direct energy

Centrica responsibility Corporate Responsibility Report 2005 Investing in sustainability Our Glens of Foundland wind farm, Aberdeenshire Contents 01 About this report 02 CEO Introduction 04 Key issues 05 05 06 07 Climate change Vulnerable customers Health, safety and security Emerging issues 48 49 50 51 52 53 54 56 Customer safety Customer experience Customer privacy Advertising and selling Customer diversity Performance Future commitments Case studies 46 46 47 Green electricity Domestic customers Business customers 08 CR highlights 2005 11 Business overview 12 13 13 14 14 15 15 16 2005 highlights British Gas Residential Energy British Gas Services British Gas Business Centrica Energy Centrica Storage Centrica North America Europe 59 Employees 60 63 64 65 66 67 73 73 73 74 75 75 75 76 76 77 77 78 79 79 80 81 81 81 82 83 83 84 87 Human capital management Health and safety Employee safety Occupational health Workplace diversity Measurement and monitoring Work-life balance Caring for carers Supporting senior women Cultural awareness Development Employee induction British Gas Engineering Academy Academy of Customer Excellence Graduate development programme Investors in People Leadership development programme Management Talent Review Employee relations Employee engagement Trade unions Communicating with employees Redundancy and redeployment Offshoring Pensions Reward and remuneration Benefits Future commitments Case studies 17 Business case for CR 18 Business principles 19 21 Our business principles Progress in 2005 22 CR governance 23 25 25 26 CR Committee Risk management Corporate responsibility risks Association of British Insurers (ABI) disclosure guidelines on social responsibility Quality management 28 29 Dialogue with stakeholders 30 31 39 Stakeholder map Stakeholders Dialogue in 2005 40 Customers 41 41 42 42 43 44 44 45 45 45 Vulnerable customers ‘here to HELP’ British Gas Home Energy Care British Gas Energy Trust Debt management Energy efficiency Energy Efficiency Commitment Energy efficient products Energy efficiency advice Business energy efficiency Corporate Responsibility Report 2005 www.centrica.com/cr05 Contents 94 95 97 97 98 continued 93 Environment Climate change Renewable energy Our investment in renewables Stakeholder consultation Biodiversity 135 Education and skills 135 Think Energy 135 In-kind support 136 Performance 137 What we invest 140 Per Cent Club 141 Probus BNW 142 BITC CR Index 143 Stakeholder views 143 Employee opinions 144 Community awards 145 Case studies 98 Gas production and storage 99 Gas production 100 Gas storage 101 Emissions trading 102 Power generation 103 Management and compliance 109 Our UK fuel mix 110 Resource efficiency 110 Initiatives 113 Management systems 113 Involving employees 113 Performance 114 Performance data 120 Future commitments 120 Strategy 120 Environmental governance 121 Environmental stewardship 122 Targets for 2006 123 Summary 125 Case studies 151 Investors 151 Case studies 152 Suppliers 153 Selection 153 Payment 153 Future plans 154 Government 155 Economic impacts 157 Value added statement 158 Focus on… 159 160 160 161 162 163 Energy efficiency Fuel poverty Emissions trading Renewables obligation New technologies Non-financial reporting 127 Communities 128 Working in communities 128 Vulnerable customers 129 ‘here to HELP’ 130 Working with Help the Aged 130 Raising the Roof 131 REECH 132 Employee involvement 132 Volunteering 132 Fundraising 164 Performance summary 169 Future commitments 180 External assurance statement and commentary Corporate Responsibility Report 2005 www.centrica.com/cr05 About this report This report covers our corporate responsibility activity and performance from 1 January 2005 to 31 December 2005. It updates our last corporate responsibility report, which was published in May 2004. For the third consecutive year, our report is externally assured by The Corporate Citizenship Company. The scope of the report covers our global operations. Our main operations are in the UK and North America and as a result, the content of this report focuses on these activities. In future reports, as our international businesses continue to evolve and grow, we will report our activity and performance accordingly. We use external guidelines and frameworks to inform our reporting where relevant. Although we do not explicitly base our report on the Global Reporting Initiative guidelines, we have included a GRI index to show which elements of the guidelines we cover and to enable comparison with other companies’ reports. We have also indexed the report against our Group business principles and the principles of the United Nations Global Compact, to which we are a signatory. In response to stakeholder feedback received during 2005 we have introduced a number of changes to our approach this year. We have: • focused more closely on our most significant areas of impact – climate change, vulnerable customers and health and safety • published our report online to help us target its communication more effectively and provide greater flexibility in presenting information • organised the report according to our main stakeholder groups to make navigation more straightforward • provided information at various levels; from ‘quick-read’ overviews to more detailed performance data and document downloads • produced a printed summary report to give stakeholders an ‘at a glance’ overview of our activities and encourage readers to visit our online report. We believe we have made good progress in 2005 but recognise the need to continually review and improve our approach. Feedback from our stakeholders will help us to do this. We encourage you to contact us with your views. Grant Dawson Grant Dawson Group General Counsel, Company Secretary and Chair of the Group Corporate Responsibility Committee 1 Corporate Responsibility Report 2005 www.centrica.com/cr05 Chief executive welcome statement Welcome to Centrica’s Corporate Responsibility Report 2005. This highlights our CR performance – and gives case studies of some of the people and communities we have been able to help. In response to feedback from our stakeholders last year we have made some changes to the way we report our performance. We have focused more closely on areas where our activities had the most significant impact – climate change, vulnerable customers and health and safety. In addition, we are publishing the full version of our report solely online for the first time, presenting information in various levels of detail to cater for our different audiences. During the year, the increase in wholesale gas and power costs, to unprecedented levels, presented a massive challenge to our residential energy business and led to a round of price increases across the industry. British Gas worked hard to minimise the effect, particularly on our vulnerable customers and brought in a range of innovative schemes to offer support. For example, we gave winter fuel rebates totalling £6.7 million to customers most in need. In response to declining North Sea gas reserves, we have committed to invest £16 billion in future gas supply contracts, and gas and power projects for the UK. Projects include long-term supply contracts, investments in capacity at liquefied natural gas reception terminals and the acquisition of two exploration blocks in Nigeria. In 2006 we expect to develop our upstream activities in other parts of the world. This will all, of course, present corporate responsibility (CR) risks but our business principles and risk management processes will guide the way we handle them. One of our aims is to find ways to reduce our carbon footprint and make a positive contribution to the battle against climate change. Our major investment in renewable energy in the form of onshore and offshore wind farms demonstrates our commitment – and we have introduced a range of offers to encourage our customers to become more energy efficient. The energy efficiency measures installed by British Gas in 2005 helped our customers save more than £37 million. Health and safety remains central to our thinking. We always run our operations with the safety of our employees, customers and members of the upper most in mind. Despite the challenges we faced in 2005, I believe we made genuine progress in our social, ethical and environmental management. Our continued inclusion in key socially responsible investment indices – including the Dow Jones Sustainability Index and FTSE4Good Indices – and improved score in the Business in the Community CR Index are testimony to that. One other area I’d like to highlight is the dedication of our employees. They have delivered an outstanding performance during a turbulent period, a sign of their commitment to Centrica. It is encouraging that our employee engagement score increased by 1.3% – in a year that was certainly the toughest since Centrica was formed in 1997. Sir Roy Gardner 2 Corporate Responsibility Report 2005 www.centrica.com/cr05 Chief executive’s welcome statement Our workplace initiatives have been recognised in a number of awards. In particular, British Gas has become the first major UK Company to be accredited to the new 2004 ‘Revised Investor in People Standard’. Our graduate programme won the Personnel Today Award for Excellence in Graduate Recruitment in 2005, beating off challenges from more than 60 entrants. And British Gas Business was voted the 15th Best Workplace in the UK by the Financial Times sponsored Best Place to Work Institute. During 2005, I announced my intention to step down as chief executive. During my nine years with Centrica, I have had the privilege of leading a remarkable team of talented individuals, all committed to our open and honest approach to our social, ethical and environmental responsibilities. I shall be handing over to Sam Laidlaw, who joins us from Chevron at the end of June. Sam will bring an invaluable combination of upstream expertise and a very considerable reputation for managing a large-scale global energy business. I am confident that he will share my commitment to continual improvement in our corporate responsibility performance. Our record in 2005 demonstrates good progress. Whatever happens in the energy market in 2006, Centrica will not be distracted from our goal of delivering a world-class performance in this field, as in every other. Sir Roy Gardner Chief Executive 3 Corporate Responsibility Report 2005 www.centrica.com/cr05 Key issues Responsible business. Centrica’s vision is to be a leading supplier of energy and related services in our chosen markets, in order to maximise value to shareholders. We believe that meeting and exceeding our responsibilities to society as a whole contributes to sustainable commercial success. Climate change By managing our environmental impact we seek to contribute to the creation of a sustainable low carbon economy whilst ensuring security of energy supply. Vulnerable customers Our aim is to make life safe, warm and comfortable for all of our customers but particularly for people on low incomes, older people and those with a disability. Health, safety and security The health, safety and welfare of our employees in the workplace, and others who may be affected by our activities, are top priorities for Centrica. 4 Corporate Responsibility Report 2005 www.centrica.com/cr05 Key issues Climate change Climate change is the greatest environmental challenge facing society today. The world is warming up, largely because of emissions of greenhouse gases, particularly carbon dioxide (CO2). About 6.5 billion tonnes of CO2 is emitted globally each year, mostly through burning coal, oil and gas for energy. Centrica accepts the need to play its part in cutting its emissions and encouraging our stakeholders to be more energy efficient. The earth’s surface temperature has risen over the past 140 years, with the largest increases occurring in the second half of the last century. Globally, the ten hottest years on record have all been since 1990. Scientists predict that temperatures could climb by between 1.4˚C and 5.8˚C over the next 100 years. These increases will bring changes in weather patterns and lead to rising sea levels, caused by the melting of the Arctic ice cap. There is already evidence to suggest a greater frequency and intensity of storms. The costs of climate change could be enormous. Scientists talk of flooding, droughts, food shortages and the spread of disease. But all is not lost. There is a great deal that governments, industry and consumers around the world can do to reduce emissions of greenhouse gases, though we need to move quickly. At Centrica, we believe we can make progress on reducing the direct impact of our activities on the environment without harming our economic performance. What we are doing • All the upstream assets we own have an environmental management system in place to ensure they are run to high environmental standards. By the end of 2005, all Centrica’s seven gas-fired power stations in the UK had received independent certification that their EMS conformed to ISO14001. • We are planning to invest £750 million in renewable energy and are meeting our obligation to supply 5.5% of our electricity from renewable sources. • Under our Energy Efficiency Commitment, we invested £112 million on subsidising products such as cavity and loft insulations for around one million homes in 2005. • We have introduced new more environmentally friendly products and services – and plan more over the next few years. • Our employees have contributed greatly to our ‘green’ approach. In 2005 they recycled more and wasted less. We have already developed a series of schemes to assist people on low incomes, older people and those with a disability. These include our ‘here to HELP’ programme in the UK and our ‘Neighbor-to-Neighbor’ scheme in the US. We have also introduced the independent British Gas Energy Trust, winter fuel rebates and to provide further assistance to those that need extra support. These initiatives are supporting the Government’s aim that by 2010 no vulnerable family should be in fuel poverty. We have called for a more ‘joined-up’ approach between Government, industry and voluntary groups to beat the problem, bringing together support on energy efficiency and advice on handling debts. We have tailored our ‘here to HELP’ programme to promote the use of insulation as well as offering advice to low income people on applying for unclaimed benefits. What we are doing • Tackling fuel poverty by providing free energy efficiency products to vulnerable customers. • Helping people who have problems paying their energy bills through a combination of practical support, alternative payment methods and advice. • Encouraging vulnerable customers to access the financial benefits they are entitled to claim. • Working with local authorities, housing associations and national charities to provide a range of free services designed to tackle the root causes of household poverty. Vulnerable customers We have customers who for reasons of age, health, disability or low income are unable to safeguard the welfare of members of their household. We identify these people as ‘vulnerable customers’. Rising wholesale energy costs have forced suppliers to increase gas and electricity prices. Unfortunately, these higher bills are contributing to the difficulties faced by vulnerable customers. Our aim is to find solutions to help disadvantaged communities, families and individuals to reduce the impact of tough but necessary business decisions. 5 Corporate Responsibility Report 2005 www.centrica.com/cr05 Key issues Health, safety and security The health, safety and welfare of our employees and others who may be affected by our activities is a top priority. As we continue to develop our upstream strategy, the area of health, safety and security becomes ever more important. Getting hydrocarbons from under the ground and generating power can be very hazardous. We are constantly reviewing our health and safety performance and upgrading our management systems. Any accident or incident is scrutinised and lessons learned. Looking further afield for gas supplies is also leading to greater security risks. The protection of our employees and contractors requires constant vigilance. There are also strong health and safety elements of our downstream operation – everything from safe driving to secure offices to the safety of appliances in customers’ homes. Centrica’s Board monitors the Group’s safety performance closely. Action plans and targets are reported regularly to Directors. We have maintained the strong health and safety results achieved in 2004, and there is evidence of further performance improvement in most businesses. Many parts of the Company perform favourably when measured against recognised health and safety standards. What we are doing • Our strategy is to have regular audits and verification exercises, clear targets, crisis management systems, risk assessment and training at all levels • We make provision for the health, safety and welfare at work of our employees and others who may be affected by our activities • We seek continual performance improvement • We aim to comply with all relevant legislation, best practice and standards relating to every part of our business in the UK, the US and Europe • Accident prevention programmes are integral to the business process • The frequency of lost time injuries and ill health has been reduced • Some aspects of the way we do things, particularly on stress management and rehabilitation, have been highlighted on the Health and Safety Executive’s website. Renewable energy We are investing £750 million in renewable energy and started producing our own ‘green’ power in 2005. Health, safety and security In 2005 our lost time injuries per 1,000 employees reduced by 39%. ‘here to HELP’ Our ‘here to HELP’ programme is helping thousands of people improve their quality of life. 6 Corporate Responsibility Report 2005 www.centrica.com/cr05 Key issues Emerging issues Operations in developing countries After many years of plentiful North Sea reserves, the UK is now a net importer of gas. Apart from the question over where the UK’s future gas will come from, we need to make decisions on how to access and generate the energy we need whilst meeting our environmental goals. In the future, we are likely to see new technologies coming along that will deliver greener energy from other sources. However, until new technology is available on a commercial scale, natural gas will continue to be our main fuel. The UK will become more reliant on overseas gas from the likes of North and West Africa, Norway and the former Soviet Union. Centrica has committed to invest £16bn in future energy supplies for the UK. Although we continue to acquire gas fields in the North Sea, in the long term, meeting the UK’s gas need will rely on long-term contracts with other European countries, effective liberalisation of gas transmission and distribution networks in Continental Europe and supplies of liquefied natural gas shipped from Africa and the Middle East. In 2005, as part of our gas procurement strategy, we acquired the right to explore for gas and oil in two exploration blocks in Nigeria. We plan to begin a three-year drilling programme in late 2006 to establish the volume of gas and oil reserves in the blocks. Centrica is the main operator and we are working with an infrastructure partner and two local Nigerian companies to implement the project. The UK economy is critically dependent on affordable energy. Ensuring a diverse choice of energy supply means we will be working in locations that bring new and different business challenges. We are very aware of the geopolitical, social, ethical and environmental issues of doing business in Nigeria, but are committed to working with our local and international stakeholders to identify and manage the impact of our business activities. Our business principles will inform and guide our implementation of the project and our interaction with stakeholders. Before our work programme begins we undertake a comprehensive social and environmental impact assessment to gain a full understanding of the issues involved. We focus closely on the issues of human rights and labour standards, working with local communities to ensure that our presence in the country contributes positively to its development. Discussions with a range of stakeholders has highlighted corruption as a particular issue within Nigeria. In line with our business principles and policy on bribery and corruption we will not engage in bribery or any form of unethical inducement or payment. Our planned activities are at early stage and the areas outlined above are emerging issues for Centrica. But as we continue to develop our international gas procurement strategy these issues will become a greater and more material element in how we run our business. We are actively engaging with NGOs, other companies with operations in Nigeria, and home and host governments to understand the business and social climate in a particular country. We have also reviewed our policies on human rights, bribery and corruption and are developing guidance and training to help employees avoid any breaches of our policies. 7 Corporate Responsibility Report 2005 www.centrica.com/cr05 CR highlights 2005 Customers £6.7m To lessen the impact of energy price increases on vulnerable customers, British Gas provided £6.7 million of winter fuel rebates in 2005. £37m The energy efficiency measures installed by British Gas helped our customers save more than £37 million. $1.5m Direct Energy’s $1.5 million support for the ‘Neighbor-to-Neighbor’ programme helped thousands of indebted customers. £8.5m Since our ‘here to HELP’ programme began in 2002, British Gas has identified £8.5 million of unclaimed benefits for vulnerable customers. 470,000 Almost 470,000 homes have now signed up to British Gas’ ‘here to HELP’ programme. 250,000 British Gas issued 250,000 alternative format communications such as braille, large print and audio. Employees 11% Our human capital return on investment ratio increased by 11% to 2.1. 1.3% Our employee engagement score increased by 1.3%. 12,000 We distributed 12,000 copies of our business principles and sound business practice guide to employees. 39% Lost time injuries per 1,000 employees reduced by 39%. 1,100 More than 1,100 trainees went through our British Gas Engineering Academy. Personnel Today Award Our Graduate development programme won the Personnel Today Award for Excellence in Graduate Recruitment. 8 Corporate Responsibility Report 2005 www.centrica.com/cr05 CR Highlights 2005 Environment 26 MW In May we generated the first electricity from our 26 MW Glens of Foudland onshore wind farm in Aberdeenshire. 15% We traded 15% of the carbon allowances in Europe through the EU Emissions Trading Scheme last year. ISO14001 standards All our UK power stations are certified to ISO14001 standards. 32.9% We reduced our building energy use by 32.9% on our 2000 baseline. 60% The recycling rate in our offices increased by 60% on our 2000 baseline. WWF-UK WWF-UK selected British Gas as the energy supplier that had done most to reduce its greenhouse gas emissions. Community £8.2m Our total community contribution increased by 11% to £8.2 million. $100,000 Direct Energy employees supported the relief efforts for hurricanes Katrina and Rita, raising more than $100,000. £350,000 Our UK employee fundraising partnership with children’s charity NCH raised more than £350,000. £6m The British Gas Help the Aged Partnership has invested more than £6 million to improve the lives of around 1.7 million older people. £420,000 Our people invested more than 15,000 hours in volunteering activities – £420,000 of in-kind support. Excellence Award British Gas’ ‘here to HELP’ programme won Business in the Community’s Healthy Communities Excellence Award programme in 2005. 9 Corporate Responsibility Report 2005 www.centrica.com/cr05 CR Highlights 2005 Investors 91% Our score in the BITC corporate responsibility index improved by five percentage points to 91%. Responsible investment Centrica continued to be included in the Dow Jones Sustainability World and European Indexes and the FTSE4Good Indices. Global 100 Centrica was named in the Global 100 Most Sustainable Corporations in the World index. 10 Corporate Responsibility Report 2005 www.centrica.com/cr05 Business overview Our key markets and our main activities United Kingdom Canada USA Belgium The Netherlands Spain Sourcing energy We source energy by exploring for and producing gas; by trading on the energy markets; and through the generation of electricity from our gas-fired power stations and from wind farms. Home services We offer a range of services to residential customers. These include the installation and servicing of home heating and security systems and the care of electrical wiring, kitchen appliances and plumbing and drains. Gas and electricity supply We supply gas and electricity to residential and business customers through our highly customer focused brands. Gas storage We store gas under the North Sea for producers and suppliers including our own businesses. 11 Corporate Responsibility Report 2005 www.centrica.com/cr05 Business overview 2005 Highlights Group turnover^ by business 2005 £million Group operating profit* by business 2005 £million 7,000 6,000 5,000 4,000 3,000 2,000 1,000 0 1,000 800 600 400 200 0 -200 British Gas Residential Energy British Gas Services British Gas Business Centrica Energy Centrica Storage Centrica North America Europe Other ^ from continuing operations. * including joint ventures and associates, net of interest and taxation, and before exceptional items and certain re-measurements. Investing in our business United Kingdom • North Sea oil and gas fields: acquired shares in three fields for £268m. • Horne and Wren gas fields: £35m development completed and first gas delivered. • Humber power station: increased interest from 60% to 100% in Humber Power Limited. • Aberdeenshire wind farm: £31m investment to build our first wind farm. • Barrow offshore wind farm: invested over £50m. • Canvey Island LNG: acquired at least 20% interest in proposed LNG reception facility. • Isle of Grain LNG: acquired import capacity for 20 years. • International Power: agreed first coal-indexed power purchase. • Exploration: investment to widen our search for supplies. • British Gas: £386m capitalised investment to date on improved customer service systems. Europe • Norway: £4bn long-term import deal delivered its first gas supplies. • Belgium: acquired a 25.5% stake in Belgian generator SPE SA. • The Netherlands: acquired Dutch energy supplier Oxxio BV for £95m. 12 Corporate Responsibility Report 2005 www.centrica.com/cr05 Business overview British Gas Residential Energy Turnover^ Operating profit* £6,032m 2004 £5,901m £90m 2004 £242m Main activities We supply gas and electricity to residential customers throughout Britain – under the British Gas name in England, as Nwy Prydain and British Gas in Wales, and as Scottish Gas in Scotland. We are the first choice gas supplier for millions of people and, since the market opened for competition in 1998, we have become the country’s largest supplier of electricity to residential customers. www.house.co.uk ^ from continuing operations. * including joint ventures and associates, net of interest and taxation, and before exceptional items and certain re-measurements. Gas and electricity supply British Gas Services Turnover^ Operating profit* £1,024m 2004 £943m £111m 2004 £72m Main activities We are Britain’s largest domestic central heating and gas appliance installation and maintenance company, providing services under our HomeCare range, which also covers plumbing and drains, home electrics, kitchen appliances and monitored home security systems. We directly employ more than 8,300 engineers and also offer services through British Gas-owned Dyno-Rod franchises. www.house.co.uk ^ from continuing operations. * including joint ventures and associates, net of interest and taxation, and before exceptional items and certain re-measurements. Home services 13 Corporate Responsibility Report 2005 www.centrica.com/cr05 Business overview British Gas Business Turnover^ Operating profit* £1,510m 2004 £1,200m £77m 2004 £68m Main activities We market gas and electricity to businesses, from the largest commercial operations to small and medium-sized enterprises, under the British Gas Business brand, offering the flexibility of an open tariff or the security of fixed contracts. We remain the number one supplier of energy to the commercial sector in Britain (measured by supply points). We also provide heating care for businesses. www.britishgasbusiness.co.uk ^ from continuing operations. * including joint ventures and associates, net of interest and taxation, and before exceptional items and certain re-measurements. Gas and electricity supply Centrica Energy Turnover^# Operating profit* £1,011m 2004 £931m £903m 2004 £773m Main activities This consists of our upstream gas production, electricity generation, wholesale and industrial gas sales and our energy trading and optimisation unit. We have gas reserves in Morecambe Bay, supplemented by interests in several North Sea fields. To help us meet our customers’ electricity demands we have seven gasfired power stations and are investing in renewable generation through offshore and onshore wind farms. www.centrica.com ^ from continuing operations. * including joint ventures and associates, net of interest and taxation, and before exceptional items and certain re-measurements. # excludes revenue from other Centrica businesses. Sourcing energy 14 Corporate Responsibility Report 2005 www.centrica.com/cr05 Business overview Centrica Storage Turnover^# Operating profit* £195m 2004 £133m £154m 2004 £69m Main activities We operate the Rough gas storage facility, a partially depleted gas field 18 miles off the Yorkshire coast in the southern North Sea, supported by a gas processing terminal at Easington. We provide storage services for a range of customers, including businesses within Centrica. Rough can store over 100 billion cubic feet of gas and is the largest storage facility in the UK. For regulatory reasons, Centrica Storage operates separately from the rest of the Group www.centrica-sl.co.uk ^ from continuing operations. * including joint ventures and associates, net of interest and taxation, and before exceptional items and certain re-measurements. # excludes revenue from other Centrica businesses. Gas storage Centrica North America Turnover^ Operating profit* £3,552m 2004 £2,242m £185m 2004 £132m Main activities Direct Energy is North America’s largest competitive energy solutions provider. In Canada we serve customers in Ontario, Manitoba and Alberta. In the US we have customers in 10 states in the regions of New England, the North East and the Mid-Atlantic (including through our subsidiaries CPL Retail Energy and WTU Retail Energy in Texas). Direct Energy Business Services supplies energy solutions to businesses throughout Canada and in the US. www.directenergy.com www.cplretailenergy.com www.wturetailenergy.com ^ from continuing operations. * including joint ventures and associates, net of interest and taxation, and before exceptional items and certain re-measurements. Sourcing energy Gas and electricity supply Home services 15 Corporate Responsibility Report 2005 www.centrica.com/cr05 Business overview Europe Turnover^† Operating profit (loss)* £427m 2004 £286m £(9)m 2004 £5m Main activities We have acquired a 25.5% stake in the generator SPE into which we rolled our Luminus energy retailing operation. SPE is now the number two competitor in the Belgian market. We have also extended our presence into The Netherlands where we bought the fourth largest energy supplier, Oxxio. In Spain, where competition in the electricity market is restricted, Luseo Energía is focusing on selling energy management products and services. www.luminus.be www.oxxio.nl www.luseoenergia.com ^ from continuing operations. * including joint ventures and associates, net of interest and taxation, and before exceptional items and certain re-measurements. † 2005: £119m excluding joint ventures. 2004: £8m excluding joint ventures. Sourcing energy Gas and electricity supply Home services 16 Corporate Responsibility Report 2005 www.centrica.com/cr05 Business case for CR Our business case for corporate responsibility (CR) focuses on the three ‘Rs’: Return Creating sustainable value for our shareholders Risk Identifying, understanding and managing risk Reputation Protecting and enhancing our reputational capital Creating sustainable value Our primary responsibility is to create maximum value for our shareholders. To meet our goals and deliver the sustainable returns our shareholders expect, a responsible approach must underpin our strategy. At Centrica, CR is often about making very challenging business decisions based on a complete understanding of the wider social and environmental context. Managing risk The Combined Code on Corporate Governance requires companies listed in the UK to have processes in place to understand and manage the risks that could affect the business. We understand the importance and potential impact of nonfinancial risks and, as such, have identified social, environment and ethical (SEE) factors in our group risk register and risk management processes. As we continue to develop our upstream operations in the UK and internationally, our ability to manage SEE risks effectively will be of primary importance. Protecting our reputation Our research demonstrates the high value our CR activities create for our brand and reputation. Our stakeholders, particularly our customers, have high expectations of our social and environmental approach. Our ability to meet these expectations is vital to building trust and loyalty in the marketplace. We know that operating with integrity and successfully managing CR issues will help us deliver our strategy. Equally, we understand the cost of getting it wrong and how this would harm our reputation. Engaging our employees A Company’s ‘CR credentials’ are becoming an important factor when people select potential employers. Our employees, who are often also shareholders and customers, have a vested interest in effective CR. They also have an important role to play in helping us to embed our business principles and realise our CR goals. This goes way beyond their participation in community activities and touches all aspects of their relationship with Centrica and in turn their relationship with our customers. Managing costs Understanding how our business affects the environment and wider society enables us to develop products, services and systems that improve efficiency. For example, by re-engineering our waste management we have increased recycling by 60% since 2001. This has enabled us to make significant cost savings across the Group. 17 Corporate Responsibility Report 2005 www.centrica.com/cr05 Business principles During 2005 we reviewed our Group business principles in line with our renewed focus on energy and related services. We consulted with external and internal stakeholders to guide our approach. Our business principles underpin our values and set out our commitment to operate responsibly wherever we work in the world and to engage with our stakeholders to manage our social, ethical and environmental impact. Our principles are endorsed by the Centrica Board and senior management and we are committed to upholding them as a central part of our business process. We have produced detailed guidance for our employees and business partners, which explains the standards we expect and how to put our principles into practice. We will support those who make decisions based on our business principles. We do not make gifts or donations to political parties but do engage and participate in public policy debates and consultations, and we regularly meet politicians and civil servants to brief them on our strategy and discuss energy policy issues. We treat any breach of our business principles with the utmost seriousness and will take appropriate action to address the reason for any such breach. Our confidential ‘whistleblowing’ helpline enables employees to report instances where they suspect non-compliance with our business principles. Calls to this helpline are monitored and reported on a quarterly basis to the General Risk Management Committee and Audit Committee and appropriate action is taken to address issues raised. In 2005 more than 12,000 copies of our Business Principles and Guide to Sound Business Practice were distributed to employees across the Group. 18 Corporate Responsibility Report 2005 www.centrica.com/cr05 Business principles Our business principles Principle 1: Integrity in corporate conduct We are committed to working within the laws and regulations of all the countries in which we operate. In the absence of such laws and regulations we will adopt recognised international standards of best practice. We also support the ten principles described in the United Nations Global Compact and will seek to address social or environmental matters that may affect our shareholders, employees, customers and neighbours. We believe that competitive markets can only flourish where there are sound business ethics. As such, we will assess the implications of our business decisions for all our stakeholders and manage our social, ethical and environmental impact accordingly. Therefore we do not engage in bribery or any form of unethical inducement or payment. All offers or payments accepted or solicited by our employees, or made by our employees to third parties, must be declared. We will maintain accurate records of all transactions made by or on behalf of the group and its customers. We do not make gifts or donations to political parties. All employees are required to avoid any activities that might lead to, or suggest, a conflict of interest with the business of the company. Employees must declare and keep a record of hospitality or gifts received, which will be subject to annual audit. Relations with stakeholders Principle 2: Ensuring openness and transparency Open and transparent communications with our shareholders, employees, customers, local communities and society at large are important to us, while respecting commercial confidences and the privacy of our employees and customers. Centrica will also provide meaningful and timely communications to stakeholders of our social, ethical and environmental performance in respect of these principles through the annual reporting process and online progress reports. Relations with our customers and business partners Principle 3: Enhancing customer experiences and business partnerships We will treat our customers fairly and professionally to deliver a good quality customer service based on trust and credibility. We will also work with our customers to ensure the safe and responsible use of our products and services. We maintain dialogue with regulators, consumer and industry organisations and relevant not-for-profit organisations to inform our decisionmaking and ensure that we provide innovative products and services that are relevant to the markets in which we operate. We will disseminate these principles to our business partners – including sub-contractors, suppliers and joint venture partners – and will seek to promote their application throughout our supply chain. Relations with our employees Principle 4: Enhancing employee relationships We value our people and are committed to creating a culture of mutual trust and respect. We will recruit people on the basis of the qualifications and abilities needed to do the job, while promoting diversity and development throughout our business. We will not tolerate any form of discrimination, harassment or bullying in the workplace. We will work with our employees to ensure fair consultation and representation in decision-making, and respect employees’ rights to freedom of association and collective bargaining. We will also enforce a health and safety management system in an effort to prevent fatalities, work-related injuries and health impairment among employees, customers and suppliers. Relations with communities Principle 5: Respecting human rights We will support all aspects of human rights consistent with the Universal Declaration of Human Rights. Together these obligations form the basis of our respect for the communities and societies in which we operate. Principle 6: Protecting the environment We are committed to understanding, managing and reducing the environmental impact of our activities and will seek to implement internationally recognised environmental management systems to achieve this aim. In particular, we are committed to the development of renewable energy sources that will facilitate the reduction of our carbon footprint. We will enable our customers to participate in the move towards a low carbon future and encourage our employees to make responsible use of resources. 19 Corporate Responsibility Report 2005 www.centrica.com/cr05 Business principles Our business principles continued Continual improvement and assurance Centrica is committed to verifiable and systematic monitoring, reporting and reviewing of our performance in accordance with these principles and as a signatory to the UN Global Compact. We are committed to continual improvement and are implementing an appropriate corporate responsibility strategy – including indicators, target setting, stakeholder engagement and a verifiable assurance programme open to independent audit where appropriate. Principle 7: Investing in communities We recognise that good relations and long-term partnerships with local communities are fundamental to our sustained success. Wherever we operate, we seek to develop enduring relationships with our neighbours based on mutual trust, respect and understanding of our impact. We are committed to the alleviation of fuel poverty and the promotion of social inclusion. We also promote education, skills development and employability in the communities we serve. Applying our business principles Communication and compliance We will treat any breach of these principles with the utmost seriousness and will support our employees, suppliers and business partners where compliance with these principles jeopardises the achievement of business targets. We aim to ensure that all our employees are familiar with these principles and apply them consistently throughout our business activities. This will be done using existing internal communication channels supported by practical guidance and training. If an employee has concerns about malpractice or non-conformance with these principles, we provide appropriate means and safeguards for disclosure, which are communicated to employees. Ensuring openness and transparency Open and transparent communications with our shareholders, employees, customers, local communities and society at large are important to us, while respecting commercial confidences and the privacy of our employees and customers. Centrica will also provide meaningful and timely communications to stakeholders of our social, ethical and environmental performance in respect of these principles through the annual reporting process and online progress reports. 20 Corporate Responsibility Report 2005 www.centrica.com/cr05 Business principles Progress in 2005 In 2005 we distributed around 12,000 copies of our business principles and guide to sound business practice booklets to employees across the company. The Corporate Responsibility Committee (CRC) reviewed our Group business principles following our renewed focus on energy and related services. During the year we consulted with external and internal stakeholders as part of our wider stakeholder dialogue to guide our approach. Our stakeholders were supportive of the changes we made but encouraged us to focus on effectively communicating, integrating and monitoring our principles across the Group. The Centrica Executive Committee and Centrica Board approved our revised business principles in November 2005 and will oversee their implementation during 2006. We are pleased to have reviewed and updated our business principles. However, this is only the first step. Our challenge in 2006 is to ensure that we communicate them effectively to our employees and put in place processes to measure and communicate our performance to our stakeholders. Communication We will communicate our revised business principles during the first half of 2006. Printed booklets will be available to all employees and we will use a range of internal communication channels – including online training, face-to-face briefings and company magazines – to ensure that our people are aware of and understand our principles. We will contact our suppliers and business partners to make them aware of our revised principles and engage them in helping us to uphold our commitments. Our campaign will also enable us to raise awareness of our whistleblowing helpline. Guidance and training We are working with the Institute of Business Ethics to produce guidance materials for employees and managers to help them interpret and uphold our principles. On issues such as human rights, bribery and corruption and cultural awareness, we will produce guidance materials and deliver training workshops for senior managers, particularly those working internationally. Business principles training will also be integrated with our induction process and added to our existing training and development framework. Monitoring Through the CRC, we will report our performance against each of our business principles to the Centrica Board on an annual basis. During 2006 we will continue to develop processes to monitor and measure our performance in line with our business principles. 21 Corporate Responsibility Report 2005 www.centrica.com/cr05 CR governance The way CR is managed The Centrica Board reviews our CR strategy and performance annually and is kept informed of progress as well as new developments that may affect its duties. Our Corporate Responsibility Committee (CRC) oversees our CR strategy and meets four times each year. Chaired by the General Counsel and Company Secretary, the CRC is a subcommittee of the Executive Committee and is responsible for ensuring that social, environmental and ethical risks are managed in line with our business principles and that key stakeholders are consulted. In 2006 the CRC will become a full committee of the Centrica Board, reporting quarterly. This reflects the importance placed on effective CR management to our strategy and ensures that key issues are discussed at the highest level of the organisation. The new CRC will be chaired by Mary Francis CBE, one of Centrica’s non-executive directors. The other committee members are: • Grant Dawson, Group General Counsel and Company Secretary • Mark Clare, Managing Director, British Gas Residential Energy • Jake Ulrich, Managing Director, Centrica Energy • Anne Minto OBE, Group Director, Human Resources • Chris Weston, Managing Director, British Gas Services • John Way, Head of Business Assurance • Ian Peters, Managing Director, British Gas Business. The committee will also be attended by: • Janice Thompson, SVP HR, Marketing and Communication, Centrica North America • Simon Henderson, Director of Corporate Reputation • Mike Garstang, Director of Health, Safety and Environment • Andrew McCallum, Group Corporate Responsibility manager. 22 Corporate Responsibility Report 2005 www.centrica.com/cr05 CR governance CR Committee Mary Francis CBE, Non-Executive Director Mary Francis joined the Board in June 2004. She is a Non-Executive Director of the Bank of England, Aviva plc and St. Modwen Properties plc. She is a Director of Fund Distribution Ltd and a Trustee of the Almeida Theatre. She is a former Director General of the Association of British Insurers. She was previously a senior civil servant in the Treasury and the Prime Minister’s Office. Grant Dawson, Group General Counsel and Company Secretary Grant Dawson has been Group General Counsel and Company Secretary of Centrica since the demerger of British Gas plc in February 1997, having joined British Gas in October 1996 from Nortel Limited, previously known as Northern Telecom Limited. Grant was called to the Bar in 1982 and is a member of Lincoln’s Inn. He has spent most of his career in industry, joining the legal department of Racal Electronics plc in 1984 and then STC plc as legal adviser in 1986 until they were taken over in 1991 by Northern Telecom Limited. Mark Clare, Managing Director, British Gas Residential Energy Mark Clare joined British Gas plc in 1994 as Group Financial Controller, and was appointed Finance Director of Centrica plc in 1997. From November 2000 to December 2001, he was responsible for the development of strategy, financial services and e-commerce. He was appointed Managing Director of British Gas in January 2002. He is a Non-Executive Director of BAA plc, The Energy Saving Trust Ltd and The Energy Retail Association Ltd. Jake Ulrich, Managing Director, Centrica Energy Jake Ulrich was appointed to the Board in January 2005. He was appointed Managing Director of Centrica Energy in 1997. Between 1994 and 1997 he was Managing Director of Accord Energy Ltd, a joint venture between Natural Gas Clearinghouse (NGC) and British Gas plc. He previously worked for NGC, Union Carbide Corporation and the OXY/Mid Con/Peoples Energy Group. Anne Minto OBE, Group Director, Human Resources Anne Minto was appointed Group Director, Human Resources for Centrica on 1 October 2002. Prior to that she was Director, Human Resources for Smiths Group plc, a position which she had held since early 1998. After qualifying as a lawyer, she worked for over 13 years with Shell. In 1993 she was appointed Deputy Director General of the Engineering Employers’ Federation. She is chairman of the Centrica Pension Schemes. She is Vice President and Chairs both the Institute of Employment Studies and the Engineering Development Trust. She was awarded an OBE for services to the engineering industry in 2000. Chris Weston, Managing Director, British Gas Services Chris Weston was appointed Managing Director, British Gas Services in June 2005. Prior to this he was Managing Director, British Gas Business from January 2002. Leaving the army after seven years service, Chris attained a PhD from Imperial College. Following study he was responsible for strategy and regulation at Mercury Communications. Chris was appointed a Director of Cable & Wireless in Australia in 1997, then returned in 2000 to Europe as Managing Director of Onetel. 23 Corporate Responsibility Report 2005 www.centrica.com/cr05 CR governance CR Committee continued John Way, Head of Business Assurance John has a record of senior business assurance appointments, most recently as Chief Internal Auditor of Abbey National and ICI and Director of Audit and Risk Management at Inchcape. He has worked in North America and Asia and has travelled extensively in his business career. John is a Chartered Accountant, a member of the Institute of Internal Auditors and sits on governance committees of the Institute of Chartered Accountants. He is responsible for risk advice across Centrica, control assessment, internal auditing and provides the Audit Committee with independent assurance and advice on risk and controls. Ian Peters, Managing Director, British Gas Business Ian Peters was appointed Managing Director, British Gas Business, in June 2005. Ian joined Centrica in March 2002 from Marsh, the world’s leading risk management and insurance broking specialist where he held various positions. He moved to British Gas as Business Development Director in April 2004 after being Managing Director of Goldfish Bank since 2002 where he led the financial turnaround and eventual sale to Lloyds TSB. Prior to Marsh, Ian held various roles in his 18 years at National Westminster Bank, including Director of Merchant Services, Head of Retail Marketing and Sales and Head of Small Businesses. 24 Corporate Responsibility Report 2005 www.centrica.com/cr05 CR governance Risk management Centrica places great importance on risk management. We assess all the risks facing our businesses and aim to create a culture that puts risk management at the centre of our decision-making. Processes for all kinds of business risk are key to meeting the requirements of the Turnbull Guidance on Internal Control, part of the Combined Code on Corporate Governance. The Board sets the framework and is responsible for determining the Group’s risk ‘appetite’. Risk management processes are overseen by the Audit Committee. The Centrica Executive Committee reviews key risk areas and has formed two subcommittees to monitor risk and set policy. The Group Risk Management Committee, made up of senior managers, meets quarterly before each Audit Committee meeting. It considers reviews by the business assurance teams of the most important risk areas and challenges managers to show that action plans are in place to handle them. Business continuity plans have been prepared for each area of our business. Centrica employs a full range of crisis management measures. They range from crisis and business continuity planning in each of the operational businesses to a corporate crisis management plan covering major financial or operational threats. This approach is supported at Executive level and involves simulation exercises to test levels of response. Corporate responsibility risks Our Corporate Responsibility Committee oversees a number of key social, ethical and environmental risks, which may not materially affect the future of our business but are significant in the delivery of our strategy. These include: • Climate change and environmental impact • Vulnerable customers • Health and safety • Human rights and labour standards • Ethical issues in our supply chain • Diversity and inclusion. 25 Corporate Responsibility Report 2005 www.centrica.com/cr05 CR governance Association of British Insurers (ABI) disclosure guidelines on social responsibility We manage our social, environmental and ethical risks in accordance with the disclosure guidelines on social responsibility developed by the ABI. The table below explains our approach. Disclosure requirement The Board takes regular account of the significance of social, environmental and ethical matters to the business and the Company. Our approach The Board reviews our CR strategy and performance annually and is kept informed of progress made in managing key issues. Issues include: climate change and environmental matters, vulnerable customers, health, safety and security, pensions, organisational restructuring, industrial relations and offshoring. Many of these issues were discussed as part of the wider agenda at each meeting in 2005 and the Board also approved the Group’s revised business principles. The Board has identified and assessed the significant risks to the Company’s shortand long-term value arising from social, environmental and ethical matters, as well as the opportunities to enhance value that may arise from an appropriate response. The Board has received adequate information to make this assessment and account is taken of social, environmental and ethical matters in the training of Directors. Social, environmental and ethical issues are included in our risk management procedures at Group and business unit levels. Board members receive formal training on issues relating their role with the Company. This includes briefing on issues relating to corporate responsibility. The Corporate Responsibility Committee ensures that the Board is updated on progress in managing key issues as well as new developments that may affect its duties. The Board has ensured that the Company has in place effective systems for managing significant risks which, where relevant, incorporate performance management systems and appropriate remuneration incentives. The Board has established objectives and policies for managing significant risks to meet the requirements of the Turnbull Guidance on the Internal Control, part of the Combined Code on Corporate Governance. The Board sets the framework and is responsible for identifying significant risks (including social, ethical and environment risks), determining the Group’s ‘risk appetite’ and developing mitigation and monitoring strategies. The Board sets objectives, performance targets and policies for managing key risks. 26 Corporate Responsibility Report 2005 www.centrica.com/cr05 CR governance Association of British Insurers (ABI) disclosure guidelines on social responsibility Disclosure requirement A description of social, environmental and ethical related risks and opportunities that may significantly affect the Company’s shortand long-term value, and how they may impact on the business. A description of the Company’s policies and procedures for managing risks to short- and long-term value arising from social, environmental and ethical matters. A description of the extent to which the Company has complied with its policies and procedures for managing risks arising from social, environmental and ethical matters. continued Our approach Our most significant social, environmental and ethical risks have been outlined in this report. The Board, either directly or through its committees, sets objectives, performance targets and policies for management of key risks facing the Group. This includes risks arising from social, environmental and ethical matters. At each of its five meetings in 2005, the Audit Committee received an internal control report, which allowed it to track a number of issues and monitor performance against objectives. The Chairman of the Audit Committee reported the issues discussed and conclusions reached at the following Board meeting. A description of the procedures for verifying social, environmental and ethical disclosures. This report is assured by The Corporate Citizenship Company. In addition, a significant amount of our activity on environmental matters, customer-related issues and health and safety is subject assessment and audit by third parties including regulators and accreditation bodies. 27 Corporate Responsibility Report 2005 www.centrica.com/cr05 CR governance Quality management We seek to meet best practice standards in the way we run our business and in the products and services we provide. In many instances we seek external and independent certification of the standards we are achieving. British Gas British Gas has a business management system that covers quality management, environmental management and Investors in People. This system is regularly reviewed by external independent assessors and is checked internally – providing a framework for continual improvement. ISO9001: 2000 British Gas’ quality management systems are certified to ISO9001: 2000 Company Wide Registration by the British Standards Institute. Only a limited number of companies worldwide achieve this status. The integrated management systems at our power stations and Hydrocarbon Resources Limited (HRL) follow the principles of ISO9001. Investors in People British Gas has achieved businesswide Investors in People certification to the revised standard. This national standard sets a level of good practice for improving an organisation’s performance through its people. EnergySure British Gas energy sales employees are accredited under EnergySure, the first national accreditation scheme for energy sales. This shows they are appropriately trained and registered on a nationwide database designed to protect consumers. ISO14001 A large majority of British Gas sites are certified to ISO14001 for their environmental management systems. All seven of our UK power stations and HRL are accredited under this international environmental standard. We will apply the principles of ISO14001 in our environmental management system in our international ventures. OHSAS18001 The health and safety management systems at our power stations, HRL and in our international ventures follow the principles of the Occupational Health & Safety Assessment Series OHSAS18001. Competence Assurance Our competence assurance programme at HRL is externally accredited by COGENT, the sector skills council for chemicals, nuclear, oil and gas, petroleum and polymers. We are extending this programme to our UK power stations. Direct Energy In 2005 Direct Energy introduced an Integrated Management System that is compatible with ISO14001, OHSAS18001 and the US OSHA VPP standard. 28 Corporate Responsibility Report 2005 www.centrica.com/cr05 Dialogue with stakeholders Structured engagement with all our stakeholders is fundamental to the way we do business and enables us to identify and tackle our key issues. We manage this process by building strong, two-way relationships with employees, customers, investors, regulators, suppliers, opinion-formers and communities. It is not a one-off activity to produce a report but a continuous process that involves employees at all levels of the organisation – from our Chief Executive meeting a senior politician to an engineer chatting to a customer. In 2005 we consulted our stakeholders to find out their views on CR, their interpretation of Centrica’s responsibilities and whether our activities and level of disclosure were fulfilling their expectations. The research identified environmental issues as the most important for stakeholders and indicated that, although we had highlighted our main areas of impact, more tailored communication was needed. We intend to run a similar programme in 2006 to help us continually improve our approach to CR. 29 Corporate Responsibility Report 2005 www.centrica.com/cr05 Dialogue Stakeholder map We communicate with our stakeholders on a wide range of issues. For some customers, how we deal with human rights issues might be a significant factor in their choosing to use our services. Similarly, with many investors, particularly those specialising in socially responsible investment, we cover subjects under the headings on the left of the table. The table below, which is not exhaustive, illustrates how we view key social and business issues, as well as highlighting subjects on which we have concentrated with various stakeholders. Issues Stakeholders Charities and NGOs Consumer organisations Customers Climate change & environment Vulnerable customers Health & safety Human rights & labour standards Ethical issues in our supply chain Diversity & inclusion • • • • • • • • Employees Government & Parliament Investors Communities Regulators • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • Suppliers • Trade unions 30 Corporate Responsibility Report 2005 www.centrica.com/cr05 Dialogue Stakeholder: Charities and NGOs We work with a range of charities and non-governmental organisations (NGOs) to enhance our understanding of social and environmental issues. Issue: Climate change and environment In 2005 we held discussions with the World Wildlife Fund (WWF) on our UK fuel mix strategy and on the development of our more environmentally friendly products in British Gas. We also participated in WWF climate change research conducted by Innovest. Direct Energy funded a WWF study on the effect of climate change in North America. We also worked with environmental NGO, Global Action Plan, to deliver an innovative employee scheme called ‘eco teams’ which encouraged our people to adopt a more eco-friendly lifestyle and change their behaviour to reduce their environmental footprint at home and work. Issue: Vulnerable customers We worked with a range of charities, including Help the Aged, to understand the needs of vulnerable customers and ensure that our support is targeted effectively. With Help the Aged we developed joint campaigns to raise awareness of unclaimed benefits, fuel poverty and excess winter deaths. Issue: Health and safety On carbon monoxide safety, we maintained dialogue with the gas industry safety group CO-Gas Safety – an independent charity committed to reducing accidents involving carbon monoxide – and other organisations such as the Royal Society for the Prevention of Accidents. Issue: Human rights and labour standards We have identified human rights as an emerging issue for the Group as our gas exploration and production strategy extends to developing countries. In 2005 we initiated dialogue with the International Business Leaders’ Forum to gain a better understanding of the issues and to help develop our approach. In addition, we began a programme of work with the Institute of Business Ethics to review our human rights policy and processes and to develop guidance and training for employees and managers on identifying and managing human rights issues. We intend to begin discussions with Amnesty International, Human Rights Watch and the United Nations Development Programme on our strategy and work with them to identify risks and opportunities to tackle human rights issues through our development activities. Issue: Ethical issues in our supply chain We worked with the Institute of Business Ethics (IBE) to review our business principles and the guidance we provide to our employees and managers. As part of this project, IBE is supporting us with the development of a training workshop for our procurement teams, which will be implemented in 2006. Our engagement in this area is also covered in our dialogue with a range of organisations on human rights and labour standards. Issue: Diversity and inclusion We worked with a range of charities and NGOs during the year to deliver our diversity and inclusion strategy. For example, we are working closely with the Employers’ Forum on Age to ensure we are fully prepared for the introduction of the UK Age Legislation in 2006. We also continued to support ‘Race for Opportunity’ and ‘Opportunity Now’ during the year. 31 Corporate Responsibility Report 2005 www.centrica.com/cr05 Dialogue Stakeholder: Consumer organisations Regular discussions with consumer organisations help ensure we are tackling key consumer issues. Issue: Vulnerable customers We engage with energywatch – the UK gas and electricity consumer watchdog – on a range of topics, and in particular on the measures we have in place to combat fuel poverty and more specifically our commitment to providing support for our more vulnerable consumers. Issue: Health and safety We are committed to raising awareness of the dangers of carbon monoxide poisoning. Indeed, through our membership of the Energy Retail Association, we have collaborated with fellow members with the aim of promoting the issue across the industry. Stakeholder: Customers Two-way dialogue with our customers is essential if we are to understand and meet their needs. Issue: Climate change and environment In 2005 we conducted extensive customer research to help us develop new environmentally focused propositions in British Gas. Through a combination of focus groups and one-to-one interviews we gained a great deal of insight into customers’ perceptions of more environmentally friendly products and services. Issue: Vulnerable customers British Gas encourages feedback from customers who have benefited from our initiatives – for example ‘here to HELP’ and Home Energy Care – through a combination of satisfaction surveys and discussions with our employees. This helps us identify opportunities to improve the services we provide. Issue: Health and safety We reached out to our customers on product safety issues through campaigns and communications. Our particular focus was on carbon monoxide safety. We also continued to promote home safety issues through our http://www.britishgassafety.co.uk/ which provides practical advice for customers. Issue: Diversity and inclusion Recognising the diversity of our customers in Greater London, British Gas ran a marketing communications campaign in a range of languages in late 2005. We then conducted research among customers from ethnic minority backgrounds to assess the effectiveness of this approach and better understand how these groups would like us to communicate with them. 32 Corporate Responsibility Report 2005 www.centrica.com/cr05 Dialogue Stakeholder: Employees Listening and responding to the views of our employees is key to our success. We liaise with our people through a range of internal communication channels and our annual employee engagement survey. Some 83% of employees responded in 2005. Issue: Climate change and environment Our ‘Natural Capital’ campaign encouraged employees to help us achieve our environmental goals in areas such as energy use, waste and recycling. We also worked with the environmental organisation, Global Action Plan, to deliver an innovative employee initiative called ‘eco teams’ which encouraged our people to adopt a more eco-friendly lifestyle and change their behaviour to reduce their environmental footprint at home and work. Issue: Vulnerable customers During the year we communicated extensively with employees on the issues faced by vulnerable customers through our in-house publications and intranet, as well as in faceto-face briefings. We also produced an employee version of our 2004 CR Report which provided context and background in this area. Our stakeholder engagement programme included a number of groups with employees on our key CR issues, including vulnerable customers. This work indicated a high level of awareness among employees about our support for vulnerable customers, particularly in relation to the services and propositions we offer to support those most in need. Issue: Health and safety We delivered health and safety training and awareness raising initiatives during the year. These ranged from occupational health sessions on stress management and mental health to updates on safety aspects of new technologies for our engineers and technical teams. Issue: Human rights and labour standards Our annual employee engagement survey measures engagement in key areas such as, ‘me as an individual’, ‘management impact’, ‘customer focus’, ‘team leadership’ and ‘performance and development’. In 2006 we plan to introduce a human rights training workshop for employees and new guidance materials to help them interpret and uphold our business principles. Issue: Ethical issues in our supply chain Our work in this area during the year did not progress as far as we had hoped. However, we plan to introduce business principles training for our procurement team in 2006. This will help them identify potential ethical issues in our supply chain and work with our suppliers and business partners to communicate our business principles. Issue: Diversity and inclusion Diversity and inclusion is a core part of people strategy. A dedicated intranet site provides employees and managers with guidance on key areas and enables them to request support. Our employee engagement survey gives our people the opportunity to provide feedback on our approach and in 2005 we ran our first diversity and inclusion awards programme to recognise and celebrate examples of best practice. 33 Corporate Responsibility Report 2005 www.centrica.com/cr05 Dialogue Stakeholder: Government and Parliament We maintain a constructive relationship with government and MPs of all parties, primarily through face-to-face briefings and discussions and also through membership of such organisations as the Whitehall and Industry Group. Issue: Climate change and environment We contributed to the UK Government’s Climate Change Review Programme in March 2005. The review was set up by the Government to examine how existing policies are performing and to evaluate the range of policies that the government might put in place in the future to reduce emissions. In addition, Centrica has also provided evidence to several Select Committee inquiries in respect of climate change. Issue: Vulnerable customers In addition to working closely with the UK Government to ensure that their fuel poverty targets are met, we worked in partnership with fuel poverty charity National Energy Action to hold a series of dinners and lunches with key MPs from all parties to build understanding about the causes of fuel poverty and debate the most appropriate solutions. Issue: Health and safety British Gas has worked hard to highlight the dangers of carbon monoxide poisoning. We had several meetings with MPs during 2005, including Barry Shearman and John Trickett, who chairs the All-Party Gas Safety Committee, to encourage them to raise awareness among their constituents. Issue: Human rights and labour standards We are working with the Foreign and Commonwealth Office to support our gas procurement activities in Nigeria and to inform our future plans in this area. This will continue during 2006 with quarterly meetings and discussion on specific projects. Issue: Diversity and inclusion We contributed to the UK Government’s consultation on the Age and Equality legislation to be introduced in 2006. This process enabled us to share our experiences and learning to help shape the legislation. We also took part in debates with Government departments including the Women and Work Commission. Stakeholder: Investors Creating sustainable shareholder value is at the heart of our strategy. Our investors’ interest in how we are addressing the social, ethical and environment impact of our operations is increasing. Issue: Climate change and environment/Vulnerable customers/Health and safety/ Human rights and labour standards In 2005 we ran two roadshows with investors to outline our approach to managing our key corporate responsibility issues. 34 Corporate Responsibility Report 2005 www.centrica.com/cr05 Dialogue Stakeholder: Communities We aim to play an active role in local communities engaging with our neighbours to tackle issues of wider social concern. Issue: Climate change and environment Our wind farm construction projects have involved liaison with community stakeholders. Face-to-face meetings and public exhibitions help us to keep our stakeholders informed of progress. For example, we held the first public exhibitions outlining the detail of our Lincs project in November and a questionnaire was circulated to more than 22,000 households and businesses in the Skegness area to seek views on the proposal. The survey generated a 15% response, showing more than eight out of ten were in favour of the development. Issue: Vulnerable customers British Gas’ ‘here to HELP’ programme has delivered benefits to hundreds of communities across Britain. Our links with these communities and the feedback we receive helps us shape the support we offer vulnerable customers. Through our winter rebate scheme, we have provided financial support of up to £60 to more than 200,000 customers. In addition, our community energy advisers, debt advisers and engineers talk to thousands of customers each day. This helps us provide advice to vulnerable customers. Issue: Human rights and labour standards Human rights and labour standards are emerging issues for Centrica as we continue to develop our international upstream strategy and begin to look to secure gas supplies in developing countries. In 2005 we acquired two exploration blocks in Nigeria. During 2006 we will develop a range of activities in collaboration with the communities in the areas affected by our operations. Our business principles will guide our approach. We have also offshored part of our British Gas back-office operations to India. It is our priority to ensure that contracted companies operate to the highest standards particularly in relation to training, pay and benefits and operational culture. Issue: Diversity and inclusion We want to become an employer of choice and for our engineering workforce to reflect more closely our UK customer mix. The British Gas Engineering Academy’s diversity and education team, formed in 2003, is working to recruit more women and people from minority ethnic groups into our engineering workforce. The team attends community and recruitment events around the country to promote careers in engineering to children aged 13 to 16. In 2005 the team attended 36 events, reaching almost 150,000 young people across Britain and providing positive role models to attract engineers from all backgrounds regardless of gender or race. We also supported ‘Women into science and engineering’ and ‘The year in industry’ programme run by the Engineering Development Trust. 35 Corporate Responsibility Report 2005 www.centrica.com/cr05 Dialogue Stakeholder: Regulators Centrica operates in regulated markets. Managed dialogue and the development of oneto-one relationships with regulatory authorities are essential if we are to meet our regulatory obligations, inform policy making and share best practice. Issue: Climate change and environment Throughout the year British Gas has maintained a dialogue with Ofgem on a number of environmental issues. In particular, we’ve collaborated with the energy regulator in respect of our EEC2 obligations and have launched a number of innovative schemes. British Gas is a member of the Energy Retailers Association (ERA), which was established in October 2003 and is the only dedicated trade association for energy suppliers. The ERA was set up to identify areas where energy suppliers could work together for the common good without competitive advantage. The main priorities identified by the board of the ERA are: fuel poverty, energy efficiency, sales practice, changing supplier, customer billing, debt and sustainability. Issue: Vulnerable customers We remain committed to tackling fuel poverty and to providing additional help and support to our more vulnerable customers. For example, against the backdrop of unprecedented increases in the wholesale cost of energy, we have continued to liaise with Ofgem in the delivery of energy efficiency measures that contribute to the reduction of fuel poverty. And, recognising the impact price rises can have, we introduced ‘winter rebate’ payments to more than 200,000 of our more vulnerable customers. Issue: Health and safety We have contributed to industry discussions with Ofgem in a number of areas connected with the safe supply of energy in the UK and in consumers’ homes. 36 Corporate Responsibility Report 2005 www.centrica.com/cr05 Dialogue Stakeholder: Suppliers We work with our suppliers to ensure that they manage their operations in a manner consistent with our values and business principles. Our 2005 CR stakeholder dialogue programme included a discussion group with some of our main suppliers. The key results of the session are outlined below and we plan to run a similar session with suppliers in 2006. Working with Centrica Our suppliers find it refreshing that their relationship with Centrica is built on partnership. They recognise that close working relationships are very important and they want to understand our strategy and what drives shareholder value. They say individual relationships with suppliers are more important in British Gas than in other large corporations. What does corporate responsibility mean to our company? • It is a major factor in supplier relations, committing both the company and supplier to act responsibly • It’s about having a strong corporate ethic – strong people, customers, community and environment • It involves supporting customers by disposing of equipment in an environmentally friendly way and investing in communities • Initially, it was referred to as social responsibility. It’s now known as corporate responsibility, which should make it more quantifiable. Does Centrica ask about CR in its tendering process? • Centrica has started using CR criteria in its own purchasing decisions • It has been built into Centrica’s tender proposals , resulting in environmental responsibility. The Company asks about environmental policy, health and safety, diversity but less on community investment. Have you started using it in your own purchasing decisions? Generally suppliers have not integrated CR questions but some have built recycling initiatives inspired by Centrica into their tender proposals. 37 Corporate Responsibility Report 2005 www.centrica.com/cr05 Dialogue Stakeholder: Trade unions Constructive and open relationships with trade unions are essential to managing our business activities. Issue: Health and safety We engage with trade unions on quarterly basis through the National Joint Council, which comprises full-time officials and representatives from our business. For specific programmes we form consultation groups to address and respond quickly to issues. These often occur on a weekly basis. In 2005 we continued our dialogue with trade unions on health and safety matters at both national and local level. At local site level trade union representatives sit on our health and safety steering groups. Issue: Human rights and labour standards We engage with trade unions on quarterly basis through the National Joint Council, which comprises full-time officials and representatives from our business. For specific programmes we form consultation groups to address and respond quickly to issues. These often occur on a weekly basis. In 2005 we worked in collaboration with trade unions to develop our standards of employment for British Gas’ offshored activities in India. We also worked together to develop a robust framework for managing any future offshoring projects. Issue: Diversity and inclusion We engage with trade unions on quarterly basis through the National Joint Council, which comprises full-time officials and representatives from our business. For specific programmes we form consultation groups to address and respond quickly to issues. These often occur on a weekly basis. In 2005 we worked with our trade unions to introduce a number of changes to British Gas call centre working patterns to meet inbound telephone call demand. This consultation took into account the flexible working needs for employees, particularly those with caring responsibilities or who prefer to work part-time. 38 Corporate Responsibility Report 2005 www.centrica.com/cr05 Dialogue Dialogue in 2005 In 2005 we commissioned The SMART Company, an independent research agency, to consult our stakeholders to find out their views on CR, their interpretation of Centrica’s responsibilities and whether our activities and level of disclosure were fulfilling their expectations. The SMART Company managed a series of discussion groups and conducted in-depth interviews with key opinion-formers, community partners, suppliers, employees, customers and investors. General feedback • All groups were able to discuss what CR meant, but the concept meant least to customers. • Attitudes varied widely among the groups, with customers most likely to be cynical about corporate motives. • Centrica graduate trainees were the most passionate about CR and about incorporating business principles into their behaviour. • All groups agreed that we had identified the most important CR issues and that environmental impact was particularly important. • Awareness levels of our CR reporting were relatively low and all groups said more targeted communications would help. • The revised business principles were considered to cover the most significant areas. Key results Stakeholders identified a number of areas where they believed we should focus our attention: 1. Focus on major impact areas All stakeholder groups identified environmental issues, particularly climate change, as the key area for us and expected a clearer explanation of our position and approach to managing our impact. • We have aligned the report structure with our individual stakeholder groups, which should make it easier to navigate. • We have tried to provide different ‘levels’ of information to cater for everyone from the ‘quick glance’ visitor to those who want detailed data. 2. Communication should be more tailored Employees and customers are interested in CR but they do not want to read a detailed report. A more accessible summary version should be produced for those who want a short comprehensive summary of Centrica’s CR performance. 3. Decide what Centrica stands for and take action Stakeholders want to know in simple terms what matters to us and what we are doing to manage our main impact areas. The focus of CR should not be on ticking boxes but on taking a position on key issues. 4. Maintain community partnerships Our partnerships are a key strength. Feedback indicated that we should continue to involve employees in our community partnerships. Our response We have used the stakeholder feedback to develop our approach, particularly our reporting and communications, because much of the response related to this area. In particular: • We have decided to report our CR performance online, which provides greater flexibility, improves accessibility and enables us to target our audiences more effectively. • We have structured the report to place a greater focus on our key issues – climate change, vulnerable customers, and health and safety. • We have produced a summary report, which will be available to download soon and will be communicated to key audiences including employees. • We plan to develop a business principles awareness workshop for employees, which will help to increase their understanding of CR. • We will continue to work with community partners to develop innovative community programmes that tackle our key areas of impact. 39 Centrica Responsibility Report 2005 www.centrica.com/cr05 Customers Centrica has around 30 million customer relationships in the UK, Europe and North America. At the heart of our organisation is a ‘passion for customers’. Operating with integrity Our aim is to earn the trust and respect of our customers by consistently delivering high standards of service. Being responsible and responsive in how we manage relationships with our customers is absolutely central. Our key concerns are: Vulnerable customers Our aim is to make life safe, warm and comfortable for all our customers but particularly for those on low incomes, older people and those with a disability. Energy efficiency Centrica plays a leading role in tackling fuel poverty and climate change by championing the efficient use of energy. Customer experience Only by continuously listening to our customers on a wide range of issues can we fulfil their expectations and earn their satisfaction. Customer safety We are always seeking to develop innovative ways to promote the safe and responsible use of our products and services. Customer diversity To deliver excellent service we must understand individual customer needs and make sure we meet them. Advertising and selling We work hard to ensure that our communications with customers are open and credible, and that the right procedures are in place to deal with their concerns. 40 Corporate Responsibility Report 2005 www.centrica.com/cr05 Customers Vulnerable customers Our aim is to make life safe, warm and comfortable for all our customers but particularly for those on low incomes, older people and those with a disability. At a time of rising energy costs, our programmes are delivering practical solutions to help vulnerable customers. Sharp rises in the cost of wholesale energy led all UK energy companies to increase gas prices in 2005, which highlighted the position of older and vulnerable people on fixed incomes. To lessen the impact of price increases on vulnerable customers, British Gas provided £6.7 million in winter fuel rebates. More than 200,000 British Gas customers benefited from the rebates in 2005. We have developed a range of initiatives to help our most vulnerable customers. Our aim is to find innovative ways to reduce the effect of price increases on these customers as a result of difficult but necessary business decisions. We are also working with community partners in this field. here to HELP’ British Gas is working with a number of charities, housing associations and local authorities to improve energy efficiency and tackle fuel poverty. In 2005 we identified more than £2.6 million of unclaimed benefits for vulnerable households. Home Energy Care British Gas’ Home Energy Care programme provides essential services for some of our most vulnerable customers. More than 580,000 customers currently benefit from this scheme. British Gas Energy Trust We continued to support the work of the British Gas Energy Trust Fund – an independent fund established with a £10 million investment by British Gas. In 2005 the Trust provided grants to help more than 1,700 families and individuals. Neighbor-to-Neighbor programme Direct Energy’s $1.5 million investment in the Neighbor-to-Neighbor project helped thousands of customers in debt in North America. Debt management We provide a combination of practical support and advice to help customers who are having problems paying for their gas and electricity. ‘here to HELP’ British Gas won Business in the Community’s Healthy Communities Excellence Award for our ‘here to Help’ programme in 2005. In addition, it was also awarded the Cause Related Marketing Award at the Marketing Society Awards for Excellence 2005. Launched at the end of 2002, ‘here to HELP’ is a household poverty programme run in partnership with six charities. It tackles a range of issues affecting older people, those with disabilities, single parents and families with young children. The support we offer includes the installation of energy efficiency measures, a benefits health check and a range of support measures from our charity partners. These are free to eligible people. Benefits health check Clients are guided through the benefits health check over the phone. If any unclaimed benefits are identified, we advise them how to make the claim. Performance highlights 2005 Homes signed up Homes completed (measures installed) Household assessments completed Charity referrals Quality of life assessments completed Value of unclaimed benefits identified (£m) Average benefit gain per household (£) * Cumulative figures since the programme began. 2004 78,019 48,232 62,193 15,695 12,103 3,184 1,197 Cumulative* 469,444 95,240 156,160 38,273 20,028 8,464,969 1,407 116,823 28,212 38,466 8,636 4,602 1,696 1,542 41 Corporate Responsibility Report 2005 www.centrica.com/cr05 Customers Vulnerable customers British Gas Home Energy Care continued The Trust, a registered charity, is governed by its own board of trustees and is run by Charis Grants, which manages a number of utility trust funds under a shared programme of giving. That means an applicant to one fund is automatically considered for other funds run by Charis. The Trustees’ aim is to make a longterm difference to people’s lives by freeing them from the maze of debt and giving them the chance to make a fresh start. From November 2004, when the Trust was set up, to the end of 2005, it made 1,741 awards totalling more than £1.3 million. Two programmes make up the British Gas Energy Trust: (i) the ‘Individual and Families in Need’ programme which awards grants to individuals and families to clear energy arrears and in some cases pays for essential household costs. Applicants must be current domestic customers of British Gas or Scottish Gas. The total awarded through this programme by the end of 2005 was £657,000, with the average grant working out at approximately £350. The payments are made to the relevant company or supplier, not to the individual. The money is a grant and does not have to be paid back. (ii) The ‘Organisational Grants’ programme which helps voluntary sector groups such as Citizens Advice Bureaux and money advice centres. This programme has so far carried out one round of bids for funding and has announced grants of more than £650,000 to 12 groups in England, Scotland and Wales to provide advice and education on debt related matters. The trust excludes financial help to cover fines, tax or national insurance debts, medical equipment, holidays, business debts, personal loans or anything owing to shopping catalogue and credit card companies. Home Energy Care provides essential services for some of our most vulnerable customers. They include annual safety checks and the provision of specially designed appliance controls and adaptors for older people, people with disabilities and those who are chronically sick. More than 38,500 customers joined our Home Energy Care service during 2005, bringing the total number of customers receiving our support to 584,000. New helpline In 2005 British Gas supported the launch of the National Home Heat Helpline for customers who may be in need of support, such as help paying their energy bills. The service is run by the Energy Retail Association and funded by British Gas and the other major energy suppliers. This helpline offers one point of contact, connecting customers to advice and help from their energy supplier. A specialist British Gas team takes calls from British Gas customers and puts them in touch with the most appropriate support. The helpline number is 0800 33 66 99 and lines are open from 9am to 8pm Monday to Friday and 10am to 3pm on Saturday. British Gas Energy Trust We continued to support the work of the British Gas Energy Trust, an independent fund established with an investment of £10 million over three year period from British Gas. It is the first national utility trust fund. In addition to making grants to people in debt, the Trust provides funding to voluntary sector organisations and registered charities which assists in the prevention and relief of poverty, with particular emphasis on fuel debt. 42 Corporate Responsibility Report 2005 www.centrica.com/cr05 Customers Vulnerable customers Debt management continued Direct Energy helped establish two programmes in Ohio, administered by the Salvation Army, designed to help people struggling to pay their bills. In one, Direct Energy kicked off a pledge drive with a $25,000 contribution to the EnergyShare programme, which helps pay home heating bills for eligible people. It serves as a last resort for the elderly, the ill, or anyone facing financial hardships from unemployment or family crisis. In the other, Direct Energy approached Columbia Gas with an idea to start the HeatShare scheme which helps low-income residents who have exhausted other sources of energy assistance. Again, Direct Energy contributed $25,000. We have continued to develop ways of helping our vulnerable customers reduce their expenditure on energy. Through a combination of practical support and advice we aim to do everything we reasonably can for customers who would like to pay but can’t, while persuing early repayment of debts by customers who could pay but choose not to. British Gas British Gas offers a range of payment options including direct debit, standing order, cash, cheque or prepayment. Payment can be in advance or by weekly, fortnightly and monthly payment arrangements, which can be made through a number of locations including The Post Office and outlets that support PayPoint and PayZone. We make every effort to meet our customers face-to-face to discuss any money problems they may have. Disconnection is always the last stage of a detailed debt follow-up process that involves numerous contacts with our customers. We do not want to disconnect customers and it is our policy never to disconnect a vulnerable customer. We much prefer to focus on finding a payment method that suits them. Direct Energy Direct Energy’s Neighbor-to-Neighbor programme helps customers pay their home energy bills in emergencies. Customers in genuine financial need can receive up to $150 twice a year. The programme, to which customers can contribute by voluntarily adding extra money to their regular payments, has helped more than 9,000 Texas customers with their bills since it was re-established two years ago. The company contributed an additional $1,100,000 to the programme in 2005, on top of the $350,000 contributed annually. 43 Corporate Responsibility Report 2005 www.centrica.com/cr05 Customers Energy efficiency The UK Government’s long-term goal is to reduce the country’s carbon emissions by 60% by around 2050, with significant progress by 2020. British Gas plays a leading role in helping to achieve these challenging targets. We work with a range of commercial partners, voluntary organisations, charities and the public sector to deliver energy efficiency initiatives, and the effectiveness of these partnerships is a key factor in our success. Under the UK Government’s Energy Efficiency Commitment (EEC), electricity and gas suppliers are required to achieve energy-saving targets by promoting improvements in domestic energy efficiency. Half of the energy savings have to be targeted at the ‘priority group’ – households receiving income-related benefits or tax credits. EEC has an environmental aim, providing carbon savings to tackle climate change, as well as a focus on alleviating fuel poverty. British Gas domestic customers In 2005 British Gas subsidised more than nine million energy efficiency measures, such as cavity wall insulation and low energy light bulbs, with an equivalent lifetime carbon saving of 1.3 million tonnes, benefiting more than 1.1 million households. Energy efficiency programmes Energy Efficiency Commitment Our multi-million pound British Gas ‘here to HELP’ programme is tackling fuel poverty and improving energy efficiency. Energy efficient products British Gas is developing innovative products and services to help customers reduce their carbon footprint. Energy efficiency advice In addition to installing energy efficiency measures British Gas is providing expert advice to help customers reduce their bills. Direct Energy Direct Energy has gained a reputation as an innovator for the work it has done to boost energy efficiency among its business customers. Energy Efficiency Commitment During the year we subsidised more than nine million energy efficiency products, benefiting around 1.1million vulnerable households. The total energy saved by the products subsidised by British Gas in 2005 was equivalent to approximately £37 million. Expenditure has increased by 24 million to £112 million (£88 million in 2004), in recognition of the increased size of the new EEC obligation, which started in April 2005 and will run for three years. We used innovative ways to engage our customers in energy efficiency in 2005. For example, we piloted a council tax rebate scheme in partnership with three district councils, offering rebates of up to £100 on cavity wall insulation. Such was the success of the pilot, with around 400 properties insulated, that the scheme is being rolled out to an a further 21 local authorities in 2006. Direct Energy launched project ‘evolve’ in 2005, a partnership agreement with the University of Calgary which is a holistic energy-management solution that should result in CO2 reduction of 14,500 tonnes which is the equivalent of taking 2,960 vehicles off the road and should reduce energy consumption by more than $30 million over seven years. Performance highlights 2005 Customer energy efficiency measures subsidised (million) Vulnerable households benefiting (million) Non-priority households benefiting (million) Lifetime carbon savings for measures subsidised (million tonnes) 9.0 1.1 2.5 1.3 2004 6.1 1.1 0.8 1.0 44 Corporate Responsibility Report 2005 www.centrica.com/cr05 Customers Energy efficiency continued Energy efficient products We offer our customers the opportunity to reduce their fuel costs by using energy efficient products to reduce CO2 emissions. Condensing boilers British Gas’ energy-saving boilers release less CO2 emissions than conventional boilers and can help to reduce our customers’ heating bills by as much as 40%. British Gas has installed 135,000 energy-saving boilers since their launch in 2000. Partnerships We are working in partnership with electrical retailer Currys to offer customers substantial discounts and trade-ins for ‘A’-rated energy efficient appliances. In partnership with B&Q, we provide funding to promote energy efficiency products. Customers receive savings on a wide range of products, including loft insulation, low energy lighting and energy efficient appliances. Business energy efficiency Direct Energy has gained a reputation as an innovator for the work it has done to boost energy efficiency among its business customers. Its focus has been sustainability through the development of energysaving solutions and renewable power options for its residential and commercial customers in Canada and the United States. In 2005 the company offered green power to businesses in Ontario and Alberta through its ‘Be Green’ programme, enabling businesses to offset up to 100 per cent of their electricity load with renewable sources. Central to Direct Energy’s commitment to leadership, innovation and advancement of the electricity industry is the company’s Centre for Research and Technology, created in 2004, which is located at its Canadian headquarters in Toronto, Ontario. Each solution it creates features sustainable technology designed to increase energy efficiency. In 2005 Direct Energy introduced a web-based tool to allow business customers to manage energy use remotely. It gives business customers up-to-the-minute energy usage information to help them to keep more efficient control of their energy usage. Here are just some of the innovative schemes from Direct Energy during the year. The schemes are based on a mixture of technical prowess, imaginative thinking and a genuine concern for customer needs. • In Alberta, a partnership with the University of Calgary is not only saving energy but helping develop sustainable energy education and research. • In Ontario, a creative financing agreement is helping the Canadian Forces Base Kingston achieve significant energy and financial savings in its 150 buildings. • A new partnership with the Texas Stadium and the Dallas Cowboys supplies electricity to the team’s corporate and practice facilities and provides services expected to make big reductions in energy demand and cut energy consumption by up to 20 per cent annually. • The acquisition of renewable power supplies is allowing Direct Energy to offer green power options in Canada and the United States. • Direct Energy has worked with Smardt to develop a chiller used in air conditioning for the commercial and industry market that gives the lowest energy consumption figures in the industry. Energy efficiency advice As well as installing energy efficiency products, British Gas provides expert advice to help our customers make their homes more energy efficient, cut their energy costs and reduce their carbon footprint. We are using our main advertising channels to communicate with customers on energy efficiency and ‘green’ issues. Our Energy Advice Service (0845 965 0650) offers free advice and information on energy-saving ideas. Our highly trained advisers are qualified with a certificate in energy awareness from the City & Guilds of the London Institute. We are constantly reviewing our training programmes to ensure our advisers have the right skills to help our customers. Our team of community energy advisers works with local authorities and housing associations to promote energy efficiency and generate referrals to our energy efficiency grant schemes. They help ensure that those customers most in need receive our support and assistance. 45 Corporate Responsibility Report 2005 www.centrica.com/cr05 Customers Green electricity Green electricity is power generated from environmentally friendly sources such as wind farms. In the UK we are working hard to meet the Government’s renewable energy targets. Under the ‘Renewables Obligation’ all licensed suppliers must provide a percentage of electricity generated from renewable sources – 15% by 2015. Centrica is investing £750 million alongside joint venture partners to develop renewable electricity generation. In 2005 we produced our first green power from our 26MW Glens of Foudland onshore wind farm in Aberdeen, and construction of our Barrow offshore wind farm, a joint venture with Danish energy group DONG, is on track to begin commercial generation in the first half of 2006. In addition, we continue to buy energy from other generators of renewable electricity and from Non Fossil Purchasing Agency auctions at which electricity is sold from renewable sources including landfill gas, smallscale hydro and wind power. We are proud to have been the only UK energy company to meet the UK Government targets in both 2004 and 2005 for buying and providing electricity from renewable sources. Our investment in renewable electricity is enabling British Gas and Direct Energy to offer innovative products to our domestic and business customers to help them reduce their carbon footprint. Domestic customers British Gas plans to increase the number of its ‘green’ offerings to allow customers to be more energy efficient and help reduce their carbon footprint. Green electricity is power generated from environmentally friendly sources such as wind farms. Last year, our energy efficiency measures saved householders a total of £37 million. WWF-UK selected British Gas as the energy supplier that had done most to reduce its greenhouse gas emissions. The Company has already signed up more than 27,000 customers to green power, which it offers at no extra charge. For every ten customers taking renewable electricity, we support the planting of a sapling through the Carbon Neutral Company. So far, British Gas has committed to planting 33,000 saplings in woodlands around Britain – enough to absorb more than 60,000 tonnes of carbon dioxide. The Company has a green package of measures designed to help consumers save money, reduce energy consumption and offset the carbon emissions created by heating and lighting their homes. Paperless billing We have almost 570,000 customers receiving quarterly paperless billing (bills are sent online), which helps to reduce the impact on forests and gives customers an annual £5 fuel discount. Almost 240,000 customers signed up to paperless billing in 2005 and we plant a tree for every 100 customers who sign up. Energy Savers Report We’re encouraging customers to find out how much energy they could save by carrying out an online energy report for their home. This provides them with an energy rating for their property and makes recommendations that could help them save money and improve their property’s energy rating. Find out more at www.house.co.uk/waste. Energy Savers Club The club is a two-year online offer for householders who want to improve the energy efficiency of their homes and reduce their bills. The opportunity to receive £10 cashback per year per fuel for becoming more energy efficient. Climate Aware This initiative, believed to be the only one of its kind in Europe, gives consumers an opportunity to offset the carbon emissions from their homes by making a payment to environmental experts ‘Climate Care’ based on an average 12 months’ consumption, which funds carbon reduction projects around the world. Quarterly online newsletters are sent to participating customers with the latest green tips and news, as well as keeping them up to date on how the money is being spent. Online green help British Gas’ green website is the main source of information for: saving energy in the home; simple practical tips and exclusive discounts on energy- saving measures; and the latest ‘green gadgets’ that can be bought online (such as solar powered iPod and mobile chargers and Electrisave, a remote monitor that attaches to the fuse box and can help monitor electricity usage). New technology British Gas has a range of hi-tech methods to save energy and therefore money in the home. 46 Corporate Responsibility Report 2005 www.centrica.com/cr05 Customers Green electricity continued Direct Energy Business Services launched a renewable electricity scheme for commercial and industrial customers in 2005. ‘Be Green’ enables customers to offset a percentage (from 10 to 100 per cent) of their electricity load with power generation from renewable sources. The Company has observed a growing appetite among Canadian businesses for renewable energy. This is as a result of continued upward pressure on nonrenewable energy costs, a decrease in ‘green’ energy prices and increasingly a focus on corporate responsibility and environmental stewardship. Research conducted in 2005 identified that 77 per cent of Canadians were more likely to invest in, and 81 per cent to buy from, a company they viewed as socially responsible. Domestic combined heat and power The company is developing a microgeneration boiler with Microgen. It gives hot water and heat as well as powering electrical appliances such as a television, fridge or DVD. This could reduce bills by £150 a year and benefits the environment by cutting carbon emissions by 1.5 tonnes a year. These boilers should be available by 2007. Rooftop wind turbines We are working with Windsave to produce wind turbines that can be fitted on the roof of a property, harnessing wind power to generate electricity. If trials go well, the rooftop wind turbines should be available in 2007. Solar panels These panels, fitted in the roof, provide free hot water, even on cloudy days. We are working with our partners, Worcester Bosch, to produce the panels, which have strong green credentials. Business customers British Gas Business In 2005 we increased the number of business customers supplied with 100% renewable electricity, helping them reduce their carbon footprint and achieve potential savings on the Climate Change Levy. Customers taking ‘green’ energy include The Royal Bank of Scotland, Vodafone, BT and HSBC. We aim to encourage more of our corporate and small and medium-sized enterprise customers to sign up for ‘green’ power during 2006. Direct Energy Business Services 47 Corporate Responsibility Report 2005 www.centrica.com/cr05 Customers Customer safety Safety is a key element of our operation and we are developing innovative ways to promote the safe and responsible use of our products by customers. Carbon monoxide safety British Gas is the leading carbon monoxide (CO) incident investigator in the UK. Our CO investigation team is the most experienced in the UK and since 1996 has undertaken more than 2,400 investigations for most gas suppliers. We work with the Health and Safety Executive to develop policy on CO incidents and, in conjunction with City & Guilds, have designed and developed a national CO incident investigation training programme and qualification. British Gas actively supports the Gas Industry Safety Group, CO-Gas Safety – an independent charity committed to reducing accidents involving CO – and other organisations such as the Royal Society for the Prevention of Accidents. Alongside other gas supply companies, we have signed a cooperative agreement to publicise gas safety matters. Safety advisers and service engineers from British Gas provide face-to-face safety advice to help ensure that our products are used in compliance with the highest safety standards. Carbon monoxide incidents 2000 – 2005 100 80 60 % 40 20 0 2000 2001 2002 2003 2004 2005 Total CO incidents British Gas supplied British Gas service history Source: Health & Safety Executive 2000 91 74 3 2001 84 61 5 2002 53 37 3 2003 46 28 0 2004 37 25 5 2005 35 18 3 Total CO incidents British Gas supplied British Gas service History Our central heating systems are certified to the British Standards Institute ‘Kitemark’ scheme and we offer safety checks for landlords to help improve the quality of gas equipment in rented accommodation. We also offer gas fire control adaptors free of charge for customers with a disability. 48 Corporate Responsibility Report 2005 www.centrica.com/cr05 Customers Customer experience Centrica promotes a passion for customers across its businesses. We believe there is a direct link between employee engagement and customer satisfaction. We aim to keep improving our customer experience and upholding the following principles: • always treat customers with respect • resolve matters to our customers’ satisfaction • keep our promises to customers • protect the privacy of our customers’ data • recognise the diversity of our customers. Customer satisfaction is a key element of performance appraisal for executive directors and senior managers. Each month, customer service performance is reported to senior managers. This reporting process enables us to track the performance of our own service delivery and of our suppliers. British Gas The level of major change and increasing wholesale energy prices in 2005 made it very challenging to deliver the level of service our customers expect. Satisfaction fell in both the residential energy and home services parts of the business. This can be partly attributed to energy price rises and the implementation of a new work scheduling system in British Gas Services. Despite this British Gas was ranked top gas supplier in the JD Power Customer Satisfaction Index in 2005 and customer complaints to energywatch, the UK energy industry watchdog, also reduced by 27% during the year. Residential energy customers are being progressively switched to a new billing system – the world’s largest transfer. Some 1.25 million accounts had been moved by the end of 2005 – and this will continue in 2006. Encouragingly, overall satisfaction among customers on the new system improved throughout the pilot phase. A customer satisfaction improvement programme will be rolled out in British Gas Services in 2006, targeting reductions in the number of repeated engineer visits and broken appointments. We will also seek to improve our call centre performance by increasing our investment in manpower levels. Industry-wide billing investigation In February 2005 independent UK watchdog, energywatch, lodged a super-complaint against the industry, the first of its kind in the energy sector. Energy regulator Ofgem carried out a 90-day investigation of energy suppliers’ handling of fuel bills. It found no evidence of widespread failure of industry billing processes but resulted in the regulator giving all energy suppliers one year to: • Waive energy bills in cases where no bill has been issued for two years and the supplier is at fault • set up an independent body, with the power to award compensation and resolve disputes quickly • review domestic customers’ contract terms to ensure compliance with consumer rights legislation. British Gas has taken steps to ensure full compliance with the recommendations of this investigation. British Gas Business Overall customer satisfaction rose from 61 to 64 out of a possible 100 in 2005, against a target of 63, while energy complaints per 1,000 customers dropped from five to three against a target of four. These improvements were reinforced by exceptionally high contract renewal rates of 96% in very challenging market conditions. Throughout 2006 we will introduce further improvements to our service by introducing a system resulting in a single named point of contact for customers. This will mean our customers need only discuss their account with one person who has full knowledge of their account. In 2006 we will begin transferring more customers to our new billing system. This will provide greater flexibility than our existing systems and will bring significant benefits to our people and our customers. We continually evaluate our performance, placing great emphasis on first-time resolution of issues and delivering on our promises. Last year saw the introduction of proactive account management coupled with a greater focus on the coaching and development of our people. As a result, we have seen repeat calls fall from 18% to 10%. 49 Corporate Responsibility Report 2005 www.centrica.com/cr05 Customers Customer experience Direct Energy continued In 2005, Direct Energy continued to focus on overall customer improvements, supported by customer satisfaction data, in addition to feedback from external research. We met or exceeded all our main customer experience targets in our energy and services businesses and introduced a ‘Customer Charter’. This will be reviewed annually. Measure Extremely or very likely to recommend Met or exceeded expectations Extremely or very satisfied with our people Number of complaints (% of customer base) 2005 59% 53% 68% 0.10% 2004 56% 53% 62% 0.12% Our customer satisfaction programme will be expanded in 2006 to include ‘relationship surveying’. This will provide greater insight into the factors affecting our customers’ perception of Direct Energy. Direct Energy ‘Customer Charter’ • We promise to give you consistent, expert advice about the energy management of your home or business. • We promise to respect and care for your property. • We promise to stand behind our employees, our work and our products. • We promise to provide easy options for contacting us and will do our best to meet you at your convenience. Customer privacy We have procedures inplace to make sure we comply with the Data Protection Act 1998 and data protection specialists have been nominated for the Group. The way we use customer information is set out in the Uses of Information section of a customer’s terms and conditions. Special attention is given to ensuring a customer’s marketing preferences are adhered to. Security of customer information is also of great importance to us and the call centres carry out checks to verify each caller’s identity. As well as safeguarding customer information, the measures we have in place to deal with data protection aim to keep employee and shareholder information secure. 50 Corporate Responsibility Report 2005 www.centrica.com/cr05 Customers Advertising and selling Sales British Gas is a founder member of the Association of Energy Suppliers (AES), overseas the operation of and compliance with the industry code of practice for face-to-face sales. Our direct sales agents operate in conformity with the AES Code of Practice. To reinforce this commitment, all British Gas domestic energy sales agents are fully trained and accredited to the ‘EnergySure’ standard – the first national accreditation scheme. Customer complaints received by energywatch relating to British Gas energy sales fell by 55% during 2005. In 2006 British Gas will launch a partnership with the Metropolitan Police to combat distraction burglary in London. We plan to fund an award scheme that will aim to encourage residents to report bogus callers. Marketing British Gas is a member of the Direct Marketing Association (DMA) and our direct marketing and telesales activities are conducted in accordance with the DMA’s code of practice. Our customer communications are written in a way that is clear for the target audience. Advertising Demonstrating integrity is very much part of our brand. Our advertising is extensively researched with consumers to ensure that it conveys an acceptable and positive image of our brands. We are a member of ISBA and have representation on its board. As energy prices increased during 2005, so too did competition in the marketplace with suppliers focusing their efforts on retaining and attracting customers who were keen to shop around for the best deal. During the year, the Advertising Standards Authority (ASA) upheld seven complaints against British Gas, mainly from our competitors. We treat these complaints very seriously and respect the ASA’s decision. We have dealt extensively with the ASA, Committee of Advertising Practice (CAP) or Broadcast Advertising Clearance Centre (BACC) and with our competitors, through the Energy Retail Association, to ensure that clear and consistent processes are in place. We have agreed with the ASA a more responsive and flexible arrangement for dealing with complaints, particularly those from competitors. We have also conducted a full review of our internal systems and increased the rigour of our approval processes. Every piece of work is submitted to the BACC or CAP for approval before it is published or broadcast. Our internal competition compliance team also checks for conformity with regulatory and legislative requirements. Our goal is to significantly reduce the number of upheld complaints whilst continuing to compete as we should in the marketplace. 51 Corporate Responsibility Report 2005 www.centrica.com/cr05 Customers Customer diversity We recognise that some of our customers have particular needs, which we take into account when delivering products and services to them. Our creative communications are responding to the needs of our diverse consumers in a number of ways. Diverse communications Bills in different formats More than 55,000 of our customers are registered to receive their bills in an alternative format, such as Braille or large print. In 2005 we sent out over 250,000 such communications. They ranged from gas and electricity bills and statements to marketing inserts and terms and conditions. Telephone translation service In 2005 we spoke to more than 1,800 customers in their preferred language via our innovative telephone translation service. In addition, we encourage our people to use their language skills and understanding of different cultures to help us communicate with and serve our customers better. Textphone support Working with the Employers’ Forum on Disability and the Royal National Institute for Deaf People, British Gas has improved our service to customers with hearing or speech impairment by providing a single textphone number that is answered by a special team. Employers’ Forum on Disability Centrica is a Gold Card member of the Employers’ Forum on Disability and an active member of its Customer Advisory Group – a cross-industry group which meets quarterly to identify key issues for service providers and to recommend best practice solutions. Language Line Our Language Line service enables British Gas engineers and call centre agents to ‘speak’ to customers in over 150 languages at any time of the day. It has been commended by the Commission for Racial Equality, won approval from Trading Standards and was backed by 62 MPs in a Commons Early Day Motion. The service enables engineers to communicate vital safety advice to customers who do not speak English fluently. The engineer is able to call our language service provider to secure a three-way conversation with the customer in the required language. 52 Corporate Responsibility Report 2005 www.centrica.com/cr05 Customers Performance Customer performance highlights 2005 Energy efficiency measures subsidised by British Gas (million) Lifetime carbon savings for measures subsidised (million tonnes) Number of priority* households benefiting from measures (million) Number of non-priority households benefiting measures (million) Homes signed up to British Gas ‘here to HELP’ programme Winter fuel rebates to British Gas customers (£ million) Reduction in complaints to energywatch about British Gas (%) British Gas Business contract renewal rate (%) Number of carbon monoxide incidents with British Gas service history Advertising Standards Authority complaints upheld against British Gas 9 1.3 1.1 2.5 116,823 6.7 35 96 3 7 2004 6 1.1 1.1 0.8 78,019 n/a 30 99 5 1 * Under the UK Government’s Energy Efficiency Commitment, priority customers are those in receipt of at least one of the following benefits: council tax benefit, housing benefit, income support, income-based job seekers allowance, attendance allowance, disability living allowance, war disablement pension which includes either a mobility supplement or constant attendance allowance, disablement pension which includes constant attendance allowance, state pension credit, child tax credit where the relevant income is £14,600 or less, working tax credit where the relevant income is £14,600 or less. 53 Corporate Responsibility Report 2005 www.centrica.com/cr05 Customers Future commitments What we said we’d do Vulnerable customers Meet the industry commitment and continue to develop innovative initiatives that help our most vulnerable customers. What we’ve done What we plan to do next Continued to work with members of the Energy Retailers Association, Ofgem, local councils and charities to deliver a range innovative activities to support vulnerable customers. British Gas won Business in the Community’s Healthy Communities Excellence Award for ‘here to Help’. Continue to be on ensuring vulnerable customers are identified and working with a range of external partners to provide a range of solutions and services to help. Fuel poverty Continue to address the primary causes of fuel poverty through initiatives that combine heating, insulation and income related measures. British Gas installed more than nine million energy efficiency measures, such as loft and cavity wall insulation and low energy light bulbs, benefiting more than 1.1 million priority households. Continue to deliver our Energy Efficiency Commitment, including a focus on ‘priority’ customers to address fuel poverty, through initiatives such as our Winter Fuel Rebate scheme. Customer experience Identify and report on customer experience performance indicators across our businesses. Introduced a range of new systems and processes to further improve levels of customer service. British Gas was ranked top gas supplier in the JD Power Customer Satisfaction Index in 2005. Customer complaints to energywatch, the UK energy industry watchdog, also reduced by 27% during the year. Successfully migrate customers new billing systems and reduce engineer repeat visits in British Gas. Introduced a named point of contact for all British Gas Business customers. Introduce relationship surveys in Direct Energy. Customer safety Continue to raise awareness of key safety issues, including carbon monoxide (CO) poisoning in collaboration with industry bodies. Delivered continual improvement in health and safety performance across almost all of our businesses. A British Gas campaign targeted students’ landlords and homeowners to raise awareness of CO poisoning. Work with fire brigades across the UK to highlight the dual issues of fire safety and CO safety. Build on our successful student campaign in 2005 with a further campaign focusing on wider home safety issues. Diversity and inclusion Develop and implement action plans in each business to further embed diversity and inclusion good practice into the service we provide to our customers. Action plans are in place for each business unit, focusing on key aspects of customer diversity including website accessibility and alternative format communications. Continue to monitor the implementation of business unit action plans through the Diversity and Inclusion Action Group help ensure a ‘business as usual’ approach in this area. 54 Corporate Responsibility Report 2005 www.centrica.com/cr05 Customers Future commitments continued What we said we’d do Advertising and selling Improve internal processes to minimise advertising related complaints and share knowledge and good practice across businesses. What we’ve done What we plan to do next The Advertising Standards Authority (ASA) upheld seven complaints against British Gas, mainly from our competitors. We have also conducted a full review of our internal systems and increased the rigour of our approval processes. Continue to work with the ASA and other industry bodies to improve our internal processes to develop a more responsive and flexible approach to dealing with complaints, particularly those from competitors. Green propositions Develop ‘green’ customer propositions to enable customers to benefit from renewable electricity and reduce their carbon footprint. British Gas launched a range of ‘green’ propositions and new technologies including ‘Climate Aware’, a product that enables customers to offset their carbon emissions. our energy efficiency measures saved householders a total of £37 million. Continue to develop green product offerings to meet our customers needs, helping them reduce their carbon emissions and their household’s environmental impact. 55 Corporate Responsibility Report 2005 www.centrica.com/cr05 Customers Case studies Quality of life Edward Findlay is a lone parent from Tyne & Wear, who lives with his 10year-old son Jack and works full time as an engineer repairing launderette machines. Through ‘here to HELP’, Edward has received free loft insulation and free energy efficiency advice and light bulbs. His free benefit health check identified £2,172.56 a year of unclaimed benefits: £38.08 in child tax credit per week and £3.70 in working tax credit. Edward said: “Despite living in a relatively new house, the insulation in place fell short of the recommended depth and now I’ve had more insulation installed by British Gas I can really feel the difference. The house is much warmer. “The extra money is great. It comes in very handy and goes a long way. It means I don’t have to worry about getting little treats for Jack. It’s definitely made life easier for both of us.” Home Energy Care British Gas is also keen to promote the Priority Services Register (PSR), which entitles vulnerable people to free services from their energy supplier. Great-grandmother Frances Hilton, on British Gas’ register, was chosen to launch a campaign run by consumer champion energywatch, and supported by Trade and Industry Minister Nigel Griffiths, to encourage another 750,000 people in need to sign up to the PSR with their supplier. Mrs Hilton, 100, is on the special password protection scheme. She said: “People should find out what is on offer. They are entitled to it and it will make life safer and easier.” Energy Trust Keeping heads above water A 74-year-old man and his wife from the West Midlands, both with health problems, were struggling on a low income. They had £300 a week coming in but outgoings of £285. Their financial difficulties had led to a build-up in arrears, which they were unable to pay. The British Gas Energy Trust awarded the couple £1,700 to clear their energy arrears, giving them the chance of a fresh start. A middle-aged single mother with three children under five had a weekly income of £110, which was eaten up by bills. She had suffered marital abuse, which led to depression. Her problems were compounded by a dependence on alcohol and by the behavioural problems of one of her children – which meant she was unable to work. The Trust awarded her £500 to clear her energy arrears, and now she feels confident she can keep on top of her bills. 56 Corporate Responsibility Report 2005 www.centrica.com/cr05 Customers Case studies continued Energy efficient tax breaks In 2005 British Gas completed a successful pilot programme with four local councils, offering householders the opportunity to receive rebates worth up to £100 on their council tax by installing energy efficiency measures. We’re delighted that the Government has recognised the success of the programme – which clearly shows that tax breaks are an effective way of encouraging householders to play their part in saving energy and delivering a low carbon economy. The scheme is particularly effective among middle income groups. In the light of figures showing £1 in every £3 spent on heating is wasted through the 10.3 million homes in the UK with insufficient insulation, we are calling on the Government to urge more local authorities to sign up to the scheme. We plan to extend the programme significantly in 2006, with the goal of reaching more than 800,000 households. The initiative provides a real opportunity for councils to show their commitment to help protect the environment and for the public to benefit from lower council tax and energy bills. CO student awareness campaign Students were today urged by British Gas to shop dodgy landlords who endanger them by flouting the law to boost their profits. To support the campaign, aimed at warning about carbon monoxide poisoning, thousands of beermats are being sent to university bars across the UK. The call comes after research by British Gas reveals that two-thirds of students have never seen a Landlord’s Gas Safety Record – the certificate required by law to guarantee gas appliances in their rented home are safe. So British Gas and Scottish Gas are encouraging all students to demand their landlord shows them their safety record – or press for them to be struck off the accommodation list. The beermats are shaped like a tombstone and carry the chilling epitaph of a fictional character who died from CO poisoning. A message on the back urges students to ‘nag their landlord’ about a Gas Safety Record. Forty university and college bars are already using them. Chris Bielby, Head of Safety at British Gas, said: “These landlords are breaking the law – it’s as simple as that. A Gas Safety Record isn’t like a washing machine or a fridge. It’s not something that’s good to have. It’s something all students are entitled to by law. “This is a fantastic phase of their life and we don’t want that destroyed by a tragic incident that could so easily have been avoided.” The National Union of Students has welcomed the campaign. Veronica King, the NUS’ Vice President for Welfare, said: “It is shocking but nonetheless unsurprising that students are settling for cheap rather than safe accommodation at present, and we would attribute this trend to the huge financial burden students now face.” The research also revealed that around a quarter of students feel their health and safety is at risk in their rented home – even so, a third choose their home because it’s cheap, with only one in ten putting safety first. If students had £30 to spare, clothes, music and alcohol would come first on their shopping list. Fewer than one in five students has a carbon monoxide detector. 22 per cent think a smoke detector will help prevent CO and one in eight incorrectly think it’s adequate that appliances are safety checked every five years. 57 Corporate Responsibility Report 2005 www.centrica.com/cr05 Customers Case studies continued Reaching minority groups in London London is the most diverse city in the world, its residents speaking over 300 languages. British Gas recognises that there’s no ‘Mr and Mrs Average’ in London, and that our communications need to change to ensure we reach all our customers. For example, as part of the winter warmth campaign, partnership with Help the Aged and the Greater London Authority, Cold Can Kill packs were sent out to 120,000 people aged 65 or over with the strapline ‘working together to stop the cold killing older people’. To ensure that the campaign reached elderly people in black and minority ethnic communities, it was promoted on ethnic minority radio stations and translated posters were sent to community groups. The Cold Can Kill pack was translated into ten languages. Investing in new systems We are investing in new technologies and infrastructure and in the training and development of our people to make sure our customer experience keeps getting better. For example, we introduced a new customer relationship management programme in British Gas in 2005, enabling us to provide a more personal service. This is part of a major change programme, representing an investment of £430 million and will involve the transfer of almost 17m customer accounts to new computerised systems. The programme provides a single energy bill for gas and electricity and an automated home move process, which allows us to improve billing accuracy and flexibility, get a better understanding of the issues that cause concern and meet customers’ needs more effectively. British Gas Home Services is investing in new systems to change the way our engineers’ work is allocated. This new way of working will improve the way we provide customer service and will have positive benefits for employees as well. The new systems will offer more customers flexible appointment slots, including our new family friendly appointment (10.00 am – 2.00 pm). 58 Corporate Responsibility Report 2005 www.centrica.com/cr05 Employees Valuing our people. Centrica employs more than 35,000 people around the world, including almost 30,000 in the UK. The calibre and conduct of our people is central to our relationship with customers, shareholders, suppliers and the communities in which we operate. We aspire to build relationships with our employees based on mutual trust and respect for the individual. We promote and invest in: Health and safety The health, safety and welfare of our employees in the workplace, and others who could be affected by our activities, are top priorities for Centrica. Diversity and inclusion Valuing diversity makes business sense and we are committed to creating a truly inclusive workplace with equality of opportunity for all. Employee relations An open and fair approach to employee relations is essential to build strong relationships with our people. Learning and development Our business success depends on the capabilities of our people, so identifying potential and providing development and career opportunities is a key priority. Recruitment and retention It is vital that we attract, motivate and retain the best available people to work with us to deliver our business objectives. Reward and remuneration We work hard to reward our employees fairly for their efforts, recognising the valuable contribution their performance makes to the business. Performance highlights We continued to develop our approach on human capital management reporting in line with the principles set out in the ‘Accounting for People’ report. 59 Corporate Responsibility Report 2005 www.centrica.com/cr05 Employees Human capital management During 2005 we played an active role with a number of other blue-chip organisations on the human capital panel of the Charter Institute of Personnel and Development. The purpose of this panel is to promote the adoption of human capital reporting, to track its development and to share material with its members to demonstrate the value and contribution of human capital management. Centrica fully supports this initiative. In 2005 we reviewed our people measures in line with our people strategy and the increasing focus on non-financial reporting. We made good progress with human capital management during the year and our performance against these key indicators is presented below. Human Capital Return on Investment 2005 Human Capital Return on Investment Ratio defined by by PWC Saratoga 2.1 2004 1.9 Change +11% The improvement in our 2005 HCROI performance reflects both an increase in the profitability of the business and a managed reduction in the headcount within the retained businesses. Number of employees 2005 Number of employees 35,410 2004 43,414 Change -18% During 2005 the number of employees dropped significantly, due partly to the completion of the sale of The AA and Onetel from the Group and partly as a result of the cost reduction plan supporting our aim of becoming the lowest cost-to-serve provider. Employee safety 2005 Lost time injuries/1,000 employees Lost time injuries/100,000 hours worked Total injuries/100,000 hours worked 13.2 0.7 3.1 2004 21.5 1.1 5.1 Change -39% -39% -39% Employees from ethnic minority backgrounds 2005 Employees from ethnic minority backgrounds 17.2% 2004 16.6% Change +4% 60 Corporate Responsibility Report 2005 www.centrica.com/cr05 Employees Human capital management Age profile 40 35 30 25 % 20 15 10 5 0 16-25 25-35 continued 35-45 45-55 55-65 65+ 2005 2004 16-25 22.7 23.0 25-35 33.2 32.7 35-45 24.3 24.8 45-55 16.3 16.1 55-65 3.3 3.2 65+ 0.1 0.2 2004 % 2005 % Employees with a disability 2005 Employees with a disability 2.5% 2004 2.4% Change +4% Gender profile 2005 Female employees Male employees 30.9% 69.1% 2004 33.2% 66.8% Change -2.3% +2.3% Employee engagement score 2005 Employee engagement score (maximum score: 5) 3.78 2004 3.73 Change +1.3% 61 Corporate Responsibility Report 2005 www.centrica.com/cr05 Employees Human capital management continued Participation in employee share schemes 2005 Sharesave Share Incentive Plan Direct Energy Employee Share Purchase Plan 41% 17% 34% 2004 34% 14% 25% Change +7% +3% +9% Next steps We will continue to refine and evolve our approach during 2006. We intend to develop measures to show the break-even point for the training investment we make in new employees. 62 Corporate Responsibility Report 2005 www.centrica.com/cr05 Employees Health and safety The health and safety of our employees and others who may be affected by our activities is a top priority. Centrica’s health and safety performance is linked to action plans and targets which are reported regularly to the Centrica Board. Scrutiny is also applied to accidents and incidents to ensure that lessons are learned. The positive health and safety (H&S) results achieved in 2004 have been sustained and there is evidence of further performance improvement in most businesses. Many parts of the company perform favourably when measured against recognised H&S standards. There is much of Centrica’s H&S performance of which we can be proud. For example, accident prevention programmes are integral to the business process, the frequency of lost time injuries and ill health has been reduced and aspects of our successes, particularly on stress management and rehabilitation, have been highlighted on the Health and Safety Executive’s website. During the year we experienced the death at work of a UK service engineer. An inquest is now underway to establish the causes of this death. Our gas installation standards were subject to professional review and a number of near miss incidents were investigated. Performance among service engineers generally continues to be robust in relation to the 8.2 million home visits made each year. Incident at Rough gas storage facility An incident on 16 February 2006 resulted in an explosion and fire at our Rough gas storage platform, causing the facilities to be evacuated and shut down. Injuries were sustained by several employees. All safety and emergency systems worked as designed, to contain and control the fire. The incidence response procedure ensured effective evacuation. A detailed investigation by the Health and Safety Executive (HSE) is ongoing and it would be premature for us to speculate on the results of that investigation. We understand that the HSE is focusing on the apparent catastrophic failure of a cooler unit. Our current best estimate of the date of resumption of injection operations is 1 June 2006. Our current best estimate is that full production rates will be available from 1 October 2006 at the latest. Both these estimates remain subject to change. To read our latest update report on the incident please visit www.centrica-sl.co.uk 63 Corporate Responsibility Report 2005 www.centrica.com/cr05 Employees Health and safety Employee safety continued We learned from the investigation of incidents, near misses and a death at work. As a result, we have reinforced our safety processes. The visible leadership of directors and managers and the engagement of our workforce will be key to developing a stronger safety culture in 2006. Our business continues to grow internationally – for example, we now have back office activities in India and will be exploring for gas in Nigeria. We are developing our safety systems to ensure we can manage the hazards in these environments. We will continue to reinforce our safety culture and enhance our knowledge sharing network. We will improve incident reporting and investigation by investment in systems and training. We will also complete the implementation of the competency and professional development framework for health, safety and environment practitioners. In 2005 health and safety performance improved in most parts of the business. Substantial progress was made towards our targets and with our preventive programmes, and there was a general reduction in the frequency of workplace injuries and ill health. Our upstream businesses achieved excellent performance standards, a sign of our employees’ commitment and the impact of our safety programmes. Direct Energy successfully integrated new businesses into its existing safety management systems. Our European operations were given a safety audit and are acting on the findings. In the UK, the appointment of a new facilities management contractor helped us bring added focus to health and safety in the workplace. Performance highlights Employee safety Lost time injuries/1,000 employees Lost time injuries/100,000 hours worked Total injuries/100,000 hours worked 2005 13.2 0.7 3.1 2004 21.5 1.1 5.1 Change -39% -39% -39% 64 Corporate Responsibility Report 2005 www.centrica.com/cr05 Employees Health and safety continued Mental health review We also developed guidance to help managers support employees with mental health problems by separating work factors from the psycho-social and socio-economic factors which may be contributing to their ill health. Mental ill health affects between 14% and 20% of the UK population at any one time. We want to ensure that our managers have the right tools to manage mental health issues in the workplace appropriately and make the necessary interventions at the earliest possible stage. Health promotion In response to feedback from managers we implemented a number of initiatives during the year, including an advice pack on driver comfort to reduce ergonomic problems and driver fatigue. We also piloted an online health risk assessment for employees. The number of employees accessing our employee assistance programme increased to 7% after a communication programme. Future plans We recognise how musculoskeletal problems can affect attendance and work capability, so we are planning for 2006: • a workshop for employees suffering from knee problems • a wellness induction programme for gas engineers covering lifestyle, drugs and alcohol, nutrition and physical fitness, which will conclude with a one-hour exercise session at a nearby gym • prescription gym membership with personal exercise programmes to help employees recovering from musculoskeletal problems. Occupational health Our occupational health programme aims to promote the health and safety of our employees. This means ensuring a good fit between the person and the job and recommending any suitable adjustments. Our approach is to take action through practical support and training and by raising awareness of work-related health issues. In 2005 we established a back-care programme for employees with a history of back problems and those with physically demanding roles. We also put in place a managers’ toolkit on mental health – an increasing cause of sickness absence for employees – and extended our health promotion activities. Back-care workshops Four out of five people will experience back pain during their life. This clearly has an impact both on the individual and their employer. In 2005 we introduced a self-management programme to help employees experiencing chronic back pain to manage their condition. More than 300 employees took part in workshops during 2005 with encouraging results. Some 67% of those attending the workshops during the first six months of the year were off work less often, with 55% not being off at all because of back pain in the following six months. 65 Corporate Responsibility Report 2005 www.centrica.com/cr05 Employees Workplace diversity Our business case for diversity is built on two principles. The first is the recognition that valuing diversity is simply the right thing to do for any organisation. The second is the commercial recognition that it makes good business sense. The impact of changing demographics and social and technological change makes good diversity management and the creation of an inclusive organisation an increasingly important part of sustainable business success. Our aim is to promote activity across the Company that will enable us to understand, reflect and serve the breadth of diversity in the communities in which we operate. Leadership Our diversity and inclusion action group, led by Jake Ulrich, Board Director and Managing Director of Centrica Energy, provided direction to this work during the year. Recognising good practice The Centrica Diversity Awards took place for the first time in 2005. Inviting nominations from across the Group, the awards recognised and celebrated excellence in diversity and inclusion. We won a special Business in the Community Opportunity Now award in recognition of our success in topping the Female FTSE 2004 index by having three women directors (33%) on the Centrica Board. They are Helen Alexander CBE, Mary Francis CBE and Patricia Mann OBE. Women make up 31% of Centrica’s workforce. Just under a quarter of the group’s senior managers are women and one woman is a member of the Centrica Executive Committee. For the second year running, Centrica won a special commendation for its pioneering carers’ network in the Employer of the Year Awards. Direct Energy received an award from the Canadian Association of Retired Persons for being the best employer for Canadians aged 50 plus. We supported the launch of the Department of Trade and Industry’s ‘Getting Women on Board’ guide and also the Cranfield School of Management Female FTSE Index 2005. Building awareness and understanding A main focus during the year was generating greater awareness of diversity and inclusion at all levels. A tailored online learning package was rolled out to 5,000 employees and we will extend this in 2006. We also ran training programmes for our line managers and human resources managers, and built diversity training into other development programmes. In January 2005 Sir Roy Gardner and his executive team took part in an interactive diversity workshop, which addressed all elements of diversity and the business case and has assisted in ensuring diversity issues are addressed within our overall business. Another main programme has been improving cultural awareness, particularly to support our growing international operations. Centrica Energy has developed awareness workshops for employees and provided online resources to increase understanding of the impact of different cultures and customs on business practice. Additionally, in our UK call centres, we have introduced many initiatives to increase cultural awareness. We are taking proactive measures to increase the number of female and ethnic minority applicants to engineering positions. Measuring performance We developed more effective ways to measure our performance in this area. Our annual employee engagement survey enabled us to gather feedback, measure the success of our initiatives, and identify areas for further action. We developed an index of diversity questions and were able to compare results between 2004 and 2005. We also measured the diversity of our workforce across a number of key areas. Working with others We worked with a number of partner organisations on diversity initiatives, enabling us to share best practice and tackle key issues. We sponsored the Diversity Award at the Business in the Community Annual Awards. We are an active member of the following organisations: • • • • • • • Employers’ Forum on Age Employers’ Forum on Disability Opportunity Now Race for Opportunity Employers for Carers – Carers UK Stonewall Working Families. Policy consultations We have taken part in a number of Government initiatives and policy consultations, including advising on age discrimination legislation. We have responded to formal consultations – for example, on Working Families: Choice and Flexibility. Centrica also gave a presentation to the Women and Work Commission on our flexible working practices. Preparation for new legislation We have taken steps to provide guidance and support to implement new legislation on religion and belief, and on sexual orientation. The majority of our call centres now have prayer rooms and our pensions arrangements recognise same-sex partnerships. Action plans are in place to review our employment policies and provide awareness training for all employees in line with new age discrimination legislation, which will be introduced in 2006. 66 Corporate Responsibility Report 2005 www.centrica.com/cr05 Employees Workplace diversity continued Measurement and monitoring We continue to develop our monitoring processes and also to seek to improve our workforce data in line with the Accounting for People principles on Human Capital Management. Our most recent data shows that over 17% of our employees come from ethnic minority backgrounds, 31% of our workforce is female, 2.5% have identified themselves as having a disability and that over half of our people are between the ages of 25 and 45 (57%). To improve our ability to monitor progress in our diversity and inclusion work we have developed a diversity index for use with the information we obtain from our annual employee engagement survey. The index is made up of seven questions from the survey as listed below, together with the overall scores for 2004 and 2005. These scores are marked out of a possible five and our aim is to see the score for all questions improve year on year. Diversity index questions 2005 People are respected for their contribution rather than gender, ethnicity, age etc My work and personal life are reasonably well balanced My ideas and opinions count I believe there are opportunities for me to develop my career within Centrica I have a manager that cares about me I would recommend Centrica’s products and services to family and friends Overall I am extremely satisfied with this business as a place to work 2004 change % 3.81 3.53 3.43 3.78 3.50 3.32 +1% +1% +3% 3.21 4.00 3.21 3.93 0% +2% 3.60 3.63 -1% 3.42 3.45 -1% 67 Corporate Responsibility Report 2005 www.centrica.com/cr05 Employees Workplace diversity continued As well as looking at the overall scores we are able to undertake more detailed analysis by using the demographic data that employees provide as part of the survey process and we can look at the responses from different groups e.g. gender split or age splits or by different racial groups. For example, from this year’s data we have seen that employees with disabilities score lower on all questions than other employees and that younger workers between 16 and 25 have the highest scores in each category. This information is very valuable and helps us to identify areas for action for the coming year and also to indicate where we need to do further research with our people to understand the changes that are needed to make sustained improvements. The data can also be viewed at business level and this is an important part of the individual business action planning process. Ethnicity 100 80 60 % 40 20 0 White 2005 2004 Ethnic group White 83.4 82.8 Ethnic group 16.6 17.2 2004 % 2005 % 68 Corporate Responsibility Report 2005 www.centrica.com/cr05 Employees Workplace diversity Ethnicity (UK) continued White Chinese Other Ethnic Groups Pakistani Indian Other Asian Bangladeshi Black Carribean Other Black Other Mixed Black African White & Black Caribbean White & Asian White & Black African Unstated Ethnicity 0 10 20 30 40 50 60 70 80% 2005 2004 White Chinese Other Ethnic Group 2.1 0.6 Pakistani Indian 75.6 73.7 5.3 0.2 0.9 2.2 0.9 7.9 2004 % 2005 % Other Asian Bangladeshi Black Caribbean 0.5 0.7 Other Black Other Mixed 0.8 0.6 0.6 0.6 0.5 0.2 0.5 0.5 2004 % 2005 % Black African White & Black Caribbean 0.4 0.4 White Asian White & Black African 0.2 0.2 Unstated Ethnicity 10.6 10.8 2004 % 2005 % 0.4 0.6 0.3 0.3 69 Corporate Responsibility Report 2005 www.centrica.com/cr05 Employees Workplace diversity Ethnicity (US) continued White (not Hispanic) Unknown race South Asian 1 Hispanic East Asian Black (not Hispanic) South-East Asian 2 West Asian 3 North American 4 0 10 20 30 40 50 60 70 80% 2005 2004 1 2 3 4 East Indian, Pakistani, Sri Lankan Cambodian, Indonesian, Laotian, Vietnamese Armenian, Egyptian, Iranian, Lebanese, Moroccan Inuit, Metis White (not Hispanic) 62.8 66.0 Unknown race South Asian Hispanic East Asian 19.0 16.3 2.7 3.9 4.0 3.9 3.2 3.4 2004 % 2005 % Black (not Hispanic) 4.0 3.1 South-East Asian 3.4 2.1 West Asian North American 0.6 0.8 0.4 0.6 2004 % 2005 % 70 Corporate Responsibility Report 2005 www.centrica.com/cr05 Employees Workplace diversity Disability 3.0 2.5 2.0 % 1.5 1.0 0.5 0.0 2005 continued 2004 Disability 2.4 2.5 2004 % 2005 % Age 40 35 30 25 % 20 15 10 5 0 16-25 25-35 35-45 45-55 55-65 65+ 2005 2004 16-25 22.7 23.0 25-35 33.2 32.7 35-45 24.3 24.8 45-55 16.3 16.1 55-65 3.3 3.2 65+ 0.1 0.2 2004 % 2005 % 71 Corporate Responsibility Report 2005 www.centrica.com/cr05 Employees Workplace diversity Gender 100 90 80 70 60 % 50 40 30 20 10 0 2005 continued Male 2004 Female Male 66.8 69.1 Female 33.2 30.9 2004 % 2005 % 72 Corporate Responsibility Report 2005 www.centrica.com/cr05 Employees Workplace diversity Work-life balance continued We have a seen a real change in our culture. Productivity and employee engagement have improved and the better use of offices has brought annual benefits of £8 million. Flexible working has been a major feature of our approach in British Gas for a number of years. Our 8,000 engineers are all home workers, using laptop and wireless technology to deliver expert service to our customers. Supporting senior women Our aim is to help women move into senior positions in the organisation and we are keen to encourage research and activity in this area. We were one of the sponsors of the Female FTSE 2005. We believe there are three key factors in developing an environment that allows individuals to succeed regardless of gender. Flexible career paths Our succession planning and talent management processes have been reviewed. We encourage flexible and creative career paths that value diverse experience and expertise and move away from a more formal and rigid career structure. Flexible working options Our ‘work:wise’ flexible working project, which now benefits around 2,500 employees in our offices, has provided a model for employees to review working arrangements and we have invested in the infrastructure to give employees the tools and support needed. Investment in leadership and coaching Mentoring is widely encouraged and managers are involved in internal and external programmes. Our Chief Executive, Sir Roy Gardner, and Chairman, Roger Carr, have themselves taken part in a FTSE 100 mentoring programme for senior women. Training has been developed to help managers handle a flexible workforce. It covers such areas as management style and communication. Additionally, we have sought to develop close working relationships with our recruitment agencies. We run workshop days with them to ensure women are well represented on our job shortlists. The balance between work and personal life is an important aspect of our work on diversity and equality. We aim to think creatively about new ways of working to improve employee retention, productivity, motivation and morale, as well as increasing diversity and talent. In line with Centrica’s strategy of being an employer of choice and valuing diversity, we try to ensure that work-life balance is reflected in all our policies. Our flexible working policy enables our people to seek different working arrangements during their career. Employees’ requests are supported wherever possible, whilst considering the needs of the business. ‘work:wise’ More than 2,500 employees are now benefiting from greater flexibility through our ‘work:wise’ programme. The programme was introduced to help employees balance their commitments in and out of the workplace and to make better use of office space. Flexible working is not about giving people new equipment (e.g. laptops and wireless capability). It is not enough to focus only on technical training. The cultural aspects are equally, if not more, important. that’s why we support employees and managers through a combination of roadshows, teambuilding workshops and manager coaching sessions. An internal survey highlighted that 38% of employees felt their work-life balance had improved as a result of the work:wise programme, whilst our more mobile workers are saving an average of 100 miles of travelling each week. Caring for carers An increasing number of our employees have caring responsibilities. We have this year reviewed our carers’ policy and expanded our definition of a carer to include those who care for a close friend. We have also taken steps to ensure that carers are able to access flexible working and other support. Our carers’ network was set up in 2004 by carers in the organisation as a source of support and advice about all aspects of combining caring and working. It has now grown to more than 200 members spread across the organisation. For the second year running we were shortlisted in the Employer of the Year Awards for Carers, and the chairman of our network, George Spedding, was given special commendation for his work. We encourage employees with caring responsibilities to get involved with the network, share experiences and help shape our approach to support carers. In 2006 we will also be continuing our long-term partnership with Carers UK by supporting the charity in relation to its involvement in the Work and Families Bill and raising awareness of the social and business benefits of supporting carers. 73 Corporate Responsibility Report 2005 www.centrica.com/cr05 Employees Workplace diversity Cultural awareness continued Understanding cultural difference is equally important in our offices and call centres in the UK where our employees come from a variety of backgrounds. Our diversity and inclusion intranet site enables employees to find out about religious and cultural festivals celebrated by their fellow workers. It also gives information on activities organised in our call centres and offices that help employees to discover more about different cultures. We will continue to extend our cultural awareness activities during 2006 with more workshops and online resources. One of Centrica’s key strategic priorities is to secure future gas supplies for the UK. In pursuit of this goal we are already identifying opportunities to explore for gas and oil in developing countries. We are also establishing back office operations in India and working hard to grow our presence in continental Europe. As our business activities become increasingly international, the need for our people to adapt to different cultures is very important. To ensure they have the necessary levels of understanding and feel confident when working with different cultures, we developed workshops in 2005 in partnership with Global Business Culture, an organisation providing specialist support to companies in this area. The workshops have proved very successful and provided valuable insights to help our people establish strong business relationships across various cultures. The programme of training is now being rolled out to a wider audience, particularly in Centrica Energy. Additionally, we developed an online learning tool – a website called ‘working across borders’, which provides detailed information on culture, customs and business practices. Similar considerations of cultural difference apply to our British Gas operations in India. We have worked with our Indian business partners to provide our people with training and guidance. 74 Corporate Responsibility Report 2005 www.centrica.com/cr05 Employees Development At Centrica we recognise that the success of our business depends on the capabilities and dedication of our people. We are committed to developing employees to do their job in the most effective way, identifying their potential and providing development and career opportunities. In this way we can maximise their contribution to the overall performance of Centrica. Our approach to talent management is one of continuous development. Once we have attracted talented individuals, from within the Company and the external marketplace, we maintain our focus on their learning and development. The academy is not just for training new recruits. We have more than 9,000 qualified engineers who have advanced and refresher training there. Each British Gas engineer has around 10 days’ training every year at one of our 12 training centres or seven mobile training units. The training updates are either to address a training need identified via our National Technical Help Desk, quality assurance processes, legislative changes or on products about to be launched. One of our major current initiatives is training on high-efficiency condensing boilers. British Gas has taken on more than 300 unemployed people through the Job Centre Plus, New Deal, and welfare-to-work initiatives during the past three years. Over 500 apprentice recruits joined the British Gas engineering workforce during the year. Engineering diversity We want to become an employer of choice and for our engineering workforce to reflect more closely our UK customer mix. The academy’s diversity and education team, formed in 2003, is working to recruit more women and people from minority ethnic groups into our engineering workforce. Real World Environment training programme Real World Environment is a new concept in training delivery, simulating real-life situations for service engineers and sales advisers. It is regarded as a ‘breath of fresh air’ in the training world. The training programme for service engineers was recognised at the Gas Industry Awards in 2005, its third award win in a year. In 2004 it won the Bespoke Solution of the Year award at the World of Learning, the highest accolade in the UK training industry, and the Chamber of Commerce Technology and Innovation Award. Learning and Skills Award Our Engineering Academy was awarded Beacon status as a learning and skills centre in 2005. Beacon status recognises excellent post-16 learning providers delivering high quality teaching. We also won an award from Women into Science and Engineering (WISE) for our efforts to recruit women into engineering jobs. WISE aims to attract more girls and women into science and engineering (and construction) and to support organisations that help them advance their careers. Direct Energy The first technicians from the Direct Energy heating, ventilation and air conditioning (HVAC) apprenticeship programme graduated in 2005. Canada is experiencing a shortage of skilled trades workers and the Conference Board of Canada has forecast a potential shortfall of one million skilled workers by 2020. Direct Energy introduced the HVAC apprenticeship programme at our state-of-the-art facilities to provide a combination of academic and practical training for our new technicians. The programme aims to attract apprentices by offering them a professional certification programme enabling them to maintain heating, ventilation and air conditioning systems. Anne Chambers, Ontario’s Minister of Training for Colleges and Universities, commended the programme as an excellent example of the kind of initiative the government was encouraging. Employee induction Our Group-wide induction programme helps employees to quickly acquire a good understanding of Centrica, the specific business they are joining and the site where they will be based. It includes how their role fits into the business, the support they will receive and the pay and performance structure so that all recruits know how they will be evaluated and rewarded. Each new Centrica employee has an induction manager and is often assigned a buddy or mentor. In most cases a combination of written information, face-to-face events and one-to-one discussions with managers is followed by a period of job-specific training and then an evaluation. These evaluations have been very useful in redesigning the process over time. We have a similar scheme in place for graduates on our Graduate Development Programme. British Gas Engineering Academy We are investing £30 million a year in the British Gas Engineering Academy, which was founded in 2002. In 2005 it trained more than 1,100 new engineers. 75 Corporate Responsibility Report 2005 www.centrica.com/cr05 Employees Development continued Introducing new systems During the year we began to implement a new customer billing system in British Gas Residential Energy and a new engineer deployment system in British Gas Services. The Academy designed training activities to support the implementation of both systems. So far, training on the new customer billing system has been delivered to more than 2,500 employees in the UK and in our new back office operations in India. Each employee received, on average, 87 hours of training (and rated this training at an average of 88%). More than 450 engineering support staff and 1,800 employees in our service centres received training on the new deployment system. Technical training was further supported by a five-day change management programme called ‘Leading the Way’ with modules on ‘adaptability’, ‘collaboration’, ‘managing people’ and ‘problem solving’. The programme was attended by 300 employees in 2005. Vocational qualifications We worked with the Learning and Skills Council to develop a programme of NVQ qualifications for employees in British Gas. The programme includes modules on ‘customer service’ and ‘management’. In 2005 we delivered a successful pilot involving around 100 employees and plan to make the programme available to about 400 employees in 2006. Future commitments We aim to complete the training rollout for our new billing systems, which will involve training for over 5,000 employees onshore and offshore. During 2006 we will complete a full review of call and service centre employee career development and introduce a new standard framework. We plan to finish our strategic review of our new-start training processes for office recruits in British Gas. Academy of Customer Excellence The British Gas Academy of Customer Excellence was created in 2004 to bring together our customer service training teams. Customer service sets us apart in our marketplace and this new academy supports our drive to put customers at the heart of everything we do. Building on the success of our engineering academy, the customer service academy encourages best practice and knowledge sharing. By co-ordinating activities nationally, this new structure improves the consistency of our training design and delivery. Management development ‘Launch Pad’ programme At a time of significant business change it is critical that we select and develop high-calibre individuals for management positions. Our ‘Launch Pad’ programme aims to provide a ready pool of managers with the right skills and approach. With a clear focus on performance management, the programme is designed to develop business and people skills. More than 40 employees participated in the programme in 2005. ‘Orbit’ programme Our ‘Orbit’ programme enables existing team managers to develop the ability to focus on managing people, using such modules as ‘leadership’, ‘motivation’ and ‘developing people’. The programme was delivered to more than 600 managers in British Gas in 2005. Graduate development programme Our graduate programme covers general management, finance, IS and engineering disciplines. The programme is designed to develop future senior managers by giving them a thorough understanding of the operational aspects of our businesses from the outset. Through a combination of training courses and on-the-job training, our graduates gain experience in a number of areas, including customer focus, change management, coaching, leadership and communication skills. Graduates are aided in their development with guidance on how to manage their career path. They have support from the central graduate team, ‘business buddies’ and through the use of mentors. They are also included on the management talent review system to ensure that, once they have completed the training programme, their progress can be monitored and developed to help them fulfil their full potential. Our graduate programme won the Personnel Today Award for Excellence in Graduate Recruitment in 2005, beating off challenges from more than 60 entrants. This category is designed to recognise achievement in attracting and retaining graduates. According to the judges, Centrica’s winning formula comprised ‘superb team-working, management buy-in, dynamic leadership, exceptional energy and a real sense of fun’. 76 Corporate Responsibility Report 2005 www.centrica.com/cr05 Employees Development continued Investors in People British Gas became the first major UK company to be accredited to the new 2004 ‘Revised Investor in People (IiP) Standard’ in 2005. This leading standard assesses how effectively a company communicates its strategic objectives to employees. We worked with IiP to develop an implementation strategy and were the first UK company to train internal reviewers to the revised standard. We trained 35 British Gas employees across the country, achieving a firsttime pass rate of over 90%. This reflects the quality of our people and our investment in training We undertook a comprehensive internal review, visiting 23 locations and interviewing more than 1,900 employees at all levels – more than 8% of the people in British Gas. Management teams received a detailed feedback report highlighting strong performance and areas for development. As a result of our IiP achievements, we were shortlisted in the National Business Awards and have been invited to give presentations on our experience to the Department for International Development and the Department of Constitutional Affairs. We are aware of the need to strive to improve our approach to employee development. In 2006 we will continue to work with IiP to measure and share best practice internally and benchmark ourselves externally. Leadership development programme We offer a range of management development programmes for each stage of a manager’s career with Centrica, from individuals in their first management position to more experienced managers responsible for leading whole business units. Our leadership competence framework defines the skills and types of behaviour we believe our leaders need to deliver our business strategy. New senior managers attend a oneday interactive induction workshop. This gives them a deeper appreciation of the business whilst learning about Centrica’s relationships with all key stakeholders. Workshops are also provided in diversity awareness and in interviewing and assessor training to help foster a manager’s broader sense of responsibility to existing and potential employees. In 2006 we will introduce awareness training on our business principles into the leadership development framework. The LEAP programme (Learning, Engaging, Achieving and Performing) has been designed to support the development of middle and senior managers, so they can support the changing nature of the business and tackle the changing demands of their role. LEAP provides development solutions for all managers involved in our Management Talent Review process, helping them improve their capability in specific skill areas according to their needs. We have developed a senior leadership programme for high potential senior managers, in partnership with Dukes University in the USA and the London School of Economics. The programme, which combines two one-week residential programmes, draws leaders from across the Group to work on global business issues. This programme has been a key to talent management and the development of our senior leaders in 2005. In 2005 about 1,200 managers across Centrica took part in one or more LEAP programmes. This equates to at least 14,000 hours of training. LEAP has a number of courses aligned to one of four key management skills: change, business, people or personal. These are the skills that underpin effective delivery against our leadership competencies. All managers are expected to have a development plan to help build competence and gain skills in priority areas, either to enhance performance in their current role or to prepare them for an identified future role. 77 Corporate Responsibility Report 2005 www.centrica.com/cr05 Employees Development continued All roles at executive level have successors identified and ‘emergency’ candidates nominated to cover key roles if necessary. Succession plans for each business unit are reviewed by the Centrica Executive Committee annually and talent pools are established for key areas such as general management. The MTR process also enables Centrica to manage risk by identifying high potential individuals who may be considering leaving the organisation. We continued to develop talent pools during the year by defining the selection criteria and we hope to implement this work during 2006. Career development workshops are available to all managers, encouraging them to take more personal responsibility for their career path. In addition to management development programmes and development moves, the highest potential managers are invited to lead key strategic projects, attend internal and external networking events and are assigned internal business mentors. Those identified as having the potential to become future Centrica business leaders also have access to external executive coaching. Management Talent Review Centrica’s Management Talent Review (MTR) is a well-established strategic business process. The MTR enables the development potential of our future leaders to be identified and tracked. In addition, it aids succession planning and internal and external resourcing at senior levels. It also provides vital information about the strength in depth of our leadership, to facilitate long-term resource planning. The process was enhanced in 2005 by an exercise to model the behaviour, skills and attributes of people with high potential through internal and external research and benchmarking. During the year more than 700 managers were reviewed against this model. Together with information about performance and aspirations, individuals’ ‘promotability’ is evaluated. These ‘promotability’ assessments are calibrated to ensure consistency across the business. The MTR is a transparent process enabling managers to discuss their rating and personal aspirations with their line manager. It is supported by an online system so that individuals can update their experience, achievements and aspirations, and management reports can be generated. The process provides valuable information to help us ‘succession plan’, implement developmental moves for our managers and support the retention of high performing and high potential people. Development moves across our businesses are encouraged and tracked by the Centrica Executive Committee and local management levels. In 2005 some 160 senior managers benefited from a developmental move. 78 Corporate Responsibility Report 2005 www.centrica.com/cr05 Employees Employee relations We have a history of good employee relations in Centrica. Employee engagement, regular dialogue and open communication are important building blocks of our people strategy. They help us create a motivated and productive workforce that will deliver the levels of service our customers expect. The key relationships are between individual employees and their line manager, their team and their business unit. Last year was challenging for Centrica and we had to make some difficult decisions relating to our organisation to reduce operating costs. During the year we offshored some British Gas back-office roles to India and announced a number of redundancies. Throughout the implementation of these changes, our priority was always to treat our employees fairly, maintain open dialogue with them and help them find alternative employment or training opportunities. In 2005, 83% of employees responded to the survey, with more than 30,000 employees having their say. Overall engagement improved 1.3% across the Group, which is a significant achievement given the number of organisational changes implemented during the year. This is primarily because of the strength of ‘management impact’, which suggests that an impressive 79% of employees are satisfied with their relationship with their line manager. Positive results The survey threw up some positive findings. For example, more than eight out of 10 employees know their objectives and 83% of managers hold regular team meetings, with 82% making sure performance reviews take place. Some 80% of employees feel they have a manager who cares. According to the survey, 80% are aware of how people’s work affects Centrica’s performance, 79% believe their team works well with other teams to provide good customer service, and 77% feel their team is trusted and they can trust the people they work with. Opportunities for improvement But there were some disappointing scores. Only 57% agree that directors inspire employees to achieve, and 58% that directors listen to and act upon employees’ views and concerns. The focus for 2006 is to improve the extent to which employees feel more committed and valued. Our score for ‘commitment’ has decreased marginally for the second consecutive year and just six out of 10 feel the company values their contribution. But this could be largely a result of the restructuring and change, making people feel less secure in their work. For one call centre, the score for commitment dropped 32% from last year as people learned of plans to ‘offshore’ their operations. For Centrica overall, however, there was an increase in the extent to which employees felt supported during organisational change. Lower scoring questions in 2005 included referring a friend for employment and opportunities to build a career within the Centrica Group. Just 64% believe these opportunities exist. In 2006 we will extend our employee engagement survey to employees in our offshored operations in India. Employee engagement The Centrica annual employee survey measures engagement and commitment levels for every team at every level across the Group. The results are used to create an action plan, produced by the Centrica Executive Committee and all teams throughout the Group. These action plans include central and local issues and are linked to personal objectives. In addition, for the first time this year, the survey was used to measure the diversity of our workforce. Centrica also donated 50p to its charity partner NCH for every completed survey, raising more than £15,000 for a children’s centre. The survey measures engagement in five key areas; ‘me as an individual’, ‘management impact’, ‘customer focus’, ‘leadership’ and ‘performance and development’. All but one of these areas – ‘leadership’ – increased from 2004 to 2005. The ‘performance and development’ dimension was the most improved area. In particular, there has been an 11% increase in satisfaction regarding learning and development opportunities since 2003. 79 Corporate Responsibility Report 2005 www.centrica.com/cr05 Employees Employee relations Trade unions continued Formal agreements exist with these unions that cover recognition, membership and procedural and substantive items (e.g. pay). Communication involves sharing of information, consultation and negotiation, which occurs at national and local meetings. The arrangements with trade unions for British Gas office staff go further, with a modern partnership agreement entailing more involvement and participation than traditional arrangements on subjects such as organisational change. Centrica and its business units in the UK have reviewed their consultation arrangements following the introduction of the European Information and Consultation Directive in April 2005. It has been agreed with the lead trade unions that current consultation arrangements cover the requirements of the Directive and that there is no need to establish National Works Councils. For staff not represented by a union, we put in place consultation arrangements as the situation requires, e.g. for change programmes and redundancies. North America Our businesses in North America recognise and work with two trade unions. The Business Services division works with the UAW – the United Automobile, Aerospace and Agricultural Implement Workers of America. It is one of the largest and most diverse unions in North America, with members drawn from almost every sector of the economy. UAWrepresented workplaces range from multinational corporations, small manufacturers and state and local governments to colleges and universities, hospitals and private non-profit organisations. The Home Services division works with CEP – the Communications, Energy and Paperworkers Union. Home Services includes employees involved in the service and installation of HVAC (heating, ventilation and air conditioning) products for residential and small commercial customers. CEP is one of the largest unions in Canada, representing just about every type of worker. CEP represents workers in pulp and paper mills, telephone companies and the oil, gas, chemical, mining and aerospace industries. As in the UK, working relationships are positive with the trade unions and there is a good record of change without disputes. We recognise collective relationships with trade unions, which help us support our business goals. There have been extensive changes in our UK businesses in recent years, which have enabled us to reduce costs, improve our systems and enhance the levels of service we provide to our customers. We have worked successfully with trade unions to manage these changes and in nearly all cases have avoided disputes. A good example is the offshoring of back-office roles in British Gas to India and the closure of three offices in Oldham, Manchester and Solihull. The only exception to this excellent industrial relations record was the one day lost in British Gas Services in 2005, when engineers were in dispute with the company over changes to the final salary pension scheme. However, through constructive dialogue with the conciliation service ACAS and the GMB and T&G unions, we were quickly able to reach a satisfactory solution. While we were disappointed to be unable to avert the single day of industrial action, we were pleased that our record of strong relationships with trade unions led to a speedy resolution. Around 50% of employees are covered by collective agreement on health and safety, and remuneration. Trade union relations in Great Britain Our trade union relationships fall into three main categories: British Gas engineers (GMB); British Gas office and field debt staff (Unison and GMB); and Centrica Energy Power Stations (Amicus and Prospect). 80 Corporate Responsibility Report 2005 www.centrica.com/cr05 Employees Employee relations continued Timely communication underpinned the process and online communication sites were set up in all affected business areas, with further support provided through the engagement of a specialist career counselling and outplacement support provider. To minimise redundancies and retain skills, knowledge and experience, redeployment opportunities were actively sought within Centrica. Line managers received training on how to manage change and individuals whose roles were identified as at risk were offered personal career coaching. Our employee assistance programme provided free access to a 24-hour personal support service for employees and their families. The decision to offshore, combined with the impact of efficiencies from our new billing system, will result in about 1,500 job losses in the UK and the closure of the Solihull, Manchester Gould Street and Oldham offices. We are committed to ensuring that our employees are fully supported during this period of change and that we maintain the quality of service to customers. Business reasoning Communicating with employees Centrica places great importance on communicating with our people. We believe that building employee engagement will create long-term value for our stakeholders and position Centrica as an employer of choice where the best and brightest people want to work. Employees receive a series of regular communications to keep them informed of our strategic direction and business performance. We employ a full range of communications channels including intranet, audio, video and printed publications but the emphasis is on face-to-face dialogue. We actively promote two-way involvement in decision making at all levels of the organisation. We also have a number of initiatives in place for measuring employees’ perceptions. This is achieved through our team briefing systems, intranet portal, regular employee engagement surveys and action planning forums. Employees’ views are also sought using a network of local consultative bodies. We continue to be a strong supporter of Investors in People. Offshoring delivers significant benefits through lower labour costs, as well as maintaining high levels of productivity given the highly skilled workforce in India. It is important that British Gas cuts operational costs to remain successful in a competitive and volatile energy market. Offshoring offers a way of protecting the quality of service we provide customers, whilst maintaining competitive prices. Handling the changes in the UK We have taken several steps to help those leaving the Company to seek new opportunities. In addition to receiving a competitive redundancy package, employees are eligible for outplacement support for up to 12 months. We have also earmarked £500,000 to support those who wish to retrain. Many have found new jobs at other businesses within the Group. In addition, companies continue to call us in an effort to recruit our skilled and experienced employees. Offshoring Offshoring has been a growing trend in global business in recent years. According to the McKinsey Global Institute, the number of offshore service workers will jump from the current 1.5 million to 4.1 million by 2008. In 2005 British Gas began rolling out a new customer billing system. Part of a major change programme representing an investment of £430 million, the process involves the transfer of almost 18 million customer accounts to new systems. These changes will result in significant operational efficiencies across the business. As part of our efforts to achieve further cost savings, we are transferring the majority of our remaining back-office activities to India. These roles will be based in Delhi, Pune and Mumbai. We are working with two outsourcing providers, EXL and WNS, which have considerable experience in helping companies set up and run operations in India. Redundancy and redeployment In 2005 we announced further changes to our business that would deliver a materially reduced cost base in British Gas Residential Energy. As a consequence, a number of people left the business. Our priority was to redeploy as many employees as possible, making redundancies only as a last resort. In line with previous changes, this programme emphasised consultation, openness, transparency and fairness. Business proposals to implement the changes were shared and agreed with employee and trade union forums, as part of a formal collective and individual consultation process. 81 Corporate Responsibility Report 2005 www.centrica.com/cr05 Employees Employee relations continued British Gas engineers’ pension arrangements At the beginning of 2006 we introduced a new defined benefits pension arrangement for new British Gas engineers joining the Group. This involved the closure of the engineers’ final salary section of the engineers’ pension scheme to new entrants. We made this decision to bring the engineers’ scheme in line with the rest of the Group and to protect the long-term future of the fund for existing and new members. Our new arrangement – called Centrica Engineers Retirement Income Section (CERIS) – will continue to provide defined benefits to members, based on career average salary, rather than final salary. The new CERIS scheme ranks among the best occupational schemes in the market, comparing well with pension schemes operated by leading companies in the UK – such as Tesco, National Grid and HSBC. Most of the Group’s employees are members of one of five defined benefit arrangements. These schemes are funded to cover pension liabilities in respect of accrued service to date. They are subject to independent valuations at least every three years, on the basis of which the appointed actuary certifies the rate of employers’ contributions payable. The assets are invested together in the Centrica Combined Common Investment Fund (CCCIF) in a range of investments that will generate income and capital growth, to meet, together with future contributions, the costs of benefits. In setting the investment strategy for the pension scheme, there are a range of options open to the CCCIF Trustee. These include active investment management, aiming to achieve investment returns that, over the long term, are better than those ofa specified benchmark. Passive investment management aims to achieve a return as close as possible to a particular benchmark. This is often known as index tracking, as the benchmark is often an index. An example of an index is the FTSE100. Each investment style has its own cost profile and level of fees charged by the investment manager, which can affect future expected returns. Based on the assessment of the fund, the CCCIF Trustee employs a number of investment managers to promote adequate diversification by fund management organisation and investment style. The managers have been set mandatespecific benchmarks, which have clear performance objectives attached. Where appropriate, explicit risk parameters have been developed to which the managers are expected to adhere and against which they are monitored. It is CCCIF Trustee investment policy to leave the extent to which social, environmental or ethical considerations are taken into account to the discretion of the investment managers. However, ethical investment is discussed generally at Trustee meetings. The CCCIF Trustee policy in relation to voting and activism is to delegate responsibility for the exercising of rights (including voting rights) attaching to investments to the investment managers. Each appointed investment manager is required to have a clear voting policy, which is acceptable to the CCCIF Trustee and is expected to produce regular reports in this regard. The CCCIF Trustee will review the voting policy of each investment manager at least annually. Setting up our operation in India Live offshore operations began in January 2006, following a seven-month transfer period. By the end of 2006 we expect to have over 1,200 full-time equivalent employees in Noida, Pune and Mumbai. More than 100 employees have volunteered to go to India for periods of up to four months to provide training and support to our offshore operation, taking advantage of an opportunity to gain experience that might benefit them in their future career. To ensure that our offshore agents perform to the same high standards as we expect in the UK, we are investing in an extensive training programme, with each individual spending an average of eight weeks in the classroom. This includes data protection training to meet our stringent information security standards. Our partners have in place competitive reward and recognition systems and will be measuring employee satisfaction as part of our global employee engagement process. All our people in India are kept up to date with UK operations through our web-based intranet, internal newspaper and cascaded briefings from team managers. Pensions Centrica operates various pension arrangements, which are managed by Trustees. The Trustees act in the best interests of all classes of member and the employers. Trustees are appointed by Centrica and include membernominated Trustees. Responsibility for the selection, retention and realisation of investments has been delegated to appointed fund managers, who are regulated by the Financial Services Authority. The scheme’s investment performance is measured through the Bank of New York performance measurement service. Results are published in an annual newsletter for pension scheme members. 82 Corporate Responsibility Report 2005 www.centrica.com/cr05 Employees Reward and remuneration We work hard to reward our employees fairly and we regularly review our remuneration packages to ensure they remain competitive. Our induction process introduces new employees to the way their performance is evaluated and recognised. We use bonus schemes to encourage employees to surpass business and personal goals. All roles above a certain threshold are managed within a single reward strategy. Below this threshold each of our businesses develops and manages its own reward policy. Senior management reward strategy Centrica aims to recruit, motivate and reward high calibre employees. A total remuneration package that is competitive, flexible and recognises good performance is a crucial tool in aligning executive performance and shareholder interest. Our reward strategy for senior managers is based on: • the competitive market environment for employees • incentives based on performance • individual contracts sympathetic to individual circumstances • opportunities for international experience • a degree of flexibility to suit individual lifestyles. Employee remuneration In 2005 our average employee salary was £22,346, compared to £22,752 in 2004. The reduction is because of changes in the structure of the employee population during 2005. At 1 October, 2005, the UK minimum hourly wage for employees aged 22 years and over was £5.05. The minimum wage for an employee aged under 22 or in training was £4.25. All Centrica UK employees are paid in excess of these levels. Board remuneration Centrica has a Remuneration Committee made up of independent non-executive directors to make recommendations to the board on the policy and framework for executive remuneration. It also determines the remuneration packages for each of the members of the executive team. Centrica provides a detailed Remuneration Report on these areas as part of the Annual Report & Accounts. Annual pay audit In 2005 we conducted a third comparative review of the levels of pay for male and female employees. The results showed that the gender pay gap in Centrica is much narrower than published national norms. Salary sacrifice schemes Centrica introduced two salary sacrifice schemes in 2005, enabling employees to save tax and National Insurance contributions. Our childcare voucher scheme enables employees to sacrifice up to £217 each month and instead receive childcare vouchers of equal value. We also launched a similar scheme enabling employees to lease a PC through salary sacrifice. It achieved a take-up rate of over 10% of eligible employees. Company shares schemes We encourage our employees to own Centrica shares so they can share in the growth of the Company. Our three schemes are Sharesave and Share Incentive Plan in the UK and Share Purchase Plan in North America. Sharesave enables employees to save up to £250 per month from their posttax salary for either three or five years and exercise the right to buy Centrica shares at a 20% discount based on the market value at the start of the savings contract. Almost 41% of employees are in this scheme. The Share Incentive Plan enables employees to contribute up to £125 per month from their pre-tax salary (or 10% if lower) to buy shares each month. For every two shares purchased by the employee, Centrica allocates one free share, up to a maximum of 20 shares. Over 17% of employees participate. In North America employees can join the Direct Energy Employee Share Purchase Plan (ESPP). Participants can purchase Centrica shares and receive one matching share from the Company for every two shares they buy. Employees may invest from 1% to 5% of their base salary up to a maximum investment of $10,000. Almost 34% of employees have joined this plan. Benefits FlexSA Our benefits package is made up of core benefits and a flexible spending account (FlexSA), which is currently set at a percentage of base salary for both full-time and part-time employees. FlexSA enables eligible employees to express a preference in the composition of their benefits package. They can ‘spend’ their flexible spending account on a range of benefits including additional holiday, retail vouchers and/or additional voluntary pension contributions. Alternatively, employees may choose to receive up to 89% of the non-utilised allowance as a non-pensionable cash allowance. More than 1,000 employees joined the scheme in 2005, bringing the total number benefiting to 7,712. 83 Corporate Responsibility Report 2005 www.centrica.com/cr05 Employees Future commitments What we said we’d do Talent management Skill HR business partners to enable line managers to forecast future capability requirements and develop plans to address deficiencies, whilst creating ‘talent pools’ for key roles. Leadership development Continue to implement performance improvement plans in all areas to reduce poor performance and identify development interventions for high performers. What we’ve done What we plan to do next Continue to develop talent pools during the year by defining the selection criteria and we hope to implement this work during 2006. Defining selection criteria for general management talent pools and commence identification of people to enter those pools. Around 1,200 managers across Centrica took part in one or more LEAP programmes. This equates to at least 14,000 hours of training. Ongoing professional development for our engineers and customer service agents is a key focus for 2006. Training our people on new IT systems is a priority. We will extend our ‘LEAP’ programme for middle managers and run half-day seminars on ‘hot topics’ for our senior managers. We will also continue to work with several external business schools including Dukes University and London Business School. Employee engagement Target 5% improvement in employee engagement score during 2005 by extending flexible working, team building activities and supporting managers and employees through change. Diversity and inclusion Develop and implement diversity and inclusion action plans in each business to address key priorities. Continued to implement diversity and inclusion action plans providing training on diversity and cultural awareness to around 5,000 employees. Our focus for 2006 is on implementing policies and processes in line with the new age legislation in the UK and to complete the rollout of our online diversity learning package. Overall engagement improved 1.3% across the Group, which is a significant achievement given the number of organisational changes implemented during the year. Our focus for 2006 is to improve the extent to which employees feel more involved and committed. This includes feeling valued and responding to leadership. Health and safety Continue to scrutinise and challenge periodic data reporting through the regular use of our corporate audit. Reduced lost-time injuries per 1,000 employees by 39%, reduced lost-time injuries per 100,000 hours worked by 36% and reduced total injuries per 100,000 hours worked by 39%. Continue to scrutinise and challenge periodic data reporting through the regular use of our corporate audit, learning from incidents in 2005. 84 Corporate Responsibility Report 2005 www.centrica.com/cr05 Employees Future commitments continued What we said we’d do Reward and remuneration Continue to monitor market practice to ensure we maintain our competitive position to recruit and retain talented individuals, whilst embedding and improving reward and recognition policies that drive and reward high performance. Human Capital Management Deliver a robust HCM process as part of the wider human resources transformation programme to improve our systems and data capture. What we’ve done What we plan to do next Average employee salary fell slightly due to changes in the structure of our employee base but an additional 1,000 employees joined our flexible benefits scheme and the number of employees participating in our three share schemes increased. Continue to monitor market practice to ensure we maintain our competitive position to recruit and retain talented individuals, whilst embedding and improving reward and recognition policies that drive and reward high performance. Developed processes to measure and report against key human capital indicators, and included these measures in our CR report for the first time. Our human capital return on investment improved from 1.9 in 2004 to 2.1in 2005. Continue to refine our HCM processes and report against identified indicators striving for year-on-year improvement. Occupational health We are planning a workshop for employees suffering from knee problems, a wellness induction programme for gas engineers and prescription gym membership to help employees recovering from musculoskeletal problems. Training and development Our British Gas Customer Service Academy aims to complete the training roll-out for our new billing systems to over 5,000 employees onshore and offshore. We will complete a full review of call and service centre employee career development and introduce a new standard framework. 85 Corporate Responsibility Report 2005 www.centrica.com/cr05 Employees Future commitments continued we said we’d do International processes What we’ve done What we plan to do next Continue to develop health, safety and security management and employee relations processes in our international operations in India and Nigeria. Engineer development Our British Gas Engineering Academy will continue to work with schools and communities to increase the talent pool from which we recruit tomorrow’s engineers. 86 Corporate Responsibility Report 2005 www.centrica.com/cr05 Employees Case studies ‘Leadership in Safety’ programme During the next six months, British Gas will be putting 700 of its people through a major safety leadership programme. The interactive programme, which has already been delivered to directors and front-line managers, combines classroom learning with ‘hands on’ activities in a workshop environment. Feedback from those who have been involved suggests that the course has revolutionised the way they look at safety, both in and out of the workplace. About 90% of the incidents reported throughout British Gas (and indeed most other companies) can be ascribed, directly or indirectly, to the behaviour and attitudes of the people involved. ‘Leadership in Safety’ focuses on this and aims to ensure that developing an effective safety culture is central to all that we do. Our move towards behavioural training began in 2004 with the British Gas ‘DoorSTEP Challenge’ programme (Stop, Think, Evaluate and Plan), which encouraged our engineers to adopt a ‘risk-based approach’ to every job they do. This programme focused on the motivational factors behind safe working and aimed to equip supervisors with valuable techniques to help them recognise and reinforcement good practice in their workplace. Winning ways on mental health An employee with a poor attendance and performance record as a customer service agent was referred to Occupational Health. He was found to have mental health problems. Occupational Health suggested that the company fund the treatment necessary to help him return to an acceptable level of attendance and performance. Without that support, the employee would have been dismissed. However, since treatment, he has gone on to win an attendance recognition and sales award. Ambition Balaal Imran, 20, is a trainee central heating engineer from Harrow. At school his friends talked about wanting to go to university to become doctors, lawyers and engineers – but he was unsure of what he wanted to do and didn’t necessarily want to follow the higher education route. “I liked the idea of hands-on training. I have support from the trainers at the Engineering Academy, both in the classroom and working on gas appliances, but I really enjoy being out in the field with a fully qualified engineer. This way I get to find out what the job really involves and find out what customers expect from us.” There are two distinctive routes into the business: Service and Repair Engineers or Installation Engineers. As an apprentice central heating engineer, Balaal will be involved in the entire central heating installation process, planning the job in consulation with the customer and installing, testing and commissioning the system. Service and repair engineers carry out annual servicing of central heating systems, plus maintenance, including fault diagnosis and repair. Apprentices work towards NVQ level 3 under continual assessment. When training is completed, engineers are mentored by a fully qualified engineer and work within a team of up to 30 engineers. The British Gas Engineering Academy is made up of a 12-strong nationwide network of training centres. The company spends £30 million every year on training and recruitment and will take on 1,000 new recruits in 2005 to train as gas engineers and plumbers. Back to full duties A gas engineer was referred to Occupational Health with backache. The company funded a course of physiotherapy and, for some months, he continued work with fewer duties. But his symptoms did not improve and he took sick leave. The company funded a medical investigation, which highlighted a need for surgery. Centrica paid the £8,000 cost of surgery and he has now returned to full duties. Without treatment, it is likely he would have lost his job – and Centrica would have lost his experience. 87 Corporate Responsibility Report 2005 www.centrica.com/cr05 Employees Case studies continued “I tell you what though, you really notice the value of all that learning, especially in the winter months. You know what it’s like, the summer’s over, autumn sets in and the temperature drops, so everybody switches on all their heating for the first time in months. And it’s only then that they realise that they have a fault. I’ve never been busier in my life. “What does the future hold for me? Well I’m still learning the ropes and I want a lot more fault-finding and technical experience. Once I’ve got that, hopefully I can pass on what I know to the next generation of engineers in the same way that my colleagues have done with me. “More and more women are coming into engineering. The team I work with are great and I don’t get treated any different from any of my male colleagues. This job is far more interesting than working in an office; there is more variety, new people and new locations.” Engineering Academy – Jenny from Peterborough Home service operations “From an early age I have been interested in mechanical and electrical engineering. I took this apprenticeship as a technical engineer just over a year ago. “I originally joined British Gas because of the job security, the great benefits and the long-term training. I guess they’re not the most exciting reasons in the world, but when you’ve been made redundant twice through no fault of your own, as I have, these things are music to your ears. “The training on the apprenticeship has taught me how to install and maintain central heating systems. The training is done in a structured format, so it’s never too much trouble if things need to be recapped. The training involves fairly intense college work, where you learn more technical skills and techniques than you ever thought possible! “Work placements is part of the training, covering various aspects of the job role, at all times working with experienced engineers. I enjoy the freedom that the job offers and also meeting new customers. “However, what keeps me here is a different thing entirely. I just love getting out and about in the van and helping our customers. You really can’t beat the buzz of turning up at someone’s house and fixing a problem that has really been stressing them out. “People still look twice when I turn up, because – how can I put it? – when someone calls for a gas appliance engineer they expect a bloke to turn up! They quickly get used to me though, especially when they see me get to work sorting out their boiler, radiator or whatever is needed. British Gas Business Our highest scoring business unit in 2005 was British Gas Business (BGB), which achieved 4.25 out of 5. BGB’s commitment to employee engagement led to it being voted the 15th Best Workplace in the UK by the Financial Times sponsored Best Place to Work Institute UK 2005, claiming second place in the category for large UK employer. British Gas Business also won a Disability Excellence award for its disability equality work. Redeployees train as engineers Revved up for new blue van role Employees affected by the job restructures announced last year have traded in their PCs for toolboxes, thanks to a recruitment initiative by our British Gas Engineering Academy. So far, 29 office-based employees affected by the changes within the business have been offered the chance to re-train in engineering roles. Former Solihull business analyst Carl Collis, who started with the Engineering Academy at Filton College, Bristol, last month said he is really excited about joining the Academy and is looking forward to his career change. “After hearing the news that I was going to be made redundant, I began looking at possible roles and then when I heard I had secured this new role, I was thrilled,” he said. Dave Cox, who manages some of the recruitment team for the Engineering Academy, said: “We were keen, wherever possible, to offer engineering roles to suitable redeployees. It’s important to be able to retain talent and skills where we can, and channel them into a growing part of our business.” 88 Corporate Responsibility Report 2005 www.centrica.com/cr05 Employees Case studies continued Building in diversity Sam Martin, Vicky Shenton, Debra Higgins and Barbara Wynne have helped build diversity into the workplace at British Gas Business. They made sure everyone was involved during the planning of the new Spinneyside headquarters in Leicester. Focus groups helped get the views of a wide range of people – in terms of faith, disability, work-life balance and more. They have helped make the Diwali and Eid festivals as familiar as Easter or Christmas. Our people have the confidence to organise celebrations and events, knowing that their colleagues will want to join in. Every week, different festivals for all faiths are displayed on the intranet, including details of the meaning behind the celebration. By working alongside colleagues with different beliefs and different needs, people widen their horizons. Mum’s the word Debbie Atkins has worked for the company for 13 years. When she started a family, she didn’t want to leave – and the company didn’t want to lose her. Her British Gas Business manager devised a flexible contract for her, enabling her to work three days a week during term-time only. He saw the benefit of the arrangement for Debbie and for the company. She has been working flexibly for two years now. “If my application for flexible working had been turned down, I would have been forced to leave the company – and that was something I did not want to do,” she said. Being aware A project to encourage diversity awareness was undertaken by British Gas Home Services’ Leeds Area Service Centre. A training package was developed for customer service advisers and one for managers – which went into more detail about recruitment and equal opportunities. In total, 200 staff were trained over a period of four months, and there are plans to roll the package out to many more employees during 2006. Going to prison Niki has extended her recruitment job for British Gas Residential in Cardiff to involve ex-prisoners. She has forged links with three local prisons, Usk, Bridgend and Cardiff, and has visited Cardiff prison three times to give presentations to prisoners and probation officers. This channel has already notched up its first success. One new starter has settled in well after leaving prison and is a valued member of her team. There are more interviews taking place. Engineering a new approach The goal of the British Gas Engineering Academy’s Diversity team is to change the face of the engineering workforce to reflect more closely the mix of customers the company serves. In particular, it aims to recruit more women and more young people from different backgrounds on to its apprenticeship scheme – not least by providing positive role models. Team members work closely with schools and have developed projects that fit within the national curriculum. They also target community activities such as careers fairs, demonstrating how a good career with British Gas is open to anyone with the right level of ability and commitment, regardless of gender or ethnic background. The team, formed three years ago, is held in high esteem by external organisations and agencies and has raised British Gas’ profile within the minority ethnic communities throughout Great Britain. Working patterns that fit By seeing people’s disabilities, religious beliefs and cultural needs as opportunities rather than problems, we have retained skills, knowledge and expertise. Darren Gartside is a typical British Gas Business manager. He truly believes that diversity gives us a broader and deeper pool of knowledge and experience and creates a dynamic and enthusiastic workforce. By introducing flexibility, Darren enabled a Muslim colleague to pray five times a day and a recruit to carry on studying for a BSc in software engineering whilst working as a customer service adviser. He devised a mobility scooter for an employee who was finding walking painful. Our customers have benefited from Darren’s keenness to embrace diversity through the retention of skills and experience that we may otherwise have lost. 89 Corporate Responsibility Report 2005 www.centrica.com/cr05 Employees Case studies continued Opening new channels Press Officer Steve has worked well beyond his brief to drive home the message of diversity. By opening up entirely new media channels, he has helped British Gas Residential communicate with customers and potential recruits never previously reached. He has built relationships with journalists in the ethnic media, enabling him to understand what current issues are important and to achieve coverage in a number of national ethnic papers for the first time. This has helped ensure the company is not perceived as overwhelmingly white. Steve has ensured that the British Gas name holds credibility with many important external audiences, including MPs, local community leaders, journalists and editors from the ethnic press. He has also got coverage for the company’s diversity work in mainstream national newspapers and radio. No carping about age Ben Lenton and John Tideman won the Best Employers Award for Direct Energy from CARP, the Canadian Association of Retired People, by showing how the company had attracted and retained employees over the age of 50. The company needed to fill vacancies for sales agents and management with dependable, productive people and to align its sales force with an increasingly important market segment, the over-50s. This approach has helped set the company apart from its rivals. The winning entry came on the heels of a success story in the Heating Ventilation and Air Conditioning sales group, where 36% of sales consultants are over 50. Out of the nine consultants who reached the $1 million club in sales for 2004, five were in that age group. 90 Corporate Responsibility Report 2005 www.centrica.com/cr05 Employees Case studies continued Engineering diversity We want to become an employer of choice and for our engineering workforce to reflect more closely our UK customer mix. The academy’s diversity and education team, formed in 2003, is working to recruit more women and people from minority ethnic groups into our engineering workforce. The team aims to: • promote a career in engineering to children aged 13 to 16 • raise awareness of the importance of a diverse workforce • promote and develop a network of engineering ambassadors • attend community and recruitment events around the country. By adopting this strategy we hope to make a long-term positive impact on the diversity of our recruitment, particularly of apprentices. Our objectives are to: • increase the number of female engineers from the current position of 1.3% of the engineering workforce to 4% by 2010 • increase the number of engineers from a minority ethnic group from 3.8% to 9% by 2010. In 2005 our diversity and education team attended 36 events, reaching almost 150,000 young people across Britain and providing positive role models to attract engineers from all backgrounds regardless of gender or race. Here are some of the highlights from the year: • increased understanding of equality and diversity issues among our employees and managers through awareness workshops • designed and ran interactive energy and engineering challenges in schools, communities and organisations • developed a leaflet in partnership with the Black Training and Enterprise Group, encouraging young people to consider British Gas as a career • targeted advertising at publications for teenage girls such as Cosmo girl, Bliss and Sugar magazine – and used ‘freebies’ such as British Gas Engineering Academy lip gloss, a big hit at careers fairs • created an ‘It’s a gas challenge’ – an interactive curriculum-based training tool for schools • produced a recruitment video starring a diverse group of engineers • relaunched the schools and communities section of the British Gas Engineering Academy website attracting more than 35,000 visitors since September 2005 • spoke at the House of Commons about female engineers and their position in our industry. 91 Corporate Responsibility Report 2005 www.centrica.com/cr05 Employees Case studies continued Table 1 – Industrial staff employed by British Gas as at December 2003 Industrial staff employed 2003 Total number Male Female White Ethnic group No response 8,341 99% 1% 87.6% 2.7% 9.7% Industrial staff employed 2005 9,424 98.8% 1.2% 88.14% 3.84% 8.01% Our 2005 successes go some way to shaping our plans for 2006 – more of the same. We will focus our efforts on working with schools and communities to increase the talent pool from which we recruit. We will also continue to improve our advertising, website and literature, ensuring we use today’s methods to attract tomorrow’s engineers. 92 Corporate Responsibility Report 2005 www.centrica.com/cr05 Environment Reducing our carbon footprint In 2005 Centrica Energy generated almost 12 TWh of electricity and produced more than three billion therms of gas. In May we produced our first green power from our 26MW onshore wind farm at Glens of Foudland, Aberdeenshire. Centrica was named as the country’s greenest energy supplier by the environment charity WWF-UK for the way we limit carbon dioxide emissions and manage our climate change risks. Our operations havea significant impact on the environment. We are committed to managing the direct impact of our activities and to helping our customers use our products and services in an environmentally responsible manner. We focus on: Reducing our impact on climate change By managing our environmental impact we seek to contribute to the creation of a sustainable low carbon future whilst ensuring security of energy supply. Improving energy efficiency We are developing products and services to help our customers, shareholders and wider stakeholders use energy more efficiently. Renewable energy Making significant investments in renewable energy technologies is helping us reduce our carbon profile and increase the diversity of our fuel mix Biodiversity We are implementing a new biodiversity strategy to ensure that we proactively identify and manage biodiversity issues in areas near our operations. Power generation We run seven gas-fired power stations in the UK and two in North America. Together these stations provide total generation capacity of 3,306 MW. Gas production and storage We play a key role in the development and exploitation of UK and European offshore gas reserves. Resource efficiency A continuous improvement programme helps us to reduce our own energy use, the impact of our transport fleet and the waste our operations produce. Involving our employees Informing and engaging our employees on environmental matters is key to reducing our impact and achieving our goals. Environmental management systems Our environmental management systems ensure that we manage our impacts effectively and identify opportunities for improving our performance. 93 Corporate Responsibility Report 2005 www.centrica.com/cr05 Environment Climate change Climate Change is probably the biggest single environmental issue the world has to face both today and in the future. Our view is that climate change is happening and human activity is contributing to it, so we therefore need to develop policies and action plans aimed at firstly slowing and, eventually stabilising the processes which are causing the change. This will take a significant effort and there are some who say that even such a modest goal is unrealistic. Whilst it may be difficult achieve, a gradual slowing and eventual stabilisation of green house gas emissions is possible and we are committed to play our part in the process and to support Government policy and action plans aimed to achieve this. As a leading energy company Centrica is taking steps to help reduce its overall impact on climate change both directly through our own business activities and also indirectly through supply chain management and by helping our customers to use energy more efficiently. Our energy and carbon strategy for the next five years is currently in development and we are consulting with our stakeholders on our planned approach. Renewable energy Investing in renewable energy technologies is helping us reduce our carbon profile and increase the diversity of our fuel mix. Energy Efficiency Commitment We play a leading role in tackling fuel poverty and climate change by championing the efficient use of energy. Emissions trading Centrica is a strong supporter of the EU Emissions Trading Scheme and an active participant in the traded market. Resource efficiency We are committed to reducing our own energy use, the impact of our transport fleet and the waste from our operations produce. 94 Corporate Responsibility Report 2005 www.centrica.com/cr05 Environment Renewable energy As part of its commitment to reduce carbon emissions and to tackle climate change, the UK Government has placed a ‘renewables obligation’ on all energy suppliers, requiring 15% of their power to be sourced from renewable means by 2015. Centrica is investing £750 million over the next few years in the development of its own renewable generation assets, primarily offshore wind farms, which will help it to meet a portion of its obligation and deliver ‘green’ electricity to customers. In addition to developing our own assets, we meet our renewables targets by contracting directly with generators of ‘green’ power or by buying green certificates, otherwise known as Renewables Obligation Certificates (ROCs), which guarantee that power purchased has been generated by renewable means. Centrica has given strong support to independent generators including those developing biomass, wind and landfill technologies. We currently source around 5% of the electricity we supply to our customers from renewable sources. In 2004/05, the last year for which figures are available, we were the only large supplier to meet our renewable obligation solely through presenting ROCs. Centrica’s ROCs come from independent green generators and from our own renewable sources. 95 Corporate Responsibility Report 2005 www.centrica.com/cr05 Environment Renewable energy continued GB Renewables obligation compliance by supplier (Compliance by supplier) British Energy Centrica E.ON EDF Energy GDF RWE npower Scottish Power SSE Other 0 37% 0.5m 1m 0% 14% 100% 90% 63% 60% 73% 80% 1.5m 2m 2.5m 3m CP3 Renewables Obligation (MWh) ROCs Presented Buy-Out British Energy Centrica 187,607 1,130,997 1,871,111 - E.ON 2,617,525 295,099 EDF Energy 1,614,942 937,020 GDF 452,666 ROCs Presented (m) Buy-Out (m) RWE npower 1,644,583 1,087,635 Scottish Power SSE 945,369 345,116 1,860,402 458,034 Other 114,309 198,652 ROCs Presented (m) Buy-Out (m) Source: Ofgem Annual Report 96 Corporate Responsibility Report 2005 www.centrica.com/cr05 Environment Renewable energy Our investment in renewables continued Stakeholder consultation We engage widely with our stakeholders on our renewables projects and are committed to working with local communities at every stage. Information ranging from initial documents to survey plans are circulated to interested parties, enabling them to comment and provide further information where necessary. We hosted public and special interest group visits to our Glens of Foudland wind farm in Aberdeenshire. One local school took part in a project about the wind farm and in the official opening. Other schools have visited the site or had visits from members of the development team to explain their work and to answer questions. Centrica is also part-sponsoring the redevelopment of Lincolnshire Wildlife Trust’s popular Gibraltar Point nature reserve visitor centre in Skegness and has supported its grant applications for funds to enable the work to go ahead. We are working with centre management and education staff there to help raise awareness of renewables development and the importance of such measures to protect our environment and tackle climate change. Centrica’s first wind farm, the Glens of Foudland in Aberdeenshire, began full commercial generation in July 2005. Our Barrow wind farm is well on the way to completion; full commercial generation is expected during the first half of 2006. Lynn and Inner Dowsing are two consented wind farms to be built off the Lincolnshire coast, east of Skegness. Construction will begin in 2007. Centrica’s proposed construction projects in the UK Government’s ‘second round’ of offshore wind developments, which include the ‘Lincs’ development, are not expected to begin until 2008. Environmental surveys have been carried out over a two-year period to identify potential effects and to allow methods of lessening them to be planned. The Docking Shoal and Race Bank form another proposed round two wind farm development for which we hope to submit our consent application during 2007. As an electricity generator we have an interest in looking at alternative fuels for our power stations. Biofuels have the potential to offer significant environmental benefits; Centrica has tested their use and is looking at ways of using this form of fuel. The Company is pioneering the development of micro CHP for smallscale and domestic applications. The ability to use gas not just to provide heat but also to generate electricity will bring significant benefits to our customers and to the environment. Centrica is also investigating the use of other sources of renewable energy such as small-scale wind turbines, heat pumps and solar heating. Consultation and impact assessment Lincs is the first of Centrica’s prospective developments in the socalled ‘second round’ of offshore projects. This year we expect to seek consent to progress work on this 250MW project. Environmental surveys have been carried out over a two-year period to identify potential effects and to allow methods of lessening them to be planned. The first public exhibitions outlining the detail of the Lincs project were held in November in Skegness, Hunstanton and King’s Lynn, and a questionnaire was circulated in May 2005 to more than 22,000 households and businesses in the Skegness area to seek views on the proposal. The survey generated a 15 per cent response. Almost 85 per cent of those who responded were in favour of the development. The Docking Shoal and Race Bank are planned for thr second-round project. Survey work is now underway, and Centrica is committed to liaising with interested stakeholders to build an understanding of the sites and of any issues that their prospective development might raise. Consent applications are expected to be submitted during 2007. 97 Corporate Responsibility Report 2005 www.centrica.com/cr05 Environment Biodiversity We are developing a biodiversity policy and plan through our Environmental Strategy Group. The policy and action plan will reflect the scale and nature of our operations and activities, in particular those related to power and gas assets in the UK and overseas. We aim to have the policy and plan completed before the end of 2006. We aim to enhance the biodiversity of the environment within the boundaries of our sites and we will work with local agencies, interest groups and schools to contribute to the environment outside them. Our biodiversity action plan will also include developing greater awareness of our impact on the environment among our employees and steps they can take to improve our performance. Base line surveys and existing issues A number of our power stations and gas assets are located in or close to very sensitive environments, in particular Humber and Roosecote power stations. These two facilities have undertaken a baseline environmental survey, as has our Peterborough power station. It is our intention to have baseline biodiversity studies carried out on all upstream and power station assets by the end of 2007. Exploration in Nigeria Biodiversity and environmental protection will be at the forefront of our new exploration activities in Nigeria. Environmental and social impact assessments will be undertaken to give us baseline information. We will work with the national and local environmental agencies and with community groups to understand our environmental and social impact. Centrica will develop, together with these interest groups, an environmental management system to protect and enhance the environment and to develop a greater awareness of its environmental and biodiversity obligations. Gas production and storage Centrica plays a key role in the development and exploitation of UK and European offshore gas reserves. Our Morecambe Bay field remains our key gas asset but we are developing, together with other organisations, gas reserves in Norway and other fields on the UK continental shelf. The reserves in UK waters are starting to decline and our dependence on foreign supplies will increase. Future gas supplies will come from a variety of countries. Much will be piped from places such as Norway and Russia, while the rest will be shipped as liquefied natural gas (LNG). Some LNG will come from new sources including West Africa. We are developing an LNG capability in Nigeria. This will involve the whole process of seismic exploration and the building of onsite oil and gas infrastructure and pipelines. We are committed to ensuring that we conduct our activities to the highest ethical, social and environmental standards. To support our strategy, we have secured regasification capacity at the Isle of Grain LNG terminal and are one of four partners involved in the development of an LNG import facility at Canvey Island, Essex. The proposed terminal would offer regasification capacity of 5 billion cubic metres and we are currently working with a range of stakeholder during the planning permission process. Centrica also plays an important strategic role in UK gas storage. Our Rough facility in the North Sea is the country’s largest. When gas supply is plentiful, we store the excess capacity in the offshore field. When additional supply is required, we release this gas back into the UK network. This balancing is important in maintaining gas supply – particularly if weather patterns become less predictable in the future. Incident at Rough gas storage facility An incident on 16 February 2006 resulted in an explosion and fire at our Rough gas storage platform, causing the facilities to be evacuated and shut down. Injuries were sustained by several employees. All safety and emergency systems worked as designed, to contain and control the fire. The incidence response procedure ensured effective evacuation. A detailed investigation by the Health and Safety Executive (HSE) is ongoing and it would be premature for us to speculate on the results of that investigation. We understand that the HSE is focusing on the apparent catastrophic failure of a cooler unit. Our current best estimate of the date of resumption of injection operations is 1 June 2006. Our current best estimate is that full production rates will be available from 1 October 2006 at the latest. Both these estimates remain subject to change. To read our latest update report on the incident please visit www.centrica-sl.co.uk 98 Corporate Responsibility Report 2005 www.centrica.com/cr05 Environment Gas production and storage Gas production continued Accidental spills Offshore operators are required to report Hydrocarbon Resources Limited (HRL) is the Centrica subsidiary that operates the offshore Morecambe gas fields and onshore gas processing terminals at Barrow-in-Furness. At peak production around 15% of UK gas supply is obtained from this source. Morecambe reserves are in decline and as such we are pursuing opportunities to acquire sources of additional capacity. Our environment policy seeks to protect the natural environment, the conservation of resources and promote the principles and practices of sustainable development. Our policy is delivered through an Environmental Management System (EMS), which was certified in February 2001 and re-certified in February 2005 against the international standard ISO14001. Areas of environmental focus within the HRL environmental management programme are: Atmospheric emissions • Exhaust gases produced by combustion of fuel gas or diesel for power generation • Exhaust gases produced by the gas turbine-powered compressors used to export gas to onshore terminals and onward to the national transportation system • Flaring or venting of hydrocarbon gas. Produced water discharges to sea Formation water found in gas reservoirs is produced in small quantities as a byproduct with the gas. This ‘produced water’ is treated to remove hydrocarbon condensate with treated water discharged into the sea. Through treatment system design and performance monitoring, the hydrocarbon content in the produced water is restricted to an industry agreed limit, currently of 30 parts per million by volume. every hydrocarbon spill into the sea, to carry out an investigation into the causes, and to take steps to avoid recurrence. Unlike oil production installations, gas producing platforms have only small inventories of hydrocarbon liquids, namely hydrocarbon condensate and diesel fuel. Chemical use and discharge Offshore gas production utilises bulk chemicals to assist the required physical processes. Large machines such as compressors and pumps require lubricants. Steel structures and pipework need protection against corrosion. Waste management As with any industrial activity, solids and liquid waste streams are created. All offshore waste is transported onshore for disposal. Gas flaring/venting Natural gas is a valuable commodity and flaring and venting operations are minimised to secure maximum commercial value. Small amounts of gas are, however, burnt (carbon dioxide emissions) in flare systems or vented (methane emissions) for the following purposes: 1. Planned depressurisation of gas inventories to allow plant maintenance, repairs or modifications to be carried out. 2. Emergency depressurisation of gas inventories in response to safety protection systems operating. 3. Disposal of small purge flows from gas blanketing systems in flammable liquid storage tanks or to maintain flare/vent systems free of oxygen. Offshore, the Department of Trade and Industry controls gas flaring and venting by means of a licence known as ‘a consent.’ The consent places a ceiling for the volume of gas lost in this way and requires monitoring and reporting of the gas flared or vented annually. At the terminals, flaring and venting are included in the emissions authorisations. Offshore operators are being encouraged by Government to operate a flare consent transfer system. The intention is to establish targets for reducing the amount of flaring and venting as part of the UK’s undertaking under the Kyoto Protocol. The scale of the Morecambe operation and the already low frequency of flaring and venting provide no opportunity for meaningful participation in such a scheme. Ozone depletion Ozone depleting chemicals are used in fire suppression systems, e.g. halon, and also in some air conditioning and industrial refrigeration systems, both onshore and offshore. We continue to assess viable alternatives to the existing chemicals and to minimise losses through leaks, to reduce the environmental impact. In our South Morecambe gas processing plant we have replaced freon, a CFC and ozone-depleting chemical, with R22, an HFC. Although R22 is significantly less ozonedepleting than freon, it does have a global warming potential some 1,700 times that of carbon dioxide. We are committed to minimising losses and to working with a national user group to identify and assess alternative refrigerants. Halon manufacture has been phased out world-wide and there are timetables in place for restrictions on refilling fire suppression systems and, ultimately their removal or replacement. We have plans in place to replace our halon fire suppression systems, where appropriate, using alternative suppressants, at a cost of £6.6 million. 99 Corporate Responsibility Report 2005 www.centrica.com/cr05 Environment Gas production and storage Gas storage continued Onshore, discharged water is passed through carbon filters and a caustic dosing plant to reduce contaminants. The resulting effluent is analysed to ensure compliance with discharge limits set by the Environment Agency. Surface water from the process areas passes through an oily water separator into a retention pond. The effluent is analysed to ensure compliance with discharge limits before it is pumped to the storm water sewer with almost no effect on the marine environment. Emissions to land Waste from offshore is returned to the base at Immingham and, together with waste from onshore activities, is disposed of by licensed waste disposal companies. Recycle/reuse Condensate, a by-product from gas processing, comes onshore and is stabilised before being sold for other uses. Waste oil is recovered both offshore and onshore for recycling off-site. Methanol is injected onshore to prevent hydrate formation in the pipelines. It is recovered from the produced water and stored for reuse. Scrap metal and waste paper are collected offshore and onshore for recycle and reuse. Energy Most of the energy consumed offshore is required to drive the gas re-injection compressors. Energy consumed onshore operates the gas compressors and large process heaters and is related to customer needs. Rough is currently predicted to last until 2029 but is subject to regular review. On decommissioning, the platforms and other equipment will be completely removed. Transport Supply and support vessels transport materials and equipment to the offshore platforms from the Immingham support base and return waste onshore. People travel to and from the platforms by helicopter from the heliport at Kirmington. Atmospheric emissions are reduced by using low sulphur fuels and minimising the number of shipments and flights. Centrica Storage operates the Rough field, the UK’s largest gas storage facility, 18 miles off the East Yorkshire coast. The two offshore complexes are connected to the gas processing terminal at Easington via a 36-inch diameter pipeline. This depleted natural gas field has a reservoir located about 3,000 metres under the sea bed and is designed to inject gas to a total storage capacity of 2,800 million cubic metres. This stored gas is available to be piped back into the National Transmission System (NTS) at rates of up to 42 million cubic metres a day. This is equivalent to about 10% of the total gas supplied in Britain during the coldest day in winter. Areas of environmental focus in the environmental management programme are: Atmospheric emissions Atmospheric emissions arise from the combustion of natural gas, producing carbon dioxide, oxides of nitrogen, carbon monoxide and unburnt hydrocarbons. Sulphur dioxide is produced from the combustion of diesel offshore and transport operations. Emissions to water Discharges to water from offshore operations include small quantities of water associated with gas processing together with discharges of sewage, cleaning and maintenance chemicals and service water from the accommodation facilities. Sea water is used in the cooling water systems with a minimal impact on the marine environment. 100 Corporate Responsibility Report 2005 www.centrica.com/cr05 Environment Gas production and storage Emissions trading continued This method of trading allowances gives companies flexibility in meeting emission reduction targets – by reducing emissions on site or by buying allowances from other companies. This facilitates carbon abatement at the lowest cost and is therefore the most economically efficient solution. Our power stations, gas installations and Rough gas storage facility are all covered by the scheme. We are active in the emissions market through our Accord trading arm. We are also participating in the Clean Development Mechanism (CDM) and the Joint Implementation (JI) market. The CDM/JI market is another part of the Kyoto Protocol and promotes projects in another country, leading to lower emissions (compared with what would have happened had the project not taken place). Our externally verified data for 2005 will be published here by the end of May 2006. Centrica is a strong supporter of the EU Emissions Trading Scheme (ETS), which began in January 2005. The first phase runs to 2007 and the second from 2008 to 2012. The EU ETS is designed to tackle emissions of greenhouse gases, mostly carbon dioxide, and combat the threat of climate change. It follows a similar voluntary scheme that has been running within the UK since 2002. EU member state governments fix an emissions cap for all installations covered by the scheme, set out in a National Allocation Plan. Installations must hold an emissions trading permit, which is, in effect, a licence to operate and emit carbon dioxide. The scheme allows companies to emit more than their allowances (each allowance represents one tonne of carbon dioxide) by buying allowances from the market. A company emitting less than its allocation can sell its surplus allowances. 101 Corporate Responsibility Report 2005 www.centrica.com/cr05 Environment Power generation Centrica currently runs seven gas-fired power stations in the UK and three in North America. All of the UK stations environmental management systems have been certified to ISO14001 and two of them have been verified to the European Eco Management and Audit Scheme (EMAS). Together, these stations provide total generation capacity of more than 3.3 GW. In addition, we are constructing a new CCGT power station in the South West of England at Langage. The new station will have a generating capacity of up to 1010MW and we anticipate that generation in 2008/09. Gas is the cleanest fossil fuel from which to generate electricity. We have the highest number of gas-fired power stations in the UK which, helps us to generate electricity with a reduced environmental impact. Gas prices and availability will become less stable in both the short and long term and as such Centrica is reviewing its ‘energy mix’ at the same time as responding to the UK Government’s Energy Review consultation. During 2006 we will see all UK power stations move from being regulated under Integrated Pollution Control to come under the new pollution prevention control regulations (PPC). The PPC applications are publicly available and contain a significant amount of information about each of the stations. Centrica is also actively involved in the European Union Emissions Trading Scheme (EU ETS). The EU ETS is designed to tackle emissions of greenhouse gases, mostly carbon dioxide, and combat the threat of climate change. Environmental regulations and our carbon trading obligations have focused our attention on ensuring that we apply the best available techniques to our operations. In 2006 we will adopt improvement programmes at our power stations and our upstream assets. Our aim will be to optimise our activities to minimise our environmental impact and improve our operational efficiencies. On a smaller scale we are pioneering the development and uptake of domestic mini combined heat and power units. These will operate on state-of-the-art fuel cell technology and will provide both hot water and also electricity whilst producing lower overall emissions and less reliance upon the national grid electricity supply. 102 Corporate Responsibility Report 2005 www.centrica.com/cr05 Environment Power generation continued Management and compliance Our power station teams are committed to achieving high standards in environmental performance. Our processes are designed to ensure the highest standards of environmental management are delivered and procedures are reviewed on a regular basis. In 2005 Centrica received no fines or penalties for its environmental operations. Where minor environmental incidents occur, however infrequently, steps are taken to address these as quickly as possible. Pollution Prevention Control (PPC) Pollution control is a very important part of the environmental management systems we operate in our power stations. Pollution control also forms part of the remit of The Environment Agency, which has responsibility for monitoring and regulating the impact that industry has on air, land and water quality. The Environment Agency conducts an annual appraisal of the environmental risks posed by a range of businesses including power generators. Each of our UK power stations has been assessed and awarded an Operator Performance Risk Appraisal (OPRA) under this process. Peterborough Location Storeys Bar Road, Peterborough Cambs PE1 5NT. Date acquired by Centrica October 2001. Fuel The station can burn both gas and distillate. Running regime The power station offers flexible operations, typically starting up and shutting down on a daily basis thereby meeting the demands of Centrica’s customers in a challenging market. Total amount of electricity generated in 2005 804 GWh. Air Emissions Pollutant Oxides of Nitrogen Sulphur Dioxide Carbon Monoxide Carbon Dioxide 2005 Total Mass Emissions per annum (Tonnes): 6 1.1 1.1 0.8 103 Corporate Responsibility Report 2005 www.centrica.com/cr05 Environment Power generation continued Water management Peterborough Power Station has an air-cooled condenser to eliminate the need for cooling water. It makes use of a grey water supply provided by Anglian water’s sewage treatment plant in Peterborough. This grey water prevents the use of clean potable water from the towns supply, and it reduces the unnecessary use of chemicals to regenerate the ion exchange resins which we use to demineralise the water to protect the power stations boilers and steam turbine. This helps Peterborough Power Station to protect the environment through reduced chemical use. Awards Peterborough Power Station has been awarded the Investors in People Award with staff training being considered key in ensuring the site has a very competent workforce which is completely in tune with health, safety and the environment. Community The Power Station holds an Open Weekend, annually, where members of the public can come to the site and learn more about the operation of the plant. Frequent site visits which are hosted for various interest groups including schools and societies. Peterborough Power Station will continue to support environmental projects in the local community. Previous projects have included the Peterborough Green Wheel Cycleway, Flag Fen Bronze Age Excavation and the Wildlife Trust. Roosecote Location Barrow-in-Furness, Cumbria, LA13 0PQ. Date acquired by Centrica 14th May 2003. Fuel The station is dual fuel with the capability to burn both gas and distillate. Running regime The power station offers flexible operations in order to meet the demands of Centrica’s customers in a challenging market. Total amount of electricity generated in 2005 805 GWh. Air Emissions Pollutant Oxides of Nitrogen Sulphur Dioxide Carbon Monoxide Carbon Dioxide 2005 Total Mass Emissions per annum (Tonnes): 623 7.7 6 Data available late May 06 104 Corporate Responsibility Report 2005 www.centrica.com/cr05 Environment Power generation continued Water management Roosecote Power Station is water-cooled. The station abstracts water from Cavendish dock. The water is returned to the dock at up to ten degrees Celsius higher than ambient temperatures. As a result the dock is extremely attractive to a range of wildlife, including exotic species not normally found in the UK. It is an exemplary demonstration of collaborative working between power generators, landowners and the environmental regulators. Community The role of Roosecote power station in sustaining the benefits of the heated discharge to Cavendish Dock has been recognised by the English Nature. Glanford Brigg Location Scawby Brook, Brigg, Humberside, DN20 9LT. Date acquired by Centrica Summer 2002. Fuel The station is dual fuel with the capability to burn both gas and distillate. Running regime The power station offers flexible operations, typically starting up and shutting down on a daily basis thereby meeting the demands of Centrica’s customers in a challenging market. Total amount of electricity generated in 2005 587 GWh. Air Emissions Pollutant Oxides of Nitrogen Sulphur Dioxide Carbon Monoxide Carbon Dioxide 2005 Total Mass Emissions per annum (Tonnes): 623 7.7 6 Data available late May 06 Water management Water is extracted from the nearby River Ancholme for two purposes, firstly cooling and secondly, for conversion in the demineralisation plant to process water. Cooling water is circulated using large vertical pumps and is passed to the cooling towers where it is cooled and for re-use. Awards Glanford Brigg Generation Station has been awarded the Royal Society for the Prevention of Accidents (ROSPA) Gold Medal. The site has also attained the Investors in People Award for its development of a competent workforce. Community In 2004 Glanford Brigg Generation Station raised £2700. This money was used to sponsor local junior football teams, scout groups as well as being donated to Scawby Primary School and Local under 5’s playgroup to help fund new buildings, a local animal sanctuary and carer support groups. Work has now begun with local schools to build a partnership so that Brigg Power station can participate in and support active learning as part of the curriculum. 105 Corporate Responsibility Report 2005 www.centrica.com/cr05 Environment Power generation Kings Lynn continued Location Willows Business Park, Saddlebow, Norfolk, PE34 3RD. Date acquired by Centrica October 2001. Fuel The station burns gas. Running regime The power station offers flexible operations, typically starting up and shutting down on a daily basis thereby meeting the demands of Centrica’s customers in a challenging market. Total amount of electricity generated in 2005 818 GWh. Air Emissions King’s Lynn Power Station has planned a Survey of its emissions to air and water monitoring equipment for 2005 and maintenance tasks to ensure compliance with EN14181 Quality Assurance of automated measuring systems. Air Emissions Pollutant Oxides of Nitrogen Sulphur Dioxide Carbon Monoxide Carbon Dioxide 2005 Total Mass Emissions per annum (Tonnes): 289 91 13 Data available late May 06 Water management Kings Lynn Power Station uses an air-cooled condenser to eliminate the need for cooling water. Some town’s water is used to provide make-up water for the boiler and steam turbine. This water is treated by the power station to removal harmful minerals that would damage the equipment at the station. Awards Kings Lynn Power Station has been awarded the Investors in People Award with staff development being considered key in ensuring the site has a very competent workforce. Barry Location Sully Moors Road, Sully, Vale of Glamorgan, CR64 5YU. Date acquired by Centrica July 2003. 106 Corporate Responsibility Report 2005 www.centrica.com/cr05 Environment Power generation Fuel The station burns gas. continued Running regime The power station offers flexible operations, typically starting up and shutting down on a daily basis thereby meeting the demands of Centrica’s customers in a challenging market. Total amount of electricity generated in 2005 716 GWh. Air Emissions Pollutant Oxides of Nitrogen Sulphur Dioxide Carbon Monoxide Carbon Dioxide 2005 Total Mass Emissions per annum (Tonnes): 289 0 16.4 Data available late May 06 Water management Barry Power Station uses an air-cooled condenser to eliminate the need for cooling water. The town’s water is used to provide make-up water for the boiler and steam turbine. This water is treated by the power station to removal harmful minerals that would damage the equipment at the station. Barry Power Station has planned a comprehensive ground survey of its drainage systems to ensure integrity of system and the protection of controlled waters. Community Barry Power Station, through the Barry Foundation, at the time of build, donated £600,000 to the Bananal Island Project in Brazil. This project involved the reforestation of indigenous trees. In recognition of its donation, the first six million tons of carbon to be sequestered from the air by the forest will be accredited to Barry Power Station. It is estimated that if Barry Power Station were to operate at max load for its estimated life cycle it would produce less than 6 million tons of carbon. South Humber Bank Location South Marsh Road, Stallingborough, Northeast Lincolnshire, DN41 8BZ. Fuel The station burns gas. Running Regime The power station is a joint venture between Centrica and Total and offers flexible operations in order to meet customer demand in a challenging market. Total amount of electricity generated in 2005 = 7,618 GWh 107 Corporate Responsibility Report 2005 www.centrica.com/cr05 Environment Power generation continued Air Emissions Pollutant Oxides of Nitrogen Sulphur Dioxide Carbon Monoxide Carbon Dioxide 2005 Total Mass Emissions per annum (Tonnes): 2969 0 61.8 Data available late May 06 Water Management Cooling water is drawn from, and returned to, the River Humber under a license granted by the Environment Agency. A small amount of mains water is used on site for domestic purposes. Industrial water is also supplied to provide make-up water to process via a demineralisation plant. The site has two small sewage treatment plants to treat domestic waste prior to return to the River Humber. However, since 2000, these plants have been regularly emptied by tanker and recycled. Killingholme Location Chase Hill Road, North Killingholme, Immingham, North Lincolnshire, DN40 3EH. Date acquired by Centrica July 2004. Fuel The station burns gas. Running regime The power station offers flexible operations, typically starting up and shutting down on a daily basis thereby meeting the demands of Centrica’s customers in a challenging market. Total amount of electricity generated in 2005 3053 GWh. Air Emissions The site provide financial support to the local community and local authority and has purchased an air quality monitoring station at a local school. The data from the station is shared with the local community at the environmental liaison committee, demonstrating to our neighbours that our emissions have no significant impact on the local air quality. Air Emissions Pollutant Oxides of Nitrogen Sulphur Dioxide Carbon Monoxide Carbon Dioxide 2005 Total Mass Emissions per annum (Tonnes): 1803 3.5 331.1 Data available late May 06 108 Corporate Responsibility Report 2005 www.centrica.com/cr05 Environment Power generation continued Awards In 2004 Killingholme Power Station was awarded the Royal Society for the Prevention of Accidents (ROSPA) Gold Medal and was re-accredited with the Investors in People award in recognition of the continuous development of our staff in the areas of health, safety and the environment. Community Over the past year, we have continued to develop relationships with external interested parties by promoting the use of the Killingholme visitor centre. Our UK fuel mix Breakdown by fuel type for the year from April 2004 to March 2005 Coal 14% Natural Gas 62% Nuclear 16% Renewable 5% Other 3% Breakdown by fuel type for the year from April 2004 to March 2005 Fuel Type Percentage (%) Coal Natural Gas Nuclear Renewable Other Total 14 62 16 5 3 100 These figures are for electricity supplied by Centrica (British Gas) overall. 109 Corporate Responsibility Report 2005 www.centrica.com/cr05 Environment Resource efficiency The efficient use of energy is a cornerstone of our approach to sustainability. We are a leading provider of energy-saving capital through our Energy Efficiency Commitment. We also lead by example and use our own resources and materials effectively through waste reduction programmes and recycling. Energy management programmes are key to the way in which we run our facilities. We have implemented comprehensive data monitoring and logging at our main offices and operational sites. This data is used, for example, to optimise the heating and cooling of offices, reducing our energy demand and cutting costs. We have also improved how our building management systems work and introduced new ways of maintaining our facilities. Our asset teams apply the best available operational techniques to minimise our environmental impact. We are looking at how we can use this principle to better identify ways of operating – through our Group Environmental Management System. We seek to enhance our employees’ working experience, enabling them to bring value to the business whilst ensuring they have the right work-life balance. We strongly support home working and provide the equipment to make this possible. The company has invested in teleconferencing and videoconferencing, which cuts down travelling and car use, thus reducing our environmental emissions. Initiatives We have implemented a programme that helps us reduce our own energy use, lessen the impact of our transport fleet and cut the waste our operations produce. Resource efficiency Target** by end 2005 based on 2000 baseline Vehicle fuel use Building energy use Waste disposal from offices Recycling rates in offices -13% -15% -15% 50% Progress by end of 2004 -8% -15.5% -44% 51% Progress by end of 2005 -8% -32.9% -35.75% 60% ** Our 2000 baseline is normalised against FTE and takes into account changes to the structure of the company such as the acquisition or sale of a facility or business. 110 Corporate Responsibility Report 2005 www.centrica.com/cr05 Environment Resource efficiency Reducing our energy use continued Centrica has made significant progress in reducing the carbon footprint of our operations. Our 2000-2005 environmental action plan set a target of reducing electricity use in our offices by 15%. However, through a combination of improved energy management and consolidation of our properties, we achieved a reduction of 32.9% (excluding data centres). Electricity consumption in 2005 was down by 2,244 tonnes CO2 (6.7%) and overall gas consumption reduced by 48.9% against our 2000 baseline. We continued to install sub-meters at our offices during 2005. This technology enables us to monitor energy usage remotely, delivering sustained savings through greater efficiency. Our 2006-2010 action plan will target further reduction in our energy consumption. In 2006 we aim to reduce electricity and gas usage by 5.78% and 9.33% respectively, cutting emissions of CO2 by 6.39% against the 2005 baseline. Centrica energy management programme results, December 2005 Centrica Group (excluding CIS) Electricity (kWh) Gas (kWh) Tonnes CO2 Conditioned floor area (m2) FTEs CO2/m2 CO2/FTE 2000 89,646,431 52,271,292 48,480 223,715 19,696 0.22 2.46 2005 60,722,433 26,720,700 31,188 155,955 18,891 0.20 1.65 % change -32.3 -48.9 -35.7 -26.5 -4.1 -12.5 -32.9 Waste reduction In 2005 we introduced our ‘Paperchase Challenge’ with the aim of cutting paper use in Centrica offices by a further 10% on 2004 figures (24.1% reduction). By the end of the year we had achieved an overall reduction of 23%. We are now looking at more innovative ways to cut the use of paper and in 2006 we have set a target reduction of 10% on the 2005 figure. Waste recycling Waste recycling is an important part of our environmental stewardship. We set a 2005 objective of recycling 50% of office waste (mainly paper and related materials). We achieved an overall figure of 59.57% but some locations were better than others. Our 2006 target is to achieve an overall 62% recycling figure. 111 Corporate Responsibility Report 2005 www.centrica.com/cr05 Environment Resource efficiency continued Use of technology We invest in technology such as video, web and teleconference facilities to enable our people to ‘meet’ colleagues in different locations without the need to travel. All British Gas engineers have deployment systems that route them to the nearest job by post code, which has reduced driving distances and time, improving our customer service. Fleet operations Centrica operates a fleet of around 9,500 vehicles, including British Gas vans and company cars. In 2005 our commercial vehicle fleet covered more than 100 million miles and used 13.8 million litres of diesel. Changes to the Centrica fleet since our first five-year action plan was introduced mean that the 15% fuel reduction target has not been achieved. Issues such as changes in vehicle weights and specifications and energy losses through equipment such as air conditioning were not initially predicted. Our 2006-2010 action plan includes the development of a verifiable database for fuel use and the implementation of a fuel management programme with targets. Vehicle replacement programme We are maximising the use of new vehicles equipped with the latest lowemission engines. We use whole-life costing in the choice of operational vehicles and company cars to ensure that the most appropriate vehicle and fuel type is chosen and that fuelefficient vehicles are favoured. Regular maintenance on vehicles is carried out to ensure they meet emission standards and to ensure that the vehicles are in optimum condition. We are developing a revised fuel strategy that will ensure maximum benefits are made of latest vehicle technologies. We are also investigating the possibility of using biofuels to power our vehicles. Management information We have improved our fleet management information to offer better quality data on the fleet, focusing on fuel used by each driver/vehicle. Highrisk drivers are identified and provided with training to help them improve their driving style to reduce the risk of accidents. We benchmark performance data against that of other leading companies with similar vehicle fleets. Influencing our supply chain In terms of resource efficiency, there is only so much we can achieve ourselves, so we encourage our suppliers to help us to deliver improvements. In 2005 we undertook an audit to assess the quantities and types of paper we use across the Group. Our aim is to use as much recycled paper as possible. We worked with our suppliers to test the paper we use for billing and successfully trialled a 50% ‘recovered’ paper for our bill inserts. From May 2006 we will print all British Gas bills and inserts on ‘Era Silk’, a paper made from 50% recovered paper and 50% virgin fibre. The recovered paper is sourced locally (79% of it from within a 100-mile radius of the mill), reducing the amount of waste sent to landfill and the distance the raw material has to be transported. The virgin fibre is all Forest Stewardship Council certified, originating from well-managed forests and controlled sources. Flexible working Getting the work-life balance right is very important for the company and its employees. We support home working and provide staff with broadband connections and laptops. This reduces car travel, which means reduced emissions and less risk of road accidents. 112 Corporate Responsibility Report 2005 www.centrica.com/cr05 Environment Management systems Environmental management systems Centrica has successfully implemented ISO14001 certified environmental management systems in all its major assets. Two of our power stations have also had their management systems verified to the European Union’s ecomanagement and audit regulation system, EMAS. These systems help ensure that we manage our environmental risks, reduce our impact on the environment and identify opportunities for improving our performance. The main requirements are that we: • assess the significance of the effect our activities can have on the environment • implement robust controls to manage our environmental performance and set and meet objectives to reduce our environmental impact • commit ourselves to continual improvement, to preventing pollution, and to complying with environmental legislation and regulations. Our 2006-2010 environmental action plan has identified the need for a revised Group Environmental Management System (GEMS). We have increased our upstream capability through acquisitions in recent years and now need to consolidate our systems and to ensure a consistent approach. GEMS will provide greater continuity across the business and streamline the process of implementation, audit and certification. It will be developed at group level and cascaded through the business by the end of 2009. Involving employees Centrica developed Natural Capital as its main tool for informing and engaging its employees on environmental matters. Issues addressed include energy savings, reducing waste and recycling. It has been very successful over the years, meeting all its environmental targets. We aim to relaunch Natural Capital in 2006, with the emphasis on our ‘future generations’. Centrica recognises that many of the environmental issues facing our children and our children’s children will be as a consequence of our actions today. Global warming, habitat loss, groundwater contamination and hazardous waste disposal may all have significant effects on future generations if we fail to take steps now to mitigate them. Centrica takes its environmental governance extremely seriously and our next five-year plan sets out a wide range of initiatives aimed at maintaining our environmental leadership. To develop future programmes we are working with our employees on areas such as climate change, recycling and energy conservation and asking what we can do today to ensure the prosperity of those who come after us. We are looking to make this a two-way process involving dialogue with our employees’ children, grandchildren and other young relations. Our environmental education website ‘Think Energy’ provides informative and entertaining information on energy management and energy saving. We will be adding other environmental topics over the next few years. Performance The most significant environmental challenges for Centrica in 2005 were participation in the EU Emissions Trading Scheme and preparing for the Pollution Prevention Control Regulations. In 2005 our first five-year environmental action plan came to a conclusion. It has brought a number of important improvements in Centrica’s environmental performance, particularly in energy efficiency, waste reduction and recycling. We have now developed a new five-year plan, sensitive to changes in business needs and external expectations. Centrica has certification to ISO14001 across all its environmentally sensitive assets. ISO14001 was gained for the first time at Roosecote and Barry power stations. In addition, both Killingholme and Humber power stations retained verification to EMAS. No enforcement action was taken against Centrica under environmental legislation during 2005. Our offices did well on energy conservation and waste management. Energy management figures show an overall reduction over the five-year period of 32.9% (CO2/FTE) against the original target of 15%. This reduction comprises a reduction of 32.3% for electricity (kWh) and 48.9% in gas consumption. Waste recycling reached an average figure of 59.6% during 2005 against the 50% target. Last year saw a 10% reduction in the waste sent to landfill and an increase of 6.8% in waste recycled. Operational waste recycling figures were as high as 63% for hazardous waste recycled and 74% for non-hazardous waste. New targets for waste recycling will be set in the second five-year plan. ‘Paperchase’, our scheme to cut paper use, delivered big savings in the amount of paper we bought. 113 Corporate Responsibility Report 2005 www.centrica.com/cr05 Environment Performance continued Performance data The tables below provide data on our environmental performance across the business. The Trilogy system used for the collection and presentation of the data is being further developed during 2006. These developments will influence what data is being collected and how it is to be represented. Our aim is to further align our reporting with our regulatory data management and reporting obligations. N.B. CO2 data will be released in mid-May of each year following the end of the trading period. Incidents Incidents 2005 half* 4 0 20 2001 IPC Breaches Incidents Complaints (inc noise) 6 0 3 2002 11 0 35 2003 15 2 2 2004 12 13 26 2005 5 30 51 * HRL Only for 2004 & 2005 half years CSL data has only been included in the Full Year of 2005. 114 Corporate Responsibility Report 2005 www.centrica.com/cr05 Environment Performance Air emissions continued Air emmissions Non-Operational Air Emissions 2001 Building energy Gas Electricity Others Total Transport Commercial Company Car Rail Air Total Business Miles Helicopter & Shipping Total Fuel Use Total CO2 (ex production) Total No FTE Efficiency ratio (CO2/FTE) 000 Miles 000 Miles 000 Miles 000 Miles 000 Miles 000 litres 000 litres Tonnes 149,173 72,238 N/A 3,447 224,858 N/A 4,834 80,722 26,489 3.00 181,956 51,772 52 4,993 238,772 3,891 35,066 163,277 38,295 4.26 191,097 87,970 446 7,741 287,254 1,738 31,163 174,987 37,421 4.68 191,877 71,435 1,127 9,070 273,509 2,439 34,981 174,104 38,042 4.58 48,503 59,464 N/A 4,877 112,844 1,270 11,531 77,021 27,874 5.52 100,017 44,728 1,166 10,393 156,304 3,712 17,376 111,195 31,002 3.6 MWh MWh MWh MWh 58,964 97,341 1,857 158,162 57,947 109,293 2,222 169,462 51,514 117,785 2,190 171,489 40,249 108,488 0 148,737 16,002 46,837 0 62,839 27,724 95,435 0 123,159 2002 2003 2004 2005 half* 2005 * HRL Only for 2004 & 2005 half years CSL data has only been included in the Full Year of 2005. 115 Corporate Responsibility Report 2005 www.centrica.com/cr05 Environment Performance Gas production continued Gas Production 2005 half* 2001 Operational Energy Consumption Off-Shore Fuel gas used Diesel used On-Shore Fuel gas used Electricity from National Grid Electricity generated Electricity used Total Energy Consumption Total CO2 Energy Consumed Operational Air Emissions Off-Shore Gas Flared Gas Vented Benzene Fugative On-Shore Gas Flared Gas Vented Benzene Fugative CO2 from Incinerator Methane from NRU’s kscm kscm kg Tonnes Tonnes Tonnes 21,158 477 N/A N/A 120,558 N/A kscm kscm kg Tonnes 6,304 1,676 N/A N/A GWh GWh GWh GWh GWh 3,480 22 19 N/A 4,090 GWh Tonnes 563 494 2002 2003 2004 2005 1,750 494 1,849 1,615 1,383 971 779 40 1,772 1,331 2,350 13 16 N/A 4,136 2,650 15 0 15 4,534 2,709 8 57 65 4,169 1,240 2.2 28 30 2,050 2,651 20.1 49 69 4,509 Tonnes 1,112,899 1,120,232 1,568,152 1,054,106 517,866 1,139,789 5,241 1,403 N/A N/A 5,201 1,707 13 96 6,334 40 0 0 2,613 35 0 0 5,404 1,220 24 96 15,057 528 N/A N/A 451,173 1,498 7,832 394 3 0 281,048 530 8,768 14 0 0 209,342 388 4,089 95 0 0 102,708 185 11,526 906 6 0 176,942 357 * HRL Only for 2004 & 2005 half years CSL data has only been included in the Full Year of 2005. 116 Corporate Responsibility Report 2005 www.centrica.com/cr05 Environment Performance continued Gas production continued Gas Production 2001 On-Shore (continued) Gas & Methane Vented Nitrous Oxide Sulphur Dioxide Freon R22 Carbon Monoxide Unburned hydrocarbons (from PGCs) Total CO2 equivalents from emissions Total Gas CO2 (Emissions and Energy) Gas Produced Efficiency ratio (CO2/mscm) Tonnes Tonnes Tonnes Tonnes Tonnes Tonnes 0 152 N/A 13 14 319 0 447 1 13 512 605 0 555 0 18 497 113 0 357 0 7.8 593 59 0 164 0 0 255 65 0 390 0 22.2 377 142 2002 2003 2004 2005 half 2005 full Tonnes 1,290,554 1,616,535 1,878,465 1,295,256 634,803 1,353,424 Tonnes 2,403,453 2,736,767 3,446,617 2,349,362 1,152,669 2,493,213 mscm 15,065 160 13,265 206 18,070 191 10,802 217 4,995 231 14,647 170 * HRL Only for 2004 & 2005 half years CSL data has only been included in the Full Year of 2005. 117 Corporate Responsibility Report 2005 www.centrica.com/cr05 Environment Performance continued Power generation Power generation 2001 2002 2003 2004 2005 half 2005 full Operational Energy Consumption Gas Consumption Fuel Oil Total Energy Consumption Total CO2 Energy Consumed Operational Air Emissions Nitrous Oxide Sulphur Dioxide Carbon Monoxide Total VOC Methane Particulates Total CO2 equivalents from emissions Total CO2 (Emissions and Energy) Electricity Produced Efficiency ratio (CO2/GWh) Tonnes Tonnes Tonnes Tonnes Tonnes Tonnes Tonnes Tonnes GWh 4,006 8 160 153 173 9 1,245,493 5,906,971 3,544 1,667 5,420 10 176 187 214 0 1,684,696 7,088,790 10,523 674 5,593 21 159 166 171 11 1,737,541 7,411 19 248 140 166 19 2,300,892 3,543 26 131 41 54 2 1,099,464 6,669 50 464 96 136 7 2,070,250 Tonnes Tonnes Tonnes Tonnes 1,483,611 936 1,484,547 4,661,478 1,719,929 1,120 1,721,049 5,404,094 1,683,031 4,998 1,688,029 3,352,638 1,961 3,354,599 1,411,818 11,423 1,423,241 4,468,977 2,908,083 13,545 2,921,628 9,173,912 5,300,411 10,553,441 7,037,953 12,834,333 12,519 562 16,462 652 5,568,441 11,244,162 7,126 576 14,401 552 * HRL Only for 2004 & 2005 half years CSL data has only been included in the Full Year of 2005. Water consumption Water consumption 2005 half 780,031 399,927 2005 full 1,586,929 771,739 2001 Process & Domestic Cooling Water m3 m3 697,231 681,795 2002 1,611,321 1,859,405 2003 1,513,711 723,540 2004 1,814,529 833,644 118 Corporate Responsibility Report 2005 www.centrica.com/cr05 Environment Performance Waste continued Waste 2005 half 2005 full 2001 Office Waste Recycled Office Waste Final Disposal Office Waste Total Office Waste % Recycled Office Waste Operational Waste Hazardous Waste Total Recycled Hazardous Waste Final Disposal Hazardous Waste Total Hazardous Waste % Recycled Hazardous Waste Non Hazardous Operational Waste Total Recycled Total Final Disposal Total % Recycled Total Recycled Waste Total Final Disposal Final Disposal per FTE Total Waste % Recycled Waste Tonnes % Tonnes Tonnes Tonnes % Tonnes Tonnes 11,800 6,000 17,800 66% 12,875 10,646 0.40 23,521 55% Tonnes Tonnes Tonnes % N/A N/A 0 0% Tonnes Tonnes Tonnes % 1,075 4,646 5,721 19% 2002 2003 2004 2,571 5,457 8,028 32% 3,603 3,888 7,491 48% 3,929 3,783 7,712 51% 1,765 1,253 3,018 58% 3,704 2,616 6,320 59% 1,411 370 1,780 79% 654 329 983 67% 1,920 776 2,696 71% 721 354 1,075 67% 1,766.87 617 2,385 74% 11,861 7,943 19,804 60% 15,842 13,770 0.36 29,612 53% 11,290 5,820 17,111 66% 15,548 10,037 0.27 25,585 61% 12,061 6,465 18,526 65% 17,850 11,024 0.29 28,874 62% 5,288 2,067 7,355 72% 7,774 3,674 0.26 11,448 68% 3487 1,496 4,983 70% 8,959 4,729 0.15 13,688 65% Note all information in this appendix includes CSL figures in previous years CSL figures have been omitted. 119 Corporate Responsibility Report 2005 www.centrica.com/cr05 Environment Future commitments Commitments and challenges The end of 2005 saw the conclusion of the first five-year environmental action plan. Significant improvements in our performance were achieved in areas of energy management, resource use and waste management. Centrica has developed a second five-year action plan that will take us to the end of 2010. The new plan builds on our past success and reflects current and future environmental issues and challenges. Centrica has changed significantly since the implementation of the first plan and there are likely to be significant changes to our business in the next five years. To meet these challenges, we are making commitments in three key areas: strategy, governance and stewardship. Strategy Senior management commitment and resource. Governance Environmental governance is a mandatory element of the plan. Stewardship Taking forward-looking steps to environmental leadership. Targets Outlining our key targets for 2006 and beyond. Strategy The strategy element of the plan will enable senior management to contribute to its implementation and will ensure that the appropriate high-level commitment is secured. An Environmental Strategy Group (ESG) will be developed to support the implementation of the initiatives in the plan. The ESG will ensure a co-ordinated approach is taken to environmental governance and stewardship and that resources are made available in the overall Centrica business plan. Trading Trading in carbon dioxide was introduced across the EU in January 2005. Centrica has been actively involved in Phase I and secured full verification of its emissions within the set period. We are currently preparing for Phase II. Commercial The alignment of environmental and commercial requirements will be the main business challenge for the second environmental action plan. The link between sound environmental management and operating efficiencies, increased stakeholder perceptions and improved governance will have an effect on the financial and commercial performance of the company. A mechanism to quantify this improvement is to be implemented in key operational areas. Best practice A centrally co-ordinated environmental management system is to be developed and cascaded across the Group. The Group Environmental Management System (GEMS) will provide a processled approach to applying ISO 14001 (and EMAS if appropriate). Environmental governance Our stakeholder dialogue programme in 2005 identified environmental issues as an area where we are expected to be leading our sector. New business growth will inevitably result in the company moving into technologies and locations where retaining such a reputation will become more challenging. Complying with national and international environmental obligations, regulatory and voluntary, is critical to the success of our business. Environmental governance covers legal, trading, commercial and best practice. Legal Our power stations and upstream gas assets are regulated under the Pollution Prevention and Control (PPC) regulatory framework. Part of our obligations under PPC involve adopting the best available techniques (BAT) to reduce our environmental impact. To meet our BAT requirements we have pit in place improvement programmes for each of our regulated facilities. 120 Corporate Responsibility Report 2005 www.centrica.com/cr05 Environment Future commitments continued Vehicle management Our target is to develop a transportrelated ISO14001 environmental management system to optimise vehicle use. This will include a purchasing policy for new and replacement vehicles (fleet and company cars), fuel use (linked to journey management) and driver training. We will also seek to influence car manufacturers on fuel efficiency and vehicle emissions. Travel plans Travel plans have been developed for a number of locations. These are to be reviewed and updated and actions will be taken to optimise car use and parking. Environmental auditing Greater emphasis will be placed upon internal capabilities for the auditing of the existing environmental management systems and the Group Environmental Management System. This will focus attention on the professional development of internal auditors and will deliver greater selfreliance and improved communications, as well as a sharing of resources and best practices. Environmental training and competency We want to develop a structure for environmental professionals in Centrica, covering the operational and managerial levels from green team members to the group operational environment manager. The structure will include profiling the skills and competencies required. To support the environmental structure, the development of internal training course materials and the scheduling of training for operational and managerial levels will be further developed in the second five-year plan. Natural Capital Natural Capital (NC) raised the environmental profile at an operational level during the first five-year plan. NC is to be relaunched in 2006. The aim will be to encourage staff to contribute to environmental initiatives by considering the impact of their actions, no matter how small, on the prosperity of future generations and the environment in which those generations will live. Environmental stewardship Centrica strives to be at the forefront of environmental stewardship. We are committed to improving our overall performance and are constantly seeking ways to extend our environmental profile. The 2000-05 environmental action plan brought about significant improvements in our performance. Our 2006-10 plan will build on earlier successes and broaden the extent of our stewardship. Key areas that will be covered are set out below. Energy We aim to develop energy management targets for our buildings and assets. Waste and recycling We will seek improvements in maintenance and waste recycling. Supply chain We want to influence our supply chain and will involve contractors and suppliers. The focus of the early stage of this process will be on those Centrica considers constitute the highest environmental risk as a result of what they do or supply and/or where it comes from. Support by way of training provision, competency development and assurance, cross-auditing and technical support will be provided. 121 Corporate Responsibility Report 2005 www.centrica.com/cr05 Environment Future commitments Targets for 2006 Energy continued Environmental management system We aim to develop a Group-wide environmental management system by the end of 2006. We have set an ambitious target to cascade and embed this new system across the entire Group by the end of 2009. Leadership We will develop a Group-wide environmental strategy group, reporting to the corporate responsibility committee, to lead our environmental activities and drive a coordinated strategy across the business. Our people We will relaunch our ‘Natural Capital’ employee programme on the theme of ‘future generations’. Our green teams are keen to expand their skills and competencies. In addition, we will develop a range of technical and management training courses for employees. These will be delivered to our green teams to build environmental knowledge and enthusiasm and will be available to a wider audience, including employees’ families, suppliers and business partners. To optimise environmental performance and reduce costs, each office has specific energy targets for 2006. Our overall aim is to achieve a 5.78% reduction in electricity usage and a 9.33% reduction in gas usage, equating to a 6.36% reduction in the amount of CO2 produced. Waste We have increased our waste recycling target from 50% to 62%. We aim to achieve a minimum recycling rate of 50% in every office. ‘Paperchase’ Our target for a further reduction in paper usage is an additional 10% against 2005 performance. We are also introducing recycled paper into our billing process and will report on our progress next year. Biodiversity It has been a long-term aim for us to develop a biodiversity policy and action plan. Our business has been going through a sustained period of change in recent years and setting a meaningful biodiversity policy has been difficult. We now have greater clarity of the issues we will be facing in 2006 and beyond and are determined to ensure a proactive biodiversity policy and action plan. We will develop our policy in consultation with stakeholders and devise plans that encompass our upstream and downstream businesses. 122 Corporate Responsibility Report 2005 www.centrica.com/cr05 Environment Future commitments Summary What we said we’d do Office energy continued What we’ve done What we plan to do next Reduce energy use per person in our buildings by 15% compared to 2000 baseline. Achieved target with an overall reduction of 32.9% (CO2/FTE) excluding IS data centres. Achieve a further reduction in energy of 5.78% electricity, 9.33% gas equating to a further reduction of 6.36% in CO2. Office recycling Maintain office recycling rate of 50% level compared to 2000 baseline. Exceeded target with an overall year end recycling rate of 59.57%. Achieve overall office recycling target of 62% with a minimum of 50% in every office. Office waste Reduce waste sent to landfill by 15% compared to 2000. Our end of 2005 figures show a 35.75% We are reviewing how we can improve reduction in the volume of waste sent on these figures across the business. to landfill . Management systems Extend ISO 14001 certification to Roosecote and Barry power stations. Achieved target – all UK power stations are now fully certified. Maintain certification and develop Group Environmental Management System (GEMS). 123 Corporate Responsibility Report 2005 www.centrica.com/cr05 Environment Future commitments Summary continued What we said we’d do Renewables continued What we’ve done What we plan to do next Produce green electricity from out first onshore and offshore wind farm developments by the end of 2005. Glens of Foudland started generating in 2005, offshore generation delayed but will be operation during the first half of 2006. Produce green electricity from Barrow offshore wind farm during the first half 2006. Continue to progress on schedule, the construction Lynn, Inner Dowsing and Lincs offshore wind farms. Progress consent applications for Docking and Race Bank wind farms. Regulations Integrate the requirements of new regulations such as energy labelling, pollution prevention control (PPC) and the European Union Emissions Trading Scheme. PPC applications for all UK power stations duly made in March 2006, EU-ETS phase I verifications also completed March 2006. Implement PPC improvement programmes and preparation for phase II EU-ETS. Develop a Group-wide environmental strategy group, reporting to the corporate responsibility committee. Relaunch ‘Natural Capital’ employee campaign to continue to build employee engagement in delivering our environmental goals. Work with our suppliers to develop an enhanced paper sourcing strategy and focus on reducing office paper use. 124 Corporate Responsibility Report 2005 www.centrica.com/cr05 Environment Case studies In the dock Cavendish Dock attracts a range of wildlife seldom seen in the UK – thanks to Roosecote Power Station near Barrow. Managers there have collaborated with aquatic scientists and the dock owners to create an internationally important conservation area for migrant and resident species of birds. It is regarded as an outstanding example of how industrial needs and conservation interests can operate side by side with mutual benefit. The key is that the power station takes cooling water from the dock and returns it up to 10°C higher than ambient temperatures. Among the exotic species found there are a calcareous tubeworm from the Mediterranean and a water plant known as beaked tassel weed, also commonly found in warmer climates. And the fish grow well there too. But it is the bird populations that form the real conservation interest. In all, 32 bird species have been recorded there, in particular wildfowl, which use the site as a warm winter refuge. Groups of particular importance include the migratory waterfowl including mute swans, dabbling ducks, diving ducks and sawbills. The success of the project has recently been recognised by English Nature, which acknowledges the role played by the power station. The Cavendish Dock management strategy has been a central component in the operation of Roosecote Power Station since 1990 and Centrica remains committed to working with other stakeholders to ensure that this special habitat is cared for. British Gas Business wins European energy efficiency trophy A European energy efficiency award for making the largest reduction to energy consumption by using costfree measures has been won by British Gas Business. The Oxford office was the overall European winner for ‘saving the highest percentage of energy’ and won ‘gold’ in the Energy Trophy awards funded by the European Commission. The office also won first prize in the UK National category. The Energy Trophy recognises organisations that save energy using cost-free measures only, such as behavioural changes including turning off lights and turning down the heating. The Oxford office cut gas consumption by six per cent and electricity by 34 per cent. Fifty-seven companies and institutions entered across Europe, including utility companies, academic institutions and local authorities. The award was presented to British Gas Business at a gala dinner in Brussels last night. The business was also awarded €15,000, which will be given to Centrica’s charity of the year NCH to invest in energy-saving measures. John Beddoes, director for corporate customers, said: “We put together a ‘green team’ comprising employees from within the business. They were all committed to making significant changes to our energy consumption. They also ensured that the same commitment was instilled in their fellow employees, and the whole business is delighted to be recognised for the energy efficiency measures they have put in place.” British Gas eco teams As part of Centrica’s Natural Capital campaign, employees set up ‘eco teams’ with the aim of encouraging their families and workmates to consider the impact of their lifestyle on climate change. Some 130 employees took part in 14 eco teams, focusing on four themes – transport, energy, water and waste – and meeting about once a month to discuss ideas for practical changes. Some lobbied their local council for better recycling facilities. At the end of the four-month programme, the teams found the amount of waste thrown into dustbins fell by 31%, recycling increased by 25%, electricity use was cut by 16.5% and gas by almost 10%, and carbon dioxide emissions from energy use fell by 16%. There was a celebration event at the House of Commons and many of the eco team members said they planned to continue their new lifestyle. A part-time employee in Cheshire, a young mother, said: “It’s changed the way I run my home and the goods I buy, how I use them, store them and waste them. It’s increased my awareness of the environment. I have educated myself and, in turn, my family.” An employee in Edinburgh said: “I have been recycling for some time but I felt I could learn more. I am now more organised and aware of what I do and don’t need.” This new approach was translated into the workplace, with eco team members, for example, persuading colleagues to recycle more and put the right paper in the right bins. 125 Corporate Responsibility Report 2005 www.centrica.com/cr05 Environment Case studies continued Barry to Bananal Barry Power Station has run a groundbreaking initiative in the Amazon region in Brazil through the Barry Foundation. It is the chief sponsor of the Bananal Island Carbon Sequestration Project in Tocantins State, launched in August 1998. It unites organisations from the private, governmental and voluntary sectors to deliver the largest such project ever undertaken in Brazil. The aim is to offset some of the emissions from the Barry Power Station and at the same time benefit the local Amazonian population – and generate as much information as possible to aid similar projects. Very good progress has been made towards its objectives and it has attracted considerable interest in Brazil and internationally. Much of the attention has focused on the high level of community involvement. The project team has established two sapling nurseries for reforestation, developed an extensive environmental education programme and trained 250 local teachers. It has also led to a carbon sequestration research programme based at the Canguçu Research Centre. 126 Corporate Responsibility Report 2005 www.centrica.com/cr05 Communities Every day Centrica touches the lives of millions of people. We provide warmth, comfort and peace of mind to our customers across the world. Investing in communities We also aim to play an active role in local communities, tackling issues of wider social concern that are relevant to our business. In 2005 Centrica contributed £8.2 million, through a combination of cash, time and in-kind support*, to a range of community causes in the following areas: Vulnerable customers We are working with a range of charities and community organisations to support vulnerable customers and tackle fuel poverty. Employee involvement Encouraging and enabling our employees to make a positive impact in their local community is a central part of our community investment strategy. Education and skills We are involved in education initiatives to raise awareness of energy efficiency and work with partners to support skills development. In-kind support We are always looking to provide in-kind support where we can, from computers and IT equipment to office furniture and stationery. * London Benchmarking Group Methodology 127 Corporate Responsibility Report 2005 www.centrica.com/cr05 Communities Working in communities Centrica’s community investment programme is designed to focus on the way we affect the communities we serve. We want our employees to identify with and to participate in our community activities and build the kind of commitment our community partners value. As a business, we enable millions of customers to heat their homes. Our main social concern is ensuring sustainable access to energy. The efficient use of energy products and support for vulnerable or low-income customers are also important to us. We have a particular impact on communities where we have a business presence. Our involvement in building and running call centres, power stations, gas assets and wind farms brings a social and environmental impact. We seek opportunities to work with our neighbours on these issues. We also engage in education, training and job creation as part of our work in the community, encouraging our employees to enrich their own skills and experience through volunteering. Vulnerable customers We combine with a number of national charities to provide support to vulnerable customers in communities across the UK and North America. Working in partnership enables us to combine our skills and expertise with those of our community partners, so together we can help make life safe, warm and comfortable for families, older people and people with disabilities in disadvantaged communities. ‘here to HELP’ We work with six national charities and numerous housing associations and local authorities to tackle household poverty and improve the quality of life for disadvantaged communities across Great Britain. Help the Aged We have a long-term partnership with Help the Aged to address issues for older people: fuel poverty benefits and excess winter deaths. In 2005 our Cold Can Kill Campaign provided practical advice to 120,000 older people across the country. Raising the Roof Direct Energy is working with the Canadian homelessness charity, Raising the Roof, to combat youth homelessness and enable homeless young people to move from the street and hostels to independent living. REECH programme Our Realising Energy Efficient Communities and Homes programme is helping hundreds of people from ethnic minority communities across Britain to improve the energy efficiency of their homes. 128 Corporate Responsibility Report 2005 www.centrica.com/cr05 Communities Vulnerable customers ‘here to HELP’ continued Help the Aged Mavis Lee has lived alone in her flat in Yorkshire for seven years – and now feels much more secure. Through the ‘here to HELP’ scheme she was put in touch with charity partner, Help the Aged, which arranged for her to receive a deadlock, door chain and spy hole. Her previous locks were not very effective and the spy hole was unclear. Mavis, 73, who receives a pension and housing benefit, said: “‘here to HELP’ is an excellent scheme. I would encourage anyone to take part in it. I feel much more secure now. “In the flats I live in there are probably quite a lot of older people and most of them would benefit from new locks and better security.” Royal National Institute for the Blind …is the UK’s foremost charity in offering specialist support and advice to anyone with sight problems. It can often provide free products, such as big button telephones. Peggy, a lively 80-year-old, has had Age-Related Macular Degeneration for the past four years. She lives alone in Essex. As part of the ‘here to Help’ programme, she was referred to the RNIB, who advised her on how to cope with the illness. Save the Children …is the UK’s largest international children’s charity, working in the UK and overseas. British Gas’ partnership with Save the Children awards grants of up to £1,000 to inspire young people to take the lead in transforming their communities and enable them to do so. We want to encourage them to make a positive difference to where they live, play and socialise. The ‘Help Yourselves’ website provides advice, support and inspiration for young people thinking of undertaking projects. Scope …helps disabled people achieve equality. It focuses on people with cerebral palsy and campaigns for them to be valued and have the same rights and opportunities as anyone else. Lewis’ family, referred to Scope through the ‘here to Help’ programme, received support to secure funding for a buggy so he can get about and strengthen his leg muscles. Scope helped the family apply for a grant as well as providing general advice on disability issues. The family home was also entitled to free loft insulation, draught-proofing, free low-energy light bulbs and energy efficiency advice. National Debtline …provides a free, confidential and independent telephone helpline for people in England, Scotland and Wales with debt problems. Its aim is to help individuals find a way out of spiralling debt through timely money advice. It provides a free phone service, enabling people to speak confidentially to a trained adviser. Also on offer is a free self-help pack (for people in rented accommodation or with mortgages). The packs cover personal budgets, prioritising debt, offers of payment and how to deal with court procedures. British Gas’ multi-million-pound ‘here to HELP’ programme is a national venture tackling the root causes of household poverty in Britain’s most deprived areas. It was launched in 2002 with an aspiration to help make one million households warm, safe and comfortable. It has also identified almost £8.5 million in unclaimed benefits, making a real difference to help improve people’s quality of life. The programme offers energy efficiency improvements, benefits assessments, essential appliances and adaptors, home security measures, and advice from our charity partners – all for free. ‘here to HELP’ has received tributes from ministers, MPs and a host of community organisations. Many local authorities and housing associations have signed up to the programme and have seen the difference it can make to their communities. It won the Business in the Community Healthy Communities Excellence Award in 2005. In addition, it was also awarded the Cause Related Marketing Award at the Marketing Society Awards for Excellence 2005. The programme works through a partnership with six major national charities, each of them offering their own skills and experience in improving the quality of life for vulnerable families, older and disabled people. We refer people in need to the charity we think can offer them most help. Our partners are Help the Aged, Family Welfare Association, National Debtline, Scope (includes Capability Scotland), Royal National Institute for the Blind and Save the Children. 129 Corporate Responsibility Report 2005 www.centrica.com/cr05 Communities Vulnerable customers continued To advise people on how to keep warm, we produced a ‘Cold Can Kill’ pack – plus two thermometers for the home. Around 130,000 packs were distributed through channels such as charities, health trusts, local authorities and GPs. We also funded 70 partnership roadshows across Britain so packs and advice could be handed out directly to older people. We also commissioned a survey, carried out by the Building Research Establishment, into housing conditions in Britain. The survey showed there were 1.5 million households of older people living without adequate heating and insulation. The survey found one in three households containing people over 85 was too cold, compared with one in five for younger people. The partnership called on the Government to adopt an action plan. • Increase investment in its Warm Front programme by at least £100 million a year to ensure the 2010 target for the elimination of fuel poverty amongst older people is reached. • End the means-testing of Warm Front so that all pensioners receive free central heating. • Target the delivery of Government programmes, including Warm Front, to deprived and rural areas where many fuel-poor people live. • Extend the gas network where it is economic. Where it is not, consider increasing the range of measures, e.g. grants to include more expensive installations. Our partnership also launched, together with the Greater London Authority, a winter warmth campaign aimed at warning older people in London that the cold can kill and showing them how to keep warm. It involved mailing information to 550,000 households. Family Welfare Association …is a national charity providing support to families and individuals in need. It works to improve the quality of life for disadvantaged people. Its grants supply, for example, energy efficient fridges. Mary is disabled and lives in a council bungalow in Middlesbrough. Now 79, she used to be a voluntary carer for disabled children. She was referred by the ‘here to HELP” team to the Family Welfare Association, which arranged for her to have a fridge-freezer, cavity wall insulation, and provided her with low energy light bulbs. Mary said: “It’s marvellous. I never thought I was entitled to anything and I can’t believe it. Everybody has been very kind.” For more information on the British Gas ‘here to HELP’ programme, visit www.house.co.uk/HELP. Raising the Roof Direct Energy is a lead sponsor for a new $1.2 million programme to combat youth homelessness in Canada. The company has pledged to give $330,000 to the three-year programme called ‘Youth Works’, which was introduced by Raising the Roof, a national homelessness charity supported by Direct Energy. Three agencies have been chosen to receive the Youth Works money – one each in Calgary, Toronto and St John’s. They run schemes that build selfsufficiency and enable homeless young people to move from the street and hostels to independent living. About 500 high-risk young people aged from 16 to 24 will benefit. At the end of the programme, Youth Works will make recommendations on what is needed to fill gaps in the lives of homeless young people, how best to provide support and what level of funding is needed to keep them off the streets. Young people represent up to one third of Canada’s homeless population. In Toronto alone, roughly 10,000 are homeless and between 1,500 and 2,000 are homeless on any given night. Raising the Roof was founded in 1997 in response to Canada’s homelessness crisis. It is the country’s only national charity dedicated to long-term solutions to homelessness. Direct Energy has been supporting it since 2003. Each year, Direct Energy employees in Canada sell toques (woollen hats) for Raising the Roof. Over the past three years as a national Raising the Roof partner, Direct Energy has donated a total of $850,000 through a combination of corporate donations and funds raised by its employees. Working with Help the Aged Now in its seventh year, the British Gas Help the Aged Partnership continues to grow in strength. British Gas has invested more than £6 million to develop and implement practical schemes to improve the lives of around 1.7 million older people. In 2005 it focused on the problem of thousands of older people in Britain dying needlessly from the cold. Figures released in October showed that more than 32,000 people died from cold-related illnesses last winter in England and Wales (in Scotland, 2,760), the highest for five years. Some 24,700 of these deaths were of people aged 75 or over. 130 Corporate Responsibility Report 2005 www.centrica.com/cr05 Communities Vulnerable customers REECH continued REECH provides training and support for community advice workers and volunteers to enable their communities to access energy efficiency advice, information and grants. Delegates who attend training sessions can access the British Gas energy efficiency programme and receive low-energy light bulbs for their communities. To date, 272 organisations representing minority ethnic communities, or working closely with those communities, have registered with NEA to join the REECH project and more than 750 community organisations in all areas have been contacted. Almost 7,000 low energy lamps have been distributed to REECH community organisations. REECH (Realising Energy Efficient Communities and Homes), now entering its fourth year, is an innovative scheme that has helped hundreds of people from ethnic minority communities across Great Britain. Established by fuel poverty charity National Energy Action (NEA) and British Gas, REECH aims to help members of ethnic minority communities overcome barriers that can prevent them from heating and insulating their homes affordably. Ethnic minority communities face particular difficulties when trying to access the range of energy efficiency information and assistance available to the public. REECH aims to ensure communities don’t miss out on vital help and information they need to keep their homes warm and safeguard their health. REECH community organisations Awareness raising sessionss Bradford Greater Manchester London West Midlands Total 2 2 5 – 9 No. of attendees 6 10 30 – 46 Training courses 7 22 11 19 59 No. of trainees 39 116 38 80 273 Potential households reached 25,705 67,002 15,258 34,193 142,158 131 Corporate Responsibility Report 2005 www.centrica.com/cr05 Communities Employee involvement We encourage our employees to get involved in their local communities and increase their contribution to society. We gather their opinions so we can better understand their expectations and help them make the best of the charity and volunteering activities that are open to them. In 2005 our people invested more than 15,000 hours in volunteering activities with a range of charities and community organisations. This in-kind support equates to an investment of around £420,000. In 2005 our ‘Helping Children Shine’ partnership with NCH in the UK began and employees raised almost £350,000. Through employee fundraising and company support we generated more than £200,000 for victims of the Asian tsunami. Direct Energy employees collected at least $100,000 for the relief efforts for hurricanes Katrina and Rita. We also supported employees through our matched funding programme, payroll giving scheme and charity employee lottery. In 2006 we will launch an intranet site which will help us extend community involvement opportunities to people across the Group. The site will provide a hub, enabling employees to manage their charitable giving and select volunteering assignments from a database listing thousands of opportunities for fundraising. Volunteering We provide opportunities for our employees to get involved in their local communities whilst developing their own skills and experience. In 2005 we worked with Community Service Volunteers, and our employees invested more than 15,000 hours in volunteering, which equates to around £420,000 of in-kind support. In the UK we backed Volunteering England’s Year of the Volunteer campaign and Direct Energy sponsored the Volunteer Citizen of the Year award in Alberta. Our volunteering policy enables employees to take up to 16 hours out of work time each year to get involved in volunteering activities. Research shows that these activities are good for morale, building teams and developing personal skills, whilst also giving something back to the communities in which we live and work. There are many skills employees can develop through volunteer work, not least team working, planning, marketing, project management, delegation, collaboration and customer focus skills. We see our commitment to volunteering as a way of supporting individual and team development. In 2006 we will launch an intranet site to help employees find volunteering opportunities in their community. The ‘Get Involved’ site will provide access to thousands of volunteering assignments across the UK. In North America, Direct Energy employees will still be able to volunteer their time to support a range of charities including Raising the Roof. Fundraising Our Charity of the Year initiative provided the focus for our UK employees’ fundraising activities during the year. From February 2005 to March 2006 our charity partner was the children’s charity NCH for which employees raised almost £350,000. Direct Energy and its employees donated $750,000 to charity. The Canadian homelessness charity, Raising the Roof, again benefited from the fundraising efforts of Direct Energy employees who raised more than $85,000 through the Direct in the Community fall pledge drive. Our people were also involved in fundraising activities to help victims of natural disasters in 2005. Through employee fundraising and company support we generated more than £200,000 for victims of the Asian tsunami. Direct Energy employees supported the relief efforts for hurricanes Katrina and Rita, collecting more than $100,000. We offer matched funding to employees raising funds for charities in their own time. During the year we provided around £45,000 to help the efforts of our people go even further. Although we plan to take a break from our UK Charity of the year programme in 2006, we will still encourage and enable our employees to get involved in fundraising activities for local charities and causes. Our new ‘Get Involved’ intranet site will help employees find fundraising events and activities to support. 132 Corporate Responsibility Report 2005 www.centrica.com/cr05 Communities Employee involvement Latest Charity of the Year continued The ‘Helping Children Shine’ partnership will enable Centrica employees to fund projects local to them in one of four key areas of NCH’s work being – young carers, mental health, disability and adoption and fostering. Key objectives • To raise £250,000 for NCH in the first year of the partnership. • To generate awareness of the issues facing disadvantaged children and young people in the UK today amongst Centrica employees and the general public. Fundraising calendar NCH worked with employees across Centrica to help them arrange a wide range of fundraising activities. Four themes were developed to link fundraising with awareness messages focusing on specific issues. Our employee charity of the year for 2005/06 was NCH Our partnership will work to help children shine Imagine never having someone to hug you, someone to play with, someone to talk to or a day without abuse. Thousands of children and young people can’t and that’s why Centrica and NCH are working together to support vulnerable children and young people throughout the UK. NCH runs more than 500 projects for the UK’s most vulnerable children, young people and their families and in doing so, supports over 140,000 people. The support of Centrica employees will enable NCH to help children achieve their full potential. Fundraising calendar ‘Big days out’ ‘Peace of mind’ ‘More than words’ ‘Families matter’ February 2005 May 2005 August 2005 November 2005 Young Carers Mental Health Disability Adoption and Fostering 133 Corporate Responsibility Report 2005 www.centrica.com/cr05 Communities Employee involvement Previous year’s charities continued How we select our Charity of the Year We begin by asking our employees about the types of causes they would like to raise funds for, using the established employee communication channels to co-ordinate responses. According to feedback from employees we select a shortlist of charities. The shortlisted charities are then invited to make a presentation to a panel of employees from across the group, including home-based and fieldbased employees. The panel uses the following criteria to select one Charity of the Year: • national coverage, with the ability to interface with all major UK Centrica offices, either through the charity’s existing infrastructure or proposed new arrangements • ability to work closely at a local level with nominated fundraising champions to support and facilitate fundraising events. Fundraising champions act as co-ordinators, with the majority of event delivery and planning managed by the charity • effective financial planning and administration abilities, with defined budgets and efficiency of spend • originality, enthusiasm and the ability to maintain momentum for fundraising activities throughout the year • ability to work with our media teams to generate positive media coverage, at a national and local level • an appropriate account management structure to ensure effective liaison at a national level with our Community Affairs team and Employee Communications teams • appropriate reporting mechanisms to enable the Community Affairs team to monitor levels of funds raised and agree support for specific projects in their region • availability of relevant materials to brief employees and maintain momentum throughout the partnership. Our employee charity of the year for 2003/2004 was Cancer Research UK Cancer Research UK The ‘Touching Lives’ partnership was launched in October 2003. The campaign worked to dispel the myths about cancer and enabled Cancer Research UK’s work to touch the lives of more people, bringing Cancer Research UK closer to achieving their mission of curing cancer faster. Our employee Charity of the Year in 2002/2003 was The Meningitis Trust The Meningitis Trust The ‘Every Second Counts’ partnership was launched in September 2002. The aim of the campaign was to raise awareness of the symptoms of meningitis and the vital importance of early diagnosis… Our employee Charity of the Year in 2001/2002 was The Cystic Fibrosis Trust. Cystic Fibrosis Trust Breathing Life partnership The Breathing Life partnership, launched in April 2001 was formed to do exactly what the name suggests – to breathe life into the lives of those affected by cystic fibrosis and help to raise awareness of this chronic condition. 134 Corporate Responsibility Report 2005 www.centrica.com/cr05 Communities Education and skills Learning is the way individuals and organisations develop and grow. Centrica has a responsibility to help people, young and old, take advantage of the opportunities that life presents. We look for opportunities that are closely linked to our business to help widen horizons. These opportunities might be linked to our products or arise through our experience as an employer. Some examples are: British Gas’ ‘Think Energy’, one of Britain’s biggest energy education programmes for 7-18-year-olds, is being used in more than 52% of schools across Britain. The British Gas Engineering Academy trained more than 1,000 new engineers during 2005. Through its education and diversity strategy, the Academy is working in communities across the country to reach out to diverse groups and raise awareness of careers in engineering. In-kind support Think Energy British Gas’ national ‘Think Energy’ programme is a free online educational programme designed to teach students about different types of energy and the importance of energy efficiency. Educational resources, based on the national curriculum, have been developed for children aged from 7 to 18. Teachers, pupils and parents can access free downloadable resources from the website. Since it began, more than 52% of schools have requested the resources. In 2005 we launched a new ‘Think Energy’ website to encourage children to get involved in the battle to save energy and combat climate change. Fun online characters such as Billy Buzz and Power Pals have been introduced to help educate tomorrow’s adults about the dangers facing the planet. We hope ‘Think Energy’ will inspire children to think about the energy they waste and the impact this has on the environment. The award-winning programme has been running successfully for four years and has already been used in thousands of schools, helping to develop an understanding of energy concepts. For more information visit www.think-energy.com We aim to recycle furniture and IT equipment that is no longer required within the business, often donating it to community organisations and schools close to our business locations. In 2005 we closed and relocated a number of offices as part of our ongoing property strategy. We worked with Green-Works, a charity that helps companies make redundant office furniture available to the non-profit sector. The total value of goods donated was almost £70,000. This helped us to preserve valuable resources, protect the environment and regenerate communities across the UK. We will continue to look for opportunities to support our local communities through in-kind donations in 2006, working with partner organisations to reduce our environmental impact and maximise the community benefits. Supporting hurricane victims In the days immediately following the devastation caused by hurricane Katrina, Direct Energy employees reached out to help people in the Gulf Coast region, providing a variety of in-kind support. While employees in Canada began collecting clothing and supplies, employees closer to the devastated areas quickly began sorting boxes of supplies and some took survivors into their own homes. In Texas, employees helped to sort clothing and hygiene supplies and our residential services group used company trucks and manpower to deliver donated goods to the various emergency shelters. 135 Corporate Responsibility Report 2005 www.centrica.com/cr05 Communities Performance 2005 performance highlights 2005 Community investment (£m)* Percentage of pre-tax profit (%) Employee volunteering (hours) Per cent club position CR Index community score Employee opinion score 8.2 0.6 15,000 48th 100% 3.97 2004 7.4 0.6 13,000 48th 100% 4.05 Change +11% 0 +15% 0 0 -2% * Measured using London Benchmarking Group methodology. We discuss and agree with our charity partners how we will measure the impact of our community projects. In addition to specific project indicators we look at longer-term benefits and ongoing sustainability. We measure our performance through: • • • • • • • • The London Benchmarking Group The BITC Per Cent Club The BITC Corporate Responsibility Index Probus BNW Community Involvement Index Best practice awards programmes Employee opinion surveys MORI CR research Stakeholder research. In 2005 Direct Energy was one of the founding members of LBG Canada, an affiliate of the London Benchmarking Group. This enables us to track the impact of our community programmes in Canada and share knowledge with other companies. 136 Corporate Responsibility Report 2005 www.centrica.com/cr05 Communities Performance continued What we invest In 2005 we contributed £8.2m to a wide range of community causes through a combination of cash, time and in-kind support. 10 9 8 7 6 £m 5 4 3 2 1 0 2001 2002 2003 2004 2005 2001 4.62 2002 5.67 2003 6.63 2004 7.35 2005 8.2 £m We carefully manage and measure our contributions through membership of the London Benchmarking Group (LBG). Participation in the London Benchmarking Group provides us with a number of key indicators in relation to the performance of our community investment programme. 5 4 3 £m 2 1 0 Charitable gifts Community investment Commercial initiatives Management costs 137 Corporate Responsibility Report 2005 www.centrica.com/cr05 Communities Performance continued Contribution from previous years 2004 What we contribute to Contribution to community causes during 2004 Education, skills and employability Customer focus Sustainable enterprise Employee involvement In-kind support Source: London Benchmarking Group % contributed 13.2 71.5 2.2 8.6 4.5 2003 What we contribute to Cash Time Gifts in kind Management cost Total contribution £5,746,533 £287,303 £72,171 £515,000 £6,621,008 Category of contributions Charitable gifts Community investment Commercial initiatives £601,952 £4,239,331 £1,264,724 138 Corporate Responsibility Report 2005 www.centrica.com/cr05 Communities Performance continued These three categories, defined by the London Benchmarking Group, show how different forms of community involvement can be classified: charity donations, social or community investment and commercial initiatives. These are contributions made over and above those that result from the basic business operations. What we contribute Contribution to community causes during 2003 Education, skills and employability Customer focus Sustainable enterprise Employee involvement In-kind support Source: London Benchmarking Group % contributed 16 72 2 4 6 This table illustrates the social issues Centrica supports. The range of subject areas illustrate Centrica’s commitment to addressing issues closely related to the company’s different areas of business. 2002 What we contribute to Cash Time Gifts in kind Management cost Total contribution £4,661,250 £360,778 £153,027 £490,000 £5,665,055 Category of contributions Charitable gifts Community investment Commercial initiatives £930,982 £2,893,179 £1,350,894 139 Corporate Responsibility Report 2005 www.centrica.com/cr05 Communities Performance continued What we contribute to Contribution to community causes during 2004 Customer focus Education, skills and employability Employee involvement In-kind support Sustainable enterprise Source: London Benchmarking Group % contributed 43 26 21 6 4 Per Cent Club We participate in the Business in the Community Per Cent Club, which measures community spending in relation to pre-tax profit and encourages companies to aim to spend 1% of pre-tax profits on community activities. In 2005 we contributed 0.6% of pre-tax profits through our community investment programme, maintaining the same level as in 2004. We also stayed in the top 50 of the UK’s corporate givers, coming 48th in The Guardian Giving List in 2005. If companies were measured by the total donated, Centrica would be in the top 30. 10 9 8 7 £m 6 5 4 3 2 1 0 2002 Position Value (£m) 2003 2004 2005 50 45 40 35 30 25 20 15 10 5 0 Position 2002 5.8 36 2003 6.6 38 2004 7.4 48 2005 8.2 48 Value (£m) Position 140 Corporate Responsibility Report 2005 www.centrica.com/cr05 Communities Performance Probus BNW continued The Probus BNW Corporate Community Involvement (CCI) Index is designed to provide leading companies in the UK with an expert outside assessment of the overall quality and effectiveness of their community programmes. It compares approaches to such areas as objective setting, communication and research with other leading companies’ best practice models. It also enables companies to compare their performance with current good practice, with each other, and with their own previous ratings. CCI Index 2004/05 – Report for Centrica Category scores ‘Spider chart’ Purpose & Objectives 80 Community Benefits 70 70 74 60 68 Leadership & Management 50 Business Benefits 70 40 76 Programmes & Activities Band 1 73 64 Research, Measurement & Evaluation External Communications 67 Band 2 Internal Communications Centrica 2004 Centrica 2002/03 Highest Average Notes Dotted lines indicate bands Band 1 : outermost to Band 5 : innermost ‘Average’ 141 Corporate Responsibility Report 2005 www.centrica.com/cr05 Communities Performance continued In 2004 Centrica took part in the CCI Index for the third time. We improved on our previous performance in two assessment categories. We are rated as ‘a leading company’ in seven of the eight categories, and as ‘meeting all reasonable expectations’ in the eighth. Centrica was seen as especially strong in having a clear rationale and strategy for its community involvement and in running some excellent individual programmes. BITC CR Index The BITC CR Index assesses companies’ corporate responsibility strategies in terms of integration, performance and impact in communities, on the environment, in the marketplace and in the workplace. In 2005 we maintained our 100% score for our approach to community investment against a sector average of 94% and an Index average of 92%. Investment strategy Measurement of inputs Measurement of outputs Impact of programmes Reporting 0 Company 20 Sector 40 Index 60 80 100 Investment strategy 100 94 92 Measurement of Inputs 100 100 91 Measurement of Outputs 100 94 75 Impact of Programmes 100 79 77 Reporting 100 97 84 Company % Sector % Index % 142 Corporate Responsibility Report 2005 www.centrica.com/cr05 Communities Performance continued • Effectiveness of CCI activity practised by the utilities sector is judged significantly lower than for retail and financial services (5% compared with 15% and 18%). • Awareness of Centrica has increased slightly but awareness of British Gas has slightly decreased. The effectiveness of most companies’ activities is judged to be lower than in 2004, including Centrica’s and British Gas’. We will undertake a similar survey in 2006 which will extend to around 200 community leaders and focus more closely on measuring perceptions on our approach to: • Minimising our impact on the environment • Developing sustainable green energy solutions • Investing in communities • Supporting our most vulnerable customers • Taking a proactive approach to diversity and inclusion. Stakeholder views We are keen to get feedback on our community investment activities from our stakeholders. MORI The opinion research company MORI each year surveys attitudes among the public on CR issues. We use this survey to gain insight into how British Gas’ corporate responsibility and community investment activities are viewed. The survey confirmed that public expectation of companies remained high in 2005 with 71% believing that industry and commerce do not pay enough attention to their social responsibilities. Over half (51%) of those surveyed said that British Gas is taking its responsibilities to society and the community very or fairly seriously. Overall, people rate our current approach to social responsibility highly – British Gas was ranked 8th out of 20 leading UK-based businesses. The SMART Company In 2005 we worked with The SMART Company, a specialist CR consultancy, to research our approach to community investment with 150 UK community leaders. The results highlighted that: • Awareness of corporate community investment activity in the utilities sector has increased. On average, 37% of respondents felt they had sufficient knowledge to comment, compared with 25% in the previous survey. • Awareness is still lower than in other sectors: in the retail and financial services sectors, 55% and 41% had sufficient knowledge to comment. Employee opinions Our annual employee engagement survey shows us whether our employees value our approach to community investment. The survey enables us to ensure that our strategy is aligned with their views and expectations. Our 2005 survey identified that almost 80% of employees are proud that Centrica supports local communities through its work with a range of charities. In recent years we have given a donation of 50p for each completed survey to our employee charity of the year. In 2005 the survey raised more than £15,000 for NCH. 143 Corporate Responsibility Report 2005 www.centrica.com/cr05 Communities Performance continued Community awards 2005 Business in the Community Awards of Excellence 2005 Healthy Communities Award for British Gas ‘here to HELP’ Programme Marketing Society Awards for Excellence 2005 British Gas ‘here to HELP’ Programme Utility week corporate partnership award British Gas Help the Aged Partnership 2004 Business in the Community Awards of Excellence ‘here to HELP’ Programme 2003 Business in the Community Award for Excellence in Education and Lifelong Learning British Gas Think Energy Programme 2002 Business in the Community Award for Excellence in Cause Related Marketing British Gas Help the Aged Partnership IPR Sword of Excellence Corporate Social Responsibility Category Employee Charity of the Year Breathing Life Partnership with Cystic Fibrosis Trust Business in the Community Award for Excellence in Realising Ability Project-led Recruitment Initiative Utility Week Award for Investor in People Project-led Recruitment Initiative Business Commitment to the Environment Premier Award British Gas Think Energy Programme Hollis Sponsorship Award Educational Sponsorship of the Year British Gas Think Energy Programme 2001 UK Charity Award for Corporate Partnership of the Year British Gas Help the Aged Partnership Marketing Society Award Corporate Citizenship category British Gas Help the Aged Partnership 144 Corporate Responsibility Report 2005 www.centrica.com/cr05 Communities Case studies British Gas Help the Aged Cold Can Kill Campaign ONS statistics released in 2005 showed that more than 20,000 older people died in the UK due to cold-related illnesses. The British Gas Help the Aged Partnership launched a hard-hitting campaign to combat fuel poverty among older people by publishing disturbing new research on the extent of the problem. The research reveals that 1.5 million older households (i) are without proper heating or insulation. Of these homes, 75% are owner occupied or rented privately and are being woefully assisted by Government. These new findings come at a time when the Met Office is predicting a severe winter. In response, the British Gas Help the Aged Partnership urged Government to adopt a Five Point Plan to: (1) Increase investment in Warm Front by a minimum of £100 million per annum to ensure the 2010 elimination of fuel poverty target amongst older people is reached. (2) End the means testing of Warm Front so that all pensioners receive free central heating. (3) Target the delivery of Government programmes including Warm Front at deprived and rural areas where many fuel-poor people live. To achieve this, benefits data needs to be shared as currently 25% of the vulnerable fuel poor are not eligible for Warm Front and over 60% of these are older people most in need. (4) Extend the gas network where it is economic and where it is not consider increasing the range of measures e.g. grants to include more expensive installations such as heat pumps and other renewable sources of energy. (5) Provide more face-to-face support and practical help for older people. For instance, whilst a grant for loft insulation is helpful, clearing a loft to allow this insulation to be put in can be an impossible task for someone who is very frail. Much more hands-on assistance needs to be provided in these cases. (i) Older households relates to all households containing someone over the age of 65. REECH – Lambeth Mrs Van-Nghi Shek, a worker from Lambeth Elderly Association from Vietnam, attended a REECH training course. Asked whether she had benefited, she said: “Now I feel I understand everything. I knew a lot after the course, especially about keeping warm and saving cash. The training pack is very good and useful.” Mrs Shek is also positive about the impact her newly gained knowledge is having on her community: “I try to explain to members about energy, and we are distributing low energy lamps to householders. Many of our community are elderly and have fixed views. I am trying to change their ideas little by little.” Representatives from the association received free energy efficient light bulbs from British Gas and advice on grants. Ian Tanner of NEA, who manages the REECH scheme, said: “It’s terrific that groups like this are coming forward to find out how they can benefit.” REECH – Southwark Representatives from the Black Elderly Group in Southwark, London, received free energy efficient light bulbs after attending a training day that offered advice on heating the home affordably. They were also given information about grants. Sandra Buchanan, a care worker with the Group, said: “The training day was a brilliant day. It was really very useful and informative. It will definitely help to spread the message to the community groups like ours. Before the training, I only knew about turning lights off and closing windows when the heating is on; really just very basic knowledge.” Neil Marshall of British Gas said REECH aimed to do exactly what the name suggested – to reach out to communities that often missed out on advice which could really make a difference to their lives. 145 Corporate Responsibility Report 2005 www.centrica.com/cr05 Communities Case studies continued Right to Read British Gas Business (BGB) people in Leicestershire got involved in the Right to Read scheme in 2003. Since then, more than 60 volunteers have taken part. Windsor and Oxford offices have now started schemes in their area. Each volunteer spends an hour a week at a local school and coaches three to four children each session. Figures show that 92% of the children who participated during 2005 made a satisfactory-to-significant improvement in their reading. Our people mainly support Millfield and Crescent schools in Leicestershire. John Simpson, Millfield head teacher, said: “We have adults reading with children all over the school and everyone, adults and children, has greatly benefited.” The Right to Read scheme began in Leicestershire in 2002 – when about 25% of 11-year-olds around the country were failing to achieve grade 4, the national standard in English. BGB volunteer Hayley Springthorpe said: “I think our business is doing an amazing thing for these children and to see the look on their faces when we arrive is all the thanks we need.” The BGB volunteers have been named as Leicestershire’s Right to Read team of the year, selected from 70 organisations. Brushing up on painting skills Volunteers from the company’s Leeds office helped decorate a centre run by Wakefield-based charity Move Ahead, which supports brain injured people and their carers. The company answered an appeal to decorate the kitchen, dining room and living area of the centre. The paint came from a community scheme that reuses waste paint which would normally be tipped into landfill. Move Ahead meets twice a week and works towards enhancing the longterm services for the brain injured. The group has produced an art exhibition to create a greater awareness of this often overlooked disability. British Gas volunteer Peter Scarth said: “Move Ahead plays a vital but unsung role for the local community. It was hard work but well worth doing. Hopefully, the users of the centre will reap the benefit for a long time to come.” Another volunteer, Stacey Knight, added: “We have a lot to offer outside our day-to-day roles and it’s good to use our skills in a different way.” Cleaning up the city Employees from British Gas in Leeds cleaned up a canal bank, the closing event in the city’s ‘100-Day Clean-up Campaign’ – a scheme run by Leeds City Council to improve the local environment. The seven-strong tidy-up team blitzed the rubbish-strewn canal bank in a day that involved litter picking, clearing weeds and overhanging vegetation, and tackling graffiti. Louise Wilson, employee volunteering co-ordinator at British Gas, said the team filled an entire skip with rubbish from the area. Chris Roberts said: “The highlight of the day for me was working alongside my 11-year-old son Adam and doing something constructive that benefits the local community.” This was the second employee volunteering task for Linda Mather. “As always, the team spirit was amazing,” she said. “It was a brilliant way to clean up Leeds, and great that British Gas was involved.” 146 Corporate Responsibility Report 2005 www.centrica.com/cr05 Communities Case studies continued Helping school pupils go wild Volunteers from British Gas’ Leeds offices, including general manager Alan Johnson, answered an appeal from staff and pupils at Hunslet Carr Primary School for a nature garden to study and play in. Horticultural highlights included a pond to encourage frogs and other aquatic life as well as a ‘grow your own’ herbs and vegetable garden. Animal picture boards were also created to brighten up the fenced areas. Butterfly and bird boxes were added to allow wildlife to benefit too. School caretaker Trevor Carbutt designed most of the garden and was thrilled to see his plans come to life. He said: “We hope it will provide a peaceful environment where the children can look closely at nature and enjoy their surroundings.” Volunteer and customer manager Neil Whittaker said: “As the school is situated in a built-up area, this garden may be the only one that some children actually get to play in.” Development and talent management We seek to provide our managers with a range of development tools. One of our more innovative programmes, initiated in 2004 and aimed at developing leadership skills, is the Prison Partners Mentoring Scheme. This Business in the Community scheme pairs senior leaders with managers from the prison service. Our leaders have developed oneto-one coaching partnerships with managers at Wormwood Scrubs to enable them to work together on business and personal leadership objectives. The partners also meet collectively to share knowledge and insights on business operations and strategy development. This programme offers a two-way knowledge sharing forum ideal for challenging existing perceptions and, therefore, providing our leaders with new ways of thinking that they can then bring back and develop within the business. • Number of Centrica people involved • Quote from Centrica participant about the benefits • Key achievements in 2005 • Future plans. Solihull volunteers Pam Kaur Four volunteers from Solihull carried out a garden makeover at Chelmsley Wood as part of the Employee Volunteering initiative. Yvonne Marsh, Marj Walker, Linda Cole and Pam Kaur got involved when they heard about the Age Concern employee volunteering project. They got involved in a garden makeover for an 80-year-old man. He is disabled with limited mobility and has a speech difficulty, so he depends on carers and is no longer able to maintain his garden. Yvonne said: “After we had heard about the project we all felt we wanted to do something to help. I made a pre-visit to the garden to see what was involved, then we all worked together to get the job done. I think we worked well as a team and, at the end of a tiring day, really felt that we had achieved something.” Pam Kaur, from the billing section, found herself getting a royal pat on the back for the makeover. She was invited to represent the volunteers at Buckingham Palace, where she met royals, leading politicians and celebrities at a special event to celebrate the Year of the Volunteer. “It was such a great opportunity,” she said. “Prince Edward asked me several questions about my volunteering. I saw many of the Coronation Street stars and other ministers. It is great to see that volunteering is recognised nationally and I am glad that I am part of a team that can help people with disabilities and make a difference.” 147 Corporate Responsibility Report 2005 www.centrica.com/cr05 Communities Case studies continued Top of the class Nursery rhyme characters and a team of Scottish Gas volunteers helped to add a splash of colour to an Edinburgh nursery school. Through a Scottish Gas volunteer programme, a team of 12 staff spent two days creating a mural for the sleep and music room and renovating an outdoor play area. Scottish Gas’ Lisa Kidd said: “With the children and staff, we discussed ideas for the mural and the garden. We came up with a nursery rhyme theme for the sleep room and farmyard theme for the play area in the garden.” Crewe Road Nursery School manager Lorraine Suggitt said: “The group have worked like Trojans and everyone at the nursery is really pleased with the result. We are delighted with the partnership with the Scottish Gas staff.” Customer service adviser Will Clark said: “Being a father of a 3-year-old, I realise the importance of children’s education at an early age. What better way to improve the learning of a group of nursery kids than to make their rundown play area tidy and more interactive? I want the best for my own kid and now I can do something to improve the lives of a few others.” The right sort Fifteen British Gas workers in Leeds joined local Oxfam stores to help sort the vast amounts of clothing and other goods received following the charity’s tsunami aid appeal. Volunteers took an entire day to make headway into the donations from the people of West Yorkshire. The contributions were sold in local Oxfam stores to benefit victims of the disaster, which devastated parts of Asia at the beginning of last year. Some of the more unusual offerings included a purple velvet smoking jacket, some French francs, paisley kipper ties, a toilet brush, a multicoloured clown’s wig and an Asda uniform. Customer manager Carly Sanderson said: “We had a fantastic day, mucking in and helping Oxfam staff. Everyone at Oxfam in Leeds does an incredible job. It was good to feel I have given something real to the appeal, as well as donating money.” The work with Oxfam followed fundraising efforts by local British Gas staff, which raised £3,000 for the tsunami appeal. Helping hurricane victims Employees in Direct Energy demonstrated overwhelming generosity in the days following the devastation caused by Hurricane Katrina last summer. As well as giving donations through relief agencies, such as the American and Canadian Red Cross, staff reached out to help people in the Gulf Coast region in many different ways, including sorting boxes of supplies and taking survivors into their own homes. They contributed, along with Direct Energy, more than US$160,000 (£92,000) to charities. The company’s charity partner in Texas, Star of Hope, opened its doors, and all regional offices in Texas mobilised to welcome people into their communities. Employees volunteered their time and made in-kind donations of clothing, toiletries, non-perishable foods, diapers and pet food for delivery to shelters throughout the Greater Houston area. The Residential Services Group (RSG) used its trucks and people to deliver donated goods to the aid shelters and helped find emergency accommodation for those affected by the hurricane. Also, more than CDN$3,000 (£1,400) was raised by employees and suppliers in an auction at the Direct Energy Essential Home Services Trade Show. And members of the leadership team at RSG, who were scheduled to visit New Orleans in October, donated the value of the trip to relief efforts. Jasmina Mihajlovska, Director of Corporate Social Responsibility, said: “Employees showed tremendous compassion for people struggling to put their lives back together following this natural disaster.” 148 Corporate Responsibility Report 2005 www.centrica.com/cr05 Communities Case studies continued Employee charity of the year Our 2005/06 charity partnership was with children’s charity NCH and was called ‘Helping children shine’. Our employees raised £350,000, which will go to several of the 500 projects the NCH runs for the UK’s most vulnerable children and young people and their families. In all, NCH supports more than 140,000 people. The campaign enabled Centrica employees to fund projects local to them in one of four key areas of NCH’s work – young carers, mental health, disability, and adoption and fostering. Those four themes ran through the year, each for three months, designed to link raising cash and awareness. Employees raised money through a host of events – everything from selling cakes, washing cars and fancy dress to running the London Marathon, ferrying the NCH mascot Cedric the Dragon from office to office, and competing in Centrica’s Lakes Challenge in the Lake District. Volunteer Citizen of the Year Direct Energy supports Volunteer Citizen of the Year Direct Energy in Canada launched an award scheme to recognise the contribution volunteers make in their community in 2005. The company offered a $1,000 (£492) cash prize for the winner of the Volunteer Citizen of the Year award and a $5,000 (£2,464) grant to an organisation chosen by the winner. Almost 150 nominations were received in 2005, and the award scheme, organised jointly with the Albert Weekly Newspapers’ Association, is to run for a second year in 2006. The 2005 winner was Blanche Coultis, who has been volunteering for more than 55 years in Brooks. She was the original volunteer librarian when the Brooks Library opened in 1949 and, now a retired teacher, is the resident historian for the Brooks and District Museum and Historical Society. The award programme is an extension of Direct Energy’s Direct in the Community scheme that encourages company employees to volunteer their time in their local community. 149 Corporate Responsibility Report 2005 www.centrica.com/cr05 Communities Case studies continued Helping Children Shine Employee Charity of the Year Our Charity of the Year initiative is at the heart of our community investment programme. Fundraising takes place across all parts of the Group and enables employees to focus on one particular charity. In addition, individual offices still have the flexibility to raise funds for other causes. As an integral part of our community investment programme, the Charity of the Year receives corporate funding to facilitate the fundraising partnership, in addition to funds raised by employees. Our current charity of the year is NCH. The partnership was launched in February 2005. Helping Children Shine Imagine never having someone to hug you, someone to play with, someone to talk to or a day without abuse. Thousands of children and young people can’t and that’s why Centrica and NCH are working together to support vulnerable children and young people throughout the UK. NCH runs more than 500 projects for the UK’s most vulnerable children, young people and their families, and in doing so supports over 140,000 people. The support of Centrica employees will enable NCH to help children achieve their full potential. The partnership will allow Centrica employees to fund projects local to them and to also fund one of the four key areas of NCH’s work being highlighted throughout the partnership: namely, young carers, mental health, disability, and adoption and fostering. Key objectives • To raise £250,000 for NCH in the first year of the partnership. • To generate awareness of the issues facing disadvantaged children and young people in the UK today amongst Centrica employees and the general public. Fundraising campaigns For the first year four themes have been developed to link fundraising with awareness messages focusing on specific issues. ‘Big days out’ – February 2005 – Young Carers ‘Peace of mind’ – May 2005 – Mental Health ‘More than words’ – August 2005 – Disability ‘Families matter’ – November 2005 – Adoption and Fostering 150 Corporate Responsibility Report 2005 www.centrica.com/cr05 Investors Interest in socially responsible investment (SRI) has grown steadily in recent years, with further growth widely predicted. Most major institutional fund managers in Europe have some form of SRI capability and private investors, too, are beginning to recognise SRI as a worthwhile investment strategy. The challenge for business is to demonstrate to the investment community the link between corporate responsibility (CR) and strong financial performance. This can be a difficult task. We have clearly articulated our key issues and business case, and our approach to CR seeks to manage risk, protect our reputation and create sustainable returns for our shareholders. In 2005 we ran two roadshows with investors to outline our approach to managing our key corporate responsibility issues. Like many listed companies, Centrica’s CR performance is rated by independent organisations that assess the extent to which companies effectively manage social, environmental and ethical matters. Dow Jones Sustainability Index Centrica was selected in both the Dow Jones Sustainability World and European Indexes in 2004. This means we are judged to be among the leading sustainability-driven companies worldwide. FTSE4Good Indices Centrica has been included in the UK, European and World indices since they were launched by the FTSE Group in 2001. Business in the Community CR Index In 2005 Centrica scored 91% (86% in 2004). Global 100 Most Sustainable Corporations in the World Centrica was named as one of the world’s most sustainable companies when this new ranking was launched at the World Economic Forum in Davos in 2005. Oekom Research In 2005 Centrica was rated 8th out of 20 companies in the utilities sector for its CR performance by Oekom Research, the German ratings agency. Vigeo Centrica scored above the sector average in five of the six areas assessed by Vigeo’s corporate responsibility research for fund managers. Ethibel Investment Register Centrica continues to be included in this established register, which is used by banks, fund managers and institutional investors across Europe. Case studies Success with ShareGift Share donation charity ShareGift has won international recognition for its work with Centrica. ShareGift picked up the Innovation Award at the International Fundraising Congress in the Netherlands which followed a ‘highly commended’ in the UK Charity Awards 2005 in the Corporate Community Involvement category. Both successes stemmed from the partnership between ShareGift and Centrica over donations of the unwanted fractional entitlement cheques to ShareGift arising from Centrica’s share consolidation in late 2004. An innovative mechanism meant that shareholders could sign over their entitlements to ShareGift and even give them tax-efficiently by Gift Aid. These two initiatives together generated more than £1 million for ShareGift, which was distributed to a cross-section of UK charities, including NCH, Centrica’s charity partner. Centrica is the first company to generate a million pounds for ShareGift from shareholder donations. 151 Corporate Responsibility Report 2005 www.centrica.com/cr05 Suppliers Each year we spend billions of pounds on buying goods and services including technology, professional services, property and transport as well as specialist purchasing relating to upstream gas production, electricity generation and gas storage. Strong supplier relationships are important to our business success. We expect our suppliers and commercial partners to understand and uphold our business principles. We have adopted a policy framework to describe our approach and priorities. In 2005 we built CR risk assessment into our tendering processes for new contracts and for the renegotiation of existing contracts. Our commercial procurement and supplier management team works closely with the business to implement this process. In 2005 we completed thousands of supplier agreements, many of them through a competitive tender process or via the Official Journal of European Communities process. We will continue to follow this approach in 2006. As a result of our organisational changes in 2005, we did not make as much progress as we would have liked in this area. In 2006 we will introduce a training programme for our procurement and supplier management team to provide practical guidance on interpreting our business principles and policies in our supply chain. In addition, we will focus on the selection of suppliers and business partners for our gas exploration activities in Nigeria, working with them to ensure that operations are managed in line with our business principles. Read more about our approach to supplier relationships below. Selection Our tendering process helps us identify any potential social, ethical and environmental issues in our supply chain. Payment We believe it is important that we promote and maintain good payment practices in line with the DTI-inspired Better Payment Practice Code. Future plans We recognise the need to continually improve our processes to ensure that CR risks in the our supply chain are identified and managed. 152 Corporate Responsibility Report 2005 www.centrica.com/cr05 Suppliers Selection We continually review our procurement practices in line with our business principles and policies, good practice and growing stakeholder expectations. We aim for high standards of integrity in our business conduct and, as a FTSE100 company, we are increasingly held to account by external audiences, such as investors and analysts. It is therefore very important that we identify and manage potential risks at the earliest stage. In our tendering process we ask potential suppliers a series of social, ethical and environmental questions. We use this information to guide our decision on which supplier to use. It enables us to: • identify potential risks to our reputation • initiate dialogue and share learning with our business partners on the management of social, ethical and environmental issues • help bring about sustained improvements in performance in our supply chain and general business operations. The purpose of the group procurement and supplier management team is to get the best commercial deals for Centrica on products and services provided by third parties and support the business to manage relationships with our suppliers. We recognise the benefits of working with our suppliers and business partners to share knowledge and expertise that will help both organisations develop good social, ethical and environmental policies and processes. Payment We have a responsibility to pay our suppliers on the terms agreed at the time of purchase. Failure to do so harms our reputation, damages our supply source and strains our relationship with suppliers. We believe it is important that we maintain good payment practices. Centrica has agreed to support the Better Payment Practice Code, inspired by the Department of Trade and Industry, and is committed to: Future plans Whilst we made some progress in this area during 2005, we recognise there is still much we have to do to integrate fully and track CR issues in our supply chain. The need is threefold – firstly, to provide practical guidance to our procurement people, helping them to understand and identify potential issues; second, to ensure that our suppliers are familiar with our business principles and help us uphold them; and third, to develop systems which enable us to assess and analyse particular risks more effectively. • agree payment terms at the outset of an agreement and stick to them In 2006, we plan to: • explain the payment procedures to suppliers upon engagement • contact our major suppliers to make • pay bills in accordance with any them aware of our revised business contract agreed with the supplier principles and encourage them to or as required by law work with us in upholding them • inform suppliers without delay when • use our revised business principles an invoice is contested and settle as the basis for our partnerships and disputes quickly. third-party relationships in our international gas exploration activities Compliance with the code will only • introduce a training programme for our happen if we follow the correct procurement and supplier purchasing and payment processes, management teams to provide designed to protect us and our practical guidance on interpreting suppliers. We have advised employees our business principles and policies of our commitment to the code and • update the social, ethical and asked them to ensure that correct environmental questions we ask processes are followed at all times, suppliers. in accordance with the terms and conditions of the code. For more information on the Better Payment Practice Code, visit www.payontime.co.uk. 153 Corporate Responsibility Report 2005 www.centrica.com/cr05 Government Centrica operates in a highly regulated market. UK and EU policy decisions affect all aspects of our operations including UK investment decisions, consumer protection and employment rights. Centrica believes that liberalised energy markets are the most appropriate way to deliver Government energy policy objectives. There is also an increasing requirement for energy companies to deliver environmental objectives as part of the focus on addressing climate change. We seek to limit Government intervention in the way that the UK energy market operates and to minimise regulation, preferring self regulation where necessary. We also seek to ensure that European markets are liberalised which is essential to ensure UK security of gas supply and to secure gas for UK consumers is at a reasonable price. To this end, we work with Government and EU institutions at all levels through: • preparing company responses to Government and EU Commission consultations and providing written and oral evidence to Parliamentary inquiries • engaging in on-going dialogue with key stakeholders in UK and EU political institutions including UK Government, the EU Commission, and UK and European Parliaments • monitoring and seeking to amend, where appropriate, relevant UK legislation and EU Directives. We operate on a politically neutral basis and also work closely with Opposition Parties to inform party policy on key issues in energy, environment, consumer policy and employment relations. Centrica does not make political donations and fully complies with the Political Parties, Elections and Referendum Act 2000. 154 Corporate Responsibility Report 2005 www.centrica.com/cr05 Economic impacts Customers Turnover (from continuing operations) Total British Gas Residential Energy British Gas Services British Gas Business Centrica Energy Centrica Storage Centrica North America Europe Other 2005 £13.4bn £6,032m £1,024m £1,510m £1,011m £195m £3,552m £119m £5m 2004 £11.4bn £5,901m £943m £1,200m £931m £133m £2,242m £8m £3m Employees Number of employees Total UK Rest of Europe North America 2005 35,410 29,948 201 5,261 2004 43,094 39,522 385 3,187 Employee costs Wages and salaries Social security Other pension and retirement benefits Share schemes 2005 £1,031m £83m £136m £22m 2004 £1,093m £107m £168m £19m 155 Corporate Responsibility Report 2005 www.centrica.com/cr05 Economic impacts Suppliers 2005 Total spend with suppliers £9,917m 2004 £7,876m Shareholders and creditors 2005 Ordinary dividend per share Total dividend paid to shareholders Net debt Net interest payable 10.5p £340m £1,592m £145m 2004 8.6p £1,314m £725m £104m Governments 2005 Total taxation paid £768m 2004 £502m Profit and re-investment 2005 Profit retained Return on capital employed £672m 15.5% 2004 £205m 13.6% 156 Corporate Responsibility Report 2005 www.centrica.com/cr05 Economic impacts Value added statement Our value added statement shows the flow of money in and out of the business among our various stakeholders. It gives an account of the wealth created by ‘adding value’ to the cost of raw materials, goods and services purchased and its distribution to employees, governments, providers of capital and local communities. Distribution of Cash Value Added % £ 2005 Employees Governments Shareholders Retained for growth Lenders Community investment Total 1,189 851 711 233 284 7 3,275 £ 2004 1,280 609 1,495 -364 137 6 3,163 % 2005 36.3% 26.0% 21.7% 7.1% 8.7% 0.2% % 2004 40.5% 19.3% 47.3% -11.5% 4.3% 0.2% Centrica Cash Value Added 2005 Employees 36.3% Governments 26.0% Shareholders 21.7% Retained for growth 7.1% Lenders 8.7% Community investment 0.2% 157 Corporate Responsibility Report 2005 www.centrica.com/cr05 Focus on… This section of our report outlines some of the main CR-related issues that affect the development and implementation of our business strategy. Click on the topics below to read an overview of the issue, the policy environment, our position and what we are doing. Energy efficiency Energy efficiency continues to be an important element of UK energy policy. Fuel poverty Fuel poverty is caused by a combination of poor energy efficiency and low incomes. Emissions trading We are a strong supporter of the EU Emissions Trading Scheme. Renewable energy All licensed suppliers must provide a percentage of electricity from renewable sources. New technologies We are exploring a range of microgeneration technologies. OFR We participated in the Operating and Financial Review consultation in 2005. 158 Corporate Responsibility Report 2005 www.centrica.com/cr05 Focus on… Energy efficiency Gas and electricity used in the home are responsible for 25% of the UK’s carbon dioxide emissions. Every home in the UK creates about six tonnes of carbon dioxide each year. The Energy Saving Trust (EST) estimates we waste £6 billion of energy in Britain every year. According to the EST, the average household spends over £620 annually on fuel, but by increasing energy efficiency householders could save around £250 a year. Using less energy will help to reduce carbon emissions, enhance the security of our energy supply and reduce fuel poverty. Government strategy The UK Government’s long-term goal is to reduce the country’s carbon emissions by 60% on 1990 levels by around 2050, with significant progress by 2020. Energy efficiency continues to be an important element of UK energy policy and is regarded as the most cost-effective way to meet energy goals. Under the Government’s Energy Efficiency Commitment (EEC), electricity and gas suppliers are required to achieve energy-saving targets by promoting improvements in domestic energy efficiency. EEC has an environmental aim, providing carbon savings to tackle climate change. It also focuses on alleviating fuel poverty, with half of the energy savings to be targeted at the ‘priority group’ – households that receive benefits or tax credits. What we are doing • We are developing programmes to deliver the Government’s targets, focusing on improving energy efficiency and on tackling the social problems related to fuel poverty. • British Gas’ ‘here to HELP’ programme is one of our key energy efficiency activities, working in association with local authorities, housing associations and national charities. • We are also working in partnership with retailers to increase awareness of energy efficiency at the point of purchase and provide incentives for consumers to buy products with high energy efficiency ratings. • Energy efficiency is as much about a change of lifestyle and behaviour as about practical measures. Through our advice and education programmes we aim to show customers the financial, social and environmental benefits of being more energy efficient. • We are investing in new technologies that use less energy and give consumers greater choice when buying home energy products. 159 Corporate Responsibility Report 2005 www.centrica.com/cr05 Focus on… Fuel poverty Fuel poverty – where a household cannot afford to keep warm – damages the health of those living in cold homes and affects their quality of life. Older people, children and those with a disability or suffering from long-term illness are especially vulnerable. The main cause of fuel poverty in the UK is a combination of poor energy efficiency in homes and low income. Rising energy prices have brought the problem into sharp focus. Government strategy The Government published its UK fuel poverty strategy on 21 November, 2001 on the DTI website. It sets out the framework for the Government’s overall goal of seeking an end to fuel poverty, with the first target being to reach those most vulnerable to coldrelated ill health by 2010. What we are doing • British Gas is developing cutting edge programmes to help improve household energy efficiency and tackle the underlying social problems that contribute to fuel poverty. • We are providing practical support on benefits and debt advice to those customers that need additional support to help them strengthen their finances and reduce their fuel costs. • We are working in partnership with local authorities, charities and community organisations to ensure our programmes extend to ‘hard to reach’ customers. • By working with local authorities and social housing providers we are able join up sources of funding, enabling more homes to benefit. Emissions trading Centrica is a strong supporter of the EU Emissions Trading Scheme (ETS), which began in January 2005. The first phase runs to 2007 and the second from 2008 to 2012. The EU ETS is designed to tackle emissions of greenhouse gases, mostly carbon dioxide, and combat the threat of climate change. It follows a similar voluntary scheme that has been running in the UK since 2002. The way it works EU member state governments fix an emissions cap for all installations covered by the scheme, set out in a National Allocation Plan. Installations must hold an emissions trading permit, which is, in effect, a licence to operate and emit carbon dioxide. The scheme allows companies to emit more than their allowances (each allowance represents one tonne of carbon dioxide) by buying allowances from the market. A company emitting less than its allocation can sell its surplus allowances. This method of trading allowances gives companies flexibility in meeting emission reduction targets – by reducing emissions on site or by buying allowances from other companies. This facilitates carbon abatement at the lowest cost and is therefore the most economically efficient solution. What we are doing • We support the EU ETS scheme and are an active participant in the traded market. • Our power stations, gas installations and Rough Gas Storage Facility are all covered by the scheme. • We are active in the emissions market through our Accord trading arm. • We also participate in the Clean Development Mechanism (CDM) and the Joint Implementation (JI) market. The CDM/JI market is part of the Kyoto Protocol and promotes projects in other countries, leading to lower emissions (when compared to what would have happened had the project not taken place). 160 Corporate Responsibility Report 2005 www.centrica.com/cr05 Focus on… Renewables obligation All licensed suppliers must provide a percentage of electricity from renewable sources under the UK Government’s Renewables Obligation (RO). The target started at 3% in 2002-03 and will reache 15.4% in 2015-16. For 2005-2006 it is 5.5%. The RO helps the UK meet its goal to generate electricity from renewables, which contributes to the objectives set out in the Kyoto Protocol. The way it works Centrica meets its RO target by presenting Renewables Obligation Certificates (ROCs), which are awarded to accredited generators. ROCs confirm that the power has come from renewable sources – for example, a wind farm. We obtain these ROCs either by building our own renewable generating assets, or by buying from other accredited generators. The RO also gives us the option of paying a buy-out fee, although Centrica has not used this option. Suppliers present Ofgem with enough ROCs (each representing one megawatt hour of renewable electricity) to prove they have met their targets. What we are doing • We have met our Renewables Obligation target for the third year running, using only ROCs and not resorting to the buy-out arrangement. We are the only major supplier to do so. • Some 5.5% of our electricity was supplied from renewable sources, meeting the target set by the UK Government. • Our first green power was generated in 2005 – from the Glens of Foudland wind farm in Aberdeenshire. Our first offshore wind farm, off the Cumbrian coast near Barrow, has delivered its first power and is due to start commercial generation in 2006. Centrica has also agreed to buy all the output from the 72MW Braes of Doune wind farm in Scotland for its British Gas customers. The wind farm, being developed by Airtricity, is expected to be online in autumn 2006 and Centrica hopes to participate as a partner in the project subject to satisfactory completion of construction. • Two new green products for our British Gas customers were launched in 2005. One is Climate Aware, which enables customers to offset the carbon emissions from their home by contributing to environmental projects in developing countries. The other is the Energy Savers Club, which rewards customers for being more energy efficient at home. • We are working with partners to develop methods of microgeneration (small-scale power generation). We have combined with Microgen to develop a household boiler that will heat a home and power electrical equipment, and we are bringing Windsave rooftop wind turbines to market. 161 Corporate Responsibility Report 2005 www.centrica.com/cr05 Focus on… New technologies Developing a sustainable, balanced energy mix is essential to our strategy and our vision of how energy will be supplied in the 21st century. Developing domestic microgeneration is a key component. British Gas is exploring a range of microgeneration technologies, including domestic combined heat and power, fuel cells, wind turbines and solar thermal panels. We are pleased to see the UK Government is backing these technologies, which are regarded as having the most market potential. We’ll continue to work with product developers focusing on consumer demand to determine which will be most successful and appeal to the widest market. This will help us to: • achieve climate change targets • reduce carbon emissions • deliver our Energy Efficiency Commitment and other renewable targets • support people in fuel poverty • contribute to the UK’s energy supply • strengthen customer relationships. Stirling engine powered boiler • This will be the world’s first wallmounted combined heat and power system, providing hot water and heat as well as ‘free’ electricity. • It saves money, cutting bills by £150 a year or more and can reduce carbon emissions by 1.5 tonnes a year. • The system is connected to the electricity supply and can provide back-up during a power cut. • Field trials are under way, with customer trials planned for winter 2006. If they are successful, British Gas will sell the boiler from 2007. Fuel cell powered boiler • This has the potential to be the world’s first wall-mounted home energy system using a solid oxide fuel cell. It is a flameless boiler that creates heat and power via an electro-chemical reaction. • Fuel cells within the boiler deliver enough electricity to run the baseload in a typical home. It should significantly cut domestic energy bills and could reduce carbon emissions by up to three tonnes a year. • British Gas is investing in the technology and hopes to make it commercially available in the next three or four years. Domestic wind turbines • Wind turbines installed on the roof harness wind power to generate electricity, cutting carbon emissions and reducing energy bills. • British Gas is running the first domestic trial in the UK during 2006. Solar thermal panels • These panels can produce ‘free’ hot water even on cloudy days. They operate on the principle of light absorption and are not dependent on high temperatures or long spells of unbroken sunshine. • Solar thermal panels have real environmental credentials with longterm payback benefits and are available now through our green portal at www.house.co.uk/waste. Remote diagnostics ‘Remote diagnostics’ involves remotely monitoring central heating boilers via home sensors, which relay data via a modem and the public telephone network to servers running bespoke diagnostic software. The technology will help us to: • solve problems before they happen • constantly monitor carbon monoxide levels • predict breakdowns 24 hours a day • provide customers with additional peace of mind • improve levels of safety • provide greater convenience and less hassle. In 2006 we plan to run a technical trial involving 50 customers to confirm that the units work according to their design and specification. A commercial trial will follow to test the customer proposition, sales and conversion rates. Electronic ‘smart’ meter reading British Gas is planning to pilot new meter-reading technology in 150 homes in 2006. We install a small external electric unit attached to the gas and electricity meter inside the home. The unit reads the meter electronically and transmits the readings via a receiver to our billing system. The technology means that our customers receive bills that are always accurate and up to date, whilst reducing the need for customers to be present for regular meter readings. At the same time, it will help us improve our service by monitoring payments against regular consumption, so that we can identify any payment difficulties at an earlier stage. The technology has been designed to move British Gas and our customers towards the elimination of estimated bills. 162 Corporate Responsibility Report 2005 www.centrica.com/cr05 Focus on… Non-financial reporting In 2005 we contributed to the UK Government’s consultation on the Operating and Financial Review (OFR). We supported the revised standard and, like many stakeholders, were surprised when, in November 2005, the Chancellor of the Exchequer removed the requirement for companies to produce an OFR. We have since contributed to a further consultation investigating the impact of this decision and look forward to the publication of the results in May 2006. The timing of the Chancellor’s announcement, and the resulting confusion, had an impact on the level of information planned for our 2005 Annual Report & Accounts. The 2005 report does contain an OFR section but in a similar style to the previous year. We will review the content and layout for the 2006 report once the regulatory requirements for the Business Review – the replacement for the OFR – and the EU Accounts Modernisation Directive become clearer later in 2006. We remain committed to ensuring that our reporting accurately reflects significant non-financial issues in addition to appropriate financial measures. Despite the abolition of the OFR, our Corporate Responsibility Committee oversaw a review of our most significant non-financial issues in 2005. Processes have been put in place to measure progress against key indicators. 163 Corporate Responsibility Report 2005 www.centrica.com/cr05 Performance summary Customers Customer performance highlights 2005 Energy efficiency measures subsidised by British Gas (million) Lifetime carbon savings for measures subsidised (million tonnes) Number of priority* households benefiting from measures (million) Number of non-priority households benefiting measures (million) Homes signed up to British Gas ‘here to HELP’ programme Winter fuel rebates to British Gas customers (£ million) Reduction in complaints to energywatch about British Gas (%) British Gas Business contract renewal rate (%) Number of carbon monoxide incidents with British Gas service history Advertising Standards Authority complaints upheld against British Gas 9 1.3 1.1 2.5 116,823 6.7 35 96 3 7 2004 6 1.1 1.1 0.8 78,019 N/A 30 99 5 1 * Under the UK Government’s Energy Efficiency Commitment, priority customers are those in receipt of at least one of the following benefits: council tax benefit, housing benefit, income support, income-based job seekers allowance, attendance allowance, disability living allowance, war disablement pension which includes either a mobility supplement or constant attendance allowance, disablement pension which includes constant attendance allowance, state pension credit, child tax credit where the relevant income is £14,600 or less, working tax credit where the relevant income is £14,600 or less. 164 Corporate Responsibility Report 2005 www.centrica.com/cr05 Performance summary Employees Human Capital Return on Investment 2005 Human Capital Return on Investment Ratio defined by PWC Saratoga 2.1 2004 1.9 Change +11% The improvement in our 2005 HCROI performance reflects both an increase in the profitability of the business and a managed reduction in the headcount within the retained businesses. Number of employees 2005 Number of employees 35,410 2004 43,414 Change -18% During 2005 the number of employees dropped significantly, due partly to the completion of the sale of The AA and Onetel from the Group and partly as a result of the cost reduction plan supporting our aim of becoming the lowest cost-to-serve provider. Employee safety 2005 Lost time injuries/1,000 employees Lost time injuries/100,000 hours worked Total injuries/100,000 hours worked 13.2 0.7 3.1 2004 21.5 1.1 5.1 Change -39% -36% -39% Employees from ethnic minority backgrounds 2005 Employees from ethnic minority backgrounds 17.2% 2004 16.6% Change +4% 165 Corporate Responsibility Report 2005 www.centrica.com/cr05 Performance summary Age profile There has been no significant change in the age profile of Centrica employees during 2005. The average age continues to be in the range 25 to 35. 40 35 30 25 % 20 15 10 5 0 16-25 25-35 35-45 45-55 55-65 65+ 2005 2004 16-25 22.7 23.0 25-35 33.2 32.7 35-45 24.3 24.8 45-55 16.3 16.1 55-65 3.3 3.2 65+ 0.1 0.2 2004 % 2005 % Employees with a disability 2005 Employees with a disability 2.5% 2004 2.4% Change +4% Gender profile 2005 Female employees Male employees 30.9% 69.1% 2004 33.2% 66.8% Change -2.3% +2.3% 166 Corporate Responsibility Report 2005 www.centrica.com/cr05 Performance summary Employee engagement score 2005 Employee engagement score (maximum score: 5) 3.78 2004 3.73 Change +1.3% Participation in employee share schemes 2005 Sharesave Share Incentive Plan Direct Energy Employee Share Purchase Plan Environment Resource efficiency Target** by end 2005 based on 2000 baseline Vehicle fuel use Building energy use Waste disposal from offices Recycling rates in offices -13% -15% -15% 50% 41% 17% 34% 2004 34% 14% 25% Change +7% +3% +9% Progress by end of 2004 -8% -15.5% -44% 51% Progress by end of 2005 -8% -32.9% -35.75% 60% ** Our 2000 baseline is normalised against FTE and takes into account changes to the structure of the company such as the acquisition or sale of a facility or business. 167 Corporate Responsibility Report 2005 www.centrica.com/cr05 Centrica energy management programme results, December 2005 Centrica Group (excluding CIS) Electricity (kWh) Gas (kWh) Tonnes CO2 Conditioned floor area (m2) FTEs CO2/m2 CO2/FTE Communities 2000 89,646,431 52,271,292 48,480 223,715 19,696 0.22 2.46 2005 60,722,433 26,720,700 31,188 155,955 18,891 0.20 1.65 % change -32.3 -48.9 -35.7 -26.5 -4.1 -12.5 -32.9 2005 performance highlights 2005 Community investment (£m)* Percentage of pre-tax profit (%) Employee volunteering (hours) Per cent club position CR Index community score Employee opinion score 8.2 0.6 15,000 48th 100% 3.97 2004 7.4 0.6 13,000 48th 100% 4.05 Change +11% 0 +15% 0 0 -2% * Measured using London Benchmarking Group methodology. 168 Corporate Responsibility Report 2005 www.centrica.com/cr05 Future commitments General What we said we’d do CR Committee Manage our corporate responsibility activities through the newly established CR Committee and report quarterly performance to the Centrica Board. What we’ve done What we plan to do next Business principles Communicate our revised business principles to all our stakeholders, particularly to employees. Develop guidance to support this process, particularly focussing on human rights and bribery and corruption policies and training. Benchmarking Benchmark our CR performance through the Business in the Community CR Index and seek a year-on-year improvement in overall score. Our score in the CR Index improved from 86% in 2004 to 91% in 2005. We scored 100% for corporate strategy and for our community investment strategy. Continue to benchmark our CR performance through the Business in the Community CR Index and seek a year-on-year improvement in overall score. Stakeholder engagement Engage a range of stakeholder groups to assess opinion and expectations of our CR communications and reporting. Consulted with our stakeholders to find out their views on CR, their interpretation of Centrica’s responsibilities and whether our activities and level of disclosure are fulfilling their expectations. Stakeholders identified environmental issues as the most important. Implement another programme of stakeholder engagement during 2006 to track progress against outcome of 2005 process. 169 Corporate Responsibility Report 2005 www.centrica.com/cr05 Future commitments Employees What we said we’d do Talent management Skill HR business partners to enable line managers to forecast future capability requirements and develop plans to address deficiencies, whilst creating ‘talent pools’ for key roles. Leadership Development Continue to implement performance improvement plans in all areas to reduce poor performance and identify development interventions for high performers. Employee engagement Target 5% improvement in employee engagement score during 2005 by extending flexible working, team building activities and supporting managers and employees through change. Diversity and inclusion Develop and implement diversity and inclusion action plans in each business to address key priorities. Continued to implement diversity and inclusion action plans providing training on diversity and cultural awareness to around 5,000 employees. Our focus for 2006 is on implementing policies and processes in line with the new age discrimination legislation in the UK and to complete the rollout of our online diversity learning package. Overall engagement improved 1.3% across the Group, which is a significant achievement given the number of organisational changes implemented during the year. Our focus for 2006 is to improve the extent to which employees feel more involved and committed. This includes feeling valued and responding to leadership. Around 1,200 managers across Centrica took part in one or more LEAP programmes. This equates to at least 14,000 hours of training. Continue to develop talent pools during the year by defining the selection criteria and we hope to implement this work during 2006. Defining selection criteria for general management talent pools and commence identification of people to enter those pools. What we’ve done What we plan to do next Health and safety Continue to scrutinise and challenge periodic data reporting through the regular use of our corporate audit Reduced lost-time injuries per 1,000 employees by 39%, reduced lost-time injuries per 100,000 hours worked by 36% and reduced total injuries per 100,000 hours worked by 39%. Continue to scrutinise and challenge periodic data reporting through the regular use of our corporate audit, learning from incidents in 2005. 170 Corporate Responsibility Report 2005 www.centrica.com/cr05 Future commitments What we said we’d do Reward and remuneration Continue to monitor market practice to ensure we maintain our competitive position to recruit and retain talented individuals, whilst embedding and improving reward and recognition policies that drive and reward high performance. What we’ve done What we plan to do next Average employee salary fell slightly due to changes in the structure of our employee base but an additional 1,000 employees joined our flexible benefits scheme and the number of employees participating in our three share schemes increased. Continue to monitor market practice to ensure we maintain our competitive position to recruit and retain talented individuals, whilst embedding and improving reward and recognition policies that drive and reward high performance. Human Capital Management Deliver a robust HCM process as part of the wider human resources transformation programme to improve our systems and data capture. Developed processes to measure and report against key human capital indicators, and included these measures in our CR report for the first time. Our human capital return on investment improved from 1.9 in 2004 to 2.1 in 2005. Continue to refine our HCM processes and report against identified indicators striving for year-on-year improvement. Occupational health We are planning a workshop for employees suffering from knee problems, a wellness induction programme for gas engineers and prescription gym membership to help employees recovering from musculoskeletal problems. Training and development Our British Gas Customer Service Academy aims to complete the training roll-out for our new billing systems to over 5,000 employees onshore and offshore. We will complete a full review of call and service centre employee career development and introduce a new standard framework. 171 Corporate Responsibility Report 2005 www.centrica.com/cr05 Future commitments What we said we’d do International processes What we’ve done What we plan to do next Continue to develop health, safety and security management and employee relations processes in our international operations in India and Nigeria. Engineer development Our British Gas Engineering Academy will continue to work with schools and communities to increase the talent pool from which we recruit tomorrow’s engineers. 172 Corporate Responsibility Report 2005 www.centrica.com/cr05 Future commitments Customers What we said we’d do Vulnerable customers Meet the industry commitment and continue to develop innovative initiatives that help our most vulnerable customers. Continued to work with members of the Energy Retailers Association, Ofgem, local councils and charities to deliver a range innovative activities to support vulnerable customers. British Gas won Business in the Community’s Healthy Communities Excellence Award for ‘here to Help’. Continue to ensure vulnerable customers are identified and working with a range of external partners to provide a range of solutions and services to help. What we’ve done What we plan to do next Fuel poverty Continue to address the primary causes of fuel poverty through initiatives that combine heating, insulation and income related measures. British Gas installed more than nine million energy efficiency measures, such as loft and cavity wall insulation and low energy light bulbs, benefiting more than 1.1 million priority households. Continue to deliver our Energy Efficiency Commitment, including a focus on ‘priority’ customers to address fuel poverty, through initiatives such as our Winter Fuel Rebate scheme. Customer experience Identify and report on customer experience performance indicators across our businesses. Introduced a range of new systems and processes to further improve levels of customer service. British Gas was ranked top gas supplier in the JD Power Customer Satisfaction Index in 2005. Customer complaints to energywatch, the UK energy industry watchdog, also reduced by 35% during the year. Successfully migrate customers new billing systems and reduce engineer repeat visits in British Gas. Introduced a named point of contact for all British Gas Business customers. Introduce relationship surveys in Direct Energy. Customer safety Continue to raise awareness of key safety issues, including carbon monoxide (CO) poisoning in collaboration with industry bodies. Delivered continual improvement in health and safety performance across almost all of our businesses. A British Gas campaign targeted students’ landlords and homeowners to raise awareness of CO poisoning. Work with fire brigades across the UK to highlight the dual issues of fire safety and CO safety. Build on our successful student campaign in 2005 with a further campaign focusing on wider home safety issues. Diversity and inclusion Develop and implement action plans in each business to further embed diversity and inclusion good practice into the service we provide to our customers. Action plans are in place for each business unit, focusing on key aspects of customer diversity including website accessibility and alternative format communications. Continue to monitor the implementation of business unit action plans through the Diversity and Inclusion Action Group help ensure a ‘business as usual’ approach in this area. 173 Corporate Responsibility Report 2005 www.centrica.com/cr05 Future commitments What we said we’d do Advertising and selling Improve internal processes to minimise advertising related complaints and share knowledge and good practice across businesses. What we’ve done What we plan to do next The Advertising Standards Authority (ASA) upheld seven complaints against British Gas, mainly from our competitors. We have also conducted a full review of our internal systems and increased the rigour of our approval processes. Continue to work with the ASA and other industry bodies to improve our internal processes to develop a more responsive and flexible approach to dealing with complaints, particularly those from competitors. Green propositions Develop ‘green’ customer propositions to enable customers to benefit from renewable electricity and reduce their carbon footprint. British Gas launched a range of ‘green’ propositions and new technologies including ‘Climate Aware’, a product that enables customers to offset their carbon emissions. Our energy efficiency measures saved householders a total of £37 million. Continue to develop green product offerings to meet our customers needs, helping them reduce their carbon emissions and their household’s environmental impact. 174 Corporate Responsibility Report 2005 www.centrica.com/cr05 Future commitments Environment What we said we’d do Office energy Reduce energy use per person in our buildings by 15% compared to 2000 baseline. Achieved target with an overall reduction of 32.9% (CO2/FTE) excluding IS data centres. Achieve a further reduction in energy of 5.78% electricity, 9.33% gas equating to a further reduction of 6.36% in CO2. What we’ve done What we plan to do next Office recycling Maintain office recycling rate of 50% level compared to 2000 baseline. Exceeded target with an overall year end recycling rate of 59.57% Achieve overall office recycling target of 62% with a minimum of 50% in every office. Office waste Reduce waste sent to landfill by 15% compared to 2000. Our end of 2005 figures show a 35.75% We are reviewing how we can improve reduction in the volume of waste sent to on these figures across the business. landfill. Management systems Extend ISO 14001 certification to Roosecote and Barry power stations. Achieved target - all UK power stations are now fully certified. Maintain certification and develop Group Environmental Management System (GEMS). Renewables Produce green electricity from out first onshore and offshore wind farm developments by the end of 2005. Glens of Foudland started generating in 2005, offshore generation delayed but will be operation during the first half of 2006. Produce green electricity from Barrow offshore wind farm during the first half 2006. Continue to progress on schedule, the construction Lynn, Inner Dowsing and Lincs offshore wind farms. Progress consent applications for Docking and Race Bank wind farms. 175 Corporate Responsibility Report 2005 www.centrica.com/cr05 Future commitments What we said we’d do Regulations Integrate the requirements of new regulations such as energy labelling, pollution prevention control (PPC) and the European Union Emissions Trading Scheme. What we’ve done What we plan to do next PPC applications for all UK power stations duly made in March 2006, EUETS phase I verifications also completed March 2006. Implement PPC improvement programmes and preparation for phase II EU-ETS. Develop a Group-wide environmental strategy group, reporting to the corporate responsibility committee. Relaunch ‘Natural Capital’ employee campaign to continue to build employee engagement in delivering our environmental goals. Work with our suppliers to develop an enhanced paper sourcing strategy and focus on reducing office paper use. 176 Corporate Responsibility Report 2005 www.centrica.com/cr05 Future commitments Communities What we said we’d do Vulnerable customers Continue to work with our British Gas ‘here to HELP’ charity partners to develop innovative ways to address the root causes of household poverty across Britain. ‘here to HELP’ has reached 469,000 households, resulting in 38,000 charity referrals and has completed 20,000 quality of life assessments, identifying £8.5 million of unclaimed benefits. Continue to tackle household poverty through the British Gas ‘here to HELP’. What we’ve done What we plan to do next Employee volunteering Extend volunteering activities across the Group, developing new partnerships to increase the range and diversity of opportunities. During the year employees across the Group invested more than 15,000 volunteering hours with a range of charities and good causes. This in-kind support equates to around £420,000. Develop a website portal to enable more employees to get involved in volunteering and other community involvement activities. Employee fundraising Work with NCH to deliver a creative and Employees in the UK raised more than engaging campaign that supports £250,000 for NCH during 2005. employees’ goal of raising £250,000. Employees in North America supported the relief efforts for hurricanes Katrina and Rita, raising more than $100,000. In addition, through employee fundraising and company support we generated more than £200,000 to support victims of the Asian tsunami. Support employee fundraising activities with a focus on local charities and causes, by providing matched funding and guidance for managers and employees. Direct in the Community Identify new charitable partners in the north eastern United States to extend Direct Energy’s commitment to tackle the underlying causes of homelessness. Direct Energy identified three new charitable organisations in Texas, Ohio and Connecticut and donated USD$50,000 to each of them. The charities are: Chrysalis Centre, The Coalition on Homelessness and Housing in Ohio and Housing Crisis Centre in Dallas. All three are focused on finding long term solutions to homelessness. Encourage employees to become involved by donating their time and taking part in fundraising events. The new charities will be included in the 2006 pledge drive. 177 Corporate Responsibility Report 2005 www.centrica.com/cr05 Future commitments What we said we’d do In-kind support Continue to increase levels of in-kind support in communities where we have a business presence. What we’ve done What we plan to do next Worked with Green-Works, a charity that helps companies make redundant office furniture available to the nonprofit sector. The total value of goods donated was almost £70,000. Continue to increase levels of in-kind support in communities where we have a business presence and use our business expertise to support charities and good causes. Measurement Continue to measure the outputs and impacts of all programmes through a combination of external and internal surveys and benchmarks. Continued to measure the impact of our community investment activities using the London Benchmarking Group methodology. Centrica scored 100% for the ‘performance and impact’ our community investment activities in the Business in the Community CR Index. Continue to measure the outputs and impacts of all programmes through a combination of external and internal surveys and benchmarks. Suppliers What we said we’d do CR assessment What we’ve done What we plan to do next Further integrate CR assessment into Built CR risk assessment into our the tendering process for new contracts tendering processes for new contracts and renegotiations and for the renegotiation of existing contracts. Our commercial procurement and supplier management team works closely with the business to implement this process. Contact our major suppliers to make them aware of our revised business principles and encourage them to work with us in upholding them. Update the social, ethical and environmental questions we ask suppliers. 178 Corporate Responsibility Report 2005 www.centrica.com/cr05 Future commitments What we said we’d do Business principles What we’ve done What we plan to do next Use our revised business principles as the basis for our partnerships and third party relationships in our international gas exploration activities. CR training Introduce a training programme for our procurement and supplier management teams to provide practical guidance on interpreting our business principles and policies. Investors What we said we’d do Roadshows Deliver investor roadshows to brief analysts on our corporate responsibility activities and initiate dialogue on areas of significant impact. Delivered two investor roadshows, Deliver investor roadshows to update mainly with socially responsible analysts on our activities and investment analysts. Discussion performance. focussed on climate change, energy efficiency and vulnerable customers and feedback from analysts was extremely valuable. What we’ve done What we plan to do next SRI Respond to the main socially responsible investment indexes Dow Jones Sustainability Index and FTSE4Good Indicies - to ensure our rating continues to reflect our progress in this area. We maintained our position as a component of the Dow Jones Sustainability World and European Indexes and the FTSE4Good Indicies. We also responded to assessments undertaken by other international ratings agencies. Respond to the main socially responsible investment indexes Dow Jones Sustainability Index and FTSE4Good Indicies - to ensure our rating continues to reflect our progress in this area. 179 Corporate Responsibility Report 2005 www.centrica.com/cr05 External assurance statement and commentary Introduction Centrica has commissioned The Corporate Citizenship Company to provide it with external assurance and commentary on its Corporate Responsibility Report 2005. Centrica’s management has prepared the report and is responsible for its contents. Our objectives were to review and advise on aspects of its contents and presentation, to conduct selected checks to underlying corporate records, and to provide this statement for which we have sole responsibility. The Corporate Citizenship Company is a specialist management consultancy advising corporations who seek to improve their economic, social and environmental performance around the world. A detailed note describing our relationship with Centrica and the assurance process we have adopted appears at the end of this statement. Further information about ourselves, our key personnel and our clients is available on our website (www.corporate-citizenship.com). Our opinion In our opinion, the report provides a fair and balanced representation of the progress Centrica is making in living out its commitments to corporate responsibility. Where gaps in available performance data and stakeholder views on material issues exist, they are identified by us below. In forming our opinion and making our comments, we have had regard to the principles underlying the international assurance standard AA1000 (www.accountability.org.uk) notably concerning materiality, completeness and responsiveness. We have also had regard to the 11 reporting principles judged essential by the June 2002 GRI guidelines (www.globalreporting.org). Commentary A corporate responsibility report should explain how the company impacts on society, looking at all the important economic, social and environmental concerns of its stakeholders. It should show how crucial decisions are made and differing interests balanced. Honest about shortcomings, it should demonstrate how the organisation is responsive, by listening, learning and improving. Against this goal, we believe Centrica’s third corporate responsibility report marks a clear step forward on previous years. Specifically, the new format gives a more complete picture of the company and its material impacts. Importantly, it allows specialists to drill down into issues that are of particular interest to them. By highlighting the three areas where its impacts are most significant – climate change, vulnerable customers and health and safety – Centrica has tackled critical issues head on. This responds to views expressed by stakeholders who said they would like the company to be clearer about the key effects of its operations. Last year we said that the Company should formalise its stakeholder engagement into corporate decision-making and make the process and the results of the consultation more transparent. This report, in detailing particular stakeholder engagements, moves substantially towards achieving this. The report also gives a more comprehensive overview of the business, providing readers with a much better idea of the Company’s operations, activities and locations. The inclusion of a section on economic impacts is welcomed, as is a clear statement of economic value-added. This helps to identify the stakeholders who benefit financially from the Company’s operations. We believe that corporate responsibility reports should provide a balanced view of a company’s social, environmental and economic impacts and too often the economic section is neglected. Centrica has taken some good steps towards redressing that imbalance. Following recommendations made in last year’s assurance statement, the new report includes better performance data, more robust targets and clearer commitments, in relation to each of its stakeholder groups. For example, Centrica has provided important information about how it is meeting the Renewables Obligation, mandated by the UK government, through its development of alternative energy sources. We also note that the company has included information about the energy mix that is used to generate the energy that it sells. Inclusion of the Company’s “business case” for corporate responsibility helps explain the rationale behind its activities. There is also more complete data on customer satisfaction levels, employee engagement and training and on human capital management, all of which mark progress regarding Centrica’s approach to reporting on corporate responsibility. The creation of the Board level Corporate Responsibility Committee reflects the importance Centrica is attaching to responsible business practices. It is moving from managing specific areas relating to corporate responsibility, such as vulnerable customers and health and safety, towards a more cohesive corporate responsibility strategy. Having revised the business principles during this reporting period, distributing them throughout the Company will help to reinforce this. 180 Corporate Responsibility Report 2005 www.centrica.com/cr05 External assurance statement and commentary Looking ahead In our opinion, to build on the advances that Centrica’s 2005 report has made, there are six areas that deserve future attention, both in relation to operational practices and reporting of them. Scope Last year we said that the company’s report should indicate better the full impacts of its businesses and the influence that the company exerts in all the markets where it operates. In the “About this report” section, Centrica does explain the scope of the report and commits to reporting on activity and performance in accordance with the company’s evolution and growth. We believe that international operations – which already account for some 30% of the group’s turnover – should be more fully addressed, going beyond the limited information provided about Direct Energy in the Canada and the USA. As the business continues to grow, it is important that Centrica conveys how its business principles are applied across the Group and how they are introduced to companies that it acquires. For example, Oxxio a wholly owned subsidiary, is now the fourth largest energy company in The Netherlands but is not covered in the report other than in the business overview. Similarly, the report focuses on issues that are relevant to its residential customers but with business-tobusiness services accounting for well over 10% of Centrica’s turnover it is important for the Company to include some consideration of the corporate responsibility issues facing this part of the business. Disclosure Regarding the extent of disclosure, although the performance information provided on employees is more complete than previously, we would still welcome more data on retention, diversity in management and more details of succession-planning. The report includes reasonable information on pay and benefits but an in-depth discussion of Centrica’s approach to pensions would be consistent with stakeholder expectations. Many leading reporters also include information on the number of dismissals for breaches of the code of conduct. If Centrica is to demonstrate full commitment to its revised business principles, it should consider disclosing such information. Health and safety is going to be ever more challenging as the company continues to expand its upstream operations. Again, being clear about how Centrica ensures that the highest standards of risk management and health and safety practices are implemented across all its operations, including those with contractors and joint venture partners, will become ever more important. A cohesive, Groupwide environmental management system has still not been implemented and we look forward to next year seeing improved levels of environmental disclosure as a result of this being put in place. Acting on these points would be in keeping with Centrica’s intention to link internal audit procedures with corporate responsibility management and reporting systems. Indirect impacts Through this and previous reports, Centrica has demonstrated that it has a generally robust and open approach to dealing with direct corporate responsibility matters. However, Centrica is less good at dealing with issues over which it has influence but not necessarily control. As we stated last year, we believe Centrica should do more to manage its supplier relationships and to encourage suppliers and, where relevant, joint venture partners to operate to accepted levels of good practice. This report gives some limited information about training provided to its outsourced service contractors in India but future reports should give more information on the extent to which agency staff must adhere to its standards. Reports should also highlight any discrepancies between the treatment and conditions of fulltime employees and contractors. The Company should be commended for being open about falling short of its supplier objectives this year. It has committed to delivering relevant training and additional work in this area over the next year and we look forward to reading of progress. 181 Corporate Responsibility Report 2005 www.centrica.com/cr05 External assurance statement and commentary Governments The report addresses some of the multi-stakeholder initiatives that have been supported by Centrica, including the Code of Practice for the Marketing of Energy Supply, the Better Payment Practice Code and its contribution to the UK government’s Climate Change Review (available through the report). However, an increasing issue with many stakeholders is concern over public policy issues, notably how companies seek to influence governments through trade associations. We believe that the report should explain more fully the extent of its lobbying activities, particularly in relation to the European Union, where the liberalisation of energy markets is vital to the Company’s strategy. Future reports should also consider stating Centrica’s position on tax issues, another emerging subject of stakeholder concern and scrutiny. Sustainability The report is commendable in exploring climate change as a “big issue”. We believe it could be improved by presenting a clear picture of Centrica’s total carbon footprint, not just of its own operations, but also the products and services it sells. Projecting that would enable readers to see how Centrica’s commitment to renewable energy will contribute to national and international targets for CO2 reduction. The implementation of a biodiversity policy – and consequent strategies – features as an action point for 2006 on the environmental action plan. It is important that this commitment is met and reported on next year, both in relation to direct operations and through joint ventures. Emerging issues As Centrica operates more in nonOECD countries it will be important for the Company to ensure that its business principles and internationally accepted operating standards are not just lived out, but are applied in ways that are sensitive to local conditions and needs. We reviewed some of the cultural awareness briefings that have been given to employees supporting the out-sourced operations in India and this suggests awareness of such issues. In future we would expect to see more information on how the Company’s human rights policy is being communicated to employees and applied in practice. Continued inclusion of the UN Global Compact index will help to achieve that. We look forward to future reports reflecting how Centrica is advancing its corporate responsibility policies and practices in keeping with its stated ambitions and commitments. The Corporate Citizenship Company www.corporate-citizenship.com 27 April 2006 182 Corporate Responsibility Report 2005 www.centrica.com/cr05 External assurance statement and commentary Our relationship with Centrica We have worked with Centrica to assure its corporate responsibility reports for the past three years. We have not conducted additional consulting work during this period. As part of the assurance process we have compiled an index of GRI indicators and considered these in relation to the UN Global Compact and Centrica’s own business principles. In addition to work related to this report, Centrica is a member of the LBG (the London Benchmarking Group www.lbg-online.net) – an evaluation framework for corporate community involvement which we manage on behalf of its members and adherents. The assurance process As there are no statutory guidelines for social reporting, we have formed our judgements based on emerging best practice among other companies, the principles of the assurance standard AA1000, the approach of the Global Reporting Initiative (GRI), the stated views of principal stakeholders and our own professional expertise and experience. In particular, we have considered the availability of information, sufficiency of evidence, underlying systems and processes, internal assurance systems, adequacy of resources allocated and relevant legal and commercial constraints. We have judged materiality by considering significant legal, regulatory and financial impacts, business policies, the performance of peers and competitors and stakeholder views. A team of two, led by a director, undertook the assurance and commentary process. A second director acted as adviser to the group. The team has a variety of professional and technical competencies and experience. The work was commissioned in December 2005 and was completed on 27 April 2006. Detailed records were kept of meetings, assurance visits and correspondence relating to the materiality, completeness and responsiveness of the report, as well as to technical matters relating to the accuracy and presentation of data. Our external assurance and commentary process for the Company’s 2005 report has involved the following elements: 1. Meetings and discussions with a cross section of Centrica’s managers about its approach to corporate responsibility, its policies and performance, its future challenges and its relations with stakeholders. 2. An analysis of best practice among other companies, the principles of the GRI and AA1000as, followed by detailed discussions with Centrica’s corporate responsibility team about reporting the Company’s approach, policies, performance measures, benchmarks, stakeholder relations and future plans. 3. A review of national and international published sources of information about the views and opinions of external stakeholders, including regulatory and governmental agencies, academics and special interest groups. 4. An appraisal of Centrica’s stakeholder engagement activity, principally employee attitude surveys, customer opinion research and independently conducted surveys specifically of corporate responsibility concerns. We also interviewed a representative of the trade union, UNISON, about employee relations and in particular the partnership agreement between Centrica, UNISON and the GMB union. 5. A review of external assessments made, notably by Dow Jones Sustainability Index, FTSE4Good, Vigeo and Business in the Community’s Corporate Responsibility Index. 6. Research to establish national and international benchmarks against which to judge Centrica’s performance. 7. An assessment of the internal assurance process, notably the procedures adopted to ensure responsiveness, completeness, materiality and data accuracy. 8 Checks on a sample basis of elements of the report’s contents to underlying records, focusing on annual employee engagement results, customer satisfaction reports, health, safety and environment data, community contributions and risk management systems. Our work did not extend to a complete audit of the report’s contents nor to direct engagement with stakeholders to seek their views, beyond that mentioned above. We have not been responsible for the preparation of the 2005 report nor in devising the internal management and reporting systems that yielded the data contained therein. The opinions expressed in this external assurance statement and commentary are intended to extend understanding of Centrica’s non-financial performance and should not be used or relied upon to form any judgements, or take any decisions, of a financial nature. 183 Corporate Responsibility Report 2005 www.centrica.com/cr05