Corporate Responsibility Report 2014: Assurance statement and commentary

United Utilities has commissioned Corporate Citizenship to provide external assurance and a commentary on its Corporate Responsibility Report 2014.

Corporate citizenship logoThe scope of our assurance

The assurance provides the reader with an independent, external assessment of the report and, in particular, with how it corresponds with the AA1000 principles. It is intended for the general reader and for more specialist audiences who have a professional interest in the corporate responsibility performance of United Utilities.

United Utilities has chosen to use the AA1000 Assurance Standard 2008 (AA1000AS). Our assurance is a Type 1 assurance as defined by the AA1000AS, in that it evaluates the nature and extent of adherence to the principles of inclusivity, materiality and responsiveness and assures the behaviour of the organisation as reported here. Our assurance used disclosed information as its starting point and then investigated the underlying systems, processes and sustainability performance information to arrive at its conclusions.

AA1000 logoUnited Utilities is entirely and solely responsible for the contents of the report, Corporate Citizenship for its assurance. As noted above, our assurance is confined to the Corporate Responsibility Report 2014.

A detailed note of our assurance methodology appears at the end of this statement.

Opinion and conclusions

In our opinion the United Utilities Corporate Responsibility Report 2014 reflects the principles of AA1000: inclusivity, materiality and responsiveness.

With regard to inclusivity, the commitment to be accountable to those on whom United Utilities has an impact and who have an impact on United Utilities, and to enable their participation in identifying issues and finding solutions, we found a sustained and widespread programme of engagement with stakeholders, including customer engagement on a very large-scale.

With regard to materiality, determining the relevance and significance of issues to United Utilities and its stakeholders, we identified that internal and external views have shaped the issues reported on.

With regard to responsiveness, whether the organisation reflects stakeholder issues in its actions and communications, we found clear examples of where stakeholder interests and feedback have shaped the United Utilities programmes and report.

The level of assurance is that defined by AA1000AS as moderate.

Commentary

The Price Review led by Ofwat, the regulator, has been a major undertaking for all water companies during the year. United Utilities submitted its five-year business plan in December 2013, and discussions were ongoing as this year’s corporate responsibility report was finalised.

At its heart, the price review asks a simple question: how should water companies balance the desire for lower bills for customers, with the needs for investment, and a decent return for shareholders, now and in the future?

The Ofwat process effectively obliges water companies to consider economic sustainability alongside social and environmental investments. It requires a degree of rigour in stakeholder consultation that companies in other sectors all too often fail to match. In order to arrive at its submission, United Utilities undertook a programme of quantitative and qualitative customer engagement on a massive scale. Tens of thousands of retail and business customers have inputted their views and the company has gleaned many insights. The Customer Challenge Group, comprised of expert stakeholders, has been a particular strength.

These learnings have shaped the report as well as company performance: complaints are down and we were particularly impressed by the detailed segmentation of business customers, who will be most affected by new competition rules. Overall, customer satisfaction is up amongst business and domestic customers. This success has been built on asking people what they want, and listening closely to their answers and responding.

But customers alone cannot shape a business.

The interests of regulators, politicians, local communities and shareholders need to be weighed up and a conclusion reached. It is the nature of good stakeholder engagement that it frequently throws up differing views and interests. It requires the company to see ways in which these can be taken into account and acted on.

United Utilities found many differences of opinion – such as a desire for lower bills on the one hand, and increased investment in major capital projects on the other. Our assurance identified elaborate processes in place to understand these different views and reach a balanced decision. The report is necessarily concise in this regard on what has been a complex and time-intensive process.

United Utilities can therefore be said to show a genuine desire to be accountable to those on whom the company has an impact on, and who have an interest in how United Utilities performs. Stakeholder engagement of wider interested groups is extensive. We would like to see the company expand this further to integrate the views of trusted partners, and indeed critics, into its reporting. In future years, readers would benefit from the incorporation of views that United Utilities has accepted, accommodated or rejected, and why. This would give fuller insight into how and why positions were arrived at.

This year’s materiality matrix has been reviewed, but there have been no substantial changes to the topics covered. Transparency on key issues for stakeholders such as bathing waters and fracking has been maintained. Likewise, the targets were substantively updated last year, which we welcomed at the time. They remain unaltered. Given the point in the business cycle, this seems appropriate. However, during 2015, once the new business plan is agreed, the company will want to debate whether it sets longer term targets in new areas, and how these align with the business priorities. United Utilities has a particularly strong alignment between the corporate responsibility strategy and its commercial priorities, mindful of the need to listen carefully to stakeholder views. This alignment with business objectives, with an injection of stakeholder interests, is something that United Utilities should maintain.

The economics of the business will continue to be a matter of interest for stakeholders long after the dust has settled on the price review. Water companies are likely to face continued questions over whether bills are fair as part of a continued debate on the ‘cost of living’. We have made this point in assurance statements for a number of years but see no sign of interest slowing in the UK, particularly during a general election year.

There is room for United Utilities to share fuller information on its economic impacts, though we note the inclusion of issues such as apprenticeships, tax and executive pay. Our assurance identified that affordability is an issue that is top of mind for the company as well as many stakeholders. The Support Tariff and Trust Fund are having an impact in this area. This year’s report also links to an infographic (prepared for the business plan) showing a breakdown of how revenues are reinvested by the business.

United Utilities could develop this analysis and explain more clearly to readers how economic value created by the company is shared, such as for reinvestment in capital projects, salaries for employees, dividends to shareholders and spend with suppliers. With an annual procurement budget of over £1 billion, the knock-on impacts of investment in the community may be a key part of the story around where the money ends up. Alongside the evidence from customer surveys, the economics could be explained more fulsomely to answer questions on fair pricing.

Overall, 2014 has been a year of consolidation whilst the price review was underway. It is admirable that rather than rowing back from the issues, the company has continued to present insights and data on such as wide range of topics in a straight-forward manner. A belief that addressing responsibility issues, such as customer satisfaction, can continue to drive strong commercial success is also notable. Having collected data, the challenge is now to synthesize the information to explain why United Utilities is fundamentally of benefit to the North West, and in particular the economy. We look forward to seeing how the outcome of the new business plan shapes the next stage in corporate responsibility at United Utilities.

Corporate Citizenship
London
September 2014

 

Methodological notes

The assurance work was commissioned in July 2014 and was completed in October 2014. Detailed records were kept of meetings and correspondence relating to the inclusivity, materiality and responsiveness of the report, as well as to technical matters relating to the accuracy and presentation of data. The team comprised Richard Hardyment, Associate Director, and Peter Truesdale, Head of Assurance. The team has a variety of professional and technical competencies and experience. For further information please refer to our website.

Our external assurance and commentary process for the United Utilities Corporate Responsibility Report 2014 has involved, but not been limited to, the following elements:

  • Understanding United Utilities, its business and broader business context; its approach to and understanding of corporate responsibility; how it identifies issues material to its operations and in particular how this has been shown through its strategy development and reporting;
  • A review of material issues for the company based on a detailed media review and analysis of current regulatory and campaign group issues of relevance to the sector;
  • In depth interviews with the representatives from United Utilities including functional heads and those responsible for stakeholder engagement. Interviews were wide ranging, and covered the company’s approach, policies, governance, performance measures, benchmarks, stakeholder relations, future plans and reporting processes;
  • A detailed evaluation of United Utilities’ reporting against the principles of inclusivity, materiality and responsiveness;
  • Examination of the reporting at set stages in its development including extensive reviewing and commenting on draft chapters of the full report;
  • Testing of the assertions throughout on a section-by-section basis, including data checks on a sample of data elements, drawing from evidence and supporting documentation provided by United Utilities, interview questioning and other reporting mechanisms, frameworks and processes.

Our work did not extend to a complete audit of the report’s contents. We have not been responsible for the preparation of the Corporate Responsibility Report 2014 nor in devising the internal management and reporting systems that yielded the data contained therein.

The opinions expressed in this external assurance statement and commentary are intended to extend an understanding of the non-financial performance of United Utilities and should not be used or relied upon to form any judgments, or take any decisions, of a financial nature.

Corporate Citizenship is a leading assuror of corporate responsibility reports and an AA1000 Licensed Assurance Provider.

We have provided assurance to United Utilities for its corporate responsibility reporting since 2010. During the 2013-14 reporting period, except as noted below, our work with United Utilities focused exclusively on assurance.

United Utilities is a member of the LBG (London Benchmarking Group), an evaluation framework for corporate community involvement which we manage on behalf of its members and adherents.

If you would like to send us a comment about this report, please email our Head of Sustainability, Chris Matthews