ESG Risk Management

Copel’s corporate governance is based on the identification of risks and opportunities for decision making in all instances so as to promote the Company’s perpetuity and sustainable growth, integrating the risk management process into the commercial relations with suppliers and business partners.

The strategic risks associated with Copel’s operations are reviewed during the preparation of the Strategic Planning, whose work is carried out jointly by the top management of Copel (Holding) and its subsidiaries by means of risk identification and analysis, definition of a control and contingency plan, and establishment of monitoring actions.

Regarding socio-environmental risks, Copel adopts the best practices for risk mitigation in its operations and undertakings, as well as with the communities in the safe use of energy and in the relationship with the internal public.

It is worth mentioning that, in Brazil, environmental licensing (a special license granted by a governmental regulatory agency for the installation and operation of enterprises) is only granted upon compliance with several requirements established in specific legislation.

Covered by the operational risk category, the socio-environmental risks are those related to the impacts of Copel’s operations on society and the environment, which may affect its reputation and generate sanctions from inspection agencies. They are also related to the effects of severe weather conditions, dam failures, scarcity of natural resources, mobilization of communities or health crises, which may affect the performance of the services provided and cause losses to Copel.

Environmental Dimension

To reduce or minimize risks, Copel invests in monitoring and in the development of actions that enable a more efficient operation of the generation, transmission and distribution processes.

Some aspects considered involve the mobilization of the community, change in land use, climate change, change in economic activity, environmental impacts on biodiversity as well as those related to severe weather conditions that can cause accidents between the electric power and the population.

The management of the implementation and operation is carried out by means of a strict follow-up of the licensing process and the implementation of the works, by means of project methodology, with the management of indicators, objectives and goals.

Among the main environmental risks related to Copel’s business, we can mention those related to the implementation and operation of undertakings, such as power plants, transmission lines and substations.

Among the main risks of the environmental dimension, we highlight: the availability and quality of water, the safety of water containment structures in reservoirs (dams) and severe climatic events caused by climate change.

Social Dimension

Copel manages social risks by monitoring the conditions of the licensing process for its facilities and through programs developed by its wholly-owned subsidiaries. The Company also manages the risk to the population’s safety, due to the use of electric power, by means of programs to inform and sensitize the impacted communities.

In this sense, the Risks and Responsibilities Matrix serves as guidance for the identification of the major points of attention in the execution of the contract and the severity of the materialization of incidents. Among the social risks related to the implementation and operation of the projects, as well as to the supply chain, the following stand out: violation of human rights, accidents with employees; precarious installations and working conditions; and accidents or damages to the population.

Human Rights Violation

Among the main risks of the social dimension is the risk of human rights violation, since it may occur throughout the supply chain. Human rights are inalienable and Copel is committed to the United Nations (UN) Global Compact, ratified by adherence to Agenda 2030 and the Sustainable Development Goals (SDGs).

Besides being among the priority SDGs of Copel and the Brazilian Electric Sector (SEB), elected in a study conducted by peers in the sector, SDG 8 – Decent Work and Economic Growth aims to “promote sustained, inclusive and sustainable economic growth, full and productive employment and decent work for all.”

SDG 8 recognizes the urgency of eradicating forced labor and forms analogous to slave labor, as well as human trafficking, in order to ensure that everyone can fully achieve their potential and capabilities.

Copel understands that companies also have responsibility with target 8.7 – Take immediate and effective measures to eradicate forced labor, end modern slavery and human trafficking and ensure the prohibition and elimination of the worst forms of child labor, including recruitment and use of child soldiers, and by 2025 end child labor in all its forms.

In this sense, the Company adopts a series of measures to mitigate and remedy any violations, in addition to promoting and ensuring respect for Human Rights among employees, partners and suppliers, senior management, society, and other stakeholders. To learn about Copel’s initiatives and management on the subject, access the content here.

Diversity and Equity

Still in relation to SDG 8 and respect for human rights, it is worth highlighting Copel’s concern with the promotion of diversity and equity by fighting any form of discrimination or differentiated treatment based on color, race, ethnicity, age, social class, gender or sexual orientation.

Copel understands that companies also have responsibility with target 8.5 – By 2030, achieve full and productive employment and decent work for all women and men, including young people and people with disabilities, and equal pay for work of equal value.

Thus, the Company values decent work environments for all, adopting several initiatives on diversity issues, whether in the scope of social responsibility or in the scope of people management and the value chain.

Occupational Health and Safety

Copel monitors the social risks to which employees may be susceptible and adopts measures to ensure the safety and health of workers, either preventively or facing unexpected situations. An example is the advent of the Covid-19 pandemic in 2020, when Copel had to take responsibility for acting quickly and put more than 4 thousand employees on remote work, minimizing the impact of the pandemic on their health.

For management and monitoring of health and well-being, diversified communication channels are made available, aiming to know the employees’ opinions, as well as to correctly address situations and problems that may happen to the internal public.

Accidents in the Community

The company also manages the risk to the safety of the population, due to the use of electric energy, by means of information and awareness programs for the impacted communities. The indicator “accidents with the community” provides a parameter of success for these actions.

Governance Dimension

Risk Management aims to contribute to strengthening the Corporate Governance process, increasing assurance as to the achievement of objectives, promoting greater transparency for stakeholders and improving the Company’s internal control environment.

Moreover, it proposes to add and preserve value, minimizing losses by identifying opportunities and threats, meeting international standards and relevant legal and regulatory requirements, improving operational effectiveness and efficiency, and enhancing loss prevention and crisis or incident management.

The Integrated Management of Corporate Risks started at Copel in 2006 with the objective of consistently and permanently maximizing the economic, social and environmental values for all stakeholders. The model, at the time, was based on the Committee of Sponsoring Organizations of the Treadway Commission (COSO), and gave rise to Copel’s policy, formalizing the guidelines of the Integrated Management of Corporate Risks.

The Company is committed to the implementation and maintenance of an effective and consistent corporate risk management structure, providing the resources required for its adequate performance. In this sense, the risks are divided into the following categories: strategic risks; financial risks; operational risks; and compliance risks.

Strategic Risks

These are the risks associated with top management’s decision making and strategic planning, which may generate substantial losses in Copel’s economic value; as well as those associated with reputation, with the possibility of losses resulting from the deterioration of Copel’s brand in the market, customers and regulatory agencies, due to negative publicity.

Financial Risks

The financial risks are associated with market (risk that the fair value or future cash flows of a financial instrument may fluctuate due to changes in market prices, such as exchange rates, interest rates and stock prices); liquidity (represented by the possibility of insufficient funds, cash or other financial asset, to settle obligations on the scheduled dates); credit (risk of incurring losses due to the difficulty in receiving amounts invoiced to its customers or from a counterparty in a financial instrument, resulting from their failure to comply with their contractual obligations); and disclosure, which are risks associated with the possibility of the issuance of incomplete, inaccurate or untimely financial, managerial, regulatory, tax, statutory reports, exposing Copel to fines, penalties or other sanctions.

Operational Risks

These are risks related to the effectiveness and efficiency of Copel’s operations, information security, projects, and socio-environmental risks.

Compliance Risks

These are the risks associated with non-compliance with legal and regulatory requirements, in the environmental, labor, and tax spheres, to which Copel is subject, including internal policies and rules, exposing the Company to fines from regulatory agencies.