Verdo’s business model

CSR – Corporate Social Responsibility

Verdo’s business model

Resources

• People • Capital • Knowledge • Innovation • Wood • Solar • Water • Coal Strategic business

Other business

Activities

Development and

installation: • Biomass • Energy systems • Street lighting • Waterworks • Fibre-optic networks • Electrical installation Operation and maintenance: Regulated: • District heating • Water

• Energy systems • Street lighting

• Fibre-optic networks • Electricity grids Trading: • Biomass • District heating • Technical carbon

• Electricity sales

Value

District heating Electricity Drinking water Contributes to CO 2 emissions Contributes to CO 2 reductions Danish and international jobs Tax contribution in Denmark

Cultural and sports sponsorships in local communities

Our business model is based on the transformation of resources into value created. We approach CSR in recog nition of the mutual impact that Verdo and the outside world have on each other – how we affect and are affected by the environment and climate, as well as by our relationship with custo mers, business partners and employees. This means that CSR has both a direct and indirect impact on our business model.

Consequently, we strive to not only reduce our own CO 2 emissions from energy production, but also to reduce our customers’ emis sions, among other things. The energy optimisation we offer our customers allows them to reduce CO 2 emissions from their energy systems, street lighting business and electricity consumption.

Among other things, Verdo trades in certified fuels, which are produced by sustainable forestry operations under safe conditions. The recognised certifications ensure that strict requirements are imposed on manufacturers and business partners which, in turn, allow Verdo to sustainably and responsibly source and resell certified fuels.

Operational and contingency plans Unintended interruptions of the supply of electricity, water and heating constitute a significant risk to the health, educational and emergency organisations and public institutions we supply. To avoid interruptions, we continuously update our operational and contingency plans on heat, water and electricity supply in line with government requirements. In 2019, there were no significant unintended interruptions of supply.

Resources Our value creation is dependent on a number of resources: people, capital, knowledge and innovation as well as wood, solar, water and coal. These resources play a vital role for our long-term value creation and competitiveness as well as for the development of a sustainable business, and we therefore want to look after them and develop them. One example is our electricity and heat production at the certified biomass-fired CHP plant in Randers. This significantly reduces CO 2 emissions and contributes to a lower environmental impact.

Activities We operate across our four main value chains: heating, water, tech nical infrastructure and trading in fuels. Our expertise is therefore centred on the development and installation of energy-efficient energy systems, street lighting and intelligent infrastructure, operation and maintenance of water and heat supply as well as trading in green electricity and fuels such as certified biomass and technical carbon.

Value creation and competitive advantages Investments in innovation and development are key to our business model and set us apart from our competitors. Synergies between the regulated and commercial business create value for our electricity, water and heating customers, as they help to keep prices competitive. Trading in certified fuel has given us a unique market position based on quality and competitive prices. At the same time, we are working to push the entire industry in a more eco-friendly direction. In the development, construction and operation of energy systems, we focus on our customers’ demand for flexible energy systems to optimise operations and save energy.

Macro trends As an energy company, we are affected by macro trends such as Danish and international energy legislation, consumer demands and the UN’s 17 Sustainable Development Goals. This calls for responsible and CO 2 -reducing solutions due to the climate impact of energy production. These general drivers and trends both support and challenge growth and value creation.

Approach to CSR Our approach to CSR is defined in the following guidelines:

We create and sell green energy and sustainable solutions for the benefit of people and the environment.

We take initiatives that benefit our employees and increase their commitment, job satisfaction and safety.

We actively work with diversity in recruitment.

We actively work to train the workforce of the future.

We promote sports, culture and social activities.

Our business operations are based on sound and ethical principles, and we conduct ourselves with decency.

We launch initiatives to reduce CO 2 emissions.

We actively work with the UN’s 17 Sustainable Development Goals.

CSR – Corporate Social Responsibility

Verdo’s vision is to generate green energy that makes a world of difference. We see it as part of our responsibility to contribute to the green transformation and supply more sustainable energy. This is an ambitious but necessary vision, because according to figures from the Danish Energy Agency fossil fuels still account for more than 80% of the planet’s total energy consumption.

Transition from black to green district heating Verdo’s transition from the use of black to green energy in district heating production began in 2002 with the gradual transition from coal to biomass at the CHP plant Randers Kraftvarmeværk. The conver sion to biomass was fully implemented in 2009. From 2002 to the present day, Randers Kraftvarmeværk has reduced CO 2 emissions by 99.3%. The calculation assumes an emission factor for biomass of zero according to Commission Regulation (EU) on the monitoring and reporting of greenhouse gas emissions.

Since 2016, Verdo has fired with certified biomass in accordance with the Danish Industry Agreement for Sustainable Biomass. The reason is that CO 2 emissions from coal are permanent, while emissions from certified biomass are temporary due to documented, responsible reforestation and forest management and the absorp tion of CO 2 emissions by plants and trees over time. The transition has been crucial in reducing the CO 2 footprint of district heating production and thereby the negative environmental impact.

Since 2015, Verdo has supported indepen dent certification schemes that ensure sustainable and safe production of woodbased fuels. We do this because we believe in sustainable and documentable fuel production. Today, we have several Chain of Custody certifications (CoC) – FSC®, PEFC™, SBP and the NEPCon Generic Chain of Custody.

From permanent to temporary CO 2 emissions The 2018 Energy Agreement significantly boosted the development of fully and partially electrified energy systems. By installing a heat pump at the CHP plant, we have achieved increased efficiency with lower biomass consumption. In 2019, this enabled us to once again lower the price of district heating paid by our customers while also reducing our total CO 2 footprint.

Green energy In 2013, we began offering our customers green electricity as an alternative to conventional fossil fuel-based electricity. Today, we offer green electricity to all our customers, and green electricity now covers 100% of the Group’s own consumption.

Switch to LED lighting Since 2015, Verdo has undertaken the comprehensive task of replacing conven tional lighting units with more climate-friendly LED technology, which reduces the CO 2 impact of lighting. We have continuously installed LED lighting in our own indoor and outdoor areas, as well as helping an increasing number of customers to replace their street lighting, indoor and outdoor lighting and effect lighting with LED lighting. This has produced energy savings of up to 70%.

Energy companies’ energy-saving efforts As an energy group engaged in heat and electricity distribution, we are required to report our energy savings to the Danish Energy Agency each year. This is a high-priority area for Verdo, and every year since 2016 we have achieved energy savings in several areas.

Tree planting and forest preservation In 2016, Verdo helped plant the Oust Mølle Folkeskov forest, and in 2019 we took over the 39-hectare Randers Sønderskov forest. This was part of our efforts to protect source areas and water extraction in future. With our new strategy and vision, Verdo is accelerating the contribution to the green transformation by, among other things, living up to the UN’s 17 Sustainable Development Goals with a particular focus on goal no. 6 ‘Clean water and sanitation’, goal no. 7 ‘Affordable and clean energy’ and goal no. 13 ‘Climate action’.