Responsible Business Report 2017

Confidence in the future Introduction Our approach Our performance Looking ahead Further information Responsible Business Report 2017 2

Contents

Introduction 2 2017 highlights 3 Message from our Chief Executive 4 At a glance 5 Business model 6

Our approach 7 Our approach to being a reponsible business 7 How we engage with our stakeholders 8 Issues that matter to our stakeholders 9

We are a leading UK construction and regeneration group, offering Our performance 10 Welcomesupport at every stage of a project’s life cycle through our six How we assess our divisions of Construction & Infrastructure, Fit Out, Property Services, performance 10 An overview of our Partnership Housing, Urban Regeneration and Investments. targets and performance 11 Protecting people 12 This report sets out our progress and achievements in 2017 against Developing people 15 our five strategic responsible business commitments of keeping Improving the environment 18 Working together people safe, developing our employees, working with our supply with our supply chain 20 chain, improving the environment and enhancing communities. Enhancing communities 22 Looking ahead 25 Material issues in 2018 25 Our suite of reports Initial findings from our 2018 2017 Annual report 2017 Responsible business report materiality survey 26 A comprehensive overview A review of our responsible business of our performance in 2017 approach and our performance Further information 27 including details of how we in 2017. Material issues approach strategy, governance, and boundaries 28 people and performance to add GRI technical guidance value for all stakeholders. Our detailed reporting under GRI, to Data summary 30 be published in the first half of 2018.

Copies of our reports can be downloaded from our website at morgansindall.com, where you can also find further details of our responsible business performance. Introduction Our approach Our performance Looking ahead Further information Responsible Business Report 2017 3

2017 highlights

Our aim is to achieve Profit before tax (adjusted*) Total dividend Order book Regeneration and long-term, sustainable development pipeline success for the business, while actively creating benefits for everyone who is involved in or £66.1m 45.0p £3.8bn £3.2bn affected by our activities. 2016: £45.3m 2016: 35.0p 2016: £3.6bn 2016: £3.2bn +46% +29% +6% +1%

Accident Carbon Apprentices and Percentage spend under frequency rate1 intensity3 new graduates Group-wide agreements 0.09 10.2 217 77% 2016: 0.14 2016: 12.0 2016: 167 2016: 71%

-15% +30% - % reduction in carbon 36 emissions

1 The number of RIDDOR2 reportable accidents multiplied by 100,000 and divided by the + % number of hours worked. 6 2 The Reporting of Injuries, Diseases and Dangerous Occurrences Regulations 2013. 3 Carbon intensity is total carbon emissions divided by revenue. Introduction Our approach Our performance Looking ahead Further information Responsible Business Report 2017 4

Message from our Chief Executive

Welcome to our 2017 responsible n Improving the environment Core values business report. After a very n Working together with our Our core values sit at the heart of our successful year for our business, supply chain business, and underpin everything we do: I am proud to present this dedicated n Enhancing communities report on our performance against We operate a our responsible business strategy. We conduct regular ‘materiality decentralised philosophy surveys’ with our stakeholders to As a large construction and find out which issues they consider regeneration group, our activities material to our business. Our impact a wide range of stakeholders, The customer comes first performance against each Total including people who live in the Commitment in 2017, together areas where we operate, work on with the supporting material issues, Talented people are our projects and use our buildings provides the backbone to this report, key to our success and infrastructure. It is essential and can be found on pages 11 to 24. for the Group’s long-term success that we continuously listen to our This year we will review our We must challenge stakeholders and look for ways responsible business strategy to the status quo to create value for them through incorporate feedback from our 2018 our work. materiality survey and the six United Consistent achievement Nations Sustainable Development I am pleased to report that during is key to our future Goals (SDGs) we have identified 2017, our accident frequency rate as being relevant to the Group. By reduced by 36% from our 2016 regularly monitoring and updating performance and we achieved our strategy we can ensure it a 55% reduction in our total remains relevant and continues carbon emissions from our to drive improvements in our 2010 baseline. Whilst these responsible business activities. performances are encouraging, we must not be complacent. I would like to take this opportunity to thank everyone across the Our Total Commitments Group for the contributions that Our responsible business strategy they make to deliver our responsible supports delivery of our strategic “Achieving sustainable regeneration is business strategy and the successful objectives and is built on five performance of the Group as clearly embedded in our culture and it is Total Commitments designed to a whole. inspiring to see the difference that our directly address the needs of our key stakeholders: John Morgan work has made to people’s lives.” Chief Executive n Protecting people John Morgan Chief Executive n Developing people Introduction Our approach Our performance Looking ahead Further information Responsible Business Report 2017 5

The Group is structured around our two distinct but complementary activities, At a glance construction and regeneration.

Construction Regeneration

Construction & Infrastructure Fit Out Property Services Partnership Housing Urban Regeneration

Revenue Revenue Revenue Revenue Revenue 2016: 2016: 2016: 2016: 2016: £1,395m £1,321m £735m £634m £66m £55m £474m £433m £175m £156m Operating profit — adjusted* Operating profit — adjusted* Operating (loss)/profit — adjusted* Operating profit — adjusted* Operating profit — adjusted* 2016: 2016: 2016: 2016: 2016: £20.4m £8.9m £39.1m £27.5m (£1.3m) £0.7m £14.1m £13.4m £10.0m £13.4m

Delivering vital UK infrastructure Fit out and refurbishment expertise Integrated property Housing-led regeneration Mixed-use urban regeneration and construction Overbury specialises in fit out and maintenance programmes Works in partnerships with local authorities Works with landowners and public sector Provides infrastructure services in the refurbishment in commercial, central and Provides response and planned maintenance and housing associations. Activities include partners to transform the urban landscape highways, rail, aviation, energy, water and local government offices, further education to social housing and the wider public sector. mixed-tenure developments, building and through the development of multi-phase nuclear markets, including tunnel design; and retail banking. developing homes for open market sale and sites and mixed-use regeneration, including and construction services in education, Responsible business for social/affordable rent, design and build residential, commercial, retail and leisure. healthcare, defence, commercial, industrial, Morgan Lovell provides office interior design A recognised market leader in the social contracting and planned maintenance leisure and retail. BakerHicks offers and build services direct to occupiers. enterprise model, investing in retraining local and refurbishment. Responsible business unemployed people and helping them back From Aberdeen to Plymouth, breathing a multidisciplinary design and Responsible business engineering consultancy. into work. Responsible business life back into 14 town centres across New initiatives to keep people safe on site Continually develops close connections to the country in 2017. Responsible business include a safety app developed in house local communities through relationships with Award-winning participant in the and a consultant-led programme to drive local authorities and housing associations, mental health charity, Mind’s, Workplace behavioural change. particularly through apprenticeship and Wellbeing Index, and launched a returnships employment schemes. programme to attract people back to work after a voluntary break.

Investments

Operating profit — adjusted* Securing long-term construction and regeneration Responsible business opportunities through strategic partnerships Working with local authorities and NHS 2016: Provides the Group with construction and regeneration opportunities trusts to make the best use of their estates £0.5m (£2.0m) through various strategic partnerships to develop under-utilised and enable them to deliver front-line services property assets. to their local communities. Its 15-20 year programmes create long-term social value.

* Adjusted is defined as before intangible amortisation of £1.2m (2016: intangible amortisation of £1.4m and (in the case of earnings per share) deferred tax credit due to changes in the statutory tax rate of £0.7m). The following strategic report is given on an adjusted basis, unless otherwise stated. Introduction Our approach Our performance Looking ahead Further information Responsible Business Report 2017 6

We offer construction and regeneration services in the public and commercial sectors. Business model We reinvest cash from our construction activities into regeneration schemes that maximise longer-term value for all our stakeholders. Our specialism in these mutually supportive activities makes us competitive in the industry.

Construction Regeneration Construction & Infrastructure Fit Out Property Services Partnership Housing Urban Regeneration PropertyResponse and Services planned ConstructionVital UK infrastructure & Infrastructure and construction Fit out and refurbishmentFit Out expertise PartnershipHousing-led regeneration Housing UrbanMixed-use Regeneration urban regeneration maintenanceResponse and programmes planned Vital UK infrastructure and construction Fit out and refurbishment expertise Housing-led regeneration Mixed-use urban regeneration maintenance programmes Investments Investments Investments Investments Investments

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Our approach to being a responsible business Board

HSE committee

Our values, strategy and policies are driven by the Board and embedded throughout the Group. Group director of sustainability and procurement

While our overall approach is divisions. The steering group Board-led, our philosophy of meets regularly to monitor progress decentralisation gives our divisions against our responsible business autonomy to develop initiatives that strategy, share best practice, meet the needs of their own markets. discuss feedback from our Responsible stakeholder panels and advise Health and Our aim is to ensure a consistent business HR forum the HSE committee on external safety forum Group-wide approach to being a steering group factors that may influence the responsible business while at the strategy going forward. same time embracing ideas from each of the divisions and facilitating In addition to the steering group, the sharing of best practice. we have a health and safety forum, HR forum and carbon action group, Our health, safety and environment focusing on specific issues. All these (HSE) committee assists the Board in forums include representatives from Divisional overseeing the Group’s responsible both Group level and the divisions. responsible Stakeholder business strategy. Our Group director business panels A two-way system of dialogue and of sustainability and procurement committees feedback exists between these drives the strategy and ensures groups and the responsible that each division incorporates business steering group. Carbon it into its business. action group He chairs our responsible business steering group, whose members include representatives from all Introduction Our approach Our performance Looking ahead Further information Responsible Business Report 2017 8

How we engage with our stakeholders By understanding the expectations of all our stakeholders, we can respond more quickly to changes in markets, attract, retain and develop staff and manage our business more efficiently and profitably. The table below sets out the variety of ways in which we engage with our many stakeholders in addition to our biennial materiality survey (see pages 25 to 26).

Local and national Clients Employees Supply chain Investors government Why they are important Understanding our clients’ To remain successful as a Our supply chain (suppliers and Investors provide our business with Policy-making, legislation and requirements and keeping business we need to ensure that subcontractors) is made up of the capital required to invest in our regulation shape the markets them informed about all relevant our employees are kept safe, hundreds of companies, from long-term future. in which we operate. Two-way aspects of our operations is treated fairly and with respect and large multinational manufacturers communication helps us to vital to our continued success. that we understand their aspirations. of plant and materials to small, understand the rules that govern independent micro-businesses. our business. It also gives us the For us to be able to deliver high opportunity to share our knowledge quality projects we rely on the and experience with regulators and support and cooperation all of legislators. our suppliers. How we engage In 2017 we piloted a client panel in Each division carries out We are a founding member The executive directors undertake a We engage regularly with our Fit Out division. The feedback comprehensive employee of the Supply Chain Sustainability programme of regular communication policy‑makers through our gave us valuable information on surveys biennially. School and our Group director with institutional shareholders and active involvement in industry clients’ expectations, particularly of sustainability and procurement analysts covering the Company’s bodies including the UKGBC People panels and employee forums regarding future market trends. chairs the Infrastructure and Plant activities, performance and strategy. (UK Green Building Council) operate to ensure two-way feedback. We aim to repeat the exercise and Materials schools (see page 20). In addition, investors are given the and the Confederation with other divisions in 2018. We also engage directly with opportunity to meet with our divisional of British Industry (CBI). We collaborate and cooperate employees on a daily basis through managing directors each year. Project close-outs include our with all 379 members of the toolbox talks, safety briefings and customer satisfaction survey. This Morgan Sindall Supply Chain More details can be found in other site activities. identifies how our performance Family (see page 20). our annual report on page 26. meets client expectations. Our ‘next generation’ panel, whose Our supply chain panel meets to members are employees aged under Regular communication with discuss important issues relating to 30 from across the Group, meets clients through briefings, our Total Commitments that affect four times a year. Panellists are able online and via the media, is the way our business operates. to learn more about the way our carried out by each division. Group operates. Senior managers from each division are also given the opportunity to hear the views of young people who will form our next generation of managers. Introduction Our approach Our performance Looking ahead Further information Responsible Business Report 2017 9

Issues that matter to our stakeholders

Our responsible business Every two years, we survey our 2015–2016 Materiality survey The 10 issues identified as material stakeholders so we can understand This survey conducted in late 2015/ are shown below. We found approach is underpinned by what matters most to them and early 2016 included feedback from that they aligned to our Total issues our stakeholders tell us adjust our responsible business over 1,900 internal and external Commitments, which confirmed to strategy where necessary. are most important to them. stakeholders, including clients, us that our responsible business Participants are asked to prioritise suppliers and employees. The strategy continued to be relevant issues according to how important results, published in our 2015 annual to our stakeholders. report and available on our website, they consider them to be for us to Our legal compliance and economic identified nine issues which our focus and report on. The process and business performance relate stakeholders considered material. also provides lists of issues material to all five Total Commitments, and We added carbon emissions from to each of our divisions, enabling further information on these issues our operations as a 10th issue them to understand how they can be found in the strategic report because our construction and could tailor their approach for and governance sections in our 2017 regeneration activities impact their individual businesses. annual report. on both embodied and operational carbon.

Material issues

Our approach The development How we are How we are The carbon to health and safety and training of our recruiting and engaging with emissions of employees retaining our our employees our operations employees

Waste created by Responsible How we are Our legal Our economic and our operations sourcing of engaging with compliance business materials customers performance Introduction Our approach Our performance Looking ahead Further information Responsible Business Report 2017 10

How we Our Total Commitments SDGs assess our performance Protecting people

We monitor and report on our effectiveness as a responsible business by measuring how we perform Developing people against our Total Commitments.

Our Total Commitments are aligned to our strategic business objectives. See pages 16 to 17 of our 2017 annual report for further details. Improving the environment

For each Total Commitment we use one or more key performance In 2017 we reviewed the Sustainable indicators for which we have set Development Goals (SDGs) ourselves short-term (2020) and adopted by the United Nations in long-term (horizon) targets. 2015 “to end poverty, protect the Our performance in 2017 against planet and ensure prosperity for our targets is summarised on the all”. As part of our responsible Working together following page. business strategy, we have decided with our supply chain to adopt the SDGs shown in the Detailed narrative on our activities right hand panel, which are core and initiatives for each Total to our Total Commitments. Commitment is provided on pages 10 to 22, indicating related material Global Reporting Initiative (GRI) issues as identified by stakeholders To ensure that our reporting in 2015-2016. remains transparent and robust, we are reporting in accordance with the GRI Standards, Core option. Enhancing communities Introduction Our approach Our performance Looking ahead Further information Responsible Business Report 2017 11

An overview of our targets and performance

Total Commitments KPIs and 2017 performance Horizon ambitions and short-term (2020) targets Protecting people Accident frequency rate (AFR)1 Horizon ambition: zero incidents (see pages 12 to 13) 0.09 Short-term: 0.1 AFR Developing people Voluntary staff turnover Horizon ambition: reduce voluntary employee turnover to below 10% per year (see pages 15 to 17) 11.4% Short-term: reduce voluntary employee turnover to below 12% Number of training days per employee Short-term: achieve an average of 4.5 training days as a Group by 2020 3.3 Improving the Reduction in total carbon emissions Horizon ambition: 65% reduction on 2010 baseline by 2020 environment % Short-term: science-based targets by 2018 (see pages 18 to 19) 8 5% year-on-year reduction (total reduction under review)

Waste diverted from landfill Horizon ambition: 100% diverted from landfill 89% Short-term: 94% diverted from landfill Working together with our supply Percentage of total spend covered Horizon ambition: 80% total spend by Group-wide agreements chain Short-term: 78% total spend (see pages 20 to 21) 77% Number of suppliers and subcontractors Horizon ambition: 2,000 suppliers and subcontractors participating in the Supply Chain Short-term: 1,700 suppliers and subcontractors Sustainability School 2,059 Enhancing Number of qualifying projects using LM32 Horizon ambition: positive impact £1.5bn communities Short-term: measure 80% of projects using LM3 (see pages 22 to 23) 10 Considerate Constructors Scheme Short-term: three points above the CCS Partners’ average score (39.2 in average score 2017) 39.8/50 1 The number of RIDDOR reportable accidents multiplied by 100,000 and divided by the number of hours worked. 2 Local Multiplier 3 (LM3) is a tool which measures how every pound spent by the Group with suppliers, subcontractors and employees can benefit the local community. It does this by calculating where and how the money is re-spent and what proportion remains local. Introduction Our approach Our performance Looking ahead Further information Responsible Business Report 2017 12

Grab Cards Keeping health Division Construction & and safety Infrastructure front of mind

The Construction & Infrastructure division has introduced ‘grab cards’ to engage employees on key health and safety topics. For example, the ‘People-Plant Interface’ grab card sets out a vision whereby no-one is Protecting harmed by the operation or movement of plant; key points to remember so that risk is minimised; people and a list of discussion points to encourage debate around the best ways to ensure safety when Protecting the health, safety, and wellbeing working with or near plant. of everyone who comes into contact with our business is our number one priority.

Material issues Our approach including mental health, stress in Fatigue management Awards 2017, and has been Health and safety is the the workplace, identification of high Our Construction & Infrastructure recognised by the British n Our approach to responsibility of our Group potential incidents and a sharper division has invested in developing Construction Industry Awards for health and safety health, safety and environment focus on our key risks. Each division knowledge and understanding our BBMV joint venture’s work on (HSE) committee chaired by one is applying the framework according about fatigue in the workplace. fatigue reduction at Crossrail. Accident frequency rate of our non-executive directors. to its own business improvement Fatigue can cause harm, particularly (AFR) Fit Out has been working with plan, further embedding health, where people are working in The committee assists the Board in behavioural psychologists to trial safety and wellbeing into every potentially high risk environments fulfilling its oversight responsibilities in different ways of changing aspect of its operations. See pages such as on railway or highway relation to HSE matters and focuses on behaviour on site to see whether 75 to 76 in our 2017 annual report on infrastructure projects. As part 0.09 our health and safety culture to drive they have a positive impact on 2016: how we manage health and safety. of its research, Construction & 0.14 better behaviour and performance in safety. The trials aim to incentivise Infrastructure undertook a pilot this area. The committee also supports Safety safe behaviour rather than study in the use of the Readiband, the Group’s health and safety forum, During 2017 the number of RIDDOR penalising workers for unsafe a wrist-worn device that monitors which includes representatives from incidents across the Group fell from practices. On a project in London, alertness (see page 14). The findings our divisions. The forum identifies 62 to 43, a reduction of 31%, the site canteen has been revamped from the study were shared with and implements improvements in continuing the encouraging trend to provide a positive environment our joint venture partners and procedures, working practices, plant in improved safety performance with simplified and clearer safety suppliers in the rail industry as well operation and human behaviour that for the third consecutive year. messages, a 90-minute ‘safety as the Institute of Occupational will help us continue to reduce the However, we recognise that we workout’ being introduced to -31% Safety and Health (IOSH). The number of incidents. During 2017, need to remain focused on health develop safety awareness and division received an IOSH Award for the forum developed a framework of and safety to try and reduce our understanding, and gold cards drop in RIDDOR its work on fatigue management at key areas for further improvement, RIDDOR incidents further. issued to all site staff which are then incidents the International Railway Group Introduction Our approach Our performance Looking ahead Further information Responsible Business Report 2017 13

Protecting people continued included in a weekly draw providing We want people to feel comfortable Supporting a more active lifestyle safety standards have not been talking about mental health in the Our Investments division has been infringed. As a result of these and workplace. With one in four people working with Slough Borough other measures, the number of experiencing at least one mental Council to regenerate the borough interventions required to stop health problem in any year, this is an through the Slough Urban Renewal potentially unsafe practices has issue that could affect a significant (SUR) joint venture. At the outset, reduced significantly on the project. number in our workforce. a priority for the council was to The trials are being independently Construction & Infrastructure’s address health challenges in the monitored to determine whether or partnership with the mental health borough by encouraging people not the activities lead to genuine charity, Mind, has helped develop to≈be more physically active. SUR improvements in site safety and our approach. The division received is being instrumental in achieving should therefore be introduced Mind’s Bronze ‘Achieving Change’ the Council’s objective through more widely across the division. In award for 2016/17 and is delivering its £60m investment in addition, safety inspections are participating in their 2017/18 new facilities to promote active carried out on all Fit Out projects Workplace Wellbeing Index. lifestyles. These include the new Promoting using smartphones and tablets, Construction & Infrastructure has Arbour Park community sports enabling information on good and also launched a feedback process stadium and leisure centre and wellness in bad safety behaviour to be called ‘Views of Operatives in the improved facilities at the Silver captured and analysed. Construction Environment’ (VOICE), Blades Ice Rink, Langley Leisure and provided its employees with Centre and Salt Hill Park. Investments the built Wellbeing discussion cards setting out why has also supported local sports clubs, Focusing on mental mental health in the workplace is so for example by sponsoring local health and wellbeing environment important and giving information teams and a half-marathon event This year mental health and Studies such as The Impact of on different types of mental in October 2018. WELL Building wellbeing have been a particular Green Buildings Cognitive Function health problems. Standard focus for us. In October, Study1 have found that employees’ Construction & Infrastructure’s On a Group-wide level, we provide 2018 priorities Division cognitive performance scores commitment to improving mental an employer assistance programme, Fit Out averaged 101% higher in green health awareness and providing a ‘Raising Concerns’ helpline and n To maintain our rigorous building environments with support to employees was signposting to local and national approach to safety. enhanced ventilation compared to recognised in the government’s support services. n To review the results of data conventional building environments. independent review of mental collected in respect of high In response to such findings, Fit Out health and employers, led by Lord potential incidents to determine has formed an alliance with Delos, Dennis Stevenson and published in the appropriate risk management the company that pioneered the its report, ‘Thriving at Work’. mitigations we should adopt. WELL Building Standard (WELL) to n To extend our focus on wellbeing, promote health and wellness in the particularly on mental health and built environment. WELL certifies stress-related issues. buildings that meet its stringent benchmarks in ‘air’, ‘water’, ‘nourishment’, ‘light’, ‘fitness’, ‘comfort’ and ‘mind’. Fit Out has Accident Frequency Rate1 committed to facilitating a quarterly WELL forum to share best practice, guidance and training with its supply chain. The division has 199 also trained employees in two 2016: 330 1 Research by Harvard University, T.H. Chan new wellbeing certifications, School of Public Health’s Center for Health 1 The number of accidents and the Global Environment, SUNY Upstate ‘Fitwel’ and ‘Reset’. per 100,000 employees Medical Univeristy and Syracuse University. Introduction Our approach Our performance Looking ahead Further information Responsible Business Report 2017 14

Avoiding the Construction dangers of fatigue

The Readiband

Division Construction & Infrastructure To assess whether or not there is a correlation between fatigue and accidents, Construction & Infrastructure tested the wrist-worn Readiband device, which monitors fatigue levels, on 100 employees working on the Edinburgh Glasgow Improvement Programme rail project. The results demonstrated that groups working at night were at a significant risk of fatigue and had a reduced safety alertness score – 11% lower than people working in the day in an office or on site. The team is developing action plans to help night workers manage fatigue that will be rolled out across the division’s rail business. Introduction Our approach Our performance Looking ahead Further information Responsible Business Report 2017 15

Our approach Developing and retaining talented people is a key strategic objective for the Group and vital to our “The opportunity that success. We aim to provide all of Morgan Sindall has given our employees with opportunities to develop their careers, by ensuring me to see design from that we operate an inclusive, a different perspective empowered culture, underpinned by respect at all times. We recognise will be invaluable to me that inclusive teams are essential in the future.” to keep our business flexible and Rachel Crawford Section Engineer innovative, and to improve our understanding of the communities Developing in which we operate. Due to our decentralised approach, each division is responsible for managing Training and development people its teams and recruiting people Training opportunities with the right skills to meet both In order to ensure our employees We aim to create an environment where the current and future requirements have the right skills, we provide of its business. The Board oversees a variety of different training people feel valued and empowered. and reviews the Group’s and divisions’ opportunities including construction Helping talented We help our employees gain skills that strategic approach in respect of skills based apprenticeships and people, including succession support for students undertaking people progress support their personal ambitions and planning and inclusion. A monthly HNC, degree courses and drive the business forward. ‘people report’ is prepared for the professional qualifications. In 2017, their career Board summarising key metrics for we employed 161 direct apprentices assessing progress. The Group’s HR and 56 new graduates as well as forum, comprising the HR leads supporting a further 547 people Rachel Crawford joined Material issues from each division, is responsible on NVQs and professional Secondment Construction & for sharing best practice and qualifications. to AECOM n The development and training of our employees driving improvements in talent Infrastructure as a Division n How we are recruiting and retaining our employees management across the Group. Site manager graduate and quickly Construction & n How we are engaging with our employees development programme worked her way to Failure to recognise and respond During 2017, 11 people completed Infrastructure becoming a section to the skills shortages faced by our Partnership Housing’s site manager engineer. Rachel’s aim is Voluntary employee sector could impact the long-term turnover development programme, and a to be a chartered civil prosperity of the Group. We further 12 started in September. engineer, and with the recognise that we need to Targeted at assistant site managers, support of her senior encourage young people to the programme is designed to managers, a 12-month 11% consider a career in construction develop a pool of people ready to fill secondment to +30% and regeneration, and do more to 2016: 13% site manager roles in new build and engineering design attract minority groups into the refurbishment, as opportunities arise. specialist, AECOM, Number of training workforce and build a culture of was arranged. Rachel’s The 14-month programme, based days per employees inclusion, fairness and diversity. experience at AECOM on the NHBC NVQ Level 6 in We also recognise the opportunities will improve her ability to Construction Site Management that exist to differentiate us, by challenge designers and (Residential Development) will providing an excellent place to design buildability, and to 3.3 work, thrive and develop both enable participants to progress resolve technical queries 2016: 3.9 as individuals and as teams. to CIOB membership. apprentices directly employed more efficiently. Introduction Our approach Our performance Looking ahead Further information Responsible Business Report 2017 16

Developing people continued

Creating the next Working in teams, members professional reviews to become Foundation Fit Out’s Foundation Programme generation of leaders are given the opportunity and chartered engineers just five years Programme gives junior recruits the opportunity Investing in leadership skills is an responsibility to develop projects after graduation. important priority for us. Wherever that are presented to our Group to sample different aspects of Partnership Housing’s graduate Division possible, we want to promote from Management Team for consideration. the business and gain a deep training and career progression Fit Out within and give our people the In 2017, the panel focused on how understanding of the fit out policy helps the division build support and confidence to become to improve employee retention industry, while at the same time leadership skills and promote staff future leaders. among our younger employees. studying for academic and retention. All graduates meet four Their proposal of developing an professional qualifications. By the end of 2017, 176 employees times a year to discuss issues that induction video to explain the The programme is growing year had undertaken our leadership are important to them and their breadth of opportunities across on year and has helped increase development programme which peer group. Two of the 13 graduates the Group was adopted by the the division’s percentage of provides them with tools to recruited in 2017 are currently Group Management Team. employees under 25 from 3.5% to develop their skills as leaders and representing the division on the 7% since 2013. Sharon Juantuah, networking opportunities with Recruitment and retention Group’s next generation panel. who joined as a junior designer colleagues from different divisions We are pleased to report an overall Engaging with employees after graduating explains: “When across the Group. A further 240 reduction in employee turnover An important part of our I arrived for my interview I loved employees will participate in the across the Group from 16% in 2015 stakeholder engagement process the feel of the place. The people programme over the next 24 to 11% in 2017. This exceeds our is focused on giving employees the I met were professional and friendly. months. In addition, our divisions short-term (2020) target to bring opportunity to voice their opinions I also liked the idea of being with develop their own training specific the figure down to below 12% and about the way they work. During 32% a medium-sized company with to their individual business needs. puts us on course for our horizon the year, Property Services set up a of staff have been the benefits of a large company.” For example, Investments has ambition of below 10%. Over the new ‘values and engagement’ forum with Fit Out for Sharon has already progressed and is devised a ‘first level management last two years, all divisions have to discuss how our core values can more than 10 years now working as a project designer. and leadership’ course to give new made positive progress in reducing be promoted and communicated managers the skills and support their voluntary turnover statistics more effectively. Other divisions they need. through a broad range of initiatives, operate similar forums which including targeted training, the Our ‘next generation’ panel, provide all employees with the introduction of family-friendly whose members are nominated opportunity to voice their ideas policies and agile working. For from across the divisions, gives and concerns with senior managers. Building the next example, voluntary employee recent graduates and younger turnover has fallen from 17% to We use regular newsletters, email employees the chance to network 9% in our Infrastructure business notifications and briefing sessions generation and discuss issues that are relevant and reduced from 20% to 11% to make our employees aware of to the business, and empowers in Construction, showing a our financial performance, including them to make suggestions and continued improving trend. external factors and significant recommendations. Our third group events and the potential impact of was formed in 2017, following the Attracting and supporting talent these on the Group’s performance. success of two previous panels. Over the last 12 years, Construction In addition, our divisions use a & Infrastructure has supported 91 variety of ways, including regional students through their engineering team meetings and annual degrees as part of the Institution of conferences, to communicate with Civil Engineers’ QUEST scholarship their teams about their divisional programme. The division aims to progress and ensure that they are recruit 18 students per year, with aware of key business priorities. BakerHicks targeting a further two Our divisions undertake employee students. Many participants progress surveys every two years and the 547 rapidly through their studies and the results are reviewed, shared with people supported through NVQs first cohort recently passed their and professional qualifications Introduction Our approach Our performance Looking ahead Further information Responsible Business Report 2017 17

Developing people continued

employees and acted on. All new Diversity and inclusion We engage with our suppliers about n introducing an e-learning module maternity leave), where they are employees receive a formal The Board provides leadership on the benefits of inclusion (see page on inclusion; matched with another employee inclusion, and in June 2017 adopted 21) and then work with them to induction that covers the pivotal n introducing anonymised shortlists who has been on family leave in the role of our core values in driving a diversity policy setting out our monitor progress. We have adapted as part of our recruitment process; last two years. The scheme creates everything we do. commitment to inclusion and equal our LM3 tool (see page 23) to an informal support network for opportunity within the Board itself capture diversity data at the start n tracking underrepresented Fit Out’s employee survey, the employees while providing line and across the Group. Our regular of a project and monitor progress groups’ employment experience completed in autumn 2017 with managers with extra guidance on ‘people report’ submitted to the on workforce diversity through with the Group; and an 82% response rate, provided how to best keep in touch with Board covers key statistics and the life of the project. n undertaking a review of our ethnic valuable information that will help people on family leave, and make details of activities undertaken by pay gap in conjunction with our the division build staff retention Construction & Infrastructure them feel valued and part of the each division to improve inclusion. annual gender pay gap review. even further in 2018. The survey launched a Women into Construction team when they re-join. Over 40 These include activities to broaden returned a score of 9.1/10 for initiative on its Crossrail project, Please see our 2017 gender pay employees have currently applied the range of skills, industry experience, “I would recommend Fit Out as an holding an open day that resulted in gap report on our website for to be buddies. gender, race, disability, age, nationality employer to a friend”, confirming 11 work placements and six further details. and other attributes which can the division’s strengths in leadership permanent roles. enhance the contribution of the Welcoming people back to work and culture. Responses identified divisions and the Group as a whole. Addressing the gender pay gap Encouraging people back to work, enabling technologies and inclusion As at 5 April 2017, our median following parental leave or a career and wellbeing as focal points for gender pay gap for the Group break, helps to improve continuity, continued improvement in 2018. as a whole was 33% and our protect investment in training Investments engaged with its median bonus pay gap was 42%. and maintain a motivated, employees using an ‘Investors 9% 8% Our analysis shows that the gap knowledgeable and experienced in People’ survey. Results across of employees of employees from has arisen because women hold workforce. During the year, a the three key areas of leading, aged 24 or under BAME1 backgrounds fewer senior roles within the Group returnship programme was piloted supporting and improving staff 1. Black, Asian and minority ethnic. which tend to be higher paid. While in Construction & Infrastructure were very encouraging, with 87% women make up 21% of the overall aimed particularly at senior-level Creating family-friendly working conditions feeling that the division’s business workforce, only 8% of our senior people. The programme attracted Dawn Moore, director of human resources at 90 applicants on its initial launch Construction & Infrastructure, won the ‘Working vision is clearly communicated, 89% Encouraging better ways managers are women. Our biggest Mum’s Champion Award’ in 2017 in recognition agreeing that they are encouraged of thinking opportunity to close the gap and candidates from as far afield of her work in promoting a family-friendly therefore is by encouraging women as Florida took part, 40% of culture. Her achievements include creating a to achieve high performance and Our divisions have been deploying dedicated diversity and inclusion role, chairing 89% stating that they have a a mix of technology and face-to- into the Group and supporting them them women. Participants in the division’s ‘people board’, introducing a new positive relationship with the face discussions to help promote in their career development. To reduce the returnship programme are foster carer’s policy and enhancing maternity and paternity policies. The foster carer’s policy community in which they work. a more inclusive workplace. Urban the gap and improve inclusivity for all offered a three-month placement has been recognised by one of the division’s Regeneration has coached its senior employees, the Board has committed that includes structured skills clients, Cumbria County Council, as being a Construction & Infrastructure, great example to other local employers. to the following long-term, Group- training to help them rebuild their Partnership Housing, Urban managers using psychometric wide initiatives: confidence in a work environment. Regeneration and Property analysis to help them understand why people behave differently. Five participants have been Services will all undertake n undertaking further detailed recruited including three women, employee engagement surveys This equips them to collaborate analysis of our data to establish more effectively with their and a second cohort of five will in 2018. whether we have any underlying start later in 2018. colleagues, clients and suppliers. issues that are impacting the Construction & Infrastructure has percentage of women Construction & Infrastructure has held workshops with senior employed and the number also launched a buddy system for 2018 priority managers on ‘unconscious bias’, in senior positions, and to those just returning from family to encourage a more open way identify specific actions leave (which includes adoption, n To implement initiatives that will of thinking. to address them if appropriate; foster, shared parental leave and help address our gender pay gap Introduction Our approach Our performance Looking ahead Further information Responsible Business Report 2017 18

Our approach Carbon Change (UNFCCC) COP21 We are committed to reducing the Since 2010 we have achieved a meeting in 2015, we committed to environmental impact of our 55% reduction in total emissions, introducing science-based targets activities and in our supply chain. compared to an original target by 2018. We have worked during Where possible we use low carbon of 26% by 2020. This has been the year to establish[Image toa suitablecome] materials to reduce embodied delivered mainly through consistent framework for target-setting. carbon, design buildings to operate hard work at site level on individual Drawing on the expertise of our more energy efficiently, improve projects. The credit for this carbon action group, a submission biodiversity through imaginative outstanding performance goes to was put to the Science Based regeneration schemes, and reuse or our employees, subcontractors and Targets Initiative in December recycle waste to avoid landfill. suppliers who work collaboratively 2017, for their consideration. At to reduce greenhouse gas emissions Responsibility for our approach that time, science-based targets wherever possible on our sites, to improving the environment had been approved for fewer Improving as well as at our permanent rests with our Group director of than 100 companies globally, office locations. sustainability and procurement. so we are at the forefront of business action in this important He is supported by our divisional Outstanding performance the environment aspect of emissions reduction. environmental managers, who in in emissions reduction Improving the environment is fundamental turn can call upon the specialist By 2017, we had reduced direct fuel The challenge for us is to reduce knowledge and expertise of consumption (Scope 1) by 41%, bulk Scope 3 emissions, which result to all of our business activities. As a major divisional teams for environmental fuel purchases (Scope 1) by 18% and from the manufacture of products UK construction and regeneration group, impact assessments, waste direct electricity consumption and materials that we purchase management plans and carbon foot (Scope 2) by 79%. Improving our and the use of the buildings and the positive impact that we can make printing. In 2016 we formed a carbon understanding of fuel and electricity infrastructure that we deliver to is significant. action group with representatives use, identifying where reductions clients. Reducing these emissions from each division. The group meets can be made and implementing will involve close co-operation quarterly, under the guidance of an improvements across all divisions from our supply chain and we independent chair, to develop and has produced significant benefits. are confident that the strong Material issues implement energy efficiency and relationships we have with them Setting science-based targets carbon reduction measures. will help significantly. Our Supply n The carbon emissions of our operations Following the Paris Agreement established at the United Nations Chain Family and active involvement n Waste created by our operations Framework Convention on Climate in the Supply Chain Sustainability School will be important factors in ensuring that we fulfil our science- based targets. Our commitment to reducing 8% 89% carbon emissions was reduction in total of waste diverted recognised by two independent carbon emissions from landfill organisations in 2017. CEMARS 2016: 10% 2016: 90% awarded us with recognition for achieving seven consecutive 55% years of carbon reduction reduction in carbon verified to ISO 14064-1. CDP emissions from 2010 baseline As part of our work to (formerly the Carbon Disclosure develop science-based targets Project) awarded us an A-for our for carbon emissions, we will climate change submission, the be establishing a new baseline highest score awarded to any year of 2016, which will form UK-based construction company. the basis of future reporting. Introduction Our approach Our performance Looking ahead Further information Responsible Business Report 2017 19

Improving the environment continued

Reducing our impact on air quality Waste approximately 80% of the total The government estimates that Managing waste more effectively waste handled across the Group. 28,000 people die in the UK every We are committed to minimising We worked to improve waste 20% year as a result of air pollution. waste and, in particular, to avoiding management across all aspects reduction in total We look for ways to minimise the sending waste to landfill. During of our business, ranging from waste produced negative impact of all projects on air 2017 we implemented several straightforward skip housekeeping, quality, through a range of practical changes to our waste management through to innovative ways of improvements. At Heathrow, we strategy to improve the way waste reusing site spoil. Tracking and 96% are replacing our fleet of cars and is managed and accounted for. verification of waste treatment and construction waste vans where possible with electric Although we work closely with disposal has improved during the diverted from landfill vehicles, which is helping to reduce waste management contractors, year. Over 500 site visits were emissions. We recognise that we also work hard with materials conducted by our supply chain operating plant, and in particular suppliers, subcontractors and joint partners in 2017, to help reduce diesel generators, contribute to air venture partners to ensure that the waste and understand more about pollution. Working in conjunction challenges of minimising waste and how it could be managed. However, with suppliers of temporary power maximising reuse and recycling are we still face challenges with waste generation equipment Aggreko, properly understood and dealt segregation. This is partly due to we are specifying generators with with intelligently. limited availability of space on sites, the latest, low emission, stage 3a particularly in cities or where fast Our 2017 ‘War on Waste’ initiative engines for major projects, project turnarounds are dictated by focused on working more closely particularly in London. clients’ needs, as is often the case in with two major waste management Re-using materials fit out projects. Fit Out stripped out 72 linear metres of toughened glass partners, who account for partitions at its client’s offices in London, using the opportunity to train its supply chain in understanding the impact of their environmental performance. The division’s subcontractor, BDS Demolition, took the initiative to dismantle the glass in individual sections so that they could be reused, rather than taking the typical demolition Newman University, The construction of Cofton and recycle approach. Birmingham Hall to provide student accommodation and a Cutting down on Division teaching wing, generated Construction & 260 tonnes of waste, waste costs Infrastructure including 102 tonnes of light mixed waste and 74 tonnes of inert waste. The project saved 44% on waste costs by using wheelie bins for the light mixed waste rather than traditional skips. Segregating other core waste streams, including separating inert waste at source, reduced costs by 2018 priorities a further 21%. n To manage our carbon reduction strategy using targets approved by the Science Based Targets Initiative 100% n To undertake work to determine waste diverted standards for minimising air pollution from landfill resulting from our operations Introduction Our approach Our performance Looking ahead Further information Responsible Business Report 2017 20

Supply Chain While major infrastructure projects such as Sustainability Crossrail will leave a lasting legacy, they also School require considerable resources to ensure efficient delivery. The Group helped to establish the Supply Chain Sustainability School and our Group director of sustainability and procurement chairs the Infrastructure and Plant and Materials schools. Our involvement with the school’s special interest groups helps to ensure the supply chain is prepared, willing and able to deliver. Working together with our supply chain Treating suppliers and subcontractors as delivery 60+ 7,000+ partners on all our projects helps to build loyalty, partners organisations registered maintain quality and deliver outstanding customer service.

Material issues Our approach After receiving accreditation they Around 80% of Group turnover is are regularly assessed to ensure that n Responsible sourcing spent with suppliers of materials and they retain their preferred status. By of materials services as well as subcontractors creating a family of suppliers who who range from small to large in work collaboratively with us, we are scale. Managing our supply chain able to minimise the likelihood of in a responsible and efficient way project disruption or delays. This 77% is the function of our divisional approach also helps to ensure that of total spend on materials procurement teams, who report to the equipment and materials we use and plant covered by the Group director of sustainability and the labour we employ is reliable, Group-wide agreements and procurement. All suppliers safe and of high quality. 2016: 71% are expected to adhere to our We subscribe to the Prompt Payment standards and support us in 99.8% Code as we recognise that prompt delivering our responsible business timber sourced payment can make a difference to using sustainable strategy. In 2017, there have been Our Morgan Sindall Supply Chain Family, set our suppliers, boosting their cash certification standards 2,059 no material changes in our supply up to promote collaboration and cooperation, flow and allowing them to invest in includes 379 companies who supply goods suppliers participating chain or subcontractors. We aim to and materials that we use to deliver projects. growth for the future. During 2017 in the Supply Chain develop long-term relationships with We share opportunities at the pre-contract we developed an in-house tool stage to enable clients to receive the best Sustainability School our suppliers and subcontractors, that provides live information on solution in terms of construction methods, 2016: 2,048 and award preferred status to those environmentally-friendly materials and payment days and began training that perform highly against set low-carbon options. In 2017, the ‘Morgan all relevant staff on its use. Sindall Experience’ – our annual suppliers’ criteria, including health and safety. event – attracted almost 600 visitors. Introduction Our approach Our performance Looking ahead Further information Responsible Business Report 2017 21

Working together with our supply chain continued

Plant and labour desks Compliance and governance are industry firsts in the supply chain Fairness, Inclusion With the support of the CITB Growth Fund, the Supply Chain Our labour desk is a collaboration Operating with a diverse supply and Respect Sustainability School is working to develop a culture of of five independent labour agency chain provides many challenges. ‘Fairness, Inclusion and Respect’ (FIR) in the industry. Our businesses whose objective is to Many of our major suppliers source commitment to FIR includes: find people with the right skills, materials from outside the EU, where qualifications and safety training humanitarian and reputational risks n promoting FIR training across our entire supply chain to for our projects. The labour desk attached to poor supply management embed personal accountability for creating an inclusive reduces administrative costs and are potentially high. Our supply chain workplace; ensures that anyone who works for is also multi-layered, so we need to n challenging our recruitment, procurement and project us as a subcontractor is treated ensure that not only does our supplier delivery processes to ensure that we remove bias; and with respect and paid on time. comply with the law, but also the n building capacity in, and widening access to our supply companies with whom they trade. In addition, our plant desk has chain to ensure that all potential suppliers and During 2017 we commissioned undergone further development subcontractors have the opportunity to bid for work for us. independent auditors to heatmap during the past year. Fourteen major areas of our supply chain, To date we have 20 FIR ambassadors active across the Group different plant hire and supply identifying potential hotspots for and a FIR toolkit, containing e-learning modules, toolbox talks companies collaborate, using a non-compliance. The results of the and a resource library, is being rolled out to all divisions. shared back-office system and audit have identified where more resources, to provide plant on site to detailed examination of ethical any of our projects, normally within labour practices may be needed. four hours. A ‘green list’ of We have a published policy and environmentally friendly plant has statement on Modern Slavery and been developed, which enables us Operating fairly in late 2017 our Group director of to select and use the most energy- sustainability and procurement efficient, low noise and low emission joined the management group of and with respect generators, static equipment and the Gangmasters and Labour Abuse machinery. This is a major benefit to Authority (GLAA). Work has begun clients, providing opportunities to for everyone towards applying BES 6002, the minimise environmental impact, ethical labour sourcing standard, particularly on urban sites operating across the Group. Adoption of in or near to local communities. The the international standard for major advantage of our plant desk, sustainable procurement, ISO however is the ability to manage 20400 is also underway and and maintain extremely high levels should be completed during 2018. of safety. If a problem with any item of plant is identified, whether on one Please see our Modern Slavery of our own projects or anywhere statement on our website for else on any site in the country, our further details. plant desk is able to notify all site users within 30 minutes. 2018 priorities

n To evaluate our status in relation to BES 6002 via an external audit. n To commence the implementation of ISO 20400 across the Group. n To comply with the payment practices reporting regulations. Introduction Our approach Our performance Looking ahead Further information Responsible Business Report 2017 22

Creating opportunities for local people

Enhancing communities All of our divisions play a role in delivering social, economic and environmental value to communities, improving the quality of infrastructure and the places where BasWorx Social Property Services’ BasWorx people live and work. Enterprise social enterprise, set up a year ago as part of its property management Division programme for Basildon Council, Property Services has been creating training, apprenticeship and employment Material issues Our approach ranges from building a local school opportunities for local residents, Our activities impact the to providing vital infrastructure such including young people and the n Our economic and communities in which we operate. as the Thames Tideway Tunnel, and long-term unemployed. The business performance Each of our divisions has a long-term regeneration schemes not-for-profit enterprise provides n dedicated community liaison team How we are engaging with clients delivered through partnerships with skilled decorating, plumbing, and engages with local people to local authorities. repairs and maintenance services understand their specific needs and for the Council, with surplus inform them about what a project Our Urban Regeneration and revenue being re-invested back into will deliver. Where possible we use Investments divisions specialise in 10 redeveloping underutilised urban the enterprise or local community. local suppliers on our projects and projects using the LM3 tool BasWorx has so far trained 30 local provide training and career spaces to provide sustainable 2016: 39 residents, with eight going on to opportunities for local residents. benefits for communities. Recent examples include schemes to full-time employment with Property Delivering projects that fulfil the regenerate Salford, Blackpool, Services. The mix of ages enables needs of communities today and Slough and Bournemouth, young apprentices to be mentored 39.8/50 in the future provides us, and our delivering multi-use mixed-tenure in life skills by older trainees, who CCS1 average score stakeholders, with a tremendous facilities that include housing, 80% in turn learn more about how their 2016: 38.9 opportunity to add to the social schools, offices, retail and leisure of supply chain younger colleagues think and value of neighbourhoods, cities and facilities as well as new and based locally work in today’s society. entire regions. Our involvement rejuvenated open spaces. 1. Considerate Constructors Scheme Introduction Our approach Our performance Looking ahead Further information Responsible Business Report 2017 23

Enhancing communities continued

Creating social value As part of the ongoing support for Measuring positive contribution Between 1 January 2016 and We are always looking for UTC, Partnership Housing provided Assessing the value that 31 December 2017, 22 of our opportunities to engage with young 25 students with a week of work construction and regeneration projects (out of a total of 49) people in the communities where experience at its Tamworth office, projects bring to communities is not using LM3 generated an average we work, to encourage and support for which the students received a straightforward. The Social Value of 1.6 in social value. This means for them in careers in construction. CREST Silver Award – the only Act has helped to focus attention every £1 we spent on the project, Partnership Housing and nationally recognised accreditation on identifying and embedding the 60p was re-spent in the local Construction & Infrastructure have scheme for project work in science, legacy benefits of larger projects, community. In 2017, the LM3 Live partnered with West Midlands technology, engineering and by ensuring that public sector tool was launched, which enables UTC, a university technical mathematics (STEM) subjects. clients take social value benefits to us to predict the social value college that offers 14-19 year olds the community into account when In 2017 Investments delivered the benefits to a community at the very specialist training in construction, awarding work. last four of 12 schools under the beginning of a project. This allows architecture, interior design, Education & Skills Funding Agency’s Measures such as the number of us to discuss different scenarios surveying, management, civil Priority School Building Programme, apprenticeships or jobs created, that will help to improve the engineering and related IT North West batch. As part of the or the extent to which workers outcomes with the community skills. The divisions are supporting project the division had committed and suppliers were locally sourced, and clients. For example, we students in gaining top quality to meet or exceed a number of are all useful but do not give the can use the tool to predict how academic and vocational education and job creation KPIs. full picture. changing the level of spend with qualifications, while offering site The project generated opportunities local suppliers might impact the visits, work experience placements Our LM3 tool goes a step further for 23 new apprentices (KPI target local economy, or how selecting and mentoring programmes. by measuring how every pound 12), work for 71 existing apprentices particular supply chain partners 226 spent by the Group wth suppliers, might improve diversity. 1 (KPI target 11), 82 jobs on construction CCS site subcontractors and employess registrations projects (KPI target 8) and almost can benefit the local community. £14,000 of charitable giving.

1. Considerate Constructors Scheme

West Cumbria Construction & Infrastructure Social Enterprise has been working in joint venture with Arup to deliver essential Committing for Division infrastructure improvements for Construction & Sellafield Ltd, and has recruited the long term Infrastructure more than 300 local people. The division is currently setting up a social enterprise in West Cumbria to provide services to 2018 priority local businesses and training or retraining for local people in the n To launch our Social Value Bank, skills needed by large employers. which will sit alongside LM3 Live The enterprise will be committed and provide industry-leading to building economic prosperity measurement and monetisation in the area and providing lasting of a wide range of social value benefits for local people, benefits to communities from suppliers and employers. our projects, using the same methodology as HM Treasury Green Book guidance. The Sellafield site Introduction Our approach Our performance Looking ahead Further information Responsible Business Report 2017 24

Generating value for the Regeneration local community Marischal Square, Aberdeen

Division: Urban Regeneration Marischal Square is a new £107m development completed in 2017, providing 173,500 square feet of BREEAM Excellent rated office space as well as leisure and civic facilities. During the project, Urban Regeneration took part in local employment events, including several aimed specifically at unemployed people, young workers and ex-offenders. The LM3 tool was used on the project, with local spend in the Aberdeenshire economy estimated at 87p for every £1 of initial project investment. 35 1.87 apprenticeships local spend rate compared to investment Introduction Our approach Our performance Looking ahead Further information Responsible Business Report 2017 25

Material issues in 2018

In early 2018 we conducted our most comprehensive survey to date, to find out which responsible business issues our stakeholders think we should prioritise going forward.

2018 materiality survey be viewed in isolation; they Our latest survey used a statistical are usually interconnected and online survey tool that helps sometimes improvements in one differentiate issues according to can lead to changes in another. relevance and importance. The Our material issues remain broadly survey was completed by 2,000 in line with our Total Commitments. employees and 269 external This year’s review has highlighted stakeholders, a 20% higher three new issues for us to consider: response rate than the previous survey. Independent researchers n How we manage operations also undertook detailed telephone efficiently and add value (see interviews with a selection of clients the strategic report in our 2017 and suppliers, to help us build a annual report and our business complete picture of what matters model on page 6 of this report). most in 2018. n How we are creating Our 2018 survey included a long-list opportunities for young people. of potential issues drawn from the n How we help our employees GRI G4 Sustainability Reporting achieve work-life balance. Guidelines, the United Nation’s We are currently reviewing the Sustainable Development Goals results of our study, along with the (SDGs) and advice from our SDGs that we have identified as divisions. Respondents were asked most relevant to the Group (see to select and prioritise responsible page 10) and any changes that business issues using a scoring we should make to our responsible system. The issues identified are business strategy. Further details then placed on a matrix, displaying will be reported on our website in their position relative to the degree due course, including the results of stakeholder interest and of our 2018 materiality survey. importance to delivery of the Group’s strategy. Together, the results represent the material issues facing our business (see table on page 26). These issues should not Introduction Our approach Our performance Looking ahead Further information Responsible Business Report 2017 26

Initial findings from our 2018 materiality survey

We have grouped the issues identified under our Total Commitments. While the unlikely-to-be-material and non-material issues are not explicitly part of our responsible business strategy, they are relevant to our commitments as a responsible business. The governance and strategic issues relate to all five Total Commitments and our approach to these is covered in the strategic report and governance section of our annual report.

Key: n Engaging with n Efficient management of suppliers our operations Total Commitments n Waste management n Protecting people n Our corporate governance n Developing people Material n Engaging with clients n Improving the n Health and safety environment n Training and development n Working together of employees with our supply chain n Opportunities for young people n Enhancing communities Close to n Anti-bribery and n Human rights being corruption n Engaging with employees n Governance material and strategy

n Management of carbon emissions n Pollution n Promoting industry skills n Recruitment and retention n Suppliers’ employment n Securing a living wage n Employee work-life balance Unlikely to practices n Engaging with local be material n Client data privacy communities n Inclusion and diversity

n Responsible marketing n Response to new n Responsible sourcing n Advocacy and leadership n Conflicts of interest markets of materials n Freedom of association n Innovation n IMPORTANCE TO STAKEHOLDERS TO IMPORTANCE Understanding benefits to wider communities Not n Our impact on social value material n Biodiversity n Transportation n Environmental performance of buildings and infrastructure n Environmental performance of suppliers

Not material Unlikely to be material Close to being material Material

IMPACT ON THE GROUP Introduction Our approach Our performance Looking ahead Further information Responsible Business Report 2017 27

Further information

This section provides additional External recognition Benchmarking against our peers helps us to remain focused on best practice and continuous improvement. Some of our details on our responsible business achievements against these benchmarks are outlined below as well as some of the bodies of which the Group is a member. performance. We provide information about our external recognition, Our greenhouse gas emissions data is audited annually to ISO 14064-1:2006 to meet the requirements of CEMARS details of our material issues and the (the Carbon Energy Management and Reduction Scheme). scope of our impact (as identified in In 2017 we again took part in the annual CDP (formerly the Carbon Disclosure Project) climate change survey, our 2015-2016 materiality survey), scoring A-, the highest in the construction sector. and quantitative data on our Total Commitments. We continue our commitment to sustainable building through the Group’s Gold Leaf membership of the UKGBC, the membership organisation at the forefront of the campaign for a sustainable built environment.

We are founder members and active participants of the school, at board level.

We are a signatory to the Fairness, Inclusion and Respect in Construction commitment.

The Considerate Constructors Scheme is a non-profit-making, independent organisation founded by the construction industry to improve its image. We are an active participant and use our CCS score as a KPI for our Total Commitment to enhancing communities.

The 5% Club is a movement of employers focused on creating momentum behind the recruitment of apprentices, sponsored students and graduates into the workforce.

Build UK is the leading representative organisation for the UK construction industry. It brings together clients, main contractors and trade associations representing over 11,500 specialist contractors and other organisations committed to industry collaboration.

The FTSE4Good index and ratings measure the performance of companies on corporate responsibility standards. We re-entered the FTSE4Good in 2017. Introduction Our approach Our performance Looking ahead Further information Responsible Business Report 2017 28

Material issues and boundaries The table below explains the boundaries for our material issues, as identified in our 2015-2016 materiality survey under GRI 103: Management Approach, Disclosure 103-1 Explanation of the material topic and its boundary. We record no new changes to impact boundaries.

Material Impact within Impact outside topic 2017 the Group the Group Level of involvement Health • The Group is responsible for setting the health and safety standards and requirements for all of our project sites and offices. Anyone attending a and safety site or office is required to comply with these standards and requirements. Health and safety risks to suppliers and subcontractors • We seek to influence improvements in health and safety performance working on our sites, as well as the public. Risks can be outside of the Group’s activities through engagement with industry bodies, specifically associated with sites under construction and the HSE (Health and Safety Executive), suppliers and customers. completed buildings or infrastructure. Development • Our involvement is through the offer of training and career development to all employees (for example technical skills, apprenticeships and professional and training of qualifications support). employees Training provided to subcontractors working on our sites • We also require all subcontractors and visitors attending our sites to (positive impact: improvement in compliance, efficiency undergo formal induction training prior to entry. and quality). • Subcontractors and employees working on our projects must complete their CSCS training prior to site entry, and must have relevant training for the job on site. • We influence those in our supply chain to attend partnership events and complete relevant modules in the Supply Chain Sustainability School. Recruitment • Our involvement is in the form of policies and procedures to guide the expected standards for recruitment and retention of employees; they set and retention out what is expected from employees and what they may expect from the Group. Engaging with • We aim to achieve high quality engagement by undertaking regular employee satisfaction surveys to seek feedback. The results of these surveys our employees are shared with employees including any action plans to address issues raised. All employees are encouraged to continually challenge the Group’s approach to make further improvements where possible. The carbon • Our involvement in the impacts is influenced by policy expectations on carbon reduction, for example company car fuel efficiency. emissions of • We aim to influence risks/impacts outside our operations through supplier our operations Energy used by subcontractors working on our sites. engagement, product design and customer engagement. Embodied energy in products and energy performance of buildings/infrastructure in use. Introduction Our approach Our performance Looking ahead Further information Responsible Business Report 2017 29

Material issues and boundaries continued 

Material Impact within Impact outside topic 2017 the Group the Group Level of involvement Waste • We aim to minimise waste across all operations. • Waste recycling procedures are in place in all offices and sites.

Waste produced by subcontractors working on our sites, • We aim to influence the level of waste arising on our projects through embodied waste and waste from buildings/infrastructure engagement with clients and suppliers. in use. Responsible • Our Sustainable Procurement Policy 2012 outlines the key sourcing principles, as established by BS8903, and how we will take steps to sourcing improve our performance on a variety of environmental and social topics. Materials sourced through our supply chain and the • All relevant employees are required to respect the policy. sustainability performance of our suppliers. • We aim to influence responsible sourcing through engagement with clients and suppliers. Engaging • We aim to manage and mitigate the risks affecting quality and delivery and cultivate long-lasting relationships and partnerships with clients. with clients

Legal • Through good corporate governance, we aim to ensure that we comply with all applicable laws and registrations. compliance • We aim to ensure all employees comply with relevant legislation and Legal compliance of our suppliers and of subcontractors regulations and operate an independent service for employees and other working on our sites. individuals working on our projects to raise concerns confidentially about our operations. • We undertake assessments of all suppliers and subcontractors prior to engaging them to undertake work; part of this process includes seeking confirmation that they have complied with all relevant legislation and regulation. Economic • The Board is responsible for setting and overseeing the successful implementation of the Group’s strategy to deliver long-term value for and business all stakeholders. The Board regularly monitors the Group’s performance performance against its strategic objectives. Introduction Our approach Our performance Looking ahead Further information Responsible Business Report 2017 30

Data summary

This appendix contains a summary of our responsible business data, bringing together key Financial metrics that can be found in our 2017 responsible business report, our 2017 annual report and on our website. Metrics 2017 2016 2015 The Group is one of the top-scoring construction companies in the CDP (formerly the § Revenue £2,793m £2,562m £2,385m Carbon Disclosure Project) having achieved a score of A- for the second year running in 2017. We are a member of the FTSE4Good index and a Gold Leaf member of the UKGBC (UK § Operating profit – adjusted* £68.6m £48.8m £38.8m Green Building Council). In addition, we actively participate in Women into Construction and § Profit before tax – adjusted* £66.1m £45.3m £34.3m the WISE campaign (Women in Science and Engineering). § Earnings per share – adjusted* 121.1p 84.7p 63.0p 2017 HIGHLIGHTS Reduction in Reduction in total Reduction in total RIDDOR1 incidents carbon emissions waste produced § Year end net cash £193.4m £208.7m £57.9m from 2016 from 2010 baseline from 2016 § Daily average net cash £118.0m £25.0m (£53.4m)

31% 55% 20% § Total dividend per share 45.0p 35.0p 29.0p 1 The Reporting of Injuries, Diseases and Dangerous Occurrences Regulations 2013. § Total staff costs £455.5m £404.6m £368.9m

§ 2017 data has been taken from the 2017 audited financial statements of Morgan Sindall Group plc. How we create value for society – overview Protecting people Metrics 2017 2016 2015 Metrics 2017 2016 2015 § Total number of RIDDOR incidents 43 62 81 Total number of RIDDOR incidents 43 62 81 § Profit before tax – adjusted* £66.1m £45.3m £34.3m Accident frequency rate (AFR1) 0.09 0.14 0.17 § Total dividend per share 45.0p 35.0p 29.0p Accident incident rate (AIR2) 199 330 389 § Numbers of employees 6,400 5,982 5,828 Percentage of staff working under a certified 99 99 99 health and safety management system Reduction of CO2e relative to our 2010 baseline 55% 52% 46% Number of apprentices, graduates and employees 785 912 775 Fatalities 0 0 1 undertaking HNC or professional training Absenteeism (days per year) 5.03 4.82 3.69 § 2017 data has been taken from the 2017 audited financial statements of Morgan Sindall Group plc. Monetary value of significant fines for £1,057.80 £8,772.80 £471.20 * Adjusted is defined as before intangible amortisation of £1.2m (2016: intangible amortisation of £1.4m and (in the case of earnings per share) deferred tax credit due to changes in the statutory tax rate of £0.7m). In considering the financial non‑compliance with health and safety performance of our divisions, the principal measure used by management is operating profit adjusted to exclude intangible laws and regulations amortisation. We believe that this makes it is easier to interpret financial performance between periods as the adjusted measure removes the distorting effect of the excluded item. 1 The number of RIDDOR reportable accidents multiplied by 100,000 and divided by the number of hours worked. 2 The number of accidents per 100,000 employees

Introduction Our approach Our performance Looking ahead Further information Responsible Business Report 2017 31

Data summary continued

Developing people Improving the environment

Metrics 2017 2016 2015 Metrics 2017 2016 2015

1 Number of employees 6,400 5,982 5,828 Reduction of CO2e relative to our 2010 baseline 55% 52% 46%

Average number of training hours per employee 24.75 29.25 25.5 Scope 1 GHG emissions globally (tonnes)1 19,559 17,201 23,506

Men employed (%) 78 79 80 Scope 2 GHG emissions globally (tonnes)2 5,337 6,935 8,081

Women employed (%) 22 21 20 Scope 3 GHG emissions globally (tonnes)3 3,548 6,634 2,631 Women on the Board (%) 14 14 14 Total carbon emissions (tCO2e) 28,444 30,770 34,218 Women in senior management 8 6 7 Carbon intensity (tCO e/£m revenue) 10.2 12.0 14.4 (including subsidiary boards) (%) 2 Total energy consumption (GJ) 279,063 388,665 Employees from BAME backgrounds (%) 8.4 4.5 9 257,968

People employed aged 24 or under (%) 9 8 9 Total waste produced (tonnes) 687,803 860,209 937,271

Average age of employees 42 42 43 Total waste diverted from landfill (tonnes) 614,859 774,973 839,854

Voluntary employee turnover (%) 11.4 13 16 Total waste diverted from landfill (%) 89 90 90

Employee participation in satisfaction surveys 13 65 37 Construction waste produced (tonnes) 99,704 129,691 89,645 (% responded)2 Construction waste diverted from landfill (%) 96 94 87 Employees covered by collective bargaining 8 8 7 agreements (%) Number of projects achieving BREEAM, 40 32 47 CEEQUAL, LEED, SKA or other industry-relevant Total number of new employees 1,662 1,011 1,389 sustainability ratings

New hires (%) 27 23 16 Major environmental incidents 0 0 0

Average age of leavers 41 40 38 Monetary value of significant fines for 0 0 0 non‑compliance with environmental Number of new graduates recruited 56 101 81 laws and regulations Number of apprentices directly employed 161 104 100 1. Direct emissions resulting from fuel combustion (bulk fuels, natural gas) and vehicle fleet emissions. Number of people supported through NVQs 547 639 Not 2. Indirect emissions resulting from electricity purchased by the Group (including landlord supplied). and professional qualifications available 3. Indirect emissions from related activities such as water consumption and disposal, waste disposal, electricity transmission losses and employee travel.

1 Group headcount is comprised entirely of our direct employees for the 12-month period. We do not include any temporary Carbon emissions: workers and subcontractors who deliver our projects. The Group offers employees the opportunity to work part-time where the nature of the role and requirements of the work involved allows sufficient flexibility. We have taken action to reduce the environmental impact of our business. During the year the mix of our projects altered compared to 2016, which caused a small increase in Scope 1 emissions. However, the overall reduction of 8% in total carbon 2 Only two divisions undertook satisfaction surveys in 2017 as all divisions carry them out biennially. emissions continued our downward trend. Our carbon action group has developed science-based targets to drive further improvement. These are currently being reviewed by the World Resources Institute for approval. Our carbon emissions data is externally verified by CEMARS (the Carbon Energy Management and Reduction Scheme). Introduction Our approach Our performance Looking ahead Further information Responsible Business Report 2017 32

Data summary continued

Working together with our supply chain Governance Our Board is responsible for ensuring the sound running of the Company for our Metrics 2017 2016 2015 stakeholders in accordance with best practice corporate governance. Please see the

1 corporate governance section of our 2017 annual report for further details. Between 1 Percentage spend under Group-wide agreements 77 71 71 January 2015 and 31 December 2017, the Group made no political donations and received no legal actions for anti-competitive behaviour. Number of unique suppliers registered with the 2,059 2,048 2,130 Supply Chain School In 2016, we introduced an e-learning training module that was rolled out to all employees to test their knowledge and understanding of our anti-bribery procedures and corruption Number of high risk materials screened and 0 0 0 legislation. In 2017, the training was provided to all new employees as they joined the Group 2 sustainably sourced and a refresher e-learning module was sent to all employees who had completed the e-learning module in 2016. Timber sourced using sustainable sourcing 99.8 99.8 99.4 certification standards such as FSC and PEFC (% total timber-derived products sourced by weight at point of delivery) Engaging with clients Metrics 2017 2016 2015 Signatory of prompt payment code (UK) Yes Yes Yes Average Perfect Delivery score (%)1 82 81 77 1 Group-wide agreements include screening for environmental, labour and social criteria.

2 No high risk materials were used between 2015 and 2017. A risk register for each project accounts for supply chain risk. 1 Perfect Delivery status is granted to projects that meet four client service criteria specified by each division. All materials used are third party certified to quality and relevant procurement requirements.

Enhancing communities

Metrics 2017 2016 2015

Considerate Constructor Scheme1 226 209 201 (CCS) registrations

Average CCS score (out of 50) 39.8 38.9 39.0

Partners’ average CCS score (out of 50) 39.2 38.6 38.7

Number of projects using LM32 10 39 38

1 CCS measures the Group’s performance in local communities, using a code of considerate practice. Registered companies have to inform communities of the impacts, contribute to the local economy and create a positive operating environment. 2 We use the Local Multiplier 3 (LM3) tool to measure our contribution to local economies. The greater the number of projects, the greater the contribution to our long-term target of generating £1.5bn of social value. Morgan Sindall Group plc Kent House 14-17 Market Place London W1W 8AJ Company number: 00521970 @morgansindall morgansindall.com