An innovative project

Enel has promoted an innovative project that involves the involvement of its supply chain on a global level and aims to qualify suppliers on the basis of sustainability principles assessed through an Environmental Product Declaration – EPD.

Up to now, over 10 protocols have already been verified and 5 Product Category Rules (PCR) published on the EPDItaly Program Operator. What are the motivations and expectations of such an important initiative?

In Enel we integrate the values of sustainability in all aspects of our business, in order to always find new solutions to grow together with the communities we are part of, to increase safety, reduce the environmental impact and create shared value. The great environmental and social challenges we face require a profound rethinking of the development model. The circular economy represents a new paradigm and is establishing itself, at every level and in every geographical area, as a realistic solution to combine innovation, competitiveness and environmental sustainability. In a business based on circularity models, the use of virgin raw materials is ideally zero or, in any case, extremely reduced.

It is a process that can be reached thanks to approaches and techniques that contribute to sustainable innovation for the environment, the impact of which is greatly enhanced by new technologies and digitalisation. Applying the principles of circular economy implies a cultural change to rethink the way we use raw materials and energy: from design to production, from use to the management of so-called “waste”. At Enel we are systematically implementing it through technological and business innovation, collaboration with the outside world and rigorous metrics, following the 5 pillars that define the areas and methods of its application.

What does the new circular economy model represent for you, and more generally, for those involved in energy?

The circular economy is the key to rethinking business in terms of innovation and competitiveness. We started by transforming the relationship with suppliers, measuring their performance in terms of circularity, as we are convinced that working on the entire supply chain is necessary for the correct implementation of the new model on all our assets. If we think about renewable energies, for example, in this sector we are the main player in the world. All plants for producing energy from clean sources are viewed favorably, but those that have a positive impact considering their entire cycle, from production to recycling, are considered virtuous.
In this context, we started talking about the Circular Procurement strategy, with the aim of purchasing goods, works or services that aim to minimize and / or avoid negative environmental impacts and the creation of waste during their life cycle.

The strategy is based on 3 fundamental pillars. The first concerns the involvement of suppliers: rewarding suppliers through a specific tender tool for their commitment to the transition to the circular economy. The second is the definition of metrics and KPIs (Key Performance Index): to quantify, evaluate and validate environmental KPIs deriving from the manufacturing cycle of a Product. The last is a Co-innovation action: launching co-innovation projects together with suppliers in order to review the production processes and / or modify the purchasing methods according to the circular economy models.
The “Circular Economy Initiative for Suppliers’ Engagement “project involves around 200 suppliers globally on 12 product categories which today represent more than 60% of the expenditure for the purchase of materials. The initiative, based on the voluntary adoption of the environmental product declaration (EPD), aims to quantify, certify and communicate the market regarding the environmental impact of supplies (water consumption, CO2 emissions, impact on the soil, etc). In addition, the use of the Circular Supplier Tool allows the aggregation of data and the sector benchmarks with related improvement targets.

In the future, for each category it will be possible to analyze the KPIs of suppliers and foresee any corrective actions for poorly performing suppliers, rewarding actions for excellent ones or re-design actions for products / processes. We have already started working with our main suppliers in line with the Circular by Design principle, namely Circularity, to be incorporated into the process from the beginning. In Global Procurement we are convinced that the diffusion of the circular economy culture throughout the procurement process is capable of generating shared value for the company and all interested parties.

The public consultation process of the PCRs saw the participation of some stakeholders, in particular of the electrical / electronic sector, who provided various comments to the documents. What degree of interest did you expect?

The fact of being among the first to develop PCR in the electrical sector has aroused a strong interest from important companies at national and world level. This is an indication of how the topic is deeply felt and growing rapidly: we believe that in the near future the EPD will become a necessary requirement for all companies to be able to sell their products to the public. According to recent studies, more than 70% of consumers consider the transparency of the impacts on the environment of what they buy essential.

We believe it is necessary to support small and medium enterprises in the transition from a linear to a circular economy. It will be a fundamental step to remain competitive and sustainable over time, and in my opinion, companies are starting to understand it. From an initial phase of doubt and uncertainty regarding these issues, we are currently experiencing a moment in which it is the suppliers themselves who ask for support in order to become “sustainable” businesses.

The purpose of the “Circular Economy” project is well defined and will lead to an increase in sensitivity to operate with a view to sustainability also by the supply chain. How was the initiative received from your suppliers?

At first I must admit that few suppliers were willing to face this path. Above all, small and medium-sized enterprises did not have the necessary resources to accommodate change. During 2019 we decided to organize several workshops to tell the benefits of this transition and how this can represent an opportunity for growth and development in terms of competitiveness, innovation, environment and employment. Today, adhesion is very high on the products for which PCRs are available: many of our suppliers have registered on the Circular Supplier Tool and have started to organize themselves to start the evaluation process of the LCA preparatory to obtaining the EPD declaration.
Business models less linked to the use of raw materials allow the development of a cost structure less exposed to the risk of price volatility, both for market dynamics and for regulatory interventions. Recent estimates in 2030 speak of a possible reduction between 17% and 24% of the use of resources with savings of around 630 billion euros per year and European GDP growth of around 3.9%. Rethinking business models from a circular perspective represents at the same time a strong drive for innovation, a great limitation of the environmental impact, thanks above all to the reduction of waste, and finally an input to employment in sectors such as recycling, repair or reuse.

We can certainly say that the road is still long, but we have started an important path and we are happy to do it with our suppliers. ICMQ has been a fundamental partner for Enel for 2 years, thanks to its role as an independent third party that guarantees compliance with all the regulations and processes of this important project.