UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM SD
SPECIALIZED DISCLOSURE REPORT
Eni SpA
(Exact name of registrant as specified in its charter)
| Republic of Italy | 1-14090 | Not applicable | ||
| (State or other jurisdiction of | (Commission File Number) | (IRS Employer Identification No.) | ||
| incorporation or organization) |
1, piazzale Enrico Mattei – 00144 Roma - Italy
(Address of principal executive offices)
Massimo Mondazzi
Eni SpA
1, piazza Ezio Vanoni
20097 San Donato Milanese (Milan) - Italy
Tel +39 02 52041730 - Fax +39 02 52041765
(Name and telephone number, including area code, of the person to contact in connection with this report)
Check the appropriate box to indicate the rule pursuant to which this form is being filed, and provide the period to which the information in this form applies:
| x | Rule 13p-1 under the Securities Exchange Act (17 CFR 240.13p-1) for the reporting period from January 1 to December 31, 2018. |
This Specialized Disclosure Report on Form SD (Form SD) for the year ended December 31, 2018, is required by Rule 13p-1 of the Securities Exchange Act of 1934 (the "Final Rule"). The Final Rule was adopted by the U.S. Securities and Exchange Commission (the “SEC”) to implement reporting and disclosure requirements related to conflict minerals as directed by Section 1502 of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 ("Section 1502"). In accordance with the Final Rule, we are required to provide annual disclosure regarding products manufactured during the year that contained "conflict minerals" that are necessary to the functionality or production of those products. The Final Rule defines conflict minerals as columbite-tantalite, cassiterite, wolframite and gold, and their derivatives, which are currently limited to tin, tungsten, tantalum and gold ("3TG").
The information in this report concerns the products of Eni SpA and its subsidiaries as of December 31, 2018.
Company Overview
Eni SpA (Eni) is a publicly listed company. The Italian State is our largest shareholder with a 30.1% stake. Our common stock is listed on the New York Stock Exchange (NYSE). Eni SpA and its subsidiaries engage in the business segments described below.
Eni’s Exploration & Production segment engages in oil and natural gas exploration and field development and production, and LNG operations, worldwide.
Eni’s Gas & Power segment engages in the supply, trading and marketing of gas, LNG and electricity, international gas transport activities and commodity trading and derivatives. This segment also includes the activity of electricity generation that is ancillary to the marketing of electricity.
Eni’s Refining & Marketing business engages in the manufacturing of petroleum products from crude oil or other feedstock, including renewables, and in the marketing of a wide range of fuels and lubricants in retail and wholesale markets mainly in Italy and in the rest of Europe.
Through its wholly-owned subsidiary Versalis, the Group engages in the production and marketing of basic petrochemical products, plastics and elastomers. Activities are concentrated in Italy and in Europe. For financial reporting purposes, the results of Versalis are aggregated with those of R&M, in the reportable segment “R&M and Chemicals” because the two segments exhibit similar economic characteristics.
The segment “Corporate and other activities” includes the results of the corporate departments that provide support services to the business units (finance, treasury, IT, HR, administrative and general services, a captive insurance activity, etc...), the result of the activity of environmental clean-up and remediation of certain industrial hubs in Italy which were divested, shut down or restructured years ago and finally the results of the newly-established business of energy solutions that engages in the development of renewable energies.
In this report on form SD and the exhibit attached hereto on the conflict minerals, the terms "Eni", the "Group", "we", "us" or the "Company" refer to the parent company Eni SpA and its consolidated subsidiaries and, unless the context otherwise requires, their respective predecessor companies.
Section 1 - Conflict Minerals Disclosure
Item 1.01 - Conflict Minerals Disclosure and Report
Eni’s Products Covered by this Report
We have conducted an evaluation of our product portfolio and we have determined that there is only one broad product category of “Covered Products” sold to third parties which may contain conflict minerals that are necessary for the functionality or the manufacturing of such products (the “Necessary Conflict Minerals”):
| • | The fuels manufactured by our Refining & Marketing segment which include gasoline, gasoil, jet fuels, heating oil, lubricants, bitumen and other products, are our Covered Products. At our refining and manufacturing plants and facilities, we employ catalysts in the production process, which are necessary to the production of the fuels. Those catalysts contain Necessary Conflict Minerals, specifically tin and tungsten. We assume it is possible that trace amounts of catalysts may be found in the final products (because, although catalysts are washed out in the production process there is no de minimis standard in accordance with the Final Rule). In future, however, we may be able to conclude, based on appropriate testing, that no catalysts are present in our Refining & Marketing final products or that, in any event, our Refining & Marketing products are not covered by the Final Rule. The procurement of catalysts constitutes a very small portion of our global purchases of raw materials and other production inputs (less than 0.1% on a consolidated basis). Furthermore, the amount in weight of Necessary Conflict Minerals employed in our catalysts is immaterial. |
Being a downstream company in the supply chain of Necessary Conflict Minerals, we do not directly source our Necessary Conflict Minerals from mines or smelters and therefore we rely upon information provided by our suppliers and contract manufacturers regarding the origin of these Necessary Conflict Minerals. We request, and rely on, our suppliers and contract manufacturers to provide the information necessary to permit us to make all required disclosures under the Final Rule.
On the basis of a reasonable country of origin inquiry (RCOI) and due diligence measures described herein (including the section titled “Due Diligence Results” in our Conflict Minerals Report filed as Exhibit 1.01 to this Form SD), with respect to the year ended December 31, 2018, Eni does not have sufficient validated information from the its suppliers to determine the facilities used to process, and the country of origin and the mine or location of origin of, Necessary Conflict Minerals used in any part or product supplied to us for manufacturing the Covered Products, including whether such Necessary Conflict Minerals originated in the Democratic Republic of the Congo or an adjoining country (the “Covered Countries”).
Description of the Reasonable Country of Origin Inquiry (RCOI)
We conducted a good faith RCOI, which we believe is reasonably designed to assess whether the Necessary Conflict Minerals in our products originated from any Covered Countries or were from recycled or scrap sources.
We directed and coordinated the execution of the RCOI at Group level. Our segment and subsidiaries which were determined to be within the scope of the Final Rule were responsible for performing a risk-based analysis to identify direct suppliers to be included within the RCOI. This analysis included focusing on the suppliers presenting the highest risk of providing us with Necessary Conflict Minerals for the manufacture of our products and was based on segment and subsidiaries expertise and product knowledge. Based on this review, we determined four suppliers to be within the scope of our RCOI. We intend to reassess our product portfolio and supply chain on an ongoing basis in future years.
Our Refining & Marketing segment performed the RCOI as follows:
| We inquired with each of our catalyst suppliers regarding the country of origin of the Necessary Conflict Minerals which were utilized in manufacturing the refining catalysts supplied to us. To conduct the inquiry, we used the Conflict Minerals Reporting Template questionnaire developed by the Electronic Industry Citizenship Coalition - Global e-Sustainability Initiative (EICC/GeSI). Three out of four of our catalyst suppliers were affiliated to US listed companies or were US filers themselves and publicly state to have established conflict minerals programs and policies. The non-US listed supplier informed us to have established a policy for the responsible sourcing of conflict minerals for the purpose of complying with our request of establishing a responsible supply chain. |
Results of the RCOI
As a result of the RCOI conducted as described above, 100% of the catalyst suppliers in the R&M business have provided a response to us. Our suppliers have provided us smelter or refiner (“SOR”) names, where they sourced their minerals, including where relevant if the SORs are included in the list of SORS certified as conformant by the RMI’s Responsible Minerals Assurance Process (“RMAP”), formerly the Conflict-Free Smelter Program. However, the responses received are not yet complete in all cases, particularly with regard to a couple of suppliers with extensive supply chains, who have yet to receive complete and accurate information from all of their own respective suppliers about all the SORs in their supply chains.
Additionally, we understand that another supplier, albeit small, has encountered difficulties in tracing its supply chain. Eni sourced the catalyst containing the Necessary Conflict Minerals from this supplier in early 2014, before the full implementation of our conflict minerals program. The catalyst was held in inventory at one of our refineries that at the time was undergoing a restructuring, involving the shutdown of the plant. Eventually, we decided in 2018 to redeploy the catalyst at another of our running refineries. In 2018, we procured additional catalyst-related materials from this supplier.
Conclusion
As a result of the RCOI performed, we were not in a position to either identify the Country of Origin of all of our Necessary Conflict Minerals, or determine whether they were from recycled or scrap sources. Based on this outcome, we have exercised due diligence in accordance with the Final Rule. The due diligence measures are described in the Conflict Minerals Report filed as exhibit to this report.
In accordance with Rule 13p-1 under the Securities Exchange Act of 1934 ("Rule 13p-1"), this Specialized Disclosure Form (Form SD) and the associated Exhibit “Conflict Minerals Report” are posted to our website at https://www.eni.com/en_IT/sustainability/operating-model/human-rights.page.
Item 1.02 Exhibit
Eni’s Conflict Minerals Report for the calendar year ended December 31, 2018 is filed as Exhibit 1.01 to this Form SD.
Signature
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the duly authorized undersigned.
Eni SpA
(Registrant)
/s/ MASSIMO MONDAZZI
Massimo Mondazzi
Chief Financial Officer
Date: May 31, 2019
Section 2 – Exhibits
Exhibit 2.01 Exhibits
Conflict Minerals Report as required by Items 1.01 and 1.02 of this Form.
Exhibit 1.01
Eni SpA
Conflict Minerals Report
For The Year Ended December 31, 2018
Company overview and RCOI results
The Company overview, its Covered Products and the results of the RCOI performed by the Company on its supply chain of Necessary Conflict Minerals are described in Form SD. Based on the results of the RCOI, we decided to perform due diligence of the supply chain as provided by the Rule.
Due diligence framework
We acknowledge the due diligence framework as set forth in the internationally recognized Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Affected and High-Risk Areas ("OECD Framework") of the Organization for Economic Cooperation and Development (OECD) and we are designing and implementing our due diligence measures accordingly.
Eni’s due diligence included the following five steps of the OECD framework:
| · | Step 1: Establish company management systems; |
| · | Step 2: Identify and assess risks in the supply chain; |
| · | Step 3: Design and implement a strategy to respond to identified risks; |
| · | Step 4: Carry out independent third-party audit of supply chain due diligence at identified points in the supply chain; |
| · | Step 5: Report on supply chain due diligence |
Due Diligence Performed
Step 1: Establish company management systems
| · | Conflict Minerals team |
We have established a cross functional Conflict Minerals project team comprising executive level management with coordinators from the business units involved, to direct the overall efforts of the Conflict Minerals compliance program. The Company’s CFO (Chief Financial Officer) has sponsored this team and the compliance program has been approved by the Company’s executive management committees, which include the heads of Eni’s business units and central departments. Our only business segment involved in the program has also established a team responsible for conducting, supervising and coordinating all relevant activities at divisional level and reporting to the Group’s management team regarding the results of the activities performed. In addition, we have adopted internal, Group-level procedures and rules so as to raise awareness about our intention to establish a responsible supply chain and to establish Group guidelines on how to design and conduct due diligence on conflict minerals.
| · | Conflict Minerals policy |
We have established and we periodically update a policy with respect to the sourcing of minerals from the Covered Countries and published this Group policy on our external website at https://www.eni.com/en_IT/sustainability/operating-model/human-rights.page. In this policy we confirm our commitment to corporate sustainability and to respecting and promoting human rights in our operations and in the activities performed by our Business Partners. This policy is reviewed annually by our senior management team in charge of promoting the Conflict Minerals program.
| · | Supplier engagement |
Eni has in place guidelines, procedures and standard contractual terms & conditions that, among other things, require compliance with human rights framework as a prerequisite for qualification to do business with Eni and with the Eni Code of Ethics and Human Rights Guidelines as contractual obligations towards Eni. Our standard contractual terms and conditions regarding the supply of products that contain or may contain Necessary Conflict Minerals include clauses regarding conflict minerals and responsible sourcing. Our suppliers are required to maintain procedures reasonably designed to ensure that any Necessary Conflict Minerals sold to Eni are sourced in accordance with the principle of a responsible supply chain, and are required to promptly notify us in case of any breaches of this requirement. No such notifications have been received so far. We have increased efforts to explain to our suppliers the importance to Eni of their collaboration and commitment to our compliance program. All of our high-risk suppliers were advised on how to fill the RCOI questionnaire, which were returned to us substantially completed. We are engaging with our high-risk suppliers to promote tracing of their supply chain for the purpose of identifying the country of origin of our Necessary Conflict Minerals and the mines where they were sourced with the greatest level of specificity.
| · | Grievance mechanism |
Eni has in place a procedure for reporting any violation of our guidelines on the respect of human rights and/or other part of our compliance program via a whistle blowing mechanism whereby alleged violations can be reported to Eni via existing grievance channels for ethics or compliance violations via our external website at http://www.eni.com/portal-forms/tools/processSegnalazione.do?locale=en_IT.
Step 2 and Step 3: Identify, assess and design and implement a strategy to address risks in the supply chain
To identify, assess and respond to risks in the supply chain, we undertook the following measures:
| · | We conducted a supply chain survey, which involved all of our high-risk suppliers as described in Form SD. This survey was based on the Electronics Industry Citizenship Coalition/Global e-Sustainability Initiative Conflict Minerals Reporting Template. |
| · | The responses received from our suppliers about the country of origin of the Necessary Conflict Minerals provided to us were reviewed to assess their reliability. |
| · | Our segment team subjected survey responses to additional due diligence measures when we had reason to believe that suppliers may have provided Necessary Conflict Minerals that originated from the Covered Countries and that were not from recycled or scrap sources. All of the surveyed suppliers provided us with information about all or part of the smelter or refiner (“SORs”) that were used in the supply chain. We have no reasons to believe that the responses provided to us were inaccurate. However, we acknowledge that some of our suppliers have yet to completed tracing their respective supply chains to determine all of the SORs which may have supplied conflict minerals. | |
| · | Our executive management team in charge of the Conflict Minerals program was informed of the nature and overall risk of supplier responses received. Management reporting materials were prepared summarizing the results of the risk assessment process. |
Step 4: Carry out independent third-party audit at identified points in the supply chain
We do not have any direct relationship with any SORs in our supply chain. Furthermore, we did not perform or direct audits of SORs in 2018. In our due diligence efforts, we will consider utilizing cross-industry initiatives such as those led by the Electronics Industry Citizenship Coalition (EICC) and the Global e-Sustainability Initiative (GeSI) such as the RMI’s Responsible Minerals Assurance Process (RMAP) to conduct smelter and refiner due diligence. In the future, we may also explore other options.
Step 5: Report on supply chain due diligence
In accordance with OECD Guidance and Form SD requirements, this report and the related Form SD are available online at https://www.eni.com/en_IT/sustainability/operating-model/human-rights.page.
Due diligence results
As a downstream consumer of Necessary Conflict Minerals, we rely on our suppliers’ statements and representations to gather information about the SORs that processed the Necessary Conflict Minerals contained in the specific products or components supplied to Eni, the country of origin of our Necessary Conflict Minerals and the mines where they were sourced. Our due diligence covered all of our suppliers of Necessary Conflict Minerals.
Based on the due diligence results, at this stage, we can conclude that all of our suppliers of Necessary Conflict Minerals are fully engaged in tracing their respective supply chains and that based on their responses to our inquiries we are able to identify several SORs that were part of the supply chain of the Necessary Conflict Minerals that we used in the manufacturing process of our Covered Products in 2018. The majority of the identified SORs are included in the list of the of SORS certified as conformant by the RMI’s Responsible Minerals Assurance Process (RMAP). However, two key suppliers have represented to us that they have yet to identify all SORs in their respective supply chains, which may have provided the Necessary Conflict Minerals provided to us, whereas a third supplier, albeit of minor significance to us, has yet to gain a sufficient knowledge of its supply chain.
Accordingly, as of this reporting period, Eni does not have sufficient validated information from its suppliers to determine the facilities used to process, and the country of origin and the mine or location of origin of, the Necessary Conflict Minerals used in products or components supplied to us for use in the manufacturing process of our Covered Products.
Continuous improvement efforts to mitigate risk
We intend to take the following steps to improve the number and quality of supplier responses in the future and to mitigate any risk that the Necessary Conflict Minerals used in our products may benefit armed groups:
| · |
Continue to work closely with our suppliers to obtain the necessary validated information on the origin of the Necessary Conflict Minerals contained in the products sold to Eni, which we expect will become available as (i) more of our suppliers receive the necessary information from their respective upstream suppliers, and (ii) the RMI’s Responsible Minerals Assurance Process continues to grow and provide more visibility in determining whether manufactured products are sourced from the Covered Countries; | |
| · | work with suppliers who provided responses containing red flags by helping them understand the importance of this initiative to Eni. We will also evaluate disengaging consistently reticent and non-collaborative suppliers; | |
| · | continue to raise awareness both internally and with our high-risk suppliers about Eni’s commitment to fully trace the entire supply chain back to the countries of origin and the mine or location of origin of, our Necessary Conflict Minerals; |
| · | continue to support responsible in-region mineral sourcing from the Covered Countries in order to not negatively affect the economies of such countries. We will seek not to eliminate conflict minerals originating in the Covered Countries but rather to obtain conflict minerals from sources that do not benefit armed groups in the region; | |
| · | evaluate participation in other joint initiatives based on the literature produced by the Electronics Industry Citizenship Coalition (EICC) and the Global e-Sustainability Initiative (GeSI), which supports the responsible sourcing of minerals through the development of a Conflict-Free Smelter (CFS) program; |
| · | consider performing a due diligence of any given SOR should our supply chain findings lead to a non-certified SOR; |
| · | reiterate assessment process of our product portfolio and suppliers to obtain a complete map of Eni’s areas of risks. |
Independent audit
In accordance with the guidance set forth in the Updated Statement on the Effect of the Court of Appeals Decision on the Conflict Minerals Rule issued by the Division of Corporation Finance of the Securities and Exchange Commission on April 7, 2017, Eni has not obtained an independent private sector audit of its due diligence process.
Safe harbor statement
Certain disclosures contained herein contain forward-looking statements regarding future events and the future results of Eni that are based on current expectations, plans, forecasts, and projections about Eni’s future due diligence steps and procedures. Words such as "expects", "anticipates", "targets", "goals", "projects", "intends", "plans", "believes", "seeks", "estimates", "evaluates" variations of such words, and similar expressions are intended to identify such forward-looking statements. These forward-looking statements are only predictions and are subject to risks, uncertainties, and assumptions that are difficult to predict because they relate to events and depend on circumstances that will occur in the future. Therefore, Eni’s actual results may differ materially and adversely from those expressed or implied in any forward-looking statements. Any forward-looking statements made by or on behalf of Eni speak only as of the date they are made. Eni does not undertake to update forward-looking statements to reflect any changes in Eni’s expectations with regard thereto or any changes in events, conditions or circumstances on which any such statement is based. The reader should, however, consult any further disclosures Eni may make in documents it files with the US SEC.