Environmental, Social and Corporate Governance (ESG)

NES SUSTAINABILITY PLAN

Introduction

Networked Energy Services’ (NES) vision is to offer industry leading, high performing, cost effective and sustainable smart grid solutions with our proven and open 3 tier, multi-application platform. 

For NES, this means using innovation to embed the concepts of eco-sustainability and digital inclusion into both our technology and throughout our business as an entity to enable the most efficient, reliable and secure delivery of energy for utilities.

We are committed to sustainable value creation and delivery by aligning our business strategy to meet societal needs while reducing environmental impact and advancing social development. This commitment is embedded in our company at every level:

• as an integral part of customer satisfaction;
• within innovation of products, software and services;
• as a core pillar of our efficient operations; and 
• a fundamental part of our values and transparency.
  
  

Focus Areas for the Sustainability Management Plan 

NES recognizes that the company-wide adherence to corporate responsibility and ethics are fundamental for business sustainability and ensures this is implemented throughout our Sustainability Management Plan.

NES’ Sustainability Management Plan addresses economic, environmental, and social sustainability through key focus areas such as Environmental, Health and Safety Management (operational and product-related); Governance and Risk Management, Supply Chain, People and Workplace and Integrity and Ethics.

1. Environmental, Health and Safety Management 

NES is greatly committed to following stringent Health, Safety and Environment (HSE) regulations. Therefore, NES has adopted a clear HSE Policy and established a comprehensive HSE Management System (HSEMS) compliant with legislation, regulations, standards (ISO9001, ISO14001 and OHSAS18001) and codes to manage HSE risks. 

NES strives to protect our environment by providing quality products and services that minimize impact on the environment and maximize the sustainability of NEs’ supply and service capability whilst protecting the health and safety of our employees. Moreover, NES is committed to continually monitor our HSE performance and to continually review its HSE policy with respect to future legislation and business opportunities. 

Taking a holistic, end-to-end perspective, NES HSE and sustainability considerations and principles are embedded throughout our business value chain from: development of energy-efficient products; to sourcing materials; through to end-of-life recycling and waste disposal. Our approach enables our customers to operate at peak efficiency and performance, reducing the impact of our products and operations on the environment, providing a secure and safe work environment and create value for our stockholders by improving quality of life for our employees and end customers. 

To achieve this NES has adopted a set of strategies: 

• Manage HSE hazards to improve our operations and performance and maintain the highest level of commitment to protecting the health and safety of our employees and end customers.
• Commit to meet or exceed regulatory and policies outlined in the HSEMS. We work to create a sustainable workplace safety culture and focus our efforts to continuously enhance our health and safety performance. 
• Develop the most advanced energy efficient smart metering system which improves our employees’ quality of life while undertaking proactive measures to minimize the environmental impact of both production and distribution activities. This is achieved by optimizing materials and components used and reducing waste emitted during production activities. To accomplish this objective, NES is working to make product designs more compact, lightweight, and efficient while simultaneously reducing the number of defective products created through manufacturing processes by implementing quality management initiatives within our product lifecycle such as the Zero Defects principle through our Contract Electronic Manufacturer (CEM). 
• As part of our design efforts, we strive to make use of recyclable materials wherever possible and to minimize internal power consumption. Some examples demonstrating NES’ use of recyclable materials in NES meters include the meter cover and terminal block. The meter cover is made of ABS/PC plastic and is recyclable. The terminal block is made of polycarbonate plastic (with brass inserts) and is also recyclable. In fact, based on the weight of NES meters, approximately 80% of the meter is recyclable. In addition, NES uses recycled, recyclable, and/or reusable materials where practical for our product packaging and shipping.
• Identify areas of continuous improvement associated with our approach to product development: NES conducts Life Cycle Assessments (LCA) when designing its eco-efficient and recyclable products to quantify and measure the environmental impact associated with all stages of our products’ life cycles as well as constantly seek improvements in design, material selection and operating characteristics. 
• Examine non product specific aspects of the lifecycle including:
  • Proper planning, operation and safety practices such as eco efficient product packaging and transport economy are used throughout the shipping process.
  • Reducing the end-of-life environmental impact by providing product developers with design guidance and best practices for disassembly, reuse and recycling.
• Meet our corporate social responsibility by improving health and safety, enhancing environmental awareness, and ensuring compliance with environmental legislation.
• Raise awareness, and regularly refresh communications on key environmental and safety values and behaviors. Provide appropriate training and education for all employees regarding HSE issues, programs, and performance. 
• Actively promote recycling both internally and amongst our customers and suppliers, aiming to achieve zero emissions by improving recycling rates. 
• Work with our suppliers to establish and implement effective HSE performance goals in accordance with our ethical behavior and environmental principles and perform regular HSE field audits to determine whether the supplier is in compliance with NES recommended HSE practices. 
• Continuously improve HSE performance of our operations. 
  • Put in place enterprise-wide policies and programs to reduce energy, water and materials use
  • Maximize waste recycling
  • Eliminate hazardous materials; and 
  • Streamline logistics and packaging.
• Integrate our HSE commitment into the company’s decision-making processes and strive to continuously improve our commitment to the above-stated principles through exercise of our HSEMS, improved technology and production changes. 
• Review and update where necessary our HSE management system and policy on an annual basis. In addition, 
  • Regularly monitor the HSE aspects of NES products, services and/or activities, 
  • Identify key HSE risks and impacts, 
  • Develop operational controls, and 
  • Prepare emergency response and contingency plans to ensure that the HSE objectives and targets for quality, health, safety, and the environment are being met. 
• Ensure NES facilities provide planning, equipment and training for on-site incidents so that when necessary our employees can work with local community safety units to prepare for a combined response.

NES maintains full awareness of all relevant HSE issues together with their potential impact and strives to continuously improve HSE performance, stepping up efforts to innovate energy and environmental technologies contributing to the realization of a safe, secure and sustainable society.

2. Governance and Risk Management

a) Corporate Governance

NES is managed by a Board of Directors that establishes guidelines for Board operations and ethical conduct and supports all NES’ initiatives covering a scope beyond what is meant by ‘sustainability’. 

The President and CEO (CEO), appointed by the Board of Directors, is responsible for handling the day-to-day management of NES in accordance with instructions from the Board of the Directors. The CEO is supported by the Senior Management Team (SMT).

The SMT is responsible for general management and governance, under the authority of the Board of Directors and the CEO.

On a monthly basis, the SMT reviews NES’ governance principles and practices, sustainability priorities, strategy, KPIs and performance. The CEO, in collaboration with the SMT, provides oversight to the Board of Directors on global challenges, emerging and critical sustainability issues for the company with recommendations and seeks stakeholder feedback. 

b) Risk Management

Embedding corporate responsibility and sustainability to NES’ business activities require a robust and systematic approach to risk management to cover health and safety, social environmental and security impacts.

NES’ risk management is based on identifying, analyzing, managing, and monitoring risks as well as preparing and acting on mitigatory action plans together with the sharing of best practices and processed across our business operations. Proactive management and effective control of risks is key to our success as it creates long term value and strengthens our business performance and resilience. 

To reinforce its risk management system, NES has adopted a structured approach where the Board of Directors is responsible to oversee public policy, HSE and critical risks to sustainability, as well as to prioritize and review risk management activities on non-critical risks. The SMT is responsible for regular oversight of NES’s operational, financial and strategic risks including conflict of interest policies, code of ethics together with compliance with laws and regulations. Every business unit along with its employees is in charge of controlling risks, including: identifying, mitigating, monitoring and, depending on the probability and severity of the risk, escalation as appropriate. Risk owners within each business unit are responsible to report on key risks to the SMT not less than annually. 

NES supports its employees to implement a robust risk management system by ensuring they receive adequate trainings and follow both procedures and practical guidelines. 

Our risk management approach is handled with a cyclical and on-going process that is integral to overall business continuity. Key components of this cycle are:

• Initiate: Development of strong risk management policies and identification of existing and potential risks to the present effort.
• Plan: Development of an effective risk management plan to identify, categorize, quantify, prioritize, and respond to risks and plan for contingency risks.
• Change Management: Identifies and controls changes that could affect certain requirements, regulations, or add risk. BY reviewing our process we evaluate changes, conduct risk assessments and implement controls. 
• Execute: Execute the overall risk management plan and individual plans for specific risks that occur during the process.
• Monitor and Control: Determine whether the implemented mitigating strategies are achieving the desired objective and provide corrective action if necessary.
• Close: Close risks and issues as they are resolved and develop after action responses to further enhance risk mitigation in the future.
• Document and Record Control: Standardizing documents as a process for ensuring the latest documents are being used, documents are being reviewed periodically, and new documents are properly approved.  
• Metrics: Create a set of metrics to drive improvements, focus resources on what is important and facilitate the transfer of best practices

NES risk management system address and mitigates the wide range of potential risks across our business and operations within the four main categories below: 

STRATEGIC RISKS

Risks that affect or are created by our business strategy and strategic objectives and are associated with Corporate governance, Mergers and acquisitions, Intellectual property, Innovation and Technology, Competitors, Marketing, Sales, Program and Project, Sustainability and other strategic risks. By effectively managing strategic risks, NES can support the development and execution of the business strategy and help create value by maximizing gains and improving our competitive position.

FINANCIAL RISKS

NES addresses a variety of financial risks including risks in areas such as liquidity, assets, investments, volatility in foreign currency exchange rates, interest rate fluctuation, commodity price movement, credit movement and other markets changes, establishing a sustainable infrastructure to meet our financial and contractual obligations and manage the ever-changing regulatory and business environment while driving best performance and results year over year.

LEGAL & COMPLIANCE RISKS

Legal and compliance risks relate to legal and regulatory compliance and are enacted to ensure that organizations operate fairly and ethically, meeting its sustainability targets and compliance with environment HSE laws and regulations. NES’ proactive, regulatory risk management is implemented through specific policies, procedures and protocols to ensure that NES is in compliance well in advance of regulatory changes. Dedicated procedures and business continuity plans are put in place to manage the appropriate response to identified key risks.

Compliance risks, also known as integrity risks include those associated with:

• HSE Risks: NES has an integrated HSEM system that addresses process, compliance, and culture and is assessed on a rotational audit basis every three years. We focus on managing risks associated with evolving regulatory environment of carbon reduction, renewable energy standards and the need for increased sustainability by providing our energy efficient solutions and best management practices to reduce risks.
• Social responsibility and Corruption Practices: NES CR and Sustainability program is in compliance with UN Global Code of Compact and management ensures NES is in compliance through regular monitoring by Human Resources.  
• Quality: NES manages product and service risks to ensure we comply with laws and regulations and meet or exceed the industry expected standards.
• Process risks: NES actively monitors and manages the process risks to prevent failure and to meet our responsibilities to our customers and partners.  

OPERATIONAL RISKS

Operational risks can result from a breakdown of processes, inadequate activities by people, inadequate systems or from external events that affect the operation of our businesses. It includes information management, data protection and security, including cybersecurity, supply chain, product life cycle and  execution, safety, performance, and other risks. 

To minimize the risks arising from operational challenges, NES has put in place operational processes to ensure that our product design, manufacture and services meet the most rigorous quality standards. NES produces highly reliable, future proof, secure products and specialized services with leading edge technology. Our competitive position in the market is dependent on our ability to deliver innovative products and services, to customize them when needed and to anticipate and respond to market, regulations, eco environmental requirements as well as technological changes driven by emerging risks together with delivering products and services in line with our projected performance and cost estimates.

To protect customer services and consumer information, NES security follows a risk-based approach that tackles the real exposures and risks arising from a fast-moving threat-landscape. NES goes beyond merely achieving compliance to standards, because standards are slow-moving compared to the innovation of cyber-criminals and cyber-terrorists. Protection of our customers’ information and service reliability remains a key focus for our security initiatives. NES’ intrusion detection and response provides another mechanism to identify unauthorized access, limiting exposure to attacks and quickly locking out the attacker. Expert guidance is an important theme for NES as we continue to proactively conduct risk and vulnerability assessments based on our extensive experience of the changing threat landscape. Finally, with cyber-security regulations (such as GDPR) coming into effect in Q2 of 2018, NES offers its customers help in understanding how these regulations relate to their own compliance obligations.

Our reliance on third-party suppliers, manufacturers and service providers exposes us to volatility in the prices and availability of these components, goods, and services. To manage these risks, NES deploys a structured supply chain continuity program that develops guidelines, processes, tools and technology to support supplier continuity planning and tackles their financial, operational, environmental, and safety requirements. We also engage with our suppliers to identify, assess, manage and mitigate risks associated with HSE, quality, capability and sourcing issues and evaluate potential back up plans.

At NES, we believe that sustainability at its core is about analyzing, managing and mitigating risks and thus we ensure that quality assurance process is incorporated as a control mechanism over the risk management process. Quality assurance attributes that are followed during the risk management process are:

• Strive to highlight all risks and their subsequent decisions through documentation and tracking on a centralized log.
• Develop a complete audit trail of the risks.
• Standards and procedures involved with the risk management process are being followed.
• Risk status report is current.
• Actions from the risk management process provide better quality control.
• Corporate governance committee and each business unit is aware of the risks and their potential impact on the business and operation and how these risks should be mitigated.
  
  

3. Supply Chain

NES is fully committed to promoting sustainability throughout its supply chains and proactively works with its suppliers to support their adherence to sustainable business practices and share its best practices to forge balanced, mutually beneficial long-term relationships with them. We focus on purchasing components, products, software and services from the right suppliers who share our values and principles in all of the areas of social equity, ethics and environmental protection while ensuring they are operating according to accepted industry standards aligned with our policies and internal processes. 

NES holds its suppliers to the highest standards and expects them to provide a significant and sustainable value contribution for the success of its business and to align with the set of requirements as below:

• Comply with the UN global compacts principles and Commit to the Electronics Industry Citizenship Coalition (EICC) Code of conduct.
• Meet certified international standards such as ISO 14001 for environment and OHSAS 18001 for health and safety.
• Adhere to Sustainability performance. 
• Highest Capabilities in terms of On-time delivery, Service, Flexibility, Costs, Technical innovation, Quality, Overall business strength and productivity. 

NES tracks compliance with these standards as part of our risk analysis and supplier assessment processes and strongly encourage suppliers to implement or enhance their sustainability practices based on them. To effectively promote sustainable practices and behaviors throughout our supply chain and drive improved performance, NES has adopted a comprehensive approach to responsible purchasing that stands on 3 pillars: 

• Regularly maintaining an open dialogue with suppliers, communicating clear sustainability requirements and managing their ongoing performance across a broad set of criteria.
• Evaluate suppliers’ sustainability performance through ratings, onsite audits and a self-assessment questionnaire concerning their engagement in the main areas of corporate responsibilities and environmental maturity.
• Support suppliers’ improvement efforts where performance is not at the expected level.

At NES, we strive for a best-in-class supply chain that enable us to move at the speed of our customers’ needs and help us deliver the right solutions in the right way, while always maintaining the highest levels of quality and meeting our stances on social responsibility and ethics.  

THE RAW MATERIALS INITIATIVE

NES has adopted the raw materials initiative which set out a strategy for addressing the issue of access to raw materials in the European Union (EU). This strategy has 3 pillars which aim to ensure:

1. Fair and sustainable supply of raw materials from global markets;

2. Sustainable supply of raw materials within the EU; and

3. Resource efficiency and supply of ‘secondary raw materials' through recycling.

Our supply chain strategy covers raw materials used by European industries for production. We ensure sustainable access to these raw materials whilst maintaining the competitiveness and growth of raw materials sourced where possible in the EU. In addition, when NES sources raw material from outside the EU, priority is given to countries who have signed Letters of Intent with the EU regarding Raw Materials Diplomacy. Furthermore, NES is committed to promoting and increasing recycling within the production, Research and Development and administrative process. Recycling can reduce production costs and carbon emissions which we actively disclose through the Carbon Disclosure Project.

CARBON DISCLOSURE PROJECT

As a member of the Carbon Disclosure Project (CDP), NES actively taking steps towards building a climate safe, deforestation free, water secure future, with our carbon disclosure providing the bedrock for these ambitious actions. As the richest and most comprehensive dataset, CDP's data both fuels and tracks global progress towards building a truly sustainable economy for people and planet. By reporting to CDP, NES gains competitive advantage. Disclosure helps us stay ahead of regulatory and policy changes, identify and tackle growing risks and find new opportunities for action that our investors and customers worldwide are demanding.  See Appendix 1. 

4. Workplace, Inclusion and Diversity

At NES, the success of our company is driven by diverse and highly skilled workforce, customers and communities that supports the development of innovative approaches to a wide range of business and technological challenges. We believe innovation is strongly linked to diversity. Therefore, we are committed to creating a global workplace that encourages gender, cultural and generational diversity and embraces inclusion. 

We believe that our employees’ knowledge, skills and integrity are one of our most valuable assets and are key to ensuring NES’ future success. For that we focus on: 

• Bringing diversity to our leadership positions as well as our overall workforce.
• Bringing together talented and enthusiastic people from a variety of backgrounds and cultures.
• Building a gender intelligent organization by attracting, developing and retaining more women as part of our overall workforce and at all levels of our management team.
• Supporting competence development by creating a stimulating environment of continuous learning and enabling a work culture that supports our people so they can reach their greatest potential.   
• Encouraging open collaboration throughout the organization by using an internal social networking platform to enable employees throughout the company to share, collaborate and exchange best practices on each other’s expertise and talents.

5. Integrity and Ethics

NES is committed to conducting business with integrity and with the highest ethical practices and standards of behavior. To achieve this, NES has a comprehensive Ethics & Compliance program that sets out fundamental policies, directives and practices for every NES employee in interactions with each other, customers, communities, and other stakeholders. 

Key elements of this program includes:

• NES Code of Conduct describes how employees fulfill the requirements for ethical conduct and compliance with company policies as well as all applicable laws and regulations. It also reflects our commitment to the UN Global Compact’s principles and the United Nations’ Guiding Principles on Business and Human Rights (UNGPs) and guides employee relationships internally and with external stakeholders.
• Regularly communicating and reinforcing our commitment to ethics and compliance with applicable laws, rules and regulations, proper handling of proprietary data and information, and accurate financial reporting.
• Annual all-employee training to ensure that every employee is aware of and following the program.
• Annual Risks audit, assessment and mitigation plans to further optimize and streamline our compliance processes while preventing and detecting violations of law, regulation and company policy, and cultivating an ethical business culture throughout the company.
• Policies, Procedures and controls including zero tolerance policy requiring 100% integrity in all business practices including adherence to the law and to our own internal regulations.

APPENDIX 1

CDP is an organization that runs the global disclosure system for investors, companies, cities, states and regions to manage their environmental impacts.  The world’s economy looks to CDP as the gold standard of environmental reporting with the richest and most comprehensive dataset on corporate and city action.

CDP vision and mission

CDP want to see a thriving economy that works for people and planet in the long term. They focus investors, companies and cities on taking action to build a truly sustainable economy by measuring and understanding their environmental impact.

CDP values

1. They default to transparency

2. They place accountability at our heart

3. They learn and improve

4. They succeed together 

The challenge

We all must act urgently to prevent dangerous climate change and environmental damage. That starts by being aware of our impact so that investors, companies, cities and governments can make the right choices now.

What they do - “You can’t manage what you don’t measure”.

CDP runs the global environmental disclosure system. Each year CDP supports thousands of companies, cities, states and regions to measure and manage their risks and opportunities on climate change, water security and deforestation. We do so at the request of their investors, purchasers and city stakeholders.

Over the last two decades we have created a system that has resulted in unparalleled engagement on environmental issues worldwide.

Each year, CDP takes the information supplied in its annual reporting process and scores companies and cities based on their journey through disclosure and towards environmental leadership. Through our independent scoring methodology, we measure corporate and city progress and incentivize action on climate change, forests and water security.

Founded in 2000, CDP was the first platform to link environmental integrity and fiduciary duty. Now with the world’s largest, most comprehensive dataset on environmental action, the insights that CDP holds empowers investors, companies, cities, and national and regional governments to make the right choices today to build a thriving economy that works for people and planet in the long term.