2016 CORPORATE SOCIAL AND ENVIRONMENTAL … · value for stakeholders by providing net-zero...

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2016 CORPORATE SOCIAL AND ENVIRONMENTAL RESPONSIBILITY REPORT

INDEX OF CONTENTS

CLAUSE PAGE

1. INTRODUCTION ............................................................................................................................. 1 1.1 Our stakeholders as our whole focus .............................................................................................. 1 1.2 Our mission, vision and values: built around environment and sustainability ................................ 1 1.3 Our Corporate Social and Environmental Responsibilities ............................................................. 3 2. OUR RESPONSIBILITY TO THE FINANCIAL COMMUNITY ........................................................ 1 2.1 A constant dialogue with analysts and investors............................................................................. 1 2.2 Stock performance and news flow comitment ................................................................................ 2 3. OUR RESPONSIBILITY TO THE EPS’ PEOPLE ........................................................................... 1 3.1 Our employees’ challenges ............................................................................................................. 1 3.2 Work-life balance strategy ............................................................................................................... 2 3.3 Constant trade unions and labour relations .................................................................................... 2 3.4 Health and Safety as a priority ........................................................................................................ 2 3.5 Continuous Training......................................................................................................................... 2 3.6 Equal opportunities for the EPS’ people ......................................................................................... 1 3.7 International Labor Organization compliance ................................................................................. 2 4. OUR RESPONSIBILITY TO ENVIRONMENT: OUR BUSINESS STRATEGY .............................. 2 4.1 Our environmental policy, our investments ..................................................................................... 2 4.2 Circular economy: pollution and waste management ..................................................................... 4 4.3 The significant posts of greenhouse gas emissions generated by the company’s activities, in

particular through the use of the goods and services it produces .................................................. 5 4.4 Climate change ................................................................................................................................ 6 5. OUR RESPONSIBILITY TO SOCIETY ........................................................................................... 1 5.1 Territorial, economic and social impact in terms of employment .................................................... 1 5.2 Innovation as local development driver, partnering with Universities ............................................. 1 5.3 Sponsorships and charities ............................................................................................................. 2 5.4 Enduring partnerships and stakeholders ........................................................................................ 3 5.5 A supply chain engaged in Social and Environmental Responsibility ............................................ 3 5.6 Fair trade practices .......................................................................................................................... 3 5.7 Other measures taken in favor of human rights ................................................................................. 5 6. METHODOLOGY NOTE ................................................................................................................. 1 6.1 Reporting boundaries and indicators selection criteria ................................................................... 1 6.2 Indicators criteria ............................................................................................................................. 1 7. CONCORDANCE TABLE ................................................................................................................ 1

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1. INTRODUCTION

This report is part of a comprehensive approach to taking into account the Group’s corporate, environmental and social responsibility and transparency with respect to these issues.

Corporate social and environmental responsibility is an integral part of EPS’ way of doing business. The goal of the Group has always been to combine competitiveness with sustainability. It is a commitment aimed at pursuing growth, innovation and results, always placing great attention to the quality of life, and environmentally compatible development. The pursuit of these objectives allows EPS to create everlasting values not only to the benefit of our people, partners, stakeholders but

also to the communities where we operate.

With the appointment of the new board, since February 2015, the Group has started for the first time to formalize and monitor such goals and way to do business, with precise policies and procedures of corporate social and environmental responsibility (“CSR”), that are now implemented by our new operational and staff departments.

1.1 Our stakeholders as our whole focus

In particular, after the admissions of the EPS’ shares on Euronext in April 2015, the Group has focused immediately on the identification and formalization of its stakeholders outlined in the figure below.

Chart 1-Our Stakeholders

As an immediate consequence, the Group entrusted its new operational and staff departments, and in particular the Finance, Communication and Legal department to spearhead the implementation, ongoing application and continuous improvement by involving all employees.

1.2 Our mission, vision and values: built around environment and sustainability

EPS is a vertically integrated energy storage company. The ongoing transition in electrical power generation from fossil fuels and nuclear power to renewable energy sources has given rise to new challenges that have seen storage technology take the centre stage. The

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energy sector has encountered two main

hurdles:

• in off-grid applications (emerging markets): to serve the 2.4 billion people (35% of the global population) and energy intensive businesses around the world that are not currently reached by a reliable electric power grid, so as to (i) replace diesel-fueled generators that currently provide power and capacity to the final users and (ii) make better use of renewable energy sources.

• in on grid support (developed countries): as intermittent and unpredictable renewable energy progressively displaces traditional power plants, electricity grids increasingly need storage systems that provide both capacity and flexibility As a result, having the goal to concretely enable renewables sources to unlock the energy transition, EPS’ mission, vision and values are built around environment and sustainability.

1.2.1. A clear Vision: an Energy Company and the world’s reference for a clean energy culture

Electro Power Systems S.A. (the "Group" or "EPS") in 2016 has consolidated its business model as a player operating in the sustainable energy sector, specializing in hybrid-storage solutions and micro-grids that, in line with the Group's mission, enable intermittent renewable sources to be transformed into a stable power source.

2016 has been the first year in which the Group focused exclusively on hybrid, storage and power conversion solutions for both flexibility and capacity requirements of any national grid or

micro-grid, developing and commercializing:

- in developed countries, energy storage systems to stabilize electrical grids heavily penetrated by renewable sources ("Grid Support"); and

- in emerging economies, microgrids to power off-grid areas at a lower cost than fossil fuels ("Off-Grid Power Generation").

This dualism of hybrid solutions which can provide at the same time flexibility and capacity to any grid or micro-grid, is aimed at solving the problem of intermittence of renewables and contribute to the implementation of the energy transition, namely the development of a balanced electricity generation model on the basis of new renewable energy sources (wind and photovoltaic power) and of electricity distribution via so-called smart grids.

1.2.2. Our Mission statement: unlocking the Energy Transition

We wish to be an Energy Company and the world’s reference for a clean energy culture and smart grid excellence.

An innovative company which creates value for stakeholders by providing net-zero solutions completely safe, reliable, profitable and sustainable.

1.2.3. Our Values in three cornerstones

Seeking innovation and sustainability of the energy transition are the main values of the Group.

It is expressed in three cornerstones:

• reliability for our partners;

• proactivity for our customers;

• technological excellence in any solution deployed.

This means building value over time through continuing innovation,

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continuous improvement, transparency

and people development.

1.3 Our Corporate Social and Environmental Responsibilities

The Group has taken steps to identify its key CSR issues organized around three lines of action:

• Our responsibilities to the financial community;

• Our responsibilities to the EPS’ people;

• Our responsibility to environment;

• Our responsibility to society.

Our responses to these issues are presented in this report.

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2. OUR RESPONSIBILITY TO THE FINANCIAL COMMUNITY

The Group attributes strategic importance to financial and corporate communication as a key instrument to build a relationship of trust with the financial community, one of its main stakeholders.

In this respect, the Group maintains an ongoing dialogue, through the Investor Relations department and the Group’s top management, with analysts as well as institutional and individual investors, promoting fair, transparent, timely and accurate communication.

As of the Initial Public Offering (“IPO”) process and after that, financial communication was aimed at creating and further strengthening dialogue with key stakeholders: public and institutional investors (representing 38% of the share capital), individual shareholders and financial analysts.

2.1 A constant dialogue with analysts and investors

During the IPO process the Group met more than 50 institutional investors in France, Italy, UK. In 2015 the Group organized meetings with financial analysts and leading local investors, also participating to small and midcap conferences in Paris and Geneva, meeting more than 40 investors in Italy and abroad. During 2016 the Group continued this trend by furthering its dialogues in Italy, UK and France as a result of a constant cooperation with the most renown financial analysts of Intermonte Sim, Invest Securities and Cantor Fitzgerald.

Furthermore, EPS was present and frequently speaker in the most important worldwide summits participated by the most influent energy analysts:

- Energy and Mines World Summit (UK)

- 5th Power & Energy Kenya 2016 (Kenya)

- International Electrotechnical Commission (Japan)

- McKinsey Utility of the Future Conference (Singapore)

- Energy Storage as a game changer, are we there yet- Bocconi (Italy)

- Energy Forum Villa d’Este- Ambrosetti (Italy)

- Grid Edge Transformation- Bain & Company (UK)

- Bloomberg Energy Forum (UK)

These activities, together with the growing investors interest in the specificity of the equity story of EPS and in the storage and renewable energy industry, have led the shareholder base to become more international. In particular, this ongoing dialogue with the financial community has been the enabler of:

• the success of the IPO in April 2015, in which the Group issued 1,974,032 new shares at a subscription price of 7.30€ per share, raising 14.4 million euros;

• the success of the capital increase via private placement in December 2015, through which EPS issued additional 701,500 new shares at a subscription price of 6.80€, i.e. with only 4.2% discount versus the weighted average of the stock closing prices during the preceding three trading days;

• the financing of € 0.5 million short-term credit line to provide additional working capital and € 2 million medium-long term credit line mainly dedicated to EPS’ development plan from Unicredit;

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• the financing of € 6.5 million

oreceived by Intesa Sanpaolo structured in:

(a) €3.5 million 5-year long-term credit line, by Mediocredito Italiano, a subsidiary of Intesa Sanpaolo, primarily dedicated to continuing EPS’s research and development activities on the HyESS (Hybrid Energy Storage System) project; and

(b) €3 million short-term credit line to provide additional working capital and to boost the pipeline’s projects, primarily focused on Africa and Asia, where EPS

hybrid solutions have already been shown to dramatically reduce energy costs thanks to the Group’s innovative and proprietary technology.

The focus of the financial community in its dealings with the Group is confirmed by the coverage of its shares by French and international investment banks. The assessment and the related instant reactions to our news and press releases is periodically published (in terms of “Target Price” recommendation) on the company website in the Investors - EPS Share - Analysts Coverage section.

Details on Stock Recommendations

Investment bank Last Coverage Last recommendation Target Price per share

Cantor Fitzgerald

November 2016 BUY € 10.50

Intermonte November 2016 BUY € 9.50

Société Générale


Invest Securities


Chart 1- Analyst Coverage

2.2 Stock performance and news flow comitment

The Group is committed to continuing its efforts to maintain constant relations with its investors and analysts by their direct involvement in all its results and strategy presentation.

The Group dedicated to fulfil the commitment to its financial community, has decided and accomplished during 2016 to:

• publish and submit to the French Market Authorities their quarterly results even though French Law dated 30 December 2014 (n°2014-1662) has ruled out this obligation;

• organize conference calls with its investors on all the quarterly results and its strategy presentation in order to better outline its achievements, and publish the transcript of the entire call on its website;

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• regularly upload all investors and

analyst presentations, news and materials on its website in Investors - Financial Information - Presentation&Webcasts;

• constantly share with the financial community (that has subscribed to our newsletter) all major news and press releases published on our website and broadcasted;

• broadly share all our news-flow always through:

a. both Business Wire and Actus News Wire, broadcasters

authorized and regulated by the AMF (Diffuseur Professionnel d'Information Réglementée autorisé par l’AMF), in order to ensure a wide coverage in France and Europe; and

b. Websim: a retail specialized broadcaster, which ensures a wide coverage of our news-flow in particular in Italy.

As a consequence, our commitment resulted in a good correlation between news-flow and stock performance as shown in the chart below.

Chart 2 - News-flow correlation to stock performance

Stock performance has been subject to a lack of news-flow in the first months after the IPO, but from September 2015, particularly after the setup of a dedicated Investor Relations department led by Francesca Cocco as Vice President Investor Relations, the activation of proper broadcasters and a more focused effort towards the financial community, the stock trend has demonstrated a high sensitivity to news-flow.

This resulted in the inclusion of the Group’s stock (EPS:PA) on the CAC® MID & Small and CAC® All-Tradable indices: on 7 December 2015, Euronext

published the quarterly review results of the CAC family, and officially announced the inclusion of the EPS shares on these two leading indices on and from market close on 18 December 2015. This is proof of the solid market capitalization and significant float rotation of the shares, confirming the liquidity of the stock and enhancing visibility towards institutional investors.

The chart below outlines the EPS stock performance trend compared to the main French and Italian indexes, CAC40 (FCHI) and FTSE MIB (FTSEMIB:MI) in 2016:

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Chart 3 - Stock performance compared to CAC40 and FTSE MIB

Future challenges and approaches

The Group has met its purpose set on 2016 to forge a direct, personal and stable relationship with the investors and the financial community over time, which is based on the vocation of permanent service, transparency, accuracy and reliability of the information supplied. It is determined to further pursuit and meet the numerous opportunities on the main European financial markets, by continuing its constant presence and participation in the future small-mid conferences and road shows dedicated to corporate governance and carrying on providing accurate, precise and punctual financial information.

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3. OUR RESPONSIBILITY TO THE EPS’ PEOPLE

3.1 Our employees’ challenges

The Group considers its employees the main contributor to creating value and the strategic factor in its own success. Dedicated employees with diverse background play a crucial role in creating the innovative corporate culture EPS needs to be successful and reach the targets. For that reason, their professional and personal fulfilment and their motivation are the key drivers for the Group’s development. We are conscious the EPS Group’s performance depends on having a highly skilled, motivated, committed and talented workforce that act in a way coherent with the Group’s values and reflect the diversity of the societies in which we operate. In this context, the principal employment-related challenges are:

• Developing a team spirit around the Group’s values;

• Maintaining excellence and a top level of know-how, expertise and technical skills;

• Attracting and retaining the right people;

• Ensuring equal opportunity employment and zero discrimination;

• Promoting dialogue and respect between employees and management;

• Securing top working conditions no matter what.

3.1.1. A balanced organization

As EPS becomes an ever larger Group, it is essential for our growth and competitiveness that we further develop

diversity, improve our performance, expanding and realigning the Group’s organization. We want to make EPS a more diverse, collaborative and enjoyable place to work. As better detailed in the following sections of this report, we started by the end of 2015 a process of transformation which continued in 2016 aimed to improve and enhance every aspect of our workplace, from the employment of new people, to the design of our offices, passing through the launch of flexible working initiatives, and replacing internal emails with other collaborative and social tools, down to the organization of our work.

Management attaches great importance to the full understanding of the corporate culture and ensures that every employee fully supports the Group’s strategy. Through regular information meetings on business developments and trends, EPS’ women and men are kept up-to-date on expectations of management and stakeholders. This commitment to the EPS’ spirit also involves a commitment to its ethical values by each employee, who is asked to adhere to the Group’s Ethic Code. That is focused in particular on business confidentiality, sensitive transactions, health & safety, responsibility, risk management, respect for individual freedoms.

Within the Group, the organization is extremely flexible, thanks to the new matrix organization, and is composed of small teams who ensure horizontal interaction and a continuous adaptation to all changes or evolving external conditions.

We employ a workforce of technical, scientific and industry specialists whom we rely on to ensure the technological excellence and safe operation of the Group’s systems around the world.

Although we are an Energy Technology Company , EPS is made up of many other

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facets. Strong and committed managers

play a decisive role in the successful execution of the Group’s strategy. EPS’ leadership model clearly states that leaders have the responsibility to achieve business results and be people leaders at the same time.

Our team of corporate professionals and staff functions, although based in different locations, ensure we operate effectively as a listed company and in the most transparent way. At the end of 2016, the Group had 68 employees for an overall organization including 18 dedicated

business partners totalling 86 human resource (66 of which with a permanent employment agreement), allocated as follows: 21 of the Group’s subsidiary Elvi Energy S.r.l. (“Elvi Energy”) 6 of the Group’s subsidiary MCM Energy Lab S.r.l. (“MCM” which was leased to Elvi Energy on April 2016), 39 of the Group’s subsidiary Electro Power Systems Manufacturing S.r.l. and 2 of Electro Power System S.A. Over the last two years, the Group has been engaged in a significant corporate reorganization with no recourse to social intervention .

Chart 4 – Headcount

3.1.2. Distribution of employees by gender

29

57

86

Headcount

2014 2015 2016

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Chart 5 - Gender distribution of employees

We promote the careers of women and getting the work-life balance right between employment and family (please see the maternity leave and flexibility provisions under sections 3.1.2 and 3.2.1).

The percentage has registered only a slight growth exclusively because of the acquisition of Elvi Energy and MCM, where the quasi-totality of the resources are electrical and system engineers, a specialization which is rarely addressed by women.


To further increase women presence, the Group has promoted and is putting into place a range of policies:

• The possibility for women of working at home for 3 months to be utilized one-off in full, or on a non-consecutive basis, at full discretion of the employee after the maternity leave;

• Maternity check-up covered by the Group’s insurance of employee benefits;

• A right to request part time work;

• High quality and affordable medical childcare which is covered by the Group’s insurance of employee benefits;

• Comprehensive job protection for pregnant workers-:(1) guaranteeing a safe and non-hostile environment; (2) retain her job during pregnancy and maternity leave; and (3) return to her position or an equivalent one upon return.

3.1.3. Distribution of employees by age

Flexibility and diversity are key elements for creating an employment environment which will enable EPS to remain an attractive company over the time.

With regards to the age structure of the workforce, the Group has in whole a balance, which has allowed a constant presence of senior staff that enriches the Group’s expertise besides the junior staff [?]. Additionally, the Group’s contacts to school and universities enable the recruitment of high potential young specialists, thus bringing a reinforcement to the highly skills and new ideas requested per each recruitment.

Employees by age group Distribution

Less than age 21 0%

21 to 30 years 31%

31 to 40 years 28%

41 to 50 years 26%

51 to 60 years 8%

More than age 60 7%

Chart 6 - Employees by age group

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Our energy experts, scientist and

technologists, their skills and competences are our primary assets and this means we have a specific responsibility towards our people. As we want to develop our business and climb the value chain, the Group considers R&D critical to active innovation, technological excellence and corporate growth. Regarding the distribution of employees by occupational category,

research&development and engineering is the most represented area: as of 31 December 2016 45% of the EPS’ women and man worked on innovative projects and technologies (R&D, Innovation and Engineering) thus registering a slight increase compared to year-end 2015.

The breakdown of the workforce is as follows:

Headcount by function 31.12.2015 31.12.2016

Management 5 12

Staff: Administration & Finance, IR, Legal and Communication

6 13

Business Development and International Projects 14 7

R&D 11 19

Innovation 3 1

Engineering 4 19

Production 8 8

Project Management 3 5

Customer Value Management 3 2

Total 57 86

Chart 7 - Headcount by function

The Group has an extremely qualified staff, at year-end 2016 where almost 70% of the headcount has a university degree,

of which 65% has an Engineering degree, and 25% has a Ph.D. or an M.B.A

.

Headcount by degree 31.12.2015 31.12.2016

University Degree, of which: 40 60

- Engineers 20 39

- PHD or MBA 14 15

Technical Degree 17 26

TOTAL HEADCOUNT 57 86

Chart 8 - Headcount by degree

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3.1.4. Distribution of employees by geographical area

We consider diversity as an enrichment, because it supports the cultural change within EPS and improves our routine work everyday. We aim to create an environment of inclusion and acceptance where our employees are treated with respect and dignity and without discrimination regardless their gender,

race, sexual orientation, political affiliation or religion. The Group has increased its global presence in 2016 by launching and completing new commissions in Americas, EMEA and Asia Pacific where the Group’s employees have been deployed during 2016.

Chart 10 – EPS Installed base

3.1.5. Distribution of employees by geographical area

We consider diversity as an enrichment, because it supports the cultural change within EPS and improves our everyday routine work. We aim to create an

environment of inclusion and acceptance where our employees are treated with respect and dignity and without discrimination regardless their gender, race, sexual orientation, political affiliation or religion. The Group has increased its

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global presence in 2016 by launching and

completing new projects in Americas, EMEA and Asia Pacific where the Group’s

employees have been deployed during 2016.

3.1.6. Our team is growing

The EPS Group offers opportunities to pursue a career in a pioneering company with a strong focus on quality, innovation and sustainability.

Throughout the year, the Group has continued to promote and reward internal mobility with a communication campaign directed to employees showing the

diversity of career paths supported within the Group.

In 2016 the recruitment trend was very positive: 39 new human resources entered the Group, of which 22 entered during the acquisition of Elvi Energy and MCM, 7 were new recruitments under Elvi Energy post acquisition, 10 were new recruitments under Electro Power Systems Manufacturing S.r.l.

As at 31/12/2016 No. Variation

Recruitment 39 + 76%

Dismissals 0 0%

Resignations 12 - 24%

Variation in Human Resources + 27 + 52%

Chart 10 – Variation in Human Resources


The Group’s recruitment campaign launched since June 2015 has continued in 2016 and will be carried out in 2017 with 5 new job positions expected to be filled within 2017, which will reinforce the Innovation, Technology, Operations and Finance departments.

3.1.7. Remuneration: we reward performance

The compensation policy aims to attract, retain and reward employees, based on their collective and individual performance. This policy is grounded on four principles: (i) performance reward, (ii) budget expectations, (iii) equal and fair

compensation to employees and (iv) compensation market alignment. Total compensation is broken down to:

• fixed compensation: base salary, seniority benefits etc.;

• variable compensation: linked to specific jobs or to individual performance (bonus/variable component or allowance), which is measured based on the appraisal process outlined in section 3.1.7 of this CSR report);

• benefits: health and insurance benefits are provided to all the employees; and

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• mandatory and optional profit-

sharing: based on criteria for rewarding collective performance and appraisal process.

Compensation shall be based and benchmarked on the collective industry scheme for metal-workers (Contratto Collettivo Nazionale del lavoro, CCNL Metalmeccanici). As per 2016, the total compensation of the EPS employees was 39% higher than the minimum compensation guaranteed per each category by said collective scheme agreed with the Trade Unions.

3.1.8. Appraisals and career development

The Group’s variable compensation program, based on both collective financial performance, individual objectives and appraisal results is gradually being brought into alignment since 2015. The target percentages for variable compensation depend on local practices and are structured by level of responsibility. The results of appraisals in 2016 have allowed a promotion on 13% of the Group’s employees (nearly half of them were internships/stages transformed in permanent contracts) 23% of which [23% of these promotions involved women.

The appraisal platform studied and designed specifically by EPS has allowed an equal, independent and anonymous evaluation of the employees by their peers, direct reports and by the top management. All employees are evaluated and ranked based on their performance and potential.

For evaluation purposes, it was established a five pillars set of criteria in order to assess performance:

(A) Analytics and insight

• understanding of the issue and recommendation of realistic

solutions, based on sound business sense;

• accurate and rigorous analyses;

• priorities management; • effective planning.

(B) Internal interaction and

communication

• capacity of building strong, trust-based collaborative relationships;

• documentation production to a client ready level (content and format);

• logical workflow construction; • effective participation to

meetings; • audience engagement and

strong presence expression.

(C) Team and self management

• efficient time management; • direct reports and/or

colleagues’ motivation; • use and provision of feedback; • independent behaviour and

help requests when needed leveraging supervisors time and skills effectively;

• calm reactions and focus in stressful situations.

(D) Entrepreneurial mind-set

• contribution to the development of EPS as a company and a Group;

• self-application to develop new business/R&D;

• identification of new business development and R&D;

• contribution to creating strong EPS relationships;

• knowledge creation, organisationand/or spreading.

(E) Commitment and motivation

• ownership of the project at hand;

• will to run the “extra mile” when needed;

• proactive engagement in new challenges;

• endeavour to think in solutions:

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• care about advancing the

project no matter what.

On the basis of these criteria of evaluation, the employees are then assessed according to their performances, which rank from below

expectations, meets expectations, above expectations to outstanding, combined with their potential of improvement, which is ranked in high, good and development needs.

Chart 11 - Appraisal evaluation scheme

The results obtained by this appraisal allocate the employees within different areas of the evaluation grid , thus paving the way for a reassessment, for an improvement course or for an early promotion.

All those employees who are ranked at the extreme top right of the chart become part of the Academy Talent Program (“ATP”), which consists in a three-year program dedicated to selected talents within the EPS Group worldwide. The ATP, subject to regular performance and improvement appraisal, implies:

- increases of the total compensation and promotion program;

- stock options plans;

- benefits, bonuses;

- courses, masters whose tuition fees are paid, totally or partially, by EPS;

- secondment programs.


The Group will continue to build a value-driven high-performance culture across all our operations, supporting each and every employee in evolving his/her skills and career through our diverse systems for talent development.

3.1.9. Our team, engaged shareholders

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The Group offered stock options to all its

employees for the first time in 2015, by allocating stock options plans and profit sharing plans. As a result, at the end of 2016 4.09% of fully diluted shareholding

is held by Group’s employees and 11.09% is held by its directors.

Category Fully Diluted capital

Profit Sharing Plan

Directors and Executive Directors 11,09% 73,06%

Employees 4,09% 26,94%

Chart 12 - Profit Sharing plan description

3.1.10. Evolution in compensation, our main investment

Due to the growth from 2015 to 2016 of the whole EPS staff, total compensation

for the Group almost doubled from Euro 1,310,102mio in 2015 to Euro 2,486,678 mio in 2016.

Labour Costs 2015 2016

Staff Costs 1,310,102 2,486,678

Social Security Charges 305,960 566,432

Benefits and service costs 67,230 230,750

Other Costs 36,858 412,300

Total staff Costs 1,720,150 3,696,249

Stock Options Costs (IFRS accounting method) 4,646,452 1,620,213

Chart 13 - Group compensation

3.2 Work-life balance strategy

3.2.1. Working time and maternity protection

The average number of working hours per week is set by law. Full time employees work between 35 and 40 hours per week. EPS has also set up initiatives for a better work-life balance by offering flexible work hours at the site. For that matter the Group has not implemented a control system on working hours, badging is done only for security reasons to monitor the persons actually present in the company during the day. In addition, women with at least two children can benefit from part-time conditions and remote working flexibility programs. At the date of this report 100% of the women

with at least two children have opted for – and obtained – such flexibility schemes.

3.2.2. Our results: low absenteeism

The Total Absenteeism rate, which is a key indicator for measuring employee engagement and motivation, in 2016 was 3%. It has to be noted that 1% was due to sickness.

3.3 Constant trade unions and labour relations

The Group has historically recognized a pivotal role to trade unions and social representatives to discuss any key decision regarding its personnel.

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At EPS this dialogue plays an essential

role and goes beyond the formal legal obligations that are required, providing important input to identify any issues and fine tune strategic decisions and operations.

During the year dialogue with trade union representatives of our employees was fundamental to support the integration of Elvi Energy and MCM within the Group and to adopt a Group Business Travel Policy containing a common business travel policy within the Group that takes into account the peculiarity of the regions where the Group’s operational sites are located, as well as workers’ health and safety.

After the acquisition of Elvi Energy, meetings between local labour representatives in Valtellina (Italy) and the Group’s representatives have ensured tight coordination throughout the integration processes.

3.4 Health and Safety as a priority

Health and Safety are EPS’ number one priority. The Group is committed to providing a healthy work environment for employees, contractors and all others at

our sites to help meet our company-wide goal of achieving no harm to people. We strive to impart to employees a strong personal safety ethic that is rooted in awareness, focused on prevention and motivated by concern for human life, because we want our workforce and the employees of our partners to return home every day as healthy as when they came to work first thing in the morning. The Group is fully compliant with the Italian regulation D.Lgs. 81/08 promoting activities, training, prevention and awareness-raising on health and safety issues and drawing up and collecting good practice. For this reason and considering the nature of our operations, no collective agreements were signed for health and safety matters in 2016.

Even though the results are easily observed through indicator trends (chart occupational incidents, injuries, accidents), there are many underlying factors: work organization, risk assessment and mitigation, training, the state of the equipment, management of production processes, corporate culture and the management’s leadership on the subject.

Type of incidents, injuries and accidents 2015 2016

Occupational diseases - -

Occupational injuries 1 -

Occupational accidents - 1

Chart 14 - Incidents type

Our trend on work safety is a positive one; nonetheless, EPS continues to work to further improve its performance by remaining highly focused on the health and safety of its people and contractors. The Group has applied a health and safety management system and has a Health and Safety Representative

(Responsabile del Servizio Prevenzione e Protezione - RSPP) who supervises the compliance to the certifications OHSAS 18001, ISO 14001, ISO 9001 conferred to the Group.

The health and safety management system guarantees an effective and

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systematic administration of employees’

safety without disrupting the organizational work structure by implementing the following:

- adoption of a policy for the safety management;

- hazard identification, risk assessment and identifying the risk control procedures, as per legislative requirements;

- definition of specific programs and objectives;

- definition of tasks and responsibility;

- education, training and staff involvement;

- implementation of communication and consulting procedures with the employees and stakeholders;

- controlled management of archives;

- implementation of management procedures on the activities related to significant identified risks, including processes, such as design and maintenance;

- preparation of measures to detect, prevent and monitor potential

accidents (injuries and failed accidents) and emergencies;

- health and safety system monitoring and performance measurements, corrective actions undertaken to maintain legal compliance;

- definition and implementation of systematic and periodic inspections (accidents, incidents, non-conformities, corrective and preventive actions) on management system adequacy; and

- identification and assessment of risks and dangers associated with the activities carried out by third parties at Group’s site.

The key performance indicators we use for occupational safety are the Total Recordable Injury Rate (“TRIR”) and the Lost Time Injury Frequency Rate (“LTIFR”), the number of accidents with the loss of at least one day of work. In the reporting year 2016 we succeeded in maintaining the number of occupational diseases to zero and we had only one occupational accident injury that caused the loss of no. 35.5 working days.

Occupational safety KPI 2015 2016

TRIR 3.5 2,01

LTIFR 17.7 10,04

Chart 15 - TRIR and LTIF metrics

Several measures were taken during the 2016 in order to create the best work conditions and improve work place comfort in all EPS premises: lighting conditions, ergonomic office chairs with silicon wheels to reduce noise, correct height of office table, relaxing spaces.

The new offices and premises in Turin, Bovisa and Delebio (Italy) were studied in order to guarantee excellent work conditions. These offices, designed by international interior designers, are calm and bright, and all employees are equipped with laptop: there is no pre-

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assigned desk, as any premises of the

Group is a “working area”, to encourage team working and horizontal interactions between the team members.

Furthermore, particular attention has also drawn the subject of good posture in workplace and the muscle-skeletal and related hazards.

Itinerant employees are provided with quality company cars and computer equipment and smartphones specifically adapted to their needs and to facilitate their work conditions wherever should they find themselves.

The Group encourages employees to undertake periodical medical check-ups, by providing employees with a health insurance coverage, which guarantees a reimbursement for specific medical and surgery costs sustained by the employees during the year.

With our well-being commitment, we are involved also in promoting the personal wellness of EPS’ people against a broader public health challenge such as obesity. For this reason the Group decided not to install any vending machine in its premises, to contribute reducing the consumption of high-calories snacks and carbonated drinks, while cutting the environmental impact of logistics and packaging associated to this distribution channel.


In all the countries where the Group operates, we will evaluate the need of specific collective agreements to further regulate aspects of workers’ health and safety.

While upholding occupational Health and Safety as one of our top priorities, we will continue to improve the working environments through:

- safety measures for equipment;

- assessments to promote risk mitigation;

- specific corporate communication appointment;

- training programs that teach employees skills and information about risks management;

- organizational principles;

- healthy practices;

- employee climate surveys.

In 2017 the Group will launch a specific healthy living program to inspire a happier and more active lifestyle based on nutrition information, balanced diet choices and sports practice. In particular, the Group encourages its employees to attend at least one marathon run for a charity program. This is a net-zero initiative with the goal to promote a wealthy lifestyle through running, food, culture, art and experience in the context in which people lives and works.

3.5 Continuous Training

The exchange of information and the dissemination of a corporate culture through initiatives to raise awareness and specific training courses delivered to the entire workforce with no exceptions are fundamental to maintaining good safety results. As required by the law, the Group has a Health and Safety Executive Committee. During 2016 the Group has invested in 818 training hours divided in:

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Training 2016 Hours per employee

Employees (*) Hours

Training of employees on regulation 81/08:

Update of Reg. 81/08 training on high risks 6 9 54

Training of Reg. 81/08 on high risks 12 14 168

Training of Reg. 81/08 on basic risks 4 21 84

Training of Reg. 81/08 on low risks 4 7 28

Training of Reg. 81/08 on medium risks 8 3 24

Training of Reg. 81/08 on person responsible for safety (Preposto)

8 1 8

Training of Reg. 81/08 on RLS 32 2 64

Training on first aid 12 10 120

Training on welding 24 2 48

Training on ERP Software 48 6 220

Total 818

(*) employees are indicated as full time equivalent Chart 16 - Training Hours in 2015

Since July 2015 the Group launched the EPS’ Academy, the in-house training and management school supporting the corporate strategy and business with weekly meetings and courses. The EPS’ Academy aims to promote the development of employees and their ability to come up with effective problem solutions. In 2016 the Group extended the training on first aid to all employees.


Special and practical courses of the EPS’ Academy are also under evaluation and will be implemented in close collaboration with our workforce, particularly for training and information towards employees on environmental protection. The Group will also take into account measures to help prevent and reduce psychological stress on its employees.

3.6 Equal opportunities for the EPS’ people

The Group considers the skills and ambitions of its people as a valuable resource and is committed to creating a working environment that guarantees equal opportunities and values the results of its employees. The Human Resources department pays particular attention to ensuring equal opportunity and non-discrimination for each recruitment. Only skills, experience, qualifications and the personality of the candidates are taken into account in the election process for new employees. The diversity in terms of profiles, culture, age and gender within the Group constitutes a decisive strength and one of the most important assets.

The Group also promotes gender equality in hiring and employment, offering equivalent career paths to men and women as well as equivalent compensation and promotions. The

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company ensures equal access to

training and is committed in improving the work-life balance of its people, increasing employee awareness and communication with colleagues at all levels. All EPS’ women and men, regardless of marital status, qualify for maternity and paternity leave as per local legislation. Furthermore, as a sign of particular respect and support towards maternity, the Group guarantees number3 months of work-at-home to pregnant women to be utilized one-off in full, or on a non-consecutive basis, at full discretion of the employee.


As globalization and other global trends advance, we will expand the place of women and foreign national employees in the workforce, especially in executive posts. We will endeavour in our effort to create a work environment where each employee can demonstrate his or her talents to the greatest extent possible. As EPS becomes an ever larger company, it is essential for our growth and competitiveness that we express the value of the diversity of our workforce in all its forms.

3.7 International Labor Organization compliance

The Group promotes and implements business ethics and respect for human rights and the fundamental conventions of the International Labor Organization Declaration (“ILO”). The Group confirms its commitment on the compliance with the ILO Declaration on fundamental Principles and Rights at Work. We support and uphold the freedom of association and the effective recognition of the right to collective bargaining. All Group staff are employed in countries with favourable labour legislation. EPS

does not operate with Group’s employees in countries subject to risks with respect to noncompliance with international labour conventions. The Group respects the convention for the abolishment of child labour since all employees are of legal age at the time of their recruitment.


We aspire to build community-type labour-management collaboration that helps our global competitiveness, enrich the lives of our employees, and contribute to social development through sustainable performance.

We believe in a horizontal relation between labour and management, not the vertical one that has often defined the dynamics between trade unions and management. We seek to establish a labour management collaboration underpinned by mutual respect and equality.

The Group has therefore put in place a unique model for collaboration that facilitates interactive participation and cooperation in three different dimensions, interlinked with labour-management collaboration, namely, (i) corporate management, (ii) field operation and (iii) collective bargaining. The direction of cooperation between labour and management is defined as follows:

to enhance the value of the company and the employees through transparent and open management];

to maximize productivity through strong teamwork and innovation in the field operation dimension; and

to establish a business-oriented labour-management collaboration on the basis of rational industrial practices and a productive negotiation culture in the collective bargaining dimension.

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4. OUR RESPONSIBILITY TO

ENVIRONMENT: OUR BUSINESS STRATEGY

Energy and climate represent two of the toughest challenges of this century. The International Energy Agency (IEA) has calculated that global energy demand will increase 1.4 times between 2012 and 2040.

The renewables market is now consolidating, also thanks to the investments in two major areas of expansion in the world, such as Latin America and Far East (particularly China and Japan), where solar and wind power can be the quickest and most convenient answer to the emerging demands of energy.

The green revolution has started, and a 100 percent renewable energy system no longer seems to be a utopia.

In 2015 the twenty-first United Nations Conference on Climate Change (COP21) in Paris sent a clear message: greenhouse gas emissions must be remarkably reduced, in order to limit global warming to two degrees.

Unlike other companies, which have to develop a climate strategy aimed at mitigating their own impact on climate change, we at EPS contribute with our business not only to reduce our effects on the environment to the minimum, but also to unlock the energy transition on a global scale. We aim to establish ourselves as one of the world’s foremost eco-companies.

In other terms, regardless the policies implemented and outlined below, the main aspect to be considered is that EPS has the environment at the centre stage of its business strategy.

This has led the Group to be:

- listed in the 100 Cleantech businesses worldwide published by the Cleantech Group

- awarded as Worldwide Technology Pioneer by the World Economic Forum.

- awarded with the first prize in the Venture 4i in Grenoble and in the Italian Venture Forum 2014

- selected as a “growing success story” for the Tech Tour Growth Forum in Geneva and Lausanne

- selected in June 2015 as one of the top companies worldwide to participate at the “Future of Electricity Workshop 2015” of the World Economic Forum in New Delhi (India).

- receive in the context of the European Project Horizon 2020, the official “Seal of Excellence”, the certificate delivered by European Commission, signed by Carlos Moedas, Commissioner of Research, Science and Innovation, certifying the excellence in terms of real market potential, technology, quality of the team, efficiency of implementation and business plan.

4.1 Our environmental policy, our investments

EPS’ goal is to definitely enable renewables as a 24/7 clean, reliable, affordable power source. We develop, provide and integrate environmentally conscious solutions which contribute to the reduction of the environmental impact of the electricity generation, trading, distribution, storage and use.

Our strategic emphasis on accelerating green resources growth as our primary value proposition seeks to leverage

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energy storage as the bridge to a lower-

carbon economy and demonstrates our commitment to the climate change challenge.

The Group’s environmental policy comprises three main areas:

• Technologies: at a technological level we contribute to the provision of stable power supply and to mitigate climate change through low-carbon energy solutions;

• Manufacturing: as regards to our processes we pursue high efficient manufacturing to reduce the environmental impact in production activities;

• Basic activities: we rely on people’s personal and professional sense of responsibility for basic activities which could help reduce our consumption of resources, waste production and polluting emissions on a daily basis.

The Group makes every effort to minimize its environmental impacts: our Standards & Regulatory Assurance Specialists ensure we always operate in compliance with applicable legislation. Our actions aim to protect health and well-being of our people and communities, while contributing to socio-economic improvements and maintaining the financial stability of our business. To that extent, we consult with communities throughout the life cycle of projects and operations and develop plans to manage any related impacts.

We consider environmental protection an essential part of sustainable development in all projects, throughout the lifecycle of our systems and in all contexts in which we operate.

Just as we target with our business strategy a mitigation of climate change and resource and energy efficiency for clients through our products portfolio,

we’re also working to manage and reduce the impact of our own operations, from the R&D activities down to all stages of the energy value chain.

Outstanding operational management:

• contributes to reducing costs as it increases efficiency;

• allows for product and process innovation;

• is a requirement for the company’s license to operate; and

• reduces business risks.

Each year the Group has been compliant with the requirements of the ISO 14001 certification. More specifically, it has adopted an environmental policy that:

1. identifies the environmental aspects of its activities, products and services within the defined scope of the environmental management system that it can control and those that it can influence, taking into account planned or new developments - either new or modified; and

2. determines those aspects that have or can have significant impacts on the environment

EPS has identified the following benefits from the implementation of these standards:

• controlling potential risk factors affecting the impact of products on the environment;

• reducing the risk of confusion, deterioration, contamination and error; and

• paying greater vigilance by personnel in the performance of their activities.

The Group has also obtained without reserves the ISO 9001 certification, for the fulfilment of the specific requirements

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for a quality management system where

an organization:

• needs to demonstrate its ability to consistently provide products that meets customer and applicable statutory and regulatory requirements, and

• aims to enhance customer satisfaction through the effective application of the system, including processes for continuous improvement and the assurance of conformity to customer and applicable statutory and regulatory requirements.

Finally, safety and environmental risk mitigation are also the subject matter of the CE, CSA and UL certification of all EPS products.


The Group’s goal is zero environmental accidents. To achieve it, efficient systems, stable processes and a focused program of work with risk assessments, routines and advanced technology are mandatory. In the upcoming years, EPS’ environmental work will become even more systematic.

4.2 Circular economy: pollution and waste management

To compete successfully in the digital age, organizations need to identify appropriate responses that balance the needs for economical development, job creation, energy storage and supply with greenhouse gas emission reductions and better waste and pollution management.

As a technologically advanced and pioneering company, we recognize that we have a particular responsibility and opportunities to contribute finding the right solutions also at this level.

We have our own routines to ensure that waste is handled correctly and safety and has started negotiations to collaborate

with a specialized supplier which will manage all the processes of hazardous waste.

EPS is a paperless company, and we encourage the use of:

• Portable Document Format (PDF): to create, display and interact with electronic documents and forms;

• Databases: to capture data for prefilling and processing documents;

• Workflow platforms: to route information, documents and direct process flow;

• Digital signature solutions: to digitally sign documents (used by end-users);

• Cloud applications: to receive submitted data, store documents and manage document rights.

To minimize the use of paper we imposed a maximum of copies (printed or photocopied) per month. All the paper used for printing and package is recycled paper.

EPS has also limited the usage of “plastic” within its sites, which imposes use of washable domestic utensils and cutlery for all the employees and staff, while plastic utensils are used only for guests.

Regardless the fact that our Hybrid Storage Solutions are completely clean and manufacturing and testing protocols entail just oxygen and hydrogen emissions (reason for which we have no financial provisions for environmental risks), EPS pays particular attention to measures to prevent environmental risks and pollution, in particular to the choice of techniques and materials. To further reduce the impacts of its activities and test on its products the Group takes great measures on preventing technological and chemical hazards. The hydrogen produced during the tests is stored and recycled for further use during other tests,

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while the pure oxygen is released back in

the atmosphere.

To achieve the objective of final waste volume reduction, programs are being implemented in all of the Group’s premises to:

• minimize and control waste generation at the source;

• promote sorting by providing bins for separate waste collection or by creating in-house waste sorting centres;

• recycle materials and reuse waste by selecting the most suitable methods; and

• improve the processing and packaging of non-reusable waste.


Despite that fact that our manufacturing process does entail neither particular noise nor air, water or soil emission, in order to improve the health and wellness management process for our workforce, in 2017 the Group will make further investments to embed leading industry practices on noise pollution reduction within our premises.

4.3 The significant posts of greenhouse gas emissions generated by the company’s activities, in particular through the use of the goods and services it produces

The Group’s energy storage solutions, in particular HyESS (“Hybrid Energy Storage Systems”), allow a reduction in the quantities of energy produced by renewable sources, which would otherwise be curtailed, and represents lost income for the grid, estimated to reach more than US$ 30 billion at international level by 2023.

Our systems promote also a more direct participation of consumers at the level of

use and in the management of their consumption (management of demand).

Energy storage should permit cost savings by allowing electricity producers and suppliers to avoid purchasing electricity at peak prices and buying (or producing) it when it is cheaper, regardless of the moment when it will be used. The recourse to energy storage in order to smooth load peaks, i.e. smoothing hourly production, represents a potential market estimated in a range of US$ 10-25 billion per year by 2025.

Devices that permit the storage of excess electricity, derived from renewable energy sources during periods of strong production and weak demand (e.g. at night) and returned to the grid when demand increases (around midday)[this avoids a slowdown in conventional plants at night, and in this way permits a reduction in production costs and CO2 emissions.

Most commonly and cost effectively, all facilities and premises adopted energy-efficient LED lighting solutions, which will help reduce the consumption of electricity and the energy-related CO2 emissions. Through measures such as energy-efficient manufacturing and power equipment in all the premises of the Group we optimised the lighting system passing from a need of 12kW to only 4.6kW.

To achieve enduring operational excellence, the Group has realized a photovoltaic part of a micro-grid system implemented in the premises of Delebio to cover all the energy needs of testing activities of the systems there manufactured through the electricity produced by solar panels on the roof.

Other activities included optimizing heating and cooling processes within offices and facilities, investments in more efficient equipment, encouraging sustainable mobility of the employees, by

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train, car-sharing and less polluting

means of transport.

Our activities do not monitor specifically raw material consumption as the manufacturing process is mainly an assembly of raw materials produced by third parties such like chemical, industrial and electronics companies.

4.4 Climate change

An important target of the European energy policy is the reduction of the greenhouse gas emissions. Unfavourable climate conditions, such as storms and floods nowadays affect business continuity, in a disruptive way. To meet the high demand of solutions to ensure energy efficiency and autonomy, we at EPS have developed a full range of products and services which solve different issues in the field of business continuity for telecommunication, energy and railway companies.

The energy supply of the future must become more climate-friendly, more efficient and more intelligent. Innovative technologies, products and systems at all stages of the energy value chain are essential for achieving this objective. The stages range from extraction of raw materials, through electricity generation, trading, distribution and storage of energy, to the use of energy.

Although climate change is not directly affecting our business, the EPS’ top priority is climate protection.

The Group’s aim is to tackle this issue by further expanding renewable energies, both in mature economies and in emerging countries, and to contribute to replacing older and polluting power plants, which generate high levels of emissions, with new and high-efficient plants. We’re playing a key role in structuring the energy transition so as to solicit and enable a carbon-neutral electricity supply, while at the same time

being in a position to make provision for future energy needs with a high quality of backup power supply over the long term.

Climate protection also plays an important role in the debate going on in the public domain. Our stakeholders, mainly customers, institutions and politicians expect us to support the accomplishment of ambitious targets and to deliver a consistent approach directed towards the reduction of greenhouse gas emissions.

Our operations require energy which gives rise to the carbon dioxide emissions, directly or indirectly. To reduce greenhouse gas emissions, the Group decided to introduce a hybrid corporate fleet and will also evaluate the introduction of electrical vehicles for the urban business trips.


To help reducing the greenhouse gas emissions linked to the business trips of our workforce within the sites of the Group, we will introduce a multisite video-conference system. The Group will also introduce a specific “green procurement” in other words the sourcing of products and services which are more environment-friendly than others, such as recycled/reused materials for the premises’ stationery and similar.

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5. OUR RESPONSIBILITY TO SOCIETY

5.1 Territorial, economic and social impact in terms of employment

In pursuing its corporate goals, the Group is committed to contributing to the development of territories in which it operates by generating employment and income to local communities. This commitment is realized through collaboration in various projects with governments and local stakeholders, local content promotion, projects for local communities and with the preventive and inclusive stakeholders.

As our business continues to grow, we are creating more jobs and welcoming more individuals to the EPS family. To cultivate the economic opportunities that build mutually beneficial relationships in the communities where we operate, our manufacturing site and premises prioritize hiring colleagues from the local areas, as detailed in Section 3. Our responsibility to the EPS people in 2016 the Group acquired number39 new resources, transforming number 5 internships in permanent contracts.

5.2 Innovation as local development driver, partnering with Universities

In pursuing its corporate goals, EPS is committed to contributing to the development of territories in which we operate. This commitment is realized through collaboration in various projects with governments and local stakeholders, local content promotion, projects for local communities and with the preventive and inclusive stakeholders.

The Group has built through the years a consolidated presence in many Italian areas and has consistently built long-term relationships based on projects with national and regional authorities aimed also at sustainable development:

• HYSOLWIND project: launched in 2012, the project has led to the development, production and deployment of an integrated and optimized solution for energy storage in the off-grid sector that integrates hydrogen, wind and solar. The innovative solution is installed and under testing in the town of Macomer, in Sardinia (Italy).

• GBMP project: EPS acts as a partner in a consortium made up of regional industrial companies: Spesso Gaskets and Ferioli & Gianotti Thermal Treatments and with the technical and scientific excellence of the Department of Applied Science and Technology of the Polytechnic of Turin.

• ALCOTRA project: our products become co-generation solutions, installed to generate heat and power. Two application fields are explored: off-grid village in Lavasè, Valle d’Aosta Region (Italy) and greenhouse for plant cultivation in Albenga, Liguria Region (Italy). The Group acts as the only participant in this project.

In order to reinforce local partnerships already in place with the companies Mavel LTD and Eltek Plast S.p.A. and join the network and active research centers in the Valle d’Aosta Region, EPS requested in 2016 to the local administration an establishment, with the aim to maintain local premises in the region.

In view of the Healthcode project, started in September 2015 whose aim is to implement an advanced monitoring and diagnostic tool based on Electrochemical Impedance Spectroscopy (EIS) for μ- CHP and backup PEM fuel cell systems, the Group is part of a consortium characterized by partners with a wide experience in the industry and research

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fields, such as Ballard Europe in Hobro

(Denmark), EIFER Europaisches Institut fur Energieforschung EDF-KIT Ewiv in Karlsrhue (Germany), Università degli Studi di Salerno (Italy), University of Aalborg (Denmark), Torino E-District Consorzio (Italy), FCLAB of Université de Franche-Comté in Belfort (France), Vitamib in Grenoble (France).

To drive for excellence, EPS has had a strong and everlasting relationship with the Polytechnic of Turin right from the start. The Group has implemented an agreement with the Polytechnic of Turin, to support the design of the HyESS platform: Finite Element Method (FEM) and Computational Fluid Dynamic (CFD) analyses have been performed on main components together with Reliability, Availability, Maintainability, Safety (RAMS) analyses of the overall architecture.

The Group has a collaboration with the Istituto Superiore Mario Boella (ISMB) – a research and innovation center operating in the ICT domain - for the web-based remote control development of the HyESS.

Over [the] time we extended the dialogue to another leading Italian University: the Polytechnic of Milan, where Giuseppe Artizzu, Director of Global and Energy Strategy at EPS is visiting professor and board member of the Master Course on RIDEF (Renewables, Decentralization, Efficiency and Sustainability). At the end of 2015 and beginning 2016 we deepened this relationship even more with the strategic acquisition of a participation in MCM, a center of excellence, participated by the Polytechnic of Milan. MCM is specialized in the development, design and supply of digital control and static energy conversion systems which can be used as critical components in various applications, always with the aim of

achieving energy savings. The main component of MCM technology is the Universal Digital Control System that provides an advanced interface to the public grid for Distributed Generation systems, suitable for all sources, such as wind, photovoltaic, gas micro cogeneration and mini hydroelectricity plants. This relationship is further strengthened by Daniele Rosati, who is the Group Vice President Engineering and is visiting professor at Polytechnic of Milan where he teaches at the main course of Power Plants Electricity for engineers at the last year. He is also visiting professor at the University of Pavia at the course of Energy Conversion, Renewables, Microgrid and Energy Storage, thus permitting the building of a constant dialogue with other universities.

5.3 Sponsorships and charities

EPS contributes to associations intervening in the areas of solidarity and childhood, by providing financial assistance to support their projects.

The Group since 2015 has decided to replace the amount usually planned for the Christmas corporate gifts with a donation to the Paideia Foundation on 2015 and on 2016 with donations to the associations Hakuna Matata (founded in 2010 and is responsible for providing appropriate support to the education and growth of the central Tanzanian children) and Theodora Onlus (founded in 1995 and whose mission is to bring a smile to hospitalized children with the visit of Dottor Sogni).


The Group aims at including sponsorships and charities within a wider and more structured Corporate Social Responsibility plan. At the moment of this report, we’re taking into consideration continuous collaborations with well-established and renowned international

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solidarity NGOs who are directly involved

in projects for the supply of electricity to under-electrified locations and people, participation at the Milan Marathon 2017 and the Sgamelaa Walk for Charity.

5.4 Enduring partnerships and stakeholders

The Group business relies on effective and sustainable supply chains to meet the evolving needs of our customers. As we do with all of our stakeholders, we strive to create relationships with suppliers that are built on a foundation of integrity, respect and mutual benefit.

We seek the most responsible and cost-effective ways to secure goods and services from our suppliers. In particular we emphasize relationships with entities near our operations to the extent they meet our requirements. By supporting local suppliers, EPS benefits from proximity and security of supply, contributes to local economies and helps attract additional investment to the community.

5.5 A supply chain engaged in Social and Environmental Responsibility

EPS’ business relies on effective and sustainable supply chains and partnerships’ agreements to meet the evolving needs of our customers on the technical, energy and economic front. As we do with all our stakeholders, we strive to create relations with suppliers, providers and business partners that are built on a foundation of integrity, respect and mutual benefit. The Group is committed to build sound partnerships with suppliers through fair-trading in compliance with procurement-related laws and regulations.

Our extremely innovative activity often requires exclusive components, products and supply which in most cases are customized for our special needs or provided by a unique partner. However,

regardless of challenges, we’ve been selecting our technology providers paying a particular attention on their reputation in terms of social responsibility and operational excellence. The procurement department, in close collaboration with Engineering, Innovation, Technology and R&D has selected suppliers based on various Total Cost of Ownership (TCO) targets, combining economic performance with environmental responsibility. We work continually to improve the supply chain with a strong focus on its sourcing, sustainability, traceability and transparency. To reduce risks linked to the procurement, the Group has been working both at an engineering and market investigation levels on a variety reduction program, to ensure the sustainability of our purchasing.

5.6 Fair trade practices

As the globalization of markets continues apace, national borders liquefy and lose their relevance for trade in energy sources. Companies like EPS are therefore being challenged by their stakeholders to exert influence on their suppliers through their procurement policy on both an international and local level.

Purchases principally consist of raw materials and semi-finished products, such as the components of fuel cells, which are then assembled and integrated into the Group’s systems, of Self’s electrolytic cell and of the electronic components.

The Group is committed to build sound partnerships with suppliers through fair-trading in compliance with procurement-related laws and regulations.

The Group is committed to the highest standards of ethics, honesty, openness, and accountability. In the course of our business activities, we fully endorse all applicable anti-bribery, fraud, corruption, and money-laundering legislation, taking

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a zero-tolerance approach to any form of

corruption or fraud from either our own staff or those acting on our behalf.

The Company and its Compliance Office (Organismo di Vigilanza) provide ongoing bribery awareness training to employees and have developed proportionate procedures across all its areas of operations to ensure that bribery and corruption risks are minimized and eliminated where possible.

This commitment is reflected in the key principles contained within the Ethical Code and Anti Fraud and Corruption Code of Conduct approved by the Group, which we expect all our staff and those acting on our behalf to understand and comply with. We train our employees with session and communications on how to apply the Code’s principals. Before working with suppliers, we conduct assessment in order to determine the degree of bribery and corruption risk posed. This helps the EPS Group put mitigation plans in place when needed. We also check suppliers once the agreements are in place.

Partners agree to and undertake to fulfil any provision of the Ethic Code and Anti-Fraud and Corruption Code of Conduct approved by the Group and therefore agree, inter alia, to behave in the full respect of business, corporate and professional ethics, preventing the EPS from any relationship, agreement or role that may negatively affect our reputation, values and commitments. Our Code of Conduct explicitly prohibits engaging in bribery and corruption in any form.

Our Ethic Code applies to all employees, officers and directors. We expect and encourage our contractors and their employees to act in a way that is consistent with our Code and we take appropriate actions where we believe they have not met our expectations on their contractual obligations.

We make all payments to the partners in compliance with any applicable anti-money laundering regulation from time to time.

Furthermore, the shares of Electro Power Systems S.A. are listed on the regulated market of Euronext in Paris. In this context, compliance by the Partner with rules applicable to stock transactions and the holding and use of material non-public information it may receive in the course of its activities under this Agreement is crucial for the Company. Such rules mainly stem from Articles 621-2 to 622-2 of the General Regulation of the French Autorité des Marchés Financiers (AMF) and Articles L. 465-1 et seq. of the French Monetary and Financial Code.

In 2016 the Group introduced an anti-corruption compliance plan to which all suppliers and partners will be asked to adhere. We have incorporated CSR criteria in our purchasing processes and decisions, such as occupational health and safety, consideration of human rights, respect of labour and environment. Specific sustainability criteria are envisaged in terms of the approval procedures, procurement choices, contractual clauses and means of checking the work of suppliers.


We will incorporate CSR criteria in our purchasing processes and decisions, such as occupational health and safety, consideration of human rights, respect of labour and environment. For the upcoming years, the Group plans to create a Best Technology Provider Award to reward and provide further visibility to the most strategic partners.

The Group is introducing a procurement policy which entrusts tender contracts for works, services and supplies in compliance with the legislation in force and the principles of cost-effectiveness, correctness, competition, and

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advertising, using procedures which

guarantee participating businesses the utmost transparency, objectivity and equality of treatment.

5.7 Other measures taken in favor of human rights

We at EPS have set respect for human rights as the most important principle for conducting sound business activities. Wherever the EPS Group operates in the world, the company applies the same high standards and principles of conduct. Respect, diversity, integrity, ethics, safety and sustainability — the elements that make up the EPS’ corporate culture foundation — are taken into account by employees during their meetings with customers and colleagues around the globe.

The Group complies with all applicable laws and regulations concerning human rights in each country and region, understands international standards, and respect human rights, and shall not condone any use of either child labour or forced labour.


We will keep upholding human rights as one of our management principles and we will promote awareness about our commitment to protect human rights throughout the Group with specific workshops in the EPS’ Academy.

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6. METHODOLOGY NOTE

This CSR Report provides a detailed presentation of Group corporate social and environmental responsibility priorities and practices. It describes the current and future challenges faced by the Group in this area, the strategic approaches adopted in response and progress achieved in meeting its objectives. This report is drawn up in accordance with CSR reporting requirements applicable in France (L.225-102-1 and R.225-105-1 of the French Commercial Code). It provides a tool for measuring employment-related and societal impacts, governance and environmental performances.

This report was reviewed for compliance by the independent third-party, BDO France – Léger & associés.

6.1 Reporting boundaries and indicators selection criteria

The reporting boundary for employment, social and environmental indicators is comprised of the subsidiaries controlled by the Group as at 31 December 2016. These subsidiaries are consolidated according to the full consolidation method.

The reporting boundary for employment indicators for fiscal 2016 coincides with the Group’s structure for consolidation (cf. note [_] to the consolidated financial statements).

The following indicators concern only the workforce located in Italy due to the immateriality of information reported by other entities of the Group (Electro Power Systems Inc. and Electro Power Systems India Private Ltd.), essentially because of either the non-operational activities or the exclusive focus on business development:

• occupational accidents

• absenteeism

• training and the organization of dialogue between employees and management

• equal opportunity employment

Analysis of employment-related, environmental and social impacts relating to Group activities made it possible to define relevant indicators in accordance with requirements resulting from the Grenelle II Environmental Law (article 225). Certain information not falling within the scope of the Group’s activity or its environmental and societal priorities due to its operating method and structure was not considered pertinent and on that basis included in the reporting boundary just in the “Future challenges and approaches” section, or, with reference to the following information, excluded from this report and its reporting boundary:

• water consumption and supply in relation to local constraints;

• land use; • climate change; • biodiversity; • impacts on neighboring or local

populations; • actions against food waste.

6.2 Indicators criteria

Below are the methods for calculating

• Total absenteeism = B / (A+B). Sickness absenteeism = C / (A+B). Where:

A = Number of hours effectively worked by all Employees with contracts, including training

B = Number of hours of absence (sick leave, occupational diseases, maternity leave, accidents in the work place and/or travel-to-work accidents or any other absence not provided for by contract or social shock absorbers schemes)

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C = Number of days of sick leave

(excluding occupational diseases, maternity leave, accidents in the work place and/or travel-to-work accidents)

• Headcount: full and part-time employees on fixed-term, permanent, temporary and professional training contracts, and permanent advisors (“Employees”), as well as management (including Chairman, Executive board members and members of the Executive Committee), and partners dedicated to the business development (which have been contracted through business partnership agreements), in force as at 31 December 2016. Temporary personnel is not included in this data. When reference is made to “at the date of this report”, the data includes Employees of EPS and Employees of Elvi Energy and MCM and their partners as at the date hereof.

• Training: the percentage of persons trained in relation to the total Italian workforce at 31 December 2016.

• Workforce by social professional category: as the same classification for management versus non management employees does not exist in certain countries, management refers exclusively to chairman, executive and active members of the board.

Total Recordable Injury Rate (TRIR): is a commonly used indicator that measures how many OSHA recordable incidents a company has per number of hours worked

TRIR = (# of Recordable Injuries * 200,000) / # hours worked.

• Lost Time Injury Frequency Rate (LTIFR): is the number of lost time injuries occurring in a workplace per 1 million man-hours worked.

LTIFR = (# of Lost Time Injuries * 1,000,000) / # hours worked.

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7. CONCORDANCE TABLE

To facilitate the reading of the CSR report, the following concordance table provides cross-references to the main categories of information required by French law (Grenelle II Environmental Law and article R. 225-105.1 of the French Commercial Code):

Grenelle II Environmental Law (article R. 225-105.1 of the French Commercial Code)

ENVIRONMENTAL INFORMATION

Environmental policy

Organization of the company to take into account environmental concerns. Environmental evaluation and verification approaches

4 / 4.1

Training and information towards employees on environmental protection 3.5

Budget dedicated to environmental protection and environmental risk mitigation 4.1

Financial provisions for environmental risks 4.2

Circular Economy

Prevention, reduction and fixing of air/water/soil emissions 4.2

Prevention, recycling and cutting waste 4.2

Noise pollution and others types of pollution 4.2

The significant posts of greenhouse gas emissions generated by the company’s activities, in particular through the use of the goods and services it produces

Water consumption 4.3

Water supply considering local resources 4.3

Consumption of raw materials 4.3

Measures taken to improve the efficiency of raw materials use 4.3

Energy consumption 4.3

Measures to improve energy efficiency and better use renewable energies 4.3

Land use 6.1

Climate change

Greenhouse gas emissions 4.4

Measures to adapt to climate change 4.4

Biodiversity preservation

Measures taken to save and develop biodiversity 4.5

SOCIAL INFORMATION

Employment

Total workforce 3.1.1

Workforce broken down by gender 3.1.1

Workforce broken down by age bracket 3.1.1

Workforce broken down by region 3.1.1

2


Hires 3.1.2

Redundancies 3.1.2

Compensations 3.1.5 / 3.1.6

Evolution of compensation 3.1.6

Organization of work

Organization of work time 3.2.1

Absenteeism 3.2.2

Labor relations

Organization of social dialogue 3.3.

Outcome of the collective agreements 3.3.

Occupational health & safety

Health and safety conditions at work 3.4

Outcome of the collective agreements signed with trade unions regarding occupational health and safety 3.3

Frequency and seriousness of incidents 3.4

Occupational diseases 3.4

Training

Policies implemented regarding training 3.5

Total number of training hours .5

Equal treatment

Measures promoting gender equality 3.6

Measures promoting the employment and integration of people with disabilities 3.6

Policy against discrimination 3.6

Promotion and respect for the clauses of ILO conventions

Respect for the right to organize and collective bargaining 3.7

Abolition of discrimination in employment and occupation 3.7

Abolition of forced or compulsory labor Abolition of child labor 3.7

INFORMATION REGARDING COMMUNITY AND SOCIAL INVOLVEMENT PROMOTING SUSTAINABLE DEVELOPMENT

Regional, economic and social impact created by the activity of the company

Regarding employment and local development 5.1 / 5.2

Impact on local and neighbouring communities 6.1

Actions against food waste

Stakeholder relationship

Conditions of the dialogue with the persons and organizations 5.2

Philanthropic actions and community involvement 5.3

Subcontracting and suppliers

Integration of the social and environmental issues within the sourcing policy 5.5

Importance of subcontracting and integration of CSR in the relationships with suppliers and subcontractors 5.5

Fair operating practices

3


Actions implemented to prevent any kind of corruption 5.6

Measures implemented to promote consumer health and safety 5.6 / 3.4

Other actions promoting human rights 5.7 / 5.3

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