and discipline and looking ahead, we aim to increase the gross margin on our projects and reduce the costs associated with quality issues. Indeed, any shortfall in quality can impact our profitability; for example, in the second quarter of 2020 we made the extraor- dinary warranty provisions of EUR 175m to repair and upgrade turbine blades. A key strategic focus area is therefore to ensure our quality across the value chain lives up to customer expectations, and is befitting of our heritage as the industry leader. Our work to become the safest company in the energy industry continued in 2020, although COVID-19 meant the introduction of new policies and guidelines to keep our global workforce safe. Throughout the year, everyone at Vestas acted diligently to keep the COVID- impact at a minimum, underscoring how we take care of each other and continually evolve our safety culture. Building the future Vestas The close collaboration between our Board of Directors and Executive Management is key to ensuring a clear direction for everyone at Vestas. Through a well-established process, with a yearly strategy seminar and frequent operational follow-ups, the Board of Directors and Executive Management continuously inter- act to ensure alignment on major priorities. Through this collaboration, the Board of Directors and Executive Management has set out the future direction for Vestas as outlined in our strategy. Concretely, this means that Vestas’ focus on the climate crisis translates into addressing three key challenges. These challenges, which offer huge business oppor- tunities and which Vestas has the capabilities to solve, are: · Accelerate the deployment of renewable energy, · Drive society-wide electrification, and · Implement solutions for non-electrifiable use. Vestas’ vision and strategy address these challenges by setting strategic priorities and defining the best executional sequence. We see this as a very directional way of enabling the whole organisation to engage in our vision: to be the global leader of sustainable energy solutions. These priorities will require the integration of our onshore and offshore businesses into one efficient and winning operating model in 2021. Following meticulous planning since the announcement of the strengthened part- nership with MHI in October 2020, we are well underway with this project, but we remain realistic about the effort required to create a unified culture focused on accelerating the energy transition. We want to build an organi- sation that will become a leader in offshore by 2025, which means we need to catch up fast and successfully introduce our new offshore platform by this Annual Report 2020 release: the V236-15.0 MW™. We also continue to invest in sustaining our technology leadership through modularisa- tion, and through nurturing talent, diversity, and leadership while strengthening our customer focus. To support this development and ensure we have the right capabilities in Executive Management, we were excited to welcome Tommy Rahbek Nielsen as Chief Operating Officer and Anders Nielsen as Chief Technology Officer in May 2020. Anders Nielsen replaced Anders Vedel, who contin- ues as Chief Scientific Advisor and whom we would like to thank for his ongoing service to wind energy and Vestas. On the brink of a new sustainable era 2020 was a remarkable year that pushed the world into its worst crisis in more than a lifetime. At the same time, 2020 was also the year in which the world’s CO₂ emissions decreased more than ever before and where renewable energy showed it is ready to become the dominant energy source. “ Among the most important milestones, in 2020 we managed to scale our business to meet demand, increasing revenue to EUR 14.8bn, representing 22 percent growth compared to 2019.” Henrik Andersen Group President & CEO As such, we are on the brink of a sustainable era where we will see unprecedented change across all areas of society. Transportation, heating, and cooling will soon be electrified, and the shift to renewables will create a strong drive to integrate sustainability in everything we do. The journey ahead will not be a straight line and emissions will most likely increase again in 2021, but 2020 has shown that the solutions are ready. During the year, our supply chain and partners spent substantial time planning mutual steps to decarbonise the world’s most sustainable assets – wind turbines – even further. At the end of 2020, our 129 GW of installed wind turbines saves the world 186 million tonnes of CO₂ annually, and during the year we reduced our own carbon emissions with 33 percent, illustrating that we together with our suppliers and partners can do this with even greater momentum and speed. However, we would not be where we are today, and Vestas would not be playing the key role it is playing in creating a sustainable planet for our children and grandchildren, were it not for our employees. During an exceptionally challenging year, everyone at Vestas demon- strated incredible passion and purpose, and made individual and team sacrifices, to ensure we kept our promises and helped to accelerate the deployment of renewables for our customers and societies. On behalf of the Board of Directors and Executive Manage- ment, we want to thank all Vestas colleagues across the globe for their efforts in 2020. To this end and despite being outside the earnings guidance announced in February, eligibl e Vestas employees will receive an extraordinary reward totaling EUR 25m for ensuring business continuity and driving the global activities forward through this unprec- edented year. The decision was made by the Board on recommendation from Nomination & Compensation Committee, and excludes Executive Management because we didn’t meet our performance KPIs. This special rec- ognition reflects the tremendous contribution from team Vestas in 2020 and that COVID- 19 will impact our business well into 2021. In the future, 2020 will be remembered as the year of COVID-19, but for Vestas it was also the year where we set the direction for the next decade. Together with our 29,000 colleagues, we have an even stronger intent in 2021 to create a more sustainable planet and bring us closer to our vision of being the global leader in sustainable energy solutions. Thank you to every external and internal stakeholder for your support and commitment in 2020. ADDITIONAL INFORMATION STATEMENTS FINANCIAL STATEMENTS GOVERNANCE VESTAS PEOPLE GROUP PERFORMANCE SUSTAINABILITY – PROGRESS ON TARGETS STRATEGY AND AMBITIONS IN BRIEF CONTENTS
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