Achieving the objective of reducing emissions and, more generally, ensuring the success of the Group’s low-carbon strategy depend primarily on the continued acceptance of nuclear energy by the public, the successful shutdown or adaptation of fossil fuel power plants and the accelerated development of renewable generation resources to complement nuclear and hydroelectric generation. The Group has been particularly active in the development of solar energy in France, electric storage and low-carbon electric mobility, which will make it possible to develop and promote the Group’s low-carbon energy solutions, particularly for the transport sector, which still emits a very high level of carbon dioxide in France and Europe.
Thus, the EDF group’s strategy and energy mix are fully in line with the public low-carbon transition policies, which give EDF the opportunity to enhance the value of all its investments and activities. Nevertheless, this opportunity could be stalled by the external, societal, competitive, social, economic, or industrial context. Nuclear energy may not be recognised at the societal level as a key factor in enabling the low-carbon transition. For example:
In addition, new low-carbon energy solutions may induce new societal questions (new intrusive technologies, land rights-of-way, new conflicts related to the use of water or scarce resources, etc.). New legislative or regulatory changes brought about by climate change could also have a negative impact on EDF’s business and lead to new legal or compliance risks. The Group may also have to deal with the emergence of new technologies or disruptive solutions that are part of the efforts to meet the transition objectives.
Such situations could make it more difficult to carry out these transformations and achieve the desired objectives. They could directly or indirectly affect the Group’s business volumes, margins, asset value, financial position, reputation or prospects.
In 2019, a summary on climate change and its impacts on EDF was presented to EDF’s Scientific Council (see section 3.1.2.2.1). In addition, a Group-wide climate risk mapping of all physical and transition risks following the recommendations of the TCFD (Task Force for Climate Financial Disclosures, see section 3.2.1.1.6). Climate risks have been identified and assessed using the Group’s general risk mapping method. This mapping of climate risks, based in particular on the adaptation plans of the operating entities and on the report to the Scientific Council, has led to an action plan mobilising the Group at both corporate and entity levels. It was examined by the Audit Committee. A detailed description of this risk mapping is given in the appendix to chapter 3.
Skill adaptation and development may be insufficient in view of the Group’s transformation, business line requirements and new organisational and working methods.
Criticality in view of the control actions undertaken: Intermediate.
Human development represents corporate responsibility objective no. 2 (see section 3.3.3.1 “EDF, a company with a responsible attitude to its employees”). The Group’s scope of activity is evolving in a rapidly changing environment and context of energy and digital transition and, consequently, many new business lines are emerging and new working methods are being adopted (extended company, project platform operation, teleworking, etc.). The historical business lines are themselves undergoing dramatic change yet retaining their very high level of technicality, always with a similarly high requirement for a culture of safety and security, particularly in the hydropower and nuclear power sectors as well as for electricity networks. The human and socio-organisational dimension is a key factor in the Group’s performance. The anticipation of emerging needs and requirements related to new business lines, the necessary functional and geographical adjustments required to facilitate the evolution of the scope of activity, induce adaptation and constant development of skills and organisations. (see section 3.3.3.1.1 “Employee employability and enhancement of the internal social elevator” and section 3.3.3.1 “EDF, a company with a responsible attitude to its employees”). Obtaining qualifications or authorisations may require several years and sufficient coverage for the transfer of knowledge and experience. The rapid evolution of technology and, therefore, of the business lines, requires flexibility and an increased ability to adapt on both an individual and organisational level, as well as in terms of working methods and acquiring and transmitting individual and collective skills.
The EDF group considers the dynamic matching of skills to needs over time to be a major challenge and therefore implements the appropriate measures to facilitate change. However, it cannot guarantee that the measures taken will always be sufficient, timely or on satisfactory terms, which could have an impact on its business, financial position and reputation as an employer.
The Group may be required to meet significant commitments related to pensions and other employee benefits.
Criticality in view of the control actions undertaken: Intermediate.
The pension plans applicable in the various countries in which the Group operates involve long-term commitments to pay benefits to the Group’s employees (see note 34 of the appendix to the consolidated financial statements for the financial year ended 31 December 2019). In France, in addition to these pension commitments, the Group also owes obligations for post-employment benefits and long-term benefits for employees currently in service. The ongoing pension reform in France may have an impact on the Group’s commitments.
To cover these commitments, the Group has set up outsourced funds or pension funds. At the end of 2019, depending on the case, assets only partially covered these commitments, although, for the Group, the maturity dates of the obligations are relatively smoothed over time. At 31 December 2019, the average duration of employee benefits commitments was 19.7 years in France and 19.5 years in the United Kingdom.
The amounts of these commitments, the provisions booked, the outsourced funds or pension funds set up and the additional contributions required to make up insufficient funding are calculated based on certain actuarial assumptions, including a discount rate subject to adjustment depending on market conditions and, in the event of any employee-related commitments in France, on the rules governing retirement benefits paid out by the general retirement scheme, and amounts owed by the Group. These assumptions and rules may be adjusted in the future, which could increase the Group’s current commitments for pensions and other employee benefits and, therefore, require a corresponding increase in provisions.
Furthermore, if the value of outsourced funds or pension funds proves insufficient to meet the corresponding commitments, in particular in the United Kingdom or France, primarily due to calculation assumptions or developments in the financial markets, the Group may be obliged to make additional contributions to the relevant funds, which may have an adverse impact on its financial position.
The Group implements programmes aimed at continuously improving its operational performance, which determines its financial performance as well as the direct or indirect achievement of the corporate responsibility objectives defined in sections 3.2 and 3.3. The Group’s ability to transform also depends on the achievement of operating results, and its reputation.
However, the Group cannot guarantee that the programmes it implements will have the expected results or that such results will be obtained within the planned timetable, nor that they will be sufficient to deal with technical or industrial contingencies or regulatory and economic developments.
Failure to achieve the expected operating results may therefore lead to a direct deterioration in the Group’s financial position, reputation and ability to transform.
This section sets out the most significant risks likely to affect the control of the Group’s operations and projects.
