Workforce-Related Corporate Reporting Where to Next?

Workforce-related corporate reporting Where to next?

January 2020

Financial Reporting Council Workforce-related corporate reporting 2

Contents Introduction Examples used Our report highlights examples of current This project sought to test whether the Introduction 2 practice that were identified by the Financial principles of good reporting in our previous Reporting Lab (Lab) team and investors. Quick Read 3 reports on business models, risk and viability Not all of the examples are relevant for reporting and performance metrics could be all companies, and all circumstances, but Regulatory and market context 5 applied in the context of reporting on the each provides an example of a company workforce. Each of these reports has proven that demonstrates an approach to useful Section 1 Investor expectations and company views 6 relevant, as they highlighted the importance disclosures. Highlighting aspects of reporting Governance and management 7 of companies articulating how the workforce contributes to the success of their business by a particular entity should not be considered Business model and strategy 9 model, what the risks and opportunities are, an evaluation of that entity’s annual report as a whole. Investors have contributed to this Risk management 13 and how they measure the success of their strategy through reliable, transparent metrics. project at a conceptual level. Metrics and targets 16 This project therefore builds on the Lab’s The examples used are selected to illustrate The importance of linkage 20 previous messages and provides a view the principles that investors have highlighted from companies and investors about how and, in many cases, have been tested with Section 2 Appendix A – questions and disclosures 21 these areas of reporting can best reflect the investors. However, they are not necessarily Governance and management 22 contribution of the workforce. examples chosen by investors, and should not be taken as confirmation of acceptance of the Business model and strategy 23 What this report seeks to achieve company’s reporting more generally. This project was undertaken alongside our Risk management 24 work on climate change. In both of these Responding to feedback projects there was a clear desire for reporting Metrics and targets 25 In 2019 the Lab ran a stakeholder survey. around four elements, namely governance and As part of this survey we asked users of the Section 3 Appendix B – examples of developing practice 26 management, business model and strategy, reports for feedback. We received feedback Introduction to the examples 27 risk management and metrics and targets. As such, the Lab’s insights follow these four that the example disclosures were of Governance and management 28 elements. particular value to users. Business model and strategy 33 There are examples of developing reporting Responding to this feedback, we have practice, but further improvements can be included more examples within this report Risk management 42 expected as regulatory changes and investor than in previous Lab reports. Whilst it makes Metrics and targets 49 expectations develop. To assist, this report sets the report longer, we hope it adds to the out how companies can make their reporting overall value of this report. Section 4 Appendix C – participants and process 56 more effective and comprehensive by providing a set of questions that they should If you have any feedback, or would like to get Section 5 Appendix D – regulatory and market initiatives 58 ask to help develop their reporting. in touch with the Lab, please email us at: [email protected]

Quick Read Workforce matters have become an increasing area of focus over the last few While there are a number of metrics that might give an insight into a company, years, whether in response to new regulations or wider societal expectations there is no single approach that captures how human capital considerations have on areas such as executive pay, contractual employment arrangements, and the an impact on company performance. Both companies and investors agree that the implications of automation. workforce can have a significant influence on company performance, but there is less agreement about what information should be reported to provide insight While requirements to report on workforce-related matters have existed for a into this. number of years, new regulations have resulted in a renewed focus. However, investor participants are seeking greater insight into: There is an increasing appreciation of the value that the workforce brings to the success of a company and the importance of effective workforce engagement. • how boards consider and assess the topic of the workforce, including what Investors want to understand how the workforce creates value, how that value is information they see and what they consider the workforce to be; maintained and what risks and opportunities may arise in the future. • what the workforce is and how it contributes to the success of the business There is also an increasing desire amongst a number of stakeholders for companies model, whether it is considered a strategic asset, how it is invested in, and what to report on workforce matters, such as culture, employee engagement and the changes might need to be made to strategy in order to maximise workforce- workforce environment. A range of stakeholders have a legitimate interest in related opportunities; companies’ approaches to workforce-related matters, not least the workforce • the risks and opportunities related to the workforce and how the company is themselves. Whilst this report focuses on investors’ expectations of corporate responding to these, including the prioritisation of risks and their likelihood and reporting, alongside investors, many stakeholders are calling for companies to take impact; and the opportunity to improve their reporting on the contribution of the workforce. • how the company measures the contribution of the workforce and how it has What investors are trying to understand taken into account the workforce’s views. Investors seek more data, including Investor participants overwhelmingly support clearer disclosure of workforce financially-relevant information and reliable, transparent metrics. matters. Disclosure is developing, and as investor expectations grow and new These reflect elements of a company’s operating approach, and areas of regulatory changes are implemented, further development will be necessary. assessment and consideration by investors. These areas of investor interest broadly In trying to understand which companies are able to build and maintain a cover the following: governance and management, business model and strategy, productive workforce over time, investors are interested in how a company intends risk management, and metrics and targets. These are consistent with the areas of to support the development of its workforce in a sustainable, long-term fashion. interest expressed by investors in relation to climate reporting. There is obvious overlap and linkage between these areas, and this structure can be helpful in thinking through workforce-related matters and the disclosures that could be made. As such, the Lab’s report follows this structure. This report focuses on workforce matters, but many of the reporting recommendations could equally apply to other sustainability-related topics, such as climate change, the subject of another recent Lab report.

What to report It is important for companies to develop their reporting not only to respond to The metrics used should clearly show what parts of the workforce they apply to and reporting requirements, but also to respond to investors’ needs. In order to help should include relevant segmental information. companies to do so, the Lab has developed a set of questions for companies to ask themselves, supported by a set of examples that meet aspects of investor needs. Regulatory requirements Investors are seeking to understand the composition of the workforce and While reporting that encourages or requires detail on a company’s workforce has whether the board views the workforce as a strategic asset, how value is been in place for a few years, other relatively recent changes to regulation include: maintained and risks mitigated. To aid investor understanding companies should • updates to the UK Corporate Governance Code 2018 (“the Code”), which therefore report: includes specific provisions on the board’s engagement with the workforce, • the oversight of workforce-related matters, including how the Board engages • reporting requirements on CEO and employee pay ratios, and with the workforce and what impact the board’s consideration of workforce matters has had on strategic decisions; • a requirement to report on how directors have had regard to a range of factors, such as the interests of a company’s employees, in carrying out their duty to • who the company considers its workforce to be (including total headcount, act in a way that promotes the success of the company (their section 172 duty). demographics and employment composition such as direct employees, Further detail on the regulatory requirements can be found on page 5 and in contractors and/or others in the supply chain); Section 5. • how each aspect of the workforce creates value for the organisation and what Investors themselves are also under pressure to report more fully on environmental, opportunities there are to grow that value, including how the workforce model social and governance matters under new Financial Conduct Authority rules as a links to the business model; result of the Shareholder Rights Directive and the revised UK Stewardship Code. • the risks and opportunities related to the workforce, how the company is Mandates from asset owners are also increasingly referring to such matters, which is responding to these, how the risks were identified and where they are in the another reason for investor calls for more reporting in this area. business, including health and safety metrics; Conclusion • how the desired culture is being driven from the top including how ‘buy in’ has Despite regulatory focus over recent years and increasing company and investor been achieved from the workforce and how culture and values help achieve interest, there is a lack of consistent disclosure on workforce matters. A gap remains the strategy, including: between the reporting investors are looking for and what is being disclosed. employee engagement Investors seek a more basic understanding of the composition of the workforce, retention and turnover (both planned and regrettable) but also an indication of whether the workforce is a strategic asset and how this relates to longer-term value creation. This report provides practical examples of how values being applied in the working environment companies can close this gap. other measures of culture that the company monitors • how the company is enhancing and incentivising its workforce to deliver value. This should include information about: remuneration and other benefits training and development progression

Introduction Quick read 1 Investor expectations and 2 Appendix A – questions and 3 Appendix B – examples of 4 Appendix C – participants 5 Appendix D – regulatory and company views disclosures developing practice and process market initiatives Workforce-related corporate reporting 5 Regulatory and market context The UK Corporate Governance Code 2018 The Code requires Boards to discuss how the matters set out in section 172, including Whilst this report is not intended to be about regulatory changes and how to apply the interests of the company’s employees, are addressed. These requirements, which these, regulation has been a driver of recent changes in reporting practice. We highlight apply to accounting periods beginning on or after 1 January 2019, also include a the main regulatory developments below as they provide valuable context for this number of new expectations for boards and their committees, including the following: report. • The board should ensure that workforce policies and practices are consistent with There have been requirements for companies to report on workforce-related matters the company’s values and support its long-term sustainable success. The workforce for a number of years, but there are also a range of new regulatory requirements should be able to raise any matters of concern; companies either have implemented, or will implement, in the next reporting cycle. • The annual report… should include an explanation of the company’s approach to Companies Act 2006 (‘Companies Act’) investing in and rewarding its workforce; and • For engagement with the workforce, one or a combination of the following methods Under section 414C of the Companies Act, companies must, “to the extent necessary should be used: a director appointed from the workforce; a formal workforce for an understanding of the development, performance or position of the company’s advisory panel; or a designated non-executive director. If the board has not chosen business, include… (b)where appropriate, analysis using other key performance one or more of these methods, it should explain what alternative arrangements are indicators, including information relating to environmental matters and employee in place and why it considers that they are effective. matters”. The FRC recently issued its annual review of the Code which included consideration of Disclosures regarding principal risks and uncertainties may also be required under the how the FTSE 100 had reported early adoption of the 2018 Code. The FRC will carry Companies Act where workforce-related matters are material. out further analysis of Code reporting in 2020. In addition, the Guidance on Board For periods beginning on or after 1 January 2019, company strategic reports must Effectiveness provides useful guidance on the application of the Code, including questions include a Section 172(1) statement describing how directors have had regard to the for boards. matters set out in section 172(1)(a) to (f) of the Companies Act when performing their Other reporting requirements companies have had to respond to in recent years include: duties under section 172, which in subsection (1)(b) relates to the interests of the company’s employees. • Gender Pay Gap reporting which requires the disclosure of mean and median gender pay gaps, mean and median gender bonus gaps, the proportion of men and Under The Companies (Miscellaneous Reporting) Regulations 2018, companies must women receiving bonuses and the proportion of men and women in each quartile of disclose CEO pay ratios. This requires companies to disclose annually the ratio of their the organisation’s pay structure. CEO’s pay to the median, lower quartile and upper quartile pay of their UK employees. • Modern Slavery Statements which must describe the main actions the organisation These regulations also brought into law the requirement for stakeholder engagement has taken during the financial year to deal with modern slavery risks in the supply reporting, requiring disclosure of how the directors have engaged with employees, had chains and business. regard to employee interests, and the effect of that regard, including on the company’s principal decisions taken during the year. Market activity such as theWorkforce Disclosure Initiative, Social and Human Capital Coalition and ISO Standard on Human Capital have all recently raised the profile and importance of disclosures on workforce-related matters. The Investment Association also publishedLong-term reporting guidelines which included guidance on human capital and culture. This included suggested metrics to support human capital disclosures. These can be helpful frameworks to consider for those companies considering what kinds of disclosures to make. More information on regulatory requirements and other initiatives is provided in Appendix D.

Section 1 Investor expectations and company views

Increasingly this topic touches on a wide range of areas subject to board oversight, Governance and management from remuneration, to planning and strategy, to a consideration of company and management performance. It is important for the board to consider the interrelationship between workforce costs and benefits and treat workforce matters Investor participants are seeking a better understanding of: as a strategic issue. • how boards consider and assess workforce matters, including what information they see The board has the capacity to bring together these connections and ensure that disclosure explains how they are thinking about this issue. Investors seek to understand what insights the board has gathered and, often most importantly, Overview how the board factors these into strategic planning. This strategic view may include Throughout this project, both companies and investors reinforced the importance of sensitive information, but it is for boards to move beyond a high-level narrative the board’s role with investors seeking to understand how boards consider and assess regarding the importance of the workforce to developing meaningful metrics. workforce issues. This gives them comfort over the oversight procedures and the board’s consideration of how the company’s business model and strategy are affected by workforce matters. Investors want more information about how boards engage One approach is to report how the board engages on workforce matters, and on a range of sustainability-related topics, including the workforce, relevant to the changes they have made as a result (Rolls Royce Holdings Plc, page 32) company’s business model and strategy. Investor view “ The challenge is really to stick your neck out and say why the workforce is The role of the board important to you” – Company

Investors see the board’s involvement as providing oversight and integration of workforce matters into strategic decisions. They want to understand whether, and Company view how, the board considers the workforce to be a strategic asset. There are challenges in The role of the board gathering, managing and understanding information about the workforce, but when done successfully it contains real insight. The inclusion of workforce matters in strategic The board’s role is central to understanding and providing oversight into how plans aligns with the expectations in the Code. Investors are also seeking more practical workforce-specific risks are being managed and addressed. There is some question, information about board involvement, such as what information it has seen. however, about whether this should be overseen by the board, or whether some responsibility can be delegated to other internal functions or board committees. Not all workforce matters are subject to board oversight, with some metrics seen One approach is to explain what information the board sees and the effect of only by management, and a smaller subset by the board. However, board oversight this engagement on board decisions (Barratt Developments plc, pages is increasing as companies try to gather more information for external reporting 29 and 30) or of the involvement of Committees in workforce-related matters purposes. (RBS plc, page 31) Many companies are aware of the importance of the workforce, but find topics like health and safety easiest to consider and measure. Topics such as culture, motivation Setting the strategy and engagement are considered more difficult to address because of their strategic Different business models will give rise to different challenges, but as the nature and interconnected nature. Therefore whilst investors are interested in the workforce of work is likely to change dramatically (for example as a result of technology), it is as an enabler of future strategy, some companies are limiting disclosure on workforce increasingly important that strategic issues concerning the workforce are considered to that which is about delivery of current performance; a missed opportunity perhaps. and reported.

Governance and management

In order to help investors understand how boards consider and assess workforce Companies should then: matters, including what information they see, companies should ask themselves… • Describe the board’s oversight of • What arrangements does the board have in place for assessing and considering workforce-related matters? workforce-related matters and how the board has engaged with the workforce • Who has responsibility for workforce-related matters and how often are workforce-related issues considered? • Describe management’s role in considering and managing workforce issues • What insight does the information on workforce matters give the company and how is it being integrated into strategic planning? • Describe what impact the board’s consideration of workforce matters has had on strategic • What information and metrics do the board monitor in relation to the workforce? decisions • How does the board get comfort over the metrics being used to monitor and manage the relevant matters? Who prepares the information the board receives in relation to the workforce? • What is it like to work in the company, and how does the board get sight of the workforce’s views? How does the board interact with the workforce without management present? • Which workforce-related matters does the board consider it might be helpful to change? Is this informed by workforce feedback? • Does the board consider the workforce-related reporting to be fair, balanced and understandable?

Introduction Quick read 1 Investor expectations and 2 Appendix A – questions and 3 Appendix B – examples of 4 Appendix C – participants 5 Appendix D – regulatory and company views disclosures developing practice and process market initiatives Workforce-related corporate reporting 9 Business model and strategy An approach is for a company to report what it considers to be its workforce, including by segment or site (SAP SE, ConvaTec Group PLC, Fresnillo Plc, Carnival Corporation & Plc, pages 34 and 35) Investor participants are seeking a better understanding of: • what the workforce is and how it contributes to the success of the business model, whether it is considered a strategic asset, how it is invested in, and The importance of strategic linkage what changes might need to be made to strategy in order to maximise the A clear link between the workforce and the business model helps a company explain value of the workforce its competitive advantage. For many businesses their competitive advantage is driven in part by the workforce’s knowledge, capabilities and the intellectual property that it generates. Therefore providing a clear link between the workforce and the articulation of the business model is crucial. This is an important factor in the board’s responsibility Overview to promote the long-term success of the company. The Code states: ‘The board should In considering a company’s business model and strategy the expectations of investors ensure that workforce policies and practices are consistent with the company’s values as outlined in the Lab’s report and implementation study remain relevant. Investors and support its long-term sustainable success.’ are interested in the workforce as a strategic asset, and how the company is ensuring it maintains an effective workforce to support the sustainability of the business model. Investors are clear that, whilst the workforce is clearly a cost it is also a vital asset, helping a company stay competitive or achieve its strategy. Understanding how the Some investors are also interested in the workforce from the perspective of whether workforce is being treated and getting their insights into strategy is important. The the company offers ‘good work’. This concept is explained inGood Work: The Taylor key aspect is understanding how the workforce provides a competitive advantage and Review of Modern Working Practices and covers areas such as wages, employment drives value. quality and working conditions, amongst other factors. Such an asset is important to the strategic drivers of the company and investors Investor view want companies to explain in more detail how the employment models align with the business model. What constitutes the workforce The definition of the workforce is important. Investors and companies often have different concepts of what constitutes the workforce, with the investor viewpoint One approach is to present links between the workforce, and their view on wider than that of some companies. This can be due to internal or legal restrictions on strategy (AstraZeneca Plc, page 35) the provision of information, but can also be because companies have not considered the scope of their ‘workforce’. Companies should at least be clear about how they define their workforce, for example whether this includes contractors and others. This aligns to expectations in the Code andGuidance on Board Effectiveness, the latter of which states that companies should be able to explain who they have included in their An approach is to present links between key performance indicators and strategy in consistent ways across formats (Taylor Wimpey Plc, Rentokil Initial Plc, definition of the workforce and why. pages 36 and 37)

“I’ve only recently grasped the idea that the workforce IS the company. The workforce is your asset – intellectual property, skills and capabilities. If moving in and out over time, it’s a really key indicator” – Investor

An approach is to explain the employment model in the context of the business model(s) (InterContinental Hotels Group plc, page 38) or outline workforce One approach is to link investment in inclusion to performance and strategy strategy and links to culture (Admiral Group plc, page 39) (SSE plc, page 40)

Culture and strategic links The FRC’s 2016 Corporate Culture and the Role of Boards: Report of Observations One approach is to discuss how some of the challenges the company faces are highlighted the importance of culture to success and many of its findings were being addressed (Marks and Spencer Group plc, page 41) incorporated into the 2018 Code. The Code states that ‘the board should assess and monitor culture’. The experience of employees offers an important insight into the culture of the company. Investors too are seeking insight into the culture of a company and how that culture drives value. One approach is to disclose how a company addresses employee feedback, and The board is also in the best position to take a long term view on the pipeline of plans for the next year in the context of risk (Pearson plc, page 48) talent and succession planning. These areas are strategic, and relate directly to the company’s future. There are sensitivities, particularly around issues such as succession, which investors acknowledged, but they remain interested in what the board is trying to achieve and how board members are using the information they see. Financial statement impact Investors are also concerned that the information presented often presents only a Information about the payroll numbers in the financial statements, and the money positive picture. To many investors this feels superficial, and more information about being spent on the workforce can given them an insight, but is generally not where things may have gone wrong, and insight into what the company is going to do considered to be detailed enough to allow a full understanding of the workforce about it, would be welcomed. picture (as it only includes direct employees). As such, a number of investors are calling for more granular information, including in which locations and divisions the “Culture is a hard thing to measure, but turnover and engagement are good workforce sits, or pay bands to which this cost is apportioned, to understand the company’s drivers and associated costs even if that is not directly in the financial indicators of it” – Investor statements. “ Ask – What do you want the culture to be and how can it then be “I’m interested in how it flows through to financial statements, and obviously measured?” – Investor intangible value in acquisitions can be really relevant in terms of workforce “I’m interested in workforce reporting. I use it where it is disclosed well” value” – Investor – Investor

“What is wrong is obvious. It’s not always clear what is right” – Investor One approach is to link disclosures to definitions and personnel expenses (SAP SE, page 52)

Company view Internal systems What constitutes the workforce Some companies have systems for ongoing board consideration and others report in alignment with external reporting deadlines. Some companies are using HR and data Investors often expect companies to report on their workforce more widely than just scientists to gather further insights on their workforce and help in their assessments of direct employees. However, a number of companies only report certain information organizational development. in relation to employees, with reporting regarding the workforce appearing less frequently, most often in relation to statistics around health and safety. After ensuring that the right data is gathered and considered, there is a real challenge in interpreting what the information is saying about the company and what it means Companies explained that the workforce was not always well defined. The strict legal for the actions that should be taken. requirements relate to employees, but the Guidance on the Strategic Report and the Code refer to the workforce. Many reported the importance of board interest in this area in helping them to address information issues, improve systems, to consider this topic more strategically. Sensitivity regarding strategy and the workforce There was, still, a question for some about where responsibility should sit, as human Information on the workforce can be sensitive and often, particularly for multi- resources has a key role, but finance, strategy, risk and a health and safety may also be jurisdictional companies, legally restricted. There may be sensitivities in relation to the involved. metrics as lead indicators. In addition, different areas of the business may be more important in terms of key value drivers, or emphasized or de-emphasized business divisions, but whilst companies can acknowledge this privately it is more complicated A study carried out by Alex Edmans, a professor of Finance at London Business to disclose this publicly. School, sought to find out whether there was a link between employee satisfaction and long-term value. The study asked the following questions: Companies explained that reporting uses an investor perspective, but they are aware of its impact on current, or prospective, employees. Some felt that employees were “Does employee satisfaction improve firm value? The answer to this question their main audience for this information, as they had not received investor queries. is not obvious. While it seems natural that satisfaction will facilitate worker recruitment, retention, and motivation, investing it is costly. Do the benefits “This is sensitive internally… workforce is a leading indicator, so there can be outweigh the costs?” a nervousness” – Company “Firms with high employee satisfaction outperform their peers by 2.3% to 3.8% “Employee turnover – is it a bad sign, or part of the business model?” – per year in long-run stock returns – 89% to 184% cumulative – even after Investor controlling for other factors that drive returns. Moreover, the results suggest that it’s employee satisfaction that causes good performance, rather than “I want information beyond ‘the workforce is the most important asset’. I good performance allowing a firm to invest in employee satisfaction.” want more about how the company is ‘using and investing’ in the concept The study was based on 28 years of data from the top 100 companies to work for of human capital as a type of capital. It’s about trade-offs and decisions and in the U.S.A. the effects of those. About what is really key to making their business run and how they are supporting and encouraging that” – Investor

Business model and strategy

In order to help investors understand what the workforce is and how it contributes to Companies should then: the success of the business model, whether it is considered a strategic asset, how it is • Describe who the company considers its invested in, and what changes might need to be made to strategy in order to capitalise workforce to be (including total headcount, on workforce-related opportunities, companies should ask themselves… demographics and employment composition such as direct employees, contractors and/or • Is the workforce viewed as a strategic asset? others in the supply chain) • What is the company’s workforce, for example, does it include contractors, franchisee staff, supply chain, • Describe whether, and how, the company employees? invests in the workforce as a strategic asset • How does the employment model enhance the business model? • Describe how the workforce creates value for the organisation and what opportunities there • What workforce-related matters are relevant to the company’s business model and strategy? What process are to grow that value has been followed in order to assess the impact of the workforce? • Describe how the workforce model supports • How does the workforce help generate or preserve value in the company? How does the company invest in the the business model and strategy workforce, and what expenditures are needed to ensure that the workforce continues to help the company generate and preserve value? • Describe how the workforce-related risks and opportunities the organisation has identified • How is the workforce enhanced and incentivised to deliver value? affect the company’s business, strategy and financial planning • How do workforce matters affect key divisions, markets and/or revenue/profit drivers? Over short, medium or longer-term horizons? • How does the information gathered, particularly the workforce’s views, factor into strategic planning? • What triggers would require a change of direction? • How do workforce-related risks and opportunities impact the financial statements?

Introduction Quick read 1 Investor expectations and 2 Appendix A – questions and 3 Appendix B – examples of 4 Appendix C – participants 5 Appendix D – regulatory and company views disclosures developing practice and process market initiatives Workforce-related corporate reporting 13 Risk management Segmentation of information In relation to priority and impact, investors consider that workforce topics, some of which can be specific to an area or geography, may not be as relevant when Investor participants are seeking a better understanding of: aggregated. However, given the important role of the workforce, the returns of a division or segment can be affected by workforce-related risks. This is particularly • the risks and opportunities presented by the workforce and how the company important when it relates to an area of growth or a specific source of competitive is responding to them advantage. Segmental workforce information is therefore most valued by investors. Other reporting formats Overview Investors are positive about reporting, such as in sustainability reports, that provides Participants agreed with the conclusions of the previous Labreport on risk and viability them with more granular information, including more baseline information. This and the later implementation study, highlighting again the importance of company- granularity can be very important in understanding where risks lie, and some examples specific information in the disclosure of risks and opportunities facing the company. of the presentation of more granular information are shown in the metrics and targets Investors are also interested in which risks can be quantified and assessed, and in the section of this report. assessment of changes in the risk during the year. Some reported that gender pay gap and modern slavery statements are good sources Risks are being assessed both over a short and long timeframe, metrics are also being of information, particularly in relation to risk and overall consistency of the company’s monitored with an understanding of them as leading indicators. messaging. One investor noted that good modern slavery statements, in particular, provide additional insights into the company and its business model. This provides a good opportunity for companies to better link these statements to the rest of their Investor view disclosures, e.g. annual reports. The importance of linkage Horizons Most risk disclosures focus on either health and safety or the retention of talent. Where many companies state that their workforce is an important asset, not all link Investors expect some workforce risks, for example those related to contract formats this to other parts of the report, such as risk. Some Lab insights on better linkage can and classifications of employees and the effect they might have on reputational issues be found on page 20. There is some concern that company reporting does not go or on the company’s ability to operate its business model, potentially crystallising beyond a relatively generic ‘attraction and retention’ or health and safety risk. Investors for companies. These possible shorter-term challenges can change their view of ‘risk are looking for more specific company insight, for example around specific health and horizons. safety issues relevant to the company and risks to its specific business model and ability They are also looking to the future and trying to understand the risks of automation to achieve value creation through the workforce. and the future of work. Investors are trying to work out what risks the company faces from these challenges and what the company plans to do about them. Investors are therefore calling not only for more baseline information, but also a view to how the An approach is to link risk to other parts of the business, with descriptions business model will adapt to the future. of how the impact of workforce risks is changing and who owns the risk (Fresnillo plc, Just Eat plc, Pearson plc, SSE plc, pages 43 to 48) “On workforce issues we have a much shorter-term horizon regarding risk. More portfolio managers are willing to act. The tolerance from an investment standpoint is different [in terms of horizon]” – Investor

Company view Sensitivity of disclosure Some companies we spoke to considered workforce matters to be a risk to their “Disclosure of gender pay information is a material risk to the acquisition of business. The most frequent risks related to health and safety and the retention of talent. Everyone wants [to recruit] more senior women, but if the statistics talent. Some also considered reporting on workforce issues to be a risk in itself, given look bad, it makes it difficult to catch up” – Company questions of sensitivity and their concerns about attracting and retaining talented staff. Examples cited included a loss of competitive advantage, or difficulties hiring from a diverse talent pool where reported diversity statistics showed a lack of diversity in the “With Glassdoor, it’s harder to recruit if you have bad scores, so it’s damaging workforce. Because of the perceived sensitivity, some companies were hesitant to go to the overall value if you cut things now which have a staff impact and a beyond the reporting requirements. rating impact” – Company This sensitivity also connected to the view of workforce issues as a leading indicator. Companies continue to refine the metrics they manage and monitor internally in relation to the workforce, as they view them as helpful in raising red flags for further “Our disclosures reflect the reality of our value chain. That’s why we’re consideration. putting an emphasis on this area” – Company Understanding the risk For some companies, the supply chain may be where much of the workforce risk lies. “There is research showing diverse workforces are more efficient and Questions of scope are considered more fully in the section on metrics, but many companies do not report information related to workforce matters beyond their creative, no wonder investors want that information” – Company employees. Some reported that they had included expectations, for example around wages, in contracts within their supply chains, but that they had been assessing whether or not such expectations were being fulfilled on a more strategic basis. The Lab’s work on the Digital Future of Corporate reporting shows that the availability of data sources used by investors is growing significantly. Therefore choosing not to disclose information does not necessarily mean it isn’t available to and being used by investors, through third-party and alternative data sources such as Glassdoor. Some companies are reacting by triangulating their own information to these outside sources.

One approach is to explain the supply chain, and some of the inherent risks (SSE plc, page 44)

Risk management

In order to help investors understand the risks and opportunities presented by the Companies should then: workforce and how the company is responding to them, companies should ask • Describe the organisation’s processes themselves… for identifying, assessing and managing • What systems and processes are in place for identifying and assessing workforce-related risks? How is a workforce-related risks and opportunities consideration of workforce-related risk integrated into this process? • Describe which workforce-related risks • How are the risks related to the workforce being monitored, managed and mitigated? and opportunities are most relevant to the company • Which risks related to the workforce are most relevant to the business model and strategy? How are these • Describe where the risks and opportunities sit identified and where are they in the business? in the business and how they are managed • What opportunities does the workforce provide to enhance the value of the company? • Over what horizon have the risks been considered and risk assessments carried out? Why is this an appropriate horizon with reference to the business model? • How is the assessment of the company’s viability over the longer-term taking into account workforce-related issues?

Investor participants are seeking a better understanding of: One approach is to explain how the company engages with employees and the • what is measured, monitored and managed in relation to the workforce, feedback received (InterContinental Hotels Group plc, page 50) including more data and financially-relevant information

Investors seek transparency over the definition, scope and boundary of workforce Overview disclosures. The workforce is defined in different ways, but generally investors spoke Deciding which metrics to report has been the biggest area of discussion in relation about ‘people contributing to the organisation’ or those people who ‘provide direct to workforce issues. Companies and investors highlighted the same five elements of work for the company to help it fulfil its business model’. A number of investors expect performance disclosure as being important in relation to workforce issues as those companies to use the same definition, although others acknowledge this might not raised in our performance metrics report, namely alignment to strategy, transparency, always provide useful information. information in context, reliability and consistency. Investors are also unclear whether all workforce metrics, for example health and safety Investor view metrics and employee engagement metrics, or the stated number of employees and the disclosed personnel costs, are calculated consistently from year-to-year. Investors The importance of data want more transparency about what is covered, and in which instances, for example whether all metrics are reported using the same basis. Investors seek data that is reliable but many investors acknowledge that, whilst data is helpful, it can only tell part of the story of what is a complicated topic. There is also some concern about the maturity of the metrics being used, with most investors expressing more confidence in metrics such as health and safety. There is a balance As highlighted in the section on business models and strategy an approach is to to be found between data and narrative, with some areas, such as composition and report what a company considers to be its workforce, including by segment or site (SAP SE, ConvaTec Group PLC, Fresnillo Plc, Carnival Corporation & Plc, pages turnover being reported numerically, but others such as employee views less so. Overall 34 and 35) investors want quantitative disclosure, but interpretation of those metrics and why they are considered important necessarily requires qualitative description. Reflections on the five attributes of metrics investors seek – alignment to strategy, transparency, information in context, reliability, consistency “Sometimes with boundaries, if it’s not clear we may need reluctantly to drop the number as we can’t take anything from it, can’t ‘trust’ it” – Investor A number of investors do not think disclosures are well linked to the business model, or aligned to the strategy. The workforce can have a large impact on a company, whether “At a minimum a company should explain what the workforce is. We know in helping it achieve its strategy, or through payroll and investment costs. Where feedback is received, investors are interested in what insight that metric or feedback too much about boards, not enough about the workforce” – Investor gives the company, and how it is going to address any problems identified.

Reliability of reporting is important. It is not clear how objective the measures used are, Defining what good looks like in relation to workforce is complex. Therefore, or what level of scrutiny they have been subject to. Many investors use third party data comparisons are important. Many want to consider the company on a standalone providers to triangulate a company’s reporting, but these raise their own questions basis where they can, especially around something as important as the workforce, but about timeliness and reliability. this assessment is better developed when comparisons can also be made. This allows investors to develop a view of the usefulness of the indicator in sectors and across time, As highlighted in the performance metrics report, investors would appreciate some including whether one company values its workforce and another does not. indication of the oversight on which the information has been subject to. This may follow a spectrum, from third party assurance providers, through internal audit and to management metrics. They would also like to see more disclosure around the governance and oversight over the formulation of these metrics. One approach is to relate metrics to peer results (Coca-Cola HBC AG, page 51) “How do I get the ‘right’ picture? For example, on regrettable turnover, the company can massage the numbers. This should be subject to internal audit” – Investor The key to getting an overview of the workforce is that the disclosures has been put “Comfort over the information and what the workforce is differs wildly… [but] in context. Investors felt that targets were often explained poorly. Investors want to the number of companies making an effort or expanding on their effort is understand what the target is, what the company considers to be good performance, obvious” – Investor and relative achievement levels, particularly where there is a link to remuneration. “If there aren’t enough details to form any conclusions it’s a problem” – Investor An approach is to refer to external providers of information or external data sources (Go-Ahead Group plc, EasyJet PLC, Rentokil Initial plc, pages 50 and 38)

One approach is to present a range of interesting metrics, for example turnover, work patterns and promotion rate, by gender and location (National Grid plc, Many investors highlighted the importance of both consistency and comparability. page 55) Consistency includes the use of metrics across different reporting formats reflecting the same calculation and presentation across time. When questions of definition, boundary and scope are important, consistency becomes even more important to investors.

An approach is to present granular information with trend data (SAP SE, SSE plc, Stora Enso OYJ, page 53) plus targets, with definitions for clarity (Rolls-Royce Holdings plc, page 54)

Company view What is monitored and reported Whilst many companies are monitoring topics such as health and safety, or carrying out Many reported that it is difficult to show alignment to strategy in their workforce employee engagement surveys to get insights into their organisation, there is a greater metrics, as it can imply singling out particular divisions or segments as the ‘most variety of approaches to workforce management and disclosure than there might be on important’, or highlighting a competitive advantage. other topics. One company also highlighted that not all workforce items are linked to the strategy, Companies are not always sure what to report. A number of organisations have been with some developed for a more specific purpose, such as a reporting requirement. addressing workforce disclosures in recent years, and it is clear that metrics such as Others outlined that they are addressing the regulatory need, but utilise that health and safety, staff numbers and composition and turnover are key for building an information more strategically as well. understanding of a company. “We can report on demographics, employee engagement, turnover etc, but I Reflections on the five attributes of metrics investors seek – alignment to strategy, would ask so what? It’s the impact of those figures that is interesting.” transparency, information in context, reliability, consistency – Company Companies don’t always define what they consider the workforce to be, what scopes The context of disclosures is important. Some report investment in systems and their different metrics use, and whether these align. They are not always transparent processes to gather information for both insight and reporting, and most were about scope, calculation and boundaries when it comes to the disclosure of workforce supportive of a range of metrics giving the best picture of their company. Many felt information. that until there was access to the information it was sometimes unclear what insight it Often, the ability to disclose is closely tied to the business model. However, some could, or would, offer. companies also reported not necessarily interrogating the basis on which their metrics Companies were keen, however, also to have the capacity to tell their story. For had been disclosed. example, whilst supportive of ethnic minority disclosures, one company asked what Company views on reliability were different from investors’, as generally they had constituted an ethnic minority for their global company. In this type of instance confidence in their internal data and processes. If companies did have questions around companies feel that it is important to be able to provide the context around a metric reliability they sometimes connected this to concern about the sensitive nature of the to explain their own view. topic. In contrast to this, a lack of consistency can be difficult for some companies, as it Companies generally noted that information was subject to management and board results in a lack of comparability, and companies themselves are unable to assess consideration, with some management teams seeing these metrics on a monthly effectiveness in addressing workforce issues. There is some support from companies basis. For most companies though, workforce disclosures are not subject to external for standardisation around the basis of preparation for the metrics that investors assurance processes. considered most important. “Workforce disclosure is much more manageable as it relies on internal data. There is still some inconsistency obviously in the metrics, but it’s more achievable” – Company

Metrics and targets

In order to help investors understand what is measured, monitored and managed in Companies should then: relation to the workforce, including more data and financially-relevant information, • Describe the metrics most relevant to an companies should ask themselves… understanding of the workforce, including how • What information is most relevant to an understanding of the workforce? How are these identified and how they were identified do they link to the strategy and business model? • Describe how the company is enhancing and • What metrics are monitored in relation to the company’s culture? incentivising its workforce to deliver value, including targets used to manage workforce- • What do the metrics being monitored and managed indicate about the future direction of the company? How related challenges and performance are they being integrated into day-to-day business management and reporting? • Describe how the desired culture is being • What is the company doing to maximise workforce satisfaction and progression and how is this measured driven from the top including how ‘buy in’ has and monitored? been achieved from the workforce • What is the scope and boundary of the information presented? Is this the same across all information • Disclose employee engagement numbers, presented? retention or turnover statistics (both planned and regrettable), values applied in the working • To what level of oversight or assurance are the metrics subjected? environment or other measures used to monitor workforce culture • What external data, or external expertise, is the company relying upon? • Describe remuneration and other benefits • Are the metrics disclosed calculated consistently? Is trend data provided? and disclose training and development and progression statistics • Which methodology is used for constructing the metrics? Is this comparable to other companies in the sector? • What is the company trying to achieve in relation to its workforce and what targets has it set? Have the targets been achieved, and what comes next? • How are metrics being integrated into the remuneration policy? Is this the most effective linkage possible?

Recent Lab projects on business models, risk and viability and performance metrics, Particular insights are in each of the sections of the report, but companies should have all raised the importance of linkage of company information. The conclusions from generally consider the picture their reporting casts, and how they can fit elements of these previous reports have held true in the context of reporting on workforce matters. workforce reporting into their suite of disclosures most effectively to assist investors to understand their company. The infographic below describes some of the areas of reporting in which linkage is important, and how incorporating workforce elements into those sections of reporting can build a coherent picture about the company’s workforce, and the company’s attitude towards it.

The suite of disclosures that allow investors to understand a company:

Business model Purpose Explains how the company generate benefits Explains how the company generates for its members through economic success and preserves value over the The disclosure of whilst contributing to inclusive and longer-term a company’s purpose, sustainable growth strategy, objectives and Strategy and objectives business model should together Principal risks and viability explain what the company does and Provides insight into the company’s Explains those material to the future development, performance, how and why it does it. company, or where the impact of its position and future prospects A description of a company’s activity poses a significant risk values, desired behaviours and Business environment culture will help to explain and Performance metrics put its purpose in context. Are used in assessing progress against Provides information about the main objectives or strategy, monitoring principal trends and factors, including both risks, or generally the development, financial and wider matters performance or position of the company

Section 2 Appendix A – questions and disclosures

Governance and management

In order to help investors understand how boards consider and assess workforce Companies should then: matters, including what information they see, companies should ask themselves… • Describe the board’s oversight of • What arrangements does the board have in place for assessing and considering workforce-related matters? workforce-related matters and how the board has engaged with the workforce • Who has responsibility for workforce-related matters and how often are workforce-related issues • Describe management’s role in considering considered? and managing workforce issues • What insight does the information on workforce matters give the company and how is it being integrated into • Describe what impact the board’s consideration strategic planning? of workforce matters has had on strategic • What information and metrics do the board monitor in relation to the workforce? decisions • How does the board get comfort over the metrics being used to monitor and manage the relevant matters? Who prepares the information the board receives in relation to the workforce? • What is it like to work in the company, and how does the board get sight of the workforce’s views? How does the board interact with the workforce without management present? • Which workforce-related matters does the board consider it might be helpful to change? Is this informed by workforce feedback? • Does the board consider the workforce-related reporting to be fair, balanced and understandable?

Examples

One approach is to explain what information the board sees and the effect of this engagement on board Barratt Developments plc, RBS plc 29, 30 and 31 decisions or of the involvement of Committees in workforce-related matters

One approach is to report how the board engages on workforce matters, and changes they have made as a Rolls-Royce Holdings plc 32 result

Business model and strategy Examples

An approach is for a company to report what it considers to be its SAP SE, ConvaTec Group 34 and 35 In order to help investors understand what workforce, including by segment or site plc, Fresnillo plc, Carnival the workforce is and how it contributes to the Corporation & plc One approach is to present links between the workforce and their view on AstraZeneca plc 35 success of the business model, whether it is strategy considered a strategic asset, how it is invested An approach is to present links between key performance indicators and Taylor Wimpey plc, Rentokil 36 and 37 in, and what changes might need to be made strategy in consistent ways across formats Initial plc to strategy in order to capitalise on workforce- related opportunities, companies should ask An approach is to explain the employment model in the context of the InterContinental Hotels Group 38 and 39 business model(s) or outline workforce strategy and links to culture plc, Admiral Group plc themselves… • Is the workforce viewed as a strategic asset? One approach is to link investment in inclusion to performance and strategy SSE plc 40 • What is the company’s workforce, for example, does it include contractors, franchisee staff, supply chain, employees? One approach is to discuss how some of the challenges the company faces Marks and Spencer Group plc 41 • How does the employment model enhance the business model? are being addressed • What workforce-related matters are relevant to the company’s business model and strategy? What process has been followed One approach is to disclose how a company addresses employee feedback, Pearson plc 48 in order to assess the impact of the workforce? and plans for the next year in the context of risk • How does the workforce help generate or preserve value in the company? How does the company invest in the workforce, and One approach is to link disclosures to definitions and personnel expenses SAP SE 52 what expenditures are needed to ensure that the workforce continues to help the company generate and preserve value?

• How is the workforce enhanced and incentivised to deliver value? Companies should then: • How do workforce matters affect key divisions, markets and/ • Describe who the company considers its workforce to be (including total headcount, demographics or revenue/profit drivers? Over short, medium or longer-term and employment composition such as direct employees, contractors and/or others in the supply horizons? chain) • How does the information gathered, particularly the workforce’s views, factor into strategic planning? • Describe whether, and how, the company invests in the workforce as a strategic asset • What triggers would require a change of direction? • Describe how the workforce creates value for the organisation and what opportunities there are to • How do workforce-related risks and opportunities impact the grow that value financial statements? • Describe how the workforce model supports the business model and strategy • Describe how the workforce-related risks and opportunities the organisation has identified affect the company’s business, strategy and financial planning

Risk management

In order to help investors understand the risks and opportunities presented by the workforce and Companies should then: how the company is responding to them, companies should ask themselves… • Describe the organisation’s • What systems and processes are in place for identifying and assessing workforce-related risks? How is a consideration of processes for identifying, assessing workforce-related risk integrated into this process? and managing workforce-related risks and opportunities • How are the risks related to the workforce being monitored, managed and mitigated? • Describe which workforce-related • Which risks related to the workforce are most relevant to the business model and strategy? How are these identified and risks and opportunities are most where are they in the business? relevant to the company • Describe where the risks and • What opportunities does the workforce provide to enhance the value of the company? opportunities sit in the business and how they are managed • Over what horizon have the risks been considered and risk assessments carried out? Why is this an appropriate horizon with reference to the business model? • How is the assessment of the company’s viability over the longer-term taking into account workforce-related issues?

Examples

An approach is to link risk to other parts of the business, with descriptions of how the impact of workforce Fresnillo plc, Just Eat plc, Pearson plc, SSE plc 43 to 48 risks is changing and who owns the risk

One approach is to explain the supply chain, and some of the inherent risks SSE plc 44

Metrics and targets Examples

One approach is to explain how the company engages with InterContinental Hotels 50 In order to help investors understand what is measured, employees and the feedback received Group PLC monitored and managed in relation to the workforce, An approach is to report what a company considers to be SAP SE, ConvaTec Group 34 and 35 including more data and financially-relevant information, its workforce, including by segment or site plc, Fresnillo plc, Carnival companies should ask themselves… Corporation & plc An approach is to refer to external providers of EasyJet PLC, Go-Ahead Group 38 and 50 • What information is most relevant to an understanding of the information or external data sources plc, Rentokil Initial plc workforce? How are these identified and how do they link to the strategy and business model? An approach is to present granular information with trend SAP SE, Stora Enso OYJ, SSE 51 to 54 • What metrics are monitored in relation to the company’s culture? data, plus targets with definitions for clarity plc, Rolls-Royce Holdings plc

• What do the metrics being monitored and managed indicate about the One approach is to relate metrics to peer results Coca-Cola HBC AG 51 future direction of the company? How are they being integrated into day-to-day business management and reporting? One approach is to present interesting metrics like National Grid plc 55 • What is the company doing to maximise workforce satisfaction and turnover, work patterns and promotion rate, by gender progression and how is this measured and monitored? and location • What is the scope and boundary of the information presented? Is this the same across all information presented? Companies should then: • To what level of oversight or assurance are the metrics subjected? • Describe the metrics most relevant to an understanding of the workforce, including • What external data, or external expertise, is the company relying upon? how they were identified • Are the metrics disclosed calculated consistently? Is trend data • Describe how the company is enhancing and incentivising its workforce to provided? deliver value, including targets used to manage workforce-related challenges and performance • Which methodology is used for constructing the metrics? Is this comparable to other companies in the sector? • Describe how the desired culture is being driven from the top including how ‘buy in’ has been achieved from the workforce • What is the company trying to achieve in relation to its workforce and • Disclose employee engagement numbers, retention or turnover statistics (both what targets has it set? Have the targets been achieved, and what planned and regrettable), values applied in the working environment or other comes next? measures used to monitor workforce culture • How are metrics being integrated into the remuneration policy? Is this • Describe remuneration and other benefits and disclose training and development the most effective linkage possible? and progression statistics

Section 3 Appendix B – examples of developing practice

Introduction to the examples LIST OF EXAMPLES Area of reporting Company Page Reporting on workforce issues is a developing area of practice. New regulatory Governance and Management Barratt Developments plc 29 and 30 requirements and investor expectations, are pushing companies towards more RBS plc 31 disclosure on this area. However, as this is a developing area the questions we have Rolls-Royce Holdings plc 32 developed are designed to help make reporting more effective. Business model and strategy SAP SE 34 The following pages cover examples of developing practice. As this area is Fresnillo plc 34 developing, it is likely that expectations will also continue to evolve. Carnival Corporation & PLC 34 Our report highlights some examples of current practice which resonated ConvaTec Group plc 35 with investors. Not all of the examples are relevant for all companies and all AstraZeneca plc 35 circumstances, but each provides an example of where the company demonstrates how to enhance the value of their disclosures. Taylor Wimpey plc 36 Rentokil Initial plc 37 Highlighting aspects of good reporting by a particular entity should not be 38 considered an evaluation of that entity’s annual report as a whole. InterContinental Hotels Group plc Admiral Group plc 39 Investors have contributed to this project at a conceptual level. The examples SSE plc 40 used are selected by the Lab to illustrate the principles that investors have highlighted and, in many cases, have been tested with investors, however, they Marks and Spencer Group plc 41 are not necessarily examples chosen by investors and should also not be taken as Pearson plc 48 confirmation of a holding or acceptance of the company’s reporting more generally. SAP SE 52 Risk Management SSE plc 43 and 44 Fresnillo plc 45 and 46 Just Eat plc 47 Pearson plc 48 Metrics and Targets InterContinental Hotels Group plc 50 EasyJet PLC 50 Go-Ahead Group plc 50

Coca-Cola HBC AG 51 Rentokil Initial plc 38 SSE plc 51 SAP SE 52 Stora Enso OYJ 53 Rolls-Royce Holdings plc 54 National Grid plc 55

Governance and management

In order to help investors understand how boards consider and assess workforce Companies should then: matters, including what information they see, companies should ask themselves… • Describe the board’s oversight of • What arrangements does the board have in place for assessing and considering workforce-related matters? workforce-related matters and how the board has engaged with the workforce • Who has responsibility for workforce-related matters and how often are workforce-related issues • Describe management’s role in considering considered? and managing workforce issues • What insight does the information on workforce matters give the company and how is it being integrated into • Describe what impact the board’s consideration strategic planning? of workforce matters has had on strategic • What information and metrics do the board monitor in relation to the workforce? decisions • How does the board get comfort over the metrics being used to monitor and manage the relevant matters? Who prepares the information the board receives in relation to the workforce? • What is it like to work in the company, and how does the board get sight of the workforce’s views? How does the board interact with the workforce without management present? • Which workforce-related matters does the board consider it might be helpful to change? Is this informed by workforce feedback? • Does the board consider the workforce-related reporting to be fair, balanced and understandable?

Examples

One approach is to report how the board engages on workforce matters, and changes they have made as a Rolls-Royce Holdings plc 32 result

Workforce-relatedStakeholder corporate reporting engagement 29 continued Barratt Developments plc Engagement Outcome from engagement Annual Report and Accounts 2019 Employees continued Page 26 Engagement survey • We annually undertake an employee engagement survey to gain insight into the • We have increased the emphasis on innovation issues that matter most to our employees. For the year under review, the survey around the Group within existing schemes such as the results showed the overall level of engagement is above upper quartile and above Customer First Recognition Scheme. What is helpful? the top decile score. More than 80% of our employees took part in the survey. • New strategies to promote health and wellbeing have been • Each divisional and functional head received a report setting out the results for their put in place as detailed in the Health, safety and wellbeing Barratt Developments discloses employee-related metrics, respective teams. These results have been shared with the teams and plans have section above. the method of engaging with employees and the effect of been put in place to maintain or enhance employee engagement levels. We will be • We have continued to streamline ways of working and engagement with employees on the decisions of the Board, conducting pulse surveys during the course of the year to measure changes in any build interdepartmental relationships. key areas. including some additional data requested by the Board and plans • We have been more active in promoting our flexible • A number of changes were made to this year’s survey to encourage employees to working policy initiatives such as home working and for a future detailed review of culture. participate. These included: job shares. − Introduction of the survey, by video from the Chief Executive; • We have put in place a number of initiatives to improve − Fewer questions with more encouragement of open ended comments; and internal communications, both to and from employees. − Drill down questions, where appropriate, to further investigate answers provided. • We have actively promoted secondments and • Downloadable reports have been produced with actionable insights and guidance for opportunities for involvement in projects across the line managers. business to help career and self development of our employees. • To enable employees to see what changes are being made as a result of the survey we promote a ‘You Said, We Did’ on the Group’s intranet.

Effect of engagement with employees on Board decisions • The Board continues to encourage improvements in systems, processes and benefits which impact the health, safety and wellbeing of our employees. • To increase its engagement with the workforce, the Board nominated Richard Akers, the Senior Independent Director, as the designated Non-Executive Director for workforce engagement. Richard will attend his first Workforce Forum meeting in October 2019 and report back to the Board thereafter. He will attend at least one meeting annually going forward and is also available to members of the Workforce Forum throughout the year. • The Board discussed the benefits of a number of the suggestions made by Senior Management in respect of driving the Group’s strategy and agreed to explore the opportunity to vertically integrate with our supply chain. Ultimately, this resulted in the acquisition of Oregon. • The Board continues to encourage management to find ways of improving our diversity and inclusion position. It has requested diversity and inclusion data to be provided as part of the regional site visits that it undertakes on an annual basis. In addition, the Board monitors progress against, and the appropriateness of, the targets established to drive our diversity and inclusion initiative. • The Board gained further insight into the importance of fire stopping and how it works. • In order to ensure that the tone of our culture is driven from the top, the Board’s involvement in the review process is critical. The Board is scheduled to undertake a detailed review of our culture and will agree with management as to what, if any, actions need to be taken to further improve, develop and embed the culture across the business.

Customers

Customer satisfaction • We place customers at the heart of everything we do and focus on delivering • Achieved a 5 Star rating in the HBF customer satisfaction excellent build quality, robust policies, industry leading training and resolving any survey for the tenth consecutive year. No other customer problems quickly and efficiently. major, national builder has achieved this outstanding accomplishment. • We ensure that our customers have the opportunity to speak to members of the team working on their home throughout each step of their journey with us. • Introduced new resourcing guidelines to optimise staffing levels of Customer Care teams. • Delivered a new customer service training programme to 208 employees, in conjunction with NHBC. • Launched a new app for Site Managers to improve defect Introduction Quick read 1 Investor expectationscapture and and resolution.2 Appendix A – questions and 3 Appendix B – examples of 4 Appendix C – participants 5 Appendix D – regulatory and company views • Introduced new performancedisclosures management measuresdeveloping to practice and process market initiatives increase speed of defect resolution.

Barratt Developments PLC Annual Report and Accounts 2019

Barratt Developments AR2019 Strategic.indd 26 13/09/2019 17:01:03 42 Investing in our people Our priorities

The challenge The housebuilding industry is facing a skills shortage and as the UK’s largest housebuilder we are committed to playing our part to help address this shortage and to reduce the impact on our business.

Strategic priority Our people are the heart of our business and we aim to attract and retain the best people by investing in their development Workforce-related corporate reporting and success. We have well-established 30 apprenticeship schemes to attract the next generation to enter our industry. We seek to create a great place to work, 46 42 founded on an open and honest culture Barratt Developments plc that embraces diversity and inclusion. Investing in our people Annual ReportKeeping and Accounts 2019 people safe KPIs Pages 42 and 46 OurUpper priorities quartile employee Our principles engagement Progress in FY19 Key material issues Sean Regan, Our people are the heart of our business and • Development and training of Site Manager with 82% our continued success has been achieved our employees. Martin McVarnock The challenge (2018: 79%) through the hard work and dedication The challenge divisional SHE The housebuilding industry is facing a • How we recruit and retain the best talent. of our employees. Our future growth is To ensure our operations are incident Manager at skills shortageWhy andwe asmeasure the UK’s largest underpinned by our aim to attract and retain • How we are creating opportunities for housebuilder we are committed to and injury free and we have a positive Nomvula Park, • To gain an insight of, and provide the best people and our commitment to young people. playing our part to help address this health impact on all those employed Knowsely. a forum for, employee views. playing our part to help address the industry • How we are engaging with our employees. shortage and to reduce the impact on skills shortage. and affected by what we do. our business.• To retain and invest in the • Our approach to health and safety. best people and focus on their We have 470 apprentices, graduates and • Promoting the physical and mental development and success Our principle Strategic priority trainees on programmes, around 7% of our wellbeing of our employees. workforce. A further 146 apprentices have Health and safety is a core business Our people are the heart of our business and we aimRisks to attract D and I retain J the best been recruited in FY19 for our FY20 intake. Operational risk management value and a fundamental priority. We During the year, average training days per are committed to achieving the highest people by investingThe skills in shortage their development in our industry The development and training and success.means We have it is ofwell-established utmost importance to employee increased to 4.7 days (2018: 4.0 industry health and safety standards for apprenticeshiprecruit schemes and retain to attract best in the class people. days) and we have maintained our upper of our employees which all of our people are responsible. next generation to enter our industry. quartile performance in our engagement We continue to invest in the development survey and reduced employee turnover. We seek to create a great place to work, and success of our people, helping them to KPIs founded on an open and honest culture contribute to the long term success of the In March, we became the only major that embraces diversity and inclusion. business. housebuilder to be awarded HBF’s maximum Health and safety 5 Star customer satisfaction rating for ten As the UK’s largest housebuilder we are (SHE audit compliance) KPIs years in a row. In light of this achievement committed to playing our part to help Upper quartile employee and to recognise our employees’ dedication address the industry skills shortage and and hard work we have, for the second to reduce the impact on our business. Key engagement year in a row, awarded a share award to all to this is developing and training trade and employees below Senior Management. 96% site-based employees which we do through Progress in FY19 Key material issues (2018: 96%) a number of award-winning and established Our people are the heart of our business and • Developmenttraining and and training development of programmes. 82% our continued success has been achieved our employees. Why we measure (2018: 79%) through the hard work and dedication Progress in FY19 Key material issues • How we recruit and retain the best talent. • To demonstrate compliance with of our employees. Our future growth is We continue to prioritise and focus on health • Our approach to health and safety. Why we measure • How we are creating opportunities for safety standards on our sites underpinned by our aim to attract and retain and safety across our business and seek to • To gain an insight of, and provide the best people and our commitment to young people. • Lead indicator highlighting areas of • Promoting the physical and mental Barratt Developments PLC Annual Report and Accounts 2019 manage the inherent risks in the construction a forum for, employee views. playing our part to help address the industry • How we are engaging with our employees. SHE focus wellbeing to our employees. skills shortage. process by applying our management system • To retain and invest in the • Our approach to health and safety. and continuously reviewing our safe systems Operational risk management best people and focus on their I J We have 470 apprentices, graduates and • Promoting the physical and mental Risks of work. During the year we achieved the development and success Our approach to health and safety Barratt Developments AR2019 Strategic.indd 42 trainees on programmes, around 7% of our wellbeing of our employees. 13/09/2019 17:01:29 Health and safety or environmental maximum 5 Star status as part of the British We believe all injuries are avoidable and workforce. A further 146 apprentices have breaches could cause harm to Safety Council Occupational Health and Risks D I J been recruited in FY19 for our FY20 intake. whilst we recognise that entirely eradicating Operational risk management individuals, potential reputational Safety Audit. Our new BDW Cambridgeshire During the year, average training days per risk is a challenge, we are determined The skills shortage in our industry damage, criminal prosecution and civil division will go through this accreditation employee increased to 4.7 days (2018: 4.0 The development and training to improve our performance and reduce means it is of utmost importance to litigation, delays in construction or process in FY20. Our housebuilding recruit and retain best in class people. days) and we have maintained our upper of our employees the number of injuries occurring in our increased costs. divisions, other than our new division in quartile performance in our engagement We continue to invest in the development working environment. We maintain stringent survey and reduced employee turnover. Cambridgeshire, are certified to OHSAS 18001 and success of our people, helping them to (all are moving towards ISO 45001 as part of standards and have a continuous focus on contribute to the long term success of the In March, we became the only major health and safety with all areas and levels of business. their next assessments) and ISO 14001; BD housebuilder to be awarded HBF’s maximum Living, our bespoke wardrobe supplier, is the business. 5 Star customer satisfaction rating for ten As the UK’s largest housebuilder we are also certified to these standards. We will be years in a row. In light of this achievement committed to playing our part to help working with our Cambridgeshire division and To reflect our commitment to continuously Introduction Quick read and to recognise our Investor employees’ expectations dedication and address2 Appendix the industry A – questionsskills shortage and and3 Appendix B – examples of 4 Appendix C – participants 5 AppendixOregon, D – regulatory over the and next year, to ensure their improving our policies and processes, and hard work we1 have,company for the views second disclosures and process market initiatives to reduce the impact on our business. Keydeveloping practice processes meet these standards. during the year we updated the SHE year in a row, awarded a share award to all to this is developing and training trade and management system to ensure compliance employees below Senior Management. site-based employees which we do through In order to ensure that health and safety with new health and safety standard ISO a number of award-winning and established procedures are adhered to, compliance with 45001. We have undertaken a new campaign training and development programmes. our SHE management system is verified this year to raise awareness of good by a programme of site monitoring and housekeeping on sites to reduce risk. internal and external audits. Our SHE audit compliance scores and IIR are assured in accordance with ISAE 3000 revised. Barratt Developments PLC Annual Report and Accounts 2019

Barratt Developments AR2019 Strategic.indd 42 13/09/2019 17:01:29

Barratt Developments PLC Annual Report and Accounts 2019

Barratt Developments AR2019 Strategic.indd 46 13/09/2019 17:01:35 Workforce-related corporate reporting 31

What is helpful? RBS plc RBS’ reporting outlines considerations around the workforce and culture and outlines the Remuneration Committee’s role in Annual Report and Accounts 2018 considering workforce-related matters. Page 67

Directors’ Remuneration Policy

Approach to the new UK Corporate Governance Code (the new Code) Ahead of its formal application in 2019, detailed analysis of the new Code was undertaken in 2018 with findings presented to the Committee. The majority of the changes are in line with existing practice at RBS. A summary of the main provisions is set out below. The Committee will continue to monitor and reflect on best practice for these new requirements.

Area Description of provision RBS position Workforce Remuneration Committee to The Committee already considers papers on the broader employee proposition, for remuneration review workforce remuneration example, the group-wide remuneration and deferral policy, annual pay outcomes and alignment and related policies, and the including diversity information, and the annual Sharesave offer for employees. with culture alignment of incentives and rewards with culture, taking The Financial Reporting Council’s (FRC) guidance asks Remuneration Committees to these into account when setting consider “How do workforce incentives support our culture and encourage the desired the policy for executive director behaviours?” The removal of sales incentives for front-line employees in recent years remuneration. is a good example where desired culture and remuneration proposals have been considered together at RBS.

The Committee will review relevant culture developments and consider the potential impact on remuneration policy. The aim is to assist the Board in its responsibility to monitor how well culture is being embedded across the organisation and the role that remuneration plays in that.

Post- Remuneration Committees Under the current policy, executive directors automatically retain a significant number employment should develop a formal policy of shares after they leave. Shares from fixed share allowances continue to be held for shareholding for post-employment at least three years regardless of the reason for leaving and LTI awards held by good requirements shareholding requirements leavers will continue to be released up to eight years post departure. encompassing both unvested and vested shares. The Committee will consider whether a more formal post-employment shareholding requirement should be introduced when the new directors’ remuneration policy is due to be submitted to shareholders at the 2020 AGM.

Introduction Quick read 1 Investor expectations and 2 Appendix A – questions and 3 Appendix B – examples of 4 Appendix C – participants 5 Appendix D – regulatory and Pension The pension contributioncompany rates views The FRCdisclosures guidance recognises thatdeveloping it may practice not be appropriateand process to reduce the pensionmarket initiatives contribution for executive directors should be provision for existing directors. However, good practice is for the rates to move over rates aligned with those available to time to be aligned with those of the wider workforce. the workforce. As noted earlier in this report, RBS has already taken steps in this area with the pension rate for the new Chief Financial Officer set at 10% of salary, rather than the 25% of salary allowed for under the policy for new executive directors. The rate at 10% is the same as that applicable to the majority of the wider workforce. The position for the Chief Executive will be reviewed as part of the renewal of the directors’ remuneration policy at the 2020 AGM.

Factors in Remuneration Committees The Committee already takes many of these factors into account when determining determining should address the following executive director policy. The current policy was designed around themes of executive criteria when determining simplicity, alignment with company strategy and culture, and ensuring rewards are director policy executive director policy: clarity; supported by sustainable, risk-adjusted long-term performance. simplicity; risk; predictability; proportionality; and alignment to In terms of predictability, it is worth noting that variable pay at RBS is already culture. constrained by the 1:1 regulatory cap on grant. The new long-term incentive construct is based around lower awards levels with more predictable outcomes. In addition, there are discretionary underpins which provide scope to adjust outcomes for significant risk, stakeholder or reputational matters not already captured in the performance assessment.

Engagement Remuneration Committee to In 2018, we established a Colleague Advisory Panel, chaired by a designated non- with colleagues report on its work including executive director. The aim of the Panel is to provide direct engagement between engagement with colleagues on colleagues and Board members. The Panel includes colleagues who volunteered to executive remuneration. be involved, existing representatives from trade union bodies and works councils, our colleague-led networks and junior management teams.

Along with a broad range of strategic topics, the Panel will also be used to discuss executive remuneration and how it aligns with the wider company pay policy. Further information on the Panel can be found in the Strategic Report and the Report of the directors.

Discretion and Remuneration schemes and There is broad discretion under RBS remuneration arrangements and the Committee use of malus policies should enable the use has used discretion in the past to apply downwards adjustment to the formulaic and clawback of discretion to override outcome of LTI vestings. formulaic outcomes and include provisions to withhold or recover The remuneration policy and share plan rules contain malus and clawback provisions payments. to adjust or recover awards where appropriate. Details of the process and the circumstances in which RBS can apply malus and clawback are set out on page 80.

Rolls-Royce Holdings plc Annual Report 2018 Directors’ Report Corporate Governance 65

Rolls-Royce Holdings plc Annual Report 2018 Directors’ Report Area of focus Matters considered Outcome Corporate Governance 67 Operational Operational performance updates Year-to-date status across key operational performance measures performance/ and key priorities presented throughout the year. The operational challenges KPIs for each business were also discussed. Civil Aerospace programme challenges, Operational challenges during the year are described in the including new product introduction Civil Aerospace review on pages 24 to 29. The Board remained regularly informed on the management of these issues, including steps to minimise customer disruption, and received regular briefings from the Chief Executive and President – Civil Aerospace. Safety incidents The Board was briefed on the RIDDOR report that had resulted in Workforce-related corporate reporting the UK H&S Executive visiting the relevant site (more detail can be 32 How the Board engages found on page 99). The safety walks quick guide was provided to

Investors the Directors for their future reference when visiting facilities. DIRECTORS’ REPORT continued The Board receives a regular report from the director of investor relations on shareholder analyst feedback,

especially postStakeholder results. A CapitalInvestor Markets engagement event was held in June which provedContinued to betransparency a success inand investor introduced briefings. two The Capital Markets new membersengagement of the Executive Team to our key investors. In 2018, the Chiefevent Executive held in June and was Chief well Financialreceived and Officer introduced members of and governance Rolls-Royce Holdings plc met with investors in the UK and North America, following both the preliminarythe Executive and interim Team to results, our investors. and at In various July, we published our first ESG newsletter which is available at www.rolls.royce.com. times throughout the year. The IR team is in constant dialogue with investors in the UK and North America. At our 2018 Annual Report strategy day in September, we welcomedEmployee engagement the external perspectives of bullThe and Board bear held fund two managers Meet the Board who presentedevents for employees, in the their investment theses prior to taking questions from the Board. We haveUK held and in‘governance Germany. days’ in two of the last Page 65 & 67 three years following the release of our Annual Report. These are led by Regularthe Chairman updates and were attended given by Irene by the Dorner Chief on her employee Executive and our committee chairs and seeks to provide a discussion forumchampion for fund role andmanagers meetings/events and governance she had attended. The Board analysts. With relative stability on governance topics in 2018, we publishedconsidered a well-received a report on ESG global newsletter employee instead relations. to provide an update on our activities in these areas. The Chairman, SeniorIrene Independent Dorner also highlighted Director and an emergingmembers theme of arising What is helpful? the Board make themselves available to meet with institutional investors acrosswhen requestedher discussions with with the employees Chairman concerning and bullying and SID meeting with the ESG representatives of some of our major shareholdersharassment. in both This London was considered and Edinburgh by the Safety in & Ethics Committee Rolls-Royce explains how the board engages on workforce issues, the first half of the year. The Company’s AGM is held in different locations– see in pageorder 101 to – reachand resulted a wider in ashareholder global anti-bullying campaignDIRECTORS’ REPORT and at a high-level, some of the changes made as a result of this base. Of real benefit to the Board is the institutional investor perspectivewhich shared was launchedby Brad atSinger the end as ofchief the yearoperating and will continue engagement. officer of ValueAct. into 2019. Other stakeholder engagement The Board reviewed in detail its stakeholder groups and current Why they matter to us Employees Employee engagement is critical to our success. We work to create a diverseengagement and inclusive programmes. workplace This is wherediscussed in detail on pages 66 to 68. every employee can reach their full potential and be at their best. We engage with our people to ensure we are delivering to their expectations,FRC’s supporting publication wellbeing of the 2018 and UK making Corporate the rightThe businessBoard was decisions.updated on This the implicationsensures we for Rolls-Royce of the can retain and develop the bestGovernance talent. Code (revised Code) changes following the publication of the revised Code. Matters reserved to the Board and The Board carried out a full review of its matters reserved to ensure Type of engagement delegated authorities alignment with the revised Code and its delegated authorities. Non-Executive Directors identified as Employee Champions Board apprentice programmeUK Modern Slavery Act The anti-slavery and human trafficking statement was presented and Graduate and apprentice focused events approved by the Board in February 2018. Meet the Board events and ‘town hall’ briefings Informal leadership blogs, all employee webex programme and videos by Executive Team EmployeeThe relations Board’s and areasHSE dedicated of focus teams in 2019 are expected to include: Global HSE week, ongoing occupational safety and wellbeing programme Annual global The employee Group’s culture opinion survey and individual performance reviews Continuing to monitor compliance with the terms of the DPAs Employee volunteering Execution of strategic priorities The implications of Brexit on the Group’s activities Trade union Overview representative of the restructuring participation of the businesses, support and Principal risk reviews management functions including management of associated risk What matters to them Increased emphasis on sustainability Reputation Civil Aerospace operational delivery programme ramp-up Talent pipeline Implementationand retention of any required changes to the corporate Reward Continued monitoring of financial and operational performance Career opportunitiesgovernance framework introduced by the revised Code Employee development Continued strong focus on safety improvements HSE performance Employee engagement Diversity and inclusion

How the Board engages Irene Dorner has continued to meet with employee groups and has attended the employee stakeholder engagement meetings. She regularly provides feedback to the Board on employee topics of interest and/or concern, including our graduate and apprentice population. This direct link that Irene provides between the employees and the Directors is proving to be extremely valuable, particularly through this period of extensive change. The Board has recognised the success of Irene’s role and has recently appointed Beverly Goulet as the Board’s Employee Champion for our North American employees. Following on from the success of the first programme, the second Board apprentice programme for 2018/19 has been launched (see Nominations & Governance Committee Report on page 73). During the year, the Meet the Board events for employees were held in Friedrichshafen, Germany and Derby, UK. Both Directors and Executive Team members take every opportunity to meet with local employees and conduct town hall sessions when visiting different business locations. In 2018, in addition to the work of the employee champions, members of the Board met with employees during their visits to Indianapolis, US; Pune and Bangalore, India; and Singapore. The Board discussed employee relations in August and this will be reviewed by the Board as required but at least annually. Diversity statistics in respect of the graduate and apprentice programmes are reported to the Board periodically. Finally, when considering M&A activity, the Board always remains mindful of any impacts on employees (see strategic decisions on page 58).

Business model and strategy Examples

STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS

OUR PEOPLE

We seek to attract, develop and retain the best people, and engage them over the long term. We are committed to eliminating unsafe workplace conditions and behaviours, and to keeping our people healthy. We continue to work hard to develop an organisational culture based on trust, and to embed ethics and Workforce-related corporate reporting integrity into that culture in order to create a fair and respectful workplace. 34

50 Fresnillo plc Annual Report and Accounts 2018 EMPLOYEES AND CONTRACTORS 2018 5,139 12,462 STRATEGIC REPORT 2017 4,817 11,188 2016 4,293 7,815 SAP SE 2015 4,191 3,840 2014 3,501 3,589 Employees Fresnillo Contractors plc Annual Report and Accounts 2018Integrated69 Report (Excerpt) 2018 Page 76 UNIONISED AND NON-UNIONISED EMPLOYEES STRATEGIC REPORT 2018 1,214 3,925 CORPORATE GOVERNANCE 2017 1,081 3,736 2016 969 3,324 FINANCIAL STATEMENTS 2015 899 3,292 2014 817 2,684 Non-unionised employees Unionised employees What is helpful? GENDER DIVERSITY SAP shows what constitutes the workforce in more 7.78% 2018 OUR PEOPLE 5.22% Members of granularthe Saucito team. detail by region, function and across time. 8.89% 2017 CO E 5.71% We respect labour rights and engage seminars throughout the year as a % 8.50% We seek 2to attract, develop2016 and retain the best people, and engage them over 25 4.07% union representatives constructively. mechanism to engage and mobilise the long term. We are committed to eliminating8.33% unsafeWe workplace engage our conditionspeople through our people. The executives participate 2015 % 3.45% 5 employee surveys to better understand in a training programme organised and behaviours, and to keeping our people healthy.9.40% We continue to work hard 2014 and respond to their expectations. by the Mexico Autonomous Institute to develop an organisational culture3.85% based on trust, andDuring to embed 2018, we ethics were proud and to be of Technology (ITAM), a leading integrity into that culture Percentage in order of women to in managerial create roles a fair and respectfulrecognised asworkplace. one of the Best Places business school. MINES IN OPERATION Percentage of women in the workforce (unionised and non-unionised) to Work in Mexico. % DIVERSITY & INCLUSION TALENT MANAGEMENT We value and respect all people from EMPLOYEES AND CONTRACTORS5 VOLUNTARY LABOUR TURNOVER One of the world’s oldest continuously operated mines, % We seek to recruit, retain, and develop diverse backgrounds. We aspire to 2018 OBJECTIVES 2018 5,139 12,462 11.99% 2018 10 the most talented people in order to develop an inclusive culture where • Continue stabilising ore grades Fresnillo produced 24% of the Group’s total silver in 2018 2017 4,817 11,188 5.99%POINTS Fresnillo plc 2016 4,293 TRASH7,815 9.09% ensure we have an appropriate pipeline our people feel valued and are inspired and ore throughput. 2017 and generated 16.9% of total adjusted revenue. 2015 4,191 3,840 5.61% to meet the future needs of the business. to contribute to their fullest potential. • Maintain development rates at 2014 3,501 3,589 10.48% We attract and develop talent with a With the support of the University of 2016 Annual Report and Accounts 2018 6.29% current levels in the short term, Employees Contractors long-term mindset (see the case study Arizona, we continue to train managers 9.21% while increasing them in the 2015 ‘SecuringPage a talented 50 and and diverse 69 and executives on how to manage a medium and long term. Carnival Corporation & plc is the world’s largest leisure travel company and among5.39% the most profitable engineering workforce ’ on page 70) diverse workforce, raising awareness UNIONISED AND NON-UNIONISED EMPLOYEES 7.77% Our success depends on the talent, passion and dedication of our 2employees,014 both onboard our ships and • Carry out intensive infill deep and financially strong in the cruise and vacation industries, with a portfolio of 105.48% dynamic brands that and emphasise the value of training of unconscious bias and its impact on drilling to increase certainty in ashore,include whonine consistentlyof the world’s201 8deliver leading1,214 joyful cruise and lines. memorable3,925 Together, vacation the corporation’s experiences cruise for our lines guests. operate We 103 strive ships to and mentorship. We believe that the decision making. We also supported Ownership: 100% Fresnillo plc Location: Zacatecas 2017 1,081 3,736 Voluntary labour turnover Total turnover operational planning. reflectwith cruises the diversein all of andthe2 01 world’sglobal6 969 marketplacemost popular3,324 and vacation communities destinations. we serve. best retention strategy is to provide the Women in Mining chapters in the • Expand flotation area at the In operation since: 1554 Mine life (years): 8.6 (2017: 8.8) 2015 899 3,292 opportunities for people to learn and Mexican States of Zacatecas and Sonora. 2014 817 2,684 AVERAGE WORKFORCE TRAINING HOURS grow. For example,E among our non- beneficiation plant. Facilities: Underground mine and flotation plant AS See our website for our Diversity 2018 94 unionisedI workforce,RE we promoted 143 • Continue deepening the Non-unionised employees Unionised employees NC and Inclusion Policy. Milling capacity (2018): 8,000 tpd/2,640,000 tpy 2017 87 What is helpful? San Carlos shaft. employees to higher positions and Workforce: 1,122 employees, 2,159 contractors 2016 89 offered changes of business unit to a 2020 GOAL & UPDATEGENDER DIVERSITY 2015 100 further 58.Fresnillo In addition, reports we reviewed what it considers to be its workforce, 2014 87 2018 PERFORMANCE 7.78% Diversity & Ethics 2018 our incentives to better recognise 5.22% Members of the Saucito team. including by segment and site. • The silver ore grade decreased due 2018 Continue2017 to build% a change diverse and inclusive workforce and provide all performance. Our new performance to differences versus the geological 8.89% MINE PRODUCTION employees with a positive2 work017 environment and opportunities to AVERAGE HSECR TRAINING HOURS appraisal mechanism aligns training 5.71% We respect labour rights and engage seminars throughout the year as a model and increased dilution; ore build a rewarding career to further drive employee engagement.8.50% needs and helps us identify high Ore milled (kt) 2,443 2,447 (0.2) 2016 union201 8representatives constructively.45 mechanism to engage and mobilise throughput remained steady 4.07% 2017 35 potential people. We develop our high year-on-year. Silver (koz) 15,117 16,512 (8.4) 8.33% We engage our people through our potentialpeople. The middle executives managers participate via the We continued our multicultural,2015 diversity and inclusion campaign in 2018: 2016 50 • A new contractor was hired, Gold (oz) 42,290 38,784 9.0 3.45% employee2015 surveys to better understand69 in a Leaderstraining programmewith Vision programme. organised This 9.40% Lead (t) 19,619 • Together20,514 with Catalyst(4.4) 2(the014 leading U.S. nonprofit with a mission to andexpand2 respond014 opportunities to their expectations.for women)57 we made a by theinvolves Mexico senior Autonomous executives Institute delivering however development rates 3.85% declined due to lower productivity Zinc (t) 31,094 pledge30,021 to support3.6 the advancement of women's leadership and diversityDuring in the2018, workplace. we were proud to be of Technology (ITAM), a leading Percentage of women in managerial roles recognised as one of the Best Places business school. from other contractors and Silver ore grade (g/t) 214 • Together229 with Executive(6.6) PercentageLeadership of women Council in the workforce(ELC) – the leading US organization working to empower black corporate equipment failures. (unionised and non-unionised) to Work in Mexico. TOTAL RESERVES leaders - we made a pledge to support and encourage diversity in the workplace. DIVERSITY & INCLUSION • 70,322 metres of infill drilling was Silver (moz) 176.7 179.7 (1.7) TALENT MANAGEMENT We value and respect all people from carried out. VOLUNTARY LABOUR TURNOVER Gold (koz) 566 590 (4.1) We seek to recruit, retain, and develop diverse backgrounds. We aspire to • Continued preparation of the 11.99% 2018 the most talented people in order to develop an inclusive culture where AVG ORE GRADE IN RESERVES 5.99% infrastructure for the expansion FY2018 HUMAN cAPITAL PERFORMANcE ensure we have an appropriate pipeline our people feel valued and are inspired What is helpful? RECOGNITION WORKFORCE Carnival ARISON MARITIME CENTER 9.09% of the beneficiation plant. Silver (g/t) 243 240 1.3 2017 Carnival Corporation & PLC WORKFORCE 5.61% to meet the future needs of the business. to contribute to their fullest potential. • 247 metres deepening of the Gold (g/t) 0.78 0.79 (1.3) 10.48% We attract and develop talent with a With the support of the University of Carnival discloses what it considers to be its We employed201 6an average of 88,000 crew members onboard our 104 ships at any given time, (which San Carlos shaft. 6.29% Cut-off grade (g/t AgEq) 212 196 excludes8.2 employees on leave) and 14,000 shoreside employeeslong-term (full andmindset part time/seasonal).(see the case study This Arizona, we continue to train managers 9.21% FY2018 Sustainability Report workforce, includingTOTAL RESOURCES referencing a seasonal 2015 ‘Securing a talented and diverse and executives on how to manage a includes seasonal employees5.39% of Holland America Princess Alaska Tours, which significantly increases its 2019 OBJECTIVES engineering workforce ’ on page 70) diverse workforce, raising awareness Silver (moz) HURRICANE RELIEF812.0 PSYCHOMETRIC812.8 EVALUATION work force(0.1) during the late spring and summer7.77% months in connection with the Alaskan cruise season. Page 90 workforce. 2014 • Continue the infill drilling 5.48% and emphasise the value of training of unconscious bias and its impact on Gold (moz) 1.83 1.85 (1.1) and mentorship. We believe that the decision making. We also supported programme to improve the Voluntary labour turnover Total turnover accuracy of the geological model. AVG ORE GRADE IN RESOURCES best retention strategy is to provide the Women in Mining chapters in the • Enhance management controls. Silver (g/t) 339 320 5.9 opportunities for people to learn and Mexican States of Zacatecas and Sonora. AVERAGE WORKFORCE TRAINING HOURS Gold (g/t) travelSEACURE0.76 LABOR UNION0.73 4.1 grow. For example, among our non- • Increase development rates to GUEST AND CREW CARE TEAM See our website for our Diversity 2018 94 unionised workforce, we promoted 143 over 3,000 tpd in the short term Cut-off grade (g/t AgEq) 131 93 40.9 and Inclusion Policy. Investor expectations2017 and Appendix87 A – questionsemployees and to higher positions and Appendix C – participants Appendix D – regulatory and and commence operatingIntroduction the Quick read 2016 89 Appendix B – examples of 90 1 CARNIVAL CORPORATION & PLC2 – Sustainability offered changes3 of business unit to a 4 5 tunnel boring machine. company views 2015 disclosures100 further 58. In addition,developing we reviewed practice and process market initiatives 2014 87 • Continue deepening the our incentives to better recognise San Carlos shaft. performance. Our new performance • Continue construction of AVERAGE HSECR TRAINING HOURS appraisal mechanism aligns training the tailings flotation plant. needs and helps us identify high 2018 45 • Install flotation cells at the 2017 35 potential people. We develop our high beneficiation plant. 2016 50 potential middle managers via the 2015 69 Leaders with Vision programme. This 2014 57 involves senior executives delivering EnablingEnabling our our people people continued Workforce-relatedcontinued corporate reporting 35 Overview – 01 Overview LeaversLeavers and and hires hires by by age age band band – 01 Overview ContextContext HiresHires ConvaTec Group plc 10 At Atthe the end end of of2018 2018 we we employed employed 9,413 9,413 people10 people (2017, (2017, 9,549), 9,549), a decreasea decrease of of1% 1% since since 2017. 2017. Approximately Approximately 62% 62% of ofour our workforce workforce Corporate Responsibility Report 2018 are manufacturing site employees (2017, 60%). Information on our , , are manufacturing site employees (2017, 60%). Information on our , , Page 30 employeeemployee profile, profile, and and starters starters and and leavers, leavers, is illustratedis illustrated below below and and gender diversity is discussed later in this section. Our employee LeaversLeavers gender diversity is discussed later in11 this section. Our employee Delivering for for Delivering turnover for 2018 was 21% (2017, 21% ). 11This is largely driven by the – 16 customers Delivering for for Delivering turnover for 2018 was 21% (2017, 21% ). This is largely driven by the – 16 customers competitivecompetitive employment employment environment environment relating relating to toour our largest largest plants plants in thein the Dominican Dominican Republic, Republic, Mexico Mexico and and Slovakia. Slovakia. –– What is helpful?

We also employ the services of approximately 270 agency staff and

We also employ the services of approximately 270 agency staff and independentindependent contractors contractors (2017, (2017, 300). 300). ConvaTec reports what it considers to be its workforce. It Leavers and hires by gender provides useful information on leavers and hires by age, gender AlthoughAlthough our our employees employees are are spread spread across across our our global global footprint, footprint, Leavers and hires by gender there is a significant concentration of people at our manufacturing there is a significant concentration of people at our manufacturing contribution – 25 Making a socio-economic and function.

Hires contribution – 25 Making a socio-economic locations.locations. Our Our largest largest factories factories are are in Mexico,in Mexico, the the Dominican Dominican Hires Republic and Slovakia, with additional production in the UK (two Republic and Slovakia, with additional production in the UK (two ,, locations),locations), Denmark Denmark (two (two locations), locations), Belarus Belarus and and the the Netherlands. Netherlands. , , OfOf countries countries with with no no manufacturing manufacturing operations, operations, the the USA USA has has by byfar far , , the largest concentration of employees. None of these countries the largest concentration of employees. None of these countries LeaversLeavers featurefeature on on the the UK UK Government Government Foreign Foreign and and Commonwealth Commonwealth Office Office listlist of ofpriority priority countries countries for for human human rights rights concerns, concerns, published published ,, in 2018. in 2018. people – 29 people Enabling our – 29 people Enabling our people – 29 people Enabling our people – 29 people Enabling our

FromFrom time time to totime time we we need need to toreorganise reorganise our our business business to toensure ensure we we MaleMale FemaleFemale remainremain competitive, competitive, and and this this may may involve involve moving moving activities activities and and roles roles from one place to another, or closing facilities. When this results in

from one place to another, or closing facilities. When this results in

Key Performance jobsjobs being being lost, lost, we we aim aim to tohandle handle this this sensitively sensitively and and in compliancein compliance EmployeesEmployees by by function function Indicatorswithwith all allapplicablecontinued applicable regulations. regulations. In 2018,In 2018, approximately approximately 135 135 people people left left thethe business business as asa result a result of ofredundancies redundancies (2017, (2017, 245), 245), relating relating mainly mainly to tostreamlining streamlining of ofthe the workforce. workforce. with partners – 37 partners with Working responsibly – 37 partners with Working responsibly WeWe are are committed committed to toproviding providing fair fair pay pay for for our our employees. employees. All our sites comply with national minimum wage regulations All our sites comply with national minimum wage regulations SalesSales and and marketing marketing GeneralGeneral and and administrative administrative (where these exist). (where these exist). OperationsOperations ResearchResearch and and development development

OurOur key key stakeholders stakeholders for for these these issues issues are are our our employees employees

themselves, but they are also relevant for the national governments Strategic prioritiesthemselves, but they areKey also Performance relevant Indicators for the national governments Employees by region thatthat regulate regulate labour labour standards standards in thein the markets markets where where we we operate, operate, Employees by region as well as unions and works councils, where these are present. The

as well as unions and works councils, where these are present. The – 40 planet the Conserving

Be a Great Place to Work* – 40 planet the Conserving AstraZeneca plc informationinformation in thisin this section section relates relates to toall allof ofthe the Group’s Group’s employees, employees, as asdetailed detailed above, above, unless unless specifically specifically stated. stated. Issues Issues relating relating to to Evolve our cultureemployees who work in ourEmployee supply belief chain in areour strategycovered in the sectionOrganisational structure – % of Employees who would recommend Annual Report and Form 20-F Information 2018 Improve our employees’employees engagement who with work in our supply chain are covered in the sectionemployees within six management AstraZeneca as a great place to work

“Working Responsibly with Partners”. Americas APAC EMEA our Purpose and Values“Working and promote Responsibly greater with Partners”. steps of the CEOAmericas APAC EMEA Page 22 understanding of, and belief in, our strategy. Simplify our business 89% 72% 83% Develop simpler, more efficient processes EmployeesEmployees by by age age bracket bracket and flatten our organisational structure 2018 89% 2018 72% 2018 83%¹ – 48 transparently and Behaving ethically to improve productivity, encourage – 48 transparently and Behaving ethically accountability and improve decision 2017 88% 2017 70% 2017 81%² What is helpful? making and communication. 2016 80% 2016 82% 2016 74%³ AstraZeneca outlines its workforce’s view on the strategy Attract and retain the best talent 1 S ource: December 2018 Pulse survey 1 S ource: December 2018 Pulse survey An inclusive environment that enhances across a sample of the organisation. –– across a sample of the organisation. and leadership. It also outlines that it is trying to achieve an 2 2 our ability to attract and retain diverse S ource: December 2017 Pulse survey S ource: December 2017 Pulse survey objective of being a great place to work, with KPIs to measure talent with critical capabilities. across a sample of the organisation. across a sample of the organisation. 3 S ource: December 2016 Pulse survey 3 S ource: December 2016 Pulse survey its progress. Be a Great Place to Work from page 38. across a sample of the organisation. across a sample of the organisation. terms – 51 terms Principles and terms – 51 terms Principles and

ConvaTecConvaTec is ais “real a “real living living wage” wage” payer payer in thein the UK UK AsAs a progressive a progressive employer, employer, we we strive strive to tocontinually continually review review our our Do business sustainably†

employment practices. In November 2017, we received

Introduction Quick read Investor expectationsemployment and practices. Appendix In November A – questions 2017, weand received Appendix B – examples of Appendix C – participants Appendix D – regulatory and 1 confirmation of our2 accreditation as a “real living wage”3 company 4 5 company views confirmation of ourdisclosures accreditation as a “real living wage”developing company practice and process market initiatives Making science accessible Ethics: Non-compliance with our Health: Reachingfromfrom people the the Living through Living Wage our Wage Foundation, Foundation,Environmental and and thisprotection: this accreditation accreditation Operational has has Deliver our business strategy in a way Code of Ethics Access to Healthcarebeenbeen confirmed programmesconfirmed for for 2018. 2018.greenhouse gas (GHG) footprint¹ that brings wider benefits to society statement – 55 statement Assurance statement – 55 statement and the planet. Assurance 56.6 12.0mDuringDuring 2018, 2018, we we commenced commenced1,769 a review a review ofkt ofour COour living livinge wage wage position position Focus on: acrossacross all allConvaTec ConvaTec “geographies”, “geographies”, starting starting with with our our plants plants in thein the per 1,000 employees in people Dominican Republic and Mexico, where approximately 50% of

Dominican Republic and Mexico, where approximately 50% of > increasing access to healthcare Commercial Regions ourour total total workforce workforce is located.is located. In 2019,In 2019, we we will will complete complete the the for more people10 Including seven Non-Executive Directors. 10 Including seven Non-Executive2018 Directors. 56.6 2018 review,review, and and take take action12.0m action to toensure2018 ensure full full alignment alignment with 1,769with applicable kt applicable COe > furthering ethics11 Employee and transparency turnover in our 2017 CR Report was understated due to the late living wage levels across the whole Group. 11 Employee turnover in our2017 2017 CR Report was understated due41.4 to the2017 late living wage levels7.2m across 2017the whole Group. 1,705 kt COe in everything weprocessing doprocessing of aof number a number of leaversof leavers (reported (reported as 18.6%).as 18.6%). > reducing environmental impacts on 2016 50.7 2016 4.2m 2016 1,684 kt COe human health30 and the natural world. 30 1 O perational GHG footprint is emissions ConvaTecConvaTec Group Group Plc Plc from all Scope 1, 2 and selected Scope 3 Connect our workCorporate Corporatewith the Responsibility Responsibility Report Report 2018 2018 sources. See page 231. UN Sustainable Development Goals and integrate our commitments into There were 2,042 instances, most of them Our Access to Healthcare programmes, Our 2018 operational GHG footprint met day-to-day business activities. minor, of non-compliance with our Code including Healthy Heart Africa, Healthy our target of progressing our Science Based of Ethics or supporting requirements in Lung, and Phakamisa, have reached Targets and represents a 0.4% reduction Sustainability from page 42. our Commercial Regions by employees 12.0 million people through education, from our 2015 baseline. and third parties. screenings, diagnosis and treatment cumulatively since the start of each programme.

* We will review the Be a Great Place to > We changed the title of our Environmental “ Our achievements are only made Work KPIs in 2019 to evaluate appropriate protection KPI. In line with World representation of the strategy. Where Resources Institute GHG Protocol, a possible by a skilled and talented

possible, we will continue to make updates carbon dioxide equivalent (CO2e) number on current indicators publicly available. can be used to report on GHGs, and it is team who live our Values and are commonly called ‘carbon’. At AstraZeneca, † As disclosed in the 2017 Annual Report, the majority of our operational GHG true to our Purpose.”

we reassessed our Do business sustainably footprint is from non-CO2 GHGs so we KPIs in 2018: are now using the better representation of ‘GHG’. There is no change in the

> We added an Ethics & Transparency content of our CO2e reporting. KPI to measure progress for our > The retired KPIs are reported for continuity third sustainability focus area. in the 2018 Sustainability Report on > We expanded the Access to www.astrazeneca.com/sustainability. Healthcare KPI to incorporate The retired KPIs are the Dow Jones more of our programmes. Sustainability Index rating and number of people reached through only our Healthy Heart Africa programme.

22 AstraZeneca Annual Report & Form 20-F Information 2018 / Strategic Report 21 Strategic report

20 Our strategy continued

Becoming the Workforce-related corporateemployer reporting of choice 36

What is helpful? Taylor Wimpey plc Taylor Wimpey presents links between key performance indicators and strategy, noting Annual Report and Accounts 2018 and Website key priorities and referencing rankings (Glassdoor) as an external benchmark. Page 20 and 21

Our people are the backbone of our customer- career change. We piloted this approach in centric approach and we are investing in their six regions during 2017 and 2018, focusing What this means... Our KPIs Read more on page 25 Read more on pages 32 to 33 development to ensure they have the right skills on five key trades: bricklayers, carpenters, Voluntary employee turnover Directly employed key trades people, and to help underpin our future growth. We scaffolders, painters and joiners. We currently including trade apprentices aspire to be the employer of choice in our directly employ 748 key trades including trade 14.5% 748 sector, offering a unique and valued employee apprentices (2017: 581), a 29% increase on 2018 14.5% 2018 748

In practice Taylor Wimpey plc Annual Report and Accounts 2018 experience by investing in our people, giving 2017. Our approach includes recruiting a 2017 14.0% 2017 581 them more challenge, more ownership and greater diversity of candidates to join our – Attraction, recruitment and retention more flexibility, where it counts. We were apprenticeship schemes. This includes working of a talented employee base is a 2016 13.9% 2016 450 pleased to have been named in the top 10 with St Mungo’s, one of our national charities, competitive advantage that cannot places to work in the UK for 2019, by to support their long term unemployed clients to be easily or quickly replicated Number recruited into early Health and Safety Annual Injury – Properly resourcing future growth talent programmes Incidence Rate (per 100,000 Glassdoor, as rated by employees, once again transition from their Train and Trade scheme 175 employees and contractors) 228 the only commercial housebuilder to make the into paid employment. – Importance of employee buy in 2018 175 2018 228 list. This is the second consecutive year we to strategy 2017 126 2017 152 have featured on the list, having ranked number Through our learning and development – Increased commitment to customer 15 in 2018. initiatives, aimed at growing talent from within, service and Taylor Wimpey culture 2016 104 2016 211 we give our employees the opportunities and – Increased employee and customer We may be a national homebuilder, but for skills to become our future business leaders satisfaction customers, it is their interactions with the local and develop their careers with Taylor Wimpey. site and sales team and regional office that We continue to expand and improve our early Key priorities matter. This is where their impression of Taylor talent development programmes. Apprentices Wimpey is formed and where we strive to prove and apprenticeships will support our plans for – Continue to prioritise health and to them that they made the right choice by direct labour. We will increase the numbers of safety at all levels of the business choosing a Taylor Wimpey home. Embedding apprentices in 2019 and will deliver a more – Create a more consistent framework our approach to customers and getting buy in consistent framework and development path for and development path for early and and commitment from our employees has been apprentices through the business. We are ongoing talent management a key part of our strategy. During 2018 we ran a delighted to have been named as a top – Focus on direct labour programme very successful engagement programme employer for graduates and apprentices by and roll out to all regional businesses featuring emails, presentations, meetings and JobCrowd in 2018/19. – Continue to engage our employees focus groups hosted by senior management with the strategy and get their feedback across the country, as well as an all staff survey. There is nothing more important to our Board or – Increase apprentices and our early employees than health and safety. Building sites talent programmes There is a skills shortage in our industry. are, by their very nature, dangerous and so we To reduce the impact on our business and do everything we can possibly do to minimise help reverse this trend, we are increasing the those risks. We embed a safety culture through number of trades people we hire directly. training, awareness and visible health and Q&A Read more on page 7 This also has the benefit that it will increase safety leadership. customer satisfaction and underpin future growth. During 2018, we began our first direct labour model, increasing the number of trades people we hire directly (as well as through subcontractors). This includes both experienced trades people and new recruits to the industry, such as apprentices and people looking for a Taylor Wimpey plc Annual Report and Accounts 2018

Key performance indicators What is helpful? Rentokil Initial plc Rentokil Initial presents links between key performance Annual Report 2018 indicators and strategy on workforce-related matters plus Page 25, 28, 29 and 52 references external data such as Glassdoor to triangulate its Priorities and principles Link to strategy information. How we measure performance Commentary on performance Our progress in 2018

– As a service organisation, our people make our Lost Time Accident (LTA) rate – All our operations, with the exception of Europe, have LTA rates at world-class levels (<1.0) but increased LTAs in H1 Colleagues company what it is. LTA rate defined as number of lost time accidents per 100,000 negatively impacted performance, despite improvements in H2 and a record safety performance in Q4. Overall WDL Ensuring ‘Everyone Goes – Our priority is ensuring ‘Everyone Goes Home Safe’. standard working hours. increased slightly due to increased WDL in Europe (which accounts for approximately one third of the Group’s total). 0.63 – Health & Safety (H&S) is the first agenda item in all – In 2018 we continued to deploy Safety Leadership Behaviours to encourage our managers to display positive leadership 2018 LTA rate Home Safe’ senior management meetings (including Executive Working Days Lost (WDL) rate and also launched a global ‘Safety Moments’ initiative to encourage colleagues to share personal safety experiences. (2017: 0.58) Leadership Team and Board). WDL rate defined as number of working days lost as a result – Also in 2018 our SHE leadership team produced 36,000 online training courses on driving at work, vehicle and motorcycle – We hold an annual Board review of H&S Policy. of LTAs per 100,000 standard working hours. safety, thermal fogging, working with explosive atmospheres, ladder safety, working at height and workplace transport safety. – During the year our UK business won a Gold Award from the Royal Society for the Prevention of Accidents and in India, Rentokil PCI won the award for Best Company in Facility Management for driving corporate commitment in occupational safety from the International Institute of Security and Safety Management. 14.77 – Fatal incidents in 2018 included two road traffic incidents, both involving third parties who were found to be at fault, and 2018 WDL rate the death of a colleague in Guatemala who died from electrocution on a customer’s premises. Further, one of our technicians (2017: 11.65) in India died after contracting septicaemia as a result of sustaining spinal injuries in a fall from height in 2017.

Employer of Choice – We invest in training and development to ensure Sales and service colleague retention – The challenge of attracting and retaining talent in a highly competitive and complex market continues, but we believe our colleagues’ expertise is unrivalled. Defined as total sales and service staff retained in year as we have built sound foundations through our Employer of Choice programme. – We recruit, appoint and promote on merit. a percentage of sales and service headcount at start of year. – During the year we launched our new global recruitment portal in 17 markets, resulting in a 400% increase in online 82.1% – We listen to our colleagues via ‘Your Voice Counts’ YVC trend score analysis. applications per role and a 24% improvement in time to hire. Sales colleague retention (YVC) surveys and act on feedback to make – We believe we are raising the bar in our industry for the quality of our training and development programmes and during 2018 (2017: 77.3%) improvements. developed over 500 online training courses and videos, resulting in approximately 1.2m views of training content. Strategic Report Corporate Governance Financial Statements Additional28 Information– Diversity is important25 to us and in 2018 we launched our first ‘Women in Pest Control’ programme designed to encourage female recruitment and retention. Our business model – Project 365 is focused on improving short-term retention (0-6 months, 6-12 months) and we have made particularly encouraging progress in our Europe and Asia regions. 0-6 months service colleague retention in Europe rose by 15% to 92% 85.1% and 6-12 months service colleague retention in Asia rose 17% to 95%. Service colleague retention 28 – We believe line manager quality is vital to retaining colleagues and we have targeted resources to improve standards, with (2017: 76.0%) Keyvery positive performance candidate and manager feedback. indicators Why we’re different – expertise of our people – We are passionate about deliveringRentokil excellent Initial employs aroundState 39,500 of Service – In-year improvements have been generated through: Glassdoor rating1 Customers service to every customer and expertskeeping and our invests in trainingDefined and as total number of service visits performed MeasuringKey• increased performance customer achievement account management indicators toin drive 2018 customer loyalty; Keeping our promises promises to them. development to ensure their asknow-how a percentage of total number of visits due. • improved customer service responsiveness within European operations, in particular in our Workwear operations 97.9% is unrivalled. We choose people who live 4.2/5 Prioritiesthrough implementation and principles of the Quality agenda;Link and to strategy How we measure Stateperformance of Service Commentary on performance Our progress in 2018 to customers our values of Service, Relationships and • improved products and services. (2017: 97.8%) Teamwork. Experience is less important Measuring achievement in 2018 in some roles than attitude as we provide Would recommend the Company to a friend – As a service organisation, our people make our Lost Time Accident (LTA) rate – All our operations, with the exception of Europe, have LTA rates at world-class levels (<1.0) but increased LTAs in H1 – Our business model depends on servicing the needs – We made over 117,000 CVC calls globally to our customers in 2018 (2017: 110,000) to rate us on five service elements: Delivering outstanding the best training in our industries.Customer This year Voice Counts (CVC) Colleagues company what it is. LTA rate defined as number of lost time accidents per 100,000 negatively impacted performance, despite improvements in H2 and a record safety performance in Q4. Overall WDL of our customers in line with internal high standards technician, complaint handling, customer contact, product quality and documentation. we have continued to see veryMeasured positive by implementation of an average Net Promoter Priorities and principles –Link Our priorityto strategy is ensuring ‘Everyone Goes Home Safe’. standardHow we working measure hours. performance Commentaryincreased slightly dueon toperformance increased WDL in Europe (which accounts for approximately one third of the Group’s total). Our0.63 progress in 2018 customer service and to levels agreed in contracts. – AsiaEnsuring was the most ‘Everyone improved region Goes in 2018, with an increase of 4.8 points to 48.6 points. Our Rest of World operations colleague opinions on workplaceScore review across all branches,83 including% in-year acquisitions. – Health & Safety (H&S) is the first agenda item in all 43.0 – In 2018 we continued to deploy Safety Leadership Behaviours to encourage our managers to display positive leadership 2018 LTA rate – Measuring customer satisfaction allows us to identify improved by 3.2 points to 43.7 points. Our Pacific region declined by 1.3 points, however the region has a high overall score site Glassdoor and are rankedCVC 8th score out of represents the net balance of those customers Home Safe’ – Assenior a service management organisation, meetings our people(including make Executive our LostWorking Time Days Accident Lost (WDL)(LTA)Customer rate rate Voice Counts points – Alland also our operations, launched witha global the exception‘Safety Moments’ of Europe, initiative have LTAto encourage rates at world-class colleagues levels to share (<1.0) personal but increased safety experiences.LTAs in H1 (2017: 0.58) unhappy customers, reduce customer attrition and promoting our serviceGlassdoor compared CEO withapproval those neutral or of 59.2 points. The highest net promoter scores in LeadershipGroup of 61.2 Team points and were Board). received by our UK and Ireland operations. (2017: 44.0 points) – Also in 2018 our SHE leadership team produced 36,000 online training courses on driving at work, vehicle and motorcycle 800,000 companies in the 2018 Employees’ Colleagues company what it is. LTAWDL rate rate defined defined asas numbernumber of oflost working time accidentsdays lost asper a 100,000result negatively impacted performance, despite improvements in H2 and a record safety performance in Q4. Overall WDL increase revenue, profit and cash. not promoting. – In our Pest Control category Europe improved by– 3.9We points hold an to annual40.4 points Board and review Asia ofimproved H&S Policy. by 3.8 points to 46.1 points. safety, thermal fogging, working with explosive atmospheres, ladder safety, working at height and workplace transport safety. Choice, ‘UK’s Best Places to Work’ and 7th – Our priority is ensuring ‘Everyone Goes Home Safe’. standardof LTAs per working 100,000 hours. standard working hours. increased slightly due to increased WDL in Europe (which accounts for approximately one third of the Group’s total). 0.63 While scores from North America remain very high overall at 57.8 points, they saw an in-year decline of 2.9 points in 2018. in the UK’s Best Workplace – Leadership Ensuring ‘Everyone Goes – Health & Safety (H&S) is the first agenda item in all – InDuring 2018 thewe yearcontinued our UK to business deploy Safety won a Leadership Gold Award Behaviours from the Royal to encourage Society for our the managers Prevention to ofdisplay Accidents positive and leadership in India, – Our Hygiene category improved overall by 0.1 points to 48.1 points across the Group, with Asia showing the greatest 2018 LTA rate and Culture survey by Glassdoor and the 93% Home Safe’ senior management meetings (including Executive and alsoRentokil PCIlaunched won the a global award ‘Safetyfor Best Moments’ Company initiative in Facility to Managementencourage colleagues for driving to corporate share personal commitment safety inexperiences. occupational improvement of 6.1 points to 52.1 points. Working Days Lost (WDL) rate safety from the International Institute of Security and Safety Management. 14.77(2017: 0.58) Chartered Management Institute. Leadership Team and Board). – Also in 2018 our SHE leadership team produced 36,000 online training courses on driving at work, vehicle and motorcycle WDL rate defined as number of working days lost as a result 2018 WDL rate UK businesses Trustpilot rating – We hold an annual Board review of H&S Policy. – safety,Fatal incidents thermal infogging, 2018 included working twowith road explosive traffic atmospheres, incidents, both ladder involving safety, third working parties at heightwho were and found workplace to be transportat fault, and safety. of LTAs per 100,000 standard working hours. (2017: 11.65) Retaining our customers – Customer retention is crucial to our long-term success. Customer retention – Our 20 basis point in-year improvement has been generated through: – Duringthe death the of year a colleague our UK business in Guatemala won a who Gold died Award from from electrocution the Royal Society on a customer’s for the Prevention premises. of Further, Accidents one and of our in India,technicians – Benefits include: increased purchasing and cross- • increased customer account management to drive customer loyalty; Rentokilin India died PCI wonafter thecontracting award for septicaemia Best Company as a in result Facility of sustaining Management spinal for injuries driving incorporate a fall from commitment height in 2017. in occupational 1. As of 31 December 2018. Defined as total portfolio value of customers retained Autogate rodent bait box training selling; lower price sensitivity and terminations; Excellent • improved customer service responsiveness within European operations, in particular in our Workwear operations % safety from the International Institute of Security and Safety Management. 14.77 as a percentage of opening portfolio. 85.9 positive customer recommendations and a Employerthrough implementation of Choice of the Quality agenda;– andWe invest in training and development to ensure Sales and service colleagueCustomer retention retention – TheFatal challenge incidents ofin 2018attracting included and retainingtwo road talenttraffic in incidents,a highly competitive both involving and thirdcomplex parties market who continues, were found but to webe atbelieve fault, and 2018 WDL rate strengthened unique selling point. • improved products and services. (2017: 11.65) our colleagues’ expertise is unrivalled. Defined as total sales and (2017:service 85.7%) staff retained in year as we havethe death built of a sound colleague foundations in Guatemala through who our died Employer from electrocution of Choice programme. on a customer’s premises. Further, one of our technicians – We recruit, appoint and promote on merit. a percentage of sales and service headcount at start of year. – Duringin India thedied year after we contracting launched oursepticaemia new global as recruitmenta result of sustaining portal in 17 spinal markets, injuries resulting in a fall in from a 400% height increase in 2017. in online 82.1% How we create value Leadership in digital – We listen to our colleagues via ‘Your Voice Counts’ YVC trend score analysis. applications per role and a 24% improvement in time to hire. Sales colleague retention – We(YVC) invest surveys in training and act and on development feedback to make to ensure – TheWe believe challenge we ofare attracting raising the and bar retaining in our industry talent in for a highly the quality competitive of our training and complex and development market continues, programmes but we andbelieve during 2018 (2017: 77.3%) Our financial model to compound growth is a virtuous circle Employer of Choice Sales and service colleague retention – We aim to drive shareholder value through higher Ongoing Revenue growth and innovation – 13.2% Ongoing Revenue growth in 2018 was in excessour colleagues’improvements. of our medium-term expertise target is unrivalled. of 5% to 8%. Organic Revenue growth we havedeveloped built over sound 500 foundations online training through courses our and Employer videos, of resulting Choice programme.in approximately 1.2m views of training content. Shareholders predicated on delivering growth organically and through M&A Defined as total sales and service staff retained in year as revenue by focusing on our Pest Control, Hygiene Defined as revenue growth (at CER) from the continuing was 3.7% and growth from acquisitions 9.5%. – We recruit, appoint and promote on merit. – DuringDiversity the is yearimportant we launched to us and our in new2018 global we launched recruitment our first portal ‘Women in 17 markets, in Pest resultingControl’ inprogramme a 400% increase designed in toonline encourage which leads to increased density and is directly correlated Rentokil Initial is leading the way in digital products and applications a percentage of sales and service headcount at start of year. 82.1% and Protect & Enhance businesses, supported operations of the Group (including acquisitions) after – Organic Revenue growth was in line with financial– Wetargets, listen butto ouraffected colleagues in H1 viaby the‘Your ongoing Voice Counts’impact of last September’s 13.2% applicationsfemale recruitment per role and and retention. a 24% improvement in time to hire. Driving higher revenue and innovating at pace. We are seeing unprecedented levels of by M&A investment and divestmentto improved of non-core gross margins across our business categories. hurricane on our operations in Puerto Rico and unseasonably cold weather in March and April in North America.YVC trend score analysis. – Project 365 is focused on improving short-term retention (0-6 months, 6-12 months) and we have made particularly Sales colleague retention removing the effect of disposed or closed businesses.change in the impact of technology on our customers and our (YVC) surveys and act on feedback to make Ongoing Revenue growth – We believe we are raising the bar in our industry for the quality of our training and development programmes and during 2018 or poorly performing businesses.The above, combined with our low-cost operating model, This improved to 4.3% in H2 from 3.0% in H1. Adjusting for the impact of Puerto Rico, Group Organic growth was 4.0% encouraging progress in our Europe and Asia regions. 0-6 months service colleague retention in Europe rose by 15% to 92% 85.1(2017: 77.3%) % improvements. (2017: 14.5%) developed over 500 online training courses and videos, resulting in approximately 1.2m views of training content. drives strong profitable growth and sustainable Free Cash frontline and back office colleagues, and use IT to improve the Service colleague retention – Medium-term financial target: 5% to 8% Ongoing and at the upper end of our medium-term target of 3% to 4%. – Diversityand 6-12 monthsis important service to us colleague and in 2018 retention we launched in Asia roseour first 17% ‘Womento 95%. in Pest Control’ programme designed to encourage Flow which is deployed in two ways: first, into a financially quality and consistency of service delivery, drive innovation and (2017: 76.0%) Revenue growth. Investor expectations and– Pest ControlAppendix grew strongly A – questions at 12.6% (4.8% and Organic), driven by strong innovation and digital performance,Appendix asC recognised– participants Appendix D – regulatory and – femaleWe believe recruitment line manager and retention. quality is vital to retaining colleagues and we have targeted resources to improve standards, with Introductiondisciplined M&A programme and operationalQuick investment; read reduce costs. We believe we are leading the pest control industry in Appendix B – examples of 4 5 1 by The2 Queen’s Award for Enterprise – Innovation.3 – Projectvery positive 365 is candidate focused on and improving manager short-term feedback. retention (0-6 months, 6-12 months) and we have made particularly and second, into maintaining our progressive dividend policy. the commercialisationcompany of the ‘Internetviews of Things’ through connecteddisclosures developing practice and process market initiatives – Hygiene delivered an excellent performance with Ongoing Revenue growth of 26.5%, 2.8% Organic, aided by the encouraging progress in our Europe and Asia regions. 0-6 months service colleague retention in Europe rose by 15% to 92% 85.1% devices and have digital expertise at every stage of the customer acquisitions of Cannon Hygiene Services and CWS Italy. journey from web searching through to e-billing. Innovation and 6-12 months service colleague retention in Asia rose 17% to 95%. Service colleague retention Compounding revenue, profit and cash flow growth – 47 companies were acquired in 2018 adding £170m of annualised revenues. (2017: 76.0%) underlines our brand positioning as the experts in pest control – We are passionate about delivering excellent State of Service – In-yearWe believe improvements line manager have quality been is generated vital to retaining through: colleagues and we have targeted resources to improve standards, with and continues to differentiate the business. It is also anCustomers important service to every customer and keeping our •very increased positive customercandidate account and manager management feedback. to drive customer loyalty; – Our objective is to deliver sustainable profit – Ongoing Operating Profit growth of 13.3% is in excess of our medium-term target of c. 10% and reflects growthDefined in all regionsas total number of service visits performed Achieving greater Ongoing Operating Profit driver of organic growth and enables us to enhance our product promises to them. • improved customer service responsiveness within European operations, in particular in our Workwear operations growth through reductions in central/regional and our return to profitable growth in our France operations. as a percentage of total number of visits due. 97.9% Defined as operating profit (at CER) from theoffering continuing while operationsat the same time meeting emerging threatsKeeping and new our promises through implementation of the Quality agenda; and profitability overheads and restructuring costs, and by improvingOrganic and M&A revenue growth – Adjusted profit before tax at actual exchange rates of £308.0m increased by 7.4% on 2017, reflecting growth in all regions State of Service of the Group (including acquisitions) after removingregulatory the requirements.effect of We have a strong pipeline of innovations 13.3% • improved products and services. to customers – We are passionate about delivering excellent – In-year improvements have been generated through: (2017: 97.8%) service productivity pricing and margin improvement. disposed or closed businesses. Ongoing Operatingin place Profit which istarget an key pest groups of rodents and insects.of operation partially offset by the adverse impact of foreign exchange. State of Service Ongoing Operating Profit growth Customers service to every customer and keeping our • increased customer account management to drive customer loyalty; – Medium-term financial target: Ongoing Operating ‘adjusted’ measure and is presented before amortisation and Defined as total number of(2017: service +14.5%) visits performed promises to them. • improved customer service responsiveness within European operations, in particular in our Workwear operations Profit growth of c. 10% per annum. impairment of intangible assets (excluding computer software) – Our business model depends on servicing the needs Customeras a percentage Voice of total Counts number (CVC) of visits due. – We made over 117,000 CVC calls globally to our customers in 2018 (2017: 110,000) to rate us on five service elements: 97.9% Increased density Lumnia Insect Light Trap units Revenue generatedDeliveringKeeping by sales our outstanding promises through implementation of the Quality agenda; and and one-off items. of our customers in line with internal high standards technician, complaint handling, customer contact, product quality and documentation. State of Service shipped to date of Lumnia Light Trapscustomerto customers to date service Measured by implementation of an average Net Promoter • improved products and services. and to levels agreed in contracts. Score across all branches, including in-year acquisitions. – Asia was the most improved region in 2018, with an increase of 4.8 points to 48.6 points. Our Rest of World operations 43.0(2017: 97.8%) – Measuring customer satisfaction allows us to identify improved by 3.2 points to 43.7 points. Our Pacific region declined by 1.3 points, however the region has a high overall score – We aim to generate sustainable Free Cash Flow – Free Cash Flow of £192.0m (2017: £175.8m) represents an increase of £16.2m on the prior year and an adjustedCVC Free score Cash represents the net balance of those customers Customer Voice Counts points Delivering sustainable ImprovedFree gross Cash margins Flow at AER unhappy customers, reduce customer attrition and of 59.2 points. The highest net promoter scores in Group of 61.2 points were received by our UK and Ireland operations. through managing working capital, bringing capex c. 60,000 c. £20Flow conversionm of 94.2% (2017: 87.0%), in line with– Our our businessmedium-term model target depends of c. 90%.on servicing the needs Customerpromoting our Voice service Counts compared (CVC) with those neutral or – We made over 117,000 CVC calls globally to our customers in 2018 (2017: 110,000) to rate us on five service elements: (2017: 44.0 points) Defined as net cash flows from operating activities, adjusted for Delivering outstanding increase revenue, profit and cash. – In our Pest Control category Europe improved by 3.9 points to 40.4 points and Asia improved by 3.8 points to 46.1 points. Free Cash Flow in line with depreciation and significantly reducing of our customers in line with internal high standards not promoting. technician, complaint handling, customer contact, product quality and documentation. cash flows related to property, plant, equipment and software, Measured by implementation£192.0 of an average Net Promoterm While scores from North America remain very high overall at 57.8 points, they saw an in-year decline of 2.9 points in 2018. Connected devices being used Connected messagescustomer sent service and to levels agreed in contracts. – Asia was the most improved region in 2018, with an increase of 4.8 points to 48.6 points. Our Rest of World operations restructuring costs. the interest element of finance lease payments and dividends Score across all branches, includingFree Cash in-year Flow, 94.2%acquisitions. conversion 43.0 Low-cost operating model – Our Hygiene category improved overall by 0.1 points to 48.1 points across the Group, with Asia showing the greatest – Medium-term financial target: Free Cash Flow on our customer premises during 2018 – Measuring customer satisfaction allows us to identify improved by 3.2 points to 43.7 points. Our Pacific region declined by 1.3 points, however the region has a high overall score received from associates. CVC score represents the net(2017: balance £175.8m, of those 87.0% customers conversion) improvement of 6.1 points to 52.1 points. Customer Voice Counts points conversion of c. 90% per annum. unhappy customers, reduce customer attrition and promoting our service compared with those neutral or of 59.2 points. The highest net promoter scores in Group of 61.2 points were received by our UK and Ireland operations. (2017: 44.0 points) increase revenue, profit and cash. not promoting. – In our Pest Control category Europe improved by 3.9 points to 40.4 points and Asia improved by 3.8 points to 46.1 points. Strong profit and Free Cash Flow 70,000+ +50m Retaining our customers – Customer retention is crucial to our long-term success. Customer retention – OurWhile scores 20 basis pointfrom Northin-year America improvement remain has very been high generated overall at 57.8 through: points, they saw an in-year decline of 2.9 points in 2018. – Benefits include: increased purchasing and cross- Defined as total portfolio value of customers retained – •Our increased Hygiene customercategory improvedaccount management overall by 0.1 to points drive to customer 48.1 points loyalty; across the Group, with Asia showing the greatest Rentokil Initial plc Annual Report 2018 selling; lower price sensitivity and terminations; as a percentage of opening portfolio. •improvement improved customer of 6.1 points service to 52.1 responsiveness points. within European operations, in particular in our Workwear operations 85.9% Focused investment positive customer recommendations and a through implementation of the Quality agenda; and Customer retention Retaining our customers – Customerstrengthened retention unique is crucialselling topoint. our long-term success. Customer retention – Our• improved 20 basis productspoint in-year and improvementservices. has been generated through: (2017: 85.7%) – Benefits include: increased purchasing and cross- Defined as total portfolio value of customers retained • increased customer account management to drive customer loyalty; Financially disciplined M&A programme selling; lower price sensitivity and terminations; as a percentage of opening portfolio. • improved customer service responsiveness within European operations, in particular in our Workwear operations 85.9% and operational investment positive customer recommendations and a through implementation of the Quality agenda; and – We aim to drive shareholder value through higher – 13.2% Ongoing Revenue growth in 2018 was in excess of our medium-term target of 5% to 8%. Organic Revenue growth Customer retention strengthened unique selling point. Ongoing Revenue growth • improved products and services. (2017: 85.7%) Shareholders revenue by focusing on our Pest Control, Hygiene Defined as revenue growth (at CER) from the continuing was 3.7% and growth from acquisitions 9.5%. Turbo-charging growth Driving higher revenue and Protect & Enhance businesses, supported operations of the Group (including acquisitions) after – Organic Revenue growth was in line with financial targets, but affected in H1 by the ongoing impact of last September’s 13.2% by M&A investment and divestment of non-core removing the effect of disposed or closed businesses. hurricane on our operations in Puerto Rico and unseasonably cold weather in March and April in North America. Ongoing Revenue growth – Weor poorly aim to performing drive shareholder businesses. value through higher Ongoing Revenue growth – 13.2%This improved Ongoing to Revenue 4.3% in H2growth from in 3.0% 2018 in was H1. Adjustingin excess forof our the medium-term impact of Puerto target Rico, of 5%Group to 8%. Organic Organic growth Revenue was 4.0% growth (2017: 14.5%) Shareholders – revenueMedium-term by focusing financial on target: our Pest 5% Control, to 8% OngoingHygiene wasand at 3.7% the and upper growth end of ourfrom acquisitions medium-term 9.5%. target of 3% to 4%. Revenue growth. Defined as revenue growth (at CER) from the continuing – Pest Control grew strongly at 12.6% (4.8% Organic), driven by strong innovation and digital performance, as recognised Installing a PestConnect system and Protect & Enhance businesses, supported operations of the Group (including acquisitions) after – Organic Revenue growth was in line with financial targets, but affected in H1 by the ongoing impact of last September’s 13.2% Driving higher revenue by M&A investment and divestment of non-core hurricaneby The Queen’s on our Award operations for Enterprise in Puerto –Rico Innovation. and unseasonably cold weather in March and April in North America. removing the effect of disposed or closed businesses. – Hygiene delivered an excellent performance with Ongoing Revenue growth of 26.5%, 2.8% Organic, aided by the Ongoing Revenue growth or poorly performing businesses. This improved to 4.3% in H2 from 3.0% in H1. Adjusting for the impact of Puerto Rico, Group Organic growth was 4.0% (2017: 14.5%) Rentokil Initial plc Annual Report 2018 – Medium-term financial target: 5% to 8% Ongoing and atacquisitions the upper of Cannon end of our Hygiene medium-term Services andtarget CWS of 3% Italy. to 4%. Revenue growth. – Pest47 companies Control grew were strongly acquired at in12.6% 2018 (4.8% adding Organic), £170m drivenof annualised by strong revenues. innovation and digital performance, as recognised by The Queen’s Award for Enterprise – Innovation. Achieving greater – Our objective is to deliver sustainable profit Ongoing Operating Profit – OngoingHygiene deliveredOperating an Profit excellent growth performance of 13.3% is in with excess Ongoing of our Revenue medium-term growth target of 26.5%, of c. 10%2.8% and Organic, reflects aided growth by the in all regions profitability growth through reductions in central/regional Defined as operating profit (at CER) from the continuing operations and ouracquisitions return of toCannon profitable Hygiene growth Services in our andFrance CWS operations. Italy. overheads and restructuring costs, and by improving of the Group (including acquisitions) after removing the effect of – Adjusted47 companies profit were before acquired tax at inactual 2018 exchange adding £170m rates ofof annualised£308.0m increased revenues. by 7.4% on 2017, reflecting growth in all regions 13.3% service productivity pricing and margin improvement. disposed or closed businesses. Ongoing Operating Profit is an of operation partially offset by the adverse impact of foreign exchange. Ongoing Operating Profit growth – OurMedium-term objective financialis to deliver target: sustainable Ongoing profit Operating Ongoing‘adjusted’ measure Operating and is Profit presented before amortisation and – Ongoing Operating Profit growth of 13.3% is in excess of our medium-term target of c. 10% and reflects growth in all regions (2017: +14.5%) Achieving greater Profit growth of c. 10% per annum. profitability growth through reductions in central/regional Definedimpairment as ofoperating intangible profit assets (at (excluding CER) from computerthe continuing software) operations and our return to profitable growth in our France operations. overheads and restructuring costs, and by improving ofand one-off the Group items.(including acquisitions) after removing the effect of – Adjusted profit before tax at actual exchange rates of £308.0m increased by 7.4% on 2017, reflecting growth in all regions 13.3% service productivity pricing and margin improvement. disposed or closed businesses. Ongoing Operating Profit is an of operation partially offset by the adverse impact of foreign exchange. Ongoing Operating Profit growth – WeMedium-term aim to generate financial sustainable target: OngoingFree Cash Operating Flow Free‘adjusted’ Cash measure Flow andat AER is presented before amortisation and – Free Cash Flow of £192.0m (2017: £175.8m) represents an increase of £16.2m on the prior year and an adjusted Free Cash (2017: +14.5%) Delivering sustainable Profit growth of c. 10% per annum. Free Cash Flow through managing working capital, bringing capex Definedimpairment as ofnet intangible cash flows assets from (excluding operating computer activities, software)adjusted for Flow conversion of 94.2% (2017: 87.0%), in line with our medium-term target of c. 90%. in line with depreciation and significantly reducing cashand one-off flows related items. to property, plant, equipment and software, £192.0m restructuring costs. the interest element of finance lease payments and dividends Free Cash Flow, 94.2% conversion – WeMedium-term aim to generate financial sustainable target: Free Free Cash Cash Flow Flow Freereceived Cash from Flow associates. at AER – Free Cash Flow of £192.0m (2017: £175.8m) represents an increase of £16.2m on the prior year and an adjusted Free Cash (2017: £175.8m, 87.0% conversion) Delivering sustainable conversion of c. 90% per annum. Free Cash Flow through managing working capital, bringing capex Defined as net cash flows from operating activities, adjusted for Flow conversion of 94.2% (2017: 87.0%), in line with our medium-term target of c. 90%. in line with depreciation and significantly reducing cash flows related to property, plant, equipment and software, £192.0m restructuring costs. the interest element of finance lease payments and dividends Free Cash Flow, 94.2% conversion Rentokil Initial plc Annual Report 2018 – Medium-term financial target: Free Cash Flow received from associates. (2017: £175.8m, 87.0% conversion) conversion of c. 90% per annum.

Rentokil Initial plc Annual Report 2018 KPIs 2018 status and 2019 priorities Our culture Doing business responsibly

Workforce-relatedIHG® Academy corporate reporting 2018 status Making IHG a great place to work 38 Number of people participating • We undertook a comprehensive review of the IHG Academy in IHG Academy programmes. programme to create a series of recommendations to help Being a responsible business cannot be achieved us grow in the coming years. without the support and active engagement of SustainedWhat is participation helpful? in the 2018 13,531 InterContinental Hotels Group plc IHG Academy indicates the • We ran 2,203 IHG Academy programmes across 70 countries. 2017 13,633 colleagues all around the world. strengthIHG reports of our what progress it considers in to be its workforce, and explicitly ties 2019 priorities Website – How our business works creatingthese employment career building forms to its business2016 model. In this context,11,985 IHG • Continue to provide skills and improved employability to people and opportunitiesalso explains its and employee engagement engagement metric in the context of its through IHG Academy, ensuring a positive impact for local people, 2015 9,287 Our culture withbusiness the communities model. in which our owners and IHG. we operate (see page 24). Pages 14 and 18 • Build on programme review and refresh supporting materials to drive greater participation and deliver engaging

candidate experience. culture Our the future. In 2018, we launched a new • 22,518 General Managers and (in the • Deliver a globally scaled approach to IHG Academy, utilising Our toolkit to support individuals navigate their US predominantly) other hotel workers it as a frontline recruitment tool. people careers. And we’re investing in our who work in managed hotels, who have • Enhancing IHG Academy’s reputation amongst academic Leadership Development programmes, contracts or letters of service with IHG institutions and community partners, as being an outstanding including Leading Others and Career and whose costs are borne by those hotels. programme for students. 2018-2020 target Insights, to ensure we are developing the • Continue to drive quality growth in the programme towards Engagement next generation of leaders. our longer-term target of 30,000–40,000 IHG Academy Track and report employee engagement each year. participants by 2020. Employee engagement In 2018, IHG achieved an average Understanding how our employees feel is Carbon footprint 2018 status engagement score of 86%. important to us. Twice a year, we measure Carbon footprint per A • Achieved 2.2% reduction in our carbon footprint per occupied For further progress in detail against this through our employee engagement occupied room. room from 2017 baseline. all of our 2018-2020 targets, please survey, Colleague HeartBeat, and ask for We work with our hotels to drive 2019 priorities see our Performance pages: 33 to 36. their feedback about how we can make 2018 26.02kgCO ea reductions in carbon emissions, 2 • Continue to reduce our carbon footprint across our entire estate. IHG an even better place to work. In 2018, 2017 26.61kgCO ea IHG achieved an average engagement score to reduce our overall carbon 2 • Partner with owners and our hotels to share best practices to help We are a people business. Whether footprint (see page 24). of 86%. Our results garnered recognition 2016 29.36kgCO e drive greater reductions. someone is a guest staying in one of our 2 hotels, an owner investing in our brands, from AonHewitt as a Best Employer, 2015 benchmarked against industry scores. 30.84kgCO2e or they are joining us as a colleague, their choices are shaped by our people. The As we franchise 82% of our hotels globally, Employee Engagement 2018 status experiences we create, the services we offer, we do not employ the majority of our the opportunities we afford. A diverse and survey scores A • Launched improved and simplified performance colleagues. When our entire Group’s estate Average of our revisedb bi-annual management process. inclusive culture enriches all of this, and it is taken into account, more than 400,000 Colleague HeartBeat survey, plays a critical role in how we work better people work across IHG branded hotels • Launched a new tool to help IHG assess and prepare hotel completed by our corporate, 2018 86.0% together, growing our business and and corporate offices. Of those employees leaders in Greater China, our fastest growing region (see page 23). delivering on our purpose of providing customer reservations office 2017 85.0% directly employed by IHG, as at and managed hotel employees 2019 priorities True Hospitality for everyone. 31 December 2018: (excluding our joint ventures). 2016 88.7% • Continue to refine performance management processes, in order Guiding us all is a set of everyday values, • 7,598 people globally (including those in to focus on productive development conversations. We measure employee 2015 87.3% which shape the way we work and provide our corporate offices, central reservations engagement to monitor risks • Further drive adoption of improvements to our human resources a strong sense of shared purpose. offices and owned hotels (excluding those relating to talent (see page 28) and systems, including online colleague training, to further our ability in a category below)), whose costs were to help us understand the issues to develop and retain talent. borne by the Group; that are relevant to our people as • Support the recruitment and development of General Managers • 5,214 people who worked directly on we build a diverse and inclusive for our managed hotels. behalf of the System Fund and whose costs culture (see page 23). • Drive adoption of our learning solutions, such as the IHG Frontline were borne by the System Fund; and training curriculums, and branded service culture programmes Do the Aim Show across all IHG hotels. right thing higher we care

a In 2018 the carbon reduction measure was restated in line with a new baseline for the 2018-2020 target. The 2016 and 2015 figures could not be restated and are not comparable.

b Introduction In 2017 the employee engagement surveyQuick was read revised and relaunched as the ColleagueInvestor HeartBeat expectations survey. Theand 2016 and 2015Appendix figures Arelate – questions to previous and survey results, which could not Appendix C – participants Appendix D – regulatory and be restated and are not comparable. 1 2 3 Appendix B – examples of 4 5 company views disclosures developing practice and process market initiatives

Celebrate Work better difference together

Please see www.ihgplc.com/responsible-business for our 2018-2020 Responsible Business targets. Attracting, rewarding and developing talent We took steps in 2018 to evolve our talent practices and enhance our Room to Grow promise. We launched our new approach to performance, and initiated frequent check-in IHG | Annual Report and Form 20-F 2018 | Strategic Report | Key performance indicators 35 conversations, giving our people more opportunities to gather feedback on their performance, and discuss development and career aspirations. We are also establishing forums to help identify and retain top talent, and add rigour to our succession planning, ensuring we are developing a diverse pipeline of talent for

IHG | Responsible Business Report 2018 18 Company Overview Strategic Report Corporate Governance Financial Statements Additional Information

In the past I’ve outlined my priorities, which I indicated would be my priorities for a number of years to come. Here’s how we are doing... Our Culture

Company Overview Strategic Report Corporate Governance Financial Statements Additional Information ENSURE ADMIRAL REMAINS ONE OF, IF NOT THE, BEST CAR INSURERS IN THE UK

Progress in 2018 2019 focus Number one car insurer in the UK Maintain our lead in cost efficiency, Market leading combined ratio rigorous risk selection and effective claims management by continuing Voted Best Motor Insurance and to identify improvements in our Best Insurance Provider in the approach and operations Personal Finance Awards 2018/19 by UK consumers Improve online self-service options for customers Leading telematics provider Maintain our culture of providing New products include short term excellent customer service Workforce-related corporate reporting insurance and partnership with Ford 39

% “People who like what they DEMONSTRATE ADMIRAL CAN BE A of employees do,believe do it better”: this belief is GREATAdmiral CAR INSURER Group BEYOND plc THE UK integral to our culture. We have this is a friendlycreated place an environment where ProgressAnnual in Report 2018 2018 2019 focus Admiral employees look forward EuropeanPages insurance6, 7 and first 8 ever Continue the overall long term to work to coming to work and providing profit and growth to over strategy of building sustainable, great service to customers. We 1 million customers profitable businesses encourage our people to get Improvements in digital and Build on synergies across the involved in innovation, proactively self-serviceWhat offeringis helpful? for customers European insurance companies improving our processes, services Elephant grew to over 200,000 Elephant continues to focus on and working environment. As vehiclesAdmiral in forcelinks its focus on employeeshigher retaining to its widercustomers culture and and lists improved combined ratio responsible employers we aim progress and future areas of focus. to create an inclusive working environment and support our Company Overview staffStrategic wherever Report possible. Corporate Governance Financial Statements Additional Information 95 DEVELOP SOURCES OF GROWTH AND PROFITS BEYOND CAR INSURANCE This is underpinned by our Four Pillars: Progress in 2018 2019 focus Household insurance grew Grow the UK Household and Loans to over 800,000 customers businesses with a focus on the Growing Loans business in UK long-term objective of developing COMMUNICATION EQUALITY FUN In the past I’ve outlined my priorities,sources which of competitive I indicated advantage would 06 Admiral Group plc · Annual Report and Accounts 2018 Launched Household insurance be my priorities for a number of years to come. Here’s how we In any organisation, clear communication Being different is what makes us special; We work hard, but also encourage our in France is vital, and to ensure this we promote we’re proud to represent people of all staff to have fun, allowing a balanced work are doing... open-plan workplaces and constant genders, sexual orientation, ethnicities, environment that builds strong cohesion communication and interaction across and abilities, and are always working among colleagues, and improves morale ENSURE ADMIRAL STAYS A GREAT PLACE TO WORK teams and departments: it’s little things towards improved representation all round. In fact, we feel that this is so ENSURE ADMIRAL REMAINS ONE OF, like this can really help break down the throughout the Group. Overall, the important, we’ve even got our own ProgressIF NOT THE, in 2018 BEST CAR INSURERS2019 IN focus THE UK barriers and encourage teamwork and a Group gender split is improving, and Ministry of Fun! collaborative environment. we continue to promote diversity at all OnlyProgress company in 2018 to be named in 2019Continue focus to respond to staff Sunday Times Best Companies to feedback and continuously improve management levels. Number one car insurer in the UK Maintain our lead in cost efficiency, REWARD AND RECOGNITION Work For since inception in 2001 – Continue our focus on profitable rigorous risk selection and effective Market1st in 2019 leading combined ratio growth in which all our staff also We firmly believe that a job well done should claims management by continuing Voted 10th Best Workplace in benefit through the share scheme be appropriately rewarded, be it with a Voted Best Motor Insurance and to identify improvements in our Board composition since 2010 BestEurope Insurance Provider in the departmental awards ceremony, the award approachBuild on our and strong operations track record of 3rdPersonal best largeFinance employer Awards for 2018/19 women encouraging diversity across the of additional shares, or even just a simple 12 Improve online self-service options Employee inby the UK UKconsumers Company ‘thank you’. Without the hard work and for customers 9 OverLeading 10,000 telematics staff received provider shares Continue to develop our people dedication of our staff, we wouldn’t be where Gender Maintain our culture of providing Newin the products business include short term by offering exciting new career we are today. All of our staff receive shares in 6 excellent customer service insurance and partnership with Ford opportunities Admiral - everyone owns part of the business Over 250,000 online courses and 3 Male almost 700 classroom training Ensure our people enjoy coming and every job is important and impacts Female sessions completed by UK staff to work their returns. The share scheme provides 0 an incentive for strong performance, and Male – 49% Female – 51% DEMONSTRATE ADMIRAL CAN BE A 2017 2011 2014 2015 2018 2012 2016 2010 2013 promotes collaboration towards building a GREAT CAR INSURER BEYOND THE UK profitable and innovative business. Progress in 2018 2019 focus European insurance first ever Continue the overall long term profit and growth to over strategy of building sustainable, 253,241 698 1 million customersAdmiral Group plc · Annualprofitable Report andbusinesses Accounts 2018 21 Improvements in digital and Build on synergies across the online courses classroom sessions self-service offering for customers European insurance companies completed delivered by Academy Elephant grew to over 200,000 Elephant continues to focus on vehicles in force higher retaining customers and improved combined ratio

Admiral Group plc · Annual Report and Accounts 2018 07 Introduction Quick read Investor expectations and 2 Appendix A – questions and 3 Appendix B – examplesDEVELOP of 4 AppendixSOURCES C OF – participants GROWTH AND 5 Appendix D – regulatory and 1 company views disclosures and process market initiatives developing practice PROFITS BEYOND CAR INSURANCE

Progress in 2018 2019 focus Household insurance grew Grow the UK Household and Loans to over 800,000 customers businesses with a focus on the Growing Loans business in UK long-term objective of developing sources of competitive advantage Launched Household insurance in France

ENSURE ADMIRAL STAYS A GREAT PLACE TO WORK

Progress in 2018 2019 focus Only company to be named in Continue to respond to staff Sunday Times Best Companies to feedback and continuously improve Work For since inception in 2001 – Continue our focus on profitable 1st in 2019 growth in which all our staff also Voted 10th Best Workplace in benefit through the share scheme Europe Build on our strong track record of 3rd best large employer for women encouraging diversity across the in the UK Company Over 10,000 staff received shares Continue to develop our people in the business by offering exciting new career Over 250,000 online courses and opportunities almost 700 classroom training Ensure our people enjoy coming sessions completed by UK staff to work

Admiral Group plc · Annual Report and Accounts 2018 21 Valuing difference Workforce-relatedValuing difference corporate reporting 40

SSE’s Return on Inclusion Introducing ‘Return on Inclusion’ SSE plc Top 10 positive SSE scored 67/100 in the ROI scoring process. This equates to a solid performance within Equal This Return on Inclusion (ROI) study is the latest in a seriesfindings of people- by ‘Valuing Difference’ Diversity Report Approach’s ‘Aspiring’ classification, showing that progress is being made but there are still focused quantification reports by SSE. It follows on from SSE’s valuation of Pages 6 and 8 significant areas for further development to maximise impact and return. SSE will need to score 1 Equal Approach 75/100 or more to reach Equal Approach’s ‘Champion’ classification. the human capital of its workforce in 2014 , the calculation in 2016 of the financial return from investing in an employability programme1. High forquality, long-term well respected SSE wanted to find out two things from the calculation of its ROI: what is the ROI from gender diversity initiatives invested in unemployed young people2, and the reporting of SSE’s UK genderleadership pay of SSE’s gap I&D3. strategy, both between 2014-2017, and what is the expected ROI from gender diversity initiatives over the next three years, from 2017-2020, within the company and externally, assuming continued investment at current levels? The output of the ROI analysis however also informed SSE of the financial benefits This ROI tool supported SSE to review the impact of its investment in genderwith diversity strong initiatives,positioning in the sector. to adopting an approach focused on promoting wider inclusivity throughout the company. What is helpful? and will also help refine SSE’s future investment decisions in inclusion practices.2. Clear aspirationalSSE will be targets able around The results to use this analysis to target investments, invigorate programmes and evidencefemale greater representation return on by businessSSE links its investment in inclusion to its investment from a new Inclusion Strategy. This in turn should result in generatingunits, andgreater key influencers benefits are aware The results of the analysis by Equal Approach showed that for every £1 invested by SSE, there is a £4.52 ROI for 2014-2017 gender for both the business and employees. of this commitment. performance and strategy, including showing diversity initiatives. While this result is significant in financial return terms, the results for future ROI (in the period 2017-2020) show there is the potential to greatly increase SSE’s ROI as it becomes more focused on creating a truly inclusive workplace. 3. Senior executive/corporate serviceshow the measure is calculated, the results and commitment to evidencing flexiblewhat they are doing to address them. Continued investment without a change in the allocation of resources is expected to achieve a £7.56 ROI by 2020, demonstrating What is ‘Return on Inclusion’? structures to bring out the best in the long-term nature of some of SSE’s current diversity activities. With some small adjustments to SSE’s I&D Strategy to focus on their teams. some wider inclusion initiatives, the ROI model showed it would be possible to achieve a ROI of £11.33. Most impressive however The Equal Approach ROI tool provides evidence of the bottom line impact of embedding is the ROI that SSE should be able to achieve with the refocus of its current strategy towards targeted inclusion initiatives that inclusion throughout an organisation and was developed across three continents,4. Performance with overmanagement Equal Approach has found to have measurable impact and value for other organisations. This final approach would increase SSE’s two years’ worth of data collection and analysis, based on over 2,500 organisations.governance The ensures output that there expected ROI to £15 per £1 invested, around double the ROI from continuing with business as usual. of the tool provides specific ratios and analytics with which to identify past, ispresent a lack of and bias, future whilst delivering monetisation of I&D initiatives, with the information recalibrated every six weekssustained to maintain performance. its credibility. In addition, the ROI tool gives specific feedback as to where and5. Businesshow future performance activity and the For every should be focused to maximise the impact of inclusion strategies and initiatives,dividend and return in turn profile to support maximise the bottom line or social impact changes. ROI and future investment remain positive and consistent. £4.52 ROI What did the analysis involve? 6. Quality management and innovative £1 contributions were identified from invested in 2017 The findings contained within this report were identified through data capture, qualitative and female talent across a range of quantitative research, focus group liaison, interviewSUSTAINABILITY feedback and information REPORTbusiness available areas. in the public domain. The ROI tool for SSE reviewed 81 data points across over 20 categories. The raw For every £7.56 ROI SSE’s vision is to be a leading energy company in a low-carbon world. Its purpose is to provide the energy needed today while buildingdata a better is then world inputted of energy against for specifically tomorrow. developed formula using dedicated7. Excellent software, employee which wellbeing translates the information into a numerical result, and a primary report of outputsprovisions and and findings employee flexible And its strategy is to create value for shareholders and society from developing, operating benefits options e.g. Holiday+. £11.33 ROIand owning energy and related infrastructure inis a produced.sustainable The way. results This of strategy, each statistical which isreturn are compared against global, national, regional and sector norms. Further information on the methodology can be found online at £1 underpinned by a commitment to strong financial management, is built on four pillars . 8. Long-term focus on inspiring talent, invested in 2020 £15.00 ROI www.sse.com/beingresponsible/reporting-and-policy. through Teach First partnership and other similar initiatives. CASE STUDY STRATEGIC PILLAR #3 STRATEGIC PILLAR #4 Inclusion and diversity9. Transparency around pay parity and direction of travel with measurable It’s well evidenced that when companies commit to inclusive leadership and to harnessing diversity of thought, they are Inclusion review of Current direction Tweak current strategy Entirely focused outcomes, first to market in sector more successful. With decarbonisation,with gender payelectrification gap reporting. and building sustainable infrastructure at the core of SSE’s business Continued investment by SSE in Continued investment by SSE Creatingupdated strategy BeingConducting primary research roles in SSEN gender diversity initiatives, with in diversity initiatives but small strategy, innovative and new ways of thinking are needed. These business challenges, combined with a changing and Refocused investment in inclusion 10. Excellent returner rates following the same allocation of resources adjustments to the existing I&D dynamic labour force, further strengthens the case for organisations to be far more inclusive and diverse. valueinitiatives, with resources fully sustainable sabbaticals and maternity, Figures published by the ONS assumed as in 2017. Strategy to focus on wider inclusion The majority of data used for this study was provided by SSE’s Human Resources team, focused and targeted based on an enhanced through recent policy for January to March 2019 show £1 initiatives too that drive measurableA strategy of developing, operating and owning A sustainablewith additional company is oneprimary that offers research profitable and market analysis. This included twelve interviews with updated strategy which aims to creates value for shareholders. A dividend commitment solutions to the world’s problems. In support of its vision, Calculating SSE’s ‘Return enhancements forcould parental achieve leave. a £15 return for every for every pound invested, a significant that 18% of the UK working impacts. built on world-classmaximise assets, impact. growth options and the skills purposesome and of strategy, SSE’s SSE most has adopted senior four leadersfundamental (both genders, but majority female) carried out by Equal and experience SSE has in low-carbon technologies fairly businessApproach goals for 2030and which fully are anonymised directly aligned to to the minimise on bias Inclusion’ in answers, as well as an optional survey£1 invested and create a significantly increase from £4.52 one year before. age population reported they remunerates shareholders for their continued investment. United Nations’ Sustainable Development Goals. Back in 2017, SSE worked with more diverse business as a result. It This was a result of the initiatives and have a disability. However, only As was seen in 2018/19, successful transactions can also for SSE employees on the way feedback is delivered in the company, with 899 people create substantial value to finance further investment for Throughtaking its goals, part. the A UN number has created of a blueprintfocus groupsfor a were inclusionalso held specialistsby Equal Approach Equal Approach to understand is the multiplicity of differences – at action SSE is taking to encourage SSE’s Inclusion Strategy challenge traditional thinking around an 51.7% of these people were in growth and discretionary share buybacks, or contribute to sustainablethe public world – perception and it is one that of SSE SSE. is putting at the to conduct a ‘Return on Inclusion’ all levels and in all these different fairness, transparency and openness ability to work differently and flexibly – not work, compared to 81.7% for the management of net debt. forefront of its business, with a strategy that is geared to SSE is now two years into a targeted delivering decarbonisation and to enabling the Group to (ROI) study which delivered two ways – that has been proven to make for all at every stage of the employee three-year programme of work with Equal offering agile working arrangements should people without disabilities – a The same strategy also creates real, lasting value for society. realise its vision of being a leading energy company in a key outcomes: the financial return organisations more successful. lifecycle. Approach based on an Inclusion Strategy be the exception rather than the rule. ‘disability employment gap’ of SSE makes a significant contribution to the economies 8. low-carbon9. world. 29.9 percentage points. The it operates in by paying the right amount of tax, at the from every pound spent on diversity of encouraging difference ‘IN, ON and UP’ right time, in the right place. SSE also makes significant initiatives; and clarity on the specific Over 2018/19, SSE and Equal Approach at SSE. This initial phase is a review of SSE’s SSE has made significant progress over underemployment of disabled economic contribution to the countries in which it operates Climate action: Reduce the carbon intensity of people represents a huge by sustaining and creating quality jobs, paying fair wages, electricity generated by 50% by 2030, compared actions SSE needs to take to increase reran its ROI as at 31 March 2018 to foundations to bring sustained change, as 2018/19 in these areas. As well as gender bias committing to tax transparency, supporting indigenous to 2018 levels, to around 150g/kWh. the diversity across the whole evaluate progress made opposed to investing in one off interventions. language review of all adverts and ‘inclusive untapped pool of skills, talent, supply chains, providing community investment funds experience and economic value. and delivering infrastructure to support the transition organisation. against its £15 per 2018 prompts’ are being built into SSE’s role to a low-carbon economy. Affordable and clean energy: Develop and build £1 invested target, 2017 This has involved an almost forensic review profile template as standard, inclusive hiring by 2030 enough renewable energy to treble By changing its focus to building and which it aims to of processes, from before people join to manager training and inclusion and diversity Like many employers, while SSE 1 renewable output to 30TWh a year. http://sse.com/media/306295/SSE-Human-Capital_Final_For-Web.pdfsupporting a truly inclusive culture achieve by £4.52 £7.51 when they leave, to ensure everything SSE awareness training is now mandatory. takes steps to meet additional 2 http://sse.com/media/385008/Changing-lives-growing-value_2016.pdfand new ways of working, rather than 31 March 2021. return on does is fair, transparent and open to all. SSE’s needs of individuals if required, Industry, innovation and infrastructure: Build return on 3 this has not been a specific area http://sse.com/media/475985/SSE-GPG-2017.pdfelectricity network flexibility and infrastructure one-off initiatives around specific types The ROI tool inclusion Group Executive Committee have a standing SSE has also increased governance around inclusion6. 7. Delivering the five-year dividend plan that helps accommodate 10m electric vehicles of diversity such as gender, BAME or showed that SSE Inclusion and Diversity monthly agenda item all roles being advertised openly, with 80% of business focus previously. Over Likely to be at least c.£4.25 in GB by 2030. Dividend per share pence LGBTQ+, the analysis showed that SSE had generated a £7.51 and the SSE Board receive an update and of roles advertised openly in the last four 2018 however, SSE worked with 94.7 97.5* 88.4 89.4 91.3 84.2 86.7 +RPI +RPI Equal Approach to undertake 80.1 80.0*+RPI Decent work and economic growth: Be months of 2018/19, and has updated its 75.0 actively feed into the business goals around 70.0 66.0 the leading company in the UK and Ireland 60.5 a ‘proof of concept’ project to 55.0 Inclusion and Diversity at least quarterly. AAA-rated accessible career site with a 46.5 42.5 championing Fair Tax and a real Living Wage. 35.0 37.7 30.0 32.4 increase the proportion of talent 25.7 27.5 broader range of diverse case studies. In To truly embed an inclusive culture, SSE December 2018, SSE also began monitoring with both visible and non-visible FY99 FY00 FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20e FY21e FY22eFY23e Forecast disabilities within the recruitment Introduction Quick read Investor expectations and Appendix A – questions and Appendix B – examples of 4 Appendix C – participants 5 Appendix D – regulatory and believes there are three key drivers for the proportion of job adverts that offer agile Dividend sustainability on quality and nature of operations, assets and on long-term ﬁnancial outlook 2 3 working arrangements, finding that 79% did. process for SSE’s Networks * 2019 – recommended; 1 company views disclosures and process market initiatives change at this stage: get the job description 2020 – intend to recommend. developing practice right and widen thinking around what kind An employee survey in June 2018 found that business, SSEN. Ten roles were DILEMMA of skills and experience are really required 44% of SSE employees felt they could work selected, with a full ‘inclusion for the role; ensure all vacancies are openly differently, an increase from 37% the year review’ carried out by experts advertised and open to all to apply; and before. Equal Approach to assess their See page 6 . See page 24 . Self-disclosure rates for ethnicity pay gap reporting attractiveness and suitability for people with disabilities. In January 2019, SSE responded to the UK not be representative and meaningful. This has the Government’s consultation on ethnicity pay gap potential to undermine how impactful ethnicity pay Equal Approach shadowed these SSE plc Annual Report 2019 03 Reputation reporting. SSE fully supports enhanced reporting gap reporting will be. While all SSE employees have roles on site and created a “What and greater levels of transparent disclosure from the option to provide self-disclose their ethnicity Preparation good looks like” competence organisations, and believes that shining a spotlight information voluntarily, only around 11% of employees Attraction and skills template for each role, on ethnicity pay information could generate choose to do so. Recruitment and with new job descriptions using accelerated progress in this area. SSE’s full response selection inclusive language created. can be found on sse.com/sustainability/reporting With a date for ethnicity pay gap reporting likely to be A focus group was then held -and-policy. set over the year, these low rates of self-reporting will with individuals with different be an issue for SSE. Over 2019/20, SSE therefore plans IN disabilities to review the changes. A key concern highlighted by SSE however is to launch a drive for more employees to provide this SSEN is building this insight into ensuring there is an appropriate ethnicity information, should they wish to do so. Key to this will its business-as-usual recruitment self-reporting rate by employees, and that this be establishing trust with employees and providing processes, with the aim of sharing rate is clearly communicated by organisations. If transparency around why the information is being the practical adaptations made Measurement organisations report their ethnicity pay gap using collected. with the wider SSE Group as well a low self-reporting rate, the reported figures may Behaviours as its industry networks to share Working Differently Processes learnings and ignite positive Transitions UP ON Culture and change. Between Levels Behaviours Talent Management Coaching and Mentoring Secondments Management and Leadership

56 SSE plc Sustainability Report 2019 SSE plc Sustainability Report 2019 57 Workforce-related corporate reporting 41

ORGANISATION AND CULTURE CHANGE HOW OUR CULTURE WAS LOST Marks and Spencer Group plc Transformation Update, 1 October 2019 FROM TO

Professional Management Plain Speaking Speak What is helpful? Marks and Spencer discusses a workforce matter that had gone Leadership close to the Leadership detached and front line and customer defensive poorly, namely its culture was lost, with an overview of some of the challenges it faces, plus what it is doing to address them.

Fast-pace, responsive, Bureaucratic organisation commercial business

Collaboration to drive Collaboration a cloak for decision-making indecision

14 ORGANISATION AND CULTURE CHANGE WHAT WE’RE DOING TO GET IT BACK

Risk management

Examples

One approach is to explain the supply chain, and some of the inherent risks SSE plc 44

CASE STUDY Inclusion and diversity It’s well evidenced that when companies commit to inclusive leadership and to harnessing diversity of thought, they are Inclusion review of more successful. With decarbonisation, electrification and building sustainable infrastructure at the core of SSE’s business roles in SSEN strategy, innovative and new ways of thinking are needed. These business challenges, combined with a changing and dynamic labour force, further strengthens the case for organisations to be far more inclusive and diverse. Figures published by the ONS for January to March 2019 show Calculating SSE’s ‘Return could achieve a £15 return for every for every pound invested, a significant that 18% of the UK working on Inclusion’ £1 invested and create a significantly increase from £4.52 one year before. age population reported they Back in 2017, SSE worked with more diverse business as a result. It This was a result of the initiatives and have a disability. However, only inclusion specialists Equal Approach is the multiplicity of differences – at action SSE is taking to encourage SSE’s Inclusion Strategy challenge traditional thinking around an 51.7% of these people were in to conduct a ‘Return on Inclusion’ all levels and in all these different fairness, transparency and openness SSE is now two years into a targeted ability to work differently and flexibly – not work, compared to 81.7% for (ROI) study which delivered two ways – that has been proven to make for all at every stage of the employee three-year programme of work with Equal offering agile working arrangements should people without disabilities – a key outcomes: the financial return organisations more successful. lifecycle. Approach based on an Inclusion Strategy be the exception rather than the rule. ‘disability employment gap’ of from every pound spent on diversity of encouraging difference ‘IN, ON and UP’ 29.9 percentage points. The initiatives; and clarity on the specific Over 2018/19, SSE and Equal Approach at SSE. This initial phase is a review of SSE’s SSE has made significant progress over underemployment of disabled actions SSE needs to take to increase reran its ROI as at 31 March 2018 to foundations to bring sustained change, as 2018/19 in these areas. As well as gender bias people represents a huge the diversity across the whole evaluate progress made opposed to investing in one off interventions. language review of all adverts and ‘inclusive untapped pool of skills, talent, organisation. against its £15 per 2018 prompts’ are being built into SSE’s role experience and economic value. £1 invested target, 2017 This has involved an almost forensic review profile template as standard, inclusive hiring By changing its focus to building and which it aims to of processes, from before people join to manager training and inclusion and diversity Like many employers, while SSE supporting a truly inclusive culture achieve by £4.52 £7.51 when they leave, to ensure everything SSE awareness training is now mandatory. takes steps to meet additional and new ways of working, rather than 31 March 2021. return on return on does is fair, transparent and open to all. SSE’s needs of individuals if required, this has not been a specific area one-off initiatives around specific types The ROI tool inclusion inclusion Group Executive Committee have a standing SSE has also increased governance around of diversity such as gender, BAME or showed that SSE Inclusion and Diversity monthly agenda item all roles being advertised openly, with 80% of business focus previously. Over LGBTQ+, the analysis showed that SSE had generated a £7.51 and the SSE Board receive an update and of roles advertised openly in the last four 2018 however, SSE worked with Equal Approach to undertake actively feed into the business goals around months of 2018/19, and has updated its DECENT WORK AND ECONOMIC GROWTH Inclusion and Diversity at least quarterly. AAA-rated accessible career site with a a ‘proof of concept’ project to SUSTAINABILITY REPORT broader range of diverse case studies. In increase the proportion of talent Workforce-related corporate reporting To truly embed an inclusive culture, SSE December 2018, SSE also began43 monitoring with both visible and non-visible believes there are three key drivers for the proportion of job adverts that offer agile disabilities within the recruitment change at this stage: get the job description working arrangements, finding that 79% did. process for SSE’s Networks right and widen thinking around what kind An employee survey in June 2018 found that business, SSEN. Ten roles were DILEMMA BEING A RESPONSIBLE EMPLOYER SSE becomes a Social Mobility Employer of skills and experience are really required 44% of SSE employees felt they could work In 2018/19,selected, SSE became with a Socialfull ‘inclusion Mobility Employer through its A changing workforcefor thestrategy role; retaining ensure fairness all vacancies at its core are openly differently, an increase from 37% the year signingreview’ of the Socialcarried Mobility out Pledge, by experts a cross-party campaign to improveEqual social Approach mobility in the to UK. assess SSE is verytheir supportive of the SSE has a well-establishedadvertised responsible and employer open to ethos, all tobased apply; on a numberand of basic principlesbefore. which help ensure value is aims of the Pledge which align closely to its company values and Self-disclosure rates for ethnicity pay gap reporting created and retained for employees and the organisation: commitmentattractiveness to being a andresponsible suitability employer. for SSE knows there is a strongpeople business with case disabilities. for social mobility and that it is in everyone’s In January 2019, SSE responded to the UK not be representative and meaningful. This has the interest to make sure progress is made in this area. Details of some of Government’s consultation on ethnicity pay gap potential to undermine how impactful ethnicity pay SSE’s existing initiatives and future work focused on improving social mobilityEqual are detailedApproach below. shadowed these Reputation reporting. SSE fully supports enhanced reporting gap reporting will be. While all SSE employees have roles on site and created a “What Progress Preference Focus on Create an and greater levels of transparent disclosure from the option to provide self-disclose their ethnicity for carrying Preparation Partneringgood lookswith experts like” competence organisations, and believes that shining a spotlight information voluntarily, only around 11% of employees employees the UK and inclusive SSE’s partnerships with key organisations in this space have proved hugely important. SSE’s Barnardo’s Works out work Attraction employabilityand skills programme template for young for each unemployed role, people has operated for more than a decade, and led to the creation on ethnicity pay information could generate choose to do so. from within Ireland culture in-house Recruitment and of a withnew employability new job descriptionsprogramme for its using Irish business with partners Business in the Community Ireland; SSE has accelerated progress in this area. SSE’s full response worked with Career Ready since 2013 to provide mentors and paid work placements to secondary school students, selection ofteninclusive from low-income language families; created. and SSE’s partnership with Teach First enables the company to promote careers in the can be found on sse.com/sustainability/reporting With a date for ethnicity pay gap reporting likely to be STEMA industryfocus togroup students was from then all backgrounds. held -and-policy. set over the year, these low rates of self-reporting will Changingwith individuals recruitment processeswith different be an issue for SSE. Over 2019/20, SSE therefore plans Underpinning these principles is the fundamental belief that all SSE employees and those in its supply chain must be In 2018/19,disabilities SSE adopted to review a new approach the changes. to apprenticeship recruitment, with qualifications asked for as a preference treated – and treat each other – with fairness and respect. Key to this is SSE’s commitmentIN to paying the real Living Wage. A key concern highlighted by SSE however is to launch a drive for more employees to provide this ratherSSEN than as is mandatory. building This this aimed insight to help into SSE broaden its applications and give those who are perhaps from more challenging backgrounds, and therefore have had less of a chance at a good education, a better opportunity to join SSE. ensuring there is an appropriate ethnicity information, should they wish to do so. Key to this will its business-as-usual recruitment self-reporting rate by employees, and that this be establishing trust with employees and providing SSE is using the evolving world of work as an opportunity to influence and develop its workforce strategy. Under SSE’s Openingprocesses, access at with senior the levels aim of sharing rate is clearly communicated by organisations. If transparency around why the information is being operating model adopted in 2019, greater decentralisation of corporate functions will lead to the core business areas At a thesenior practical management adaptations level, SSE is focusing made on making changes at a much earlier stage, before recruitment, to build having a more bespoke approach to their human capital strategies. WhilstMeasurement this will allow greater flexibility and more inclusive role profiles that focus on experience and transferable skills, rather than simply qualifications, degrees and organisations report their ethnicity pay gap using collected. with the wider SSE Group as well a low self-reporting rate, the reported figures may accountability within individual business, a common culture, including agreed standards around SSE’s commitment to technical expertise. This work is in the early stages, but it is hoped that it will help SSE attract people from other sectors Link to the strategic pillars: responsible employment practices, and its approach to employee engagement,Behaviours will be set at Group-level and remain core. as wellas asits those industry who have networks had a more to diverse share career journey. Working Differently SSE believes that more business-specific people strategies, engagementProcesses and consultation forums, will enable a more agile, learnings and ignite positive Focusing Developing, Creating Being better engaged and productive workforceTransitions overall. Beyond the Living Wage: Introducing Living Hours on the core operating, owning value sustainable UP ON Culture and change. Between Levels Behaviours keen to support the Living Wage Foundation’s efforts Developing skills for theTalent future ManagementEmployee benefits and well-being Living Wage employer. SSE has been to take action against insecure working arrangements Investing in a pipeline of skilled Recognising there are many ways to a vocal advocateCoaching and champion and for Mentoring such as exploitative use of zero-hour contracts which the Living Wage since its accreditation have become entrenched in some parts of the economy. KEY DEVELOPMENTS individuals in preparation for theSecondments 2020s reward people beyond remuneration, Management and PEOPLE AND CULTURE KEY MITIGATIONS and to deliver SSE’s business strategySSE is SSEplc has an extensive range of benefits in 2013 and has been a member of Therefore, in 2017, SSE joined the Living Hours Steering IN 2018/19 essential. Over 2018/19, SSE invested available for its employees. Back the Living Wage Scotland Leadership Group and, over 2018/19, contributed to the Steering £11.1m in internal and external learningAnnual in 2017, Report SSE launched 2019 new and Group since it was created in 2014. SSE The real Living Wage sets a minimum standard for pay Group meetings and also conducted a number of joint What is the risk? – One of the four – SSE has a detailed inclusion and diversity policyand anddevelopment. plan In addition, SSE’s improved employee benefits aimed remains committed for the long-term that meet the real costs of living. However, a salary people consultation sessions with the Foundation on this issue. 56 TheSSE risk plc that Sustainability SSE is unable Report to attract, 2019 develop and retain an 2030 Sustainable which is sponsored by the Group Executive Committee.investment in its technical pipelineand at enhancing employee well-being, to paying its direct workforce and canSSE live plc on Sustainability is also dependent Report on the 2019 number and57 security appropriately skilled, diverse and responsible workforce and Development goals set Progress and performance were reviewed byprogrammes the increased again between including enhanced parental benefits, supply chain workers a wage they can of hours they work – in other words, people need Living Living Hours is a new accreditation which sets the 2017/18 and 2018/19, from £15.4m Emergency Day Passes, Technology live on. Hours to provide security alongside a real Living Wage. standard on responsible working hour practices. It leadership team, and maintain a healthy business culture by SSE includes to be Executive Committee on a quarterly basis andto by£17.2m. the The number of peopleSustainability on Loans and SSE Advantage Report which 2019 offers comprises two key commitments from employers for which encourages and supports ethical behaviours and the leading company Nomination Committee twice per year in 2018/19.one of SSE’sFrom pipeline programmes savings and cashback deals. Other As a champion for the Living Wage since 2013, SSE was both their direct employees and sub-contracted workers: decision-making. in the UK and Ireland 2019/20, SSE’s Group Executive Committee willalso reviewincreased to 1,239, around 6% benefits range from employees being of SSE’s total workforce. Including given the opportunity to volunteer a A right to a contract with ‘living hours’: a guaranteed minimum of 16 hours a week (unless the worker opts out), with a right championing fair tax progress on a monthly basis. pipeline programmes, SSE invested a working day each year to good causes, 1 to switch to a contract that reflects accurate working hours for those regularly working above their contracted hours; and Material influencing factors: and a real Living Wage. – Group policies including “Doing the Right Thing,total ofa £28.2mguide in training and skills to financial education and advice over 2018/19 and delivered an average services, free counselling support – Rewarding employee contributions through fair pay and benefits. – During the year, Sue to ethical business conduct”, explicitly outline the steps What is helpful? Decent notice periods for shifts: of at least 4 weeks’ notice, with guaranteed pay for cancelled or changed shifts. of 22 hours of training per full-time sessions, energy discounts, a cycle-to- 2 – Recognition of the value and benefit of having an inclusive and Bruce was appointed employees should take to ensure their day-to-day actions equivalent employee. Over the pastSSE linkswork workforce scheme and the risk opportunity to other to parts of the business, including At the launch of Living Hours in June 2019, SSE announced its commitment to becoming one of the first five organisations to diverse workforce. non-Executive and decisions are consistent both with SSE’s fivevalues years and SSE has delivered over buy up to 10 extra holiday days each gain Living Hours accreditation in the UK. – A responsible employer ethos (see the Sustainability Report for Director for Employee ethical business principles. SSE employees can600,000 report learning interventions. Morethe wideryear. workforce strategy, and across reporting formats, with information on SSE’s commitment to further detail). Engagement. One of incidents of wrongdoing through both internalinvesting and in the development of itskey developmentsCommitment to and the Living mitigations. Wage – Clearly defined roles, responsibilities and accountabilities for all the key purposes of external mechanisms. SSE uses an independentworkforce “Speak can be found on pages 33 In September 2018, SSE celebrated its employees. this role is to provide Up” phone line and email service, hosted externallyto 34 of itsby Annual Report 2019. fifth anniversary of being an accredited – Availability of career development opportunities and appropriate a direct channel of SafeCall, through which incidents can be reported. succession planning that recognises potential future skills shortages. communication to the – The Audit Committee reviews all key accounting – Clear personal objectives and communication of the SSESET of values. Board for all employees. judgements made as part of the preparation of the – A focus on ethical business conduct and creating a culture in which Annual Report and Accounts. 52 SSE plc Sustainability Report 2019 SSE plc Sustainability Report 2019 53 employees feel confident to speak up when they suspect wrongdoing. – SSE’s business leaders are required to undertake regular succession planning reviews. At a Group level, SSE continues to develop its approach to the management of talent and strategies to strengthen this.

Oversight Group Governance, Culture and Controls Committee KEY DEVELOPMENTS POLITICS, REGULATION AND COMPLIANCE IN 2018/19 KEY MITIGATIONS Introduction Quick read 1 Investor expectations and 2 Appendix A – questions and 3 Appendix B – examples of 4 Appendix C – participants 5 Appendix D – regulatory and What is the risk? – companyUK Government’s views – The Groupdisclosures has dedicated Corporate Affairs, Regulation,developing practice and process market initiatives The risk from changes in obligations arising from operating continuing focus on Legal and Compliance departments that provide advice, in markets which are subject to a high degree of regulatory, energy supply markets guidance and assurance to each Division regarding legislative and political intervention or uncertainty. including further the interpretation of political, regulatory and legislative potential interventions. change. These teams take the lead in engagement Material influencing factors: – UK Government policy with regulators, politicians, officials, and other such – Constitutional uncertainty relating to Brexit. evolution in key areas stakeholders. – Changes in financial, employment, safety and consumer legislation such as carbon price – SSE has a clear Political Engagement Statement that and regulation and the impact of these changes on business as usual support and the capacity sets out principles for any employees who make activities. market. representations to institutions of governments or to – Government intervention into the structure of the energy sector – SSE continues to focus legislatures on the Company’s behalf. including renationalisation of any aspect of the UK’s energy advocacy efforts on – The Group has a dedicated project team to manage all infrastructure. maintaining a long- aspects of the regulatory and legislative change impacts – Changes to corporate governance requirements. term collaborative and of Brexit. Further details are available on page 13 . – International and national agreements such as the 2015 Paris cooperative UK-EU – There is regular engagement with the Board and Group Agreement on Climate Change. relationship relating to Executive Committee on political and regulatory energy issues. developments which may impact SSE’s operations or strategy. – SSE has a long-term strategy to reduce the carbon intensity of the electricity it generates.

Oversight Group Governance, Culture and Controls Committee KEY DEVELOPMENTS SAFETY AND THE ENVIRONMENT IN 2018/19 KEY MITIGATIONS What is the risk? – Continued progress of – Safety is the Group’s number one value with Board The risk of harm to people, property or the environment the 50by20 Safety family oversight being provided by the Safety Health and from SSE’s operations. initiative which targets a Environment Advisory Committee. 50% reduction in injury – Crisis management and business continuity plans are in Material influencing factors: rates and 50% of our place across the Group. These are tested regularly and – Clear and appropriately communicated safety processes. people active on health are designed for the management of, and recovery from, – Safety culture – “if it’s not safe, we don’t do it”. by 2020. significant safety and environmental events. – Clear, effective and regular communication of all relevant – One of the four – SSE’s dedicated Engineering Centre of excellence reviews safety updates. Sustainability goals set and develops plans to ensure that the integrity of its – Competent employees and contractors. by SSE is to reduce the assets is maintained. – Regular and documented training. carbon intensity of the – Full environmental impact assessments are carried out – Adverse weather. electricity it generates by for all major projects, to ensure adverse environmental – Challenging geographic locations. 50% by 2030, compared impacts are well understood and minimised. – Appropriate task and asset risk assessment. to 2018 levels, to around 150g/kWh. Oversight Group Safety, Health and Environment Committee

SSE plc Annual Report 2019 71 Understanding the risk of modern slavery Group Principal Risks Action taken in 2018/19: SSE understands that no sector or industry is exempt from the potential of • Consideration of modern modern slavery. Human rights are considered within SSE’s 10 Group Principal slavery and human rights Risks, which are reviewed on an annual basis by the SSE plc Board, under the abuses within the review of risks ‘Large Capital Projects Quality’ and ‘Politics, Regulation and Compliance’. Group Principal Risks. • Desktop risk assessment of Annual risk assessment of tier 1 expenditure all Tier 1 expenditure. • Detailed risk assessment issued to strategic suppliers, While the proportion of SSE’s tier 1 expenditure with companies in countries responsible for around 35% with a very high risk of modern slavery remains relatively low, SSE recognises of Tier 1 expenditure. that increasing reported instances of modern slavery within the UK and Ireland mean a risk of modern slavery exists in SSE activities at home. Further action for 2019/20: SSE again reviewed its risk exposure through analysis of 2018/19 tier 1 • Review and update desktop expenditure1. SSE’s methodology for assessing modern slavery risk was risk assessment methodology. created in 2016/17 using up to date sources at that point2. SSE understands • Work collaboratively with that the growing focus on modern slavery means that the availability and strategic suppliers to mitigate accuracy of information around modern slavery risk is continuing to advance. modern slavery risk through SSE will therefore review and update its risk assessment methodology in the onward supply chain tiers. 2019/20 and on a three-year basis going forward.

This review of risk exposure led SSE to understand that less than 1% of its supply chain expenditure is in a combination of high-risk categories and high-risk industries. Higher value examples include tree-cutting, trench digging work and the purchase of wood poles, which represent around three-quarters of the overall 1%.

MappingSSE’s of SSE’s tierbusiness 1 procurement expenditure structure by country-of-origin was also completed, with over £3.0bn of the total £3.2bn mapped by the location of the paid address as provided or held by SSE, by further location-data reconciliation, orSSE the iscompany’s a FTSE100 location company as recordedthat currently on the has Companies operations House only indatabase. the UK andOver Ireland. 5,000 Itcompanies develops, wereoperates mapped and ownsout of aa diversetotal of rangearound of 8,000 energy tier businesses 1 suppliers. and SSE is found involved that in the the vast generation, majority, overtransmission, 90%, of this distribution expenditure and was supply with of UK companies.electricity, While the production, payment to storage, a UK address distribution at a tier and 1 level supply is accurate, of gas and SSE other understands energy services.this finding does not reflect the full supply chain of some of the goods it purchases, for example higher value electricity components which are often Principal business activities Workforce-relatedmanufactured overseas. corporate SSE reporting therefore undertook a risk assessment of its strategic suppliers in 2018/19 (see below) to begin 44 to go beyond tier 1 risk analysis, and SSE will continue to try and better understand its risk in 2019/20. Networks – SSE delivers energy to homes and businesses in Great Britain through its Scottish and Southern Electricity Networks (SSEN) businesses. It owns and operates electricity distribution networks in the north of Scotland and central southern England, and the electricity transmission network in the north of Scotland. SSEN operatesCase five study: economically Risk assessment regulated energy of networks, strategic comprising suppliers over 130,000km of overhead lines and SSE plc underground cables and 106,000 substations. SSE also has an ownership interest in gas distribution in Scotland Modern Slavery Statement andIn southerndeveloping England. its approach to understanding the potential of modern slavery in its supply chain, in January 2019 Pages 2 and 3 and SSE issued a risk assessment questionnaire to its largest strategic suppliers, of which the majority responded by Wholesalethe end of – MarchSSE is a2019. leading Expenditure generator with of electricity these suppliers from renewable comprised sources around in35% the of UK total and procurement Ireland under spend the Sustainability Report 2019 bannerfor 2018/19. of SSE Renewables.The questionnaire Its interests focused in renewableon understanding energy theseare complemented suppliers’ approach by ownership to managing and operation their direct of andflexible supply thermal chain riskpower relating stations to modernacross these slavery. countries. For example, It owns through and operates reviewing gas if storage appropriate facilities policies in the and UK, operatesprocesses and are energy in place portfolio and if managementthey undertake division audits, and modern invests slavery in gas focused production training in the and North risk assessments. Sea and west of What is helpful? Shetland. On 31 March 2019, SSE had 10,532MW of total generation capacity and total output over 2018/19 was 30,835GWh.As expected, the scale of the suppliers surveyed and the nature of the goods and services SSE procures from SSE has increased its reporting on its supply chain and the them, the assessments confirmed SSE’s expenditure with these companies is generally low risk. A small number related challenges, including the risk assessment, actions taken Retailof potential – SSE supplies medium electricity risk areas and were gas identified, and other andservices SSE towill householdsnow work withand these businesses suppliers in Great to understand Britain and and actions planned. thewhether island of action Ireland. needs It supplies to be taken. electricity One andsupplier gas toresponded millions ofthat household it is undertaking and business a full review accounts, of their and Modern provides otherSlavery related Policy products as a direct and resultservices, of SSE’sincluding questionnaire telephone and broadband subsequent and recommendations. boiler care, to household customers. SSE Enterprise provides energy and related services to industrial, commercial and public sector customers acrossThese the suppliers UK. were targeted based on existing strong relationships with them, and SSE is focused on ensuring Understanding the risk a collaborative approach around modern slavery. Over 2019/20, SSE shall review the effectiveness of this Thequestionnaire breakdown ofand subsidiaries work with coveredthese suppliers by this toStatement, raise awareness categorised of modern by their slavery country and of share incorporation, good practice. of modern slavery SSE’sModern holding slavery in the will company, be added business to the agenda area (Networks, on a quarterly Wholesale, basis at Retail the meetings or Enterprise) between and SSEprincipal and these activity, can be found on Pages 8 and 9. Further detail of SSE’s structure and the businesses it operates can be found at strategic suppliers, with a full annual update on progress. Group Principal Risks sse.com/whatwedo. Action taken in 2018/19: SSE understands that no sector or industry is exempt from the potential of • Consideration of modern 1 This includes expenditure on SSE’s joint venture projects where SSE is responsible for the procurement of goods and services, unless the joint modern slavery. Human rights are considered within SSE’s 10 Group Principal slavery and human rights ventureWorkforce publishes their and own modern supply slavery chain statement. Risks, which are reviewed on an annual basis by the SSE plc Board, under the abuses within the review of 2Chartered Institute of Purchase and Supply (CIPS) and Walk Free Foundation risks ‘Large Capital Projects Quality’ and ‘Politics, Regulation and Compliance’. Group Principal Risks. SSE plc Modern Slavery Statement 2019 03 • Desktop risk assessment of SSE’s direct workforce is based only in the UK and Ireland. At 31 March 2019, SSE had 20,370 direct employees Annual risk assessment of tier 1 expenditure all Tier 1 expenditure. who work across offices, depots, operational sites and construction sites, 96% of which were based in the UK and • Detailed risk assessment 4% based in Ireland. In addition, SSE had a contingent labour force of 4,533, with 96% of these individuals working issued to strategic suppliers, While the proportion of SSE’s tier 1 expenditure with companies in countries responsible for around 35% in the UK and 4% in Ireland. These are people who are not directly employed by the company but carry out work with a very high risk of modern slavery remains relatively low, SSE recognises of Tier 1 expenditure. using SSE’s IT systems and/or on SSE premises as consultants, temporary agency workers and contractors. that increasing reported instances of modern slavery within the UK and Ireland mean a risk of modern slavery exists in SSE activities at home. Further action for 2019/20: SSE publishes extensive information about its workforce and approach to responsible employment within its SSE again reviewed its risk exposure through analysis of 2018/19 tier 1 • Review and update desktop Annual Report and Sustainability Report which can both be found on sse.com. Given the nature of SSE’s business expenditure1. SSE’s methodology for assessing modern slavery risk was risk assessment methodology. and operations, in general SSE’s workforce is highly skilled with employment terms and conditions to match. At 31 created in 2016/17 using up to date sources at that point2. SSE understands • Work collaboratively with March 2019, SSE’s employees had an average length of service of 9.8 years and an average employee’s earnings that the growing focus on modern slavery means that the availability and strategic suppliers to mitigate were £45,230. Over 95% of employees were also on permanent contracts. accuracy of information around modern slavery risk is continuing to advance. modern slavery risk through SSE will therefore review and update its risk assessment methodology in the onward supply chain tiers. 2019/20 and on a three-year basis going forward. In 2018/19, SSE spent around £3.2bn through its supply chain with around 8,000 tier 1 suppliers. The nature of SSE’s business means that it is involved in several capital projects as well as operations at different stages during a This review of risk exposure led SSE to understand that less than 1% of its supply chain expenditure is in a combination given year – from pre-planning and design, to development, planning, construction and operation. This means that of high-risk categories and high-risk industries. Higher value examples include tree-cutting, trench digging work and the SSE’s supply chain and the types and volumes of goods and services it purchases will vary annually, from on-site purchase of wood poles, which represent around three-quarters of the overall 1%. civils works to the purchase of offshore wind turbines. Mapping of SSE’s tier 1 procurement expenditure by country-of-origin was also completed, with over £3.0bn of the total £3.2bn mapped by the location of the paid address as provided or held by SSE, by further location-data reconciliation, Due to the nature of SSE’s operations, the number of workers within its supply chain can vary substantially or the company’s location as recorded on the Companies House database. Over 5,000 companies were mapped out throughout the year. Although it is not possible to directly monitor worker numbers throughout its supply of a total of around 8,000 tier 1 suppliers. SSE found that the vast majority, over 90%, of this expenditure was with UK chain, SSE has worked with PwC since 2011/12 to better understand the supply chain of its activities. In 2018/19, companies. While payment to a UK address at a tier 1 level is accurate, SSE understands this finding does not reflect the SSE’s activities supported a total of 105,250 jobs across the UK and Ireland. These reports can be found on full supply chain of some of the goods it purchases, for example higher value electricity components which are often manufactured overseas. SSE therefore undertook a risk assessment of its strategic suppliers in 2018/19 (see below) to begin sse.com/sustainability/reporting-and-policy. to go beyond tier 1 risk analysis, and SSE will continue to try and better understand its risk in 2019/20.

Case study: Risk assessment of strategic suppliers Investor expectations and Appendix A – questions and Appendix C – participants Appendix D – regulatory and Introduction Quick read 1 2 In3 developing Appendix its Bapproach – examples to understanding of 4 the potential of modern slavery in its5 supply chain, in January 2019 company views disclosures SSE issueddeveloping a risk assessment practice questionnaire toand its largestprocess strategic suppliers, of which marketthe majority initiatives responded by the end of March 2019. Expenditure with these suppliers comprised around 35% of total procurement spend SSE plc Modern Slavery Statement 2019 02 for 2018/19. The questionnaire focused on understanding these suppliers’ approach to managing their direct and supply chain risk relating to modern slavery. For example, through reviewing if appropriate policies and processes are in place and if they undertake audits, modern slavery focused training and risk assessments.

As expected, the scale of the suppliers surveyed and the nature of the goods and services SSE procures from them, the assessments confirmed SSE’s expenditure with these companies is generally low risk. A small number of potential medium risk areas were identified, and SSE will now work with these suppliers to understand whether action needs to be taken. One supplier responded that it is undertaking a full review of their Modern Slavery Policy as a direct result of SSE’s questionnaire and subsequent recommendations.

These suppliers were targeted based on existing strong relationships with them, and SSE is focused on ensuring a collaborative approach around modern slavery. Over 2019/20, SSE shall review the effectiveness of this questionnaire and work with these suppliers to raise awareness of modern slavery and share good practice. Modern slavery will be added to the agenda on a quarterly basis at the meetings between SSE and these strategic suppliers, with a full annual update on progress.

1This includes expenditure on SSE’s joint venture projects where SSE is responsible for the procurement of goods and services, unless the joint venture publishes their own modern slavery statement. 2Chartered Institute of Purchase and Supply (CIPS) and Walk Free Foundation SSE plc Modern Slavery Statement 2019 03 Workforce-related corporate reporting 45

What is helpful? Fresnillo plc Annual Report and Accounts 2018 73 Fresnillo plc Fresnillo provides risk disclosure linked to strategy and growth plans, with a statement of changing impact and stated risk owner. RiskSTRATEGIC disclosure REPORT Annual Report and Accounts 2018 is covered across life cycle, with link to strategy, indication of change, a description and key indicators (this page and next page). CORPORATE GOVERNANCE FINANCIAL STATEMENTS Pages 36 and 73

INSTILLING A CULTURE OF SAFETY

Our goal is to instil a safety culture where our workers and contractors have the knowledge, competence and desire to work safely. INTENT

Relevance and risk in the lifecycle of mining

EXPLORATION DEVELOPMENT OPERATION CLOSURE Risk: High Medium Low IMPROVEMENT APPROACH ME CUIDO, NOS CUIDAMOS (I CARE, WE CARE) ME CUIDO This comprehensive programme integrates the best systems, projects NOS CUIDAMOS and behaviours into one cohesive initiative in order to encourage safe working. It enables us to continuously innovate in safety, risk assessment and emergency preparedness, while also developing accountability through better leadership and clearer responsibilities. A key strength RESULTS DEPLOYMENT of the programme lies in its ability to involve each and every one of us in building trust and respect. It highlights the importance of safe working, recognises positive behaviours and creates a learning environment.

LEADERSHIP: RISK COMPETENCIES – BEHAVIOUR: LEARNING ENVIRONMENT: VALUES-DRIVEN LEADERSHIP A MATURE AND RESILIENT REDUCE RISKS THROUGH KEY ACTIVITIES: SAFETY CULTURE ENGINEERING, SYSTEMS, • Senior leadership education courses. KEY ACTIVITIES: BEHAVIOURS AND • Supervisor education courses. • Stepback & Think STOP +. LESSONS LEARNT • Coaching our people. • Positive recognition. KEY ACTIVITIES: • Communicate and implement ACCOUNTABILITY: RISK COMPETENCIES – SYSTEMS: improvements and corrective INTEGRATION OF SAFETY AND ESTABLISH A RISK-BASED actions. OPERATIONAL MANAGEMENT SYSTEMS MANAGEMENT SYSTEM • Investigation – Eye On Risk. KEY ACTIVITIES: KEY ACTIVITIES: • Safety is the responsibility of • Internal documents aligned line management. with ISO standards. • Senior management involvement • Critical control risk protocols and in processes, systems, operations organisational implementation. and reports.

Protective equipment used when handling sodium cyanide.

STRATEGIC REPORT

SOCIAL AND SUSTAINABILITY REVIEW CONTINUED

HUMAN RIGHTS We are committed to the responsible operation of our We respect and support human rights and will never be business. We do all we can to ensure the highest standards complicit in their abuse. We address grievances related to our of ethical behaviour, health and safety, environmental business activities where relevant, and do not tolerate human stewardship and governance, while sharing the benefits of rights violations committed by our employees, contractors, mining with our communities. During 2018, we were again or public or private security providers acting on our behalf. proud to be part of the FTSE4Good Index. We were also recognised by a number of other bodies this year, including: Key human rights issues for businesses operating in Mexico Occupational Health & Safety an Ethics and Values in Industry award from the Mexican Fresnillo plc Annual Report and Accounts 2018 61 Confederation of Industrial Chambers (CONCAMIN); and (See our compatible mining section) Modern slavery the Socially Responsible Company award from the Mexican Working conditions Centre for Philanthropy (CEMEFI). (See our people section) Child labourSTRATEGIC REPORT Unions: freedom of association CORPORATE GOVERNANCE OUR APPROACH TO SUSTAINABILITY (See our people section) DiscriminationFINANCIAL STATEMENTS We believe that responsible mining is compatible with Environment high stakeholder expectations in terms of ethical, social and (See our compatible mining section) Land rights environmental performance, and recognise that our social Corruption: Transparency in government licence to operate is dependent upon being trusted by our payments (See our compatible mining stakeholders. This underlines the importance of responsible and risk sections) CAPITAL EXPENDITURESSecurity Ourbusiness exploration practices programme being deeply continued integrated in intohelp our to optimise water consumption and 2018, identifying additional mineralisation ensure that the tailings sent to the dam Capex in 2018 totalled US$72.9 million business model, and of factors that affect stakeholders Source: Country Guide to Human Rights and Business in Mexico published by the atbeing the mainconsidered Ciénega at mine.every Basedcritical on decision-making have a level. lower water content. and was allocated to mine development, these results, we are considering a 2,000 Danish Institute for Human Rights.sustaining capex, and the construction tpd expansion of the beneficiation plant Productivity remained broadly of the third tailings dam and the high KEHOLDE at Ciénega.S TA preliminaryRS economic unchanged over 2017MODERN as the higher SLAVERY compact thickener. Budgeted capex for Modern slavery is a grave violation to human rights. It assessment concludedS CULT in the year ore throughput offset the increase in 2019 will mainly be allocated to mining HIC UR highlightedET the needE for greater capital workers and contractors.comprises all forms of contemporaryworks and sustaining slavery capex.such as Other forced

expenditure on this project, and we are labour, servitude, humansmaller trafficking capital and investments all forms of in child the year S

H labour. We have a zero-tolerance approach to modern slavery currently evaluating waysG to improve Silver reserves increased due to higher will continue to advance the IT initiatives

A BUILD N R TRUST I and demand that all employees, suppliers and contractors E N

its economic viability. In theI meantime, ore grade, while gold reserves decreased towards completion, including Track

T M H reject any and all of its forms. E E exploration activities and mining works as a result of the depletion of higher ore Plus, ProxAlarm, Ventilation plus and B L E I B N T continue toE advanceP inA the area. grade areas. Gold and silver resources MineOps Optimiser. FI M TS CO decreased due to a higherVisit cut-off us online grade. to read our Modern Slavery Report. We also concluded a relatively minor CIÉNEGA US$/TONNE MILLED capital project at Ciénega: the installation CHILD LABOUR of a high compact thickener which will Child labour deprives young people of their childhood, SUSTAINABLE DEVELOPMENT GOALS dignity and education. Our minimum age for employment Since we adopted the United Nations Sustainable is 18, and we require contractors70.8 at all our sites to adhere to this Development Goals (SDGs), we have strategically aligned rule. We contribute to the201 8eradication of child labour 70.8in our FINANCIAL PERFORMANCE our sustainability strategy to advance these goals directly communities by supporting2017 school infrastructure, as66.5 well as Financial highlights 2018 2017 % change 74 Fresnillo plc Annual Report and Accounts 2018 as part of our core business processes, or indirectly reading and other programmes2016 that improve educational55.5 Adjusted revenue (US$m) 187.1 198.3 (5.6) 2015 63.0 74 Fresnillo plc Annual Report and Accounts 2018 through collaboration and leverage. opportunities for children. Adjusted production costs (US$m) 93.8 86.7 8.2 2014 70.8 STRATEGIC REPORT Segment profit (US$m) 79.2 DISCRIMINATION97.1 (18.4) 74 Fresnillo plc Annual Report and Accounts 2018 CIÉNEGA ORE MILLED PER PERSON STRATEGIC REPORT Capital expenditure (US$m) 72.9 We46.5 are committed56.8 to ensuringTONNES that our people are treated Exploration (US$m) 22.9 fairly16.5 and with dignity38.8 in the workplace and do not tolerate any form of harassment, intimidation or discrimination. We promote STRATEGIC REPORT Cost per tonne (US$) 70.8 66.5 6.5 Workforce-relatedSOCIAL AND corporate SUSTAINABILITY reporting REVIEW CONTINUED Cash cost ($/oz gold) 25.9 equal(163.7) opportunities,N/A ensuring that employment and career 46 development decisions 1,252are based on performance, qualifications, Margin ($/oz) 1,243.4 1,431.1 (13.1) SOCIAL AND SUSTAINABILITY REVIEW CONTINUED In collaboration with other members of the Silver Institute, skills, experience and ethical2018 behaviour. We have1,252 policies in place Marginwe are (expressedworking on as a % sustainability of gold price) initiative to communicate98.0 based112.9 on salary scales to2 0mitigate17 gender payment1,322 gaps. In 2018, how silver, our flagship product, contributes to a sustainable the gender payment gap201 of6 non-unionised, non-executive1,577 SOCIAL AND SUSTAINABILITY REVIEW CONTINUED 2015 1,697 CERTIFICATIONS Adjustedfuture. For revenue example, decreased it is a key tomaterial US$187.1 used inCash renewable cost perFresnillo gold ounceemployees wasplc US$25.9, was 3.95%. We train our executives, managers and Fresnillo Saucito Ciénega Penmont San Julián energy, electric vehicles, and anti-bacterial applications 2014 1,626 CERTIFICATIONS million in 2018 due mainly to lower an increase comparednon-unionised to -US$163.7 employees to raise awareness of unconscious OHSAS 18001 FresnilloCertified SaucitoCertified CiénegaCertified PenmontCertified San– Julián volumessuch as water of gold treatment, sold and medicallower volumes applications in and 2017 clothing. as aAnnual result of the biasReport expected and their and impacts Accounts on decision 2018 making. Sets out criteria for international CIÉNEGA CASH COST OHSAS 18001 Certified Certified Certified Certified – of lead and zinc sold at lower prices. decrease inPages gold ore 61, grade, 68 the and higher 74 GOLD US$/OUNCE CERTIFICATIONSbest practice in occupational health See our website for more on the alignment Setsand safetyout criteria management. for international Fresnillo Saucito Ciénega Penmont San Julián Ciénegaof our is sustainability the Group’s strategy most and polymetallic the SDGs. cost per tonne and higher treatment best practice in occupational health mine, a fact demonstrated by the and refining charges, partly mitigated andOHSAS safety 18001 management. Certified Certified Certified Certified – significant contribution from silver, lead by higher by-product credits per gold Sets out criteria for international and zinc of 57.5% in 2018 (2017: 57.2%). ounce. Margin per ounce decreased to 25.9 PERFORMANCEbest practice in occupational health GENDER PAY GAPS OF NON-UNIONISED, NON-EXECUTIVE EMPLOYEES US$1,243.4 in 2018 (2017: US$1,431.2). 2018 25.88 98.0% 1,269.28 and safety management. Support and Average Gap PERFORMANCEWe regret to report five fatal injuries in 2018 and one fatal injury in early 2019. We are Cost per tonne at Ciénega increased Expressed as a percentage of gold 2017 -152.87 112.9% 1,267.44 Open pit Underground 2016 -217.19administrative per hierarchical117.4% 1,246.47 committed to implementing the measures required to reverse the negative trend in 6.5% to US$70.8 mainly due to the prices, the marginOperations declinedOperations to 98.0% Projects Explorations staff level We regret to report five fatal injuries in 2018 and one fatal injury in early 2019. We are 2015 245.49 78.2% 1,126.54 our safety record. increase in contractors for development (2017: 112.9%). 2014 288.00 77.1% 1,257.66 committedPERFORMANCE to implementing the measures required to reverse the negative trend in First level ‘Senior Engineer’ -2.50% -6.15% -23.46% -3.21% -13.91% -6.61% Secondand civil level works. ‘Junior Cost Engineer’ inflation at this mine -0.85% -4.63% -5.16% 8.71% 5.39% -1.04% ourWeFATALITIES safetyregret record. to report five fatal injuries in 2018 and‘I CARE, one WE fatal CARE’ injury TRAININGS: in early 2019. We are was 1.57%. See detailed breakdown on page 91. Gold price Third level ‘Assistant’ 16.33% -21.36% -100.00% -7.98% 51.86% -9.28% FATALITIEScommitted2018 to implementing the 5measures required‘I CARE, WE to reverseCARE’ TRAININGS: the Numbernegative Numbertrend in Cash cost Mine of courses of people Overall average gap -3.95% our2017 safety record.1 % Figures represent margin between cash cost and gold price 2018 5 Number Number 2016 3 Saucito 96 3,254 2017 1 Mine of courses of people FATALITIES2015 1 ‘IFresnillo CARE, WE CARE’ TRAININGS:64 2,706 2016 3 Saucito 96 3,254 COMMUNITY PRIORITY ASSESSMENT STAKEHOLDER GROUP 20148 1 5 San Julián 78Number 2,358Number 2015 1 Fresnillo 64 2,706 2017 1 Mine of courses of people We engage communities through 2Number014 of fatal injuries1 to employees or contractors. Ciénega 42 1,472 Community 2016 3 SanSaucito Julián 7896 2,3583,254 household surveys, interviews with Juanicipio 13 201 Number2015 of fatal injuries1 to employees or contractors. CiénegaFresnillo 4264 1,4722,706 leaders and focus groups to identify Formal authorities the issues that matter to them in order 2014 1 JuanicipioSan Julián 1378 2012,358 TOTAL RECORDABLE INJURY FREQUENCY LOST TIME INJURY FREQUENCY RATE (LTIFR) to identify risks and opportunities. Informal authorities Number of fatal injuries to employees or contractors. Ciénega 42 1,472 RATE (TRIFR) FOR EVERY 1,000,000 HOURS FOR EVERY 1,000,000 HOURS Larger spheres represent greater TOTAL RECORDABLE INJURY FREQUENCY LOSTJuanicipio TIME INJURY FREQUENCY13 RATE201 (LTIFR) Employeesimportance by the vertical to the conveyor individual at the stakeholder Fresnillo mine. Unionised employees RATE2018 (TRIFR) FOR EVERY 1,000,00020.47 HOURS FOR2018 EVERY 1,000,000 HOURS 8.64 groups at Ciénega. 2017 23.22 2017 8.14 Employees by the vertical conveyor at the Fresnillo mine. Non-unionised employees 2018 20.47 2018 8.64 TOTAL2016 RECORDABLE INJURY16.93 FREQUENCY LOST2016 TIME INJURY FREQUENCY5.99 RATE (LTIFR) 2017 23.22 2017 8.14 Contractors RATE2015 (TRIFR) FOR EVERY 1,000,00026.84 HOURS FOR2015 EVERY 1,000,000 HOURS7.51 2016 16.93 2016 5.99 Employees by the vertical conveyor at the Fresnillo mine. 20148 20.4721.12 20148 3.7 8.64 2015 26.84 2015 7.51 Water Waste water infrastructure Road infrastructure Telecommunications 2017 23.22 2017 8.14 Public works Electricity Public lighting Environmental pollution 2The014 number of fatalities + lost-time cases21.12 + restricted work 2The014 number of lost-time3.7 injuries + fatalities per 1,000,000 cases2016 + medical treatment + first16.93 aid cases per 1,000,000 hours2016 worked. 5.99 Health services Pavements of streets and walkways Thehours201 5number worked. of fatalities + lost-time cases + restricted26.84 work The201 5number of lost-time injuries + fatalities7.51 per 1,000,000 cases2014 + medical treatment + first aid cases21.12 per 1,000,000 hours2014 worked. 3.7 hoursTOTAL worked. RECORDABLE INJURY FREQUENCY LOST TIME INJURY FREQUENCY RATE (LTIFR) RATE (TRIFR) FOR EVERY 1,000,000 HOURS FOR EVERY 1,000,000 HOURS TOTALThe number RECORDABLE of fatalities + lost-time INJURY cases FREQUENCY + restricted work LOSTThe number TIME of INJURY lost-time injuriesFREQUENCY + fatalities perRATE 1,000,000 (LTIFR) cases + medical treatment8.69 + first aid cases per 1,000,000 hours worked. 4.68 RATEhoursHerradura worked. (TRIFR) FOR EVERY 1,000,000 HOURS FORHerradura EVERY 1,000,000 HOURS 7.53 4.63 8.69 4.68 HerraduraTOTAL RECORDABLE INJURY FREQUENCY HerraduraLOST TIME INJURY FREQUENCY RATE (LTIFR) 7.53 4.63 RATENoche (TRIFR) FOR7.93 EVERY 1,000,000 HOURS FORNoche EVERY 1,000,0003.45 HOURS Buena Buena 8.699.86 4.686.57 NocheHerradura 7.93 NocheHerradura 3.45 7.53 4.63 Buena 9.86 Buena 6.57 31.18 14.04 Fresnillo Fresnillo Noche 7.93 29.39 Noche 3.45 9.47 31.18 14.04 FresnilloBuena 9.86 FresnilloBuena 6.57 29.39 9.47 23.65 11.72 Saucito Saucito 27.7431.18 10.25 14.04 Fresnillo 23.65 Fresnillo 11.72 Saucito 29.39 Saucito 9.47 27.74 10.25 19.95 4.09 San Julián San Julián 23.65 32.52 7.63 11.72 Saucito 19.95 Saucito 4.09 San Julián 27.74 San Julián 10.25 32.52 7.63 17.84 6.35 Ciénega Ciénega 19.9523.41 4.09 6.57 San Julián 17.84 San Julián 6.35 Employees in front of the shaft winch at the Saucito mine. Ciénega 32.52 Ciénega 7.63 2017 2018 23.41 2017 2018 6.57 Employees in front of the shaft winch at the Saucito mine. 2017 2018 17.84 2017 2018 6.35 Ciénega Ciénega 23.41 6.57 Employees in front of the shaft winch at the Saucito mine. 2017 2018 2017 2018 Introduction Quick read 1 Investor expectations and 2 Appendix A – questions and 3 Appendix B – examples of 4 Appendix C – participants 5 Appendix D – regulatory and company views disclosures developing practice and process market initiatives Careers at Just Eat We have the capability to report across the full suite Strategic report Early careers of people metrics that senior leaders can use to inform We want to provide opportunities for people entering decision making. Having consistent international people the world of work for the first time and help them learn data in one system has removed the risk of excessive and grow as professionals. Our dedicated early careers reliance on anecdote and intuition and enabled a more team built on their successes and learning from 2017 informed business case approach to people decisions. hiring 17 graduates onto our graduate programme in This ability to report comprehensively on people metrics 2018. Our primary focus for graduate investment was in has unlocked our ability to provide people data insights, tech talent with 12 of the 17 graduates being hired for maintain our edge in a hugely competitive talent market our technology teams. 2017 was about piloting apprentices and helps to support timely recommendations which into our business and through 2018 we decided to focus can be acted upon no matter which country we need on apprenticeship schemes for other parts of the business the data in. such as marketing. We had 11 apprentices join the business to kick start their careers whilst gaining a qualification. Reward and benefits Reward linked to performance Throughout 2019, encouraging early careers through To support our business drive to provide the best possible helping people find their place at work is something we experience to our customers internationally, throughout will continue to support with outreach programmes 2018 we evolved our annual performance-related bonus with local schools, apprenticeships and graduate scheme to include a customer-related metric. The bonus Infrastructure Organisational Strategic report opportunities. We will be looking to grow these scheme will continue to be reviewed to ensure it supports initiatives internationally as well. short-term business objectives whilst rewarding Technology resilience Growth, people and culture To support the inclusion initiatives with regards to early individual performance. careers we are actively working to attract, develop and Bonuses for business leaders are determined through promote technology careers. For example, we have STEM a combination of business and personal performance ambassadors promoting Science, Technology, Engineering Owner: Chief Product and Technology Officer Owners: Chief Executive Officer and Chief People Officer – which ensures that our leaders are all invested in our and Mathematics (STEM) subjects at schools. In addition future success. In addition, we regularly review our Change Link to strategic pillars Change Link to strategic pillars we partner with CoderDojo to run ‘coding for girls’ at compensation packages so that they are competitive 1 2 1 2 3 our offices supported/taught by Just Eat employees. against the market. Talent development Senior leaders are eligible to receive performance Workforce-relatedWhat is the riskcorporate and impact?reporting What is the risk and impact? Part of our Talent Development Approach throughout 2018 47 share awards, which align their interests with those Widespread and/or prolonged outage of critical platforms We change our scale and organisation without has been to drive engagement via our online learning of shareholders in linking reward to business and share and infrastructure that support our services to customers protecting the positive and powerful aspects of our tools. We introduced a number of initiatives to help price performance. and Restaurant Partners. culture today as an agile, entrepreneurial business. focus learning activity which resulted in a 38% increase WhatDue to the is onlinehelpful? nature of our businesses, large-scale In addition, the changes across our senior leadership Justin the Eatnumber plc of logins to these learning tools year on Benefits In presenting the principal risks on the following pages, The three-year strategic plan considers the Group’s outages would have an immediate impact on orders and team create uncertainty and/or impact on the positive year. We have largely moved away from traditional At Just Eat, we are strong believers in creating a positive Strategic report Just Eat provides risk disclosure outlining owner, change in risk and impact, the context of the risk, and evolving approach, with a revenue as customers would be unable to transact with aspects of our culture, increasing this risk. Annualclassroomthe Board Report haslearning provided and and Accounts havedetails been 2018as appropriate delighted with around the andcash encouraging flows, Underlying working EBITDA, environment investment to support in areas and separateus. Thereafter, reference the in impact a previous to our capital brand markets could day deepen transcript if reinforcing the link to strategy. strategic context, mitigation, key risk indicators, such as marketing and technology and key financial This may in turn impact our ability to attract and retain Pagesadoption 21, rate 27 andfollowing 33 our move to a digital learning promote the wellbeing of our people. One of the ways we were unable to pass collected revenue back to our categorisation and ownership. Two risks were merged ratios over the period. For the purposes of the viability key talent, affecting our achievement of strategic solution to ensure accessibility for all teams internationally. we promote this is by providing a wide range of benefits partners or pay our suppliers. and one risk has been added. A summary of the changes thatstatement, support certain our employees’ key assumptions lives now of and the inplan the were future. objectives and performance milestones. Management development What is the strategic context? is provided below: Wesubjected have recently to sensitivity launched analysis, a new enhancedboth individually user-friendly and What is the strategic context? Our people managers play a crucial role in creating high in aggregate, to ensure the business is still viable in a Offering a reliable service is key to building our customers’ Strategic report benefit portal in the UK which will encourage greater Infrastructure Organisational As we grow in scale and complexity as a listed business, performing,Growth, people motivated and culture and engaged – This risk teams. brings Whether elements and Restaurant Partners’ loyalty and trust. That is why take-upstressed of environment available benefits. and to Our identify goal in if 2019any additional is to create we will continue to introduce structural, leadership, a newof the manager“Growth andis hired scalability” in Australia and or“People newly and promoted culture” we innovate and operate with a resilient mindset and afinancing consistent requirements benefit brand would for our be employees required. internationally. process and governance improvements that allow us intorisks a together managerial from role 2017. in Italy, The resultwe want is a to new ensure risk whichour Technology resilience haveGrowth, increased ourpeople reliability and capability culture and performance to manage and control our business effectively. managersspeaks to the have challenges access to in the balancing tools and our resources need for greater they The Justsensitised Eat sharesave scenarios scheme model enablesthe impact employees of certain to of through 2018, lowering this risk from prior levels. structure, process and governance as we grow, with the the Group’s principal risks materialising. For example, a However, we recognise that the energy and creativity need to be successful people managers. We run specialised contribute to a regular savings plan to purchase Company Our technology profile includes large data processing existing culture and entrepreneurial energy that has fall in orders due to a total outage from an unmitigated we have comes from our cultural underpinnings as a training sessions for all our managers to help them and shares. Since its launch in 2015, this has proved to be a Owner: Chief Product and Technology Officer platformsOwners: enabledChief Executive Officer through cloud andinfrastructure, Chief People which Officer disruptive, entrepreneurial business and this is worth theirbeen teamsresponsible succeed. for our In addition,successes. all Furthermore our managers it are hugelytechnology popular failure benefit. (Technology 2018 saw resilience), a further an increase unexpected in offers the resilience and scalability of highly redundant Change Link to strategic pillars Change Link to strategic pillars protecting. Therefore we seek to strike the right balance provideddiscusses with the curatedcultural topicsand uncertainty that support, risks educate associated and thechange number in legislation of employees (Social, signed regulatory, up to the and scheme. legislative), The architecture, but inherently brings with it cyber, with leadership changes. a sudden and sustained inability to process card payments 1 2 1 2 3 when making leadership changes and adopting corporate engage them to ensure we drive excellence throughout first sharesave scheme launched in 2015 also reached its networking and computing risks. (Supplier resilience) and an adverse outcome from ongoing best practices to ensure our culture is protected. ourSupplier manager resilience populations. – This is a new entrant into our maturity in November 2018. Employees who participated How is the risk managed? in thistaxation scheme audits, saw as wella significant as downside increase impacts in share that mayprice What is the risk and impact? What is the risk and impact? How is the risk managed? Evolvingprincipal ourrisks approach and recognises to people our data dependence on a Architecture – Our platforms are all hosted on Amazon betweenresult from the competition offer price and theeconomic share priceheadwinds on the e.g. Widespread and/or prolonged outage of critical platforms We change our scale and organisation without Talent assessment – This provides leadership and Invariety 2018 ofthe suppliers people team including invested large in cloud technology providers, and Web Services on a “three site basis” to provide multi-site vestingBrexit. Mitigating date. factors to address these risks, which and infrastructure that support our services to customers protecting the positive and powerful aspects of our decision making on investing, succession planning niche technology services companies, outsourcers, resilience and failovers to reduce the risk of major outages resource into driving a more progressive approach to might include a reduction in marketing spend, delaying and Restaurant Partners. culture today as an agile, entrepreneurial business. and management of our talent pipeline, in line with delivery logistics suppliers and device manufacturers. and to enable rapid restoration of services. people systems and data. This has meant we can leverage or cancelling discretionary activities and a headcount our values, vision and strategy. Dependent on supplier, disruptive impacts could be Due to the online nature of our businesses, large-scale In addition, the changes across our senior leadership and accelerate our ability to provide the business with freeze, have not been modelled. These assumptions Monitoring – Our specialist technology teams provide experienced across our online platforms, our operational outages would have an immediate impact on orders and team create uncertainty and/or impact on the positive Change Management – Through planning and consistent people insights which drive improvements in the business formed the a “reasonable worst case” scenario. 24/7 monitoring of our platforms and respond to outages. revenue as customers would be unable to transact with aspects of our culture, increasing this risk. two-way communication, we ensure collective andcall centresprocess andimprovements our expanding in the delivery people networks. team. MiraThe three-year Magecha strategic plan does not include cash flows us. Thereafter, the impact to our brand could deepen if Business recovery – We have implemented recovery alignment and employees that are engaged with Certain business risks we face, such as those disclosed This may in turn impact our ability to attract and retain Interimin respect Chief of anyPeople future Officer mergers and acquisitions that we were unable to pass collected revenue back to our plans to minimise disruptions and facilitate the business change. within Note 20, are generally faced by other comparable key talent, affecting our achievement of strategic 5might March be 2019 approved by the Board in the future. Such partners or pay our suppliers. resumption of services. Careers at Just Eat onlineWe have businesses. the capability There to are report also across additional the fullrisks suite that

Employee voice – We listen to our employees, and Strategic report objectives and performance milestones. activities will be approved by the Board having regard What is the strategic context? Key risk indicators regularly measureEarly careers their engagement to ensure we have theof people Group metricsis exposed that to senior that are leaders not considered can use to principal inform What is the strategic context? to the Company’s financial position and projected cash Offering a reliable service is key to building our customers’ • Systems availability/percentage of uptime levels a clear employeeWe want value to provideproposition opportunities that motivates for peopleand entering risksdecision but making.may have Having an adverse consistent impact international if they occur. people As we grow in scale and complexity as a listed business, flows at such future time. and Restaurant Partners’ loyalty and trust. That is why retains ourthe talent. world of work for the first time and help them learn data in one system has removed the risk of excessive • weBackup will continue success tometrics introduce structural, leadership, we innovate and operate with a resilient mindset and and grow as professionals. Our dedicated early careers reliance on anecdote and intuition and enabled a more Based on the results of this analysis, and assuming that process and governance improvements that allow us Inclusive culture – Through our diversity, inclusion and Longer-term prospects have increased our reliability capability and performance • Outage root cause and problem management metrics team built on their successes and learning from 2017 informed business case approach to people decisions. to manage and control our business effectively. belonging programme, we are striving to create a culture The sections described “Our Business Model” and any impact of the Group’s principal risks does not exceed through 2018, lowering this risk from prior levels. • Results of business recovery exercises of inclusionhiring and openness 17 graduates that ontodrives our actionable graduate programme in “Our markets”This ability to reportin the Strategiccomprehensively Report describe on people how metrics the theAnnual impacts Report modelled, and Accounts the Board 2018 has Just a reasonable Eat plc 33 However, we recognise that the energy and creativity Our technology profile includes large data processing feedback from2018. our Our workforce. primary focus for graduate investment was in Boardhas unlocked has positioned our ability the to Company provide peopleto take data advantage insights, expectation that the Company will be able to continue we have comes from our cultural underpinnings as a platforms enabled through cloud infrastructure, which tech talent with 12 of the 17 graduates being hired for of themaintain growing our edge markets in a hugely in which competitive the business talent operates market in operation and meet its liabilities as they fall due disruptive, entrepreneurial business and this is worth Key risk indicators offers the resilience and scalability of highly redundant our technology teams. 2017 was about piloting apprentices and howhelps the to supportCompany timely is positioned recommendations to create value which for over the three-year period of their assessment to protecting. Therefore we seek to strike the right balance • Levels of existing talent architecture, but inherently brings with it cyber, into our business and through 2018 we decided to focus shareholders,can be acted upon taking no account matter whichof the countryrisks described we need in 31 December 2021. when making leadership changes and adopting corporate networking and computing risks. • Number onof criticalapprenticeship vacancies schemes for other parts of the business thisthe datasection in. of the Annual Report. best practices to ensure our culture is protected. such as marketing. We had 11 apprentices join the business Going concern How is the risk managed? • Time to hire data How is the risk managed? to kick start their careers whilst gaining a qualification. Reward and benefits In adopting a going concern basis for preparing Architecture – Our platforms are all hosted on Amazon • Key employee engagement metrics Viability statement Talent assessment – This provides leadership and Reward linked to performance the financial statements, the Directors have made Web Services on a “three site basis” to provide multi-site Throughout 2019, encouraging early careers through In accordance with provision C.2.2 of the Corporate decision making on investing, succession planning To support our business drive to provide the best possible appropriate enquiries and have considered the Group’s resilience and failovers to reduce the risk of major outages helping people find their place at work is something we Governance Code, the Board has assessed the prospects and management of our talent pipeline, in line with experience to our customers internationally, throughout cash flows, liquidity position, borrowing facilities and and to enable rapid restoration of services. will continue to support with outreach programmes of the Company over a longer period than the 12 months our values, vision and strategy. 2018 we evolved our annual performance-related bonus business activities as set out on page 18, in Note 20 to with local schools, apprenticeships and graduate required when preparing financial statements on a Monitoring – Our specialist technology teams provide scheme to include a customer-related metric. The bonus the Group’s financial statements on pages 124 to 128, Change Management – Through planning and consistent opportunities. We will be looking to grow these Going Concern basis. This assessment involved a robust 24/7 monitoring of our platforms and respond to outages. scheme will continue to be reviewed to ensure it supports and the Group’s principal risks and uncertainties as set two-way communication, we ensure collective initiatives internationally as well. review of the principal risks facing the Company and Business recovery – We have implemented recovery alignment and employees that are engaged with Group,short-term particularly business those objectives which whilst rewardingcould impact solvency, out on pages 20 to 28. plans to minimise disruptions and facilitate the business change. To support the inclusion initiatives with regards to early performanceindividual performance. or the Group’s business model. The Board Introduction Quick read Investor expectations and 2 Appendix A – questions and 3 Appendix B – examples of 4 Appendix C – participants 5 Appendix D – regulatory and Based on the Group’s forecasts, the Directors are resumption of services. 1 company views careers we aredisclosures actively working to attract, develop and conductedand processthis review for a period ofmarket three initiatives years, which Employee voice – We listen to our employees, and developing practice Bonuses for business leaders are determined through satisfied that the Company, and the Group as a whole, promote technology careers. For example, we have STEM was selected as this is the period covered by the Group’s Key risk indicators regularly measure their engagement to ensure we have a combination of business and personal performance have adequate resources to continue in operational Annualambassadors Report and Accounts promoting 2018 Science, Just Eat Technology, plc 27Engineering three-year strategic plan approved by the Board on • Systems availability/percentage of uptime levels a clear employee value proposition that motivates and – which ensures that our leaders are all invested in our existence for the foreseeable future. Accordingly, and Mathematics (STEM) subjects at schools. In addition 6 February 2019. retains our talent. future success. In addition, we regularly review our the financial statements have been prepared on • Backup success metrics we partner with CoderDojo to run ‘coding for girls’ at compensation packages so that they are competitive the going concern basis. • Outage root cause and problem management metrics Inclusive culture – Through our diversity, inclusion and our offices supported/taught by Just Eat employees. belonging programme, we are striving to create a culture against the market. • Results of business recovery exercises of inclusion and openness that drives actionable Talent development Senior leaders are eligible to receive performance feedback from our workforce. Part of our Talent Development Approach throughout 2018 share awards, which align their interests with those has been to drive engagement via our online learning Key risk indicators of shareholders in linking reward to business and share tools. We introduced a number of initiatives to help • Levels of existing talent price performance. focus learning activity which resulted in a 38% increase • Number of critical vacancies in the number of logins to these learning tools year on Benefits • Time to hire data year. We have largely moved away from traditional At Just Eat, we are strong believers in creating a positive • Key employee engagement metrics classroom learning and have been delighted with the and encouraging working environment to support and adoption rate following our move to a digital learning promote the wellbeing of our people. One of the ways solution to ensure accessibility for all teams internationally. we promote this is by providing a wide range of benefits that support our employees’ lives now and in the future. Management development We have recently launched a new enhanced user-friendly Our people managers play a crucial role in creating high benefit portal in the UK which will encourage greater Annual Report and Accounts 2018 Just Eat plc 21 performing, motivated and engaged teams. Whether take-up of available benefits. Our goal in 2019 is to create a new manager is hired in Australia or newly promoted a consistent benefit brand for our employees internationally. into a managerial role in Italy, we want to ensure our managers have access to the tools and resources they The Just Eat sharesave scheme enables employees to need to be successful people managers. We run specialised contribute to a regular savings plan to purchase Company Annual Report and Accounts 2018 Just Eat plc 27 training sessions for all our managers to help them and shares. Since its launch in 2015, this has proved to be a their teams succeed. In addition, all our managers are hugely popular benefit. 2018 saw a further increase in provided with curated topics that support, educate and the number of employees signed up to the scheme. The engage them to ensure we drive excellence throughout first sharesave scheme launched in 2015 also reached its our manager populations. maturity in November 2018. Employees who participated in this scheme saw a significant increase in share price Evolving our approach to people data between the offer price and the share price on the In 2018 the people team invested in technology and vesting date. resource into driving a more progressive approach to people systems and data. This has meant we can leverage and accelerate our ability to provide the business with people insights which drive improvements in the business and process improvements in the people team. Mira Magecha Interim Chief People Officer 5 March 2019

Annual Report and Accounts 2018 Just Eat plc 33 Workforce-related corporate reporting 48

Section 3 Our performance 65 What is helpful? Pearson plc Pearson discloses how it addresses employee feedback, and plans for the next year in the context of its risks. In addition, its risk disclosure Annual Report and Accounts 2018 outlines the reason for the risk rating, controls, outcomes of activity and plans for the next year’s activity. Page 27 and 65 Overview Strategy and change

Reason for risk rating Put greater focus on diversity and inclusion (D&I): 3 Talent we designed our future state diversity framework, This risk has reduced due to: Failure to maximise governance and measurement model. We received Impact of improved financials: Stabilising financial our talent – Risk that we are awards for our localised D&I efforts and increased performance has driven an improving outlook for unable to attract the talent marketplace recognition. You can read more about employee incentivisation helping raise morale; also we need and to create the our diversity, equality and inclusion activities under positive sentiment of strategy approved by the Board conditions in which our Sustainability on p38 Compensation toolkit enabling managers to people can perform to Released the organisational health index survey for all address specific retention risks as needed the best of their ability. Pearson employees, the results of which will influence (with Executive approval); primary retention the priority order of the 2019 action planning. managed through total reward action in strategy Our Decrease in impact Better data enabling improved decision making 2019 outlook and plans and probability Leadership development programmes. HR will continue to work with Pearson leaders to Strategic priorities: increase engagement and organisational health, Existing controls acting on the findings from the organisational health 1 Grow market share through digital Detailed monthly reporting of HR data and insights survey taken in late 2018. Our aims in 2019 are to: transformation to proactively identify and manage risks, including Develop sustainable total reward programmes Section 2 Our strategy in action 27 turnover (voluntary and involuntary) data as well aligned to the business strategy 2 Investing in structural as gender diversity at all career grades, with regular growth opportunities Develop awards and recognition for the workforce Executive review to identify areas for improvement and marketplace Consistent performance, talent and succession Deliver organisational design and change Become a simpler, management processes 3 management to support business deliverables more efficient and Employee policies including the Code of Conduct

Upskill the workforce on digital customer channels Our performance more sustainable Employee engagement forums and action plans business B2B, while continuing to acquire new digital talent Exit interviews conducted and monitored globally and expertise to identify any trends and concerns

Overview Drive sales performance through embedding ‘Pearson U’ learning platform best practice sales incentive design External careers website and talent acquisition Empower managers with greater flexibility to How we serve and engage Key concerns Our response approach to improve attraction of digital skills make reward decisions for their teams, underpinned Wide range of employee benefits. Employees by greater transparency of our pay practices to Outcome of 2018 activities our employees In 2018, we invited all our Three main themes emerge from We are focused on creating a Refresh leadership skills, competencies and Our mission-driven To support our digital transformation, acquisition of employees to take part in a survey our OHS findings: Our people healthier company, encouraging digital talent is a high priority. Challenges continue with behaviours and continue leadership employees are key to to get a better understanding want to feel aligned to Pearson’s and enabling more people to digital hiring but we are seeing some improvement, development programmes Refresh approach to performance management, the sustainable success of where we can continue to vision, strategy, culture and progress. We are working to grow driven by clarity of skillset needed and a targeted adapting more contemporary practices to drive Governance of Pearson. improve. We started several values; they want to be able to and develop talent, drive more compensation guide enabling Pearson to be more high performance bottom-up innovation deliver with current capabilities diversity, ensure greater competitive. As a result, year over year percentage of digital hires is up by 37%. We also: Utilise new approach to talent review, assessing all 57% of employees took programmes; held town and processes; and they want to employee engagement, VPs against required capabilities and culture needed part in our 2018 organisational halls with senior leaders and understand more about Pearson’s drive innovation, support Focused Leadership development programmes Drive internal mobility through increased visibility to Our strategy in action in strategy Our health survey (OHS) global conversations with our ability to innovate, and adapt to accessibility and inclusion efforts, for senior leaders with specific mentoring talent and cross-business development opportunities CEO. We launched a Pearson change. Our Innovation Jam and improve sharing of best programmes for high potential employee (HiPO) Promote enterprise-wide talent management mindset, Alumni network to connect generated ideas around how we practice across the company. women in these roles owned by leadership across all areas. Develop a Continued targeted learning throughout the former, present and future can facilitate learning and design mindset for analytical, digital and innovation skills organisation with ‘Pearson U’ learning platform Pearson people. for a “YouTube” generation. Deliver refreshed global diversity and inclusion enhancements, career development workshops, approach, operational plan and measurement model; manager fundamentals training and emphasis on increase gender diversity, especially in senior all employees having development goals leadership roles.

Shareholders Launched the Alumni programme Financial statements

We engage with our investors Our shareholder base has a We have a positive, ongoing We have a broad range of on an ongoing basis. We diverse range of views covering dialogue with our shareholder investors who entrust their Introduction Quickcommunicate read with them 1financial, Investor environmental expectations andand 2base. Appendix We aim Ato – deliver questions and 3 Appendix B – examples of 4 Appendix C – participants 5 Appendix D – regulatory and capital with us. regularly, including at our socialcompany issues. views long-termdisclosures sustainable value developing practice and process market initiatives financial results, our AGM for our investors and all our Our performance 625 investor meetings with and at investor meetings and company stakeholders. conferences around the globe. 344 institutions in 2018

Learners

We regularly talk to and survey Learners have increasing We are matching this Pearson helps millions learners to understand how expectations over the value of expectation. For example, we are of learners across the learning is evolving, observe their education. They expect using predictive analytics to give world progress throughout changing demographics, experiences both inside and us early alerts to identify where their lives. attitudes and buying behaviour. outside the classroom that are students are struggling much We put learner needs at the more rewarding, more engaging earlier in the process and Governance 80% of students surveyed centre of what we do and work to and less time consuming. Digital therefore can help to get say our products help them build world-class digital products is a normal, integral part of their them back on track quickly. get more out of the class and services to deliver amazing day-to-day life and they expect experiences and improve digital education products to learning outcomes. meet this expectation.

Educational institutions & educators

We collaborate with educators on In a cost conscious environment, We aim to provide more engaging We work with teachers, thought leadership and product educators are focused on ways to connect educators with instructors and educators development in order to give the delivering high quality their students, accelerated across all stages next generation of learners the educational experiences that through the move to digital.

of education. tools they need to be successful. set their students on a course to This enables more timely Financial statements a better career and life for them feedback on student progress 89% of educators and their families. to help set them up for success. surveyed said our products We also continue to listen and allow students to study observe how things are changing anywhere, anytime in the classroom to adapt to the next generation of learners.

ReadmoreonourapproachtostakeholderengagementintheGovernancereport,onp93 Workforce-related corporate reporting 49

Metrics and targets Examples

CHIEF EXECUTIVE’S REVIEW CONTINUED

Our culture 4. The right people 5. Innovating with data Workforce-related corporate reporting easyJet cares about its people and believes they set 50 easyJet has the ambition to become the most data-driven the airline apart. Providing the warmest welcome in the airline in the world and is now investing substantially to give Making IHG a great place to work sky, easyJet’s customer-facing employees are the very best greater focus and weight to our use of data to improve the in the industry and contribute significantly to the positive customer experience, drive revenue, reduce cost and improve Being a responsible business cannot be achieved experience that customers enjoy, leading to increased operational reliability: Go-Ahead Group plc InterContinental Hotels Group Plc loyalty andEasyJet repeat plc business. At the end of the 2018 financial • Revenue – opportunities to leverage existing data-based without the support and active engagement of year, 14,605 people (2017: 12,181) worked for easyJet. Annual Report and Accounts for the year ended 29 June 2019 Our culture Annual Report and Accounts 2018 initiatives, in particular focusing on enhancing the revenue colleagues all around the world. Creating an inclusive and energising environment which management system, harnessing customer-related information Page 36 Page 18 attractsPage the 18 right people and inspires everyone to learn and and improving easyJet’s ability to target clients with the grow is at the heart of easyJet’s strategy. This is particularly right offer. In particular, easyJet is focusing on harnessing important as our business continues to evolve. This year new sources of data to improve demand-forecasting and easyJet has introduced a new employee listening tool, Peakon, simulation capabilities, and to deliver further competitive to obtain real-time, honest feedback on a more regular basis pricing for tickets and ancillary products such as to help make better, data-led people decisions and to make seat allocation. easyJet a better place to work. Results of a first trial of the • Cost and operations – specific data applications have What is helpful? Whatthe future. is helpful?In 2018, we launched a new • 22,518platformWhat General were is good. helpful? Managers The engagement and score(in the of 8.0 out of culture Our opportunities to improve utilisation and productivity, fuel 10 is strong and the overall employee Net Promoter Score Our toolkit to support individuals navigate their US predominantly) other hotel workers efficiency and resilience, enabling predictive maintenance (eNPS) was 27, where any positive score is good on the Go-Ahead refers to the external provider of its employment index,people and other metrics such as InterContinentalcareers. And we’re Hotels investing Group explains in our how whoEasyJet work references in managed an external hotels, data who source, have and reducing waste, whilst also helping to minimise the Ourabsenteeism key performance and turnover, indicators including continued stating from which section of the business the biggest it engages with employees and the feedback Peakonencouraging benchmark. a greater In our cabin sense crew of reliability.community, eNPS impact of disruption by combining machine learning Leadership Development programmes, contractswas 41, a high or score letters with ofa direct service link to with our positive IHG predictions of delays and optimisation algorithms to find effects came. received.including Leading Others and Career andcustomer perception whose costs ofare crew. borne Our Tegel by those employees hotels. are the best solution to the problems. During 2018 easyJet 2018-2020 target Insights, to ensure we are developing the exceptionally positive about their experience with easyJet implemented an OTP simulator that allows for rapid and Engagement next generation of leaders. with the base registering an eNPS of 67. easyJet will work often pre-emptive action resulting from first wave issues Track and report employee engagement to maintain and improve further its employee engagement. each day. Protect and grow the core continued each year. easyJet is seen as an attractive employer and featured in • Customer – both on board to complement existing Employee engagement the Top 50 places to work in the UK Employees’ Choice demand and personalisation initiatives, such as food and In 2018, IHG achieved an average Understanding how our employees feel is Awards on Glassdoor UK, voted by easyJet employees. beverage, and ‘off-board’ where we will develop our Non-financial continued engagement score of 86%. important to us. Twice a year, we measure easyJet continues to recruit to support its growth, adding capability to make the most efficient, effective decisions over 742 pilots and 1,544 cabin crew during the 2018 financial to the customer’s benefit such as in managing disruption Description: We measure how Performance: Our rail operations this through our employee engagement

75 For further progress in detail against Employee engagement year (2017: 399 pilots and 1,076 cabin crew). 29% of positions (for example by implementing the Optym solution in future 67 engaged our people are through recorded a second consecutive year 65

63 all of our 2018-2020 targets, please survey, Colleague HeartBeat, and ask for index (%) 62 60 59 58 annual independent employee of strong improvement reflecting were also filled by internal candidates (2017: 36%). Retention planning from 2019). surveys, conductedsee independently our Performance the focus we pages: have on colleague 33 to 36. their feedback about how we can make 47 46 rates remain good with total employee turnover at 6.5% by ORC, across all of our businesses. involvement, personal development IHG an even better place to work. In 2018, easyJet’s new Chief Data Officer, Luca Zuccoli, joined the 62 Bus and performance management. (2017: 7.4%), while flight deck turnover was 4.9% (2017: 3.6%). We are a people business.Whilst a similar Whether approach is IHG achieved an average engagement score There is also a strong pipeline of pilots and crew who want business in August and has started the process of hiring an adopted in our bus operation, our of 86%. Our results garnered recognition to work at easyJet, with 75,000 applications during the 2018 additional 28 data scientists to join the existing team of 22. 75 Rail 15 16 17 18 19 someone is a guest stayingscore dipped in slightly one reflecting of our a time lag between action being from AonHewitt as a Best Employer, financial year, an increase of 7,800 compared to 2017. As a result easyJet has made a major step up in its data hotels, an owner investingtaken and colleaguein our feedback. brands, or they are joining usTo address as a colleague, this, the timing of theirthe benchmarked against industry scores. Since 2015, particularly through its Amy Johnson initiative, activities and now has over 50 data projects in place to next survey will be delayed. drive the above benefits, more than doubling the number choices are shaped by our people. The As we franchise 82% of our hotels globally, easyJet has been seeking to encourage more women to become pilots, to help address the significant gender of initiatives in the last six months. easyJet expects to secure Description:experiences We measure we create,Performance: the services Absenteeism we offer, we do not employ the majority of our benefits from the 2019 financial year which will deliver

Absenteeism 4.2 imbalance in the worldwide pilot community. easyJet’s current

3.9 3.9 employee absence by the fell in the year largely due to 3.8 3.8 the opportunities we afford. A diverse and substantial future annualised benefits. (% of working hours) percentage of scheduled hours an improvement at GTR. colleagues. When our entire Group’s estate target is that 20% of its new entrant co-pilots attracted by inclusive culture enriches all of this, and it not worked due to unplanned is taken into account, more than 400,000 2020 are female. In the 2018 financial year easyJet attracted OUR PROMISE absenceplays from a work, critical across the role in how we work better 3.8 whole Group. people work across IHG branded hotels 15% female new entrant co-pilots, up from 13% in the 2017 easyJet has consolidated and updated its customer and together, growing our business and and corporate offices. Of those employees financial year and 5% when the initiative was started in 2015. employee values and behaviours, which it is now calling Our delivering on our purpose of providing Promise. This is one single, simple way to bring together the 15 16 17 18 19 directly employed by IHG, as at In May, easyJet announced the appointments of a number True Hospitality for everyone. 31 December 2018: of new Airline Management Board (‘AMB’) members, to take elements which will support Our Plan: Description: Employee turnover Performance: The slight easyJet forward in alignment with the updated strategy: Employee turnover (%) • Safe and responsible: safety is our number one priority 11.4 11.3 Guiding us all is a set of everyday values, 11.0 is measured by the percentage of improvement in the year was • 7,598 people globally (including those in 10.5 10.5 employeeswhich who shape leave the Groupthe waydriven primarily we work by and lower providelevels our corporate offices, central reservations • Garry Wilson as Chief Executive of easyJet Holidays • On our customers’ side: we always think about the 11.00 during the year. of employee turnover at GTR. customer and see things from their point of view a strong sense of shared purpose. offices and owned hotels (excluding those • Luca Zuccoli as Chief Data Officer • In it together: we are one team and work together in all in a category below)), whose costs were • Flic Howard-Allen as Chief Communications Officer we do borne by the Group; • Ella Bennett as Group People Director 15 16 17 18 19 • Always efficient: we will always be efficient and focus on • Thomas Haagensen was promoted to Group • 5,214 people who worked directly on what matters most Description: Across the rail Performance: After a substantial Markets Director SPADs (per million miles) behalf of the System Fund and whose costs • Forward thinking: we anticipate what we need tomorrow 0.85 industry train operating companies reduction in the prior year, SPADs • Lis Blair was promoted to Chief Marketing Officer 0.77 0.76 report signals passed at danger increased but remained below were borne by the System Fund; and and consider how what we do today might affect us in 0.69 0.76 0.63 (SPADs). Many SPADs happen each the levels of two years ago. the future year and Domost the have little or no AimOur performance is significantlyShow potentialright to cause thing harm. All SPADs higherbetter than industry averagewe of care are given a risk ranking which 1.2 SPADs per million miles. This brings a clarity of purpose and understanding for all of considers the actual and possible our employees that will drive better customer service and 15 16 17 18 19 consequences of each incident. long-term success for the business.

Description: RIDDOR (reporting Performance: After last year’s RIDDOR accidents Introduction Quick read of injuries, diseases andInvestor dangerous expectationssignificant fall, RIDDORand accidents Appendix A – questions and Appendix B – examples of Appendix C – participants Appendix D – regulatory and 0.70 4 5 (per 100 employees) 1 2 3 18 0.62 0.61 occurrences regulations)company relates to viewsincreased but were 20% below disclosures developing practice and processeasyJet plc Annual Report andmarket Accounts initiatives 2018 a workplace incident that results five years ago. We maintain a high 0.51 in any absence from work for over priority in ensuring that our people 0.42 0.61 seven days or any legallyCelebrate reportable have theWork necessary better tools and incident to the Healthdifference and training totogether do their jobs safely. Safety Executive. 15 16 17 18 19 Attracting, rewarding and developing talent We took steps in 2018 to evolve our talent practices and enhance our Room to Grow promise. We launched our new approach to performance, and initiated frequent check-in conversations, giving our people more opportunities to gather feedback on their 36 The Go-Ahead Group plc Annual Report and Accounts 2019 performance, and discuss development and career aspirations. We are also establishing forums to help identify and retain top talent, and add rigour to our succession planning, ensuring we are developing a diverse pipeline of talent for

IHG | Responsible Business Report 2018 18 2018 INTEGRATED ANNUAL REPORT 29 SR

Petros Papageorgiou is one of the Our people asked for further simplification SSR Company’s employees who benefited of processes and they see opportunities to be more empowered to find better ways SI from our Fast Forward programme. of performing their work. Petros is a Channel Sales Manager in Italy. He has recently Going forward, especially in light of the 2018 completed our Fast Forward programme, an experiential survey results, we will also ask our people to learning programme for people with leadership potential suggest ways to address the concerns that and an aim to progress to a function head role. surfaced in the survey, ensuring we remain an organisation with high engagement and PETROS What has helped you to become a candidate strong growth. PAPAGEORGIOU for a promotion? Our performance framework also aligns CHANNEL My job is to help the 400 business developers on my with our core values. In managing team and team serve our 9,000 customers successfully through SALES individual performance, we apply an iterative activating our full portfolio. What has made the difference MANAGER ‘plan, act and review’ cycle to continuously was communicating the strategy so that our people improve. This allows us to bridge our strategy understand our priorities, involving customers in and its execution by aligning priorities across developing our plans, and removing internal barriers functions and teams. which keep business developers from serving our customers. This way, I achieved both revenue and profit To ensure that our people balance short- targets, as well as increases in customer satisfaction and long-term objectives, in addition to and employee engagement numbers. planning and assessing performance against financial objectives, we also plan and measure On a personal level, the skills learned going through achievement for fostering partnerships, the Fast Forward programme are very relevant for what STRATEGIC REPORT innovation, people leadership, managing I would need for my next role. I knew that the majority resources and compliance with policies of employees who go through this programme earn and procedures. promotions within a year of graduating, so I was very Our role in society continued interested in participating. We aim to further simplify elements of our performance framework and improve our How does the Fast Forward programme help ability to support growth by fostering ongoing you to accelerate your development? conversations between managers and team members about priorities, goals, progress The Fast Forward programme has taught me to reflect and lessons learned. Because continuous and ask for feedback. This helps me avoid making the learning supports development and improves Workforce-related corporate reporting same mistakes twice, so I’ve been able to achieve more 51 performance, we also facilitate real-time and become more effective. It has helped me develop feedback from employees’ networks. future business scenarios and anticipate the implications. SSE plc By participating in Fast Forward, I also got to work on a What is helpful?cross-country project assignment on evolving our field Annual Report 2019 Coca-Cola HBC AG sales as we transform into a Total Beverage Company and SSE provides a performance summary of workforce-related informationand got across exposure years for to the work of the country senior 2018 Integrated Annual Report Page 29 PEOPLESustainability Report 2019 comparison purposes. leadership team. This has made me more comfortable with new business situations, helped me to make better decisions in complex situations, and to become better at Through their shared talents, skills and values, SSE’s employees enableserving the company our customers. to create long-term value for shareholders and for society. SSE must therefore create an What is helpful? engaging and supportive environment where people want to work and where they can Response from Sanda Parezanovic Coca-Cola provides a comparison to peer results, contribute and develop. Core to this, and meeting SSE’s strategic challenges, is being a In addition to nurturing the full potential of our people, thereby providing helpful context. responsible employer that respects individuals and values the workforcewe consider as a whole. building a pipeline of future leaders critical for our growth. The Fast Forward programme is designed Performance summary to provide exposure to professional experiences that Unit 2018/19 2017/18 are not available at an employee’s current job. These are 90 Total employees Headcount 1 20,370 20,786 Gender split of employees Headcount 1 male/female 13,974/6,396complemented 14,321/6,464 with mentoring from senior leaders, (% male/female) (68.6/31.4)coaching from (68.9/31.1)experienced professionals and extensive 84 Gender split of Board of Directors Headcount 2 male/female skill7/3 building modules.7/3 This experiential learning

(% male/female) (70/30) (70/30) 89 CCHBC SANDA programme has a strong track record of accelerating 88 CCHBC 88 CCHBC Gender split of senior management 3 Headcount 4 male/femalePAREZANOVIC 44/10 38/9 78 (% male/female) (81.5/18.5)development of(80.9/19.1) our talent towards senior leadership roles. GROUP HUMAN Total Recordable Injury Rate (employees Per 100,000 hours worked In0.16 2018, our talent management0.20 practices were and contractors combined) 72 RESOURCES recognized by the Chief Learning Officer Learning in Retention/turnover rate % 86.8/13.2 86.3/13.7 100 80 FTSE FMCG norm 81 FMCG High-performing norm 89 High-performing DIRECTOR 86 bottlers Coca-Cola

Practice awards with a Silver Talent Management Award. 85 System Coca-Cola Total internal and external recruitment Number (% internal) 3,430 (32.5%) 3,899 (33.8%) 66 Average length of service Years 9.8 9.5 Employees on permanent contracts % 95.1 95.3 Learning and development expenditure 5 £m 11.1 12.4 60 16 17 18 18 18 18 18 18 Investment in pipeline programmes 6 £m 17.2 15.4 Average training per FTE Hours 22 22 Employee engagement: 7 Speak up contacts made Number 112 105 outperforming peer companies (%)

1 As at 31 March in each financial year. Figures include all SSE UK and Ireland employees, excludes contingent/agency staff. 2 As at 31 March in each financial year. For more information see page 102 . 3 SSE defines “Senior management” for these purposes as its Executive Committee and direct reports as at 31 March each year, which ties in with the Hampton-Alexander and UK Corporate Governance Code definitions and best reflects strategic decision-making and oversight within the company. The figures for the Executive Committee include the relevant members of the Committee in each financial year, as well as the Company Secretary and MD Corporate Affairs and Sustainability, who attend all Committee meetings. Administration employees have not been included when calculating the direct reports to these individuals. Note that significant changes were made as at 1 April 2019, see the “Gender balance” section on page 34  for more detail. 4 As at 31 March in each financial year. 5 Total internal and external learning and development expenditure excluding pipeline programme investment. 2017/18 figures have been restated to include relevant investment data not previously captured. 6 Total cost of apprentice, graduate, Technical Skills Trainee and other pipeline programmes, including salary costs. 7 Number of contacts made through both internal mechanisms and through SSE’s externally hosted whistleblowing channel. Figures are for calendar year.

32 SSE plc Annual Report 2019

SAP SE Integrated Report (Excerpt) 2018 Pages 4, 73, 253, 256

What is helpful? SAP discloses a range of employee metrics, such as an external ranking (Glassdoor), retention rate and tenure, with performance presented across years and definitions. This disclosure also links to personnel expenses and definitions.

What is helpful? Stora Enso OYJ Stora Enso provides more granular detail on the workforce, including across locations and age ranges. It also highlights minimum wage Annual Report 2018 considerations and payment terms across different, including lowest wages compared to minimum wages on a country-by-country basis. Page 21

21 – Social agenda – Employees and wider workforce wider and – Employees agenda – Social Sustainability 2018: Enso Stora Compensation and equal opportunity1 Our lowest wages compared to local minimum wages1 Ratio of highest individual compensation Female employee compensation Ratio of our lowest wage to the local minimum wage to median compensation2 compared to male employees1 3 2018 2017 2018 2017 2018 2017 Brazil² 1.0 1.1 China 89 81 101% 100% China³ 1.2 1.3 Finland 15 14 97% 97% Estonia 1.1 1.0 Germany 5 5 93% 97% Laos 1.2 1.3 Poland 24 19 87% n/a Latvia 1.1 1.2 Russia 30 31 93% n/a Lithuania 1.4 1.0 Sweden 43 37 99% 100% Poland 1.0 1.0 ¹ Figures for the six largest countries in terms of the total number of employees. Russia 1.5 1.0 ² The ratio shows how many times larger the highest individual annual total compensation, including incentives, is compared to median 4 compensation. For 2018 reporting, the calculation methodology was developed to include incentives consistently. The 2017 figures are Uruguay 1.0 1.1 recalculated accordingly for comparability. 1 In material locations of operations, compared to minimum wage levels set at national, state, or provincial level as applicable. ³ Calculated using weighted averages based on gender comparisons within each country’s employee categories as applicable. The ratio shows how many times larger our lowest wage is compared to the local minimum wage. Figures for China and Germany based on samples due to data availability. 2 Including employees of our 50%-owned joint operation Veracel. 3 Due to variations in regional minimum wages, the ratio is calculated as a weighted average for Stora Enso’s units in China. The weighting is based on the units’ total number of employees. Share of female employees at Stora Enso 4 Including employees of our 50%-owned joint operation Montes del Plata. 2018 2017 Total number of employees at year-end1 25 880 25 210 Share of women among all employees (%) 26% 26% Share of women among senior managers (%) 20% 21% Women in the Group Leadership Team 5 out of 12 5 out of 12 Women on the Board of Directors 3 out of 9 3 out of 9

1 Excluding employees of our 50%-owned joint operations Montes del Plata and Veracel. Reporting changed for the 2018 report from full-time equivalents to headcount. 2017 figure restated accordingly.

Employee distribution and turnover1

China4 Finland Germany Poland Russia Sweden Group total Female Male Female Male Female Male Female Male Female Male Female Male Number of employees 2 590 (48%) 2 780 (52%) 1 320 (20%) 5 150 (80%) 220 (21%) 830 (79%) 450 (20%) 1 770 (80%) 270 (24%) 860 (76%) 1 070 (21%) 4 100 (79%) 25 880 Up to 30 990 1 240 120 560 30 140 90 340 30 130 140 510 21% 31–50 1 580 1 470 750 2 560 100 310 240 970 200 610 550 1 590 51% 51 and over 20 70 450 2 030 90 380 120 460 40 120 380 2 000 28% Number of hires2 1 070 (44%) 1 360 (56%) 80 (20%) 330 (80%) 30 (50%) 30 (50%) 30 (27%) 80 (73%) 30 (33%) 60 (67%) 100 (30%) 230 (70%) 4 040 Up to 30 620 930 20 70 20 20 10 40 10 30 30 80 53% 31–50 450 420 50 200 10 10 20 30 20 30 60 120 42% 51 and over 0 10 10 60 0 0 0 10 0 0 10 30 5% Number of leavings3 1 230 (49%) 1 300 (51%) 60 (20%) 240 (80%) 20 (29%) 50 (71%) 20 (13%) 130 (87%) 10 (14%) 60 (86%) 100 (28%) 260 (72%) 3 890 Up to 30 720 840 0 10 0 10 0 30 10 10 10 30 47% 31–50 510 450 20 70 10 10 10 50 0 40 60 90 39% 51 and over 0 10 40 160 10 30 10 50 0 10 30 140 14% Employee turnover 48% 47% 5% 5% 9% 6% 5% 7% 5% 7% 9% 6% 15% 4 1 Figures for the six largest countries in terms of the total number of employees. Rounded to the nearest 10. 2 Hires: numbers of permanent employees joining the company. Excluding hires due to acquisitions. 3 Leavings: numbers of permanent employees leaving voluntarily or due to restructuring, retirement or death. Excluding leavings due to divestments. 4 The employee turnover in China mainly comes from Stora Enso China Packaging units where packaging manufacturing operations are relatively labor intensive and the number of employees vary according to seasonality. The high employee turnover of China Packaging units also has a significant impact on the Group employee turnover. The Group employee turnover excluding China Packaging units is 7%.

Introduction Quick read 1 Investor expectations and 2 Appendix A – questions and 3 Appendix B – examples of 4 Appendix C – participants 5 Appendix D – regulatory and company views disclosures developing practice and process market initiatives Strategic Report Rolls-Royce Holdings plc Annual Report 2018 46 Sustainability – Our People

Employee engagement Diversity and inclusion promoting the opportunities that education and career choices in STEM can offer. We provide a variety of channels to We are committed to building an inclusive communicate and engage with, and listen culture and diverse workforce. We believe We continue to work with organisations to, our employees and their representatives. that a culture of inclusion is paramount to such as Women in Science and Engineering, creating an environment where all our Women in IT, Women in Finance and Women We encourage participation and people can be at their best. in Nuclear to boost our visibility amongst engagement throughout the organisation, potential female talent. We support initiatives through both formal and informal channels, Our employee resource groups (ERGs) driven by these organisations and others, including our intranet, newsletters and support this by connecting people with and sponsor awards such as Female employee magazines. Team briefings and shared characteristics or experiences. Undergraduate of the Year and Young employee forums allow employees to We have 18 ERGs globally, including our Woman Engineer of the Year to celebrate discuss key developments and business PRISM and Propel with Pride groups for success and showcase role models in the performance, and to contribute their views. LGBT+ employees; women and gender engineering sector. diversity groups; and faith and ethnicity We consult and work closely with elected based groups. Additional support networks Our global diversity and inclusion and employee representatives through are also available in key geographies, anti-discrimation policies ensure that all well-established frameworks, including such as working parents, veterans and employees, regardless of gender, race, our European Works Council. disabilities groups. religion, physical ability or any other Our annual employee engagement survey characteristic, are treated with dignity and Diversity continues to be a significant helps provide a measure of success for our respect, and feel safe and empowered to challenge for the engineering sector as a engagement activities. This year, 57% of work without fear of bullying and whole, but we are making progress as an our in-scope employees participated in the harassment. At the end of 2018 we organisation. We are committed to increasing survey. The 2018 results highlighted strong launched a global anti-bullying campaign, the number of women at all levels, and have belief in our Company vision and values. championed by our Chief People Officer. made good progress towards our 2020 Our sustainable employee engagement This will continue into 2019 and will focus diversity targets during the year. We are score remained stable for the third year on encouraging employees to recognise actively recruiting from groups typically running, despite the ongoing and challenge inappropriate behaviours. under-represented in our sector, particularly restructuring programme. women and minority ethnic groups. To We give full and fair consideration to all Our incentive schemes and all-employee support the number of women in senior employment applications from people with share programmes enable everyone to manager positions we have introduced disabilities and support disabled employees share in our success. 50:50 shortlists and have partnered with in the workplace, helping them to make the Workforce-related corporate reporting the FT 125 Women’s Forum in the UK. best use of their skills and expertise to 54 For more information on the Board’s reach their full potential. stakeholder engagement see Through our community investment and What is helpful?Corporate Governance section, education outreach programmes we aim Rolls-RoyceFor Board membersHoldings byplc gender page 67. to engage young people from diverse see page 59. Rolls-Royce shows progress against aims across a number of years, with targets clearly 2018 Annual Report backgrounds in STEM subjects at an early indicated, and definitions included demonstrating consistency. PageFor 46 Board diversity, see pages age. Our activities are focused on 73 and 74.

Progress against our 2020 diversity targets In 2017 we launched a diversity and Female employee population 1 Female senior manager population 2 inclusion strategy with global targets to increase female participation at all levels 2020 TARGET 17% 2020 TARGET 25% by 2020. These are supported by local 2018 15.5% (8,300) 2018 14.7% (13) targets in key regions where we face 2017 15.1% (7,400) 2017 13.6% (18) specific diversity challenges associated 2016 2016 with ethnicity, nationality and age. 14.8% (7,400) 11.4% (16) 2015 15.2% (7,700) 2015 7.3% (14) Our inclusiveness score is measured by a 2014 14.8% (8,000) 2014 6.7% (12) subset of our employee engagement survey, including questions related to whether

people feel they can be themselves at work 3 3 and are treated with fairness and respect. Female graduate population Female high potentials population

2020 TARGET 30% 2020 TARGET 30% Inclusiveness score 2018 26% 2018 26% 2020 TARGET 84 2017 23% 2017 25% 2018 81 2016 24% 2016 25% 2017 80 2015 26% 2015 25% 2016 79 2014 25% 2014 24%

1 Employee headcount data is calculated as the average number of full time equivalents throughout the year. Certain joint ventures are classified as joint operations. As a result, 1,000 employees associated with joint operations are included within our overall headcount, however we do not collect diversity information from these employees, therefore they are omitted from this data. 2 Senior management population for 2018 is calculated as Executive Team and ELG population (2018 total: 88), prior years data refers to the senior leadership team that has been replaced by the ELG through restructuring. 3 The graduate and high potentials targets refer to the number of employees on development programmes as at 31 December each year.

Introduction Quick read 1 Investor expectations and 2 Appendix A – questions and 3 Appendix B – examples of 4 Appendix C – participants 5 Appendix D – regulatory and company views disclosures developing practice and process market initiatives National Grid Annual Report and Accounts 2018/19 Strategic Report | Our commitment to being a responsible business

National Grid Annual Report and Accounts 2018/19 Strategic Report | Our commitment to being a responsible business

Promoting an inclusive required by the Companies Act 2006 Employee turnover and diverse workforce (Strategic Report and Directors’ Reports) Turnover is defined as employees who have Our inclusion and diversity policies Regulations 2013. left in the last 12 months as a percentage of demonstrate our commitment to providing headcount last year. Voluntary turnover relates We define ‘senior management’ as those Promoting an inclusive requiredan inclusive, by the Companies equal and Act fair 2006 working Employee turnover to employees who have left through either environment by: managers who are at the same level, or resignation or retirement. Non-voluntary and diverse workforce (Strategic Report and Directors’ Reports) Turnoverone level is defined below, as employees our Group who Executive have Regulations• driving 2013. inclusion and promoting equal attrition includes any other leave reasons – Our inclusion and diversity policies left in theCommittee. last 12 months Our definition also as a percentage includes of including dismissal, severance, etc. demonstrate our commitment to providing opportunities for all; headcountthose who last year. are Voluntary directors turnover of subsidiaries, relates or an inclusive, equal and fair working We define• ensuring‘senior management’ our workforce, as whether those part-time,to employees who have who responsibility have left through for planning, either directing Non- environment by: managersfull-time who are or at temporary, the same level, are treated or fairly andresignation or controlling or retirement. the activities Non-voluntary of the Group, or a one level below, our Group Executive Voluntary voluntary Total • driving inclusion and promoting equal with respect; attrition strategicallyincludes any significant other leave part of reasons the –Group, Committee. Our definition also includes includingand are dismissal, employees severance, of the Group. etc. % % % opportunities for all; those who• eliminating are directors discrimination; of subsidiaries, and or • ensuring our workforce, whether part-time, who have• ensuringresponsibility that selectionfor planning, for employment,directing UK 6.4 5.9 12.3 Gender demographic Non-as at 31 March 2019 full-time or temporary, are treated fairly and or controllingpromotion, the activities training, of the development, Group, or a benefit Voluntary voluntary Total with respect; strategicallyand significant reward is part of based theon Group,merit and in line US 6.6 4.5 11.1 • eliminating discrimination; and and are employeeswith relevant of the Group. legislation. Our% %Senior % Whole NGV 8.3 12.8 21.1 Board1 management2 Company3 • ensuring that selection for employment, UK 6.4 5.9 12.3 6 National Grid Annual Report and Accounts 2018/19 Strategic Report | Our commitment to being a responsible businessGenderA demographic total of 18.1% of as our at total 31 Marchworkforce 2019 have Total 6.6 5.1 11.7 promotion, training, development, benefit Male 8 171 17,0 8 4 declared themselves to be of ‘minority’ racialUS 6.6 4.5 11.1 and reward is based on merit and in line or ethnic heritage. We recognise the value a 6. Included in ‘Total’ are Non-executive Directors and Female 4 81 5,492 Executive Directors. with relevant legislation. diverseOur workforce andSenior inclusive cultureWhole bringNGV 8.3 12.8 21.1 Board1 management2 Company3 Total 6 12 252 22,576 to our business. We have many initiatives to Total 6 6.6 5.1 11.7 Training days per employee A total of 18.1% of our total workforce have encourage and promote diversity and inclusion. declared themselves to be of ‘minority’ racial Male 8 171 17,0 8 4 Male (%) 66.7 67.9 75.7 From 1 April 2018 to 31 March 2019, the or ethnic heritage. We recognise the value a 6. Included in ‘Total’ are Non-executive Directors and Female During 2018/19,4 in the US81 we attracted5,492 64% Executive Directors.Female (%) 33.3 32.1 24.3 total number of training days delivered per diverse workforce and inclusive culture bring female applicants and 42% ethnically and employee (as recorded in our HR systems), to our business. We have many initiatives to Total 6 12 252 22,576 across the whole of National Grid is 5.3 days Workforce-related corporate reporting racially diverse applicants to our graduate Training1. days‘Board’ perrefers employee to members as defined on the encourage and promote diversity and inclusion. Company website. (6.5 in 2017/18). During 2018/19 there was 55 Promoting an inclusive required by the Companies Act 2006 EmployeeMale (%) turnoverdevelopment66.7 roles. We67.9 also took 51%75.7 femaleFrom 1 April 2018 to 31 March 2019, the applicants and 49% ethnically and racially 2. ‘Senior management’ refers to Band A/B employees a 1.2 days’ reduction in training received and diverse workforce (Strategic Report and Directors’ Reports) Turnover is defined as employees who have total numberas well of astraining subsidiary days directors. delivered per RegulationsDuring 2018/19,2013. in the US we attracted 64% Female (%)diverse33.3 applicants into32.1 our internship24.3 by employees, primarily driven by the US Our inclusion and diversity policies female applicants and 42% ethnically and left in the last 12 months as a percentage of employee3. This (as measurerecorded is also in ourone ofHR our systems), Company KPIs. For more workforce contingency plan for seven labour demonstrate our commitment to providing headcount lastprogrammes. year. Voluntary Our UKturnover Graduate relates Programme across theinformation, whole of see National page 18. Grid is 5.3 days racially diverse applicants to our graduate 1. ‘Board’ attracted refers to members 20% female as defined applicants on the and 58% disputes and the introduction of innovative an inclusive, equal and fair working We defineNational ‘senior Grid management’ Annual Report and as Accountsthose 2018/19to employeesCompany website.Strategic who Report have left| Our through commitment either to being a responsible(6.5 in business 2017/18). During 2018/19 there was National Grid plc Whatmanagers developmentis helpful? who are roles. at the We same also level, took or 51% female ethnically and racially diverse applicants. Total headcount4 training design and scheduling processes. environment by: applicants and 49% ethnically and racially resignation2. ‘Senior or management’ retirement. refers Non-voluntary to Band A/B employees a 1.2 days’ reduction in training received Nationalone level Grid below, presents our aGroup range Executiveof metrics, including someattrition baselineas well includesOur UK as subsidiarymetrics any Industrial other suchdirectors. leave as Placement turnover, reasons and–work Studentpatterns by employees, and promotionThe tables primarily belowrate, drivenby show gender bythe the breakdown US of • driving inclusion and promoting equal Committee.diverse Ourapplicants definition also into our includesinternship 3. This measureInternship is also programmesone of our Company attracted KPIs. For 30% more female Annual ReportPromotion and Accounts rate 2018/19 opportunities for all; and location.programmes. Our UK Graduate Programme includinginformation, dismissal, see page 18.severance, etc. workforceemployees contingency by work plan pattern for seven and labour diversity. those who are directors of subsidiaries, or applicants and 55% ethnically and racially disputes and the introduction of innovativePage 43 The table below shows the rate of promotion • ensuring our workforce, whether part-time, who attractedhave responsibility 20% female for applicantsplanning, directing and 58% diverse applicants. within the business. Promotion rate is defined ethnically and racially diverse applicants. Total headcount4 Non- training Workdesign pattern and scheduling processes. full-time or temporary, are treated fairly and or controlling the activities of the Group, or a Voluntary voluntary Total as number of employees who were promoted with respect; strategicallyOur UK significantIndustrial Placement part of the andGroup, Student The tablesOur below US business show the created breakdown a record of number to a higher grade as a percentage of Internship programmes attracted 30% female Promotion rate • eliminating discrimination; and and are employees of the Group. employeesof opportunities by work% pattern for these and% diversity. students% and Full-time Part-time5 headcount last year. applicants and 55% ethnically and racially graduates, with 63 graduate development The table below shows the rate of promotion • ensuring that selection for employment, diverse applicants. UK 6.4 5.9 12.3 within the business. 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We actively support Black, adjustments in job design and provide discussed and considered the culture of the IntroductionNGV 436 70.8 Quick read180 29.2 Investor expectations and Appendix A – questionsTotal and Appendix B – examples of10.0 Appendix C – participants Appendix D – regulatory and Asian, and minority ethnic (BAME) initiatives, appropriate training for existing employeesCompany. 14. In You can scope are read active, more permanent about employees. the2 Out of scope 3 4 5 and Nicola Shaw is actively involved in the who become disabled. We are committed to arecompany temporary views employees. disclosures developing practice and process market initiatives Total 6 17,084 75.7 5,492 24.3 Board’s culture on page 53. BAME/Diverse Leaders Programme. We are equal opportunity in recruitment, promotion 5. Employees recorded in our system as part time, or have Keeping our Board and Group Executive <1 full time equivalent. also part of the 6th cohort of Business in the and career development for all employees,The Group Executive Committee also Committee updated Community’s BAME Cross Organisational Ethnicityincluding demographic those with as atdisabilities. 31 March Our 2019 policy receives aGender bi-annual update on people-related Our Board and Group Executive Committee Mentoring Circles Programme. Gurvinder ‘Minority’recognises refers to racial/ethnic the right for heritageall people to workmatters. In addition to these reports, the receive regular updates on matters relating Badesha, our Head of Assurance, is one of declarationsin an as environment recorded in that our issystem. free from Committee receives regular talent updates to our people. For the Board, this includes the lead mentors on the programme, and our discrimination. Those who have not stated their ethnicity and considers the remunerationMale structureFemale for four key focus areas for our people and UK HR Director, Sarah Stanton, is the UK are excluded from the baseline. senior management. It also monitors safety organisation: our culture, diversity, the Executive Sponsor of the Accessibiility Our leaders support a diverse workforce. andFor operational performance# and% receives# % people we need for the future and driving for Group that helps disabled people overcome example, Dean Seavers was featured in the White 17,6 34 reports onUK matters 4,023of business73.7 conduct,1,438 as 26.3 efficiency. The Board also receives updates barriers and improve their lives. 2018 Black History Month Magazine givingwell his as risk and compliance matters for on our employee opinion survey results and Minority perspective on inclusion and diversity3,910 at review. This includesUS 12,625 breaches76.5 of the ‘Code3,874 23.5 action plans. Additionally, this year the Board The gender demographic table that follows National Grid. We actively support Black, of Ethical Business Conduct’ and bi-annual discussed and considered the culture of the Declined to state 1,032 NGV 436 70.8 180 29.2 shows the breakdown in numbers of Asian, and minority ethnic (BAME) initiatives,reports from the Group Ethics and Company. You can read more about the employees by gender at different levels of the and Nicola Shaw is actively involved in the White (%) 81.9 Compliance Committee.6 Board’s culture on page 53. organisation. We have included information BAME/Diverse Leaders Programme. We are Total 17,084 75.7 5,492 24.3 Minority (%) 18.1 relating to subsidiary directors, as this is also part of the 6th cohort of Business in the The Group Executive Committee also Community’s BAME Cross Organisational Ethnicity demographic as at 31 March 2019 receives a bi-annual update on people-related Mentoring Circles Programme. Gurvinder ‘Minority’ refers to racial/ethnic heritage43 matters. In addition to these reports, the Badesha, our Head of Assurance, is one of declarations as recorded in our system. Committee receives regular talent updates the lead mentors on the programme, and our Those who have not stated their ethnicity and considers the remuneration structure for UK HR Director, Sarah Stanton, is the UK are excluded from the baseline. senior management. It also monitors safety Executive Sponsor of the Accessibiility and operational performance and receives Group that helps disabled people overcome White 17,6 34 reports on matters of business conduct, as barriers and improve their lives. well as risk and compliance matters for Minority 3,910 review. This includes breaches of the ‘Code The gender demographic table that follows Declined to state 1,032 of Ethical Business Conduct’ and bi-annual shows the breakdown in numbers of reports from the Group Ethics and employees by gender at different levels of the White (%) 81.9 Compliance Committee. organisation. We have included information relating to subsidiary directors, as this is Minority (%) 18.1

43 Workforce-related corporate reporting 56

Section 4 Appendix C – participants and process

Process Companies Investors Participants join projects by responding to a - First Group plc - Artemis Investment Management LLP public call or being approached by the Lab. An iterative approach is taken, with additional - Fresnillo plc - British Columbia Investment Management Corporation participants sought during the project, though it - Halma plc - Data user workshop group & Japan Stewardship forum is not intended that the participants represent a statistical sample. References made to views of - Howdens plc - Evenlode Investment Management Limited ‘companies’ and ‘investors’ refer to the individuals - InterContinental Hotels Group plc - Glass, Lewis & co LLC from companies and investment organisations that participated in this project. Views do not necessarily - LandSecurities Group Plc - Hermes Fund Managers Limited represent those of the participants’ companies or - SSE plc - Invesco Fund Managers Limited organisations. - Unilever plc - Legal & General Investment Management Limited Views were received from a range of UK and international institutional investors, analysts We also heard from a range of companies at - National Employment Savings Trust (NEST) Corporation and retail investors through a series of in-depth roundtables organised by design agencies, and - Office of the New York City Comptroller interviews and roundtables. We also heard from a we thank all of those companies for their input. range of companies through FRC-led roundtables, - RBC Global Asset Management (UK) Limited one-to-one interviews or roundtables with other agencies. - RPMI Limited - S&P Global Inc Participants - Schroders Investment Management Ltd Thank you to all of the participants for contributing their time to this project. - Sustainalytics The Lab received a great deal of support from a - UAW Retiree Medical Benefits Trust wide range of organisations throughout this project, particularly those organisations that have been - USS Investment Management Ltd working in this area for a number of years. This - Retail Investor Representatives (2) assistance has been invaluable, and we thank these organisations for giving so generously of their time. - US Institutional Investors (5)

Section 5 Appendix D – regulatory and market initiatives

Introduction Quick read 1 Investor expectations and 2 Appendix A – questions and 3 Appendix B – examples of 4 Appendix C – participants 5 Appendix D – regulatory company views disclosures developing practice and process and market initiatives Workforce-related corporate reporting 59

It further expects explicit reference to the pay and conditions of the workforce in Regulatory and market initiatives consideration of the executive compensation landscape and award. Additional guidance Legal and regulatory requirements is provided in the Guidance on Board Effectiveness, for example that “Communication and engagement will involve those with formal contracts of employment (permanent, Companies are required by law to report on some workforce/employment issues, fixed-term and zero-hours) and other members of the workforce who are affected notably section 172 of theCompanies Act 2006, which requires directors to have by the decisions of the board. For example, companies should consider including regard to a number of matters including employees. individuals engaged under contracts of service, agency workers, and remote workers, regardless of their geographical location. Companies should be able to explain who they Section 4141C of the Act requires companies to provide a strategic report. Section 414C have included and why.” states that: The 2018 Guidance on the Strategic Report provides further detail of where companies “The strategic report must contain… (2)(b) a description of the principal risks may need to consider issues related to the workforce, including their business and uncertainties facing the company… [and] (4) The review must, to the extent environment, and principal risks and uncertainties. necessary for an understanding of the development, performance or position of the company’s business, include… (b) where appropriate, analysis using other key It also provides helpful guidance on the content of a section 172 statement, which is performance indicators, including information relating to environmental matters most of relevance in this circumstance to reporting on the interests of the company’s and employee matters.” employees, but also the reference to the long term and high standards of business conduct. There are also a range of employment laws, such as health and safety requirements (the Health and Safety at Work etc Act 1974 is the primary piece of legislation covering Also in 2018, the FRC published The Wates Corporate Governance Principles for Large occupational health and safety), and disclosures, such as theGender Pay Gap, CEO pay Private Companies, which also refer to workforce issues, including around engagement ratio reporting andModern Slavery Statements, to which companies are subject. and workforce voice, compensation and culture. FRC Guidance The Taylor Review In 2018, the Financial Reporting Council published a new UK Corporate Governance Good Work: The Taylor Review of Modern Working Practices, was the result of Code. The Code now includes references to the workforce in relation to Board Matthew Taylor’s independent review commissioned by the Prime Minister, with the Leadership and company purpose and Remuneration. Principle E is as follows: “The aim of providing recommendations to ensure that all work in the UK economy is fair board should ensure that workforce policies and practices are consistent with the and decent with realistic scope for development and fulfilment. The review sets out 7 company’s values and support its long-term sustainable success. The workforce principles to address the challenges facing the UK labour market, such as new forms should be able to raise any matters of concern.” The Code references the importance of work and working models. In its response to the Taylor Review, the Government of board oversight of the culture of the company, its role in considering reward and supported the aim regarding fair and decent work, aims which are often described as incentivisation, and disclosures regarding ongoing engagement with the workforce, ‘Good Work; outcomes. including specifically referencing three options for encouraging such engagement. The Government consulted on a range of topics arising from the Taylor Review, including employment status and transparency. The Government’s Good Work Plan, published in December 2018, outlines the vision for the future of work in the UK.

Market initiatives, frameworks and research The Global Reporting Initiative (GRI) developed a standards framework to help businesses understand and communicate their impact on critical sustainability issues There have also been a range of market initiatives and research papers on the topic of such as climate change, human rights, governance and social well-being. Social workforce disclosures. Standards cover such topics as Labour/Management Relations, Occupational Health In 2017 The Investment Association produced itsLong Term Reporting Guidance, which and Safety and Training and Education. The new Occupational Health and Safety refers to workforce issues. It promotes specific narrative disclosures, including around disclosure, for example, looks at companies’ impacts on the health and safety of investments in productivity, human capital management risks and opportunities, workers and expects companies to move away from lost-time injury rates to a wider incentivisation issues for the wider workforce and the board’s view of the company’s conception of worker health, addressing ‘recordable injuries’ and ‘injury severity’. culture. It also calls for the disclosure of specific metrics, with market, geographic The Organisation for Economic Co-operation and Development has also looked at the and sector breakdowns, including identifying the following as being of particular issue of the Future of Work, focusing on skills issues, labour market transformation and importance: the risks and opportunities of automation. This data on the workforce helps build a • Total headcount – broken down by the division between full-time and part-time picture of the challenges companies are already facing, and will face in the future. employees, gender, and diversity; The CIPD has also been looking at issues surrounding the workforce for a number of • Annual turnover – including both planned and regrettable turnover; years. It has been carrying out research into Investor Perspectives on people, data and reporting in collaboration with Warwick Business School and the University of Kansas • Investment in training, skills, and professional development – including the rate of School of Business, including exploring if and how investors use people data to inform progression and promotion within the business; and their investment decisions. CIPD has also looked at indicators tied to job quality, and in • Employee engagement score. its UK Working Lives surveys produce an evidence-based understanding of job quality. Other market initiatives include the growth of funds and indices related to human In April 2019 the PLSA published its latest research on workforce disclosures, titled capital metrics, for example the L&G Future World Gender in Leadership UK Index Hidden Talent 2: has workforce disclosure by the FTSE 100 improved? The research Fund and the Thomson Reuters Diversity and Inclusion Index, which uses their data to was undertaken by the High Pay Centre and built on the PLSAs previous work on the provide an investable index. workforce and its previous Hidden Talent Research, launched in 2017. The latest report identifies positives and areas of improvement in the reporting of workforce issues. The Workforce Disclosure Initiative, supported by over 120 investors, was launched to respond to investor concern that company reporting does not provide the sort The International Organization for Standardization (ISO) recently published ISO 30414, of information they seek on workforce topics. The WDI therefore aims to improve Human resource management – Guidelines for internal and external human capital company data on how they manage workers in their direct operations and supply reporting. This document provides guidance on the disclosure of topics such as chains. The WDI’s 2018 survey received responses from 90 global companies, compared turnover, health and safety, culture and leadership, and is applicable to organisations of to 34 in 2017. The WDI publishes findings from the surveys, with actions for a range of all sizes. market participants to address. The Hampton-Alexander, Parker and McGregor-Smith reviews have all been published The Corporate Reporting Dialogue’s ‘Better Alignment’ project is focused on driving in recent years, looking at issues of diversity in boardrooms and companies. Updates of alignment in the corporate reporting landscape, to make it easier for companies to progress towards targets outlines in these reviews are generally published on an annual prepare effective and coherent disclosures that meet the information needs of capital basis. markets and society.

The United Nations’Sustainable Development Goals (SDGs), are a universal call to In addition, in theStrategic Investor Initiative’s Emerging Practice in Long-term Plans action to end poverty, protect the planet and ensure that all people enjoy peace and human capital-related categories identified as most relevant to the consideration prosperity. The 17 goals cover a range of areas including good health, infrastructure, of long-term issues were workforce demographics, stability, composition, skills and hunger and income inequality. Many of the SDGs are interconnected, but the most capabilities, culture and empowerment, health and safety, productivity, compensation relevant to the issue of the workforce is Goal 8: Decent work and economic growth, and incentives and human rights. which covers labour rights, youth unemployment and includes as one of its goals to ‘achieve full and productive employment and decent work for all women and men, The Embankment Project for Inclusive Capitalism (EPIC) brought together a number including for young people and persons with disabilities, and equal pay for work of of number of companies, investors and academics to identify and create new metrics equal value’. to measure and demonstrate long-term value to financial markets. The EPIC report addressed a number of different topics, but noted that Talent and employees, make The World Business Council For Sustainable Development launched, earlier this a big difference when considering a company’s long-term value. The EPIC report year, the final version of itsSocial and Human Capital Protocol. The Protocol offers suggested three key areas in which greater disclosure would be helpful: Human Capital a framework for companies to measure and value their impacts, as well as their deployment, Employee Health and Organisational Culture, with metrics or standardized dependencies, on people and society. It supports best practice reporting and survey questions (for culture), suggested under each of the topics. EPIC proposes a long more effective decision-making by helping companies considering their risks and term value framework to assist companies to determine and assess the metrics that are opportunities and more effectively communicate their value. relevant to articulate sustainable value creation for their business. In 2016 the Committee on Workers’ Capital launched theTaskforce on Workers’ Rights The Institute of Chartered Secretaries and Administrators’‘The Stakeholder Voice in in the Investment Chain. The CWC identified key gaps among entities in the investment Board Decision-making’ outlines ten principles to assist boards in thinking about how chain with respect to the evaluation of workers’ rights in investment decisions and to ensure they understand and weigh up the interests of their key stakeholders when set up the taskforce to liaise with those in the investment chain to elevate the profile taking strategic decisions, thereby providing an indication of how boards may address of workers’ rights. As a result of this work, it published the CWC Guidelines for the some of the reporting expectations inherent in the requirements of section 172. Evaluation of Workers’ Human Rights, which groups indicators across ten categories. The GC100 has also developed Guidance on Directors’ Duties and section 172 Under the Sustainability Accounting Standards Board framework, human capital reporting, with practical steps for how the duty can be discharged. information addresses the management of the human resources as key assets. Items mentioned as fundamental include productivity issues such as engagement and compensation, plus skills, education and compensation. These are tied to material issues, for example the management of the health and safety of employees in industries operating in dangerous working environments. In the US, the Human Capital Management Coalition, through the Investor Advisory Committee, has been lobbying the SEC on a rule-making petition to require disclosure by companies on a set of decision-useful workforce issues.

The Lab has published reports covering a wide range of reporting topics. The Financial Reporting Council (FRC) is the UK’s independent regulator responsible for promoting transparency and integrity in business. The FRC Reports include: sets the UK Corporate Governance and Stewardship Codes and UK standards for accounting and actuarial work; monitors and takes action to promote the quality of corporate reporting; and operates independent enforcement arrangements for accountants and actuaries. As the Competent Authority for audit in the UK the FRC sets auditing and ethical standards and monitors and Reporting of performance metrics June 2018 enforces audit quality.

The reporting of performance metrics continues to be of Investors’ use of performance metrics performance, position and prospects. They rely on company significant interest to investors. Regardless of their position reporting as a base, but they also use a range of external in the investment chain, investors have strong views about During the project we heard that investors use metrics for a sources to triangulate that information, or where reporting The FRC does not accept any liability for any loss, damage or costs howsoever how companies should report their performance. It is clear range of reasons: is not provided by the company. that this issue is central to questions about how companies • analysis and valuation (benchmarking, comparing across demonstrate the value they create and how investors a sector and screening); Regulatory and market initiatives value companies. As a result of wide-ranging discussions, arising, whether directly or indirectly, whether in contract, tort or otherwise the Financial Reporting Lab (‘the Lab’) has developed a • assessing management’s credibility; The last few years has seen a number of regulatory and market initiatives regarding the reporting of performance framework and set of questions for companies and their • assessing long-term value; boards to consider when reviewing their reporting of metrics. The European Union’s Non-Financial Reporting from any action or decision taken (or not taken) as a result of any person relying stewardship; performance metrics. • Directive, the Commission’s Action Plan on Sustainable Finance, and initiatives such as the Task Force on Climate- • forecasting or assessing trends; and Investors often refer to the impact the reporting of Related Financial Disclosures, are changing the way that on or otherwise using this document or arising from any omission from it. performance metrics has on their assessment of • assessing whether management is appropriately companies are thinking about reporting on wider metrics. management credibility. The metrics chosen, how they are incentivised. reported, and whether or not the information is reported In relation to financial metrics, in October 2015, the These various uses and approaches mean investors may European Securities and Markets Association (ESMA) in a way that investors consider to be fair, balanced and be seeking different metrics, or using them in different understandable are central to this assessment. published its Guidelines on Alternative Performance ways, depending on their position in the investment chain Measures (APMs). Following its release, the Financial © The Financial Reporting Council Limited 2020 Investors want to see the metrics that management uses and the reason for assessment. For example, a sell-side Reporting Council’s Corporate Reporting Review team internally to monitor and manage performance, as these analyst may be more interested in standardised measures conducted two reviews into the use of APMs, which give insight into a company’s strategy and measure how for forecasting purposes, a governance specialist may be considered the extent to which companies were applying it is performing against that strategy. In this context, more interested in wider metrics as leading indicators the guidelines. The principles set out in this report are investors find it important to be given insight into how of long-term value, and a buy-side analyst may be more consistent with ESMA’s guidelines but provide an investor management links its metrics to its business model and interested in first assessing the performance metrics perspective on the reporting of all types of metrics strategy, including why metrics ‘make sense’ for the of an individual company at an in-depth level before (including wider metrics that are not covered by ESMA’s The Financial Reporting Council Limited is a company limited by guarantee. company and what it is trying to achieve. comparing these metrics to other companies. However, guidelines). these are only generalisations and all investors we spoke A view of performance is important for a number of to, regardless of their position in the investment chain, reasons. However, investors most often seek to understand Artificial Intelligence and corporate reporting mentioned using GAAP, non-GAAP and wider metrics how a company has performed in order to assess its future in different ways. The framework and questions for prospects. Metrics act as a signal, and performance is companies consolidate an overall investor view, but there understood in the context of the targets set, the wider will always be some difference depending on investment environment, and where the company intends to go next. style, position in the investment chain, place in the market Because of this, investors are also concerned about the and personal approach. How does it measure up? quality and sustainability of the reported performance, which helps explain why wider metrics, beyond the Investors use all information that might help them traditional financial metrics, are of increasing importance. build a picture about management and the company’s

Financial Reporting Council January 2019

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Quick read Introduction Regulatory and market 1 Investor expectations 2 Appendix A – questions 3 Appendix B – examples 4 Appendix C – participants 5 Appendix D – regulatory Introduction Quick read overview1 Investor expectations and company2 Appendix views A – questionsand recommended and 3 Appendix B – ofexamples developing of practice4 Appendixand C – processparticipants 5 Appendixand market D – regulatory initiatives company views disclosures disclosures developing practice and process and market initiatives