms, many companies are simply selling products without packaging, others are adopting reusable packages while others are embracing two modern techniques named as technical cycle and biological cycle. In the first one, products are reused, repaired, remanufactured and recycled. In the second one, biodegradable materials are returned to the earth through processes6 like composting and anaerobic digestion. Concretely, the third goal outlined by the American foundation “regenerate nature” is certainly the most difficult to achieve. Industries should shift the focus from raw materials extraction to nature regeneration and should no longer simply focus on not damaging the environment, rather on how they can actively improve it [CITATION Ell24 \l 1040 ].

By keeping products and materials in use, less land will be required for sourcing virgin raw material and stuff procurement will be increasingly focussed on renewable resources. To achieve visible results and tangible changes, manufactures and companies should be financially supported by the government due to the incoming costs to implement new processes within the production chain. Furthermore, they need time to complete this transition to a circular economy and more7 theoretical information based on academic research.

In this regard, ‘Circularise’, a Dutch supply chain transparency software provider, has given a significant contribution within the study of CE stages. It has designed the so known ’10 R-Strategies’ [Figure 1, 10 R-Strategies - 1.1. Principles and stages of Circular Economy. Source: www.circularise.com] which guide how circular design and manufacturing can keep resources in use and waste out of the environment. The R-strategies, sometimes also referred to as the R-Hierarchy or the R-Ladder, fall under a hierarchy (shown above) going from the longest waste loop to the shortest. The shorter the loop, the more sustainable the strategy is and the higher the strategy is on the ladder, the tighter the waste loop. This means that the strategy requires fewer materials and is therefore more circular [CITATION Dap23 \t \l 1040 ].

Firstly, we analyse the short loops, which are focused on smarter product use and manufacturing. Although they are considered idealistic, we can act on the value chain (when products are first conceived, designed and developed) through strategies that tackle waste at the crucial product design phase. The first R0 Refuse prevent the use of harmful product or material and offer an alternative. R1 Rethink stands for reconsidering ownership, use and maintenance. The last short loop is R2 Reduce: decrease the use of raw materials in products and services.

The following medium loops extend the lifespan of a product and its components. They all require8 market receptivity, effective logistic and a Life Cycle Assessment (LCA). The strategy R3 Reuse assumes a secondary use of products by another owner for the same intended purpose, while R4 implies the repair of products for extended use. R5 and R6 correspond respectively to Refurbish that means upgrading or modernising the components and the outside of a product with new fabric, casing or paint and Remanufacture which involves integrating product components that are still perfectly intact into new products with the same function. Finally, R7 stands for Repurpose, a strategy that incorporates discarded components into a completely different product for a unique benefit or alternative purpose. Although they are widespread strategies, R8 Recycle and R9 Recovery are placed at the bottom of the table due to the many processes and costs associated9 with.

4 CE principles. Ellen MacArthur Foundation. Source: www.ellenmacarthurfoundation.org

5 Source: Video on Ellen MacArthur Foundation website; www.youtube.com/watch?v=NBEvJwTxs4w (February 2020)

6 In anaerobic digestion, biodegradable material is broken down by microorganisms through a sequence of biological processes that occur in the absence of oxygen.

7 Circularise is a platform that provides digital product passports and enables supply chain actors to share sensitive data without risking privacy and confidentiality.

8 The Life Cycle Assessment (LCA) is an important tool for environmental policy. It is made up of an analysis consisting of quantitative comparisons of flows and transformations of materials and the general environmental impacts since the acquisition of raw materials, production and use up to waste management [CITATION Aré24 \p 234-249 \l 1040 ]

9 [CITATION Dap23 \l 1040 ], op. cit., p.9.

1.2. The European framework for sustainable development

From the beginning of the 90s to today, the European Union (EU) has been trying to create a common guideline for all Member States with the aim of reaching sustainability shared targets. This sub-chapter presents a timeline of the initiatives and policies undertaken by the European Commission (EC) to shape a Sustainable Development (SD). The Cambridge English Dictionary defines sustainability as «the quality of being able to continue over a10 period of time».

The most contemporary interpretations of sustainability divide the concept into three different pillars which make up the so-called Triple Bottom Line (TBL): environment; society; and economy. This theorical model was developed in the second half of the 1990s by Elkington and states that a sustainable society is achieved through a right balance between the respect for the planet, the well-being of the population and the solidity of companies [CITATION Pol20 \l 1040 ]. The following timeline [Figure 2] shows the main deals and agreements of last decades that will be considered in this thesis:

2000, Lisbon Agenda 2009, Lisbon Treaty 2015, Paris Agr. 2021, ECL 2023, GDIP 2030th th th

2002, 6 EAP 2013, 7 EAP 2020, EGD 2022, 8 EAP 2050

Figure 2, Timeline - 1.2. The European framework for sustainable development. Source: own processing

The first agreement here considered is Lisbon Agenda, an action and development plan devised in 2000 which promised to reach by 2010 a goal deemed to be unattainable for Europe: becoming the most competitive economy in the world. As expected, this did not happen due to two main reasons: firstly, the EU was lagging behind the US in most technical and scientific fields; secondly, the lack of political will in terms of collective and coordinated structural measures [CITATION Wyp20 \l 1040 ].

Then, with the 6th Environment Action Programme (EAP)11, the EU set itself targets for 2012, among them, the development of a strategy for the sustainable management of resources by laying down priorities and reducing consumption. According to the final report of the 6th EAP, in that period the EU has been able to stabilise resource use whilst the economy has been growing. Even though some national

10 Definition of Sustainability. Cambridge Dictionary (2024). Source: https://dictionary.cambridge.org/dictionary/english/sustainability

11 The EAPs have defined environmental legislation in the EU since the 1970s. They have been the guide for EU in environmental protection and key policies. In the time interval between the Lisbon Strategy (2000) and the EGD (2018) the 6th and 7th EAPs