Verdo’s business model

Statutory statement on social responsibility and the gender composition of management pursuant to section 99 a and 99 b of the Danish Financial Statements Act.

This report forms part of Verdo’s annual report, and covers the period from 1 January 2021 to 31 December 2021.

Mission

Verdo operates and develops sustainable critical infrastructure for the benefit of customers and future society

– based on heating, water, electricity and technical infrastructure

CSR – Corporate Social Responsibility

One green step ahead – together

At Verdo, we are very driven by a strong common purpose. We have a clear aim of contributing to positive change in society. It is also our belief that we, as a cooperative society and a supplier of critical energy infrastructure, have a special duty to take a responsible and sustainable approach to everything we do. Put briefly: We have a great social responsibility and we take this very seriously.

We have a targeted focus on our social responsibility, as part of our efforts to grow our business sustainably. By ‘sustainable’, we mean that at Verdo we strive to use our resources in a way that will not burden future generations – environmentally, socially or economically.

There are many ways companies can meet their responsibilities to create a greener and more sustainable world. At Verdo, we have committed to doing so through what we call our social contract. We view our social contract as our birth certificate. It must serve to continually remind us to deliver the extra long-term dimension that helps make a difference to our customers, employees, local communities and partners.

The social contract therefore has a broad aim, covering efforts in relation to both climate and the environment, and social and economic sustainability. However, as a company that emerged from society’s need for energy, and which provides citizens with security and welfare through the supply of drinking water, power and heating, our primary focus is on sustainability within the green transition.

This is reflected in our ‘One green step ahead – together’ vision. We work hard every day to reduce our greenhouse gas (CO2) emissions, and make a sustainable imprint on the future. Our core business is the operation and development of sustainable critical infrastructure based on heating, water and electricity. We also develop green energy plants for industry and utilities, in Denmark and abroad, and we are one of Europe’s leading suppliers of sustainable, certified biomass for industry and district heating plants. We are also one of Denmark’s largest players handling the operation and maintenance of street lighting, and we supply charging stations for electric and plug-in hybrid vehicles. It is therefore our goal to be among the energy companies that are leading the way in the green area.

Verdo’s business model

Resources

• People • Knowledge • Raw materials • Renewable energy • Capital

Activities

Development and

installation: • Energy plants • Street lighting • Traffic systems • Electrical installation Operation and maintenance: • District heating • Drinking water • Energy plants • Street lighting • Fibre-optic networks Service: • Energy plants • Electrical installation Trade: • Electricity sales • Biomass • District heating • Technical carbon • Coal

Verdo adjusted the structure of the Group’s parent company, Verdo S/I, from a self-governing institution to a cooperative society with limited liability (a.m.b.a) in 2021. This was driven by a desire to harmonise the corporate structure with the way the company is managed in practice. As a cooperative society, Verdo is owned by the consumers and is thus the common property of the local community. Our business model is based on us transforming resources into something of value. This involves a significant reciprocal impact between Verdo and the outside world. We are therefore striving to reduce our own CO2 emissions in energy production, but also to reduce emissions from both our commercial and private customers.

Verdo aims to help meet and promote the UN’s 2030 Sustainable Development Goals. We are in a position where we can positively influence the realisation of the global goals, and the goals therefore serve as a guide for Verdo’s sustainability goals. In our CSR work in relation to the climate and environment, we work specifically with global goal #6 – clean water and sanitation, #7 – affordable and clean energy, and #13 – climate action.

Based on our vision and mission, we also have a strategic focus on global goal #9 – industry, innovation and infrastructure, #11 – sustainable cities and communities, and #17 – partnerships for the goals.

Value creation

• Future-proof heating, drinking water and electricity • Green transition • Greater digitalisation • Robust infrastructure • Contributing to a sustainable society – locally and nationally • Danish and international workplaces with a focus on skills growth • Tax payments in Denmark

This section reports on significant risks of adverse impacts on the climate, environment and social factors Verdo’s business activities are deemed to have, and how we manage these risks, pursuant to section 99 a(3) of the Danish Financial Statements Act.

Risk assessment

Verdo’s transformation from black to green energy in district heating production began back in 2002, when the Randers CHP plant started gradual conversion from coal to biomass. Today, the CHP plant has reduced CO2 emissions by 99.3% compared to firing using coal, and continues to work towards the green transition.

Our sustainable biomass, which is used in our district heating production and also sold to our customers in both the private and commercial segments, is certified through schemes that support and ensure that we meet recognised and regulatory standards. To continue to ensure we procure our fuels sustainably, in 2021 we further systematised our procedures for using suppliers based on the new RE-II Directive, which entered into force on 1 July 2021.

The new RE-II Directive sets sustainability criteria and documentation requirements for wood industry waste products and other biomass used for energy purposes.

A significant part of Verdo’s business model is the sale of coal and technical carbon through our Norwegian-US subsidiary Carbon Partners Inc. Technical carbon is used, for example, in the alloy industry and in the manufacture of solar cells. We are keenly aware that the extraction and use of coal is not sustainable. We are therefore committed at the same time to taking responsibility in working towards the green transition of the industry and phasing out coal.

We have a values-based management foundation, and we strive to ensure all our employees follow internal standards and policies.

Responsible supplier management is an area in which we can see some risks of negative impacts on human rights and corruption. Over a number of years, we have had our suppliers in our Trading division commit to our Code of Conduct. We have not identified any specific risks in relation to human rights or corruption in 2021. This remains a focus area, and in 2021 we formulated a Code of Conduct which will apply to the whole Group. We will commence dialogue with our strategic suppliers on this in 2022.

Social conditions are impacted by low unemployment and difficulty finding suitable candidates for advertised positions. This means higher costs for outside recruitment agencies and loss of earnings due to unfilled positions. We will therefore focus in 2022 on employer branding and further optimising our internal recruitment processes, in order to attract more qualified candidates.

We can also achieve the right mix of resources among our employees through relevant continuing training. A risk in this respect is that the relevant continuing training needs are not identified and implemented. We have a process for either employee development talks (MUS) or group development talks (GRUS) that we follow when reporting in our HR system.

We saw a declining proportion of apprentices in 2021. Given that apprentices are a pathway to recruiting competent tradesmen, it is important that we have our pipeline. We are therefore seeking to recruit apprentices as broadly as possible. Failure to retain employees who can no longer work in a full-time position represents a risk of losing resources. Opportunities for reduced working hours, such as part-time positions or senior or flex jobs will therefore be evaluated in dialogue with the employee, job centre and immediate manager.