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The corporate governance of Reykjavik Energy should ensure professionalism, efficiency, cost effectiveness, transparency and responsible management. The principal operations of Reykjavik Energy are governed by Act no.136/2013. In 2014 the owners of the company renewed a joint agreement on operations. The ownership policy was also revised. The policy contains stipulations regarding corporate governance. The drafting of these documents, the Articles of Association of Reykjavik Energy and rules of procedure for all the boards, took into account the guidelines, which the Chamber of Commerce established in collaboration with the Confederation of Icelandic Employers and Nasdaq.

Reykjavik Energy considers the company’s corporate governance fulfils the guidelines

Owners of Reykjavik Energy

G1 Board-Separation of Powers

The Board of Directors of Reykjavik Energy comprises six members. Five of them, including the chairperson and vice-chairperson, are appointed by the Reykjavik City Council and one by the municipal council of Akranes. The local authority of Borgarbyggd nominates one observer to the board. The chairperson of the board may not take on any other job for Reykjavik Energy.

The Board of Directors appoints the CEO of the company, writes the job description and handles the termination of employment. The CEO handles all the day-to-day management of the company and manages holdings in Reykjavik Energy’s subsidiaries. The CEO of Reykjavik Energy may not be a member of the Board of Directors of Reykjavik Energy and board members of Reykjavik Energy may not sit on the boards of subsidiaries. The CEO of Reykjavik Energy cannot be a member of its board of directors and members of the board cannot sit on the boards of its subsidiaries. Early in 2019, the CEO of Reykjavik Energy stood down from the boards of directors of two of Reykjavik Energy’s subsidiaries.

It is stipulated that there be a division of tasks between the CEO and Board of Directors in the rules of procedure of the board and the job description of the CEO.

G2 Board-Transparent Practices

Stjórn Orkuveitu Reykjavíkur

The Board of Directors, from left: Guðjón Viðar Guðjónsson, Hildur Björnsdóttir, Gylfi Magnússon, vice-Chasirman Brynhildur Davíðsdóttir, chairman, Kjartan Magnússon og Sigríður Rut Júlíusdóttir. Observing member is Halldóra Lóa Þorvaldsdóttir.

Alternate members: Auður Hermanndóttir, Margrét S. Björnsdóttir, Páll Gestsson, Katrín Atladóttir, Björn Gíslason og Geir Guðjónsson. Varaáheyrnarfulltrúi er Lilja Björg Ágústsdóttir.

The Board of Directors of Reykjavik Energy places an emphasis on transparency in its work and the minutes of its board meetings and meeting documents are not confidential and are accessible to all on the company's website. The minutes of the board meetings contain, among other things, a record of all the decisions of the board and board members have the right to have their positions on specific issues briefly noted in the minutes.

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Maria Dis Ageirsdottir
Maria Dis Ageirsdottir
Project manager

Maria Dis has worked on the design of utility systems and project management for many years, first at an engineering company and then for utilities in the city of Oslo. At Veitur Utilities she is in charge of construction investment projects. María is a civil engineer by training, but she's also attended an international communist summer camp in East Germany. She did this just before the fall of the Berlin wall and was 12 years old with a Duran Duran hairdo and little interest in politics. She has the same interests as beauty queens, i.e. horse riding, exercise and outdoor activities.

G3 Incentivized Pay

Gender equality Reduced inequalities Promotes UN‘s Sustainable Development Goals

The ownership policy of Reykjavik Energy stipulates that the salaries of CEOs shall be on a par with comparable jobs, but take into consideration the fact that the company is owned by public bodies. The salary terms of CEOs and other members of the personnel of Reykjavik Energy shall not be the highest in the labour market. The Compensation Committee of Reykjavik Energy shall review the salaries of its CEOs on an annual basis with regard to the objectives and yardsticks of the company. There is no direct correlation between the salaries of CEOs or those of other executives and specific yardsticks in operations, financial or otherwise. Interviews with employees, including executives in the Group, are guided by the Group’s values, and performances are assessed with them and other non-financial factors in mind. The values are: foresight, efficiency and integrity.

Board of director fees and the salaries of the CEO and other top executives are specified in the annual accounts of the Reykjavik Energy Group.

G4 Fair Labor Practices

Decent work and economic growth Promotes UN‘s Sustainable Development Goals

Reykjavik Energy is a member of the Confederation of Icelandic Employers through its membership of the Samorka Federation of Energy and Utility Companies. Reykjavik Energy negotiates with trade unions in collaboration with the Confederation of Icelandic Employers. Reykjavik Energy also has other communications with unions. Employees are free to be members of the trade union of their choice in accordance with labour market regulations or they can opt not to join a union.

The company makes individual employment contracts, based on collective wage agreements with the unions, with all its full-time employees. These specify, among other things, salaries. Reykjavik Energy’s contracting is extensive and from companies of varying sizes. At the end of 2018, some 20 people were working daily for the Reykjavik Energy Group as contractors. The number of full-time employees in the same period amounted to 538. Contractors therefore made up 3.7% of the workforce.

The rights of contractors’ employees are discussed in the chapter on corporate social responsibility.

Union membership

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Olafur Helgi Hardarson
Olafur Helgi Hardarson

Ólafur Helgi is satisfied at work. The job is interesting and demanding, since he is in charge of the monitoring and maintenance at substations, as well as the analysis and testing of equipment. He is a qualified electrician with an industrial training diploma from the University of Reykjavik and is therefore called an electrical technician. He most enjoys travelling around the country and looking at special places, particular strange pools. Fish tubs at a hot water spring in Snæfellsnes top his list. He also enjoys walking out into Icelandic nature, although he prefers peculiar lowlands to mountains.

G5 Supplier Code of Conduct

Good health and well-being Responsible consumption and production Promotes UN‘s Sustainable Development Goals

Reykjavik Energy's policy is to issue open calls for tender for the purchase of goods, services and construction work, and to accept the most favourable offers. Otherwise private requests for tenders shall be made, mostly through invitations for bids, direct contracts or direct procurement. The favourableness of offers is often evaluated on the basis of more factors than price. These include, among others, safety and environmental issues and there are provisions in the tender documents to avoid the constant changing of National ID numbers by certain companies.

There is an effort to fully utilise materials that have been purchased or are in stock or to sell them off. There was a good usage of older inventories in 2018 and the stock position for goods that were older than two years decreased by 27% between years.

Reykjavik Energy has laid down joint liability in its work contracts with a view to protecting the rights of the employees of contractors and their sub-contractors. Evaluations of contractors are based on their performance in security and environmental issues as well as the quality of their work and reporting. If a contractor’s performance is deemed unsatisfactory in the evaluation, the transaction is halted, at least temporarily.

Eco-friendly labels are favoured in the procurement of operational goods, such as paper and detergents, for example. About 55% of the procurement in 2018 of photo-copying paper, envelopes, printed material, detergents, stationery and printing cartridges carried eco-friendly labels. Printing and photocopying is controlled and has contracted by 40% since 2015, see annex.

The Reykjavik Energy Group has not screened its suppliers according to environmental indicators. The companies do not have any assessments of the potential or real risks posed by the negative environmental impact of their supply chain or responses to those impacts.

In 2018, there were no cases of a bid being rejected on suspicion of an abusive change of national ID number nor because of an unsatisfactory result in the evaluation of a contractor. In 2017, a bid for one project was halted in accordance with Reykjavik Energy’s measures against the abusive changing of a national ID number.

G6 Ethics-Code of Conduct

Good health and well-being Promotes UN‘s Sustainable Development Goals

The Code of Conduct of Reykjavik Energy is founded on integrity, which is one of the company’s values. The code of conduct is registered and public and should help the staff to allow integrity, respect and non-discrimination characterise all their dealings, whether they be with customers, colleagues, management, contractors or other stakeholders. These are not exhaustive and do not exonerate us from the responsibility of following our own conscience when ethical issues arise.

The code of conduct was established by the management for Reykjavik Energy in the year 2000 and were examined, reviewed and approved by the Board of Directors of Reykjavik Energy in 2017. They form part of the board’s rules of procedure. They are introduced to new employees and accessible to all staff. If an employee considers the code has been breached or is confronted with an ethical issue, he/she can approach a supervisor or colleague he/she trusts. If an employee considers there has been a violation of the code, such as bullying or harassment, he/she can also directly approach an external counsellor, and the established procedure will then take over, anonymously if requested.

Following an internal audit conducted on Reykjavik Energy in 2018, rules on how to respond to harassment in the workplace were updated in accordance with current regulations.

G7 Anti-Bribery/ Anti-Corruption

At Reykjavik Energy there are registered work procedures for the processing of issues when an employee or executive is alleged to have violated company rules or committed fraud at work. The rules of procedure are accessible to all employees. Suspected violations should be made known to the next supervisor or internal auditor of the company, who must be informed of it, but this information is treated as confidential to protect the anonymity of the informer.

The management of Reykjavik Energy, managing directors and directors are responsible for the internal supervision of their specific divisions. Quality Control is responsible for ensuring that Reykjavik Energy’s internal monitoring system is effective. Reykjavik Energy's quality control system is independently certified by external entities. Reykjavik Energy complies with the standards of the internal auditors association when conducting internal audits. The Internal Audit Division of the City Council of Reykjavik fulfils the function of internal auditors of Reykjavik Energy. Within Reykjavik Energy there are compliance officers who supervise the disclosure of information to the Stock Exchange and Financial Supervisory Authority.

G8 Tax Transparency

Reduced inequalities Promotes UN‘s Sustainable Development Goals

Reykjavik Energy only operates in Iceland and its operations are therefore entirely subject to Icelandic tax law. With the mandatory unbundling of Reykjavik Energy at the beginning of 2014, the current Group form was created. It is characterized by three elements:

  • The parent company is a partnership company and pays higher income tax than a public limited company. On the other hand, dividend payments to its owners are tax-exempt.
  • The largest subsidiaries – Veitur Utilities and ON Power – are public limited companies which are jointly taxed for risk aversion.
  • The operation of water and sewerage systems is managed by a special partnership company but these statutory municipal functions are not subject to income tax.

KPMG has calculated the Reykjavík Energy Group's tax footprint. The tax footprint comprises both taxes that are credited in the management of the company and the taxes which the company collects and must be passed on to the authorities. In year 2018, Reykjavik Energy’s tax footprint amounted to ISK 6.838 million. In addition, a total of ISK 2.264 million were paid in VAT.

KPMG’s report of the tax footprint of the Reykjavik Energy Group is attached.

Tax footprint of the Reykjavik Energy Group

G9 Sustainability Report

Responsible consumption and production Promotes UN‘s Sustainable Development Goals

Multiple factors determine whether the operations of Reykjavik Energy and its subsidiaries - Veitur Utilities, ON Power and the Reykjavik Fibre Network - are sustainable. This condensed report takes into account the factors, which Reykjavik Energy considers to be the most important. Reykjavik Energy therefore looks on this report as its annual sustainability report. The websites of the companies contain some information on environmental, financial and personnel issues, which are often updated more than once a year.

In 2018, a report was published in the wake of an international evaluation of the sustainability of the Hellisheidi Geothermal Power Plant. The evaluation is founded on the Geothermal Sustainability Assessment Protocol (GSAP) which is being developed on behalf of the Icelandic government and geothermal steam companies in Iceland. The Hellisheidi Geothermal Power Plant is the first operating power plant that it is being applied to.

The main conclusion of the sustainability evaluation was that the Hellisheidi Geothermal Power Plant has a negligible negative effect on the environment and community and has an important socio-economic impact, particularly in the production of clean and cheap electricity and hot water to meet the needs of the capital area. However, the assessment also revealed a deviation from the exemplary performance, which ON Power is addressing.

G10 Other Framework Disclosures

This sustainability report of Reykjavík Energy for year 2017 is made with reference to Nasdaq's ESG Reporting Guide for Nordic & Baltic Markets, issued in March 2017.These guidelines are based on guidance from the Uited Nations' Stustainable Stock Exchange Initative and The World Federation of Exchange. References to the UN's Sustainable Goals have been added and we follow the provisions of law Icelandic law 3/2006 on financial statements, as amended with reference to EU directive 2013/34 in year 2016.

Editorial board of Reykjavik Energy’s 2018 Annual Report: Eiríkur Hjálmarsson (information officer of Reykjavik Energy), Hólmfríður Sigurdardóttir (director of environmental affairs), Ólöf Snæhólm Baldursdóttir (information officer) and Davíd Örn Ólafsson (expert in treasury and analysis in the Financial Department of Reykjavik Energy).

Website: Overcast.

The photographs in the report were taken by Dr. Gretar Ívarsson, specialist in geological research in the Development division of Reykjavik Energy, unless otherwise specified.

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Maria Ran Ragnarsdottir
Maria Ran Ragnarsdottir
Fiber optics customer service

Maria Ran studied engineering and is the delivery manager of the Reykjavik Fibre Network. She is responsible for customer services, i.e. of ensuring that their fibre optics box is connected swiftly and well. It’s a multifarious job and various tasks relating to customers and large telecom companies land on her desk. María Rán is lively and positive and when she is in the building everyone knows about it. She follows every fad and these days Crossfit is foremost in her mind. She is also highly competitive and only participates to win. One can expect to see her in the elderly Crossfit Games in the future, she intends to give herself plenty of time to succeed in this field.

G11 External Validation & Assurance

The corporate social responsibility and corporate governance elements in this annual report were audited by Versa ehf.

The environmental aspects of the report were audited by VSÓ Consulting.

The external auditors of Reykjavik Energy are Grant & Thornton.