Managing CR

Corporate Responsibility Performance Review 2013 Managing CR

Introduction

As the UK’s largest energy 03 Chief Executive’s introduction 03 Working to make energy affordable supplier, we recognise 04 Helping to reduce carbon emissions the responsibility to help 04 Securing energy supplies keep people’s homes and 05 Earning trust 05 Our approach to corporate responsibility businesses warm and well lit 05 Graphic: CR Approach

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Chief Executive’s introduction

At the end of 2013, the UK UK’s carbon targets. The intense scrutiny was witness to the most heated faced by the energy sector hinges on the political debate about energy since interaction of these issues. Balancing these priorities is at the heart of what we do and privatisation. Customers are struggling can impact our ability to earn the trust of our with their energy costs as household stakeholders. incomes remain under pressure and the UK recovers from the worst Working to make energy affordable recession in decades. At the same We took steps in 2013 to limit the impact of rising costs on our customers. Higher time, higher wholesale commodity consumption as a result of a cold winter in £60bn prices, transportation charges and late 2012 and early 2013 allowed us to shield We have entered into long- environmental and social obligations our customers from increases in wholesale are increasing the cost of energy. The energy costs but by October 2013, we term contracts worth £60bn unfortunately had to raise residential energy debate has further eroded trust in the prices by an average of 9.2% to remain in commitments to supply gas energy sector. profitable. However, with changes the and power to our customers UK Government proposed to the Energy Energy prices are understandably a key Company Obligation (ECO), we were able to concern, and we are working hard to keep be the first supplier to reduce prices for all energy affordable. Affordability, though, customers by an average of 3.2%, effective must be addressed alongside other pressing from 1 January 2014. Including the £12 matters. Energy security is essential rebate relating to the Government’s Warm because the UK is no longer energy Home Discount, the average customer bill independent and needs to secure its energy reduced by £53, or 4.1%. supplies by competing on the global market. Climate change is a real threat and must be The need to increase prices was driven mitigated by staying on course to meet the by factors largely external to the company

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Helping to reduce carbon emissions of our customers with smart meters, nine (see page 9). Our post-tax profit margin for Securing energy supplies We are committed to supporting UK carbon out of 10 are now taking simple steps to British Gas Residential made up less than Alongside affordability and decarbonisation, reduction targets and believe energy reduce energy use in the home. We have 5% of the bill last year – a level we feel is we continue our work to secure energy efficiency is vital to cut emissions. Reducing also introduced new products and services fair considering the commodity and weather supplies. We focus on gas because we our customers’ energy consumption such as remote heating control and time- risks we take. It is essential Centrica believe it delivers on all three priorities. Gas is decreases carbon produced in homes and of-use plans. For example, customers using makes a reasonable profit enabling us to transportable and remains widely available, means burning fewer fossil fuels to generate our ‘Free Power Saturdays’ offering in North secure the gas and electricity supplies our enabling us to secure future supplies and electricity. Since 2010, the measures we have America can save approximately 16% on customers need. bring them to the UK at affordable prices. Gas installed in UK homes and businesses have their energy bills on average, while easing also has the lowest carbon intensity of fossil Installing insulation and other energy saved a total of over 9.8m tonnes of CO e, strain on the grid and reducing emissions 2 fuels, and because of its flexibility, plays an efficiency measures is an important part equivalent to taking more than 668,000 cars from peaking power plants. important backup role to renewable power in of our efforts to help customers manage off the road. a low carbon future. energy costs. We installed more than With our focus on gas, nuclear and However, only a fraction of savings available 236,000 energy efficiency measures in renewables, we have one of the lowest Centrica has continued to make good through greater energy efficiency has yet 2013 to our customers’ homes in the UK. carbon intensities of the major UK energy progress in accessing new markets and been realised. The UK needs to pursue cost- A third of these installations were for the generators. We completed our Lincs securing new sources of gas in 2013. Our total effective energy efficiency measures with elderly, disabled or those on low incomes, offshore windfarm in 2013 which is capable commitments to purchase gas and power greater urgency and zeal. and will help them save more than £950m of producing enough energy for more than for our customers is now more than £60bn. in heating costs over the lifetime of those Putting people in control of their energy use 200,000 homes. However, to enable us We have also taken a 25% non-operating measures. Overall, we supported more can also help them manage consumption, to make further long-term investments in stake in the Bowland shale exploration licence than 1.8m* vulnerable households in the leading to lower costs and carbon emissions. large scale offshore wind and renewables, in Lancashire in the UK, which could be a UK as well as helping customers in Texas We are leading the rollout of smart meters, the UK needs political consensus and legal valuable addition to the UK’s future supply through the bill assistance programme, having installed nearly 1.3m in UK homes and regulatory certainty concerning the mix. We are confident that natural gas from Neighbor-to-Neighbor. and business by the end of 2013. In a survey investment and return framework. shale can be extracted safely. We place a high

*Assured by Deloitte LLP for 2013 reporting.

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optimise our positive contribution. And finally, priority on sensitively managing the potential Markets Authority, and why British Gas has it emphasises our belief that while we have local community and environmental impact embraced Ofgem’s Standards of Conduct Corporate Strategy an important role to play, we need to work whilst we explore such opportunities. and is making fundamental reforms such together with partners in industry, NGOs as setting up our independent Customer and other stakeholders to deliver effective Earning trust Fairness Committee (see page 8). solutions to energy challenges. As the UK’s largest energy supplier we recognise the responsibility we have to help Our approach to corporate responsibility Centrica has performed strongly in taking a keep people’s homes and businesses warm I am convinced that the way we do business responsible approach during 2013, despite and well lit. We must do this in a way that is critical to earning the trust we have lost. Innovate Integrate Increase a challenging environment. We have more to earns the trust of our customers and the Our approach to corporate responsibility do to gain the respect of our stakeholders wider stakeholder community. Despite our reinforces our focus on how we do business and achieve the right balance between efforts, we, and the industry as a whole, through four core themes which shape our affordability, reducing carbon emissions and have not been successful in doing this. organisational behaviour (see graphic). It securing energy supplies. I am confident CR Approach Trust in the energy sector is at a low level, supports our strategic priorities and gives that by focusing on how we do business amplified by political positioning which has our businesses as well as our people a clear Treating Safeguarding and through the continued hard work and customers fairly the environment led the important debate about balancing framework for how to operate responsibly. dedication of our people, we can earn the affordability, climate change and energy The four themes of our approach are trust we need to deliver our strategy and security to be side-lined. treating customers fairly, safeguarding the achieve our purpose to help people today We want to earn the trust of our customers environment, caring for our people and and to secure energy for tomorrow. communities, and working with our partners. and other stakeholders and we know we Caring for our Working with must work even harder to achieve this In practice, this approach means providing people & communities our partners through action, not words. That is why products and services that customers we introduced Tariff Check to help all our think are fair and striving to treat them in a customers determine whether they are on the way that will gain their respect and trust. best deal, announced our plans to stop auto- It ensures we work to extract gas or build renewal of contracts for business customers, energy infrastructure in a way that protects Sam Laidlaw and are committed to delivering best in class the local environment. It reinforces our Chief Executive Our CR Approach explains how service levels. It is also why I welcome the drive to develop our people while treating we do business in both our competition assessment of the UK energy their safety as paramount. It compels us upstream & downstream activities. sector being conducted by Ofgem, the Office to engage with communities around our of Fair Trading and the Competition and operations to manage our impacts and

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Treating customers fairly

07 At a glance 12 Customer service Working to earn trust 08 Feature: UK Standards of Conduct 12 Customer satisfaction bring improved customer fairness through transparency, 12 Customer complaints 08 Being transparent in pricing and communications 13 Case study: Ending auto-rollover contracts engagement and to support 08 Energy pricing for business customers vulnerable customers 09 Graphic: Components of the 2013 bill and price rise 13 Caring for vulnerable customers 10 Feature: Using technology to 13 Tackling fuel poverty in the UK better manage energy costs 14 Services and advice to support 10 Clear billing UK vulnerable households 10 Engage, listen and respond to our customers 15 Supporting vulnerable customers in North America 11 Feature: British Gas Customer Board 15 Case study: Providing support through the rates our progress on their priorities Neighbor-to-Neighbor programme

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Treating customers fairly - At a glance

Overview Performance highlights

Putting customers first so they British Gas * 30 40 Net Promoter +15 feel valued whenever they Fuel poverty affects around

Score Performance declined from +30; Direct Energy NPS 30 1 in 6 British Gas customers. interact with Centrica is essential a similar drop in satisfaction 20 was experienced by other energy Low incomes and poor energy to growing our business. companies following the price rise. 20 efficiency mean too many are rationing energy whilst others 10 We are evolving how we work British Gas NPS 10 run into debt. Centrica can help Direct Energy * to ensure we treat customers +40 alleviate fuel poverty though Net Promoter insulation and heating schemes, Score Satisfaction increased from +39 due 0 0 fairly and so we can earn to a continued focus on improving 2010 2011 2012 2013 while helping address the their trust. We are making our call centre customer service and symptoms through debt and Scores are not comparable as they are measured differently payment assistance. communications and pricing residential pricing renewals. Jenny Saunders OBE more transparent and helping UK vulnerable * Chief Executive, customers get the best deal with households 1.8m Spent over £380m helping vulnerable customers through initiatives such as the Warm Home Discount. National Energy helped Tariff Check. We are improving Action how we engage with customers and continue to lead the industry Goals Target date for the number of vulnerable Return to a NPS high performance range at British Gas 2014 households supported. Maintain Direct Energy’s NPS high performance range 2014

Continue to support our vulnerable customers in the UK and North America 2014 * Assured by Deloitte LLP for 2013 reporting.

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View British Gas’ website to learn more about our approach to UK Standards of Conduct

Feature Being transparent in pricing and communications commitment to customer service. During 2013, the Customer Fairness UK Standards of Conduct bring Communicating fairly and transparently Committee recognised that Direct Debit British Gas welcomes the SOC and has made with our customers in every interaction improved customer fairness payments were confusing for some many changes to how we do business ahead is critical to earning trust, especially with customers and as a result, clearer Defining fairness is not always easy, but of them coming into force. complex issues such as pricing. In support communications are being developed we are determined to get it right for our of Ofgem’s proposals in the UK under the In 2013, we set up Conduct Committees to improve understanding. A cooling-off customers by having their interests at the RMR to make energy simpler, clearer and across the business and a new Customer period will also be introduced for new heart of how we do business. fairer for consumers, we are introducing Fairness Committee made up of senior business customers to give them time to far-reaching changes to improve the way we We are working with our customers, our Centrica and British Gas leaders as well as change their mind. communicate with customers. people, our Customer Board and our external consumer representatives who bring In 2014, we will continue to challenge the new Customer Fairness Committee to independent challenge and insight, and will In North America, the situation is different way we work and explore how customer help implement changes required by the play a crucial role leading the industry in raising as we operate in a mix of regulated and fairness can be better measured so that Standards of Conduct (SOC). These are new standards. They are assessing each part of the deregulated markets where Direct Energy we can track our effectiveness. rules introduced by Ofgem in August 2013, business to see where we can improve and will does not always bill customers directly. which support the Retail Market Review oversee significant new products and changes These efforts will bring costs and Electricity prices are often more volatile (RMR) proposals to make energy easier to to terms and conditions. challenges, but we believe the than gas prices, with costs peaking during understand and fairer for customers. improvements will enable us to give summer periods when air conditioning A key focus of the Committee will be to customers the best possible experience, increases household consumption. The We believe these changes will raise ensure we put our customers in control of making our business stronger. priority for Direct Energy is to provide standards and increase the level of trust in their energy use by helping them use less, consumers with more choice through a range the energy industry, leading to increased get the right price and manage their energy To find out more, seeBritish Gas’ Treating of innovative products, different term lengths competition driven by a stronger account more easily. Customers Fairly Statement. and price options to suit their needs.

Energy pricing The factors that influence energy prices are complex, but we are committed to delivering an affordable supply of energy in a transparent way. Our ability to charge a fair price in a highly competitive market is a determining

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factor in the success of our business. In the This means some costs must be passed onto allowed us to reduce prices by an average Of the costs we directly control, we endeavor UK, we have also worked hard to simplify bills customers. In October 2013, as a result of of 3.2% from January 2014. Including the to minimise their impact on customers. We to make them easier to understand. significant increases in wholesale gas prices, Government’s £12 rebate in relation to the have helped reduce pressures on customers’ transportation and distribution costs alongside Warm Home Discount, the average customer bills through a cost reduction programme, Around 85% of a British Gas customer’s energy sharp rises in environmental costs, British bill reduced by £53, or 4.1%. of which £300m related to British Gas. Our bill is made up of costs external to Centrica. Gas announced an average 9.2% increase in As we work to rebuild customer trust in the profits are a very minor portion of the bill. We try to mitigate these factors wherever residential energy prices (see graphic below). energy sector, we are helping customers British Gas’ profit margin for residential possible and were able to absorb some of the Environmental costs were primarily due to the understand what makes up the bill and why customers was 4.5% after tax which we cost increases in 2013. However, we must UK Government’s Energy Company Obligation prices had to rise. We have expanded our believe is competitive, reasonable and vital ensure Centrica makes sufficient profit to (ECO, see page 19). Shortly afterwards, the light bulb graphic (see graphic below) to to the sustainability of our business given secure essential energy supplies for the UK. Government proposed changes to ECO, which show where costs have changed. weather and commodity cost volatility.

Components of the 2013 bill and price rise

Price rise post Average gas and electricity bill for 2013: £1,253 Original price rise ECO changes

£50 £14 Environmental & Social policies Environmental & Social policies

British Gas 2013 Average Gas & Electricity bill (Total: £1,253) £50 Our pr £20 £15 £584 £304 £128 £74 £113 Delivery to your home Delivery to your home Wholesale energy Delivery to Environmental Taxes Operating

costs your home and Social costs ofi policies t External costs Our £37 £37 costs Wholesale energy costs Wholesale energy costs

*Based on actual 2013 results, is an average of all payment types/tariffs/regions and is based on consumption levels of 492 therms for gas and 3,688 kWh for electricity £107 price increase £66 price increase

Based on actual 2013 results, is an average of all payment types/tariffs/regions and is based on consumption levels of 492 therms Based on seasonally normal temperatures. The £66 does not include the £12 rebate in for gas and 3,688 kWh for electricity. relation to the Warm Home Discount.

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See our CR update for more information on Power-to-GoTM

Feature We believe transparency of prices is only We want to give customers more control over part of treating customers fairly. Passing their bills and help them get the best deal on savings is essential and we were the possible. In 2013, we were the first supplier in to proactively manage their energy costs. first energy company to reduce prices for the UK to proactively contact our residential Using technology to better Direct Energy’s pre-paid product, Power- all our customers following changes to customers with a personalised Tariff Check to-GoTM (see CR update), has helped manage energy costs ECO. We are also supportive of making to show whether they could save money by reduce energy consumption by 11%, it quicker and easier to switch to a better moving to a different British Gas tariff. Smart technology plays a crucial role in enabling potential savings of around deal and we are taking a leadership position giving customers greater control over their US$130 (£80) per customer. in smart meters (see page 21) which has energy use and bills. Engage, listen and British Gas also successfully trialled a been received favourably by customers In North America, smart meters are time-of-use tariff in the UK (see page and will help us make switching easier. In respond to our customers already installed in some locations and 36) and in 2014 plans to rollout similar addition to switching between suppliers, there is strong demand for product products to customers with smart meters. we are encouraging a growing number Understanding customer concerns enables innovations that reward customers for of customers to move between British us to improve the products and services This builds on existing British Gas using energy at certain times. Direct Gas tariffs rather than externally, and we we provide, helping meet their needs and initiatives. EnergySmartTM helps customers Energy products, ‘Free Power Saturdays’ have removed cancellation fees for those making us a more successful business. We monitor their energy use online. Hive and ‘Pick Your Free Day’, can help changing to another of our tariffs. are increasing engagement with customers Active Heating additionally lets customers and updating systems to improve our customers save approximately 16% on control their heating from their phone, customer service. their energy bills by doing energy-intensive Clear billing tablet or laptop and by only heating their household activities, like using the British Gas has simplified its tariffs by British Gas continues to engage customers home when they need to, customers can washing machine, on specific days when introducing a fixed standing charge covering through initiatives such as the British Gas save up to £150 on their energy bills. Our energy is free. costs like the distribution of energy to homes Business (BGB) Engagement Panel, which energy efficiency programmes further help and a single variable unit rate that are clearly is an online forum of over 350 customers Pre-payment technology in North America customers save money while reducing their shown on customers’ bills. This followed the who provide feedback on issues important is viewed positively by customers looking carbon emissions (see page 19). introduction of a single-tier pricing structure to them such as cost control and billing. The in 2012. British Gas Customer Board (see feature overleaf), also provides valuable input on key We are also campaigning for change in strategic and policy decisions. regulation to make gas bills simpler by calculating them according to the number of Day-to-day communication channels are units used, rather than the current requirements being improved to increase customer which are difficult for customers to understand. understanding and satisfaction, while

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Feature

further, especially on communicating more Report Card from the Customer Board on the five point plan British Gas Customer effectively about ‘the real’ British Gas and in leading Britain to a low carbon future. Board rates our progress Five point plan Key changes Customer Board’s on their priorities recommendations (i) introduced view of our performance “British Gas has not done enough to influence leading Britain to a low carbon The British Gas Customer Board represents 1. Revolutionise � Call centre system improvements to Major investments have enabled real future. It could have made the debate customer service enable better response times progress but momentum needs to be the interests of our customers and monitors around a need for low carbon generation � Ended unsolicited doorstep selling maintained. our progress against five priority topics more strongly in the media.” - More apps to help self-serve identified by customers in 2010. � Embedding improvements under Victor Effiom 7/10 the SOC Chaired by Ann Robinson, Head of Consumer Policy at uSwitch.com and To maintain its impact, the Customer 2. Simplify the bill � Clearer and simpler bills Bills are now much easier to understand sponsored by Ian Peters, Managing Director Board has recently updated its objectives � Combined dual fuel bill is being but British Gas must be more radical and of British Gas Residential Energy, the to ensure priorities are aligned with those 7/10 rolled out go further. Customer Board provides independent of our customers. feedback and challenge to British Gas to 3. Make pricing � Fewer tariffs British Gas is working hard to make pricing ensure we put our customers first. In 2013, “British Gas has a positive story to tell, easier to follow � Tariff Check to help people onto the easier to understand, in line with changes in the Customer Board reviewed a range of and should be clear about the value it best deal regulation. However, tariffs could be further simplified. activities from customer service, pricing provides in skills, jobs and training for 7/10 � Single tier pricing structure and tariff structures to our climate change thousands of employees.” commitments. They have also been a crucial Des Morgan 4. Be open and proud � ‘Serving Britain’ campaign and Public engagement on key issues - let people see the regional communications launched is welcome, but British Gas should sounding board in developing our activities real British Gas communicate more on positive activities under the Standards of Conduct (SOC) and We believe the Customer Board provides 6/10 such as support for vulnerable customers. the principles behind treating customers fairly. a valuable force for change at British Gas and its members do too. We look forward We surveyed the Customer Board on 5. Lead Britain to a � Lincs wind farm fully operational Centrica has re-focused on energy security to continuing our work with the Customer progress against the five point plan (see low carbon future � Leading on UK smart meter and its energy efficiency programmes but Board, delivering progress against its needs to do more to lead change for a low table). Overall, they thought British Gas had implementation new objectives. 5/10 carbon future. progressed well but said we could improve

(i) Average scores from Customer Board members.

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View our data centre for annualised complaints performance and British Gas’ website for quarterly residential complaints

reducing pressure on call centres. We are Customer service in service. We are also establishing a team In 2013, Direct Energy’s NPS score making our communications clearer and Delivering excellent service is an essential of highly trained agents that will work with increased slightly from +39 in 2012 to +40*, tailoring them to suit different customers, part of treating customers fairly. Customers customer service teams and use their expert due to a continued focus on improving whether they are tenants, landlords or are more likely to stay with us if we provide knowledge to reduce the number of repeat the service delivered by customer-facing home-owners. a positive experience. We are investing in contacts and complaints. agents and changes to renewal pricing for our people and systems to ensure we deliver residential customers. At the same time, we are investing in great service. In North America, Direct Energy faced similar digital technology to make information challenges as efforts to integrate systems However, British Gas’ NPS fell to +15*, down more accessible and communication with In the UK, British Gas is implementing IT following acquisitions impacted our service. from +30 in 2012. The decline was primarily us easier. In 2013, around 22,800 UK system improvements in both residential To improve customer satisfaction, over due to the price rise announced in October customers interacted with us on customer and business divisions that will give 600 Canada Home Services employees 2013, where an unusually high level of political service issues through social media while in customers a better service. Unfortunately, participated in Achieving Customer and media commentary occured around North America, the acquisition of Bounce the system migration impacted our ability the event alongside some customer service Excellence workshops which contributed Energy means that Direct Energy customers to respond to customers as quickly challenges during the year. to a four point increase in the Net Promoter can benefit from a wider range of products and efficiently as we would have liked. Scores (NPS) for that part of the business and more efficient customer service through Accordingly, we brought in over 300 Customer complaints compared to the same period in 2012. a leading online platform. additional customer service advisors in We want to get things right first time and we 2013. Over the next three years, we will are continually improving our customer service In contrast to the growing range of digital Customer satisfaction increase the number of advisors and provide and communications to help us achieve channels, over 23,450 customers received The quality of service we provide contributes 50% more training days with a focus on this. Serving more than 30m customers, we hand-written postcards from our Direct directly to customer satisfaction. In the improving technical and behavioural skills. inevitably receive some complaints. Energy Customer Ambassadors, thanking UK and North America we use NPS (ii), them for their business and asking whether In 2014, we are starting to see the benefit which measure customers’ willingness to Despite customer service challenges in 2013, we can improve their experience. to customers of this additional investment recommend us. British Gas received 16% fewer complaints than

*Assured by Deloitte LLP for 2013 reporting. (ii) Feeds into the Long Term Incentive Scheme for Executives (see page 79 in our Annual Report).

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Explore our data centre for the support we provide our vulnerable customers

unable to pay for essential services such as Case study in 2012 – 75% of complaints were resolved on powering and heating their homes. As part the same or next working day and 95% within We provide a wide range Ending auto-rollover contracts eight weeks. The number of complaints about of this, a new definition of fuel poverty has of support, advice and British Gas accepted by the UK Ombudsman been introduced by the Government based for business customers Services: Energy made up 10.7% of the on the lowest incomes and higher than specialised products for residential industry total, compared with our average energy bills. This definition reduces British Gas was the first UK supplier to energy market share of 31%. the number of households considered vulnerable customers announce an end auto-rollover contracts fuel poor in England to 2.6m, compared for business customers – a practice which Although British Gas was recognised as a best with 3.2m under the old definition, which meant some customers were not always practice example for its complaints literature by included households that spent 10% or on the best deal. consumer campaign group, Which?, we have more of their annual income on fuel for more work to do as Consumer Futures ranked This gives customers more control over adequate heating. their contract renewal by having the option us third out of the ‘big six’ energy companies to change to another contract, and if they for complaints handling. These changes aim to provide more targeted help for those in extreme fuel poverty, but miss the deadline for switching, we will put Direct Energy monitors its customer complaints could also reduce the number of households them on a variable tariff that has 30 days’ through a number of external channels like able to benefit from mandatory schemes like notice to leave. Better Business Bureaus and local regulators in the Warm Home Discount (see CR update) While this change means we are likely to North America. In 2013, 3,936 complaints were and ECO (see page 19). At the same time, an earn less profit in the short-term, it should received, up from 3,047 the previous year. estimated 2m of our customers could fall into improve trust and reduce complaints over the long-term. In a poll of our BGB debt as a result of changes to their benefit Engagement Panel, 83% said the change Caring for vulnerable customers income from welfare reform. made us more simple and transparent Ofgem has also released a Consumer while 73% felt they trusted us more. We remain steadfast in our commitment to support vulnerable customers, particularly Vulnerability Strategy in 2013 which This builds on our commitment to support as more and more people in the UK are recognises that changing personal micro-business customers through the struggling to pay their bills due to the tough circumstances, as well as the energy Fair Billing Charter, and in 2013, we helped economic climate and rising energy costs. market, can impact customer vulnerability. over 8,000 of them reduce their debt by Because a broader range of people will be almost £8m while maintaining their energy Tackling fuel poverty in the UK considered vulnerable, we need to identify and supply, through the BGB Small Business The UK Government is developing a new understand the different circumstances of our Advice Expertise Service (see blog). fuel poverty strategy to support those customers and provide more tailored support.

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See our CR update for more information on the Warm Home Discount

As part of this, we are reviewing our own eligibility criteria of the ‘big six’ for the Warm that provides advice and household grants vulnerable customer strategy and definition Home Discount to ensure we reach those to anyone in need of assistance, particularly In 2013, we continued to of fuel poverty, and will prioritise support for who need help the most. For our 500,000 those having difficulty paying domestic our customers in ongoing work related to low income customers who received the energy bills. £10m of this related to a support more vulnerable the Standards of Conduct (see page 8). By discount of £135, we provided an additional donation agreed with Ofgem in response customers than any other providing effective support for our customers, £60 winter discount off their energy bills. to the interpretation of regulations on the we can minimise the risk of bad debt on energy These vulnerable customers will therefore calculation of thermal energy in gas. energy supplier in the UK accounts. This benefits our business while have experienced lower bills this winter In 2013, the Trust provided 11,771 grants supporting the Government to tackle poverty. compared to 2013. to people and funded 15 Energy Debt Overall in 2013, we continued to support Advice Centres with services delivered Services and advice to support more vulnerable customers than any other alongside key partners like Citizens Advice UK vulnerable households energy supplier in the UK. We contributed and Shelter. To support a growing number We provide a wide range of support, advice over £380m to more than 1.8m* vulnerable of vulnerable people, we have committed to and specialised products for vulnerable households. While the spend was higher, fund further centres and advisors in 2014 customers. We work with the regulator and the number of customers helped was lower (see CR update). Government to develop and deliver support than 2012 due mainly to fewer households British Gas is striving to enhance services programmes as well as inputting into policy. being supported through ECO as compared for the vulnerable and protect them from to previous schemes. The changes to ECO Around half of the vulnerable homes we rising energy prices. We are increasing proposed at the end of 2013 will however helped in 2013 were supported through training for our front-line customer service increase eligibility of homeowners for 2014. Government mandated programmes to advisors so they can better identify and assist address fuel poverty, such as ECO and the We invested £18m in 2013 to the British those in need. This is complimented by our Warm Home Discount. We have the widest Gas Energy Trust, an independent charity partnership with National Energy Action who

* Assured by Deloitte LLP for 2013 reporting.

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Visit our website for our approach to treating customers fairly

we work alongside to develop training for at or below 125% of the Texas federal Case study those delivering energy and debt advice, as poverty level. This scheme will cease from well as run events that encourage take-up 2016 so excess funds rather than a fee on of energy efficiency schemes like ECO to customer bills are now being used to finance Providing support energy bill, helping us support over 5,000 reduce bills. Through our partnership with support for those in need. households. Since the programme’s Shelter, we are also working to improve the through the Neighbor- inception in 2003, we have assisted more In 2013, we continued to work with a standard of 1m homes in the private rented than 45,700 households. network of more than 30 community to-Neighbor programme sector (see page 37). organisations to deliver energy bill The funds are distributed through a Customers in Texas that need help with To support those in crisis situations, British assistance to over 84,600 vulnerable network of 32 community organisations their energy bills can receive annual grants Gas additionally provides food vouchers and customers using state and federal funding. who are best placed to reach those in up to US$600 (£366) per household is looking to introduce emergency credit on The community organisations assess need as they are already used by people through the Neighbor-to-Neighbor bill fuel cards. the level of need for individual customers requiring rent and mortgage assistance assistance programme. against the Texas Center for Public Policy among other services. To support even Supporting vulnerable Priorities’ definition of poverty, and transfer In addition to the US$600,000 (£365,510) more people, Direct Energy raises customers in North America funding to Direct Energy so that customers’ donation from Direct Energy, customers awareness about Neighbor-to-Neighbor In North America, Direct Energy supports bills can be paid. also donated US$65,365 (£39,820) to at community outreach events. vulnerable customers with the greatest the programme through their monthly Direct Energy also works with charities and number needing help in the warmer NGOs, through programmes like Reduce summer months, when electricity prices Your Use For Good. This helps them cut often peak. Direct Energy supports energy consumption and costs so more of vulnerable customers by offering options their funds can be spent on furthering their that enable them to pay bills over time and cause (see CR update). by working with customers and community organisations to deliver support through payment assistance programmes, such as Neighbor-to-Neighbor (see case study). In Texas, the state’s System Benefit Fund finances the Low Income Discount Assistance scheme that provides a minimum 10% discount on electricity bills to customers

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Safeguarding the environment

17 At a glance 21 Reducing carbon emissions in Helping to protect the our own operations 18 Graphic: The Energy Challenge 22 Energy generation environment by reducing 19 Helping our customers reduce carbon emissions and their carbon emissions 23 Office, fleet and business travel 19 Driving change by supporting 24 Protecting biodiversity, air, land carefully managing local government initiatives and water quality 19 Saving emissions and energy costs 25 Case study: Keeping tabs on basking sharks environmental impacts by improving homes 25 Feature : Managing potential environmental 21 Case study: Saving carbon through insulation impacts from natural gas from shale and biomass district heating in Solihull 26 Graphic: Natural gas from shale - the process 21 Using technology to reduce emissions from energy use

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Safeguarding the environment - At a glance

Overview Performance highlights

Managing environmental impacts Carbon savings The products we have installed in UK homes and businesses since 2010 have saved in UK homes around 9.8m tonnes of CO equivalent emissions, comparable to taking 668,000 associated with our business is 2 and businesses 9.8mtCO2e cars of the road. The innovative external wall integral to the way we operate. insulation project with British Gas is helping to transform high Carbon Carbon intensity of power generation rise living across Solihull. British intensity 200*gCO /kWh Unit: (g CO /kWh) The most significant contribution 2 2 of power 200 Gas have made a significant Group-wide carbon intensity in 2013 was 200gCO /kWh, putting us on track 2013 we can make is to help reduce generation 2 2012 200 investment in our area which is to meet our 2020 target of 260gCO /kWh, a 40% reduction since 2008. customer energy use and carbon 2 2011 226 delivering warmer homes to more than 2,000 of our customers. This emissions from energy production. energy efficient scheme reduces Internal carbon Internal carbon footprint the impact on climate change, Helping customers use energy footprint 91,464*tCO e Unit: Tonnes CO e 2 2 while the external wall cladding Achieved a 19% reduction in emissions since 2007 from our core offices, 2013 91,464 more efficiently not only cuts company vehicles and travel, against a targeted reduction of 20% by end of 2015. 2012 91,521 enhances the appearance of the carbon, but saves them money, 2011 92,115 whole area. building loyalty and trust. Steve Boyd Chief Executive, Solihull We are also working with Goals Target date Community communities to manage local Housing environmental impacts from Sell more than 100,000 ‘Hive Active Heating’ smart thermostats 2014 our operations. Reduce carbon footprint of our core offices, company vehicles and travel by 20% from 2007 baseline 2015

Reduce Group power generation carbon intensity to 260gCO2/kWh 2020

* Assured by Deloitte LLP for 2013 reporting.

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Many types of renewables are intermittent, meaning the UK still needs back-up power, such as gas.” We focus our upstream efforts on bringing gas to the UK. Gas is transportable, remains widely available and is the lowest carbon fossil fuel. As such, it is an essential component of a cost effective transition to a low carbon future.

In our downstream business, we focus on installing energy efficiency measures to help reduce consumption, which saves our customers money, emits less carbon and reduces stress on supplies. The UK must achieve carbon targets to reduce CO2 emissions by 80% by 2050, We should use gas. It’s even if this means cheaper, heating 80% of higher bills.“ homes at half the cost of electricity.” Renewable power is still more expensive The UK needs to than fossil fuels, so the invest in our energy UK can’t just switch infrastructure now in immediately.” order to keep the lights on in the future.”

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See our blog for details of our completed obligations under the CERT and CESP schemes

Helping our customers reduce Driving change by supporting We are supportive of ECO and welcomed to support the goals of the Green Deal, we government initiatives Government changes announced in believe greater flexibility and less complexity their carbon emissions We support Government programmes in the December 2013 that allow for a wider would encourage greater uptake, which is UK designed to increase the availability and range of energy efficiency measures and currently low. Energy use in our customers’ homes and uptake of products and services that drive extend the period over which ECO will businesses is the biggest single source of In addition to working with governments, we improvements in energy efficiency. be implemented by two years to 2017. carbon emissions related to our business also partner with other organisations through This will allow us to reach more homes in (see our carbon map). In 2013, we began to deliver our the Customer Led Network Revolution to a more affordable way, and also enabled commitments under the UK Government’s explore ways to drive changes in customer Reducing our customers’ energy us to reduce average household gas and Energy Company Obligation (ECO), which behaviour and energy use (see page 36). consumption reduces carbon impacts while electricity prices (see page 9). replaced the previous CERT and CESP also helping to lower bills and decrease energy efficiency schemes (seeblog for We continue to promote the UK demand – as such it is an important part of Saving emissions and energy details of our completed obligations under Government’s Green Deal, which the role we can play in balancing the multiple costs by improving homes these schemes). encourages residential customers to invest priorities of decarbonisation, affordability and Our products and services - such as in energy efficiency improvements by offering energy security as described in the energy ECO requires energy suppliers to improve insulation, new boilers or solar panels - loans and cashback payments. British Gas challenge graphic (see page 18). the insulation of properties and to install enable customers to reduce emissions and was the first energy company to offer Green lower their energy costs. The products we Although we cannot control how customers energy efficiency measures to reduce heating Deal finance to customers and has been have installed in UK homes since 2010 have use energy, we can help make their homes costs for vulnerable households. Our ECO a major enabler of customers’ Green Deal saved around 9.8m tonnes of CO equivalent more energy efficient and give them the tools commitments for 2013 totalled around cashback claims. In 2013, we carried out 2 emissions (see graph overleaf), which and technology to better understand and £420m, some of which will be delivered in 20,000 Green Deal assessments, helped equates to taking 668,000 cars off the road. manage their energy use. As a major energy 2014. The measures we installed in 2013 12,000 households fund an energy efficiency supplier, we also have an important role to will save 1.3m tonnes of CO2 emissions over measure through the Green Deal cashback The annual growth in carbon savings play in driving change especially through the their lifetime and cut heating costs by more scheme, and accepted nearly 600 Green slowed in 2013 as a result of the transition implementation of government initiatives. than £950m for vulnerable customers. Deal loan applications. While we continue from CERT and CESP to ECO. In 2013,

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Emissions saved in the UK since 2010 meet obligations set by the UK Government. We install renewable heating technologies, due to the products we have installed such as heat pumps and biomass boilers, Enabling customers to generate energy for domestic and commercial customers, from renewable sources also helps to and for community projects. In 2013, we 3,500,000 reduce carbon emissions. In 2013, we signed contracts for 4,200 district heating completed 490 installations of solar panels connections across the UK (most of which 3,000,000 at homes, schools and businesses. Although were biomass), which will have lifetime e) 2 2,500,000 we completed fewer installations than carbon savings of 267,000 tonnes. As well in 2012, our greater emphasis on larger as reducing emissions and cutting bills, 2,000,000 scale commercial projects means the total these projects provide communities, often generating capacity of the solar panels we in social housing, with reliable sources of 1,500,000 installed is higher (see table below). heating (see case study overleaf). 1,000,000 GHG Savings per yearGHG Savings (t CO 500,000 Low carbon installations 0 2010 2011 2012 2013

2013 2012 ECO focused on harder-to-treat homes of our government obligations, compared where installations are more complex, so with 676,000 in 2012. These included solid Installations Generation Installations Generation we expected year-on-year carbon savings wall, cavity wall and loft insulation, district (no.) capacity (no.) capacity growth to be lower. The proposed changes heating, and boiler replacements and made to ECO at the end of 2013, which are repairs, which together will achieve total Solar PV panels(i) 490 7.4 MWp 682 6.2 MWp expected to become legally binding in 2014, lifetime carbon savings of 5.1m tonnes CO2 will broaden the range of measures to be emissions. installed, reaching more homes in a more Biomass boilers(ii) 127 23 MWth 144 14.6 MWth The delivery of low carbon products remains affordable way. important to our business growth strategy, In 2013, we installed more than 236,000 enabling us to offer better value and a greater (i) MWp stands for megawatt peak and is the photovoltaic power under peak sunshine. energy efficiency measures in the UK as part range of services to customers, as well as (ii) MWth stands for megawatts peak of renewable heat thermal capacity.

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Explore a complete set of environmental metrics in our data centre

Case study Our blog provides more information on our A survey in 2013 of British Gas smart meter support for customers using renewable customers showed that 9 out of 10 now take heating and solar technologies. simple steps to reduce energy use in the Saving carbon through home. More than half (54%) said they had insulation and biomass Using technology to reduce saved money as a result. In North America, emissions from energy use we participated in a study that shows on district heating in Solihull We are using innovative technology to average prepayment customers reduce their empower our customers to take control electricity usage by up to 11%, helping to A British Gas contract with Solihull of their energy use and costs. Smart reduce their emissions. Community Housing will see us provide meters, for example, allow customers improvements by 2015 that will achieve to monitor and control energy use more total lifetime savings of over 130,000 effectively; prepayment plans in the US Reducing carbon emissions tonnes of CO emissions. 2 enable customers to proactively manage in our own operations Delivered as part of our ECO their energy consumption; and time-of-use commitments (see page 19), we will fit products such as ‘Free Power Saturdays’ Most of the carbon emissions we produce external solid wall insulation to 30 Solihull encourage customers to shift energy usage from our operations come from our power Council owned high-rise buildings, helping to periods of lower demand (see page 10). stations. The remainder is made up of more than 1,600 homes stay warmer. We British Gas has installed over 70% of smart emissions from our gas and oil activities will also convert electric heating systems meters in Britain – a total of 1.3m in UK and from energy use in our offices, fleet and to biomass boilers that use renewable homes and businesses since 2009. Of biomass fuels such as wood pellets from business travel. this, over 800,000 meters were installed sustainable sources. Over 1,150 homes for residential customers and we currently In 2013, our total carbon emissions will benefit from this renewable heat. expect to have installed 1.3m residential have remained broadly flat, with 7,146,412* tonnes of CO equivalent emitted, a 0.3% British Gas will become the energy smart meters by the end of 2014. Key to 2 provider for the buildings, selling heat achieving wider uptake of smart meters is rise from 2012. Emissions from power from the district systems to residents. This increasing awareness of their benefits. In generation are slightly down, offset by an work complements the wider investment 2013, we ran an advertising campaign to increase in emissions from our hydrocarbon and regeneration programme happening do just that, which resulted in a 7% increase production and storage operations. See in Solihull. in awareness in both British Gas and non- table overleaf for a breakdown of our British Gas customers. total emissions.

* Assured by Deloitte LLP for 2013 reporting.

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Energy generation in part reflects continued poor market also purchase energy from other power Of the total power we sold in the UK during Carbon emissions from our power stations conditions for our gas-fired power stations, providers. When the sources of this 2013 (including the power we generated are dependant mainly on customer demand which means they run less relative to energy are taken into account and using as well as the power we purchased from for energy, as well as the economics of other forms of generation such as nuclear information provided annually as part of the open market for resale), 10% was from different forms of power generation. We and wind. We expect to see a recovery in the UK Government’s ‘fuel mix disclosure’, renewable sources compared with the UK therefore focus on reducing the carbon demand for power from UK gas-fired power the carbon intensity of the power we sold average of 11.3%. Direct Energy’s renewable intensity of our power generation, rather stations, which will cause our overall intensity in the UK in the 2012/13 financial year was component was 14%, compared with a US 379gCO /kWh. This increase from 330gCO / than our total carbon footprint, and helping to rise over the next few years, but we still 2 2 average of 13%. customers reduce their energy use. expect to meet our long-term target of kWh in 2011/12 is because other power generators used more coal to generate When considering the power generated 260gCO /kWh by 2020, which will represent In 2013, the carbon intensity of the power 2 electricity. This makes us the second lowest globally through our investments, renewable a 40% reduction from 2008. we generate remained relatively low at among the ‘big six’ energy suppliers and well energy accounted for 16.1% of the power

200*gCO2/kWh, the same as 2012. This As well as generating our own energy, we below the UK average of 470gCO2/kWh. we generated (including off-take contracts

Total carbon emissions Low carbon power (iii)

Scope Summary 2013 2012 Amount generated (GWh) Tonnes CO2e avoided (TCO2e) (TCO2e) 2013 2012 2013 2012 Total carbon Scope 1 and 2 7,146,412* 7,128,491 emissions Renewables 5,322 5,070 2,773,334 2,471,196 (iv) Emissions from our power stations, gas and oil Scope 1 7,031,658* 7,008,906 assets, offices and fleet Nuclear 12,035 11,915 5,355,704 5,475,449 (iv) Emissions from power we import and use at our Scope 2 114,753* 119,585 (iv) power stations, gas and oil assets and offices Total 17,358 16,985 8,129,038 7,946,646

* Assured by Deloitte LLP for 2013 reporting. (iii) These figures include power generation from all wholly or partially owned assets and all other assets from which Centrica is entitled to output under site specific contracts. Excluded are any Purchasing Power Agreements that are not site-specific, i.e. contracts that could be settled from the open market.(iv) Figure restated from 2012 due to changes in emission factors and improved methodologies.

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from long-term power purchase agreements) 200,000 homes. We are involved in further to DONG Energy, who will now take the and nuclear energy made up 36.4% (through offshore wind farm projects in the Irish Sea construction phase of the project forward. We are working to reduce our 20% stake in EDF Nuclear Generation’s Zone, with our current focus on our Celtic Stable regulatory frameworks are needed to UK nuclear power stations). Using these low Array joint venture with DONG Energy near emissions associated with encourage long-term investment in renewable carbon energy sources rather than fossil fuels Anglesey. Work is underway to prepare a energy infrastructure and such investments our offices, fleet and business helped avoid emitting more than 8mtCO e in planning application for the Rhiannon wind 2 must also be balanced with our obligation 2013 (see table on previous page). farm, which could provide around 1.5m to provide customers with a reliable and travel of our core businesses. homes with electricity if built. We have equity interests in five operational affordable energy supply. Because wind We remain on track to achieve wind farms – one onshore and four offshore. We were disappointed that our Race Bank power is intermittent, gas-fired power stations Our Lincs offshore wind farm, five miles offshore wind farm project was not selected - which can be turned on and off quickly - will our 20% reduction target off the Lincolnshire coast, became fully by the UK Government to receive a transitional remain an important part of the fuel mix even operational in 2013 and is capable of feed in tariff. In December 2013, we took as more wind power comes online. producing enough energy for more than the decision to sell our interest in the project Office, fleet and business travel encouraging employees to adopt alternatives We are working to reduce the emissions to business travel, such as videoconferencing. 2007-2013 internal carbon footprint by activity associated with our offices, fleet and In 2013, for example, we cut emissions from business travel of our core businesses. our major UK properties by 8.6% compared We have the most ability to control these with 2012, mainly by improving building 120,000 emissions compared to those from our management system controls and installing energy generation and customers’ energy solar panels. Conversely, we experienced 100,000 use. In 2013, these emissions were an increase in our van fleet emissions and 91,464*tCO e, having remained at a similar those related to air travel due to an increase in Rail 2 80,000 level to 2012. This took the total reduction business activity. e) 2 Air from 2007 to 19% (see chart). We remain on 60,000 We intend to reduce the emissions from our track to achieve our 20% reduction target by Car fleet van fleet by using lower emitting vehicles. By the end of 2015 from a 2007 baseline. Tonnes (CO Tonnes 40,000 Van fleet January 2014 we had expanded our electric Property Reductions in this area are being brought vehicle trial to include 26 operational vans 20,000 about by investing in energy efficiency and our ambition is to have 1,300 electric measures in our property portfolio, introducing vans in our UK fleet by 2015 depending on 0 2007 2008 2009 2010 2011 2012 2013 more fuel-efficient vehicles to our fleet, and the availability of suitable models.

* Assured by Deloitte LLP for 2013 reporting.

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Protecting biodiversity, air, stations, on the local environment and in projects and are essential to secure planning particular, biodiversity. We have procedures permission and investment, including We have systems in place land and water quality in place at all installations to limit the risk formal consultation required by regulations. of spills or discharges, and any accidental Consulting with communities (see page at site level to assess and Managing the local environmental impacts of release is always investigated to ensure that 31) and NGOs helps us gain a better manage local impacts, and our operations is critical to the business. As lessons are learned. understanding of how new projects might well as protecting biodiversity, air, land and affect local ecosystems (see our case study In 2013, there were 57 minor non- we are committed to achieving water quality, this helps us maintain our licence on basking sharks overleaf). compliances with environmental regulations, to operate, improves efficiency and enhances independent certification to including 23 related to a single issue that Highlights of our environmental impact our relationships with local communities. caused repeated breaches of permitted assessment and management from 2013 the ISO 14001 standard for We have systems in place at site level to limits on oil in produced water from a include a review of biodiversity impacts environmental management assess and manage local impacts, and we storage platform. We have taken action across the business and working with our are committed to achieving independent to prevent further breaches, including partner, Cuadrilla Resources, to develop in all our operations certification to the ISO 14001 standard modifications to equipment. We also agreed best practices relating to the management for environmental management in all our to pay a fine of TT$10,000 (£950) for an of environmental impacts of natural gas operations. In 2013, our operations in administrative breach as a result of our production from shale (see feature on the Trinidad and Tobago achieved certification failure to submit a Marine Mammals and next page). to ISO 14001 and globally, more than 90% Turtles Protection Plan with sufficient notice of our operations measured by carbon prior to conducting a seismic survey in emissions are now certified. Trinidad and Tobago. No environmental damage was recorded. A key area of focus is on effectively managing and mitigating potential impacts from our oil Environmental impact assessments are and gas operations, wind farms and power integral to any proposed new infrastructure

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Visit our website for our approach to safeguarding the environment

Case study Feature We have provided £10,000, multiple well casings and recycling Keeping tabs on with our partners to part- Managing potential returned water. basking sharks fund research conducted by environmental impacts from We have a strong track record in safe and transparent project development for oil and Centrica Energy and DONG Energy the Manx Wildlife Trust into natural gas from shale gas production. We are working closely have formed a joint venture, Celtic basking sharks During 2013, we acquired a 25% stake with our partner, Cuadrilla Resources, Array, to develop proposals to build in the Bowland shale exploration licence to apply the same rigorous approach to wind farms in the Irish Sea Zone. operated by Cuadrilla Resources in managing potential impacts of the Bowland Together we have been supporting Lancashire in the UK. exploration project. We have developed efforts to study the potential impacts Group Operating Principles for onshore of the project on biodiversity. Horizontal drilling and hydraulic fracturing gas exploration and extraction, which are – the techniques used to extract natural One aspect of this support has been being applied to the Bowland project. gas from shale – are well established and to provide £10,000 to part-fund The Principles provide a framework for have been used by energy companies for research conducted by the Manx protecting air, water, the local environment many years. Research by the Royal Society Wildlife Trust into basking sharks and communities whenever fracturing and the Royal Academy of Engineering that live in the waters around the Isle techniques are used to produce gas or oil has shown that risks such as water of Man. from shale and other tight rock formations. contamination are very low given the depth The Trust is cataloguing and identifying of the wells, provided they are designed, We are confident that shale gas can the sharks by photographing their constructed and maintained properly, be extracted safely, and we will work dorsal fins, noting their gender and and that seismic activity is likely to be of closely with our partners to engage size, and taking a DNA swab to a smaller magnitude than that caused local communities about our plans and be analysed by scientists. Results by coal mining or that occurs naturally. respond to their concerns. We believe from the survey will not only help The graphic on the extraction process for that because of the pressing need to conservationists develop strategies to natural gas from shale on the next page, secure new sources of gas - the lowest preserve this endangered fish; they will outlines the typical distances between carbon fossil fuel - the development also allow us to make more informed aquifers and shale rock as well as some of of natural gas from shale could be an decisions about where the proposed the operational measures that can be taken important way for the UK to reduce wind farm should be sited. to protect the environment. This includes reliance on imported gas (see page 36). Underwater basking shark – © Frazer Hemming-Allen

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Natural gas from shale – the process The water- Multiple Recovered water bearing rock cemented steel is recycled or of the aquifer Conventional gas Shale gas casings protect taken to a sits high above the aquifer treatment plant Natural gas is found in Natural gas found in unconventional the shale permeable rock trapped deposits within low-permeability shale rock below a seal Natural gas ows out of well and is piped to market

Fluid injected into the well

Well Surface aquifer

Conventional gas reservoir

Pressurised uid

Steel casing Shale rock Natural gas and water Fractures

1 2 3 4 5

Well drilled vertically and Production casing inserted Well casing is perforated using Pressurised mixture of water, The fluid opens up small fractures in the then horizontally into into borehole, then surrounded high pressure water jets or a sand and chemicals is pumped shale, freeing trapped gas that flows shale rock with cement perforating gun into the well into the well and up to the surface

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Caring for our people & communities

28 At a glance 31 Engaging and supporting our Creating a great place to local communities 29 Creating a great place to work 31 Community engagement work for our employees and 29 Employee engagement 32 Community investment 29 Training and development building strong relationships 32 Case study: Ignite: £10m over 30 Continuously focusing on safety 10 years for social enterprises with local communities across our assets and operations 30 Case study: Live Safe: Speaking up on safety

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People & Communities - At a glance

Overview Performance highlights

The relationships we establish Employee Increased from 4.72 in 2012 and remained within the upper quartile performance range engagment * when benchmarked against our peers. with our employees and the 4.81 Centrica has worked hard in the communities in which we operate local community to help ensure the Lost time injury * Unit: Per 100,000 hours worked Lincolnshire coast remains a vibrant are central to our ability to frequency rate 0.11 2013 0.11 place. The District Council and Centrica (LTIFR) perform effectively. Reduced incidents by 45% per 100,000 hours worked through a 2012 0.20 have worked together to extend East continued focus on embedding a strong safety culture. Lindsey’s culture programme. Often, 2011 0.25 Creating a great place to work with multinational organisations are distant 2010 0.43 from affected communities, but this a continued focus on safety enables isn’t the case with Centrica. We look forward to continuing our work – and us to attract and retain people who Community Contributions increased by 27%; the total comprised of £380.8m in mandatory and investment £392.4m* more than £365,000 in voluntary contributions for vulnerable customers while £11.2m strong relationship – with Centrica in are committed to caring for our went to charity. respect of their offshore operations customers and making our business around our coastline. a success. Engaging and earning Cllr. Doreen the trust of local communities can Goals Target date Stephenson Leader, East Lindsey help us have a positive impact and Strive towards top quartile employee engagement performance 2014 District Council enables Centrica to become the Grow a best practice safety culture and at least maintain and if possible further improve our LTIFR performance 2014 operator of choice. Increase annual volunteering in Direct Energy to 14,000 hours 2014

Expand volunteering in British Gas to one in three employees 2018

*Assured by Deloitte LLP for 2013 reporting.

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See our blog on apprenticeships across the business

Creating a great place to work In particular, Direct Energy significantly Training and development advanced its scores during a period of Providing our people with learning and British Gas invested We aim to create a rewarding, fulfilling and continued organisational change. This was development opportunities enables them to £ inclusive place to work. We want our people achieved through strong engagement from bring new skills and capabilities to their roles. 17.7m in 2013 to deliver to be engaged in our business strategy, senior leaders and ensuring our people This helps our employees reach their full around 69,000 training motivated to help us achieve success and felt valued and understood the company’s potential and allows us to remain competitive have clear opportunities to develop their skills strategic vision during a challenging year. in a rapidly changing market. days to 12,000 engineers and careers. This will help us attract and Overall, feedback from the survey showed Raising customer satisfaction levels across retain people with the talent and expertise high satisfaction in several key areas our downstream businesses is important. needed to maintain a successful and including safety and employee relationships We are increasing the amount of training our sustainable business. with direct line managers. Scores were less customer service agents receive to ensure strong in areas such as development and the best possible service is delivered (see Employee engagement career progression as well as reward and page 12). Achieving a high level of employee recognition. We have analysed feedback engagement is a priority. How employees To secure our talent pipeline, we invest in from the survey and are putting in place think and feel impacts our performance learning opportunities for people currently plans to improve our performance. because engaged employees are likely to in our business as well as those looking be more productive and stay with us for A key engagement focus in 2013 was to start their careers. As the UK’s largest longer as they understand and feel more developing a common purpose across trainer and employer of gas engineers, committed to the business. We use a Centrica. Our people told us through the 2012 British Gas invested £17.7m in 2013 to Group-wide employee survey to measure engagement survey that they struggled to feel deliver around 69,000 training days to engagement and receive feedback on a strong sense of collective purpose within the 12,000 engineers, including more than how we can improve. In 2013, our overall organisation, which was partly a result of the 1,970 training days at the British Gas engagement score improved across the business restructure being carried out at the Green Skills Centre in Tredegar, Wales. We business to 4.81*(i) out of 6, up from 4.72 time. In 2013, we consulted employees through also helped nurture the next generation in 2012, which places us above average a range of focus groups, workshops and our of highly skilled engineers with over 1,200 compared with other high performing new internal social network, Talk Centrica, to apprenticeships across the business. This companies. More than 30,000 employees help us articulate a common purpose. We included over 30 power generation and and contractors participated in the survey decided on: ‘to help people today and secure upstream apprentices at Centrica Energy as - a 77% response rate, up six percentage energy for tomorrow’ and in 2014, we will bring well as 358 new apprentices joining British points from 2012. this purpose to life across the Group. Gas (see blog).

* Assured by Deloitte LLP for 2013 reporting. (i) Feeds into the Long Term Incentive Scheme for Executives (see page 79 in our Annual Report).

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To help tackle youth unemployment, we Continuously focusing Case study provide opportunities across our company for young people not in education, on safety across our assets employment or training (NEETs). In 2013, and operations Live Safe: Speaking are encouraged to: we announced the creation of work up on safety - Be passionate about safety and placements to train young people and equip Supplying gas and electricity is inherently have safe habits both inside and outside the workplace them with valuable ‘green’ skills through hazardous so the safety of our people, Centrica Energy’s Live Safe campaign, - Correct colleagues’ behaviour in our Transform programme, developed in customers and local communities remains a launched in 2011, encourages our a caring and enquiring way partnership with Accenture and Global constant priority. In our upstream operations, people to proactively take responsibility - Report when things go wrong, no Action Plan. We also pledged our support we focus on process safety to prevent major for their own safety and the safety of matter how minor, so that improvements to ‘Step Up 2 Serve’ which seeks to get incidents and in our downstream business, those around them. businesses more involved in providing we prioritise the safety of our customers and can be made to prevent similar The programme seeks to encourage opportunities for young people. road safety, to limit accidents for engineers occurrences employees to point out safety concerns who travel to thousands of customer homes In 2013, nearly 1,000 employees We are committed to developing future – giving them confidence and knowledge every day. benefitted from more than 3,400 hours leaders to support our continued business to speak up if they see unsafe behaviour. of Live Safe and Generation Safe (see success. In North America, for example, In 2013, we continued to embed a strong It is also about embedding safety as an CR update) training. The number of near Direct Energy launched Leader of the safety culture with improved risk management integral part of everyone’s thinking, rather misses – incidents which could have People, a programme to generate new skills processes, a common reporting framework, than something done sporadically or with caused harm – reported in our power and improve business awareness in current and further training to empower our people to the aid of a checklist. division rose by 70% from 2012 due and emerging leaders. Cultural leadership take responsibility for safety (see case study). Through ‘Don’t Walk By’ interactive to increased awareness and greater training was also delivered through the Our efforts to maintain a safety-first culture workshops, continuing awareness willingness to speak up, while the Leaders Journey programme. In total, 389 are reflected in our 2013 performance. campaigns and briefings, employees number of injuries halved. employees took part in these programmes The downward trend in our lost time and in 2014, Direct Energy aims to extend injury frequency rate for employees and its leadership opportunities. Additionally, contractors continued, falling by 45% from Centrica Energy continues to embed the 2012 to 0.11*(ii) per 100,000 hours worked. ‘CE Way of Management’ into line manager Our total recordable injury frequency rate objectives to strengthen leadership and also fell by 46% to 0.76* per 100,000 hours provide better guidance for developing worked. There were no significant process their people. safety events* or fatalities*.

* Assured by Deloitte LLP for 2013 reporting. (ii) Feeds into the Long Term Incentive Scheme for Executives (see page 79 in our Annual Report).

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Community engagement In our upstream business, process safety We are also working with others in our programmes, employee absence increased We engage with communities near our training was delivered to more than 270 industry to develop a best practice approach slightly to 7.5* days per full time equivalent operations as part of our day-to-day activities. employees across our main operations in to safety. For example, Centrica Energy employee compared with 2012. Centrica Energy project managers and issue the UK, Netherlands and Norway. Centrica involved business partners in its Generation specialists engage with key stakeholders Energy hosted training at a specialist RAF Safe programme to achieve a zero-harm to ensure each project fully assesses, facility in the UK, where major process safety environment at our power generation Engaging and supporting understands and has plans in place to manage scenarios such as explosions are played out operations. In 2013, we introduced an our local communities potential impacts, which form an essential part by actors to show what can happen when independent supplier assessment on safety for of the approval process throughout a project’s things go wrong and how potential hazards British Gas franchisees and the requirement for We want to be the operator of choice for lifecycle. In Canada, we continued to develop can be prevented (see CR update). them to have professional safety support. communities. We are dependent on local strong relations with First Nations communities communities to provide our workforce, host In our downstream business, we continued We aim to support the long-term health by supporting local programmes and assisting our infrastructure and support our licence to to raise awareness of road safety, primarily and wellbeing of our employees to improve those affected by severe flooding in 2013. operate. Operating responsibly by minimising through driver safety training (see CR update). productivity, reduce absenteeism and make We also conduct formal community In 2013, more than 4,800 employees took Centrica a better place to work. Our Group negative impacts, particularly from oil and consultations. With joint venture partner DONG part in driver safety training programmes health and wellbeing strategy focuses on gas production and power generation, is Energy, we sought views during 2013 about our across British Gas and Direct Energy. With promoting healthy lifestyle choices through therefore a business imperative. Community proposed Rhiannon offshore wind farm through more than 342 million km driven by our tailored local programmes established by consultation helps us achieve this by five public information days on the island of engineers during this period, our rigorous each business (see blog). For example, in improving understanding and mitigation Anglesey, as well as monthly drop-in sessions. approach to driver safety has contributed to 2013 British Gas launched musculoskeletal of adverse impacts while making sure low severity road incidents declining by 2% workshops, an online toolkit and an advice communities benefit from our presence. We These consultations and engagements to 4.9* per million km driven, and the total helpline, which contributed to a 60% also aim to strengthen local economies and help earn the trust and support of local number of high severity incidents falling from reduction in occupational health referrals improve living standards by investing our communities, enabling us to deliver projects six to one*, compared with 2012. compared with 2012. Despite the new resources and expertise. more effectively.

* Assured by Deloitte LLP for 2013 reporting.

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Visit our data centre to see our community contributions and website for our approach to people and communities

Community investment Gas’ partnership with housing charity, Case study We invest in our local communities to Shelter (see page 37) tackle some of society’s biggest social and - Skills development: growing social environmental issues. We contribute to charities efficiency of empty homes. Properties are enterprises with the Social Business through donations, volunteering and employee Ignite: £10m over 10 then sold to fund getting more people into Trust which has invested in eight social fundraising. We also support our vulnerable work. Our people also provide mentoring enterprises and created over 2,500 jobs, years for social enterprises customers with a mixture of company and assistance procuring materials for as well as Ignite (see case study). programmes and government schemes. We are helping energy entrepreneurs renovation. - Low carbon: teaching children about play a vital role in building a better society Our total community contributions increased Profits from Ignite’s investments will be sustainability through Generation Green through Ignite, the UK’s first impact by 27% in 2013 to £392.4m*, while reinvested to grow more social enterprises and installing energy efficiency measures investment fund with a focus on energy, volunteering hours rose by 12% to nearly and at the end of the 10 year term, any as part of the UK Government’s ECO created by Centrica. 48,700* hours. The majority of our spend surplus will be distributed to charity. scheme (see page 19). (£380.8m) went to vulnerable customers in the UK through mandatory obligations. Charitable contributions also increased to £11.2m from £9.4m and went to a range of issues (see blog). Ignite offers £10m of funds recycled In recognition of the valuable contribution £11.2m over 10 years to energy-related social our people make to local communities and enterprises to help develop and grow skills they can gain through volunteering, Charitable contributions their products and services. There will Direct Energy aims to increase their annual increased to £11.2m from also be opportunities for our people volunteering to 14,000 hours by the end of to support the social enterprises while 2014 while British Gas intends to have one in £9.4m and went to a range developing their own skills. three employees volunteering by 2018. of issues One of the first Ignite beneficiaries Our community investment is focused on with an investment of £500,000 was three areas: Midlands Together CIC, which provides opportunities for ex-offenders to learn - Vulnerability and social inclusion: new skills and gain employment by combatting fuel poverty (see page 13) and refurbishing and improving the energy improving 1m UK homes through British

* Assured by Deloitte LLP for 2013 reporting.

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Working with our partners

34 At a glance 37 Listening to and collaborating with Partnering with others our stakeholders 35 Embedding responsible business to tackle social and practices in our supply chain 37 Case study: Partnering to create better homes for Britain 35 Feature: Assessing risks in our supply chain environmental challenges 38 How we engage with key stakeholders 36 Maintaining energy security for our customers 36 Case study: Collaborating to revolutionise energy use in the UK

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Working with our partners - At a glance

Overview Performance highlights

Collaborating with partners – Supply chain Centrica’s average suppliers, joint venture partners risk Low risk rating (score of 49) low risk 49/100 Durham and Newcastle and other stakeholders – can help Average risk rating of more than 70 of our strategic suppliers for social, universities are working in a ethical and environmental issues was low risk (score of 49), compared Multi-industy average unique partnership with British us tackle social and environmental to a multi-industry average of medium risk (score of 41), where 100 medium risk 41/100 Gas and other partners to issues more effectively. equates to lowest risk. investigate how smart meters, low carbon technologies and time-of-use tariffs can improve Smart grids By working together, we can pool Customer Led Network Revolution (CLNR) time-of-use trial is seeing customers using 3% less energy the resilience of our electricity 10% overall and energy demand at peak times being cut by 10%. our skills and expertise to better network. We find that customers manage risks, improve energy can be really engaged with Shelter Delivered advice to landlords, funded debt and energy advisors at Shelter’s advice centres these ‘smart’ solutions and the security, and positively contribute partnership £200,000 and raised nearly £200,000 towards 2017 employee fundraising target. benefits they can offer. to communities. Prof. Harriet Bulkeley Durham University Dialogue with our stakeholders Goals Target date helps us build trust and their Expand EcoVadis assessment programme to cover more suppliers from across the business 2014 feedback enables us to learn and 2013 informs the way we do business. Ensure corrective action plans for low scoring suppliers are implemented 2014 2012 Help 1m UK households in the private rented sector through partnership with Shelter 2017

Raise £1m through employee fundraising through partnership with Shelter 2017

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Visit our data centre to see our supply chain metrics and website for our approach to working with our partners

Embedding responsible chain and the tools to work with our suppliers Feature business practices in our to improve performance. We integrate these assessments with other reviews of suppliers Assessing risks in high risk rating. The plans consist of supply chain on financial stability and security of supply to a prioritised list of improvements that inform our wider business risk registers. our supply chain can be monitored through the platform. We spend billions of pounds each year Suppliers will then be reassessed in 12 Over 70 strategic suppliers, which are most sourcing products and services ranging In 2013, we introduced a supplier months to evaluate the changes they critical to our business, were assessed in from central heating products, insulation assessment system to manage risk, have made. 2013. Of those assessed, one supplier was and metering services in our downstream following a pilot we conducted the year deemed high risk and just over a quarter In 2014, the EcoVadis assessment will be business to heavy equipment and offshore before. Over 70 suppliers completed received a medium risk rating. As a result rolled out to further suppliers according oil and gas management services for our a self-assessment questionnaire using they are developing and implementing to the risk associated with the kinds of upstream operations. the EcoVadis tool, providing us with corrective action plans. Nearly two thirds services they provide and the country in better insight across key areas of risk: Managing risk in our supply chain is important were categorised as low risk, with seven which they operate. environment, labour practices and to secure reliable supply of these products identified as high performers. The average human rights, fair business practices, and services, and to protect our reputation. risk rating of our assessed suppliers is 49 out and sustainable procurement. EcoVadis Our Corporate Responsibility Policy for of 100 on the EcoVadis rating scale, which assesses the completed questionnaires Suppliers sets out the minimum standards we corresponds to the low risk category and is and accompanying documentary expect, and covers issues such as managing better than a multi-industry average of 41 evidence provided by suppliers to verify safety risks and environmental impacts, (medium risk). the information. preventing bribery and corruption, as well as We aim to build strong relationships with respecting human rights. This system reduces the burden on our suppliers to work with them to raise suppliers by enabling them to share standards and ensure reliability of supply. In 2013, we launched a supplier assessment assessment results with other clients In 2013, we held a supplier forum in the programme to help us identify and manage rather than completing individual UK to share best practices on responsible social and environmental risks in our supply questionnaires. The platform helps us procurement and another in North America chain. The programme uses a system, understand the level of risk associated for Direct Energy Residential to share our established by independent supply chain with different suppliers and identify vision, challenges and expectations with our sustainability experts EcoVadis, to assess where improvements need to be made. strategic suppliers. We also surveyed 85 suppliers through an online questionnaire Corrective action plans are required representatives from key suppliers to gain (see feature). The system provides us with for suppliers who receive a medium or feedback on their relationships with us and an analysis of the risks we face in our supply what we can do better.

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Maintaining energy security operating share in the Bowland shale Case study for our customers exploration licence. With eight out of 10 UK homes reliant on gas for heating, we believe network operator; the Durham Energy the development of natural gas from shale Collaborating to revolutionise Ensuring customers have the energy they Institute provided the academic rigour could play an important role in securing need to power and heat their homes is a energy use in the UK behind the trial design, analysed the affordable energy for the UK. Experts predict fundamental part of our responsibility to results, and carried out post-trial In 2013, British Gas continued to work them and essential to the success of our that natural gas from shale has the potential evaluation with participants; and British with Northern Powergrid, Durham Energy business. In the UK, which is increasingly to reduce the amount of gas the UK needs Gas used its significant customer Institute and other partners as part of the reliant on imported gas supplies, we are to import from 76% to 37% by 2030. relationship and marketing capabilities Customer Led Network Revolution (CLNR), joining forces with partners to explore new Managing potential environmental impacts is and technology expertise to design a which is part-funded through Ofgem’s Low energy sources and trial innovative solutions a key focus of our partnership with Cuadrilla customer-friendly programme and deliver Carbon Network Fund. Through the project, to energy security challenges. Resources (see page 25). effective communications that recruited over 12,000 customers in the Northeast participants to complete the trial and In 2013, we entered into £14bn of long-term We are also working with partners through and Yorkshire trialled different combinations gather the necessary data. gas contracts providing supply from Qatar the Customer Led Network Revolution – of technology, pricing structures and Early results from the time-of-use trial and North America. We also announced the UK’s largest smart grid trial. This pilot rewards to find the most effective way to have been very positive, with participating a partnership with Cuadrilla Resources to seeks new ways to improve energy security reduce overall demand on the grid. customers using 3% less energy overall explore onshore gas supplies in Lancashire, and reduce carbon emissions by reducing Our latest trial offered more than 600 and demand for energy cut by 10% at England, having acquired a 25% non- demand on the grid (see case study). customers cheaper energy bills for saving peak times, reducing the burden on the their energy-intensive household activities power grid. to times when demand on the grid is lower, In a survey of around half of the particularly the weekend. These time-of-use participants, 94% said they found it products have already proved a popular and possible to shift their energy use and effective way for our customers in the US to 95% would choose a multi-rate tariff over reduce their energy bills (see page 10). a standard tariff if it was available after The blend of skills and expertise of the the trial. The insight we have gained has partners involved in the programme has made an important contribution to our been central to its success: Northern plans for British Gas to make time-of-use Powergrid provided essential infrastructure tariffs available to more of our smart meter and access as the ‘host’ distribution customers during 2014.

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Listening to and collaborating stakeholders such as investors, regulators and Case study NGOs directly through stakeholder workshops with our stakeholders and one-to-one meetings. Partnering to create better have a far greater impact. Listening to the people and organisations We use a Group-wide employee survey to The initial focus is jointly campaigning with that affect or are affected by our business is receive feedback from all employees on how homes for Britain Shelter to raise standards in the private important to help us understand and respond we can create a positive and high performing Nine million people in England rent their rented sector. We have already launched to their concerns, develop strong relationships environment (see page 29). We also gather homes. But many tenants face poor landlord advice videos while resources for and build trust. formal feedback on our operations and conditions with over a third of privately tenants will be launched in 2014. Through customer service from customers through the We engage with a wide range of stakeholders rented households failing to meet the the British Gas Energy Trust, we have British Gas Customer Board (see page 11) and through formal advisory groups, cross-industry Government’s Decent Homes Standard. funded six Shelter advisors, who provide the British Gas Business Engagement Panel of forums and regular interactions with millions Some renters find it particularly difficult to face-to-face debt and energy efficiency over 350 enterprise and corporate customers. of customers. Our Corporate Responsibility challenge their landlord to fix their home advice to people struggling to pay their Advisory Group, which provides valuable Where there is a shared objective or issue, without risking eviction. energy bills, including grant applications insights and input into our CR approach and we may also seek to collaborate with to the Trust to get them back on track specific issues, met three times in 2013 and stakeholders more deeply, especially where and remain energy debt free. discussed issues including Centrica’s interest we can bring together complementary skills British Gas’ employees are also getting in natural gas from shale, the UK Retail and expertise. For example, our strategic involved by supporting Shelter through Market Review, smart grids and smart energy. partnership with Shelter (see case study) volunteering and fundraising. We aim to Their feedback is shared with our Board’s enables us to reach some of the most raise £1m through employee fundraising Corporate Responsibility Committee, enabling vulnerable households more effectively while We are partnering with Shelter over five by 2017 - nearly £200,000 has been stakeholders to influence the decisions made improving insulation and gas and electrical years to improve 1m homes in the private raised so far. We also ran customer-facing by our senior executives. We also engage with safety in privately rented UK homes. rented sector across the UK by 2017. fundraising campaigns where British Gas Together, we aim to improve gas and donated 50p for every customer who electric safety, make homes more energy switched to Direct Debit, raising £60,000 efficient by tackling poor insulation, provide in 2013. advice for tenants and landlords, and advocate for higher standards across British Gas won ‘Company of the Year’ the sector. By combining our expertise, at the 2013 Business Charity Awards, in capabilities and influence, we can tackle which Shelter featured as one of our three this complex issue more effectively and community partnerships.

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How we engage with key stakeholders

Stakeholder group How we engage Stakeholder priority issues Our response

Customers - Direct feedback through daily interactions with - Energy prices and affordability While we had to increase UK residential energy prices to ensure profitability and Centrica’s customers via call centres, websites and social - Profitability ability to continue to secure energy supplies, we were the first energy company to reduce prices media following changes proposed to ECO in December 2013 (see page 9). - Improve customer service - Formal customer panels through our Customer British Gas invested in IT systems that will give customers a better service in the long-term and - Transparency of tariffs and bills Board and Business Engagement Panel enhanced our mobile apps to give customers better access to their accounts (see CR update). - Focus groups, workshops and interviews In the UK, we now offer four distinct tariffs all with a fixed standing charge and single unit rate - Surveys and online forums that are clearly shown on customers’ bills (see page 10).

Government - Consultation responses - Electricity Market Reform We engaged closely with Government and parliamentarians in the UK on key policies relating - Direct engagements with government and - Securing gas supplies for the UK to our upstream business such as boosting the UK power sector, onshore and offshore gas production and securing gas supplies from overseas. Downstream, we highlighted the benefits regulator representatives - Competitive retail markets of competitive markets, demonstrated the makeup of customers’ bills and how best to deliver - Engagement with politicians - Affordability energy efficiency to consumers in the UK. - Energy efficiency in homes and businesses Across our North American markets, we encouraged regulators and legislators to expand competitive markets and support smart meter deployment. In Texas, we continued to advocate for the benefits of demand response and time-of-use products as a solution to resource adequacy challenges in the state.

Investors - Direct engagements - Financial performance As part of our ongoing shareholder engagement and financial reporting, we brief investors about including SRIs - Investor seminars - Risk of price controls and political intervention our engagement with government and regulators on key issues. In the UK these include price control, which we believe is not the answer in a competitive market, changes to environmental - Multi-stakeholder workshops in the UK energy market and social policies together with their impact on bills, market reform and competition. - Performance and strategy briefings - Public concern around energy prices We also held a round table for investors on natural gas from shale including how we and our - Environmental risks and community relations partners manage any potential social and environmental impacts. for upstream operations See our 2013 Annual Report and Accounts.

Employees - One-on-one discussions with line managers - Development and career progression Our overall engagement score improved to 4.81 out of 6. We are putting in place plans that - Training, focus groups and workshops - Taking action from the employee survey respond to employee feedback and will further help us improve our performance. - In house social media platforms - Reward and recognition British Gas invested £17.7m to deliver around 69,000 training days to engineers and in Direct Energy 389 employees took part in programmes to develop current and emerging leaders. - 2013 Group-wide employee survey Further details available from page 29.

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Stakeholder group How we engage Stakeholder priority issues Our response

NGOs - Direct engagements including during planning - Transition to low carbon and renewable energy Our Lincs offshore wind farm became fully operational. Because wind power is intermittent, consultations - Support customers to reduce energy gas-fired power stations - which can be turned on and off quickly - will remain an important - Strategic partnerships consumption part of the fuel mix (see page 23). - Stakeholder workshops - Fuel poverty and vulnerability The products we installed in UK homes since 2010 equates to taking 668,000 cars off the road. We have installed 1.3m smart meters in the UK since 2009, which give customers - External panel, CR Advisory Group, set up in - Fair and transparent pricing greater awareness and control over their energy usage (see page 19). 2011 We continued to support more vulnerable customers than any other energy supplier in the UK. In North America we donated US$600,000 (£365,510) through the Neighbor-to-Neighbor bill assistance programme (see page 15).

Suppliers - One-on-one discussions, account reviews and - Supplier relationship management We sought the views of our strategic suppliers through our ‘Voice of the Supplier’ survey. We site visits - Increased collaboration and innovation with are responding to their feedback directly and agreeing action plans on key improvement areas. - CR supplier assessments suppliers We held two supplier forums to share our vision and challenges as well as best practices on - Supplier forums and collaborative initiatives - Supplier incentives for high CR performance responsible procurement (see page 35). - ‘Voice of the Supplier’ survey

Communities - Regular and ad hoc meetings with charities - Minimising local impact of our operations Group Operating Principles have been developed for onshore gas exploration and extraction, and local community partners - Community investment which provide a framework for protecting local communities and the environment where we or our partners operate. - Public consultations - Skills and employment - Employee volunteering In 2013, we contributed £392.4m to local communities, charities and customers to tackle social and environmental issues. Of this, over £380m went to supporting 1.8m vulnerable households in the UK through mandatory programmes. We also provided over 1,200 apprenticeships across the business.

Trade unions Formal consultation, national quarterly meetings Annual pay negotiations and collective We have engaged with trade unions on collective pay agreements: In North America we filed and regular local meetings bargaining for conciliation with UNIFOR following reluctance from the union to enter dialogue; a strong Informal regular and ad-hoc meetings Call centre working conditions partnership approach with trade unions in the UK enabled both pay negotiations and a number of restructures to be delivered successfully. Informing local representatives about matters that affect their members British Gas became the first employer to sign up to the UNISON Contact Centre Charter which establishes a set of standards for the working environment for contact centre employees.

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Managing corporate responsibility

Understanding and 41 Managing corporate responsibility 41 Governance managing our social and 41 Management environmental impacts is 41 Assurance essential to our long-term 41 Materiality 41 Graphic: Materiality matrix business success 41 Risk management 42 Key performance indicators

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Managing corporate performance. Each business unit CR team influence that issue, alongside the level of Risk management manages their respective operational stakeholder concern. In 2013, this process Identifying and understanding our most responsibility programmes while ensuring alignment to highlighted 15 issues categorised as either significant risks and developing strategies to the Group. Heads of CR from across the watch list, significant or priority as described mitigate them, is essential to managing our Understanding and managing our social business coordinate their activities through a in the graph below. The size of the circle business responsibly. We ensure that social and and environmental impacts is integral to CR Working Group. denotes Centrica’s level of influence. This environmental risks are effectively controlled our long-term business success. Engaging report provides an overview of our approach by including them within our business risk with stakeholders and assessing risks and We engage with many stakeholders in a and performance on our priority and most management procedures. Details of key risks are opportunities helps us identify our most range of ways and manage our relationships significant issues. Additional information is included in the Risks and Uncertainties summary important corporate responsibility (CR) issues with them at a Group and business unit level. provided on our website. in our 2013 Annual Report and Accounts. across the business. Our management and For more information on our stakeholder governance structures support effective engagement during 2013, see page 38. implementation and oversight of our CR CR Themes Centrica’s ability Explore materiality matrix online commitments across the company, and Assurance Treating customers fairly to influence we use independent, external assurance to Third party assurance of our data Safeguarding the environment Caring for our people & communities review our key metrics. strengthens its credibility and builds trust Working with our partners Circle size denotes Centrica's among our stakeholders. It also helps Other level of influence over this issue Customer trust Governance improve our data collection processes so Preventing fuel poverty The Corporate Responsibility Committee that we can be confident we are effectively Minimising disturbance to local communities

– a sub-committee of the Board – reviews addressing our key impacts. Deloitte LLP used s Sustainable from our operations Environmental targets strategic and long-term issues, oversees our the International Standard on Assurance supply chains & carbon savings Centrica’s Avoiding large scale Affordable CR Approach and monitors progress against Engagements (ISAE) 3000 to provide Protecting contribution industrial incidents energy biodiversity, air to local Energy pricing key performance indicators and targets. For limited assurance on 18 non-financial key & water quality communities The role of gas, incl. transparency information on the Committee’s membership performance indicators in 2013. Assured unconventional and a summary of topics covered, see page metrics are indicated with an asterisk (*) on Remuneration Keeping our people safe

Importance to stakeholder Treatment 61 of the Corporate Governance Report in the page 42 and throughout this report. Deloitte’s of employees 2013 Annual Report. assurance statement is available at www.centrica.com/CRassurance. Environmental resilience Management & Climate Change CR is managed at different levels across Materiality adaptation Centrica. The Group CR team sets and A materiality process helps us identify coordinates the CR Approach, company issues we should prioritise by assessing Watch List Significant Priority policies and procedures as well as reporting the relevance to Centrica, our ability to Relevance to Centrica

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Key performance indicators See our data centre for our full set of metrics across our key issues

Treating customers fairly Metric Unit 2013 target 2013 performance 2012 performance What’s next British Gas Net Promoter Score (NPS) Number Achieve high performance range +15* (low performance +30** (high Return to the high performance range range) performance range) Direct Energy Net Promoter Score (NPS) Number Achieve high performance range +40* (high +39** (high Remain within the high performance range performance range) performance range) Vulnerable households helped by British Number Measure only 1.8 million* 2.1 million** Continue to support our most vulnerable customers through Gas initiatives the British Gas Energy Trust and obligations such as the Warm Home Discount

Safeguarding the environment Metric Unit 2013 target 2013 performance 2012 performance What’s next

(i) (ii) Total carbon emissions Tonnes CO2 equivalent Measure only 7,146,412* 7,128,491 Continue to adopt best practice in monitoring and reporting our global carbon emissions and analyse the impacts of our strategic plans

Scope 1 emissions Tonnes CO2 equivalent Measure only 7,031,658* 7,008,906 Continue to take proactive steps to reduce our carbon emissions through innovation, technology and cultural change

Scope 2 emissions Tonnes CO2 equivalent Measure only 114,753* 119,585 Continue to reduce emissions associated with our use of electricity, particularly as part of our internal carbon footprint target

Total carbon intensity by revenue Tonnes CO2 equivalent/£m Measure only 269 298 Embed the reporting of this new metric and start to analyse developing trends as we deliver on our strategic priorities

(iii) Internal carbon footprint (property, fleet Tonnes CO2 equivalent Reduce the carbon footprint 91,464* 91,521 Continue to work to our 2015 target and travel) of our core offices, company By the end of 2013 we had achieved a 19% reduction from vehicles and travel by 20% by 2007 base year end of 2015

(iv) Carbon intensity of power generation gCO2/kWh Reduce our power generation 200* 200 Reduce our Group power generation carbon intensity to 260 carbon intensity to 260 by end by end of 2020 of 2020 Smart meter installations (residential and Number of meters installed Measure only 1,297,656 *(v) 882,983 (vi) Continue to be the UK leader in smart meter installations business customers) (cumulative since 2009)

* Assured by Deloitte LLP for 2013 reporting. See centrica.com/CRassurance to view Deloitte’s 2013 assurance statement and the 2013 Basis of Reporting. **Assured by Deloitte LLP for 2012 reporting. (i) Comprises Scope 1 and Scope 2 emissions as defined by the Greenhouse Gas Protocol.(ii) Re-stated following subsequent validation carried out on the data. (iii) Re-stated due to change in emission factors and improved data. (iv) Re-stated due to new scope (equity only) for carbon intensity target. (v) Only data representing 930,344 smart meter installations was assured by Deloitte due to the historical nature of the data. (vi) Re-stated following subsequent accounting for manually inputted data.

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Key performance indicators

Caring for our people and communities Metric Unit 2013 target 2013 performance 2012 performance What’s next Employees Employee engagement Mean score out of 6 Implement action plans driven 4.81* (upper 4.72 ** (upper To continue to strive towards top quartile performance, out of the 2012 engagement performance range) (vii) performance range) (vii) measured against an independent high performance survey benchmark range Diversity – female and male Percentage Continue to promote diversity 29 female 28 female Continue to promote diversity in leadership roles and in leadership roles and 71 male 72 male recruitment recruitment Retention Percentage Measure only 90.9* 88.3 (viii) Encourage and maintain healthy retention levels Absence Days per full time employee Measure only 7.5 * 7.0 (ix) Focus on driving down absence in British Gas Safety Lost time injury frequency rate (LTIFR) Per 100,000 hours worked Achieve a high 0.11* 0.20** Continue to grow a best practice safety culture and at performance range least maintain and if possible further improve our LTIFR Total recordable injury rate (TRIR) Per 100,000 hours worked Measure only 0.76* 1.42 performance.

Significantprocess safety event Number 0 0* 0** Continue to improve process safety awareness and performance metrics Road safety incidents rate – low severity Per 1 million km driven Measure only 4.9* 5.0 We aim to continue the reduction in road safety incidents Road safety – number of Number Measure only 1* 6 through proactive driver safety programmes high severity incidents Fatalities Number Measure only 0* 0 Community Total community contributions (x) £ million Measure only 392.4 *(xi) 309.2 (ix) Continue to seek ways we can make a positive contribution Total employee volunteering hours (xii) Number of hours Measure only 48,697* 43,488 (ix) to the communities in which we work

Working with our partners Metric Unit 2013 target 2013 performance 2012 performance What’s next Average CR risk rating of Risk score Measure only 49 49 Continue to assess the CR risks among our strategic and assessed suppliers high risk suppliers

* Assured by Deloitte LLP for 2013 reporting. See centrica.com/CRassurance to view Deloitte’s 2013 assurance statement and the 2013 Basis of Reporting. **Assured by Deloitte LLP for 2012 reporting. (vii) Based on an independant benchmark range. This differs from the rating used in the Annual Report where performance corresponds to the Long Term Incentive Scheme for Executives. (viii) Re-stated due to a change in calculation methodology. (ix) Re-stated due to subsequent review of historical data. (x) Includes charitable donations calculated through the London Benchmarking Group methodology, combined with the cost of voluntary and mandatory programmes to support vulnerable customers in the UK. (xi) Comprising £380.8 million in mandatory and more than £365,000 in voluntary contributions for vulnerable customers, and £11.2 million in charitable contributions. (xii) Includes volunteering time during business working hours as well as outside of working hours when enabled by the business.

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