Corporate Responsibility Performance Review 2 011 Building trust Introduction – Overview 02 Introduction 2011 was a challenging year. But our integrated business model proved resilient and our people delivered a strong result British Gas service engineer Introduction – Chief Executive’s review 03 Chief Executive’s In the UK, wholesale gas commodity prices due to factors that are impacting the wider rose by 30% during 2011, driven by global energy sector as well as British Gas. review factors including instability in the Middle East and North Africa and the Fukushima nuclear Retail price increases, driven by the As an energy company, 2011 was a challenging year. disaster. In North America, Direct Energy faced wholesale market, coincided with pressure we recognise that our But our integrated business difficult market conditions for the retail energy on household income for many of our business activities impact supply business and continued low gas customers due to the economic downturn. the communities we serve model proved resilient and power prices in our core markets. In the UK, although bills were actually lower and the environments and our people delivered than the previous year, the scale of unit price in which we operate. a strong result. Despite these challenges we made increases driven by factors outside the direct Understanding and good progress implementing our strategy. control of energy suppliers has resulted managing these impacts We continued our programme of investment in public frustration with a consequent will help contribute in diverse energy supplies and low carbon erosion of trust in the energy sector. towards strong, healthy generation, moving closer to producing first societies and sustainable power at our Lincs offshore wind farm in late We are acutely aware that the poor environments for current 2012. 1.7m vulnerable households benefited in economic climate in the UK is impacting and future generations. 2011 from British Gas initiatives that included a household budgets and that any increase Our corporate responsibility discounted tariff, interest free loans and payment in energy prices will cause hardship for approach drives our ability assistance, household grants and free energy some and be poorly received by many. to deliver our business efficiency advice. We have expanded into new We therefore need to do what we can strategy in a sustainable markets in North America, nearly doubling to provide affordable energy. manner. our customer base in the US North East. One of the most significant ways we help Sam Laidlaw Chief Executive Public perceptions of the energy sector customers manage their energy costs is by are different in North America and the UK. making their homes more energy efficient. In North America, wholesale gas prices have Over the past five years we’ve helped to remained low and Direct Energy has seen a insulate more than 2.5m customer homes healthy improvement in customer satisfaction, in the UK. We continued to promote the as measured by net promoter scores. In the energy efficiency measures that reduce UK, British Gas also saw improving customer bills and also help to cut carbon emissions. satisfaction scores, as well as decreases in And, through our Carbon Emissions customer complaints. Despite these operational Reduction Target obligation we delivered improvements, our brand is less well trusted more than 14.6m tonnes of lifetime carbon than before. Research indicates this is savings in 2011. British Gas was the first Introduction – Chief Executive’s review 04 We’ve embarked on a programme of £500m of internal efficiency savings to be a leaner business and support our competitive position in challenging markets energy company to offer free insulation pricing and strive to explain energy prices tax and regulatory frameworks; and an to our entire customer base and has now more clearly. British Gas launched the Honest improvement in public understanding of the extended this offer still further to customers Conversation in 2011 to explain the factors economics of energy prices leading to a of our partner organisations. behind energy prices to UK consumers restoration of trust in our industry. Centrica and raise the quality of the debate. Not has a central role to play in steering the UK We’ve also embarked on a programme only are commodity costs increasing due towards a future of affordable, secure of £500m of internal efficiency savings to to worldwide growth in demand for oil and and environmentally responsible energy. help minimise operating costs and enable gas, but also more locally, the third party us to continue to offer competitive prices costs we are obliged to pay for transportation, In North America, the precise challenges and products. Regrettably this required distribution and the environmental levies to are different, but our aims are the same – the loss of some 760 jobs in 2011 support renewables and encourage carbon to seek opportunities to grow our business and I am grateful for the co-operation reduction are an increasing component of in a sustainable manner. We will continue and professionalism shown by all of the bill. We look to the Government and the to work with determination to achieve our employees during this process. Regulator to help foster a realistic discussion this wherever we operate. Our people play a vital role in achieving with the British people about energy prices and our goals and the quality of service to the need for major investment to pay for future I look forward to reporting our progress which we aspire. We continue to invest in energy security and lower carbon emissions. to you next year and welcome feedback their careers to develop the skills we need. on our efforts to date. In 2011, we invested more than £20m A significant level of investment is required in our academies and apprenticeships. in the UK energy industry – an estimated £200bn by 2020 – to provide energy security We cannot shield our customers from and lower carbon emissions. Two factors the long-term trend towards higher energy are critical to making this viable: a profitable Sam Laidlaw prices, but we remain committed to fair energy sector operating within stable Chief Executive Introduction – Our approach 05 Our approach Stakeholder engagement and a list of the assured KPIs at Navigating We engage with stakeholders to identify www.centrica.com/CRassurance. our reporting We must understand the impacts we have their concerns, explore solutions and manage on society and the environment. We do relationships. We highlight key engagements Materiality this through engaging with stakeholders, in 2011 throughout this report. We also have Our materiality criteria measures the We have changed the way listening to their concerns, and assessing a Stakeholder engagement summary for concern stakeholders have on an issue we report. Rather than publish our impacts and risks. We have strong 2011 available, which outlines stakeholder in general, combined with the potential all information in one document, governance processes to oversee our concerns and how we responded to them. impact that issue may have on our business. at one time, we now report activities and employ an independent, Based on this, we prioritised 11 issue areas, information in four ways: third-party to review our performance. each of which includes a range of individual Assurance 2011 progress We want stakeholders to be confident issues. The graph below outlines these This document reports 2011 in the performance we report. So we issues across three categories: watch list, Governance progress on our strategic Our Corporate Responsibility Committee asked Deloitte LLP to conduct external significant and priority. and material issues (CRC) oversees progress against our assurance on our most material metrics. CR strategy and activities. The CRC Deloitte used the International Standard This document covers our activities on the Metrics met three times in 2011. For more on Assurance Engagements (ISAE) 3000 priority and significant issues in 2011, and Our data centre contains all information on committee activities to provide limited assurance on 14 non- refers back to our website where additional our financial and non-financial and topics discussed in 2011, visit financial key performance indicators. information is available on these. We will performance metrics our Governance performance summary. See Deloitte’s assurance statement report progress on our watch list issues on our website through performance updates. Performance updates We will share updates Risk management about projects and initiatives Material issues Centrica Managing the risks to our business in the Responsibility section prioritisation is essential to achieve our strategic at www.centrica.com/cr Vulnerable customers Nuclear Priority objectives. We continue to work to embed Customer trust Climate change social and environmental risk management Background and approach Environment Safety into our existing business risk processes Our CR web pages outline how we approach our key Significant and procedures, to ensure these risks Doorstep selling Energy supply are effectively managed. issues from climate change Community relations to supply chain Watch list The social and environmental risks that are Supply chain Business ethics most significant to our business are included JOIN THE ENERGY DEBATE in the Risks and Uncertainties summary in Visit our News and Views social Increasing stakeholder concern Increasing our 2011 Annual Report and Accounts. media platform.