Summary of Eni’s Integrated Reporting

The main objective of the Eni project is to analyze the effect of the current need to change from financial reporting structured organization, to, an integrated reporting structured organization. After which, the whole company aspect will need to embrace sustainability in everything they do. This will affect the company’s strategy and day to day operations. This change process from

The various elements of the project are summarized as:

1. a) Project background, objective and strategies.
2. b)
3. c) Business context and business case.
4. d) Statement of current business processes and problems. 

“After having issued a series of environmental and then sustainability reports Eni realized that, although the numbers were allowing a true and fair review of the company’s performance, operations and management, they were not necessarily relevant to the stakeholders.” Eni’s Sustainability Senior Vice president Sabina Ratti (CGMA, 2014, p 4). There was need for a broader analysis process and communication so as to put performance into context. This began the journey of integrated reporting. All in need to capture almost every aspect of Eni’s analysis.

“The concept of integrated reporting was introduced in South Africa in 2009 through King III, the code

of corporate governance. The Johannesburg Stock Exchange adopted King III, and all listed companies

are now required to “apply or explain” the King III principles, of which integrated reporting is one.

Regulatory requirements around the world and some listing requirements in different parts of the world are heading in the same direction. Requirements are emerging to increasingly disclose non-financial performance, such as”. (EYGM, 2014. p 3).

 After which in 2010, IIRC sought out to develop a worldwide framework of reporting, it was in this year that integrated reporting was to be set as a standard of corporate reporting. (EYGM, 2014. P 3).

Behind any successful company or industry, is an integrated thinking approach towards its operations. From managerial, day-to-day operations, marketing, supervisory and logistics layout of a company, there is need for a synergy that helps with the streamlining of the forward aims of the company’s goals. Eni before 2009, had a financial return report approach. This benefitted the stakeholders, in precise. The financial providers. Locking out every other stakeholder. The regulators, community and its own strategy. This for a long time has been the case all around the world. Integrated report presented its tremendous opportunities to put together not only the financial report but also almost the whole picture. Ranging from:

1. Strategy layout
2. Financial returns

• Statement of the integrated thinking process

1. Statement of goals
2. Analysis
3. Effects and recommendations.

To a lot whole of other aspects. 

Several factors influenced Eni’s project to transition from stand alone sustainability report to IR. Among them:

1. Need of unique a approach to communicate its business model and performance to stake holders.
2. Development of a tool to facilitate integrated management.

Introduction and Background

iii. Integrated reporting can spur actions (Triple pundit 2009). This can is helpful in Eni whose business structure has a sustainability strategy.

1. Evolution of laws and regulations both locally and internationally.
2. Other external events/ factors.
3. The Capabilities of IR.

This among other objectives led to the need to develop a different model of analysis report. Prompting IR.

Eni involved two of its departments, the Administrative and Sustainability departments, in the integrated reporting process to develop a 2 year plan with milestones and activities to be performed within that period.

This was an aim to promote further its strategy of sustainability, in line with the global sustainability goals.

The stakeholders to be affected by the integrated reporting project include:

Providers of capital finance.

These include all the shareholders of Eni. According to Wikipedia, the Italian government owns a 30.303% golden share in the company, 3.934% held through state treasury, another 26.369% is held through the Cassa Depositi e Prestiti. The people’s bank of china holds another 2.012%, the company is also a component of the Eurostoxx 50 stock market index (Wikipedia 2018). 

Eni boasts of a large number of employees in all the countries it has operations in. This is due to its principle of being “localized”.

 According to Forbes Eni has approximately 33, 866 employees as of may 2017 (Forbes 2017).

Eni being a multi-national company, it is widely affected by the laws and regulations of business operations set out by the governments in those countries, this considered, there must be a structure that has to envision the merging of the interests both of the local country and that of the Eni. 

Local communities around which Eni carries out its upstream and also downstream activities play a huge and important role in the success of Eni’s bigger picture. They:

• Provide human resources, i.e. manpower
• Market
• Guide to the raw materials. Etcetera

”The major problem facing Eni in the near future, is the growing trend towards environment friendly energy sources and non-toxic chemicals…” (William & Todd, 2016).

The other issue is integration of IR into the sustainability structure of the company.

The business concept according to business designer™ (business designer 2012), encompasses:

2. Strategy

• Exploration and Production
• Gas and power
• Refining & Marketing and Chemicals
• Goals (Strategic and operational)

1. Key success factors
2. KPIs (Key performance indicator) 

Eni is the 6^th largest energy company by market value. Having approximately 78000 employees in the 90 countries it has operations. According to the official website of Eni. As June 30^th, 2017 Eni had a market capitalization of US$55 billion, constantly ranking among the top 100 on Fortune Global 500 list for largest companies by revenue.

As an energy company, Eni has a vision outlining its purpose. The official vision states:  “We are an energy company.?We are working to build a future where everyone can access energy resources efficiently and sustainably. ?Our work is based on passion and innovation, on our unique strengths and skills, on the quality of our people and in recognizing that diversity across all aspects of our operations and organization is something to be cherished. We believe in the value of long term partnerships with the countries and communities where we operate.” (Eni company library 2018) 

Eni’s Stakeholders

According to Eni official site, their main business is exploration and production. Currently, it is carrying out this operation 42 countries. “…Eni’s strategy is to deliver organic production growth, leveraging on high quality portfolio of assets and longstanding relationships with host countries. Our strategy combines. Our strategy combines geographical diversification with scale benefits and project synergies.”(Eni IT 2018)

In the gas value chain, gas and power is engaged in all the phases. The strategy involves supplying, trading and marketing of gas and electricity, gas infrastructures, and LNG supply and marketing, this is supported by Eni’s multi-country approach, long-term gas availability, access to infrastructure, market knowledge, wide product range and a strong customer base. According to Statistical draft, the, Eni fact sheet. The company sells more than 60% of its gas out of Italy (Eni library factsheet 2017) 

Eni’s strategy in refining and marketing is to cut capacity and costs and enhance margins to return profitability (Eni documents 2017). 

Eni draws inspiration to carry out its day to day activities from:

According to the official website of Eni (Eni 2020 strategy 2018) its goals both long-term and short-term as of 2017-2020 comprise:

1. Long-term and high margin organic growth.
2. The re-launch of the gas and power business.

• Further reinforcement of the downstream area.

1. Commitment to the development of renewable energy (green energy) and diversification of the production mix.

1. Expansion of the investment plan.
2. Increased allocation to the programme of the disposals.

• Development of a cash flow dynamic.

1. Diversification of the dividend process. 

For any organization to achieve its goals and purpose, it has to embrace information sharing, have an open and efficient decision making process and also implement the strategy that it has adopted, this include:

• Promoting accountability

Eni has a business structure that rewards accountable players in its ranks. These involve promotions and other benefits. In the long run accountability breeds loyalty, which is key to the Eni image.

• Awarding transparency
• Acknowledging competency.

Eni identifies innovation, invention and supports it. It helps improve its manpower through supporting learning.

It also supports in-house competency.

• Advocating stewardship.

. In the years preceding IR. Information processing was majorly centered on the financial returns, this was seen in the annual reports, in our case, the, Eni standalone sustainability report.  But noe the IR helps put into practice the Integrated thinking approach to business. 

“Over the past three years, we have made significant progress in creating a more robust and flexible company. We are experiencing market conditions characterized by the collapse of gas consumption in Europe and a falling oil price. In such challenging circumstances, with the oil price dropping to its lowest level in 12 years, we have decided to implement a transformation that will ensure both growth and the creation of value. This process of radical change, begun in 2014, has enabled ENI to transform its cost structure. It is built around three central pillars: our transformation into integrated oil and gas operation, the restructuring of mid-downstream operations and a strengthening of upstream operations.” (Eni library 2017) The key performance indicator for Eni is used to track performance and compare them over the years.

Eni’s Business and Operations

Eni has developed a strategy aimed at achieving each and one of its goals. Be it the business goals or financial goals. As laid out in the Eni website^11. :

Eni has diversified over time to engage in a wide field of business operations. Mainly comprising of:

1. Gas and oil exploration, both upstream and downstream.

The company co-operates with the countries in which it conducts upstream exploration and production. “G&P is engaged in all phases of the gas value chain: supply, trading and marketing of gas and electricity, gas infrastructures, and LNG supply and marketing. Eni sells more than 60% of its gas outside Italy and its leading position in the European gas market is supported by competitive advantages, including its multi-country approach, long-term gas availability, access to infrastructure, market knowledge, wide product range and strong customer base”(Eni company 2018).

1. Refining & marketing and chemicals.

|”R&M refines and markets fuels and other oil products primarily in Italy. Our R&M division is relatively small compared to the R&M segment of our peers. Eni is the largest refiner in Italy and the leading operator in retail marketing of fuels with a market share of around 25,5%. Eni’s strategy in R&M is to cut capacity and costs and enhance margins to return to profitability.” (Eni company 2018) 

However so as to be able to achieve successful business processes, there has been adoption of several practices, this help in the day to day company activities.

1. Integrated risk management.
2. Integrated project management.
3. Clear and rigorous governance rules.
4. Connectivity of information.
5. Integrated thinking. 

Eni being a global energy company faces the problems that come with it. Its big business model draws challenges such as:

1. Operational stretch

This occurs due to the wide and diverse area covered by the management and supervisory sector. This overstretches the intensity and concentration thereby causing shallow management.

1. Shift in energy sources.

Currently there has been a shift from oil and gas energy sources to renewable an eco-friendly energy sources (William et al, 2016).

For instance the world campaign for adoption of green energy proves to either push the Eni business mission to shift its focus in other means of energy or face downward business spiral.

• Entry of new players into the market. I.e. competitive European market.

Fewer competitors mean the market share is large. But with entry of more and more players into a constant market diminishes the market cushion enjoyed previously, therefore requiring new approach to survive, this new approaches may take time and resources.

“Expanding upstream production was becoming increasingly challenging: exploration was moving to technically challenging frontiers…” (Grant, 2012.

1. Legal problems

According to Wikipedia.

“In 2009, the European Commission filed formal antitrust charges against Eni. The commission believes that Eni has conspired to keep competitors from using its gas pipelines…” (Wikipedia 2018).

Eni’s Goals and Strategy

Eni has also been occasioned by accusations of corruption in countries in which it operates. For instance the Uganda case( mobile monitor 2012). 

From the case study and our further research. We found out that adoption of the integrated reporting approach yielded better results than the stand alone sustainability report. In terms of details and ability to be implemented the IR enable a practical approach towards management and strategy layout.

In another finding, the business context and business process of Eni is hindered by the very nature of its origin. The gas and oil business. We realize that fast forward the business structure, these sources of energy will decline as it’s already being indicated by the graphs of 2012 and after.(Kustrov, 2012) 

Table illustrating demand and supply of oil in 2015 ( www.euarnmeans.com).

Also there is the entry of other key players in the industry of energy development, this include the innovative sources of energy say:

1. Solar systems
2. Renewable energies

• Geothermal power etcetera

This combined with a rigid business model could throw out the business adopting the traditional conservative approach to structural change.

There was also the issue of risk management, integrated thinking, encouraging competence and accountability. We found out that this is key factors that influence the performance of Eni, as a multi-national company.

Conclusion

Considering many variables in the analysis of our business model, we came into conclusion that the thriving of a business is determined by how well the financial and productivity year is planned from values and lessons learnt from the previous ones. If possible all the years’ analyses combined. This enables the business adopt different approaches in its business structure, in aim of being more productive. Benefiting the stakeholders. This comprehensive report generation can be done by the latest reporting strategy. Integrated reporting.

Through which analysis, presentation and implementation can be outlined and easily monitored.

Since there are many considerations for the success of a business, it is imperative for the company to be able to develop a synthetic structure that is adaptive to the changes in the market, relevant and also sustainable. 

References

IIRC(2018) Integrated Reporting. Weblog. Available from: https://integratedreporting.org/ ,  Accessed on 9^th Feb, 2018.

IIRC(2018) Integrated Reporting. Definiifion of IR. Weblog. Available from: https://integratedreporting.org/, accessed on 9^th Feb ,2018.

Pundit(2015)Importance of Integrated reporting. Weblog from: https://www.triplepundit.com/2012/03/5-reasons-integrated-reporting-be-game-changer/ , accessed on 9^th Feb, 2018.

EYGM limited (2014). Intergrated Reporting- elevating value. EYGM limited. volume 1.pages 3-5.Availabe at: https://www.theiirc.org/ accessed on 10^th Feb 2018

Wikipedia (2018) Eni – Wikipedia. Weblog. Available from: https://en.wikipedia.org/wiki/Eni/ , accessed on 9^th Feb, 2018.

Forbes (2017) Eni. Eni Statistics. Weblog. Available from: https://www.forbes.com/companies/eni/ accessed on 10^th Feb 2018.

Bsd (2013) business-context-for-kpis. Weblog. Available from: https://bscdesigner.com/wp-content/uploads/2016/05/business-context-for-kpis.png/ , accessed on 9^th Feb, 2018.

Eni (2018) Home. Weblog. Available from: https://www.eni.com/en_IT/company.page/ accessed on 9^th Feb 2018.

Eni (2018) Home- Strategy. Weblog. Available from:

https://www.eni.com/en_IT/results.page?question=Strategy/ accessed on 9^th Feb 2018.

Eni (2018) Home. Weblog. Available from: https://www.eni.com/docs/en_IT/enicom/company/company-profile/fact-sheet.pdf?lnkfrm=serp/ accessed on 9^th Feb 2018. 

Eni (2018) Home- company fact-sheet. Weblog. Available from: https://www.eni.com/docs/en_IT/enicom/company/company-profile/fact-sheet.pdf?lnkfrm=serp/ accessed on 9^th Feb 2018. 

Eni (2018) Home. company profile. Weblog. Available from: https://www.eni.com/docs/en_IT/enicom/company/company-profile/fact-sheet.pdf?lnkfrm=serp/ accessed on 9^th Feb 2018. 

Eni(2018) Home. Investors strategy. Weblog. Available from: https://www.eni.com/en_IT/investors/strategy/2020-objectives-concrete-actions.page/ accessed on 10^th Feb 2018. 

CGMA magazine. (2014). Intergareted thinking. The race has changed,(online) issue 2, page 1. Available at: https://www.fm-magazine.com/issues/2014/jun.html/ Accessed 11^th Feb 2018.

Duncun, W & Bailey, T (2016).An industry and company analysis. Linkiedin corporation. 5(12) Available from: https://www.slideshare.net/WilliamDuncan13/eni-spa-case-analysis/ , accessed on 10^th Feb 2018. 

Wikipedia(2018). Eni- statistics. Weblog. Available from:  https://en.wikipedia.org/wiki/Eni/ accessed on 10^th Feb 2018. 

Eni(2018). Managing-business-risks. Weblog. Available from: https://www.eni.com/en_IT/investors/strategy/managing-business-risks.page/, accessed on 10^th Feb 2018.

Mobilemonitor (2012). Oil firm Eni accused of bribery again – Daily Monitor https://mobile.monitor.co.ug/News/TodaysPaper/Oil-firm-Eni-accused-of-bribery-again/691252-1403676-format-xhtml-14gcwnlz/index.html/ , accessed on 11^th Feb 2018.

Kutasovic P.( 2012), Newyork. Changes in Supply of and Demand for Crude Oil: Implications for Oil Price. NMIMS Management Review Volume: April.